M.Ravindran Vs ITO (Madras High Court)
In M. Ravindran Vs ITO, the Madras High Court examined whether the Assessing Officer could validly refer a property valuation matter to the District Valuation Officer (DVO) for making an addition under Section 69B without first rejecting the assessee’s books of accounts. The Court upheld the addition and dismissed the assessee’s appeal.
The assessee, an individual deriving income from property and rent, filed his return for Assessment Year 2007-08 declaring total income of ₹1,10,880. During scrutiny proceedings, the Department noticed investment in construction of a building named “Ravindra Residency (Ravindra Arcade)” disclosed in the balance sheet for Assessment Year 2008-09 at ₹17,80,200. Presuming that the investment related to the relevant financial year, notice under Section 143(2) was issued.
To determine the actual cost of construction, the Assessing Officer sought a valuation report from the District Valuation Officer on 17.06.2010. During enquiry, the assessee stated that the investment pertained to Financial Year 2006-07 relevant to Assessment Year 2007-08, leading to reopening of assessment under Section 147. The assessee produced books of accounts, bills, vouchers, and related documents to support the disclosed investment.
However, the Assessing Officer found discrepancies between the books of accounts and the construction agreement entered into with M/s. INDO Designers for ₹17,80,200. The DVO subsequently estimated the value of the construction at ₹1,27,67,021. After segregating the portions attributable to the individual assessee and the HUF, the DVO determined the assessee’s share of construction cost at ₹41,71,518. Since the assessee had disclosed only ₹17,80,200 in the balance sheet, the difference of ₹23,91,318 was treated as unexplained investment and added as escaped income under Section 69B.
