RAJESH BALIA, J. - (1.) HEARD learned Counsel for the appellant.
(2.) THIS appeal is directed against the order of Tribunal, Jodhpur Bench, Jodhpur, dt. 7th Feb., 2005 and relates to asst. yr. 1996 -97. The facts which have led to filing of this appeal are that the respondent -assessee had constructed a house at Abu Road. The construction of house was spread over from the financial years 1992 -93 to 1998 -99 progressively. The assessee has shown investment made by him in construction of house in the books of account for each year. The total construction cost according to the books of account of the assessee came to be Rs. 16,21,484. For the first time, during the asst. yr. 1997 -98, the ITO referred the question about valuation of property under construction to the DVO because assessee has not produced the valuation report from an approved valuer about the house under construction. On the basis of report of DVO, proceedings for reassessment were initiated for the asst. yrs. 1993 -94, 1994 -95 and 1996 -97. By adopting valuation submitted by the DVO, additions were made on account of investment made in the construction of house. The reason which led AO to believe that income has escaped assessment for the aforesaid assessment years was that the DVO estimated the value of construction to be higher than the cost of construction shown in the books of account. The additions were partly deleted by the CIT(A) and partly sustained. Appeals were preferred before the Tribunal by the Revenue as well as by the assessee to the extent each was aggrieved with the order passed by CIT(A). The Tribunal found that merely on the basis of DVO's report the reassessment proceedings could not have been initiated in the absence of AO's own satisfaction about escapement of income from tax. The Tribunal found that the opinion about the escapement of income from tax ought to be of the AO himself and not of a borrowed opinion of the DVO. The principle cannot be accepted in abstract inasmuch as though the DVO's opinion in respect of cost investment may not be final, but prima facie in some cases circumstances if otherwise relevant can provide some material, like an audit report on the basis of which AO could have framed his own opinion. It is however, true that opinion about escapement of income from tax must be of AO alone and of none else. It is also trite to say that sufficiency or adequacy of material on the basis of which such opinion is formed cannot be a ground for formation of reason to believe. At the same time, it is equally true that the material on the basis of which such opinion is framed must have some relevant nexus with the formation of opinion about escapement of income from tax. Opinion cannot be formed (on) non -existent material or wholly irrelevant and extraneous material. To that extent exercise of jurisdiction by the AO is justiciable, apart from the question of limitation within which such jurisdiction can be exercised by the AO.
(3.) IF the Tribunal would have rested its decision on abstract doctrine about relevancy of DVO's report, perhaps it would have needed a close examination in view of conflicting opinion of different High Courts, and there being no precedent of this Court. However, in the facts and circumstances of the present case and on the basis of finding reached by the Tribunal, this question would not arise.;