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2015 (1) TMI 189 - AT - Income TaxValidity of reopening of assessment – Notice issued u/s 148 and reference made to DVO for making addition - Held that:- The AO has received certain information with regard to the unexplained investment in the property by the assessee during the course of assessment proceedings in the case of Shri. Khem Chand Agarwal, Rakabganj, Lucknow and on the basis of such information, the AO has formed a belief that unexplained investment in the property was made by the assessee and later on constructed flats which were sold and no income was offered thereon. On the basis of this information, the AO has formed a belief that income chargeable to tax has escaped assessment and issued notice u/s 148 of the Act – there was no illegality in the formation of belief and issuance of notice u/s 148 of the Act - There is nothing borne out from the order sheet recorded by the AO with regard to the filing of return in response to notice u/s 148 of the Act - The notice u/s 148 of the Act was issued only on 18.1.2005 and immediately thereafter on 2.2.2005 notice u/s 143(2) of the Act was issued fixing the hearing on 11.2.2005. When the AO has issued notice u/s 143(2) of the Act fixing the hearing on 11.2.2005, he should have waited for the reply of the assessee in response to that notice - Instead of waiting for the reply, the AO was in a hurry to make reference to the DVO on 9.2.2005 – the action of AO cannot be accepted - in Sargam Cinema vs. CIT [2009 (10) TMI 569 - Supreme Court of India] it has been held that before making reference to the DVO for estimating the cost of investment in the construction of property, the books of account maintained by the assessee in this regard has to be rejected – thus, the reference made by the AO to the DVO is illegal, invalid and cannot be relied on for estimating the cost of construction in the property - The AO has blindly followed the DVO’s report of which reference is invalid and made addition u/s 69C of the Act cannot be sustained – Decided in favour of assessee.
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