2019 (9) TMI 903 - AT - Income Tax

Tax Appeal Outcome: Valuation upheld under 142A, 69C addition justified, 69B applied for investment, partial relief granted.

Smt. Nisha Keshwani Versus DCIT, Central Circle, Agra.

The CIT(A) upheld the AO's decision to refer the property for valuation under section 142A, justifying the addition made under section 69C based on a ... Addition u/s 69C on the basis of valuation report - search u/s 132(1) - HELD THAT:- It is undisputed fact that appellant assessee has made investment in construction of said property No. 5/157. CIT(A) has dealt with the issue at length after considering detailed submissions filed by the assessee, valuation report, remand report of the AO and rejoinder of the assessee on the remand report as well as the objections raised by the assessee to the valuation report. CIT(A) has accommodated the assessee by and large allowing that considering contingency and miscellaneous items @2% and the method of valuation on the basis of detailed item wise as per second valuation report wherein more scientific method was followed in arriving correct investment as even admitted by valuation officer. CIT(A) are appears very reasonable and logistic on the premises of scientific approach duly supported with judicial pronouncement. Therefore, the assessee should not have any grievance from the impugned order. In the case of Shri Sanjeev [2017 (12) TMI 792 - ITAT AGRA] the facts were that the assessee has maintained books of account, balance sheet and profit and loss account for the three years and filed the material documentary evidence with year wise break up of investment made by the assessee in the construction whereas in the present case, assessee has not maintained books of account and fail to furnish bills and vouchers in support of material purchased to substantiate the cost of construction of the house. Since the assessee did not maintain regular books of account to record all the expenditure of the property so the present case is distinguishable on facts and would be no help to the assessee. Appeal of the assessee is dismissed. Issues Involved:1. Legality of the reference made under section 142A for property valuation.2. Justification of the addition made under section 69C based on the valuation report.3. Appropriateness of applying section 69B instead of section 69C for unexplained investment.Detailed Analysis:1. Legality of the Reference Made Under Section 142A for Property Valuation:- The AO, after considering the material seized during the search under section 132(1) and the submissions of the assessee, referred the property to the valuation officer under section 142A to determine the year-wise construction cost.- The assessee argued that no material was found during the search indicating undisclosed income or unexplained investment in the property. The assessee relied on the decision in CIT Vs. B.K. Agarwal (2009) 183 Taxman 434.- The CIT(A) observed that the assessee had surrendered Rs. 25,00,000 on account of investment in the property during the search, indicating unaccounted investment. Therefore, the condition for making a reference under section 142A was satisfied.- The CIT(A) concluded that the AO's action of referring the property for valuation under section 142A was justified and legally valid, dismissing the assessee's ground challenging the reference.2. Justification of the Addition Made Under Section 69C Based on the Valuation Report:- The AO made an addition of Rs. 65,91,318 under section 69C based on the valuation report, which was contested by the assessee.- The CIT(A) noted that the second valuation report prepared by the DVO on a detailed item-wise rate method was more realistic and justified than the plinth area rate method.- The CIT(A) accepted the second valuation report and granted partial relief to the assessee by reducing the addition to Rs. 28,36,777.- The CIT(A) considered the contingency and miscellaneous items at 2% instead of 3%, as taken by the valuation officer, and found the estimation reasonable.3. Appropriateness of Applying Section 69B Instead of Section 69C for Unexplained Investment:- The CIT(A) observed that the AO's addition under section 69C was not correct as section 142A does not refer to section 69C for making a reference to the valuation officer.- The CIT(A) decided that section 69B was more appropriate for the assessee's case and directed the AO to make the addition of Rs. 28,36,777 under section 69B for unaccounted investment in the property.- The assessee argued that the proceedings initiated under section 142(1) in consequence to action taken under section 153C were wrong and illegal.- The CIT(A) found the AO's reference to the DVO justified as the assessee did not maintain regular books of account or furnish supporting bills and vouchers for the construction expenditure.Conclusion:- The CIT(A) provided a detailed analysis and accommodated the assessee by allowing partial relief, reducing the addition to Rs. 28,36,777.- The CIT(A)'s findings were based on a scientific approach and supported by judicial pronouncements.- The appeal of the assessee was dismissed, and the order of the CIT(A) was upheld as reasonable and justified.Final Judgment:- The appeal of the assessee is dismissed.- Order pronounced in the open court on 16/09/2019.