Court rules against DVO valuation referral, quashes ITAT decision in favor of assessee.

The court ruled in favor of the assessee, holding that the reference to the Departmental Valuation Officer (DVO) for valuation of construction cost was unwarranted as no defects were found in the books of accounts by the Assessing Officer. The court emphasized that in cases where no such defects exist, references to the DVO are invalid. Consequently, the court quashed the decision of the ITAT and allowed the Tax Appeal in favor of the assessee.

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Issues:
1. Valuation of business asset by Departmental Valuation Officer (DVO).
2. Addition made on account of unexplained investment in construction cost as allowable business expenditure.

Analysis:
1. The case involved a dispute regarding the valuation of construction cost of a building by the Departmental Valuation Officer (DVO) as compared to the amount shown by the assessee in their books of accounts. The Assessing Officer treated the differential amount as unaccounted investment in construction, adding it to the total income of the assessee. On appeal, the CIT (Appeals) deleted the addition. Subsequently, the ITAT partly allowed the appeal by confirming the action of the Assessing Officer in referring the matter to the DVO for valuation. The Tribunal also granted a partial deduction of the addition made on account of alleged unexplained investment in construction cost.

2. The appellant raised substantial questions of law challenging the ITAT's decision. The appellant contended that the Assessing Officer had not found any defects in the books of accounts, and therefore, the reference to the DVO was unwarranted. The appellant relied on previous court decisions to support their argument, emphasizing that in cases where no defects were found in the books of accounts, references to the DVO were deemed invalid. The court, after considering the arguments and the precedents cited, ruled in favor of the assessee. The court held that since no glaring discrepancies were found in the books of accounts and the Assessing Officer had not rejected them, making a reference to the Valuation Officer was not justified. Consequently, the court quashed and set aside the impugned judgment and order passed by the ITAT, allowing the Tax Appeal in favor of the assessee.

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