Sahyog Corporation Vs ACIT (Gujarat High Court)
Conclusion: AO must apply their own mind to the contents of the DVO report and any other available material as relying solely on a DVO’s report without any independent inquiry or satisfaction was a fundamental jurisdictional flaw that invalidated the entire reassessment proceeding from the start.
Held: Assessee-firm filed a ‘nil’ income tax return for the Assessment Year 2018-19. AO received information regarding investments made by assessee in its two projects. AO referred the valuation of these investments to the DVO. DVO submitted a report valuing the investment at a higher figure than what was shown by assessee, resulting in a difference of ₹35.28 lakhs. Based only on this DVO report, AO treated the difference as unexplained investment. AO then issued a show-cause notice under Section 148A(b), passed an order under Section 148A(d), and issued a reassessment notice under Section 148. It was noted that the AO conducted no further inquiry after receiving the DVO report and did not record any independent satisfaction with its findings before initiating the proceedings. It was held that High Court quashed and set aside the entire reassessment proceedings, including the order under Section 148A(d), the notice under Section 148, and the final assessment order. AO could not assume jurisdiction to reopen an assessment based solely on a DVO report. The court clarified that a DVO report was an opinion; it was not, by itself, “information” that could form the sole basis for reopening. AO must apply their own mind to the report and form an independent “reason to believe” that income had escaped assessment. AO’s failure to conduct any further inquiry or even record satisfaction with the DVO’s report meant the assumption of jurisdiction was without authority of law.
