2011 (4) TMI 1323 - HC - Income Tax

Court dismisses appeal over reassessment process based solely on Valuation Officer's report without rejecting accounts.

The High Court dismissed the appeal for reassessment, holding that initiating reassessment proceedings solely based on the Valuation Officer's report ... DVO report as 'information' under section 147 - Admissibility of Valuation Officer's report under Section 142A - Requirement to reject books of account before referring to Valuation Officer - Reassessment notice without jurisdiction where Valuation Officer appointed impermissiblyDVO report as 'information' under section 147 - The report/opinion of the District Valuation Officer (DVO) does not by itself constitute evidence or 'information' sufficient to initiate reassessment proceedings under Section 147. - HELD THAT: - The Tribunal considered the DVO's opinion but treated it only as an opinion and not as evidence or the requisite 'information' envisaged by Section 147 of the Income tax Act. The High Court recorded that the Tribunal's view-namely that a DVO report is not, per se, information to found reassessment-was accepted in the impugned order and no contrary legal principle was found to warrant interference.Tribunal's confirmation that the DVO's report/opinion does not constitute evidence or information under Section 147 is upheld.Admissibility of Valuation Officer's report under Section 142A - Requirement to reject books of account before referring to Valuation Officer - Reassessment notice without jurisdiction where Valuation Officer appointed impermissibly - Appointment of the Valuation Officer under Section 142A and reliance on his report was impermissible where the Assessing Officer had not first rejected the books of account; consequently the reassessment notice issued on that basis is without jurisdiction. - HELD THAT: - Relying on the Supreme Court's decision in Sargam Cinema, the Court observed that an Assessing Officer cannot refer matters to a Valuation Officer under Section 142A without first recording a finding rejecting the books of account. In the present case neither the AO nor the CIT(A) recorded any finding of rejection of the books before the Valuation Officer was appointed. Because the prerequisite rejection was absent, appointment of the Valuation Officer was not open to the Department and the consequent reassessment proceedings lacked jurisdiction.Reassessment notice founded on a Valuation Officer's report obtained without rejecting books of account is without jurisdiction and liable to be quashed.Final Conclusion: The appeal is dismissed. The Tribunal's confirmation that the DVO's report does not amount to information under Section 147 is sustained, and because the Valuation Officer was appointed without the prerequisite rejection of books of account, the reassessment notice is without jurisdiction. Issues involved: Question of law regarding the initiation of reassessment proceedings based on the report of the Valuation Officer without first rejecting the books of accounts.Summary:The High Court addressed the question of whether the ITAT was legally correct in confirming the findings of CIT (A) that reassessment proceedings cannot be initiated solely based on the report of the DVO, as it does not constitute evidence as per section 147 of the IT Act, 1961. The ITAT had considered the DVO's opinion but held that it does not qualify as evidence under Section 147, leading to the dismissal of the revenue's appeal for reassessment. The Court noted that the ITAT did not address the issue of the Valuation Officer's report under Section 142-A of the Income Tax Act, as mandated by the Supreme Court in Sargam Cinema vs. Commissioner of Income Tax. It was highlighted that the Assessing Officer cannot refer the matter to the DVO without first rejecting the books of accounts, which was not done in this case. Therefore, the appointment of the Valuation Officer and the notice for reassessment were deemed to be without jurisdiction. The appeal was dismissed on these grounds, with the Court emphasizing that the question of law as framed did not even arise in this context.