INCOME TAX ACT, 1961

Section 142A

Assessment - Reference to DVO - Addition made on account of unexplained investment without rejection of assessee's books -

Assessee firm engaged in real estate development was constructing a multiplex theatre. To ascertain market value of land and correct cost of construction of building, properties were referred to the Valuation Cell of Department under section 142A. Valuation reports submitted by Valuation Officers indicate difference in cost of construction of buildings. AO assessed differential amount as unexplained investment under section 69. Assessee's case was that it had produced books of accounts before AO and AO had not found any defects whatsoever in books of accounts produced by assessee.Held: Section 142A inserted by Finance (No. 2) Act, 2014, with effect from 15-11-1972 enabled AO make a reference to Valuation Officer to determine cost of construction of buildings and rejection of books of accounts was a pre-condition for making a reference to DVO. It is only with a view to remove such hurdle, section 142A was substituted by inserting a new section 142A by Finance (No. 2) Act, 2014, which no longer requires rejection of books of accounts to make a reference to DVO. Legislature clearly conscious of the fact that substitution of section 142A by Finance (No. 2) Act, 2014 was made only for the purpose of overruling legal position. The legislature did not make the law retrospective in operation nor were pending proceedings saved as was done when section 142A was inserted by Finance (No. 2) Act, 2004 with read effect from 15-11-1972. Accordingly, it could not also said that section 142A as inserted by Finance (No. 2) Act, 2014 has retrospective effect and therefore, reference to DVO in the instant case was invalid without such rejection of books of account. Accordingly, addition made on the basis of report of DVO could not be sustained.

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