2018 (1) TMI 510 - AT - Income Tax

Invalid Reopening: ITAT rejects AO's reliance on DVO report from another case

The ITAT upheld the decision of the ld CIT(A) in dismissing the Revenue's appeal regarding the reopening of assessment u/s 147/148 of the Income-tax Act, ... Validity of reopening the assessment U/s 147/148 on the basis of DVO’s report in another case - no assessment and/or reassessment proceedings are pending - AO empowered to refer to the Valuation Officer - Held that:- There was no income tax proceedings pending on the date of reference made to the DVO. The assessment was reopened on the basis of DVO’s report in the case of Mr. Tung Kind Liu and not in the case of the assessee. We note that reopening the assessment U/s 147/148 of the Act on the basis of DVO’s report in another case was not valid. In assessee’s case under consideration, we are of the view that no valid reasons were recorded by the Assessing Officer. If the AO failed to record the valid reasons then reassessment would be bad in law. We are of the view that when the notice under section 148 has been issued and addition has been made by adopting the value estimated by the Valuation Officer and when we found that the AO is not empowered to refer any property for valuation in a case where no assessment proceedings or reassessment proceedings of the assessee is pending before him, there is no justification to make any addition in such cases. CIT(A) is correct in law as he relied the case of CIT vs. Umiya Co-op. Housing Society Ltd. (2006 (7) TMI 200 - GUJARAT HIGH COURT), wherein it was held that where no assessment and/or reassessment proceedings are pending, AO is not empowered to refer to the Valuation Officer, any matter for ascertaining cost of construction of any property of an assessee. Therefore, we are of view that reference made to the DVO by the AO was behind his jurisdiction - Decided against revenue Issues:Reopening of assessment u/s 147 of the Income-tax Act, 1961 based on DVO's report in another case.Analysis:The appeal filed by the Revenue challenged the order of the ld CIT(A) regarding the reopening of assessment for Assessment Year 2009-10. The Revenue contended that the ld CIT(A) erred in deciding that the reopening u/s. 147 of the Income-tax Act, 1961 was not valid. The case involved the assessment of Long Term Capital Gain on the sale of Land & Building by an A.O.P. The AO found discrepancies in the valuation of the property and initiated reassessment proceedings. The AO estimated the Long Term Capital Gain at a higher amount than declared by the assessee, leading to an addition to the total income.The ld CIT(A) deleted the addition made by the AO, citing that there were no income tax proceedings pending on the date of reference made to the DVO. The ld CIT(A) held that the assessment was reopened on the basis of DVO's report in another case, not in the case of the assessee. Relying on a judgment of the Hon’ble Gujarat High Court, the ld CIT(A) concluded that the AO was not empowered to refer any property for valuation when no assessment or reassessment proceedings of the assessee were pending. Therefore, the ld CIT(A) allowed the appeal on the technical ground of the reopening under sections 147/148 not being valid.The ITAT Kolkata, after hearing both parties, upheld the decision of the ld CIT(A). The ITAT noted that there were no valid reasons recorded by the AO in the assessee's case for reopening the assessment. The ITAT emphasized that the AO's action of referring to the DVO based on another case was beyond his jurisdiction. Citing the Gujarat High Court judgment, the ITAT affirmed that the AO cannot refer a property for valuation when no assessment or reassessment proceedings are pending. Therefore, the ITAT confirmed the ld CIT(A)'s order, dismissing the Revenue's appeal.In conclusion, the ITAT dismissed the Revenue's appeal, affirming the decision of the ld CIT(A) that the reopening of the assessment u/s 147/148 based on the DVO's report in another case was not valid, and the addition made by the AO was deleted.