TaxTMI 
TaxTMI 
2021 (11) TMI 561
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.... without properly appreciating the facts of the case 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 th....
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.... 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. 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 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 t....
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....ion 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. 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. CI....
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....thout properly appreciating the facts of the case and submission made before him 6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) concurred with the assessing officer and erred in considering the construction/development expenses as 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/devel....
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....f Rs. 2,92,18,917/- made by the Assessing officer on account of undisclosed investment u/s 69B of the Income Tax Act, 1961. 2. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in treating the additional income of Rs. 2,95,00,000/- admitted by the assessee during the course of survey under the head "income from other sources" whereas the assessing officer 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 conducte....
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....th the assessee and department are in appeal before the Tribunal. 5. We will first take up the assessee's appeal in IT(SS)A No. 62/Ind/2019 as the grounds of appeal taken in assessee's appeals for all the other years' are similar to the grounds of appeal taken in the present appeal i.e. IT(SS)A No. 62/Ind/2019. 6. Ground Nos. 1 & 2 raised by the assessee challenge the findings of the Ld. CIT(A) upholding the validity of assessment order passed u/s 143(3) of the Act for the AY 2016-17 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 ....
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.... the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would 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 s....
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....sing 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 seized material was seized is previous year 2008-09 relevant to AY 2009-10. The preceding six years would be AY 2008-09, 2007-08, 2006-07, 2005-06, 2004-05 and 2003-04. Therefore, after 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 exec....
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....ts seized or requisitioned have a bearing on the determination of the total income of such other person 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 referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed 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 ....
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....uch other person and no notice under sub-section (1) of section 142 has been issued to him; before 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, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. In the instant case, the documents related to the assessee were handed over to the Assessing Officer of the assessee only on 15.11.2016 and hence, reference to the date of initiation of the search under 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. Theref....
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.... 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 Section 153C of the Act and the AO had no jurisd....
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....e of actual search relating to post search period. Therefore, there was no need to pass orders u/s 153A in respect of assessment year relevant to period after the date of actual search. It is well settled law that all orders passed by authorities are within jurisdiction unless contrary is established. 52. Admittedly the documents were received by AO of assessee after the due date for furnishing the return of income for assessment year 2012-13 relevant to previous year 2011-12. Therefore, assessment could be framed u/s 153A/ 153C only when any of the conditions contemplated under clauses (a), (b) or (c) are fulfilled." 14. We further find that Hon'ble ITAT 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....
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....ya, Hoshangabad during the course of search. It was stated in the satisfaction recorded by the Ld. Assessing Officer that Page no. 1- 40 of LPS-2 contained papers regarding permission of registry of firm, M/s Golden Realities whereas Page no. 111-132 of LPS-7 contained papers regarding diversion letter and registry of firm, M/s Golden Realities. It was further stated that a document related to the assessee was also found from the mobile phone of Shri Rasmeet Singh Malhotra. Accordingly, the Ld. Assessing Officer formed a satisfaction that these seized documents had a bearing on the determination of total income of the assessee and accordingly, notices u/s 153C of the Act were 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 t....
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....is satisfied that the books of account or documents or assets, seized or requisitioned, have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A." 1.4.1] That following conditions need to be satisfied prior to the issuance of notice under section 153C of the Income Tax Act: S.No Conditions to be satisfied 1 Search is executed under section 132 of the Income Tax Act 2 During the course of search, books of accounts or documents, seized or requistioned, pertaining to other persons are found and seized 3.1 The assessing officer of the person searched must be satisfied that documents as found and seized are not 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 nat....
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....sions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 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....
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....ions 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments 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....
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.... CIT vs. Manoj Jain (2006) 200 CTR (Del) 327 : (2006) 287 ITR 285 (Del)]. " 3.6.4] That Hon'ble Delhi High Court in the case of Kabul Chawla as reported in 380 ITR 573 has held that: "38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 3.6.5] That Hon'ble Delhi High Court in the case of Pr CIT V. Meeta Gutgutia as reported in 395 ITR 526 has held that: "71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs." 3.6.6] That Hon'ble ITAT 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 ....
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....s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/s 153A of the Act. Once notices are issued u/s 153A of the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating 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....
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....und and seized during the course of search, the Assessing Officer is not justified in making the addition in non-abated assessment order while passing the order u/s 153A r.w.s. 143(3) of the Act." 3.6.7] That Hon'ble ITAT Indore Bench in the case of Shri Anil Kataria [Appeal Nos IT(SS)A Nos 177,178, 179/Ind/2016 dated 31-05-2018 has held that: "We find that in the above judgment, the Hon'ble Delhi Court held that completed assessment can be interfered with by the Assessing Anil Kataria IT(SS)A Nos.177 to 179,984, CO 49 & 163 to 165/2017 Officer while making the 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. Two important aspects come out of this judgment firstly the assessment should 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 inc....
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....had submitted registered deed of the property, but he did not furnish the required bills, vouchers and relevant document, i.e., valuation report and, therefore, the AO referred the property in question to the Departmental Valuation Officer u/s 142A to ascertain the alleged unexplained investment of the assessee in the said property. Thus, the addition in dispute on account of alleged unexplained investment in the aforesaid property was made by the Assessing Officer on the basic of the valuation report of the DVO, obtained by way of reference u/s 142A of the Act. 9. It is not disputed that a readymade building was purchased by the assessee; that no evidence was found during the course of search action conducted at the residential premises of the assessee and other family members warranting such assessment proceedings in the case of assessee; that the assessee had purchased a constructed residential house, as detailed in the purchase deed; that no construction was carried out after the purchase of the 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 recorde....
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....ly on valuation Report. The said decision of the ITAT was carried in appeal by the Revenue before the Hon'ble Delhi High Court, where also vide order Dated 23.01.2013 reported as CIT v. Abhinav Kumar Mittal [2013] 30 taxmann.com 357/213 Taxman 54 (Mag.) (Delhi), approved that in the absence of any material found during the course of search, no addition can be made simply on the basis of valuation report. The Hon'ble High Court held as under: "Section 69, read with sections 142A and 153C of the Income tax Act, 1961 Unexplained investments Immovable properties Assessment year 2006-07 Assessing Officer as a result of search conducted under section 132 upon a company and its directors issued on assessee a notice under section 153C He, in course of assessment proceedings, considered valuation of three properties, which had been purchased by assessee in relevant year, and 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 Appellate authorities deleted imp....
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....e a useful tool in hands of Assessing Officer, nevertheless it is an estimation and without there being anything more, cannot form basis for addition under section 69B - Held, yes - Whether, therefore, in absence of any other material on record, impugned addition was correctly deleted - Held, yes [Para 9] [In favour of assessee]" 3.9] That in view of the above, addition as made by the assessing officer merely on the basis of valuation report in the case of the search assessment proceedings was not justified. The addition so made now requires to be deleted in full. 18. Per contra Ld. DR vehemently argued supporting the finding of both lower authorities. 19. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by both the sides. We find that the assessee has challenged the finding of Ld. CIT(A) upholding the validity of assessment even when no incriminating documents related to the assessee were found and seized from the possession of the person in whose case search was executed and more so when no addition was made in respect of the so-called incriminating documents referred to by the Ld. Assessing Of....
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....becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom 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 Yea....
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....e's appeal is allowed. 22. Ground No. 4 raised by the assessee challenges the findings of the Ld. CIT(A) upholding the validity of assessment even when satisfaction was not properly recorded in dual capacity. Accordingly, Ground No. 4 of the assessee's appeal is dismissed as not pressed. 23. Ground Nos. 5 to 9 raised by the assessee challenge the action of the Ld. CIT(A) in maintaining addition of Rs. 36,67,707/- out of the total addition of Rs. 3,28,86,624/- made by the Ld. Assessing Officer on account of undisclosed investment in construction of project. Brief facts relating to this issue are that the Ld. Assessing Officer during the course of assessment proceedings made reference to the valuation officer for determination of cost of investment in construction of the project. The DVO submitted his report on 17.08.2017 wherein the DVO drew an investment comparison chart as under: Financial Year Cost of construction declared by assessee Cost of construction assessed by valuation cell 2012-13 179,67,427 274,38,497 2013-14 364,89,754 567,15,834 2014-15 716,50,723 1113,14,912 2015-16 645,09,766 973,96,390 2016-17 3,19,46,677 ....
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.... 2013-14 1,79,67,427 1,79,67,427 2,74,38,497 94,71,070 94,71,070 3 2014-15 3,64,89,754 3,64,89,754 5,67,15,834 2,02,26,080 2,02,26,080 4 2015-16 7,16,50,723 7,16,50,723 11,13,14,912 3,96,64,189 3,96,64,189 5 2016-17 7,75,17,766 6,45,09,766 9,73,96,390 3,28,86,624 1,98,78,624 6 2017-18 3,33,43,300 3,19,46,677 4,64,94,366 1,45,47,689 1,31,51,066 23,69,68,970 22,25,64,347 33,93,59,999 11,67,95,652 10,23,91,029 The Ld. Counsel accordingly worked out the difference in percentage terms considering the cost of construction considered by the Ld. Assessing Officer and the correct amount of cost of construction which is as under: S.No Particular Actual expenses as incurred Construction Expenses as considered by the AO 1 Construction Expenses as incurred 23,69,68,970 22,25,64,347 2 Cost of construction as estimated by the DVO 33,93,59,999 33,93,59,999 3.1 Difference in cost of construction as estimated by the DVO as shown by the appellant 10,23,91,029 11,67,95,652 3....
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....igher than the sale price as per guideline issued by the sub-registrar. The Ld. Counsel for the assessee also made us go through the various discrepancies in the report of the DVO which were summarized and tabulated on Page No. 276-277 of the paper book. The Ld. Counsel further submitted that a valuation report was also obtained from the Government approved registered valuer which was also filed during the course of assessment proceedings wherein cost of construction net of interest and pre-operative expenses was estimated at Rs. 22,13,82,000/- which was close to the amount of actual cost of construction incurred by the assessee. The Ld. Counsel vehemently argued that DVO prepared the valuation report by applying CPWD rates completely ignoring the fact that duplex were constructed at Village Pipariya, Madhya Pradesh and therefore, valuation ought to have been done using the local PWD rates and not using the CPWD rates. 27. The Ld. Counsel thereafter also referred to a table produced on Page No. 280-281 of the paper book wherein the valuation done by DVO was adjusted with the specific discrepancies pointed out in the valuation report and was also adjusted on account of rebate of ....
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....truction of boundary wall for full brick work and half brick work of Rs. 1,75,00,000/- and Rs. 90,00,000/- totaling to Rs. 2,65,00,000/- whereas only 412 running SqMtrs of boundary wall was constructed 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/-. That cost of individual boundary wall of the row houses had already been considered in the cost of construction of the row houses 2,52,64,000 2.12 Expenses on account of consultancy fees of Rs. 34,38,339/- whereas expenses as actually incurred by the appellant were of Rs. 25,31,532/- only 9,06,807 4,55,98,731 Valuation of DVO as per CPWD after reduced the additional cost as estimated but not actually incurred 29,37,61,269 Add Supervision Charges credit as allowed by DVO 79,11,805 Valuation of DVO plus supervision charges 30,16,73,074 Less Deduction for supervision charges @ 10% on Rs. 30,04,37,074 3,00,43,707 Deduction on account of CPWD rates @30% 9,01,31,122 12,01,74,829 Valuation as per DVO after cons....
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.... [Refer Abstract of Cost in the Valuation Report] at the time of valuation of temple whereas rate in case of commercial double storeyed building was Rs. 14,300/- per SqMtrs only. Hence, corresponding rebate in the valuation of temple also requires to be allowed to the appellant. 5.10.5] That additional cost of leveling of Rs. 40,95,329/- was considered by the DVO in his report whereas the appellant did not incur any expenses on account of leveling. Hence, the said amount of additional cost as added was purely on the basis of presumption and the same requires to be excluded from the valuation of the colony. 5.10.6]That additional cost of Vitrified Floor Tiles of Rs. 71,16,693/- was considered by the DVO in his report whereas the cost of duplex row houses as considered by the DVO includes entire cost of construction which also includes cost of Vitrified Floor Tiles. Hence, separate addition on account of Vitrified Floor Tiles to the valuation of the duplex row houses is not justified. 5.10.7]That expenses on account of Bore well were considered at Rs. 7,50,000/- by the DVO in his report whereas expenses as actually incurred by the appellant were of Rs. 2,50....
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....s unexplained investment, the AO was under legal obligation to verify the books and vouchers maintained by the assessee in support of the cost of construction shown by the assessee and at the same time, the AO should have pointed out specific defects in the books of account regularly maintained by the assessee. It is seen that the assessee vide its letter dt. 26th March, 1998 has requested the AO to ignore the report of the DVO and proceed with the assessment of actual amount spent duly supported by vouchers/bills as per audited books of account. It seems that the AO had not acceded to the request of the assessee. The AO has made the addition merely on the basis of the valuation report by the DVO. The AO did not care to look into the books of account regularly maintained by the assessee, which were duly supported by bills and vouchers. There is no dispute that the books of account maintained by the assessee were duly audited. In fact, the AO has not pointed out any specific defect/discrepancy in the books of account regularly maintained by the assessee relating to the cost of construction of the building in question. The valuation report of DVO is only information and estimate of c....
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....as disclosed by the assessee had actually been paid as consideration. The condition precedent for making a reference to the DVO by invoking the provisions of section 142A thus was not satisfied in the present case and neither the said reference nor the addition made on the basis of report obtained from the DVO in response to the said reference, in our opinion, was sustainable in law as rightly held by the learned Commissioner of Income-tax (Appeals). In the case of Subhash Chand Chopra v. Asst. CIT [2005] 92 TT) 1087, this Bench of the Tribunal has held that no material or evidence having been recovered during the course of search showing investment in construction, the Assessing Officer was not competent to make a reference to the DVO under section 142A and to make addition on that basis. In the case of K.P. Varghese v. ITO [1981] 131 ITR 597 cited by learned counsel for the assessee, the hon'ble Supreme Court had an occasion to consider a similar aspect in the context of computation of capital gains and it was held by their Lordships that the burden to prove that the consideration for the transfer of a capital asset has been understated by the assessee or in other wo....
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....hat the reference to DVO for estimation of the market value of the property in Punjabi Bagh was not based on any material discovered or seized during the search operations. The Counsel, however, referred to the case of another property in District Baddi (Himachal Pradesh), in respect of which documentary evidence indicated unaccounted consideration paid by the assessee, referred to by the A.O. in para 4.3 of his order. At the same time, Ld. Counsel also conceded that no addition to the tax liability of the assessee on accounts of the said other property has been made. There is no nexus between the property in Baddi (Himachal Pradesh) and the property in Punjabi Bagh (West). There is undoubtedly no material available to even remotely reflect that consideration over and above what was shown to be paid in the registered sale deed of the West Punjabi Bagh property was made over to the seller. In these circumstances, it was not fair in the first place to refer the said property for estimation of its market value by DVO." 11. In the result Revenue's appeal for the A.Y. 2005-06 is dismissed." 5.11.7]That Hon'ble ITAT Chennai Bench in the case of C R Selvaraj, Salem [....
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....per DVO report. That nothing incriminating was found in possession of the person searched related to the appellant and hence, notice as issued under section 153C of the Act was neither proper nor legal. Moreover, in this case, addition was made merely on the basis of DVO report which in any case is not considered as proper. 5.14.2] The appellant filed detailed objections during the course of search assessment proceedings against the valuation report as submitted by the DVO. However, objections as raised by the appellant were not disposed off and the difference in cost of development/construction expenses as estimated by the DVO and as declared by the appellant in its books of accounts was added to the total income of the appellant. The cost of construction/development as estimated by the DVO was higher than the fair market value of the assets as per the guideline rates. Hence, it is clear that the cost of construction/development as estimated was exorbitant and requires to be ignored. 5.14.3] The appellant on the basis of cost as declared in its books of accounts calculated the amount of profit and also paid legitimate amount of tax due on it. That if the cost of ....
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....adjusted." 28. On the other hand, the Ld. DR supported the findings of Ld. Assessing Officer. 29. We have heard the rival contentions and perused the record placed before us and also gone through the judgments and decisions referred to and relied upon by the Ld. Counsel for the assessee. We find that the assessee was engaged in construction of duplex row houses for sale in Village Pipariya of Madhya Pradesh. The assessee incurred and showed cost of construction in its books of accounts at Rs. 23,69,68,970/- which was considered by the Ld. Assessing Officer at Rs. 22,25,64,347/- despite the fact that it was categorically submitted during the course of assessment proceedings itself that correct amount of cost of construction was of Rs. 23,69,68,970/-. Under the given facts and circumstances of the case, we are of the considered view that cost of construction shown by the assessee ought to have been considered at Rs. 23,69,68,970/- only and there was no basis for considering the cost shown by the assessee at Rs. 22,25,64,347/-. Further, during the course of assessment proceedings, the Ld. Assessing Officer referred the matter to the DVO who vide his report dated 11.08.2017 submi....
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....of bungalow as sold by the appellant was also less than the cost as estimated by the Departmental Valuation Officer 4 The cost as incurred by the appellant is duly supported with all the bills and vouchers and the same is also verifiable 5 The material as purchased by the appellant i.e. steel, cement, sand, bricks all are duly vouched and are also verifiable 6.1 The DVO in his report considered an amount of Rs. 40,95,329/- incurred on account of leveling but actually no expenses were incurred by the appellant for leveling since the land of the appellant was already leveled 6.2 The expenses as incurred on account of sewer were estimated of Rs. 23,70,980/- whereas the appellant incurred an amount of Rs. 8,70,972/- only on account of sewer expenses 6.3 The DVO estimated Storm water drain expenses of Rs. 9,16,060/- whereas no such expenses were actually incurred by the appellant since there was no separate Storm water drain in the colony of the appellant 6.4 The DVO estimated expenses on account of horticulture of Rs. 8,62,175/- whereas actual expenses as incurred by the appellant were of Rs. 3,83,916/- 6.5 The DVO estimated expenses on account....
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....ted consultancy fees of Rs. 34,38,339/- whereas actual expenses as incurred by the appellant were of Rs. 25,31,532/- only 31. We have also gone through the valuation report of the DVO, CPWD rate book and valuation report obtained by the assessee from the Government approved registered valuer. We find that there were various discrepancies in the valuation report submitted by the DVO which have also been discussed supra. Further, the adoption of CPWD rates by DVO for valuing the cost of construction of project of the assessee at Village Pipariya of Madhya Pradesh also seems to be very unreasonable and far from realities. We find strong force in the arguments of the Ld. Counsel that valuation adopted by the DVO was way too exorbitant and could not have been considered as the basis for making addition to the total income of the assessee since the cost of construction estimated by the DVO was even higher than the sale price as per guideline issued by the sub-registrar. It is also evident that the DVO undertook the valuation exercise considering the CPWD rates for residential bungalows completely ignoring the fact that the assessee was engaged in construction of duplex row houses for ....
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....s of DVO's report is even more unjustified and unwarranted. iii) During appellate as well as assessment proceedings, appellant raised several objections with regards to methodology adopted by DVO as well as valuation aspect, but AO has totally failed to consider the same. He has mechanically adopted the estimate of value of construction provided by DVO. One should not lose sight of the fact that at the end of the day, cost derived by DVO in his report is nothing but an 'estimate' which is bound of have some amount of estimation, guess work & opinion involved and estimate cannot be 'exact'. After all it is an estimate done by an expert and it is a popular maxim 'to err is human'. It is evident from the very fact that, appellant has raised various discrepancies in the DVO's report. However, A.O. did not find it appropriate to invite counter comments of DVO on objections raised by the assessee. Although, it is a settled legal position that valuation report submitted by DVO is not binding upon AO, but in the present case AO has adopted and used the valuation report as if it is binding on him. Appellant has pointed out several glaring mistakes and omissions in valuation report,....
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.... which was not disturbed by the AO or DVO by bringing any specific material on record, the CIT(A) was fully justified in holding that no addition could be validly made on account of any understatement of cost of construction merely because of difference as estimated by the DVO. Hence, on this count, I am of the view that addition made merely on the basis of DVO's report is not sustainable. vi) The valuation report of DVO is not binding on the AO because it is merely an opinion of an expert. In the context of the controversy in issue, it may also be germane to notice the expression used by legislature i.e. "estimate". Thus, resort can be made to the said provision by the AO for the purpose of "estimating" the value of any investment, bullion, jewellery or any valuable article etc. However, this is settled legal position that addition cannot be made solely on the basis of valuation report which is only give an estimate as held by various High Courts, discussed earlier. vii) It is apparent from record that assessing officer has not brought any material on record to establish that the assessee had made any unaccounted investment in construction of the buildings in que....
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....521 2014-15 36489754 39701084 3211330 2015-16 71650723 77920439 6269716 2016-17 64509766 68177473 3667707 Thus, from the above the difference in investment as mentioned in the above table are confirmed. Hence, the additions made by the AO amounting to 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 are Confirmed and the appellant gets relief of Rs. 82,31,549/- in AY 2013-14, Rs. 1,70,14,750/- in AY 2014- 15, Rs. 3,33,94,473/- in AY 2015-16 and Rs. 2,92,18,917/- in AY 2016-17. Therefore, appeal on these grounds is Partly Allowed." 33. In view of the factual matrix of the case, we are of the considered view that addition made to the total income of the assessee during the course of proceedings u/s 153C of the Act solely on the basis of valuation report of the DVO and that too in absence of any incriminating material found during the course of search was not justifiable and deserves to be deleted. Even on merits of the case, our attention was drawn to the deduction given by the Ld. CIT(A) towards CPWD/PWD rates adopted for valuation. The Ld. Counsel for the as....
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....ction up to 30% has been provided in similar type of cases whereas the learned Commissioner of Income Tax (Appeals) has given only 15% deduction. Similarly, as regards supervision charges in the decisions of the Tribunal deduction upto 12.5% of self supervision charges was held to be justified whereas the Departmental Valuation Officer has given deduction of 2.5% only. 23. As observed by us in the preceding paragraphs wherein facts emanating out of the submissions made by the learned counsel for the assessee, multiple valuation reports prepared by the registered Valuer as well as Departmental Valuation Officer clearly depict that the valuation of investment in construction of the building has been overstated and looking to the fact that the impugned building is situated in Ratlam, rates taken for the purpose of valuation are excessive. We, therefore, in the given facts and circumstances of the case, find it justified to calculate the valuation of the building after giving relief/deduction/relaxation, as discussed above, against the total valuation made by the Departmental Valuation Officer............." 35. We, therefore, in the given facts and circumstances of the case....
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....interest u/s 234A and 234B of the Act. The Ld. Counsel for the assessee did not press this ground of appeal during the course of hearing since chargeability of interest under these sections is consequential and mandatory in nature. Accordingly, Ground No. 10 of the assessee's appeal is dismissed as not pressed. 38. In the result, appeal of the assessee vide IT(SS)A No. 62/Ind/2019 for AY 2016-17 is partly allowed. Since, appeals of the assessee vide IT(SS)A No. 59/Ind/2019 for AY 2013-14, IT(SS)A No. 60/Ind/2019 for AY 2014-15 and IT(SS)A No. 61/Ind/2019 for AY 2015-16 contain similar grounds of appeal, our above order passed in IT(SS)A No. 62/Ind/2019 for AY 2016- 17 shall prevail these appeals too filed by the assessee. Accordingly, other aforesaid present appeals of the assessee having similar set of facts/grounds are also partly allowed. Departmental appeals 39. Now we take up Revenue's appeals i.e. IT(SS)A No. 80/Ind/2019, IT(SS)A No. 81/Ind/2019 and IT(SS)A No. 82/Ind/2019. Ground No. 1 of these appeals raised by the Revenue challenges the action of the Ld. CIT(A) in deleting the addition made by the Ld. Assessing Officer on account of undisclosed investment u/s 69B ....
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....ither sustainable on facts nor in law. The AO has reached to conclusion that appellant has received the cash of Rs. 2,53,555/- in AY 2014-15 and Rs. 3,74,000/- in AY 2015-16 from Smt Sunita Rai against purchase of duplex no 77. Appellant during appellate proceedings has strongly contented that the deal with Smt Sunita Rai did not materialized and the advance received from Smt Sunita Rai was adjusted against the cement and steel invoices of the firm of Smt Sunita Rai. The amount as shown payable against the purchase of material by the firm was paid separately. These documents have been scanned on page 5 of assessment order. On a plain and cursory look would make it amply clear that this paper is relating to "receipt of cash from Smt Sunita Rai". Appellant has argued that the said transaction has never taken place. Smt Sunita Rai was in a deal with appellant for purchase of duplex at plot no 77, however, the deal did not materialized and the same was cancelled. The entire additions have been made on the basis of assumption and presumption without considering the correct facts of the case. Further neither the appellant nor Smt Sunita Rai has ever stated that the sale of duplex no 77 w....
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....m other sources" whereas the assessing officer had rightly taxed the additional income admitted by the assessee during the course of survey u/s 69B of the Act. 45. Ld. DR vehemently supported the order of Ld. Assessing Officer. Per contra Ld. Counsel for the assessee supported the findings of Ld. CIT(A). 46. We have heard rival contentions and perused the records placed before us. Revenue is aggrieved with the finding of Ld. CIT(A) in treating the additional income of Rs. 2,95,00,000/- admitted by the assessee during the course of survey under the head "income from other sources" as against taxability of such income by invoking of the provisions of section 69B of the Act. We find that the Ld. CIT(A) observed as follows: "I have considered the facts of the case plea raised by the appellant and assessment order. It is an undisputed facts the appellant has made disclosure of additional income of Rs. 2,95,00,000/- on account of construction material and the same was also shown while filing return of income for AY 2016-17. The AO has made reclassification of income of the assessee simply relying to the provisions of section 69B. I find it necessary to quote the provisions....
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.... offered by the appellant is not fully recorded in books of account. The only point which lies in the favour of the AO is that he has alleged that appellant failed to provide any satisfactory explanation regarding the investment. Appellant during the course of survey has disclosed additional income on account of construction material. 4.4.2 The AO in his assessment order has simply stated that the explanation offered by the assessee is not satisfactory, which cannot be any basis for reclassification of income of assessee. The AO should have elaborately explained that the income disclosed by the assessee was not earned from business or the income shown was not related to business of the assessee. The AO has also not pointed out whether the appellant has been doing some other business apart from the disclosed source of income. Thus, the AO has no locus to reclassify income of the appellant without having anything incriminating on record. The satisfaction of the AO should be on some specific finding, which is missing in the case of appellant. Thus, the findings of the AO lacks merit and are not specific. In view of the above discussion and following the decision of Hon'ble IT....