2022 (6) TMI 577 - AT - Income Tax

Addition u/s 69B - Undisclosed investment in the construction of the commercial building - reference to DVO - parameters adopted by the DVO in the estimating the cost of construction - HELD THAT - As valuation has been made by the competent wing of the department who are the engineers capable to estimate the investment made in the building. The said officers have not considered the various contentions raised by the assessee which ought to have been considered looking the analysis of the report. In the first appeal, instead ld. CIT(A) asking for a comment of the Assessing Officer or DVO made his own findings and analysis on the report of the export and sustained an addition. AR objected and submitted that even the ld. CIT(A) not being technical person has erred in sustaining the balance addition and all the contentions raised by the assessee has not been dealt with. Thus, even the action of the ld. CIT(A) is not satisfactory since the contentions raised before the Assessing Officer or the DVO has not been considered even by the CIT(A) fully. The objections of the assessee that the findings of the ld. CIT(A) on the technical issue is also not correct. Therefore, looking to the peculiar facts figures and contentions raised in respect of the DVO s report. It is in the fair interest of the justice to restored the matter back to the file of the Assessing Officer to give a fair chance to the assessee to raise their contentions in respect of the estimation made by the DVO. The Assessing Officer make this exercise in time bound manner from the DVO and decide this issues in accordance with the law after affording opportunity to the assessee with this direction, the appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Validity of relying on estimated report of registered valuer without provision in the Act.
2. Justification of sustaining estimated addition without corroborative evidence.
3. Admissibility of DVO's valuation and rejection of objections.
4. Correctness of valuation methods and factors considered by DVO.
5. Reduction of addition by CIT(A) and adequacy of reasoning.
6. Adequacy of opportunity given to assessee and necessity of restoring matter to AO.

Issue 1: Validity of relying on estimated report of registered valuer without provision in the Act.
The appeal questioned the authority of the survey team to use the registered valuer's estimated report, contending it lacked legal basis. The CIT(A) was criticized for inconsistency in allowing reliance on the report while rejecting a reference to DVO. The argument emphasized the need for specific provisions in the Act to authorize such reliance.

Issue 2: Justification of sustaining estimated addition without corroborative evidence.
The appeal challenged the CIT(A)'s decision to uphold an estimated addition without substantial evidence or justification. The argument highlighted the absence of proof supporting the estimation and failure to address discrepancies in recorded investments, questioning the factual and legal basis for the sustained addition.

Issue 3: Admissibility of DVO's valuation and rejection of objections.
The Assessing Officer's reliance on the DVO's valuation, despite objections raised by the assessee, was disputed. The appeal argued that objections were not adequately considered, citing the Supreme Court's precedent on burden of proof. The validity of challenging DVO's valuation at a later stage was also contested.

Issue 4: Correctness of valuation methods and factors considered by DVO.
The appeal detailed various discrepancies in the DVO's valuation methodology, emphasizing the need for detailed analysis beyond square meter area construction. Factors such as material quality, procurement methods, and local cost variations were highlighted to challenge the DVO's rates, questioning the accuracy and appropriateness of the valuation.

Issue 5: Reduction of addition by CIT(A) and adequacy of reasoning.
The CIT(A) reduced the addition but faced scrutiny over the reasoning behind the adjustment. The appeal raised concerns regarding the CIT(A)'s calculations for contractor profit, supervision charges, and valuation discrepancies, seeking clarity on the basis for the adjustments made, and the adequacy of justifications provided.

Issue 6: Adequacy of opportunity given to assessee and necessity of restoring matter to AO.
The appeal argued for a fair opportunity for the assessee to present objections and contentions regarding the DVO's valuation. Criticism was directed at the CIT(A) for not fully considering the assessee's arguments and technical aspects, leading to the request for the matter to be returned to the Assessing Officer for a comprehensive review, emphasizing the importance of due process and fair consideration of all relevant factors.

This comprehensive analysis delves into the various legal issues raised in the judgment, addressing the arguments presented by the parties and the reasoning behind the decisions made by the authorities involved in the case.