Commissioner's Referral to DVO Overturned for Property Value, Jurisdiction Invalid

The Tribunal held that the Commissioner exceeded authority by referring to the DVO for determining property value lower than the assessee's, citing precedent. The Commissioner's jurisdiction under section 263 was deemed invalid and reversed, as the Assessing Officer had considered relevant factors. The appeal was allowed in favor of the assessee.

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Issues Involved:

1. Assumption of jurisdiction under section 263 of the Income-tax Act, 1961.
2. Cancellation of the assessment order dated 29-12-2016.
3. Determination of the assessment order as erroneous and prejudicial to the interest of revenue.
4. Alleged violation of principles of natural justice in passing the order under section 263.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction under Section 263 of the Income-tax Act, 1961:

The primary issue in the appeal was whether the Commissioner rightly assumed jurisdiction under section 263 of the Income-tax Act, 1961. The Commissioner issued a show cause notice to the assessee, referring to the valuation done by an authorized valuer and observed that the assessment order dated 29.12.2016 was erroneous and prejudicial to the interest of the Revenue. The Commissioner believed that the Assessing Officer should have made inquiries to find the value of any comparable incident in 1981, instead of adopting a comparable from 1985 and indexing it backwards.

2. Cancellation of the Assessment Order Dated 29-12-2016:

The Commissioner canceled the assessment order dated 29-12-2016, directing the Assessing Officer to make a fresh assessment. The Commissioner was of the view that the Assessing Officer had accepted the cost of acquisition adopted by the assessee without making any inquiries, which was against the Tribunal's directions to adopt comparable valuation. The Commissioner found that the valuation report of the second valuer did not match the Tribunal's directions, and the acceptance of the higher value without any investigation could not be accepted.

3. Determination of the Assessment Order as Erroneous and Prejudicial to the Interest of Revenue:

The Tribunal examined whether the assessment order was both erroneous and prejudicial to the interest of the Revenue. The Tribunal noted that the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT had held that the twin conditions of section 263 must be satisfied for the Commissioner to exercise his power. The Tribunal found that the Assessing Officer had applied his mind and passed a speaking order, considering the Registered Valuer's report and other instances. The Tribunal concluded that the Commissioner could not substitute his view for that of the Assessing Officer, especially when the fair market value was an estimation.

4. Alleged Violation of Principles of Natural Justice in Passing the Order under Section 263:

The assessee contended that the Commissioner had violated the principles of natural justice by passing the order under section 263 without proper inquiry and verification. The Tribunal noted that the Commissioner had remitted the matter back to the Assessing Officer without making inquiries himself. The Tribunal referred to the decision of the Hon'ble Delhi High Court in Director of Income Tax vs Jyoti Foundation, which held that the Commissioner should make inquiries if he believes the Assessing Officer had not done so.

Conclusion:

The Tribunal held that the Commissioner had no authority to make a reference to the DVO for determining the market value of the property at a figure less than that shown by the assessee, as laid down by the Hon'ble Bombay High Court in CIT vs Puja Prints. The Tribunal found no merit in the exercise of jurisdiction by the Commissioner under section 263 and reversed the order, holding it invalid and bad in law. The appeal of the assessee was allowed.

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