The primary burden to prove understatement or concealment of income is on the Revenue, and the valuation report alone cannot justify additions to the income.

S. Ravindra Bhat, J.

1. The sole question framed for consideration in these appeals is as follows :—

"Whether ITAT has rightly interpreted scope, power and jurisdiction of the Assessing Officer in block assessment proceedings and the term "undisclosed income?"

2. All the appeals arise out of the common order made by the ITAT. The Revenue contends that the direction of the ITAT to delete the amounts sought to be brought to tax under Section 153A of the Income Tax Act was unjustified. The assessees had purchased eight different properties; they are related to each other. The search operations were conducted in the premises of M/s Mehra Art Palace and its partners Arun Mehra, Subhash Mehra and Sushil Mehra on 27.03.1996. Mehra Art Palace was used to export as well as sell handicrafts in the domestic market. The allegations made by the Revenue against the firm and its partners were that the high profit margins enjoyed by it were concealed and only modest amounts were disclosed in the ITRs. After issuing notice, the AO taking into consideration the materials brought on the record referred the properties for valuation to the District Valuation Officer under Section 142A of the Income Tax Act. Based upon the report received which was considered after hearing counsel for the assessee, the AO made additions. The AO concluded that a comparison between declared value and the value determined (by the DVO) disclosed serious discrepancy. He, therefore, added the difference and brought them to tax in the block assessment orders. These orders were carried in appeal to the ITAT being IT (SS) Appeal Nos.75-80/(Del)/1997, pertaining to the block assessment years 1986-87 to 1995-96.

3. The ITAT considered the submissions and concluded that the AO could not have brought to tax the amounts that he ultimately did merely based upon the DVO's report in the absence of any material pointing to under valuation. The ITAT noted that due disclosure of the acquisition of these properties had been made in the course of regular assessments and that those valuations have been accepted by the income tax authorities and wealth tax authorities as well. The ITAT thereafter allowed the appeal on the basis of the following reasoning: —

"5.5 After reading these provisions we find that these provisions are not applicable on the facts of the present case as the assessee has already declared all these properties in dispute and all the assessments have already been completed by the Income Tax Department while accepting the declared rental income as well as declared wealth by these assessees in their income-tax and wealth-tax returns. Nowhere by the order of the Assessing Officer or the submission of the learned DR reveals that any fresh material was found in the course of search or there was any material with the department to suspect that the investment in these properties were suppressed. After completion of the search the matter was referred to the valuation officer just to ascertain the value of these properties. In our considered view there was no material in referring the matter to the Valuation Cell. It was just to collect the evidence which is not permissible in law. There should be any evidence or material with the Department to suspect any transaction. Only on the basis of the presumption the suspicion is not tenable. The Assessing Officer in these cases made enhancement on the basis of only valuation report. Except this evidence there was no material or basis with the Assessing Officer; neither any material was available on the date of search nor there was any information with the department. Therefore, in view of these facts and circumstances we are of the view that the action of the Assessing Officer was out of purview of section 158BC, under Chapter XIV-B of the Income Tax Act. Accordingly we hold that the additions made on account of revaluation of these properties were invalid. Accordingly, we quash the additions in respect of all these properties b