2016 (9) TMI 798

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....n short "the Act") on account of unexplained investment in immovable property without appreciating the fact that prior to referring the property in question to the Valuation Officer for estimating the cost of investment, the Assessing Officer had rejected the books of account of the assessee and duly recorded reasons for the same on 27.8.2012 and also made a note sheet entry on 27.8.2012. 3. The brief facts of the case are that the assessee is a manufacturer and retail trader of bakery items. The assessee has filed the return declaring a total income of Rs. 1,65,595/- plus agricultural income of Rs. 1,89,400/-. The assessment was completed on a total income of Rs. 60,83,530/- + Rs. 94,700/-. A search and seizure operation under section 132....

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....t by the assessee at Rs. 5,89,600/-. The Assessing Officer considering the ownership of the property in the joint names of the assessee and his wife, Smt. Tanushree Gupta, added 50% of the difference amounting to Rs. 16,50,800/- to the income of the assessee as unexplained investment. The DVO also estimated the cost of property situated at B-35, Sector P, Aliganj at Rs. 57,97,229/- as against the declared cost in construction/investment by the assessee at Rs. 16,24,791/-. The Assessing Officer accordingly added the difference amount of Rs. 41,72,438/- to the income of the assessee as unexplained investment, thus totaling addition of Rs. 58,23,238/-. 6. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who was pleased to de....

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....used the record. The contention of the ld. D.R. was that the books of account have been rejected by the Assessing Officer and in support of his submission the ld. D.R. has filed the reasons recorded by the Assessing Officer for rejecting the books of account as Annexure 'A', which is reproduced as under to see whether the ld. D.R.'s contention is correct or not:- "M/s Shyam Bakers and Namkeen shop at Pandey Tola-P Aliganj, Lucknow, this Property was purchased in November 2006. Tanu Shree Gupta and Ramu Gupta are the owner of this property and property situated at B-35, Sector-P, Aliganj, Lucknow also jointly owned by both of the assessee. Vide notice u/s 142(1) dated 13.07.2012 assessee was asked to produce complete bills and vouchers for ....

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....intained by the assessee in respect to the construction account of the subjected property whereas in our considered opinion, this partial satisfaction does not fulfill the condition precedent laid down in section 145(3) of the Act and so the aforesaid reason given by the AO cannot satisfy the requirement of law to reject the books of account of the assessee. The Assessing Officer, before referring the matter to DVO for valuation of the investment in the property, should have rejected the books of account of the assessee, that too after satisfying the conditions precedent as envisaged under section 145(3) of the Act and without doing so, as found by us, vitiates the reference made by the Assessing Officer to the DVO. In the case of Sargam Ci....