Assessing Officer cannot refer matter to DVO without rejecting Books of Account: ITAT [Read Order]

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that Assessing Officer (AO) cannot refer the matter to DVO without rejecting the books of account.

The revenue challenged the order of CIT(A) by holding that the reference to Valuation Officer cannot be made without rejecting the books of account, by ignoring the amended provisions of 142A(2) of the Income Tax Act w.e.f. 01-10-2014 which stipulates that the AO may make a reference to the Valuation Officer, whether or not satisfied with the correctness or completeness of the accounts of the assessee.

A survey u/s 133A of the Income-tax Act, 1961 was conducted at the business premises of Pritham and Prathik, the assessee and during the survey proceedings, certain documents/loose sheets found at the business premises were impounded.   The Assessee company did not file its Return of Income for the A.Y.2014-15.

The Assessing Officer completed the assessment on 31.12.2016 by making an addition of Rs.64,10,599/- u/s 143(3) of the Act on account of the difference in Cost of Construction as per valuation Report u/s 69 of the Income Tax Act,1961.

It was submitted that the books of accounts of the assessee have not been rejected by the Assessing Officer more particularly when it was the case of the assessee that during the course of the survey, the loose papers/diary recovered from the assessee wherein the assessee has meticulously noted the expenditure on a day-to-day basis. 

Nothing objectionable was found in the diary so recovered during the course of the survey and it was the case of the assessee that in the absence of any rejection of books of accounts, the entries found to be made in the diary maintained by the assessee are required to be accepted.

The CIT(A) relied on the case of  Sargam Cinema vs. Commissioner of Income Tax, reported in (2010) 328 ITR 513 (SC) wherein it was held that without rejecting the books of accounts, it is not open for the Assessing Officer to refer the matter to Valuation Cell, Income Tax Department for determining different entries and the expenditure incurred by the assessee. 

A Coram comprising of Shri R.K. Panda, Accountant Member and  Shri Laliet Kumar, Judicial Member observed that before 01.10.2014 it was essential for the Assessing Officer to reject the books of accounts of the assessee before referring the matter to the Valuation Officer which has been failed to do. 

While dismissing the appeal of the revenue, the Tribunal upheld the order of CIT(A). The assessee was represented by Ms S. Sandhya, Advocate and the revenue was represented by Ms Swapna. 

To Read the full text of the Order CLICK HERE

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