PRINCIPAL COMMISSIONER OF INCOME TAX, SURAT-1 vs. M/S CHANAKYA DEVELOPERS

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TAXAP/487/2018HC GujaratGJHC24025103201809 May 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT was justified in upholding the deletion of the addition. The Court relied on its own previous decision in Tax Appeal No. 955 of 2013 concerning the same assessee, which in turn relied on the Supreme Court's decision in Sargam Cinema vs. Commissioner of Income Tax and a Division Bench decision of the Gujarat High Court in Goodluck Automobile (P.) Ltd. vs. Assistant Commissioner of Income-tax. The principle established was that a reference to the DVO and subsequent addition based on their report is impermissible unless the assessee's books of accounts are first rejected. In the present case, neither the AO nor the CIT(A) had rejected the books of accounts. Therefore, the enhancement solely based on the DVO's report was not permissible. The Court found no error in the ITAT's deletion of the enhancement and concluded that no substantial question of law arose.

What were the facts?

The Revenue, Principal Commissioner of Income Tax, Surat-1, filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT). The ITAT had upheld the decision of the Commissioner of Income Tax (Appeals) in deleting an addition of Rs. 3,09,03,547. This addition was made by the Assessing Officer (AO) after rejecting the assessee's (M/s Chanakya Developers) books of accounts, based on a valuation report from the Department's Valuation Officer (DVO). The High Court was considering the substantial question of law raised by the Revenue regarding the justification of the ITAT's decision.

What were the issues?

1. Whether, on the facts and in law, the Appellate Tribunal was justified in upholding the deletion of the addition of Rs. 3,09,03,547 made by the Assessing Officer after rejecting the assessee's books of accounts on the basis of the DVO's valuation report? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the reasoning of the ITAT and the High Court implies that the assessee would have argued that the addition was not sustainable without rejection of books of accounts. Revenue's Contention: The Revenue contended that the ITAT was not justified in upholding the deletion of the addition made by the AO, which was based on the DVO's valuation report after rejecting the assessee's books of accounts.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

C/TAXAP/487/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 487 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX, SURAT-1 Versus M/S CHANAKYA DEVELOPERS ========================================================== Appearance: MR.NIKUNT K. RAVAL, ADVOCATE for MRS KALPANAK RAVAL(1046) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 09/05/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

Revenue has filed this appeal against the judgment of the Income Tax Appellate Tribunal dated 22.08.2017 raising following substantial question for our consideration. “Whether on the facts and circumstance of case and in law, the Appellate Tribunal is justified in upholding the decision of the Commissioner of Incometax (A) in deleting the addition of Rs.3,09,03,547/ made by the Assessing Officer after rejecting books of accounts of the assessee on the basis of valuation report of the DVO ?”

Commissioner of Income Tax (Appeals) as well as the Tribunal both relied on the decision of this Court in Tax Appeal No.955 of 2013 in case of this very assessee where similar issue was considered in following manner: “[5.0] Now, so far as the question No.B with respect to deletion of enhancement of Rs.1,44,66,770/ is concerned, it is required to be noted that the said C/TAXAP/487/2018 ORDER vs. Assistant Commissioner of Incometax reported in [2012]26 Taxmann.com 254 (Guj.), the learned ITAT has directed to delete the said enhancement. In the case of Sargam Cinema (Supra), the Honble Supreme Court has held that unless the books of accounts are rejected, there could not have been reference to the DVO. In the present case, admittedly, neither the AO nor the learned CIT(A) had rejected the books of accounts. Under the circumstances, the enhancement of Rs.1,44,66,770/ solely on the basis of the report of the DVO, is rightly held to be not permissible. Under the circumstances, no error has been committed by the learned ITAT in deleting

the enhancement

of Rs.1,44,66,770/. [6.0] In view of the above, we see no reason to interfere with the impugned judgment and order passed by the learned ITAT. No question of law much less substantial question of law arises in the present appeal and the present appeal deserves to be dismissed and is, accordingly, dismissed.”

In the result, this Tax Appeal is also dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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