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2021 (7) TMI 1421 - AT - Income TaxValidity of assessment u/s 143(3) - principal addition in this case is on account of a valuation difference (of a storage Godown) based on the report by the Departmental Valuation Officer (DVO) to whom reference was made by the AO during assessment proceedings - as argued appellate order is without proper application of mind by the first appellate authority and there has been no consideration of the assessee’s replies and explanations furnished during the assessment proceedings for which reference was made - HELD THAT:- ‘Valuation’ being a technical matter, while the AO is not a technical person, the statute provides for a reference by him to the DVO where he seeks to verify the veracity of the assessee’s claim with regard to the cost of acquisition/construction of an asset incurred during the relevant previous year (s.142A). The law accordingly obliges an appellate authority (including the Tribunal) to hear the DVO in adjudicating an appeal agitating an addition based on his valuation report. This has not been observed by the ld. CIT(A), which procedure he shall accordingly comply with in the set aside proceedings, dilating on and issuing specific finding/s qua each item of valuation being contested by the assessee before him. Whether a rejection of accounts has to necessarily precede a reference to the DVO u/s. 142A? - As the cost met by the assessee, or otherwise proved to have been incurred, or even not incurred by the assessee, as in the case of gift, inheritance, etc., and irrespective of its reflection in his accounts, where maintained, forms part of the assessee’s explanation, and it is only the balance, excess cost, which is unexplained with any evidence, for which the rule of evidence (ss. 69/69A) deems it to be his income for the relevant year. Where, then, one may ask, is the question, i.e., for invocation of this rule of evidence, of the rejection of the books of account of the assessee’s business, which may not even be maintained or even not bear the said cost, and which (rejection) is for the purpose of properly deducing the business income, which is not a concomitant of the said invocation, and may even be independent of it? Why, the business itself may not have commenced, as in the case of Warehouse business in the instant case. The question begs an answer before the decision in Sargam Cinema [2009 (10) TMI 569 - SC ORDER] holding a reference without rejection of accounts as bad, could be relied upon. As seen, the clear and settled law does not require the rejection of accounts and, where so, is deemed irrelevant where specific adjustments to the returned income are made on the basis of the satisfaction of the relevant provisions of law, even though the said adjustments pertain to the entries in those accounts, while for an addition u/s. 69/69A the accounts are in fact being accepted to the extent of the relevant entries therein. The said decision does not cite the precise question of law raised before it for being answered, and indeed that admitted and answered by the Hon’ble Court. Further still, the judgment is sans any discussion of or on the law in the matter or reference to any precedents. The issue that therefore arises for being answered first is if, in view of the clear provisions of law and the scheme of the Act, and as further explained and expounded by the Apex Court per its several decisions, including by its’ larger Benches, could the said judgment be regarded as a complete statement of law in the matter and, where considered so, the basis thereof, as also the specification of the said statement. Before parting, it may be clarified that the various issues discussed with reference to the invalidity of the AO’s reference to the DVO are only with a view to emphasize the several aspects/dimensions of the matter on which, therefore, adjudication, where sought, may be required – upon considering all the factual and legal aspects, including those, not discussed, as are agitated or otherwise deemed relevant, per a speaking order. No final opinion in the matter is expressed or may be construed as such. That is, is a case of an open set aside.
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