TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 561
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.... and submissions made before him even when nothing incriminating was found and seized related to the appellant from the possession of the person in whose case search was executed. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of notice as issued under section 153C of the Income Tax Act even when the notice was issued under section 153C of the Act without proper recording of satisfaction in dual capacity. 3. That on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in maintaining the addition of Rs. 12,39,521/- out of the total addition of Rs. 94,71,070/- as made by the assessing officer to the total income of the appellant on account of additional cost of construction/development incurred in the project without properly appreciating the facts of the case and submission made before in and merely on the basis of report of the DVO even when the said assessment year was a non-abate assessment year and addition could have been made only on the basis of incriminating documents as found and seized. 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) e....
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....,11,330/- out of the total addition of Rs. 2,02,26,080/- as made by the assessing officer to the total income of the appellant on account of additional cost of construction/development incurred in the project without properly appreciating the facts of the case and submission made before in and merely on the basis of report of the DVO even when the said assessment year was a non-abate assessment year and addition could have been made only on the basis of incriminating documents as found and seized. 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of Rs. 32,11,330/- out of the total addition of Rs. 2,02,26,080/- as made by the assessing officer to the total income of the appellant by referring the matter to the DVO for estimation of the cost of construction/development incurred in the project without pointing out any specific defects and also without rejecting the regular books of accounts as maintained by the appellant. 5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintain the addition of Rs. 32,11,330/- to the total income of the appellant on account of additio....
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....aining the addition of Rs. 62,69,716/- out of the total addition of Rs. 3,96,64,189/- as made by the assessing officer to the total income of the appellant by referring the matter to the DVO for estimation of the cost of construction/development incurred in the project without pointing out any specific defects and also without rejecting the regular books of accounts as maintained by the appellant. 5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintain the addition of Rs. 62,69,716/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision. 6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceed....
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....s incurred by the appellant at Rs. 6,45,09,766/- only whereas correct amount of construction/development expenses as actually incurred by the appellant were of Rs. 7,75,17,766/-. 7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of Rs. 36,67,707/- out of the total addition of Rs. Rs. 3,28,86,624/- as made by the assessing officer to the total income of the appellant by referring the matter to the DVO for estimation of the cost of construction/development incurred in the project without pointing out any specific defects and also without rejecting the regular books of accounts as maintained by the appellant. 8. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintain the addition of Rs. 36,67,707/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision. 9. That o....
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....icer has rightly taxed the additional income admitted by the assessee during the course of survey u/s 69B of the Act. 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. As the issues raised in these appeals are mostly common and relate to same assessee, at the request of both the parties, these appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. 2. Brief facts as culled out from the records are that the assessee is a partnership firm formed on 01.03.2012 engaged in the business of real estate. Search action u/s 132 of the Act was conducted at the various premises of the group on 05.10.2015 and thereafter survey action was also conducted at the business premises of the assessee. Subsequently, notices u/s 153C of the Act were issued on 15.11.2016 for AY 2012-13 to 2015-16. Notices u/s 143(2) & 142(1) of the Act were issued and duly served upon the assessee. Various details were called for by the Assessing Officer which were replied by the assessee. During the course of assessment proceedings, reference was made to Valuation Offi....
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....016-17 instead of section 153C r.w.s. 143(3) of the Act. 7. Brief facts relating to this issue are that date of search in the case of the group was 05.10.2015. The documents related to the assessee found during the course of search from the various premises of the group were handed over to the Ld. Assessing Officer of the assessee on 15.11.2016. The Ld. Assessing Officer however did not issue any notice u/s 153C of the Act for the AY 2016-17 and passed assessment order u/s 143(3) of the Act for the year under consideration. 8. The Ld. Counsel for the assessee submitted that no search was carried out at the business premises of the assessee and that the documents related to the assessee were found during the course of search carried out at the various other premises of the group. The Ld. Counsel contended that date of initiation of search in case of other person is the date on which books of accounts or documents or assets seized during the course of search are handed over to the Assessing Officer of the other person which in the present case was 15.11.2016 and not 05.10.2015 and accordingly, notice u/s 153C of the Act ought to have been issued and assessment order ought to have b....
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.... be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of ....
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....er considering the facts of the assessee's case and combined reading of Section 153C as well as Section 153A, in our opinion, the issue of notice under Section 153C for AY 2001-02 & 2002-03 is barred by limitation. Accordingly, we quash the same and consequentially, the assessment order passed in pursuance to the notice issued under Section 153C is also quashed." 3.4.3] That in view of the facts of the case and the decisions as referrred, it is clear that the date of search in the case of the appellant was 15-11-2016 i.e. the date on which notice under section 153C of the Act was issued and not the date on which search was actually executed on the person searched i.e. on 05-10- 2015. Hence, additions made till the Asst Year 2015-16 in absence of any incriminating material in possession of the assessing officer were not justified. 10. Per contra Ld. DR vehemently argued supporting the finding of both lower authorities. 11. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by both the sides. Through Ground Nos. 1 & 2, the assessee has challenged the finding of Ld. CIT(A) upholding the validity of assessmen....
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....ued as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules13 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in res....
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....r section 132 shall be construed as 15.11.2016 as per proviso to sub-section (1) of section 153C of the Act. Further, the documents seized during the course of search were handed over to the Assessing Officer of the assessee after the due date for furnishing the return of income for the AY 2016-17 and in respect of AY 2016-17, no return of income was furnished by the assessee and no notice under sub-section (1) of section 142 was issued before the date of receipt of the documents by the Assessing Officer having jurisdiction over the assessee i.e. on 15.11.2016. Therefore, on a conjoint reading of the provisions contained in section 153C of the Act, it seems that the Assessing Officer should have issued notice u/s 153C of the Act and should have assessed total income of the assessee of AY 2016-17 in the manner provided in section 153A of the Act. 12. We also notice that the issue of scope of section 153C of the Act came up before the Hon'ble Delhi High Court in the case of CIT-7 v. RRJ Securities Ltd. reported in [2016] 380 ITR 612 (Delhi) wherein Hon'ble High Court held that: "24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date o....
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.... a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year." 13. We further would like to refer to the judgment of Hon'ble ITAT Delhi 'F' Bench in the case of Rajeev Behl Vs. DCIT Central Circle-15, New Delhi (ITA nos. 1927 to 1931/Del/2015) wherein Hon'ble Coordinate Bench discussed the aforesaid issue at length and held that: "34. The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned dec....
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....TAT Delhi 'F' Bench in the case of M/s R.L. Allied Industries Vs. ITO Ward-20(1), New Delhi reported in [2015] 54 taxmann.com 222 (Delhi - Trib.) has held that: "8. Thus, as per Section 153A(1)(b), the Assessing Officer is empowered to assess or reassess the total income of the six assessment years immediately preceding the assessment year relevant to the assessment year in which search is conducted. Thus, in other words, he has to assess the search year and six preceding years. As per proviso to Section 153C, for the purpose of Section 153C, the date of receiving the books of account or documents shall be considered the date of search. Therefore, with the combined reading of proviso to Section 153C and Section 153A(1)(b), it is clear that in the case of the person in whose case action is required under Section 153C, the Assessing Officer is empowered to take action under Section 153C for the year in which the seized document is received by him and the preceding six years. In the case under appeal before us, as mentioned by the Assessing Officer in paragraph 2 of his order, the seized material was received on 12th March, 2009 from ACIT, Central Circle-17. Thus, the year in which ....
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....e issued for AY 2010- 11 to AY 2015-16. 17. The Ld. Counsel for the assessee vehemently argued that seized documents referred to by the Ld. Assessing Officer in his satisfaction note which also formed part of the paper book from Page No. 424 to 470 were not at all incriminating in nature. The Ld. Counsel contended that loose papers inventoried as LPS-2 and LPS-7 consisted of permissions and diversion letters in respect of project undertaken by the assessee which had no financial impact. He further submitted that document found from the mobile phone of Shri Rasmeet Singh Malhotra represented the balance of Rajesh Agrawal HUF which was duly incorporated in the books of accounts of the assessee. The Ld. Counsel for the assessee also strongly contended that no addition whatsoever was made by the Ld. Assessing Officer in respect of the so-called incriminating documents related to the assessee which were found during the course of search and therefore, the Ld. Assessing Officer did not assume valid jurisdiction u/s 153C of the Act. The Ld. Counsel further submitted that assessment years till AY 2015-16 were non-abate assessment years and therefore, no addition was called for to the tota....
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....ot related to the person searched but in fact pertain to the other person 3.2 The assessing officer of the person searched must record his satisfaction about these documents 4 Documents related to the other person should be handed over to the assessing officer of the other person 5 The assessing officer of the other person should first verify the nature of documents and reach to a conclusion that these are incrimanting in nature, record his satisfaction and then issue notice under section 153C of the Act 1.4.2] That in the present case in hand, the assessing officer referred the loose papers as found and seized during the course of survey from the business premises of the assessee itself. That nothing incriminating was found and seized from the premises of the person searched. That in Para 7.1 on inner Page No 4 of the assessment order, the loose papers as found during the course of survey was referred. Hence, notice now issued under section 153C of the Income Tax Act was prima facie not correct. 1.4.3] That in the present case in hand, the assessing officer has not referred to any documents which were found in possession of the person searched and not found recorded i....
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.... of the order, the position that emerges there from is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19) We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." 1.6] That in view of the above discussion, it is clear that even in the present case in hand, nothing incriminating was found pertaining to the appellant during the course of search as executed under section 132 of the Act and therefore the assessing officer was not having vali....
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....eassessments without any fetters, if need be. 23. We are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open." 3.6.2] That Hon'ble Delhi High Court in the case of CIT vs Smt Suraj Devi reported in 328 ITR 604 has held that (Refer Para 7): "7. Moreover, in the present case, no evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed. A reading of para 3.4.1 of the AO's order does not disclose that the respondent-assessee had made any admission in her alleged statement under s. 132(4) of Act, 1961. In fact, no such statement has been produced before us. It is also pertinent to mention that no adjustment on account of sales consideration has been made by the Revenue in the case of the seller. Consequently, we find that no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed." ....
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.... Indore Bench in the case of M/s Anant Steels P Limited [IT [SS]A Nos 31, 28, 29& 30/ Ind/2010 dated 18-11-2015 as passed for the Asst Years 2001-02 to 2004-05] has held [refer para 16 and 17 of the order]: "16. We have heard rival contentions of both the parties. We have decided the issue that in absence of any incriminating material or documents seized during the course of search, the Assessing Officer cannot pass order u/s 153A r.w.s. sec. 143(3) of the I.T. Act in the case of Kalani Bros. in IT(SS)A No.71/Ind/2014 and others. The relevant portion of the order is reproduced hereunder: "8. In respect of 153A bad in law on the ground that original assessment proceedings u/s 143(3) was completed on 29.12.2006 (hereinafter referred as "original assessment order for ease of reference), the AO treated the said lease transaction as sale transaction and taxed the total security deposit receivable as sale consideration of sale of land. The addition made in the search assessment order pertained to the issue already dealt in the original assessment order i.e. lease transaction categorized as sale transaction. The fact that the aforesaid issue bears no relation to the any of the materia....
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....nating documents or undisclosed assets, etc. In these cases there was no incriminating document found and seized. No assessment proceedings were abated in these assessees. Thus assessments for these assessment years were completed on the date of search. The assessments were completed u/s 143(3) of the Act read with section 153A/153C of the Act after the search. There was no abatement of any proceedings in these cases for these assessment years in terms of second proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In a recent decision, Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/s 153A of the Act, only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the course of original assessment. In all these cases no assessments were pending on the date of search for thes....
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....uld have been completed earlier and secondly some incriminating material is found during the course of search relating to that assessment year. In the instant case, we find that there is no dispute to the fact that no incriminating material was found pertaining to assessment year 2007-08 and only the purchase documents in the shape of registered sale deed were found which were duly disclosed in the regular books of accounts. The Assessing Officer could not have reopened the assessment if in case the assessment has been completed earlier u/s 143(3) of the Act for the assessment year 2007-08 but this is not so in the case of the assessee because for the assessment year 2007-08 the return of the assessee was merely processed u/s 143(1)(a) of the Act which by no canon can be Anil Kataria IT(SS)A Nos.177 to 179,984, CO 49 & 163 to 165/2017 accepted as regular assessment and, therefore, the Assessing Officer had no occasion to examine the related transactions for the assessment year 2007-08. During the course of search, documents were found relating to purchase of property as well as incriminating material for undisclosed investment in construction of property which was sufficient enough....
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....he property on 16.09.2007; and that no evidence that after the purchase of the property on 16.09.2007 either any investment was made by the assessee or investment is found recorded in its books of accounts, either during the course of search of the assessee's residence and business premises, or thereafter during the course of assessment proceedings or even in the DVO's enquiry proceedings. 9.1 In the case of Abhinav Kumar Mittal (Supra), it was held that: ".......referred question of valuation of properties to DVO. On receipt of valuation report, Assessing Officer took into account difference in values as declared by assessee and as determined by DVO and added same to income of assessee as unexplained investments under section 69.The Appellate authorities deleted impugned addition made by Assessing Officer as no material was found in search and seizure operations to justify reference to DVO and the DVO's valuation was based on incomparable sales. Whether valuation arrived at by DVO was of no consequence Held, yes. Whether, therefore, appellate authorities were justified in deleting impugned addition made by Assessing Officer Held, yes [Para 6]" 10. Similarly, in the case ....
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....termined by DVO and added same to income of assessee as unexplained investments under section 69 Appellate authorities deleted impugned addition made by Assessing Officer No material was found in search and seizure operations to justify reference to DVO DVO's valuation was based on incomparable sales Whether valuation arrived at by was of no consequence Held, yes Whether, therefore, appellate authorities were justified in deleting impugned addition made by Assessing Officer Held, yes [Para 6]" 3.8.4]That Hon'ble Delhi High Court in the case of CIT Vs Nishi Mehra[2015] 56 taxmann.com 89/232 Taxman 111 (Delhi) deleted the addition emphasizing that no addition can be made only on the basis of report of DVO in absence of any corroborative evidences and held that: "Section 69B, read with section 158BA, of the Income Tax Act, 1961 Undisclosed investment (Immovable properties assessment in search cases) Block period 1986-87 to 1995-96 Whether opinion of DVO, per se, is not an information and cannot be relied upon in absence of other corroborative evidence Held, no. Whether where due disclosure of acquisition of properties had been made in course of regular assessments by assessee and ....
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....ade in respect of the so-called incriminating documents referred to by the Ld. Assessing Officer in the satisfaction note. We have gone through the satisfaction notes recorded by the Assessing Officer of the person searched and by the Assessing Officer of the assessee which have been placed on Page No. 420- 422 of the paper book. We have also gone through the loose papers seized during the course of search and inventorized as LPS-2 and LPS-7 which were referred to in the satisfaction notes and which have been placed on Page No. 424-469 of the paper book. These papers contain permissions and diversion letters in respect of project undertaken by the assessee which have no financial impact in the case of the assessee. Further, the document found from the mobile phone of Shri Rasmeet Singh Malhotra represents the balance of Rajesh Agrawal HUF which was duly incorporated in the books of accounts of the assessee. This fact is duly verifiable from the ledger account of Rajesh Agrawal HUF in the books of accounts of the assessee placed on Page No. 470 of the paper book. Therefore, it seems that the loose papers referred to by the Ld. Assessing Officer in the satisfaction notes were not inc....
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.... it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." 20. We further find that the similar issue also came up for consideration before the Hon'ble Jurisdictional High Court in the case of CIT v. Mechmen 11-C reported in [2016] 380 ITR 591 (Madhya Pradesh) wherein Hon'ble Jurisdictional High Court held that: "23. In the present case, the concurrent finding of fact recorded by the Appellate Forums is that, no satisfaction has been recorded by the Assessing Officer before issuing of notice under section 153C. Further, none of the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail." 2....
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.... 973,96,390 2016-17 3,19,46,677 464,94,366 Accordingly, the Ld. Assessing Officer worked out the excess cost of construction incurred by the assessee in various years as under: Assessment Year Excess cost of construction incurred as estimated by DVO 2013-14 94,71,070 2014-15 2,02,26,080 2015-16 3,96,64,189 2016-17 3,28,86,624 The assessee filed detailed objections before the Ld. Assessing Officer pointing out various discrepancies in the report submitted by the DVO. The assessee also challenged the CPWD rates adopted by the DVO in his report. However, the assessee failed to find any favour from the Ld. Assessing Officer who made additions of the above-mentioned amounts to the total income of the assessee u/s 69B of the Act on account of undisclosed investment in construction of project not recorded in books of accounts. 24. Aggrieved assessee carried the matter before the Ld. CIT(A) who partly deleted the addition made by the Ld. Assessing Officer on account of undisclosed investment in construction of project. 25. Now the assessee is in appeal before us in respect of the additions confirmed by the Ld. CIT(A) whereas the revenue is in appeal before us in re....
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....for the assessee further submitted that the Ld. CIT(A) during the course of first appellate proceedings allowed rebate to the extent of 30% i.e. 25% on account of CPWD and PWD rates and 5% on account of self-supervision and confirmed the balance amount of addition made by the Ld. Assessing Officer. The Ld. Counsel relied upon a table wherein additions confirmed by the Ld. CIT(A) vis-a-vis the correct position if the actual amount of cost of construction had been considered was computed and summarized as under: S.No Asst Year Actual cost of construct ion [in Rs] Cost of construct ion as declared by the appellant and considered by the AO [in Rs] Cost of construct ion as per DVO [in Rs] Differenc e as per AO [in Rs] Correct amount of difference [in Rs] Cost as estimated by the CIT(A) Difference as maintained by CT(A) 1 2012-13 NIL NIL NIL NIL NIL NIL NIL 2 2013-14 1,79,67,427 1,79,67,427 2,74,38,497 94,71,070 94,71,070 1,92,06,948 12,39,521 3 2014-15 3,64,89,754 3,64,89,754 5,67,15,834 2,02,26,080 2,02,26,080 3,97,01,084 32,11,330 4 2015-16 7,16,50,723 7,16,50,723 11,13,14,912 3,96,64,189 3,96,64,189 7,7....
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....sted with the specific discrepancies pointed out there in and also on account of rebate of CPWD and PWD rates and self-supervision which is as under: S.No Particulars Amount [Rs] Amount [Rs] 1 Valuation of cost of construction as considered by the DVO 33,93,60,000 Less Additional cost as considered by the DVO in the list of extra items in his report which were either not incurred or incurred but at a lower quantum 2.1 Expenses on account of leveling even when no such expenses were incurred 40,95,329 2.2 Expenses on account of Sewer estimated at Rs. 23,70,980/- whereasexpenses as actually incurred by the appellant were of Rs. 8,70,972/- 15,00,008 2.3 Expenses on account of Storm water drain expenses of Rs. 9,16,060/- even when no such expenses were incurred 9,16,060 2.4 Expenses on account of horticulture of Rs. 8,62,175/- whereas expenses as actually incurred by the appellant were of Rs. 3,83,916/- 4,78,259 2.5 Expenses on account of inter locking of Paver Block of Rs. 11,23,665/- whereas expenses as actually incurred by the appellant were of Rs. 5,49,090/- 5,74,575 2.6 Expens....
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....r solely on the basis of valuation report of the DVO more so when no incriminating material was unearthed during the course of search and seizure action which itself makes the addition unsustainable. The Ld. Counsel for the assessee relied upon the following written submission: "................................................ ................................................ RATE AS APPLIED BY THE DVO AND OTHER SPECIFIC DEFECTS IN THE VALUATION REPORT 5.10.1] The Departmental Valuation Officer in his valuation report considered the valuation of duplex row houses as constructed by the appellant as per DPAR-2012. The Departmental Valuation Officer applied the rate as applicable for residential six storeyed building of Rs. 14,500/- per SqMtrs [Inner page No 3 of CPWD rate book]whereas rate of residential duplex as constructed by the appellant was akin to Type-IV quarters and therefore applicable rate was Rs. 12,400 per SqMtrs [Inner page No 5 of CPWD rate book]. Thus, the rate as charged by the DVO was higher by Rs. 1,900/- per SqMtrs which in percentage terms is higher by 15.32%. This being an apparent mistake of adopting the wrong rate needs to be rectified by the DVO and va....
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....ed for the colony and considering the rate of Rs. 3,000/- per running SqMtrs, the cost of Boundary wall calculated comes to Rs. 12,36,000/- only.Hence, credit of additional cost of Boundary wall of Rs. 2,52,64,000/- requires to be allowed to the appellant. 5.10.9] That rate of material consumed as considered while calculating the CPWD rates are as under: S.No Items CPWD rates [refer Annexure 4 - 'Proforma for calculation of Cost Index' of CPWD rate book] Actual average rate Difference [in rate] Difference [in %] 1 Bricks 3,867 per 1000 piece 2,580 per 1000 piece 1287 49.88 2 Cement 587 per 100 kg 463.12 per 100 kg 123.88 26.75 3 Steels 4,669 per 100kg 3,964 per 100 kg 705 17.79 4 Tiles 467 per SqMtrs 338 per SqMtrs 129 38.17 5 Aggregate (Gitti) 1350 per m3 888 per m3 462 52.03% 6 Sand 1293 per m3 438 per m3 855 195.21% 5.10.10] That in view of the above, it is evident that corresponding rebate of excess cost of material as consumed also requires to be allowed while calculating the cost of construction of the duplex row houses of the appellant. REFERENCE TO THE DVO 5.11.1] The appellant has challenge....
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....(2000) 242 ITR 478 (Raj) relied on." 5.11.3] That Hon'ble Gujarat High Court in the case of Anand BanwarilalAdhukia Vs DCIT as reported in 75 taxmann.com 301 [2016] has held that: "Where Assessing officer had no cogent material available to satisfy himself about requirement of section 69, reference to valuer under section 142A could not have been made." 5.11.4] That Hon'ble ITAT Delhi Bench in the case of ITO Vs Rajeshwar Nath Gupta [Appeal No ITA No. 4295/Del/2005 dated 04.05.2008] has held that: "15. A perusal of the aforesaid provisions shows that section 142A is attracted, inter alia, where the assessee is found to have made investment outside the books of account or where any such investment made by him is not fully disclosed in the books of account. The condition precedent for making the reference by invoking the provisions of section 142A thus is that there should be something on record to show that the assessee in the first place has made such investment outside the books or the investment so made by him is not fully disclosed in the books of account and once this condition is satisfied, the quantum of such investment made can be ascertained by the Assessing Officer....
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....see had received anything directly or indirectly over and above the declared value of the shares, the addition made on account of deemed capital gains was not sustainable." 5.11.5] That Hon'ble ITAT Kolkata Bench in the case of Bithalnath Malia, Asansol Vs DCIT [Appeal No ITA No 15/ Kol/2013 dated 20- 02-2015] has held that:- "7. From the above discussion on the facts of the case and case laws considered by us, we are of the view, that in the present case the revenue could not establish that there is any material suggesting that the assessee paid any amount over and above the declared consideration. In term of the provisions of section 142A of the Act the reference to DVO can be made only when there is a requirement by the AO for making such reference and such requirement would arise when there is some material with the AO to show that whatever estimate or consideration declared by assessee is not correct or not reliable. The use of the word 'require' is not superfluous but signifies a definite meaning, whereby formation of mind even preliminary on objective basis by the AO is very much necessary. From the bare reading of assessment order, it does not suggest that there....
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....in. In other words, if the books of accounts are found to be correct and complete in all respect and no defect is pointed out therein and the cost of construction of building is recorded therein, addition referred u/s.142A (2) is not appropriate. Accordingly, we are of the considered view that in the present case when the Assessing Officer has not rejected the books of account by pin pointing any defects in the books of account reference to the DVO is not valid and, therefore, DVO's report could not be utilized for framing assessment even if such a report is considered to be obtained u/s.142A of the Act. Since reference to DVO being held as invalid, the assessment thereafter based on that DVO report also be invalid." 5.12] That from the above discussion ,it is evident that the assessing officer utterly failed in referring the matter to the DVO without pointing out towards any investment that was made by the appellant over and above what was disclosed in the regular books of accounts. 5.13] That in view of the above, the assessing officer was not justified in referring the matter to the DVO for estimating the cost of construction without rejecting the books of accounts as ma....
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....in the books of accounts as maintained by the appellant. Hence, there was no justification to refer the matter to the DVO for determination of the cost of construction. 5.15.2] Hon'ble Supreme Court in the case of Sargam Cinema Vs CIT [2010] 328 ITR 513 (SC) wherein their Lordship has held as under: " 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 were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived." 5.16.1] The appellant is engaged in the real estate business and constructed duplex row houses for sale. The cost of construction as declared by the appellant was properly incorporated in its regular books of accounts and was duly considered for calculating the profit on sale of these duplex row houses. 5.16.2] The cost of construction as....
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....nstruction. However, the assessee partly succeeded as the Ld. CIT(A) allowed rebate of 25% on account of difference in CPWD and PWD rates and rebate of 5% on account of self supervision thereby resulting in the following: S.No. AY Additions made by the Ld. Assessing Officer Relief allowed by the Ld. CIT(A) Additions confirmed by the Ld. CIT(A) 1 2013-14 94,71,070 82,31,549 12,39,521 2 2014-15 2,02,26,080 1,70,14,750 32,11,330 3 2015-16 3,96,64,189 3,33,94,473 62,69,716 4 2016-17 3,28,86,624 2,92,18,917 36,67,707 30. We further find that the during the course of hearing, Ld. Counsel for the assessee drew our attention to the following glaring mistakes committed by the DVO in his valuation report which in our view, are correctly pointed out: S. No Reasons 1 Cost of construction was estimated at Rs. 14,853/- Per Sq Mtr which in terms of Sq Ft calculated comes to Rs. 1,380/- per Sq Ft even when the registrar office expects cost of construction in village Piparia to be Rs. 8,500/- Per Sq Mtr which in terms of Sq Ft calculated comes to Rs. 790/- only. Hence, the cost of construction as adopted by Departmental Valuation Officer....
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....00,000/- whereas actual expenses as incurred by the appellant were to the tune of Rs. 16,00,000/- 6.8 The DVO in his report estimated expenses for Bore well of Rs. 7,50,000/- whereas actual expenses as incurred by the appellant were of Rs. 2,50,000/- only 6.9 The DVO in his report also estimated an amount of Rs. 8,47,000/- on account of M S gate which was used in duplex row houses and had already been considered in the construction cost as estimated by the DVO. Hence, separate addition for MS Gate is not justified 6.10 The DVO has estimated expenses on account of Construction of Swimming Pool of Rs. 20,00,000/- whereas actual expenses as incurred by the appellant were of Rs. 15,00,000/-only 6.11 The DVO in his report also added an amount of Rs. 1,75,00,000/- and Rs. 90,00,000/- on account of construction of boundary wall for full brick work and also for half brick work totaling to Rs. 2,65,00,000/- whereas only 412 running Sq Mtrs boundary wall was constructed and by considering the rate of Rs. 3,000/- per running Sq Mtrs, the cost of Boundary wall calculated comes to Rs. 12,36,000/- as against cost of boundary wall estimated by the valuation officer of Rs. 2,65,00,000/....
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.... are as below; i) Admittedly, the assessee company maintained its regular books of accounts supported by bills/vouchers and other records which were subjected to Audit. The AO has neither pointed out any defect in books nor brought any positive material on record to establish alleged unaccounted investment in project of appellant. Most importantly, AO has not even rejected the books of accounts even after 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 stated the cost of construction referred for valuation. It is very relevant to understand that the appellant was....
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....le court refused to interfere in the order of ITAT holding that appropriate to be taken into consideration would be PWD rates and holding difference between CPWD rates and PWD rates at 20-25%. Similar views have been expressed in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur). In view of this, a difference of 20-25% 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 25-30%. 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. v) 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 assessee. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for val....
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....-25%. Similarly, in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur) held after 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 20-25%. 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 DVO. Ld AR also placed reliance on the decision of CIT v/s VS Pratap 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. 4.2.9 In addition to above, appellant has also placed reliance on the following judgments:- * DCIT vs Anand Banwarilal Adhukia 75 Taxmann.com 302 (2016) * ITO vs Rajeshwar nath Gupta (Appeal No 4295/Del/2005 dated 04.05.2008) * DCIT vs Rohtas Projects Ltd (2010) 133 TTJ 89 (Lucknow)(UO) * CIT vs Anil Arora (ITA No 340/2015 dated 22.05.2015) (Delhi HC) * DCIT vs Bithalnath Malia (ITA NO 15/Kol/2013 dated 20.02.2015) Kol ITAT) * ITO vs CR Selvaraj (ITA 100/Mds/2015 dated 22.05.2015) (ITAT Chennai) 4.2.10 In view of the above discussion, the comparative picture of inve....
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....2014 dt05.08.2016 12.5% 20% 7 Biswa Mitra Singh vs Dy. CIT (2014) 23ITJ 413, (Indore Bench) 25% 8 DCIT Vs Anil Kataria IT(SS)A Nos 177,178,179/Ind/2016 dt 31-05-2018 10% 25% 9 Society for Advancement of Environmental Services vs. Addl. CIT ITA No. 537/LUC/09 dated 23.02.2010. 25% As observed by us in the preceding paragraphs wherein facts emanating out of the submissions made by the Ld. Counsel for the assessee, valuation report prepared by the Government approved registered Valuer as well as by the DVO clearly depict that the valuation of investment in construction of the project has been overstated and looking to the fact that the impugned row houses are situated in Village Pipariya, rates taken for the purpose of valuation are quite excessive. 34. We also find that the Hon'ble Jurisdictional Bench in the case of Shri Anil Kataria, Ratlam Vs. DCIT (Central)-1, Indore [IT(SS)A Nos. 163, 164 & 165/Ind/2016] has categorically discussed the similar issue at length and has held that: "22.............Apart from the above four mistakes pointed out by the learned counsel for the assessee, our attention was also drawn to the deduction given b....
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....ous Coordinate Benches consistently) 8,68,17,951 12,15,45,132 3 Correct valuation after considering rebate on account of difference in CPWD/ PWD rates @ 25% and on account of self-supervision charges @ 10% 22,57,26,673 4 Correct cost of construction shown by the assessee 23,69,68,970 5 Difference on account of unexplained investment in construction of project NIL 36. We accordingly hold that no addition was justified to the total income of the assessee on account of undisclosed investment in construction of project. We, thus, value the cost of construction at the actual cost of Rs. 23,69,68,970/- shown by the assessee. Accordingly, we set aside the findings of Ld. CIT(A) to the extent the Ld. CIT(A) confirmed the addition on account of undisclosed investment in construction of project. Hence, the assessee gets further relief in AYs 2013-14 to 2016-17 which is over and above the relief already allowed by the Ld. CIT(A) and therefore, the assessee gets relief of Rs. 12,39,521/- in AY 2013- 14, Rs. 32,11,330/- in AY 2014-15, Rs. 62,69,716/- in AY 2015- 16 and Rs. 36,67,707/- in AY 2016-17. Accordingly, Ground Nos. 5 to 9 of the assessee's app....
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....ngs of Ld. CIT(A). 42. We have heard rival contentions and perused the records placed before us. Revenue is aggrieved with the finding of Ld. CIT(A) in deleting the addition of Rs. 2,53,555/- and Rs. 3,74,000/- made by the Ld. Assessing Officer on account of unexplained cash received from Smt. Sunita Rai in these years respectively. We find that the impugned addition was deleted by Ld. CIT(A) observing as follows: "4.3.2 I have considered the facts of the case, material evidence on record and findings of the AO. During the course of search loose papers bearing no 4 to 6 of LPS-1 were found and seized. As alleged the seized paper contain details of cash receipt by the appellant from Smt Sunita Rai. Appellant during the course of appellate proceedings has strongly contended that the cash receipt from Smt Sunita Rai was against the agreement for purchase of duplex build at plot no 77 by Smt Sunita Rai. The appellant has also taken an alternate plea that amount received as advance from customer is not taxable as income of the appellant until and unless sale is actually executed. After considering the entire factual matrix and evidence/material on record inter alia written submission....
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....d." 43. The above detailed finding of Ld. CIT(A) has not been controverted by the Ld. DR by bringing any contrary material on record. The facts discussed above squarely reveal that the assessee duly explained the nature of loose paper on the basis of which these additions were made to the total income of the assessee. The assessee had categorically explained that the deal did not materialize and that the duplex was never registered in the name of Smt. Sunita Rai and the amount of advance was adjusted against the material supplied by the assessee to the firm of Smt. Sunita Rai which was duly recorded in the books of accounts. The Ld. Assessing Officer neither examined Smt. Sunita Rai nor did he conduct any independent inquiry from other government agencies to establish the veracity of his contention. We therefore do not find any infirmity in the finding of Ld. CIT(A) and the same needs to be confirmed. In the result, Ground No. 2 of the revenue's appeal in in IT(SS)A No. 80/Ind/2019 and IT(SS)A No. 81/Ind/2019 stands dismissed. 44. Ground No. 2 raised by the revenue in IT(SS)A No. 82/Ind/2019 challenges the action of the Ld. CIT(A) in treating the additional income of Rs. 2,95,00,0....
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....tion of income u/s 69B can only be done for income not fully disclosed in books of account and not to the income already shown in books of account. Hon'ble Jurisdictional tribunal in the case of Mukesh Sangla HUF vs DCIT (2016) 27 ITJ 172 (Trib Indore) has stated that section 69B of the Act is applicable on cumulative satisfaction of the following conditions (i) The assessee should have made the investments or is found to be the owner of any bullion, jewellery or valuable articles; (ii) Based on the material facts, the AO finds that the amount expended on such investment actually exceeds the amount recorded in the books of account (iii) The assessee either offers no explanation about the nature and source of investment or the explanation offered is not satisfaction in the opinion of the AO; (iv) The satisfaction of the AO can not be arbitrary and subjection but has to be based on the relevant material. The investment made by the assessee have been duly shown in the books of account and the findings of the AO are arbitrary and not subjective and are also not based on relevant material. The AO ought to have stressed upon some independent and arbitrary material which could e....