TaxTMI 
TaxTMI 
2011 (8) TMI 514
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....eous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 3. Brief facts are that a search and seizure action under section 132 of the Income-tax Act was conducted on the Ambience Group of Companies on 10-10-2007 and the assessee is one of the companies of this group which was covered in the search. The assessee in this year was engaged in the business of construction of property i.e. mall in the National Capital Region of Delhi. The Assessing Officer noted that this company of the Group was constructing one Ambience Mall Projects at NH-8, Gurgaon. Major construction work at this Mall was being undertaken by the construction company of the Group viz. M/s Ambience Projects and Infrastructure Ltd. and the expenses are being accounted for on the basis of bills drawn by the construction company. However, certain costs and expenses were incurred directly by the assessee company in its project. During the assessment proceedings, the Assessing Officer, based on certain seized documents mentioned in the assessment order came to a conclusion that the expenses i....
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....the books of account regularly maintained and audited and his presumption that some expenses as mentioned in certain seized documents on account of construction are not completely recorded in the books of account was not found correct when the same were explained by the appellant and verified by the Assessing Officer with the supporting evidence vis-a-vis the books of account. As Assessing Officer had also not rejected the books of account under section 145(3), by pointing out any defect, reference to the DVO was not valid and therefore, the DVO's report could not be utilized for framing assessment under section 143(3) read with section 153A of the Income-tax Act, even if such a report was considered valid to be obtained under section 142A as held by the various Tribunals and High Courts referred to supra. It is also observed that the difference between the cost of construction as per the books of account and the cost of construction as estimated by the DVO is only in the range of 3.86 per cent which is fairly marginal and is in the acceptable error margin range as the DVO's report is only an estimation and the variation is bound to be there for various reasons/factors as held by t....
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....cess. The adverse inference drawn by the CIT(A) on this issue is not proper. (iii) There is no provision in the Act that books of account should be rejected for estimating cost of construction. Since the assessee was not able to demonstrate its cost of construction as noted in the incriminating documents, the Assessing Officer can make the additions without pointing out specific defects in the books of account. (iv) Though the difference between the DVO's report and assessee's investment in percentage terms appeared to be 3.86 per cent the quantum which is very large and CIT(A) erred in deleting the additions on percentage terms. (v) Reliance is placed on the decision of Hon'ble Uttarakhand High Court in the case of Smt.Kiran Lata v. ITAT [2009] 318 ITR 44/177 Taxman 420. The head note of the said judgment reads as under:- "The assessee's main source of income was from her medical profession by running a nursing home, a newly constructed building. She had shown an investment in the building at Rs. 26.99 lakhs and the return filed by the assessee was selected for scrutiny. A notice was issued under section 143(2) of the Income-tax Act, 1961, after approva....
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....e group had already offered the tax relating to incriminating material. (iv) During the course of assessment proceedings, the assessee company in writing reconciled the alleged incriminating evidence and explained that they were recorded in the books of account of the various group entities. The Assessing Officer has maintained total silence on this aspect. Though the explanation of the assessee on each incriminating material is on record, no comment has been offered either accepting or rejecting the assessee's explanation. Thus, the assessee duly discharged its burden in respect of incriminating material on two propositions:- (a) The tax on the amount of Rs. 40 crores offered has been paid by the group as agreed to the Department. (b) In the course of assessment proceedings, assessee furnished adequate explanation about the incriminating material which has not been controverted by the Assessing Officer. In view of these facts, no addition can be made. (v) The books of account of the assessee are audited and the cost of construction in the books of account are accepted by the Assessing Officer. Once the books are accepted and assessee h....
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....f project method of accounting and completed the first project and declared some profits. It showed the cost of the construction of the first project at Rs. 39,69,440. The Assessing Officer referred the matter to the Departmental Valuation Officer to determine the cost of construction whose report showed the cost at Rs. 19,99,559. On the basis of the report the cost of construction was adopted. The Assessing Officer accepting the lower cost of construction than what was shown by the assessee made an addition of Rs. 19,69,881. The Commissioner (Appeals) confirmed the action of the Assessing Officer. The Tribunal reversed the decision the ground that it was not permissible for the Assessing Officer to refer the matter to the Departmental Valuation Officer for obtaining the cost of construction. The Tribunal held that even with the insertion of section 142A with retrospective effect from November 15, 1972, this course of action was not open to the Assessing Officer as the provision did not deal with unexplained expenditure under section 69C. On appeal : Held, dismissing the appeal, that the Assessing Officer for the purpose of getting himself satisfied about the purported unexplained....
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....ssing Officer that the documents were recorded in group entities which is available on the paper book. The Assessing Officer has nowhere given any finding that assessee's explanation is not correct. In these circumstances, Hon'ble Supreme Court judgment in the case of Sargam Cinema (supra) and Aar Pee Apartments (P.) Ltd. (supra) are very much applicable. Such a reference cannot be made under section 142A. (ix) The assessee's documents and explanation before the CIT(A) were duly forwarded to the Assessing Officer for comments; in the remand report, Assessing Officer has only insisted on his earlier stand without elaborating anything further. Therefore, in remand also, Assessing Officer has failed to justify reference under section 142A which is bad in law. (x) Assuming even that reference under section 142A is proper, the DVO's report is totally unreliable. The assessee was constructing a mall under the supervision of its group entities. The purchase of cement and steel were in bulk at competitive rates. Besides the valuation is bereft of quantity and measurement of construction. DVO instead of giving an objective valuation has merely adopted CPWD rates on flat ....
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.... some seized documents which we shall deal later. There is no reference to any specific order by the Assessing Officer rejecting the books, section 145(3) reads as under:- "Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144." 15. In this case, neither the Assessing Officer has asked the assessee any question about the assessee's books of account or method of accounting being defective nor asked to assess under section 144. For rejecting the books, assessee who has appeared and cooperated in assessment proceedings is to be called on to explain the discrepancies, incorrectness or incompleteness. The question of rejection will be tenable when assessee's explanation is property considered following by a finding that the books are incomplete, incorrect or method of accounting is not regularly followed. In this case, assessee has given a proper explanation about seized doc....
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....the Sections read as under:- "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year." 18. Se....