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2021 (2) TMI 459 - AT - Income TaxUnexplained investment u/s. 69 - Addition on basis of valuation report of the District Valuation Officer (DVO) - reference to the DVO for estimation of assets - non-submission of DVO report after reference by AO - search and seizure operation u/s. 132(1) of the Act was conducted at office/residence of assessee trust along with other assessee s of JIS Group - notice u/s. 153A(1) issued and the assessee trust filed return of income disclosing total income at Rs. Nil - HELD THAT - CIT(A) makes the finding that the failure of the DVO to submit valuation report within six months of making of valid reference, the DVO s initial valuation report could not have been relied upon to make additions cannot be faulted since it is in line with the ratio of the decision of Smt. Amiya Bala Paul 2003 (7) TMI 4 - SUPREME COURT . The non-submission of DVO report after reference by AO and Ld CIT(A) within the statutory period has not been challenged nor this factual finding could be controverted by the Revenue before us and, so it attains finality. In the result, we find that there is no valid valuation report submitted by DVO on reference by AO/Ld. CIT(A). AO had made the entire addition in all assessment years based on the initial valuation report submitted by the Valuation Officer pursuant to the reference made by the DDIT (Inv.) dated 11.07.2014 when he DDIT (Inv.) did not had the power to make the reference to the DVO which power he acquired as noted above only on 01.04.2017 by Finance Act, 2017 u/s. 132(9D) of the Act. And it has also been noted that neither the DVO filed the valuation report pursuant to the AO s reference dated 22.01.2016 nor the DVO filed the valuation report pursuant to the Ld. CIT(A) s reference through the AO by letter dated 29.01.2019. Thus, we note that the addition has been made only on the basis of the initial valuation report dated 18.11.2014 which was pursuant to the DDIT(Inv.) s reference which he DDIT (Inv) had no power to do call for. DDIT (Inv.) could not have referred the question of cost of construction/valuation of the assessee s building to the Valuation Officer in the year 2014 ; and thereafter, since the DVO did not present the valuation report after AO has referred the valuation vide letter dated 22.01.2016 as well as the Ld. CIT(A) within six months from the end of the month of the reference, the Ld. CIT(A) rightly held that DVO was bound by law sec. 142A(6) to have submitted the valuation report within the statutory time limit, which view we endorse. Whether in absence of any incriminating material found in the course of search at the premises of the assessee trust (administrative office only), the additions made in the assessments of the assessee trust which were unabated since assessment of AY 2008-09 to AY 2012-13 was non-pending on the date of search 13.03.2014, could be held to be sustainable on facts and in law? - From the perusal of panchnama and the assessment orders, it can be safely inferred that the reference made by DDIT (Inv.) for valuation of the properties on 01.04.2014 was without any incriminating materials found during search oral or documentary which could have suggested that the assessee has shown less investment in its books for building construction Therefore, no addition was permissible in the assessment order u/s 153A of the Act in the case of un-abated assessments unless it is based on relevant incriminating material found during the course of search qua the assessee and qua the AY. Thus the assessee succeeds in its cross-appeals on the legal issue raised in respect of appeals pertaining to AY 2008-09 to AY 2012- 13.Consequently appeal of assessee pertaining to these assessment years are allowed.
Issues Involved:
1. Validity of additions made by the AO based on the DVO's valuation report. 2. Whether the DVO's report was submitted within the statutory period. 3. Authority of the DDIT (Inv.) to refer the matter to the DVO. 4. Impact of the absence of incriminating material found during the search on the additions made for unabated assessment years. 5. Legal implications of the DVO's failure to hear the assessee before preparing the valuation report. Detailed Analysis: 1. Validity of Additions Based on DVO's Valuation Report: The Revenue challenged the deletion of additions made by the AO based on the DVO's valuation report. The AO had added back differences in property valuations as unexplained investments under Section 69 of the Income-tax Act, 1961. The CIT(A) deleted these additions, holding that the DVO's report was non-est (invalid) due to procedural lapses. 2. Timeliness of DVO's Report Submission: The CIT(A) allowed the assessee's additional ground, which argued that the DVO's report was invalid as it was not submitted within the statutory period of six months as required under Section 142A(6) of the Act. The DVO failed to submit a revised report within this timeframe despite multiple reminders from the AO and CIT(A). 3. Authority of DDIT (Inv.) to Refer to DVO: The CIT(A) and later the Tribunal found that the DDIT (Inv.) lacked the authority to refer the valuation matter to the DVO in 2014, as the power to do so was only conferred by the Finance Act, 2017, effective from 01.04.2017. This lack of authority rendered the initial DVO report invalid. 4. Impact of Absence of Incriminating Material: For the assessment years 2008-09 to 2012-13, which were unabated (not pending before the AO on the date of the search), the Tribunal held that no additions could be made in the absence of incriminating material found during the search. The search did not yield any such material, and the AO's additions were solely based on the invalid DVO report. The Tribunal relied on judicial precedents, including the Delhi High Court's decision in CIT vs Kabul Chawla and the Supreme Court's decision in CIT v. Sinhgad Technical Education Society, to support this view. 5. Violation of Natural Justice: The CIT(A) observed that the initial DVO report was prepared without giving the assessee an opportunity to be heard, violating the principles of natural justice. This procedural lapse further invalidated the DVO report and the subsequent additions based on it. Conclusion: The Tribunal upheld the CIT(A)'s deletion of additions for the assessment years 2008-09 to 2012-13 due to the invalidity of the DVO report and the absence of incriminating material. The Tribunal also dismissed the Revenue's appeals for these years and allowed the assessee's appeals on the legal issue. For the assessment year 2013-14, which was an abated assessment, the Tribunal dismissed the assessee's appeal, as the legal issue of incriminating material did not apply. The Tribunal's order emphasized adherence to statutory requirements and procedural fairness in tax assessments.
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