Assessment cannot be reopened solely on Valuation Officer's report. Section 148 notice quashed. Assessing Officer must reject accounts first.

The court held that reopening the assessment solely based on the District Valuation Officer's report was impermissible. The notice issued under Section 148 of the Income Tax Act for reopening the assessment was quashed. The court found that the Assessing Officer cannot refer the matter to the DVO without first rejecting the books of account. The petition was allowed, and no costs were awarded.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of assessment is based on a mere change of opinion.
3. Whether the District Valuation Officer's (DVO) report can be the sole basis for reopening the assessment.
4. Whether the Assessing Officer (AO) can refer the matter to the DVO without rejecting the books of account.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961 for Reopening the Assessment:
The petitioner challenged the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, proposing to reopen the assessment for the assessment year 2011-12. The petitioner argued that the notice was issued beyond the period of four years from the end of the relevant assessment year and that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The court noted that the reopening of assessment was solely based on the DVO's report dated 31.03.2014, which estimated the cost of construction at Rs. 8,99,96,351/-, whereas the petitioner had shown Rs. 5,94,52,001/-.

2. Whether the Reopening of Assessment is Based on a Mere Change of Opinion:
The petitioner contended that the reopening was based on a mere change of opinion, which is not permissible in law. During the original assessment proceedings, all relevant details, including construction costs, were scrutinized, and the assessment was finalized under Section 143(3) on 31.03.2014. The court agreed that reopening based solely on the DVO's report, without any new material, amounted to a change of opinion.

3. Whether the District Valuation Officer's (DVO) Report Can Be the Sole Basis for Reopening the Assessment:
The court referred to the Supreme Court's decision in Assistant CIT v. Dhariya Construction Co., which held that the DVO's report cannot be the sole ground for reopening an assessment. The court observed that the AO had accepted the books of account and framed the assessment without rejecting them. Therefore, reopening the assessment based solely on the DVO's report was not justified.

4. Whether the Assessing Officer (AO) Can Refer the Matter to the DVO Without Rejecting the Books of Account:
The petitioner argued that the AO could not refer the matter to the DVO without first rejecting the books of account. The court referred to its earlier decision in Kisan Proteins (P) Ltd. v. Assistant Commissioner of Income-tax, which stated that the AO must first reject the books of account before making a reference to the DVO under Section 142A. The court noted that the AO had made the reference without rejecting the books of account, which was impermissible.

Conclusion:
The court concluded that the reopening of the assessment based solely on the DVO's report was impermissible in law. The impugned notice dated 30.03.2018 issued under Section 148 of the Income Tax Act was quashed and set aside. The petition was allowed, and the rule was made absolute with no order as to costs.

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