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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI AAKASH DEEP JAINSHRI N.K. BILLAIYA.
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
These two separate appeals by the assessee are preferred against two separate orders of the CIT[A] – 35, New dated 27.03.2018 and 05.04.2018 pertaining to Assessment Years 2006-07 and 2007-08 respectively.
The common grievance in both the appeals relates to the addition made on the basis of Departmental Valuation Officer’s [DVO] report by holding that there was a difference between the value shown by the assessee in the books of account and value estimated by the DVO of the property Spanish Garden.
Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee is owner of Spanish Garden RGB Road, Guwahati Road, Guwahati, Assam. The Assessing Officer found that the assessee has declared cost of construction/investment in the said property.
The matter was referred to the DVO, Kolkatta and after receiving the report of the DVO, the Assessing Officer found that there was a difference in the value shown by the assessee and by the DVO and adopting the value estimated by the DVO, the Assessing Officer made an addition of Rs. 1,66,439/- in Assessment Year 2006-07 and Rs. 37,61,578/- in Assessment Year 2007-08.
5. Additions were challenged before the ld. CIT(A) but without any success.
Before us, the ld. counsel for the assessee vehemently stated that once the investments have been properly recorded in the books of account by the assessee, then without discarding/rejecting the books, the Assessing Officer should not have referred the matter to the DVO and should not have made any addition. Strong reliance was placed on the decision of the Hon'ble Supreme Court in the case of Sargam Cinema 328 ITR 513.
Per contra, the ld. DR strongly supported the findings of the Assessing Officer/ld. CIT(A).
We have carefully considered the orders of the authorities below.
Basis of the addition can be understood from the following chart:
Declared cost of Financial year- Financial construction/inv wise estimated Difference Year estment in cost of construc rupees tion/investment in rupees 2005-06 33,67,020 35,33,459 1,66,439
2006-07 7,60,95,749 7,98,57,327 37,61,578 2007-08 6,15,69,647 6,46,13,169 30,43,522 2008-09 12,47,29,721 13,08,95,383 61,65,662 2009-10 24,89,75,708 26,12,83,119 1,23,07,411 2010-11 12,09,71,650 12,69,51,543 59,79,893 Total 63,57,09,495 66,71,34,000 3,14,24,505
A perusal of the above chart clearly shows that the only reason for making the impugned addition is the difference between the investment shown in the books and the valuation done by the DVO. In our considered opinion, once the assessee is maintaining regular books of account and in the course of its business the assessee has recorded the transactions in its books of account, then, without finding/pointing out any defect in the books of account and without holding that the books of account are rejected, then the Assessing Officer cannot proceed to make addition on the basis of DVO’s report.
The Hon'ble Supreme Court in the case of Sargam Cinema [supra], has held that the assessing authority could not refer the matter to the DVO in a case where there was no categorical finding recorded by the Tribunal, then the books of account were never rejected. The relevant findings read as under:
“4. In the present case, we find that the Tribunal decided the matter rightly in favour of the Assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived.
For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the Assessee succeeds.”
In light of the aforesaid decision of the Hon'ble Supreme Court [supra], we find that in the appeals under consideration also the books of account have not been rejected. Therefore, the ratio laid down by the Hon'ble Apex Court squarely applies on the case in hand. Respectfully following the same, both the appeals of the assessee are allowed.
In the result, the appeals of the assessee in & 4116/DEL/2018 are allowed.
The order is pronounced in the open court on 15.03.2022.