Valuation report by the DVO alone cannot form a basis for reopening of completed assessment: Delhi HC
Facts:
1. The AO re-opened the assessment for impugned AYs based on the valuation report issued by Departmental Valuation Officer (DVO) estimating the value of investment made by Assessee at Rs. 211.99 Crore.
2. The AO stated that since the valuation report was not available at the time of original assessment, therefore the amount of Rs. 211.99 crores represents income of the assessee chargeable to tax which has escaped assessment even though the Assessee had declared the cost of property under the head “Fixed Assets and Capital WIP” at Rs. 592.13 Core.
Hon Delhi HC held as below:
1. The power of Income Tax Officer to reopen assessment though vide are not plenary, as the words of statute are “reason to believe” and not “reason to suspect”.
2. The expression “reasons to believe” does not mean a purely subjective satisfaction on the part of the AO, the reason must be held in good faith and cannot be merely a pretence.
3. Valuation report received after assessment can constitute a valid basis for initiation of reassessment proceedings provided the information is more than mere rumour, gossip or a hunch and there is some justified material for initiating action u/s 147 of the Income Tax Act.
4. There is no statement or discussion by the AO as to what was the basis and why he should proceed on the valuation report, its contents and why he should rely on the same.
5. The reasons do not reflect that AO has applied his mind to the facts of the case to ascertain as to whether in fact the Assessee had already declared the value of the aforesaid property under “Fixed Assets and Capital WIP” or whether such valuation is correct and proper and not.
6. The notice issued u/s 148 of the Income Tax Act is hereby quashed and set aside along with the proceedings initiated consequent to issuance of such notices.
