ACIT Vs Adish Estates Pvt. Ltd. (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has affirmed that a reference to the District Valuation Officer (DVO) for estimating the fair market value of property can only be made when income tax assessment or reassessment proceedings are already pending. This ruling came in the appeal filed by the Assistant Commissioner of Income Tax (ACIT) against Adish Estates Pvt. Ltd. for Assessment Year 2011-12. The ITAT upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete an addition of Rs. 2,28,41,677/- made by the Assessing Officer (AO).
The case stemmed from a search conducted under Section 132 of the Income Tax Act, 1961, on the Aerens Group. The AO received information from the Investigation Wing indicating that Adish Estates Pvt. Ltd. had transacted in immovable property. To ascertain the fair market value of this property, the AO, invoking powers under Section 142A of the Act, made a reference to the DVO on March 5, 2015. Subsequently, a notice under Section 148 of the Act, for reassessment, was issued to the assessee on April 1, 2015. Based on the DVO’s report, the AO completed the assessment by making the aforementioned addition.
Aggrieved by this addition, Adish Estates Pvt. Ltd. appealed to the CIT(A), who subsequently deleted the addition. The Revenue then brought the matter before the ITAT.
During the ITAT proceedings, the Revenue’s representative argued in favor of the AO’s action, relying on a written submission dated March 23, 2022. Conversely, the counsel for the assessee supported the CIT(A)’s decision to grant relief.
The core of the controversy, as identified by the ITAT, revolved around the AO’s jurisdiction to issue a DVO reference under Section 142A in relation to the initiation of reassessment proceedings under Section 148.
The ITAT critically examined the provisions of Section 142A of the Income Tax Act, which states that for the purposes of making an assessment or re-assessment, where an estimate of the value of certain investments or articles is required, the Assessing Officer “may require the Valuation Officer to make an estimate of such value and report the same to him.”
The key factual point highlighted by the ITAT was the timeline of events: the reference to the DVO under Section 142A was made on March 5, 2015, while the notice under Section 148 for reassessment was issued on April 1, 2015. This meant that at the time the DVO reference was made, there were no pending assessment or reassessment proceedings. The ITAT noted that this temporal sequence was also conceded by the Revenue in their written submissions.
The Tribunal concluded that Section 142A explicitly permits a DVO reference “For the purposes of making an assessment or re-assessment.” This phrasing, the ITAT reasoned, clearly implies that the assessment or reassessment proceedings must be in existence or pending when the reference to the DVO is initiated. In the present case, since the Section 148 notice, which would initiate reassessment proceedings, was issued after the DVO reference, the condition precedent for making such a reference under Section 142A was not met.
Judicial Precedents:
While the ITAT’s order does not explicitly cite other judicial precedents within its text, the underlying principle it reinforces is well-established in income tax jurisprudence. The legal interpretation of Section 142A has been the subject of various rulings by High Courts and the Supreme Court. The general consensus is that the power to refer to a DVO is an enabling provision to assist the AO during the course of assessment or reassessment proceedings, not prior to their initiation.
For instance, courts have often held that the DVO’s report is merely an input for the AO and not binding. However, the more fundamental point addressed here is the very authority to seek such a report. If the foundational assessment or reassessment proceedings are not in existence, the supplementary power under Section 142A cannot be invoked.
Therefore, the ITAT held that the addition made by the AO, which was directly based on the DVO’s report, could not be sustained because the reference itself was invalid from the outset. The Revenue’s argument could not refute this fundamental flaw.
In light of these findings, the ITAT found no reason to interfere with the decision of the CIT(A) in deleting the addition made by the AO. Consequently, the appeal filed by the Revenue was dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Revenue is directed against the order of Commissioner of Income Tax (Appeals)-27, New Delhi, [for short hereinafter referred to as the “(Ld. CIT(A)”] dated 09.05.2017 for Assessment Year 2011-12.
2. Before proceedings, further, we deem it necessary to briefly recapitulate the facts of the present case. Search U/s 132 of the Income Tax Act, 1961 (‘the Act’) was conducted in Aerens Group. Information was received by the Ld. Assessing Officer (‘ AO’), from the Investigation Wing, that assessee had transacted into immoveable property. With a view to ascertain fair market value of the property, the Ld. AO invoking his powers U/s 142A of the Act, made a reference to District Valuation Officer, on 5/3/2015 to ascertain the fair market value of the property. Meanwhile, the Ld. AO had issued notice U/s 148 to the assessee, on 1/4/2015. Pursuant to the notice, the AO proceeded to complete assessment after making addition of Rs. 2,28,41,677/-. Aggrieved by the said addition, the assessee filed an appeal before CIT(A), who, deleted the impugned addition. The revenue is in appeal against the said action of Ld. CIT(A). The Ld. DR vehemently argued in favour of the Assessing Officer, by relying upon written submission dated 23.03.2022 filed in this case by the Revenue. The Ld. Counsel for the assessee, placed reliance upon the action of Ld. CIT(A) in granting the impugned relief
3. We have heard rival submissions in the light of material available on record. We have noted that jurisdiction of the Ld. AO to issue notice u/s 148 viz a viz action u/s 142A is seminal to the controversy. We deem it necessary to extract the statutory provision of Section 142A of the Act, which are as under:
“ 142A. [ Estimate by Valuation Officer in certain cases. [ Inserted by Act 23 of 2004, Section 34 (w.r.e.f. 15.11.1972).]
(1) For the purposes of making an assessment or re-assessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69-B or the value of any bullion, jewellery or other valuable article referred to in section 69-A or section 69-B is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him.
(2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that he has under section 38-A of the Wealth-tax Act, 1957 (27 of 1957).
(3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or re-assessment: Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a re-assessment is required to be made in accordance with the provisions of section 153-A.Explanation. – In this section, “Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]”
4. Notice U/s 148 was issued to the assessee on 01.04.2015 and reference to DVO under Section 142A was made by the Ld. AO on 05.03.2015. Thus, as per provision of section 142A reference to DVO could be made only during the pendency of any assessment or reassessment proceedings. In the present case, the impugned reference to DVO was made on 05.03.2015 i.e. prior to issuance of notice u/s 148 of the Act, on 01.04.2015. Pertinently, the impugned position has also emanated from the written submissions dated 23.03.2022 of the revenue (supra). It is thus clear that at the time of reference to the DVO, there was no pendency of any assessment or reassessment proceedings. Consequently, the addition made by the AO which is based upon reference to DVO and his consequent report cannot survive. The Ld. DR could not controvert this basic fact of the present case. Accordingly, we are of the considered view that the there is no merit in the addition made by the AO which has its direct relationship with DVO’s report. Consequently, we are of the opinion that there is no case for interference to the decision of the Ld. CIT(A) in deleting the addition made by the AO. The grounds of appeal, raised by the Revenue are therefore dismissed.
5. In the result, appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 13.03.2025
