2017 (6) TMI 1227

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....I.T. Act, 1961 does not provide any power for the ld. AO to made any reference to the DVO. It is section 142A of the I.T. Act, 1961 which provides the power to the ld. AO for making reference to the DVO, but in terms of sub-section (1) of section 142A, the reference to DVO can only be made where an estimate of the value of any investment referred to section 69 or section 69B or section 56(2) is required to be made. But in the case of the assessee, the ld. AO before making reference to the DVO, has not required any estimate of the value of any investment referred to section 69 or section 69B or section 56(2) of the I.T. Act, 1961. 2.1 It was submitted that as evident from the DVO report, the ld. AO made reference to the DVO vide letter No. 1036 dt. 13.01.2014 and evident from Certified copy of ld. AO note sheet from 25.07.2013 to 16.01.2014, before 13.01.2014 i.e., the date of reference to the DVO, the ld. AO neither examined the books of accounts of the assessee nor rejected the books of account before making any reference to the DVO, the assessee's books of account had to rejected by the ld. AO. Hence keeping in view of the above, the ld. AO has erred in making reference to DVO u....

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....n DVO's report doesn't support the same. In light of the same, the said contention of the ld AR is devoid of any merit and cannot be accepted. 5. We now refer to the second contention of the ld AR that the ld. AO neither examined the books of accounts of the assessee nor rejected the books of account before making any reference to the DVO. In this regard, we refer to the decision of the Coordinate Bench in case of Prithavi Raj Bohra Vs. ITO (supra) wherein the issue under consideration was whether the AO was justified in referring the matter to DVO u/s 142A. It was held by the Coordinate Bench that as no books of account were rejected before referring the matter to DVO u/s 142A, the AO was not justified in making any addition in view of the report given by the DVO. The relevant findings are contained at para 2.2, 2.4 and 2.6 of its order which are reproduced as under:- "2.2 In this case, the proceedings under section 147/148 were taken. Before completion of the assessment, the AO referred the matter to the DVO in view of section 142A of the Act. Thereafter the assessment was completed and various additions were made. The assessee preferred an appeal before the learned CIT(A) cha....

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....cts in the present case are similar as in this case also no books of account were rejected before referring the matter under section 142A of the Act. The learned CIT(A) has ignored the decision of Hon'ble jurisdictional High Court which was binding in nature. However, he has considered the decision of Hon'ble Uttaranchal High Court which has been reversed now by the Hon'ble Supreme Court. In view of these facts and circumstances of the case, we hold that the AO was not justified in making any addition in view of the report given by the DVO and therefore, the appeal on this issue is allowed and the addition so made is deleted." 5.1 It is noted that the Coordinate Bench has relied on the decisions of Hon'ble jurisdictional High Court in case of Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar (supra) and Hotel Joshi (supra). These decisions have been rendered prior to the amendment brought in the Income Tax Act by virtue of which section 142A was introduced by the Finance Act, 2004. Hence, to this extent the decisions of the jurisdictional High Court do not support the case of the assessee in the instant case. 5.2. We now refer to the decision of Hon'ble Supreme Court in case of....

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....n other words, Section 142A of the Act, thus, cannot be invoked where valuation of the cost of construction is bonafide and based on books of account which has not been rejected. The report of the DVO would be dealt with by the Assessing Officer under sub section (3) of Section 142A of the Act. There is logic and reasoning for adopting the aforesaid view. There appears to be no occasion for the revenue not to accept the valuation of the cost of construction of an asset without rejecting the books of account maintained by the assessee. It would not only be unfair but against the public policy as well to assume that the assessee is dishonest and he must have submitted an incorrect account of expenses/investment." 5.4 Further, during the course of hearing, our attention was drawn to the provisions of section 142A. It is noted that an amendment has been brought in section 142A by the Finance Act 2014 w.e.f. 01.10.2014 wherein it is specifically provided that the Assessing Officer may make reference to the Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. The said amendment is prospective in nature and does not apply....