Delhi H.C : Whether, in any event, opinion of DVO, per se, is not an information and cannot be relied upon without books of account being rejected

High Court Of Delhi

CIT vs. Bajrang Lal Bansal

Block Period 1-4-1989 To 17-12-1999

Section : 69B

Dipak Mishra, CJ.  And Manmohan, J.

IT Appeal No. 182 Of 2010

August 20, 2010


Manmohan, J. – The present appeal has been filed under section 260A of Income-tax Act, 1961 (for brevity “Act, 1961”) challenging the order dated 31st March, 2009 passed by the Income-tax Appellate Tribunal (in short “Tribunal”) in IT(SSA) No. 262/Delhi/2004, for the block period 1-4-1989 to 17-12-1999.

2. The relevant facts of the present case are that a search was conducted at the respondent-assessee’s residence by the Income Tax Department. While unexplained cash of Rs. 68,943 and FDR of Rs. 54,943 was found during the search, no evidence was found suggesting a higher valuation for the property bearing No. A-156, New Friends Colony, New Delhi. However, the Assessing Officer solely on the basis of report of the District Valuation Officer made an addition of Rs. 99,33,000 under section 69B of the Income-tax Act, 1961 on account of undisclosed investment.

3. The Commissioner of Income-tax (Appeals) deleted the addition by relying upon the decision of the Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597 / 7 Taxman 13.

4. The Tribunal upheld the aforesaid deletion by observing as under:—

“6. The deletion of addition of Rs. 99,33,000 made on account of valuation difference also cannot be made in the absence of any evidence found in the course of search because undisclosed income in the block assessment is to be computed on the basis of material found in the search proceedings and the valuation report was admittedly not during the course of the search and was obtained as by the department subsequent thereto. No records thereon can be made on the same for treating the difference as income of the assessee. The order of the CIT(A) in deleting the same by following the decision in the case of K.P. Varghese (supra) is perfectly justified and is accordingly upheld.”

5. Ms. Rashmi Chopra, learned counsel for the revenue submitted that the Tribunal had erred in law in deleting the addition of Rs. 99,33,000 as undisclosed income of the respondent-assessee under section 69B of the Income-tax Act, 1961.

6. It is settled law that the primary burden of proof to prove understatement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO. (See K.P. Varghese’s case (supra), CIT  v. Smt. Shakuntala Devi [2009] 316 ITR 46 (Delhi), CIT v. Manoj Jain [2006] 287 ITR 285 /[2007] 163 Taxman 223  (Delhi) and ITA No. 482/2010 decided by this Court on 5-5-2010).

7. In any event, the opinion of the DVO, per se, is not an information and cannot be relied upon without the books of account being rejected—which has not been done in the present case. The Supreme Court in its order dated 19-10-2009 in Civil Appeal No. 6973/2009 has held as under:—

“Delay condoned.

Leave granted.

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 (AO) could not have referred the matter to the Departmental Valuation Officer (DVO) without 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, assessee succeeds.

Civil Appeal is allowed. No order as to costs.”

8. Further the Supreme Court in its order dated 16-2-2010 in Civil Appeal No. 9468/2003 has held as under:-

“Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). Opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the Civil Appeal. The Department was not entitled to reopen the assessment.

Civil appeal is, accordingly, dismissed. No order as to costs.”

9. Moreover, in the present case, no evidence much less incriminating evidence was found as a result of the search to suggest that the respondent assessee had made any payment over and above the consideration mentioned in the return of the respondent-assessee.

10. Consequently, no substantial question of law arises in the present appeal, which is dismissed in limine.

[Citation : 335 ITR 572]

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