TaxTMI 
TaxTMI 
2018 (5) TMI 2096
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....rd, are that search and seizure operation u/s 132 of the Act was carried out at the business as well as residential premises of Kataria group of Ratlam, including the assessee along with other concerns/business associates on 7.9.2011. Notices u/s 153A were issued on 30.5.2013 for the block assessment years 2006-07 to 2012-13. The assessee filed the returns for these assessment years declaring following income :- A.Y. Date of filing return 139(1) Returned income (Rs.) Date of filing return in response to notice u/s 153A Income declared in return u/s 153A (in Rs.) Additional income offered if any (In Rs.) 2006-07 27.10.2006 5,87,260 4.7.2013 5,87,260 0 2007-08 29.10.2007 4.7.2013 4.7.2013 1,88,150 0 2008-09 27.9.2009 1,21,46,936 4.7.2013 1,21,46,940 0 2009-10 24.9.2009 8,00,042 4.7.2013 8,00,000 0 2010-11 24.9.2010 3,05,619 4.7.2013 3,05,620 0 2011-12 31.3.2012 3,05,463 4.7.2013 3,45,645 0 2012-13 29.9.2012 37,41,190 4.9.2013 7,41,190 30,00,000 4. During the course of assessment proceedings as well as on examination of seized records it wa....
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.... 71/Ind/2014. As regards the ground for quantum addition, the learned Commissioner of Income Tax (Appeals) dismissed the ground as infructuous. Aggrieved, the revenue is in appeal for the assessment year 2007-08 against the finding of the learned Commissioner of Income Tax (Appeals) setting aside the assessment proceedings whereas the assessee has raised cross objection. 7. The revenue has raised the following grounds :- (i) "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in invalid the proceedings u/s 153A in absence of incriminating documents whereas, as per the Income Tax Act and in the light of various case laws the assessment proceedings cannot be invalid when a search warrant was issued in the name of the assessee. (ii) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in holding that additions based on incriminating material only can be made in abated/completed assessment. (iii) Whether returns processed u/s 143(1) can be treated as completed assessment despite the fact that Hon'ble Apex Court has categorically held that processing of return u/s 143(1) does not amount to assessment in th....
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....uted fact that no addition, alteration or renovation of aforesaid structure of the building was commenced in next two years i.e. A.Y. 2008-09 and A.Y. 2009-10. The appellant had submitted return of income u/s 139(1) of the Act on 29.10.2007 declaring the same at Rs. 1,88,153/- which was processed u/s 143(1) of the Act. Search proceedings were initiated on 07.09.2011 in case of appellant and his family members. In response to notice u/s 153A of the Act return of income was submitted declaring the same income on 04.07.2013. During search proceedings, certain loose papers were found relating to purchase of construction material and labour payments etc. pertaining to A.Y. 2012-13. The assessee had surrendered an additional income of Rs. 30 lacs as unexplained investment in construction of house during A.Y. 2012-13. (Page 68 to 80 of P.B). (iii) The AO made reference to the District Valuation Officer to estimate the cost of construction but he estimated the fair market value of land as well cost of building under construction purchased by the appellant at Rs. 142.34 lacs as against Rs. 69.76 lacs as per registered sale deeds including cost of stamps relevant for A.Y. 2007-08. Said....
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....on material and labour payments etc. pertaining to A.Y. 2012-13 hence the assessee had surrendered an additional income of Rs. 30 lacs invested in construction of house during A.Y. 2012-13. None of the loose paper found during search related to A.Y. 2007-08 to A.Y. 2011-12. There being no incriminating material relevant to A.Y. 2007-08, the assessment framed was without jurisdiction hence the same was struck down on that ground by learned CIT(A) being settled law by referring to following judgments, which deserves to be upheld :- All Cargo Global Logistics Ltd Vs DCIT 137 ITD 287 (Special Bench) CIT Vs Anil Kumar Bhatia 211 Taxman 453 (Delhi) CIT Vs Continental Warehousing Corporation 120 DTR 089 (Bom) Kabul Chawla Vs ACIT 151 ITD (Del) Gurinder Singh Bawa Vs DCIT 150 ITD 040 (Mum) Atul Barot Vs DCIT 44 Taaxman.com 167 (Mum) DCIT vs. Kalani Brothers Pvt. Ltd (2016) 27 ITJ 286 (Indore ITAT) Anant Steels Pvt Ltd vs. ACIT (2016) 28 ITJ 47 (Indore ITAT) (vii) Kind attention is invited to subsequent judgments wherein same view has been taken by Supreme Court and High Courts as under :- a. CIT vs. Singhga....
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....be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings ceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property d....
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....(A) erred in law in sustaining the additions of Rs. 7,05,000/- to the total income based on valuation report of the Departmental Valuation Officer ignoring the fact that the property was purchased by registered sale deeds and no expenditure was found to have been incurred towards addition/alteration expenses at all for next two years. Addition confirmed to the extent of Rs. 7,05,000/- is, therefore, unjustified, improper, bad in law and deserves to be quashed." 12. Briefly stated, the facts of the case are that during the course of assessment proceedings the Assessing Officer on the strength of the valuation report made an addition of Rs. 72,57,600/- towards unexplained investment in purchase of land and building. During the appellate proceedings before the learned Commissioner of Income Tax (Appeals), the assessee's objection for the exorbitant valuation of land and building was forwarded to the Departmental Valuation Officer through the Assessing Officer and fresh valuation report dated 17.5.2016 was issued and the impugned addition was restricted to Rs. 7,05,000/- only as against Rs. 72,56,600/- made earlier. The learned Commissioner of Income Tax (Appeals) did not deal with ....
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.... assessment Rs. 70,05,000/-. As a result, the addition was sustained at Rs. 7,05,000/-. These facts clearly show that there was variation in the valuation report of the Departmental Valuation Officer. This is not the revenue's case that there was any objection by the Registrar for payment of stamp duty and the purchase consideration was also not questioned. The alleged addition is also within the range of 10% of the cost of land and building shown by the assessee. We, therefore, are of the considered opinion that no addition was called for towards unexplained investment in purchase of property and we accordingly delete addition of Rs. 7,05,000/- and allow the Cross Objection of the assessee. 15. Now we shall take up cross appeals for the assessment years 2010-11 to 2012-13. In IT(SS) A No. 178/Ind/2016 for the assessment year 2010-11 the revenue has taken the following ground of appeal :- (i) "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the additions partly on account of unaccounted investment in house property. (ii) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in not considering the ....
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....mated by the DVO to the extent of 15% only ignoring the detailed written submissions and location of the property. Such estimation of cost made by DVO was not only arbitrary but it is beyond imagination. Addition so confirmed at Rs. 28,38,693/- is unjustified, improper, bad in law and deserves to be quashed. 3. Without prejudice to above, the learned Commissioner of Income tax (A) erred in law in confirming the addition of Rs. 28,38,693/- based on DVO's report dated 17.05.2016 for the year under appeal i.e. A.Y. 2010-11. She ought to have considered that there was no basis or any incriminating material to estimate and allocate additional cost of construction in A.Y. 2010-11. The appellant maintained books of accounts wherein cost of construction was regularly accounted for hence difference, if any, due to estimation of cost as per DVO report should have been considered in A.Y. 2012-13 only i.e. the year in which the construction was completed and the appellant made additional surrender of income." In IT(SS) A No.164/Ind/2016 for assessment year 2011-12 the assessee has taken the following ground of appeal :- 1. That the learned Commissioner of Income tax (A) er....
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....much after search etc. Such discrepancies prove beyond doubt that the DVO had estimated the cost in an exorbitant manner. 2. In substance, the learned Commissioner of Income tax (A) erred in law in allowing reduction in the cost of construction estimated by the DVO to the extent of 15% only ignoring the detailed written submissions and location of the property. Such estimation of cost made by DVO was not only arbitrary but it is beyond imagination. Addition so confirmed at Rs. 29,52,752/- is unjustified, improper, bad in law and deserves to be quashed." 16. From the perusal of the above grounds we find that the issues raised in these appeals revolves around the additions sustained by the learned Commissioner of Income Tax (Appeals) for the three assessment years for alleged unexplained investment in construction of building. For better understanding, we reproduce below the chart showing the additions made by the Assessing Officer and the relief given by the learned Commissioner of Income Tax (Appeals) :- Assessment Year As declared by appellant Revised estimate by DVO - II as per report dtd. 17.05.2016 Difference considered by CIT(A) for adjudication Dedu....
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....given by DVO. The AO did not consider the objection and vide para 11.4 of the assessment order he accepted the valuation report even without considering the mistakes pointed out by the appellant. Based on valuation report dated 21.01.2014 AO made additions of Rs. 136.82 lacs to the total income of the appellant for Assessment years 2010-11 to 2012-13 as unexplained investment in the house property. 03) On appeal, the learned CIT(A) directed the AO to refer the matter again to DVO and to give an opportunity to the appellant to justify cost of construction declared by him. Thereafter, DVO revised the estimates of cost of construction vide report dated 17.05.2016. The learned Commissioner of Income Tax (Appeals) granted part relief". 18. The learned counsel for the assessee further submitted that as per preliminary estimate, cost of construction and renovation including interior work was estimated by an architect engineer at Rs. 96.88 lacs which was found and seized during search proceedings vide Annexure A -1/95 page 30-35. (Page 26 to 28 of paper book). During search proceedings, the appellant was instructed by the Investigation Wing to submit the valuation report of est....
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....5/- Rs. 5,113/- Ground floor 320 4169.52 387.36 Rs. 11,898/- Rs. 475/- Rs. 5,113/- 1st & 2nd floor 690.37 4169.52 & 2737.59 641.69 Rs. 13,755/- Rs. 725/- Rs. 7,804/- Double height area 23.61 Rs. 9,198/- Terrace 41.75 - Rs. 12,287/- Total 1458.73 12446.63 1156.33 The DVO just presumed that entire building was newly constructed by dismantling an existing building. In fact, the appellant extended the basement. No prudent person will demolish basement of front portion of the building having constructed portion thereon at upper floors (Page 10-11 of P.B). Based on such presumption, DVO estimated the cost of construction of 383 sq. meter of basement area @ Rs. 9,337/- per sq. meter i.e. Rs. 35,76,071/- whereas the appellant constructed back portion of basement of 127 sq. meter only which was estimated by Registered valuer at Rs. 7,67,125/- (renovation of front portion of basement @ Rs. 300/- per sq. ft and new construction @ Rs. 475/- per sq. ft). Thus, excessive estimate of cost towards construction of ....
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....id reason at all to estimate the cost of construction of terrace floor at Rs. 5.13 lacs separately as additional expenditure. 1.5) The DVO further added consultancy charges and external services connection charges at Rs. 3.23 lacs & Rs. 1.32 lacs respectively i.e. Rs. 5.55 lacs was on very higher side (Page 65 of P.B. ) In a place like Ratlam consultancy charges is being paid to the engineer in lump-sum. Even the architect engineer of Baroda had stated his professional charges at Rs. 2 lacs in his original estimate (Page 28 of P.B) seized during search. Due to aforesaid reasons, cost of construction estimated by DVO even in his revised report was exorbitant i.e. 235% higher than the cost declared by the appellant. Cost of construction estimated by DVO at Rs. 2,14,73,441/- works out to Rs. 14,721/- per square meter i.e. around Rs. 1350/- per square feet during Assessment years 2010-11 to 2012-13. Even after partial relief by learned CIT(A) it works out to Rs. 12,515/- per sq. meter i.e. Rs. 1,148/- per sq.ft. which is beyond imagination in a small town i.e. Ratlam. In substance, learned CIT(A) allowed the deduction only towards adoption of CPWD rates to the extent of 15% bu....
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....nstruction carried out during F.Y. 2006-07 to F.Y. 2008-09. The incriminating materials during the course of search conducted on 7.9.2011 were found in the shape of loose papers relating to purchase of construction material and labour payments pertaining to the assessment year 2012-13. The assessee surrendered an additional income of Rs. 30 lacs as unexplained investment in construction of house. The assessee has duly declared construction cost of Rs. 28,61,054/- and Rs. 33,00,963/- for the assessment years 2010-11 and 2011-12. In the course of search proceedings itself a preliminary estimate made by an architect/engineer for cost of construction and renovation including interior work calculating cost at Rs. 96.88 lacs were found which is placed at Annexure A-1/05. During search proceedings, on the instruction of Investigation Wing, the assessee submitted valuation report of Government Valuer Mr. Kumawat and vide report dated 26.9.2011 the cost of construction with addition, renovation and alteration was valued at Rs. 83.43 lacs. 21. Thereafter, during the assessment proceedings the Assessing Officer again referred the matter to the Departmental Valuation Officer who vide his re....
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....ost of terrace floor at Rs. 5,18,982/- along with estimating cost of vitrified tiles and floor of 247.28 sq. mtr at Rs. 2,34,916/-. The assessee's plea has substance that when roofing of second floor has already been considered while estimating the cost of second floor and cost of tiles at terrace floor, there was no reason to again estimate the cost of construction of terrace floor at Rs. 5,12,982/- separately. (iv) The Departmental Valuation Officer further added the consultancy charges and external service connection charges at Rs. 4.55 lacs which seems to be on higher side looking to the place like Ratlam. Even the architect Engineer of Baroda has given an estimate of professional charges of Rs. 2 lacs. Apart from the above four mistakes pointed out by the learned counsel for the assessee, our attention was also drawn to the deduction given by the learned Commissioner of Income Tax (Appeals) towards CPWD/PWD rates adopted for valuation. The learned counsel for the assessee referring to various judgments of the Tribunal submitted that deduction up to 30% has been provided in similar type of cases whereas the learned Commissioner of Income Tax (Appeals) has given only....
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....by the assessee (including the amount of Rs. 30 lacs surrendered during assessment year 2012-13), we value the property at Rs. 1,19,63,266/- thereby sustaining the addition of Rs. 28,01,249/-. The assessee gets relief in various assessment years as the additions were made in separate years. However, our this decision is to be merged with the adjudication of next common ground taken up by the assessee. 24 Apropos ground no. 3 commonly taken by the assessee wherein the assessee has challenged the action of the Assessing Officer and the learned Commissioner of Income Tax (Appeals) of confirming the addition in various years even through the incriminating material relating to the alleged undisclosed investment in construction of the building was only found for F.Y. 2011-12 i.e. assessment year 2012-13. 25. The learned counsel for the assessee submitted quoting the judgment of the Hon'ble Delhi High Court in the case of CIT Vs.Dharampal Limited; ITA No. 512/2016 dated 21.8.2017 submitted that both the lower authorities erred in sustaining the addition in those assessment years for which no incriminating material was found during the course of search and, therefore, the additio....