2019 (3) TMI 1037 - HC - Income Tax

High Court rules for assessee in tax case, emphasizing procedural requirements and jurisdictional considerations.

The High Court ruled in favor of the respondent - assessee and against the Revenue, dismissing the appeal. The Court found that the reference to the ... Reference to the DVO - Proceedings u/s 153-C has been held without jurisdiction - whether reference to DVO in 153-C proceeding is valid - differential value of investment shown in the construction - HELD THAT:- A survey was conducted on 17.10.2006 at the Banarasi Misthan Group of cases and thereafter, proceedings u/s 153-C were initiated on 27.09.2007, which was challenged by the respondent – assessee at the appellate stage and the CIT (Appeals), by the order dated 19.01.2010, has decided the appeal in its favour, against which, the Revenue filed an appeal before the Tribunal, which was decided in favour of the respondent – assessee. Against the order of the Tribunal, the Revenue filed Income Tax Appeal 2014 (5) TMI 158 - ALLAHABAD HIGH COURTbefore this Court and the same was dismissed by this Court. The very basis for referring the matter to Departmental Valuation Officer in the disputed years, where the proceeding has been initiated under section 153-C has been held without jurisdiction. Once the very basis for referring the matter to the Departmental Valuation Officer has vanished, the entire proceedings cannot be held to be justified. Moreover, at the time of referring the matter to the Departmental Valuation Officer, neither returns were filed, nor the books of account maintained by the respondent – assessee were rejected, nor any assessment or reassessment proceedings were pending. In view of the judgement of Sargam Cinema [2009 (10) TMI 569 - SUPREME COURT OF INDIA] and M/S. GOPI APARTMENT [2014 (5) TMI 158 - ALLAHABAD HIGH COURT] the basis for referring the matter to Departmental Valuation Officer itself vitiates and is liable to be quashed. - Decided in favour of assessee. Issues:Validity of assessment based on reference to Departmental Valuation Officer under section 260 (A) of the Income Tax Act, 1961.Detailed Analysis:The judgment addresses the validity of the assessment based on a reference to the Departmental Valuation Officer under section 260 (A) of the Income Tax Act, 1961. The case involved three Income Tax Appeals, with Income Tax Appeal No. 382 of 2010 being the leading case. The appeal was admitted based on several questions of law, including the justification of quashing the assessment, reliance on previous judgments, and the jurisdiction of the ITAT. The respondent, a partnership firm, had filed returns declaring income and investments in a multiplex construction project. The Assessing Authority referred the matter to the Departmental Valuation Officer, resulting in an addition to the taxable income of the respondent. The respondent appealed to the Commissioner of Income Tax (Appeals) and then to the Tribunal, which allowed the appeal.The Revenue challenged the Tribunal's decision, arguing that the Assessing Authority correctly added the undisclosed investment, but the Tribunal arbitrarily deleted it. The respondent contended that the reference to the Departmental Valuation Officer was unjustified as no assessment or reassessment proceedings were pending at the time. They also cited the Sargam Cinema case and previous judgments to support their position. The High Court reviewed the case history, noting that the proceedings under section 153-C of the Income Tax Act were initiated without jurisdiction. As a result, the basis for referring the matter to the Departmental Valuation Officer was deemed invalid, as no returns were filed, no books of account were rejected, and no pending proceedings existed at the time of the referral.Based on the Sargam Cinema case and previous judgments, the Court concluded that the reference to the Departmental Valuation Officer lacked justification and should be quashed. The Court found no substantial question of law in the appeal and dismissed it, ruling in favor of the respondent - assessee and against the Revenue. The judgment emphasizes the importance of adherence to procedural requirements and jurisdictional considerations in tax assessments, highlighting the need for proper legal basis and timing for such actions to be valid.