Case Law Details
ACIT Vs M/s. Ardra Associates (ITAT Cochin)
The primary issue raised by the Revenue in this case is with regard to the conclusion of the CIT that rejection of books of account is not a pre-requisite for referring the valuation of asset u/s 142A of the I.T. Act. In this connection, the contention of the assessee and the ground on which the CIT had passed the order is that the reference to Valuation Officer itself is not in accordance with the law. The reason put forward by the AO for reference to DVO for the valuation of the construction of property is that the value declared by the assessee is less. At this point of time the A.O. has not given an opportunity to the assessee to explain the reason for the difference. Further as per section 69B of the I.T. Act when the value of investment is not recorded in the books of account or the value expended on making such investment exceeds the value recorded in the books of account in this behalf maintained by the assessee, then only the question of referring to Valuation Officer for arriving at correct value is to be followed. As rightly pointed out by the Ld. AR, the assessee had got the books of accounts audited as per the requirement of statute and also duly filed the tax audit report. The AO had not identified any mistake / omission in any of these records and the only reason put forward for reference is the difference between the value as per the report of the approved valuer, who valued as per the requirements of lending institutions and as recorded in the books of account.
Prior to 2014, in the absence of specific provision for reference to Departmental Valuation Officer (DVO), for estimating the cost of construction of a property/investment, the Assessing Officers (AO) were using the power of summons u/s 131, survey u/s 133 and power of enquiry u/s 142(1). The use of these powers by AO’s for reference to DVO, were being questioned and the various judicial forums and High Courts had taken conflicting views as to the legitimacy of use of such powers. This had been put on rest based on the judgment of Supreme Court in the case of Amiya Bala Paul v CIT 2003 (262 ITR 407), wherein the Apex Court has categorically concluded that there no power to Assessing Officer for making reference to DVO for valuation of investments for assessment purpose
Finance (No.2) Act, 2004 has inserted Section 142A as a new section, with retrospective effect from 19th November 1972 to neutralise the decision of the Supreme Court in Amiya Bala Paul v CIT (supra). As per section 142A, as introduced by Finance (No.2) Act, 2004 the Assessing Officer can refer to Valuation Officer to make an estimate of value of any investment referred to in Section 69 or Section 69B. Therefore, section 142A has given power to AO to refer to the DVO for the purpose of estimating value of any investment for making assessment subject to certain conditions.
Even after insertion of section 142A of the I.T. Act, there are number of judicial pronouncements holding that the reference to DVO under section 142A of the I.T. Act is possible only upon finding that the books of accounts maintained by the assessee is not correct and the value estimated by the Assessing Officer varies substantially from what is recorded in the books of accounts. The various judicial pronouncements confirms that the process of estimation cannot be done if the investment is properly recorded in the books of accounts and the Assessing Officer is satisfied with the correctness and completeness of such books of accounts. If the AO is not satisfied with the correctness and completeness of the books of accounts, he should record his findings and reasoning and reject the books of accounts to proceed for estimation of the value of investments by referring to DVO.
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