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Whether the assessing officer can rely on the report of the DVO even when there is no obvious reason to reject the books of account

• Unit Construction Co. Ltd. Vs. Joint Commissioner of Income-tax (Cal HC)
[2003] 260 ITR 189
Thus, it appears that it is not necessary that the books of account have to be rejected expressly or that it is to be, in express terms, recorded that the books of account are not reliable or the explanation is not satisfactory. It has to be gathered from the order itself whether in effect the Assessing Officer was satisfied with the explanation or had found that the books of account were not reliable. It is not the technical terms, which must appear in the order. It is the substance of the order that the Assessing Officer was not satisfied with the explanation which is relevant. This is apparent from sections 69 and 69B. Where accounts are not reflected in the account books, it can be explained by the assessee, who under section 69 is entitled to an opportunity to explain. If in the opinion of the Assessing Officer the explanation is not satisfactory, the income can be added.

• Amar Kumari Surana (Smt.) Vs. Commissioner of Income-tax (Raj HC)
[1997] 226 ITR 344 at page 349
It is true that merely on the basis of the fair market value no addition can be made under section 69B of the Act, 1961, but on the basis of sufficient material on record some reasonable inference can be drawn that the petitioner has invested more amount than shown in the account books, then only the addition under section 69B can be made. The burden is on the Revenue to prove that the real investment exceeded the investment shown in the account books of the assessee.
Their Lordships of the Supreme Court in the case of K. P. Varghese [1981] 131 ITR 597 have observed as under (page 618):
“This burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer.

• Yadu Hari Dalmia Vs. Commissioner of Income-tax (Del HC)
[1980] 126 ITR 48 at page 57-58
…it follows as a normal rule of presumption and evidence that where an assessee has, in fact, incurred certain expenditure and is not able to account satisfactorily for the same, an inference can be drawn that the expenditure or the unaccounted part thereof must have been met out of the undisclosed income of the previous year. The case of an item of proved expenditure is, in principle, no different from that of a cash credit. In both cases, the assessee is in possession of certain funds during the previous year the source of which he is unable or unwilling to explain satisfactorily. It is a matter entirely within the assessee’s knowledge as to how the cash credits came to be introduced or the items of wealth came to be acquired or the expenditure was incurred and once it is postulated that such cash credit or investment or expenditure belongs to the assessee then his failure to explain the same or to explain it satisfactorily can constitute a reasonable ground for an inference that the source thereof must be an item taxable under the Act. Otherwise, if a non-taxable source or a capital item was utilised for the purpose in question, the assessee could and would easily have come forward with an explanation to the said effect and proved it to the satisfaction of the ITO. We are, therefore, of opinion that the whole history of the introduction of ss. 68 to 69D and the judicial decisions bearing thereupon clearly establish the proposition that these sections are only clarificatory and that even otherwise an addition can be made towards income from undisclosed sources in respect, inter alia, of amounts of expenditure which the assessee is found to have actually incurred but not satisfactorily explained.

Whether the AO has power to refer to the DVO

• Smt. Pushpa Kumari Vs. Commissioner of Income-tax (Pat HC)
[2004] 269 ITR 366
Thus, it was held by the apex court that though under section 55A of the Act the Assessing Officer cannot call for an enquiry report, it can issue com- mission to a Valuation Officer in exercise of power under section 131(1)(d) of the Act.