DVO Report Prevails Over Seized Diary; ITAT Deletes Section 69A Additions

Raghu Nath Arora Vs DCIT/ACIT (ITAT Dehradun)

Summary: The ITAT Dehradun disposed of six appeals involving Raghu Nath Arora, his spouse Meena Arora and son Virat Arora. Four quantum appeals concerned additions under Section 69A made in the hands of Raghu Nath Arora and Meena Arora for AYs 2020-21 and 2021-22. The additions were Rs.10,00,480/- and Rs.57,43,570/- in Raghu Nath Arora’s hands and Rs.88,70,170/- and Rs.1,05,49,351/- in Meena Arora’s hands. A search under section 132 had been conducted in the family’s cases on 07.02.2022 and the departmental authorities relied upon seized diary Annexure A-1 allegedly indicating unaccounted cash receipts and expenses.

The assessees relied upon the DVO’s report dated 18.11.2022, arising from a reference made on 12.05.2022 under section 142(A), which according to the Tribunal supported the declared sale/purchase prices of 36 properties by matching them with the corresponding fair market value. The Tribunal recorded that this factual position remained unrebutted by the Revenue and held that the additions could not be sustained as they went against the DVO report. It also relied upon Commissioner of Income-tax v. Dr. Indra Swaroop Bhatnagar, CIT Vs. D.M. Prunesh and Smt. B. Jayalakshmi vs. ACIT for the proposition that such a valuer’s report, or even a favourable remand report, is binding on the departmental authorities and the department could not be treated as an aggrieved party. Accordingly, the substantive grounds challenging the Section 69A additions were accepted and all four quantum appeals were allowed. In the remaining two appeals, Raghu Nath Arora and Virat Arora challenged penalties under Section 271B for failure to get their books of account audited. The Tribunal noted that counsel could not establish any explanation, much less a “reasonable” cause, for the failure to obtain audit due to circumstances beyond their control. It therefore declined to interfere with the lower authorities’ findings and dismissed both penalty appeals.

Cases Discussed

• Commissioner of Income-tax v. Dr. Indra Swaroop Bhatnagar, (2013) 30 taxmann.com 293 (Allahabad) – relied upon for the proposition concerning the binding effect of a valuer’s report/favourable report on departmental authorities.
• CIT Vs. D.M. Prunesh (2020) 426 ITR 169 (Kar)(HC) – relied upon for the proposition concerning the binding effect of a valuer’s report/favourable report on departmental authorities.
• Smt. B. Jayalakshmi vs. ACIT (2018) 96 taxmann.com 486 (Mad.) – relied upon for the proposition that a favourable remand report is binding on departmental authorities and the department could not be treated as an aggrieved party.

FULL TEXT OF THE ORDER OF ITAT DEHRADUN

The instant batch of six cases involves the three assessees herein, namely, Sh. Raghu Nath Arora, his spouse Smt. Meena Arora and son Sh. Virat Arora. All other relevant details stand tabulated as under:

Heard all the assessees as well as the department at length.

Case files perused.

2. We advert to the former twin assessees, namely, Sh. Raghu Nath Arora and Mrs. Meena Arora’s respective twin quantum appeals each i.e. ITA No.115 & 116/DDN/2026 and ITA Nos. 118 & 119/DDN/2026; respectively, totalling four cases wherein they are aggrieved against the learned lower authorities’ action, inter alia, making section 69A addition(s) of Rs.10,00,480/- and Rs.57,43,570/- and similar addition(s) of Rs.88,70,170/- and Rs.1,05,49,351/- in their hands in both these assessment years; respectively. There is hardly any dispute between the parties that the learned departmental authorities had carried out the relevant section 132 search action in this family’s case(s) on 07.02.2022 wherein they allegedly came across the seized materials indicating various unaccounted transactions representing cash receipts and expenses etc. by both these assessees. And that the learned Assessing Office thereafter made the impugned additions in both these assessees’ respective hands to the extent indicated hereinabove which stand upheld in the CIT(A)’s detailed discussion.

3. That being the case, both these assessees as well as the department vehemently reiterate their respective stands against and in support of the impugned additions. The Revenue’s case, more particularly, is that the learned Assessing Officer as well as the CIT(A) have discussed the entire issue(s) at length that the same are ought to be upheld in the assessees’ cases since based on diary Annexure A-1 found/seized from their possession.

4. Faced with this situation, learned counsel representing assessee seeks to buttress the point that although they have canvassed various legal as well as factual issues challenging the impugned additions, the departmental authorities herein are first of all bound by DVO’s report dated 18.11.2022 inter alia agreeing with their stand throughout that the declared sales/purchases price(s); as the case may be, of all these 36 properties, including 8 agricultural lands, 10 residential parcels, 16 commercial assets and 2 residential assets; as the case may be, indeed match with the corresponding fair market value “FMV”. This detailed report further suggests that the learned DDIT/ADIT, Haldwani has made the necessary reference to the DVO under section 142(A) of the Act on 12.05.2022. This clinching factual position has gone unrebutted from the Revenue side.

5. We are of the considered view in this factual backdrop that the impugned additions made in the assessees’ hands in both the lower proceedings could not be sustained since going against the DVO report submitted under section 142(A)(i) of the Act. We further wish to emphasize here that case-law Commissioner of Income-tax v. Dr. Indra Swaroop Bhatnagar, (2013) 30 taxmann.com 293 (Allahabad), CIT Vs. D.M. Prunesh (2020) 426 ITR 169 (Kar)(HC) and Smt. B. Jayalakshmi vs. ACIT (2018) 96 taxmann.com 486 (Mad.), inter alia, hold that such valuer report; or, for that, even a favourable remand report is very much binding on the learned departmental authorities wherein the department could not be treated as an aggrieved party as well. We thus adopt the very precise reason hereinabove to conclude that both these assessees’ corresponding substantive grounds challenging section 69A unexplained money additions deserve to be accepted therefore. We order accordingly in very terms.

These twin assessees’ as many appeals two each i.e. ITA No.115 & 116/DDN/2026 and ITA Nos. 118 & 119/DDN/2026 succeed therefore.

6. Next comes Sh. Raghu Nath Arora’s and Sh. Virat Arora’s twin appeals ITA Nos. 117 & 120/DDN/2026; respectively, wherein they are aggrieved against the learned lower authorities’ action levying section 271B penalties on account of their failure in getting the books of account audited. After vehemently arguing for quite some time, learned counsel could hardly dispute that both these assessees have not been able to plead and prove any explanation much less a “reasonable” cause that they could not get their books of account audited due to the circumstances beyond control. We thus find no reason to interfere in both the learned lower authorities’ respective findings levying section 271B penalty(ies) in their respective cases. These latter twin appeals ITA Nos.117 & 120/DDN/2026 fail therefore.

7. These twin assessees’ (Sh. Raghu Nath Arora & Smt. Meena Arora) respective quantum appeals ITA No.115 & 116/DDN/2026 & ITA Nos.118 & 119/DDN/2026 are allowed and the former’s three assessee’s penalty(ies) appeals ITA Nos.117 & 120/DDN/2026 are dismissed. A copy of this common order be placed in the respective case files.

Order pronounced in the open court on 31st August, 2026