Valuation report cannot sustain addition unless books are first rejected; accepted accounts defeat DVO-based estimate.

A block assessment addition based on a Departmental Valuation Officer's estimate was held unsustainable where the Assessing Officer had not first rejected the books of account. The valuation was only an estimation, and a DVO reference could not substitute for rejection of accepted accounts. Section 142-A was not treated as curing this defect on the facts. The governing principle applied was that a valuation report, by itself, does not justify an addition unless the books are first rejected, and the addition was therefore decided in favour of the assessee.

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Issues: (i) Whether an addition based on the Departmental Valuation Officer's estimate could be sustained when the Assessing Officer had not rejected the books of account before making the reference and the valuation was only on estimation.

Analysis: The dispute concerned an addition made in block assessment on the basis of a DVO report regarding investment in property. The valuation was based on estimation, and the books of account had not been rejected before the reference was made. In such a situation, reliance on the DVO report was held to be misconceived. The insertion of Section 142-A was not treated as validating the addition on these facts, and the governing principle applied was that a reference to valuation cannot substitute rejection of accounts where the books remain accepted.

Conclusion: The addition was not sustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: A valuation report cannot form the basis of an addition unless the books of account are first rejected; a reference to the Departmental Valuation Officer, by itself, does not justify the addition when the accounts remain accepted.

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