TaxTMI 
TaxTMI 
2021 (4) TMI 684
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....t. 2. On the facts and circumstances of the case, Ld. CIT(A) erred in directing the Assessing Officer to provide deduction/set off of the addition made u/s 69B of the Income Tax Act, 1961 in view of the spirit of section 115BBE of IT Act, 1961. 3. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal. Assessment Year 2014-15 (1) On the facts and in the circumstances of the case, the Id. C[T(A) erred in deleting the addition of Rs. 6,60,08,850/- made by the Assessing Officer on account of undisclosed investment u/s 69B as per DVO's report. (2) On the facts and in the circumstances of the case, the Id. CIT(A) erred in Directing the Assessing Officer to provide deduction/set off of the addition made u/s 698 of the Income Tax Act,1961 In view of the spirit of section 115BBE of the Income Tax Act, 1961. (3) On the facts and in the circumstances of the case, the Id.CIT(A) erred in allowing relief of Rs. 21,50,000/- to the assessee against the addition made by the Assessing Officer on account of unexplained investment u/s 69 of the Income Tax Ac....
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....partnership firm and filed its return of income at Rs. 41,42,380 and Rs. 3,31,17,300/- for Assessment Year 2013-14 and 2014-15 respectively. The books of accounts are audited and TAR is filed. A search was conducted on the Signature Group on 29.1.2014 and in the course of which search was also undertaken on the assessee. No incriminating material was found during the course of the search. However, the assessee surrendered the additional income of Rs. 2.25 crores in the statement recorded u/s 132(4). The assessee offered this income in the return for the A.Y. 2014-15. In the course of the assessment proceedings all the information as required by the AO from time to time was furnished. The assessee is in the business of real estate, builders and developers. The assessee during the relevant period was developing a residential complex in the name of Virasha Heights. The expense incurred on the purchase of land and construction expenses on the project were the business expenses of the assessee. The assessee had maintained regular books of account in which all the expenses including the cost of construction were duly recorded. These books were presented before the AO during the course of....
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.... the lower authorities we find that verbatim similar issue and the grounds are raised in the case of another group concern M/s Signature Builders in IT(SS)A No.184 to 186/Ind/2018 wherein we have confirmed the view of Ld. CIT(A) deleting the addition for undisclosed investment u/s 69B of the Act based merely on the basis of Departmental Valuation Report and no incriminating material found during the course of search for the alleged unexplained investment observing as follows:- 44. We have heard rival contentions and perused the records placed before us and carefully gone through the orders of Ld. CIT(A) as well as the submissions and various case laws relied and referred to by Ld. Counsel for the assessee. Revenue's sole grievance through Ground No.1 raised in its appeal for Assessment Year 2012-13 to 2014-15 is with regard to the finding of Ld. CIT(A) deleting the addition on account of undisclosed investment u/s 69B of the Act which was made by the Ld. A.O towards the difference in cost of investment in the projects Signature Residency shown in the books of accounts vis-a-vis estimated by the Departmental Valuation Officer calculated at Rs. 2,73,48,559/-,Rs. 5,32,58,155/....
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....ed as shown in the books. 46. The issue before us can be summarised in a question that "whether the Ld. A.O was justified to make addition for undisclosed investment in construction of building projects solely on the basis of Departmental Valuation Report without rejecting the books of accounts and without brining on record any material evidence to prove such unaccounted investments in the case of the assessee who was subjected to search u/s 132 of the Act." 47. We observe that Ld. CIT has dealt with the issue in detail examining the facts and also referring to various judgments squarely applicable on the instant issue raised before authorities. The relevant extract of Ld. CIT(A) finding is reproduced below:- "5.8 As far as merit of this issue is concerned AO made addition of Rs. 99,82,487/-, Rs. 2,73,48,559/-, Rs. 5,32,58,155/- and Rs. 4,38,32,956/- in the year A.Y 2011-12 to 2014-15 towards difference in cost of investment in the project "Signature Residency" shown in the books vis-a-vis estimated by ova. This is an undisputed fact that the impunged addition was made solely on the basis of valuation report and A.O. did not bring any positive material or....
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.... the assessee were never rejected by the Department. 7. In the case on hand, it is beyond any cavil that the books of account furnished by the assessee were never rejected. No explanation was called for from the assessee stating that there was concealment or understatement of amount in the books of account. The initial burden cast on the Department to prove that there was understatement or concealment of income has not been discharged and, therefore, the Assessing Officer is not empowered to refer the matter to the Departmental Valuation Officer or rely on such report. 8. 'The above said view of this court is fortified by the following decisions: (i) In Sarqam Cinema v. CIT {2010/328 ITR 513[2011]197 Taxman 203, the Supreme Court has held as under (page 514) : "In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books w....
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....aluation Officer, whose evidence was not found during course of search - Held, yes - Whether, in instant case, since nothing was found during search in assessee's premises with regard to investment in house, Tribunal was justified in deleting additions made by Assessing Officer on account of unexplained investment in construction - Held, yes CIT Vs. Manoj Jain287 ITR 285(Delhi)- section 158BC of the Income-tax Act, 1961 - Block assessment in search cases - procedure for - Tribunal having found as a fact that search on assessee's premises did not lead to seizure of any incriminating evidence to Suggest that any income had not been or would not have been disclosed for tax purpose, deleted addition made by Assessing Officer on basis of report of valuation Officer in regard to twO of properties purchased by assessee - Whether in view of clear finding of fact by Tribunal no substantial question of law arose for consideration - Held, yes (5) (IT Vs. Sadhna Gupta352 ITR 595 (DelhiJ- section 69B of the Income-tax Act, 1961 - Undisclosed investments llnvestment in property] - Assessment year 2007-08 _ Whether, where there was no other mat....
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....ese v ITO (1981) 131 ITR 597/7 Taxman 13(SC). The Commissioner of Income Tax (Appeals) held that the addition had been made on the basis of the valuation report without there being any other material to indicate that any extra consideration had passed in respect of the said purchase of property. Thereafter, the revenue, being aggrieved by the order passed by the CIT(Appeals),preferred an appeal before the Tribunal which has been dismissed by the Tribunal by confirming the deletion made by the CIT (Appeals). 4. The only point to be considered is whether the valuation rendered by the DVO is to be taken into account or not. It has been argued by the learned Counsel for the revenue that the assessing officer was justified in referring the matter to the DVO for an opinion with regard to the fair market value of the property and once that opinion has been rendered, the some has to be taken into account and if mot were to be so, the addition of Rs. 2,81,83,000/- would be fully justified. Consequently, it was submitted by the learned counsel for the revenue that the Tribunal had erred in deleting the addition. On the other hand the learned counsel for the respondent referred to a ....
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.... addition con be mode solely relying upon report of Departmental Valuation Officer - Held, no [Para 5) 1. Revenue in this appeal under Section 260A of the Income Tax Act, 1961 ("Act" for short) impugns order dated 25.06.2010, passed by the Income Tax Appellate Tribunal in the case of M/s Labsa Construction Pvt Ltd.' on the ground of perversity. The appeal pertains to the Assessment Year, 1999-2000. (incorrectly mentioned in the impugned order as assessment year 2006-07). 2. Property in question bearing No.C-20, NDSF, South Ex., Part-II, New Delhi had two sellers. The respondent/assessee- Lahsa Construction Pvt. Ltd. had sold 50 shale of the property in favour of Mrs. Madhu Arora, whereas the second group of owners consisting of four individuals had sold 50 of the property in favour of Mrs. Madhu Arora and her husband Mr. Om Prakash Arora. 3. It is stated by the counsel for the respondent that Revenue had accepted the order of the Tribunal in the case of said four individual> as addition was mad' solely on the report of the Departmental Valuation Officer,. This statement is not controverted or' accepted by the counsel for the Revenue as he has ....
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....under section 69 of the Act is that there is a difference in the cost of construction as determined by the Valuation Officer and as shown by the assessee. At no stage of the assessment proceedings does the assessing officer appear to have mentioned that the books of accounts are defective or that the cost of construction as shown in the books of account is not the true cost of construction. Thus, while making the reference to the valuation officer, the assessing officer has not recorded any defect in the books of account nor has he rejected the same. Except for the difference in the estimated cost determined by the Valuation Officer and the actual cost as shown by the assessee, the assessing officer has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that books of account do not reflect the correct cost of construction. Under the circumstances, there was no occasion for the assessing officer to make a reference to the Valuation Officer. As held by the Supreme Court in the case of Sargam Cinema (supra) unless the books of accounts are rejected, the assessing officer cannot make ....
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....d investment in project "Signature Residency". Most importantly, AO has not even rejected the books of accounts even alter receipt of valuation report. In view of these facts, valuation report obtained from DVO cannot form a foundation ipso facto for making addition towards alleged suppression of cost of investment. Neither DVO nor AO has pointed out that certain expenditure on certain items/construction was incurred which was not recorded in the books maintained by the assessee. Hence, additions made by AO is not sustainable in law being based merely on valuation report received from DVO. ii) The A.O. has not mentioned any reason in the assessment order or in the reference to the valuation, that he had any incriminating material which led to form his belief that the appellant had under slated the cost of construction referred for valuation. It is very relevant to understand that the appellant was subjected to search and seizure ac1ion u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment in the project "Signature Residency". Lack of any incriminating material/evidence regarding under reporting ....
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.... v/s Nilesh meheshweri (2011) 53 DTR 43 (ITAT Jaipur). In view of this, a difference of 20 between cost shown in books and estimated by DVO falls within 'tolerance band' as held by various courts. Further, appellant purchased material on wholesale basis which brings 'economy of scale' into construction cost which as per appellant would result into savings upto 25. AO has acknowledged this aspect but did not provide any relief while making addition. Appellant has also argued about savings in cost of construction for other reasons as well i.e. self-supervision. consultancy charges etc. however. AO failed to allow any benefit to the assessee on any of the count which is not justified. I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts of the assesse. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 5.8 of this order. it is pertinent to refer to the decision of ITO v Is Dreamland enterprises 80 Taxmen 143 (ITAT Ahd)....
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....at DPAR rates adopted by DVO are higher than PWO rates. Hon' ble High Court of Rajasthan in the case of CIT v Is Prem Kumari Murdiya 296 ITR 344 (Raj) refused to interfere in the order of IT AT holding that appropriate rate to be taken into consideration would be PWO rates and holding difference between CPWO rates and PWO rates at 20. Similarly, in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur) held alter relying on the decision of Tek Chand v/s ITO 51 TTJ (JPR) 607 that there is variation in local PWD rates and CPWD rate by margin of 20. It has been held in the case of CIT v/s lahsa Construction (P) Ltd (2013) 357 ITR 671 (delhi) that no addition can be made solely on the basis of valuation report of OVO. Ld AR also placed reliance on the decision of CIT v/s VS Pralap Singh Amro Singh (1993) 200 ITR 788 (Raj) that addition to income could not be made on the basis of the report of the Valuation Officer. 5.11 As far as case laws relied upon by the A.O. are concerned, on perusal it is seen that none of the case laws relied upon by the A.O. are applicable to the facts of this case. The case laws referred by AO are as under:- a. CIT v ompraka....
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.... Thus it would be seen that the said judgment has no applicability to the case of the assessee. CIT v A O Ali Mohammad 296 ITR 570 (Mad) The issue in this case was that the DVO had estimated the cost of construction at Rs. 64,88,000/- as against recorded cost of Rs. 47,42,629/-. The addition mode was restricted to Rs. 9 lokh and too was, directed to be spread over 0 period of 5 years by the CIT(A) and the ITAT both. This was challenged by the deportment before the High court and the court held that ''The valuation is not a mathematical precision and there is bound to be difference between one valuer to another valuer and it is, only a pure question of fact" CIT vs, P. Mohonokala (2007) 210 CTR (SC) 20 : (2007) 291 1TR 278 (SC), referred to by the High Court held "that whenever there is a concurrent factual finding by the authorities below, the some should be accepted and no interference should be called for by the High Court" Thus it would be seen that the issue before the High court was, entirely different 5.12 In view of the above discussion, I do not find any merit in the addition 01 Rs. 99,82.487/-, Rs. 2,73.48,559/-....
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....r Assessment Years 2012-13, 2013-14 and 2014-15 respectively. We accordingly confirm the finding of Ld. CIT(A) on this issue and dismiss Revenue's common Ground No.1 raised for Assessment Years 2012-13, 2013-14 and 2014-15 in ITA No.174 to 176/Ind/2018. 7. We therefore taking a consistent view and respectfully following the decision of this Tribunal in the case of another group concern M/s Signature Builders (supra) dismiss revenue's Ground No.1 for Assessment Year 2013-14 and Ground No.1 for Assessment Year 2014-15. 8. As regards second Ground commonly raised for Assessment Year 2013-14 and 2014-15 revenue has challenged the finding of Ld. CIT(A) directing the Ld. A.O to provide deduction/set off of the addition made u/s 69B of the Act in view of Section 115BBE of the Act. Since we have already confirmed the finding of Ld. CIT(A) deleting the addition made by Ld. A.O u/s 69B of the Act this common ground No.2 raised for Assessment Years 2013-14 and 2014-15 becomes infructuous and thus deserves to be dismissed. We accordingly dismiss Ground No.2 for Assessment Years 2013-14 and 2014-15 raised by the revenue. 9. Ground No.3 raised by the revenue for Assessment Year 2013-14 ....
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.... entries appearing in the loose paper and marked as (W) are corroborated by independent evidence. There is a corresponding entry 01 Rs. 9.60. Rs. 11.50 against the land purchased wherein the amounts are recorded with a letter (c) which has been inlerred by the AO as the cash portion paid tor purchase 01 the lands under consideration and is deciphered to have been mentioned in lakh. The assessee had contended that the amount mentioned as (c) represents the commission payable to Mr. Mukesh Shah, a broker for arranging a customer for purchase of the land under consideration as the assessee was not able to commence any project on the land. The submissions 01 the assessee are not very convincing. It is seen that there is no mention 01 (c) in front 01 the land purchased from Mr. Kotwani tor Rs. 4.90 lakh which implies that the said land was being offered tor sale withoul commission. No broker would agree to make any transaction on behall 01 any customer without commission and thus the explanation 01 the assessee is not acceptable. Further a commission of Rs. 9.60 lac and Rs. 11.50 lakh is offered on a land purchased tor Rs. 27.15 lakh and Rs. 30.50 lakh making ....
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....d on 02.02.2014 in which he stated that the said firm has received cash amount outside its books, and cash payments have been made for land. The assessee has offered an amount of Rs. 225 lakh towards such income received and utilized in making unrecorded investment in land. The details of land purchased or the loose papers based on which the declaration was made is not specified in the statement recorded and hence it cannot be denied that the surrender made covered the investment in the lands under consideration. As the assessee has already offered Rs. 225 lakh towards investment in land in a general manner without reference to any specific land, credit for income declared in such declaration needs to be given, accordingly the amount of unexplained investment can be attributed to the disclosure made and no separate addition is warranted to be made for Rs. 21,50,000/confirmed in the above Para. This ground # 5 of AY 2014-15 of appeal is allowed. 13. From perusal of the above finding we observe that Ld. CIT(A) has given telescoping benefit to the assessee against the income surrendered during the course of search. Revenue failed to prove that the alleged surrende....
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.... under taken has confirmed on oath trough his affidavit that the purchaser was not known and was insisting that the payment if required to be made by cheque should be made in advance before the date of registration of the sale deed and the assessee not having much trust on the seller was not willing to make any payment in advance and as the purchase of property was negotiated at a very attractive rate and it was not advisable for the assessee not to purchase the land and to leave the transaction and hence the assessee was forced to make cash payment as demanded by the seller. Thus the identity of the sellers, the genuineness of the transaction and the exceptional circumstances warranting cash payment in the interest of business are duly established. Now the only issue which remains for adjudication is whether a genuine recorded transaction undertaken in cash in the best interest of the business and otherwise allowable can be disallowed only on a mere technical default. Reference in this regards is made to the decision of the Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO 59 taxmann.com 11 wherein the object of insertion of section 40A(3) and rule 6DD....