AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (3) TMI 28
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....e Ld. CIT (A) has erred in law and on facts in deleting addition of Rs.60,79,673/- even though there is no adverse adjudication of valuation reference u/s 142A and there is no material in support of the claim of the assessee to substantiate the valuation/ investment as disclosed before the A.O. 4. 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." The ground raised in assessee's cross objection reads as under :- "That on the facts and in the circumstances of the Respondent's case, the learned Commissioner of Income Tax (Appeals) erred in law in upholding validity of reference to Valuation Officer under section 142A of the Income Tax Act, 1961, to estimate the value of investment made on purchase of immovable property." 2. The assessee is an individual and proprietor of M/s. Y Kapur Enterprises which is engaged in the business of manufacturing and exporting readymade garments. A search and seizure operation was carried out under section 132 of the Income-tax Act at the residential and business premises of the assessee on 14.02.2007. Notice under section 153A of the Income-tax Act was issue....
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....t. In the case of CST vs. Ashok Khetrapal - 294 ITR 143 (Del.), the Hon'ble Delhi High Court also held that during the search under section 132 no incriminating material was found indicating that assessee had made higher investment in property than disclosed. No undisclosed income could be assessed on the basis of difference between investment declared in sale deed and value estimated in the DVO's report. 5. In the cross objection, the assessee has challenged the validity of reference to the valuation officer u/s 142A of the Income-tax Act to estimate the value of the investment in the purchase of the property. Since assessee had challenged the very basis of reference to the DVO which goes to the root of dispute, therefore, we will first decide the cross objection of the assessee. The learned AR submitted that it is an admitted fact that no incriminating documents were found and seized during the course of search operation with regard to the purchase of farm house. There was no evidence before the Assessing Officer prior to referring to DVO that the value of the property was under-stated in sale deed. It was only the Assessing Officer himself who felt that the price of the acquisi....
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....'ble High Court has emphasized that without rejecting the books in which cost of construction has been recorded as defective, untrue and wrong, it is not permissible to make a reference. Thus, judicious application of mind is sine qua non for a valid reference and this action does not permit roving and fishing enquiries. This principle has been enunciated in the cases of Sri Har Sarup Cold Storage & General Mills vs. ITO - 27 ITD 1 (Delhi) (TM), ACIT vs. Smt. P. Appayamma - 66 Taxman 104 (Mag.)(Hyd.), ITO vs. Dr. K. Rami Reddy - 48 ITD 377 (Hyd.), Sri Venketraju Modern Boiled & Raw Rice Mill vs. ACIT - 57 TTJ 493 and M. Selvaraj vs. ITO - 258 ITR 82 (Chennai). He also pleaded that first step is the consideration of the books of account, the second step for resorting to an estimate comes only when the books of account are rejected and without fulfilling the first step, the Assessing Officer has no power to straightaway jump to the next step of making an estimate. It is not justified to first obtain a report from the valuation cell and then inform the assessee that the admitted cost or investment is on lower side and the difference will be treated as unexplained investment. Without a....
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....oposition he relied on the following decisions :- (i) CIT vs. Ramesh Kakkar - ITA 1550 /2010 (ii) CIT vs. Madan Lal Dawar - ITA 1554/2010 (iii) CIT vs. Bhagirath Aggarwal - ITA 1551 /2010 & 1555 / 2010 (iv) CIT vs. Manoj Jain - (2006) 287 ITR 285 (Del.) (v) CIT vs. Shakuntala Devi - (2009) 316 ITR 46 (Del.) (iv) CIT vs. Bajrang Lal Bansal - (2011) 335 ITR 572 (Del.) (vi) CIT vs. Mahesh Kumar - (2011) 196 Taxman 415 (Del.) 6. On the other hand, the learned DR relied on the order of the Assessing Officer. 7. We have heard both the sides at length. It is undisputed fact that no incriminating documents were found and seized in the search operation with regard to the investment in the property, i.e., farm house at Ram Mandir Road, Village Mehrauli, New Delhi. The CIT (A) disposed of the ground no.2 in which this contention was raised by the assessee in para 7 of his order as under :- "7. I have considered the documents, facts and explanation submitted by the appellant against the reference made under section 142A of the Income tax Act, 1961 by the AO during the course of assessment proceedings. The appellant submitted that the reference made by the AO is bad in law as the AO m....
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.... shown by the assessee has not been rejected. The Hon'ble Rajasthan High Court in the case of CIT vs. Pratapsingh Amrosingh Rajendra Singh held as under :- " In respect of investment made in property, there can be only two methods to find out the correct position - (i) examination of books of account which have been maintained properly and (ii) valuation report. If the assessee has maintained proper books of account and all details are mentioned in such books of account, which are duly supported by vouchers and no defects are pointed out and the books are not rejected, the figures shown therein have to be followed. The valuation report can be taken into consideration only when the books of account are not reliable or are not supported by proper vouchers or the Incometax Officer is of the opinion that no reliance can be placed on such books of account. It is true that the Income-tax Officer has no option but to rely on the valuation report which is a document prepared by an expert and is admissible, but there must be a finding by the Income-tax Officer that the books of account maintained by the assessee are defective or are not reliable. There may be a marginal difference in the a....
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....is only when such burden was discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. The opinion of the District Valuation Officer, per se, was not an information and could not be relied upon without the books of account being rejected which had not been done in the assessee's case. Moreover, there was no evidence found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the return of the respondentassessee." The Hon'ble Delhi High Court in the case of CIT vs. Mahesh Kumar held as under :- "Unexplained investments - Assessment year 2004-05 - Assessee had purchased two plots for Rs.2 lakhs and Rs.3 lakhs, respectively - A search operation was conducted on assessee's premises - No incriminating document or material was found or seized during search operation in respect of aforesaid two plots purchased by assessee - However, Assessing Officer referred those two plots for valuation under section 142A - On basis of valuation report submitted by DVO, Assessing Officer made certain addition to assessee's income - On appeal, Commissioner (Appeals) deleted a part of tha....
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....ied." In our considered view, the issue is covered in favour of assessee by various decisions of Hon'ble jurisdictional High Court. In view of these facts, we allow the cross objection filed by the assessee. 8. In the revenue's appeal, the only issue involved is deleting the addition of Rs.60,79,673/- made by the Assessing Officer as unexplained investment in land and construction on the basis of valuation report of the DVO. 9. The CIT (A) has allowed the appeal of the assessee by holding as under:- "I have considered the documents filed by the appellant before the A.O. and placed on the records. ON perusal of the submission made before me, it is quite evidence that the learned assessing officer has not considered some objections put forth in the reply furnished by the appellant in respect of valuation of the property. I have also perused the details of working comparing head-wise investment as per valuation report of VO and valuation report of registered valuer filed by the appellant and placed at page no 220 of the paper book. On perusal, it is quite evident that the appellant agreed with the estimation made by VO almost under all the heads except valuation in respect....
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....rity cannot be basis of estimation of value of land. On the other hand, I find force in the submission made by the appellant that the valuation of land as per the registered valuer is more proper, reliable and scientific as he has considered three sale instances of the similar locality and then further appreciated and depreciated the value of land as per the norms of valuation for time gap and location advantage and then taken average mean rate for the purpose of valuation of land of the appellant. The VO has also failed to appreciate and depreciate the value of land as per the norms of valuation for time gap and location advantage. I hereby rely on the valuation of land estimated by the registered valuer as just, reasonable and scientific and grant relief the appellant of Rs 45,99,803/- being difference of estimation of cost of construction estimated by the registered valuer and VO after adjustments made by the AO in respect cost of land. In my opinion, the AO erred in denying the explanation furnished by the appellant in respect of cost of construction of Building - 2 without any basis and only on the presumption and assumption that the Building - 2 was existed in the same condi....
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....rely on the valuation of boundary wall estimated by the registered valuer as just and reasonable and grant relief the appellant of Rs 2,93,540/- being difference of estimation of cost of construction estimated by the registered valuer and VO in respect cost of construction of Boundary wall. I have considered the rival position carefully. In the case of Dinesh Jain v DCIT [2009] 34 SOT 444 (ITAT Delhi) the jurisdictional IT AT (Delhi) held as under: "We have considered the rival contentions and carefully gone through the orders of the authorities below. From the record, we found that on the basis of sale deed found during the course of search in respect of purchase of various properties, the Assessing Officer found that assessee was in receipt of rental income in respect of these properties. As per Assessing Officer, the disproportionate yield of income from these properties indicates that the amount invested has been suppressed. Accordingly, he applied provisions of Rule 3 of Part (b) of the 3rd Schedule to the Wealth-tax Rules for the purpose of determining the fair market value of these properties. The Assessing Officer also made a reference to the DVO, as the reference was made....
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....In view of the above discussion, we do not find any merit in the addition made by the Assessing Officer under the head 'Unexplained investment' on account of various properties purchased by the assessee during the block period on the basis of fair market value as estimated by the Assessing Officer. All these additions are directed to be deleted. " Moreover, the jurisdictional High Court of Delhi in the cases of Commissioner of Income tax v Prem Nath Nagpal [2007] 214 CTR 51 (High Court - Delhi), has been held that during the search some papers indicating ownership of certain property were found. No document was found indicating understatement of purchase price. There was no document found which could indicate understatement of cost of improvement. No assessment of undisclosed income could be made on alleged understatement, on the basis of DVO's report and Commissioner of Income tax v Ashok Khetrapal [2007] 294 ITR 143 (High Court - Delhi) also held that during the search under section 132 no incriminating material was found indicating that assessee had made higher investment in property than disclosed. No undisclosed income could be assessed on the basis of difference between inves....