DVO report obtained after assessment completion under section 142A invalid for revision proceedings under section 263

The ITAT Raipur allowed the assessee's appeal against revision proceedings under section 263. The revision was based on a DVO report obtained under section 142A(1) after assessment completion. The tribunal held that the DVO report was invalid as it violated mandatory provisions of section 142A - the assessee was not given opportunity to be heard as required under subsection (4), and the report was submitted beyond the six-month time limit prescribed under subsection (6). The tribunal ruled that non-compliance with these mandatory conditions rendered the DVO report non-est and illegal, making it unsuitable as basis for revisionary proceedings under section 263.

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Issues Involved:
1. Legality of the order under section 143(3) dated 30/12/2019.
2. Validity of the order under section 263 dated 25/03/2022.
3. Discrepancies in Work in Progress (WIP) valuation.
4. Reference made under section 142A.
5. Jurisdiction under section 263 based on DVO's report.
6. Compliance with procedural requirements under section 142A.

Detailed Analysis:

1. Legality of the Order Under Section 143(3) Dated 30/12/2019:
The assessee argued that the order under section 143(3) dated 30/12/2019 was not erroneous and did not prejudice the interests of the revenue. The assessment was completed after considering all relevant materials, and no amount was omitted from assessment.

2. Validity of the Order Under Section 263 Dated 25/03/2022:
The Principal Commissioner of Income Tax (PCIT) invoked section 263, claiming the assessment order was erroneous and prejudicial to the interests of the revenue. The PCIT's primary basis was the discrepancy in WIP valuation identified by the Departmental Valuation Officer (DVO). The assessee contended that the PCIT did not establish any error or prejudice, and the DVO's report was not binding on the Assessing Officer (AO).

3. Discrepancies in Work in Progress (WIP) Valuation:
During the survey under section 133A, discrepancies were found in the WIP of the assessee. The AO made a reference to the DVO under section 142A(1) for valuation, which revealed a significant difference between the book value and the DVO's estimate. The assessee objected to the DVO's valuation, arguing that the discrepancies were not properly addressed.

4. Reference Made Under Section 142A:
The AO referred the matter to the DVO on 29/12/2019, just one day before completing the assessment. The DVO's report was received after the assessment was finalized. The assessee argued that the DVO's report was not binding and that procedural requirements under section 142A were not followed, including the six-month timeline for the DVO to submit the report.

5. Jurisdiction Under Section 263 Based on DVO's Report:
The PCIT relied on the DVO's report to invoke section 263. The assessee argued that the DVO's report, received after the assessment, did not form part of the "record" for section 263 purposes. The PCIT failed to address the assessee's objections to the DVO's report, making the invocation of section 263 unjustified.

6. Compliance with Procedural Requirements Under Section 142A:
The assessee contended that the DVO's report was not submitted within the six-month period mandated by section 142A(6). The failure to adhere to this timeline rendered the DVO's report invalid. The ITAT agreed, citing precedents that emphasized strict compliance with statutory timelines.

Conclusion:
The ITAT concluded that the PCIT did not establish any error or prejudice in the assessment order. The DVO's report, received beyond the statutory period, was not binding. The PCIT failed to address the assessee's objections, violating principles of natural justice. Consequently, the revisionary proceedings under section 263 were deemed illegal and unsustainable. The appeals of both assessees were allowed.

Separate Judgments:
No separate judgments were delivered by the judges. The decision was rendered by the ITAT as a single order applicable to both appeals.

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