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TMI Blog2012 (9) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... n at Rs.19,13,100/-. Thus, there was a difference of Rs.5,89,779/- in the cost as shown by the assessee and that computed by the Valuation Officer. The Assessing Officer called upon the assessee to explain the difference in the cost. The assessee vide its letter dated 26th February, 1992 stated various grounds for the difference in valuation. The Assessing Officer did not accept the assessee's explanation and held that the difference in cost of Rs.5,89,779/- was the income of the assessee from undisclosed sources. The assessee went in appeal before the Commissioner (Appeals) who, inter alia, found that the major difference in the valuation report of the approved valuer as submitted by the assessee and the valuation report submitted by the Valuation Officer was because the approved valuer ignored various parts of the structure in his report and held that the said report could not be considered to be complete and correct. Having regard to the fact that the difference in valuation between the report of the approved valuer and the Valuation Officer was more than 30%, the Commissioner (Appeals) turned down the plea of the assessee that no addition could have been made on the basis of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance upon the decision of the Supreme Court in the case of Sargam Cinema vs. Commissioner of Income-tax, (2010) 320 ITR 513. Reliance was also placed upon the decision of the Allahabad High Court in the case of Commissioner of Income-tax vs. Lucknow Public Educational Society, (2011) 339 ITR 588 wherein following the decision of the Supreme court in the case of Sargam Cinema (supra), the court held that the Assessing Officer cannot refer the matter to the Departmental Valuation Officer without first rejecting the books of account. It was submitted that for the purpose of making a reference to the Valuation Officer, the Assessing Officer must first detect some defect in the books of account. Without rejecting the books of account, the question of making a reference would not arise. It was urged that rejection of books of account has to precede the reference to the Departmental Valuation Officer and that the report of the Valuation Officer cannot form the foundation for rejecting the books of account. The Tribunal has, therefore, erred in holding that the Assessing Officer has rightly made reference to the Valuation Officer. Reliance was also placed upon the decision of this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Valuation Officer and as such, there was no question of the Assessing Officer invoking the general powers of enquiry to make a reference in different circumstances and for other purposes. The court upheld the contention of the assessee that if the power to refer any dispute to a Valuation Officer was already available under sections 131(1), 133(6) and 142(2), there was no need to specifically empower the Assessing Officer to do so in certain circumstances under section 55A of the Act. Subsequently, the Legislature vide Finance (No.2) Act, 2004 inserted section 142A in the Act with retrospective effect from 15th November, 1972 empowering the Assessing Officer to estimate the value of any investment or any bullion, jewellery or other valuable article as referred to therein by requiring the Valuation Officer to make an estimate of such value. Under the circumstances, the power exercised by the Assessing Officer for referring the matter to the Valuation Officer for computing the cost of construction can be traced to the said section. 7. It would, therefore, be necessary to examine the nature of the powers of the Assessing Officer under section 142A of the Act, which reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds that the assessee has made investments which are not recorded in the books of account, if any, maintained by him. 9. On a conjoint reading of the provisions of section 69 and section 142A of the Act, it appears that for the purpose of resorting to the provisions of section 142A of the Act, the Assessing Officer would first be required to record a satisfaction that the assessee has made investments which are not recorded in the books of account. As a necessary corollary, he would then reject the books of account as not reflecting the correct position and then proceed to make the assessment on the basis of estimation, for which purpose he can resort to the provisions of section 142A of the Act and make a reference to the Valuation Officer for estimating the value of such investment. Thus, on a plain reading of section 142A of the Act, it is apparent that the question of estimating the value of any investment would arise only when the books of account are not reliable. Accordingly, the Assessing Officer would first be required to reject the books of account before making a reference to the Valuation Officer. The rejection of books of account should precede the reference to the Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Tribunal had decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. It was observed that the Tribunal had recorded a categorical finding that the books were never rejected, which aspect had not been considered by the High Court. The court, accordingly, set aside the order of the High Court and restored the order of the Tribunal. 12. The facts of the present case may be examined in the light of the statutory scheme discussed hereinabove as well as the decision of the Supreme Court in Sargam Cinema (supra). In this regard, a perusal of the assessment order reveals that the Assessing Officer has categorically recorded a finding to the effect that the accounts are duly audited and complete details are available. From the tenor of the order of the Assessing Officer, it is apparent that he has made the reference to the Valuation Officer merely to seek expert advice regarding the cost of construction. There is nothing in the assessment order to suggest that the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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