TaxTMI 
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TaxTMI 
2026 (3) TMI 173
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....e case, Worthy CIT(A), in Appeal No.10498/CIT(A)-3/GGN/2012-13, has erred in passing order dtd.31.01.25 in contravention of provisions of S. 250 of the Income Tax Act, 1961 hereinafter referred to as "Act"). 2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of passing asst. order by illegally assuming jurisdiction u/s 153A and more-so when no incriminating material qua this year was found in search u/s 132 on assessee. 3. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO in initiating proceedings u/s 153A even when the jurisdiction condition prescribed in clause (a) under 4th proviso to s. 153A(1), being finding of escaped income represented in the form of asset, was not satisfied. 4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of passing assessment order beyond the limitation period prescribed u/s 153B since the reference made u/s 142A to the DVO for estimation of construction expense of the appellant was illegal. 5. That on facts....
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.... affidavits of huge number of customers) and explanation during assessment to establish and corroborate that the amount disclosed in books as sale is the real transaction and the alleged unaccounted cash never existed. 8. Thaton facts, circumstances and legal position of the case. Worthy CIT(A) has erred in confirming the impugned order passed by Ld. AO u/s 153A when such order is invalid and unlawful since the approval u/s 153D was without due application of mind and was merely ritualistic. 9. That on facts, circumstances and legal position of the case Worthy CIT(A) has erred in confirming the action of Ld. AO of passing assessment order without having DIN. 10.That on facts, circumstances and legal position of the case, the order passed by Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been passed without affording reasonable opportunity of being heard. 11. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same. 2. As is evident, the assessee has assailed the twin quantum additions on merits as well as the jurisdiction of Ld. AO on leg....
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....e made only when AO had in his possession any incriminating evidence which revealed that the income valued for Rs. 50 Lacs or more was represented in the form of an "asset" that had escaped assessment. The Explanation-2 provide that for the purpose of fourth proviso, the "asset" includes immoveable property being land or building or both, shares and securities, loans and advances and unexplained deposits in the bank. The assessee asserted that during search no such document was found which could be categorized in the form of an "asset" as enumerated in Explanation-2 and therefore, the jurisdiction of Ld. AO was vitiated. However, Ld. AO quoted the provisions of Sec.153A to note that various documents were found (marked as Annexure B-14 to B-24) which revealed that income represented in the form of an "asset" had escaped assessment. In the seized documents, cash receipts against sale or advances for flats were found. The seized document was confronted to the directors of the assessee. Further, definition of "asset" was an inclusive definition and not an exclusive one. The meaning of "asset" therefore, could not be restricted only to the form of assets as mentioned in Explanation-2. ....
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.... Total (Rs.) 145,45,00,000 220,89,23,825 The Ld. DVO thus estimated investment of Rs. 220.89 Crores in seven projects as against Rs. 145.45 Crores as declared by the assessee for this year. On the basis of DVO estimation, Ld. AO made allegation of unaccounted investment for Rs. 75.44 Crores and show-caused the assessee for proposed addition. Pertinently, the DVO's report was shared by Ld. AO with the assessee for the first time only on 23-11- 2022 along with show-cause notice. 3.6 The assessee, in its reply dated 26-11-2022, pointed out that DVO submitted his incomplete reports on separate projects (without year-wise break up of expenditure) on different dates like 13-09-2022, 26-09-2022 and 10-11-2022. Thereafter, DVO sent his complete report along with year-wise break up only on 22-11-2022 in which he mentioned that the assessee had not submitted complete year-wise expenditure though the assessee had submitted complete expenditure in its reply. The complete report of the DVO was shared by Ld. AO with the assessee only on 23-11-2022 whereas the provision of subsection (6) of Sec.142A mandate DVO to furnish final report within 6 months from the end of the m....
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.... Sec.153 and 153B of the Act so as to provide that the time period beginning with the date on which the reference is made to the valuation officer and ending with the date on which his report is received by the Assessing Officer shall be excluded from the time period provided under aforesaid sections for completion of assessment or reassessment. These amendments were to take effect from 01-10-2014. It was thus stated that the legislature specifically laid out emphasis on the limitation period to file report by the DVO. In the present case, the report was never served upon the assessee by DVO and secondly, the report was furnished to AO beyond 6 months from the end of the month in which the reference was made to DVO. The DVO did not provide any opportunity of hearing and therefore, the same was to be discarded in terms of decision of Hon'ble Supreme Court in the case Rajesh Kumar & Ors. vs. DCIT (287 ITR 91). The assessee also referred to the decision of Hon'ble Gujarat High Court in the case of Munir Ismail Voraji (82 Taxmann.com 92). The assessee also assailed the action of DVO reference by Ld. AO by quoting the decision of Hon'ble Delhi High Court in the case of Aar Pee Apartment....
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....s being constructed by the assessee. One could not ignore this report as it gives proper insight of the fair value of asset. Even if the copy of the report was not served by Ld. DVO to the assessee, it would not preclude AO to take cognizance of the said report while framing the assessment. There was no bar on utilizing the contents of the valuation report while framing the assessment. The copy of report was provided by Ld. AO to the assessee by adhering to principle of natural justice and the report was duly confronted to the assessee and opportunity was granted to the assessee to offer his explanation with supporting documentary evidences. The legal objection of the assessee was thus rejected by Ld. AO. Further, DVO had taken into account all the information and records as provided by the assessee. The method adopted by DVO was suitable method of valuation. The Ld. AO also justified reference to DVO. 3.10 The Ld. AO further observed that the assessee's valuer did not make any comment on the report of Ld. DVO regarding discrepancy found in respect of measurement or quantity of material. The DVO was a qualified person u/s 142A to ascertain the value of the investment made and th....
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....he company and only the employees were present. The statement was recorded from a lowly placed employee as against the fact that only HOD or the core management only knows about each and every fact about the company and not such low-key placed employee. Pertinently, one of the directors was present in the same premises during search proceedings but the investigation team chose not to question him about this issue. He was not even confronted with Shri Amit Goyal or his statement during the search or post-search investigation. Therefore, this statement was not reliable piece of evidence to make proposed addition. The mere statement was not incriminating material in itself which could give jurisdiction to AO to make addition solely on the basis of statement of the employee as held in various judicial decisions. It was also asserted that the statement was recorded under great mental pressure and stress and the statement was retracted by way of an affidavit to DDIT (inv.). The assessee filed his retraction letter along with affidavit and categorically denied having accepted any unaccounted cash towards sale of properties. It was also contended that documents being print out of excel dat....
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....d to Annexure B-19 which pertained to 'Gateway of Dreams' project which was being carried out by another entity by the name M/s Dream City Pvt. Ltd. This entity was incorporated on 18-09-2017. However, there were transactions of cash receipts prior to period of incorporation of the said company. The assessee-company was the only entity of the group which was active during the period as mentioned in Annexure B-19. It was common practice of the business that before the launch of the project, advance bookings would be accepted by the real estate builders. The assessee was accordingly show-caused. The assessee opposed the same on the ground that this project was started by another group entity during AY 2018-19 and not in AY 2013-14. When the project was not in existence, there was no possibility of cash receipts against this project. However, Ld. AO rejected the same. Finally, cash component of Rs. 5 Lacs as mentioned in Annexure B-19 was added u/s 69A r.w.s. 115BBE of the Act. 3.16 Finally, impugned additions of Rs. 75.44 Crores and Rs. 1.08 Crores was made in the hands of the assessee in the assessment order which was subjected to assessee's further challenge before Ld. CIT(A). T....
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.... below: - Company & Project Name Date under which reference received Date of Notice Date of reply Date of inspection Date of Report No. of days between date of reference and date of report No. of days between date of inspection and date of report Comfort Green, Civil Hospital Road, Guru Teg Bahadur Nagar, Kharar 30-03-2022 05-05-2022 26-07-2022 08-08-2022 16-08-2022 05-09-2022 01-08-2022 08-09-2022 08-09-2022 05-09-2022 22-08-2022 12-09-2022 166 21 Comfort Homes, Civil Hospital Road, Guru Teg Bahadur Nagar, Kharar. 30-03-2022 26-07-2022 08-08-2022 16-08-2022 08-09-2022 18-08-2022 26-09-2022 180 39 Exotic Floors, Chandigarh, Kurali Road, Kharar 30-03-2022 26-07-2022 08-08-2022 01-08-2022 05-09-2022 14-11-2022 19-11-2022 234 5 Housing Park, (Phase 1 &Phase 2) Chandigarh Ambala Highway, Derabassi 30-03-2022 26-07-2022 08-08-2022 01-08-2022 05-09-2022 15-11-2022 21-11-2022 236 6 Noor City, KhararRoad, Kharar 30-03-2022 26-07-2022 08-08-2022 01-08-2022 05-09-2022 08-09-2022 07-09-2022 09-11-2022 224 63 Noor Villas-2, KhararKurali Road, Kharar....
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....shed by the assessee. When the report of DVO was time barred, Ld. AO could not have taken cognizance of the same and addition made solely on the basis of DVO report was illegal and deserve to be deleted. To support this legal ground, reliance was placed on judicial decisions which have already been enumerated in the impugned order. 4.4 The assessee also questioned the method of valuation of DVO on merits. It was stated that the assessee submitted various replies as and when required by Ld. DVO. All the documents in regard to the projects such as approved maps, drawings, structural designs, invoices of material and labor were filed with DVO. However, DVO did not consider the actual documents while framing his reports. He only considered CPWD rates which were much higher than the actual rates as evident from the bills / documents as provided by the assessee. The action of DVO in not considering the real figures and making report based on other estimated rates and figures was completely illegal and was not the statutory mandate. As against this, the assessee furnished independent valuer's report and tabulated reasons for difference between valuation of the projects as computed by D....
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....essment was to be completed by 31-03-2022. Just when the assessment was getting time barred, Ld. AO made reference to DVO on 30-03-2022 for valuation. Such reference could be made only to estimate the value of any 'asset', 'property' or 'investment' but estimation of cost of construction was not covered therein. The cost of construction was in respect of construction which constitutes stock-in-trade for the assessee. Therefore, reference was beyond the scope of Sec.142A in terms of decision of Hon'ble Delhi High Court in the case of Aar Pee Apartments Pvt. Ltd. (188 Taxman 39) holding that for the purported unexplained expenditure, power u/s 142A could not be exercised. 4.8 The assessee also contended that construction expenses on the project was stock-in-trade for the assessee and in case of alleged unrecorded stock purchases, addition could not be made u/s 69B. The Ld. AO did not have incriminating evidence for referring the case to DVO for valuation. No valid material or evidence was found or confronted to the assessee which could form the basis that the assessee had incurred out-of-books expenditure on projects. The excel sheet was not a signed document. There was no valid e....
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.... view of Chandigarh Tribunal in the case of Chet Ram Ravi Kumar (ITA No.696 to 698/Chd/2013). 4.10 The assessee further pointed out that regular return of income was filed by the assessee on 30-09-2013 which stood scrutinized u/s 143(3) on 30-11-2015. The alleged excel sheet as maintained by the assessee in CRS software, never had the cash component column and the same was added later on which was well explained by Shri Amit Goyal in the retraction affidavit. Thus, the additions were made merely on the basis of DVO report whereas no incriminating material was found for this year. The addition was also based on excel sheet prints which never existed at the time of search. Relying upon the decision of Hon'ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. (149 Taxmann.com 399), it was contended that no such addition could have been made in the year of completed assessment. 4.11 Even if the excel sheet was taken to be the incriminating material, the same do not satisfy the requirement of 4th proviso to Sec.153A(1) which mandate that the escaped income should be represented in the form of an asset. This condition was not satisfied in the present case. The Hon'ble Punjab & ....
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....ing no evidentiary value. No corroborative evidence was found to support these sheets. In the case of Balraj Gupta vs. ACIT (ITA No.1948/Del/2019), it was held by Tribunal that document as impounded from the hard disk was not a valid piece of evidence and addition on that basis could not be made. Similar was the decision in Gammon Constructions P. Ltd. (ITA No.1246/Del/2020 dated 20-09-2023). In the case of CBI vs. V.C. Shukla (3 AIR 410), it was held by Hon'ble Apex Court that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court was that independent corroborative evidence is required in respect of entries in regular books of accounts. Similarly, Hon'ble Supreme Court in Common Cause Vs. Union of India (2017) 77 Taxmann.com 245 (SC) stressed the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sheets. The Hon'ble Punjab & Haryana High Court in the case of Khosla Rice & General Mills Ltd. (ITA No.208/2011 dated 17-09-20....
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....xpert opinion in order to examine the genuineness of amounts disclosed in the books of accounts of cost of construction for such real estate projects for the purposes of making an assessment. It will help AO in making objective and fair assessment. Such reference was purely discretionary on the part of Ld. AO and it was to assist him for making the assessment. Adhering to principles of natural justice, Ld. AO shared the valuation reports with the assessee. Moreover, AO was in possession of incriminating material indicating that cash of Rs. 433.35 Lacs was used for construction purposes. Though the said paper was seized during search on 21-01-2021 whereas the projects under reference for the year under consideration were completed prior to the date of search, however, the said seized document pointed that the assessee had been making construction expenditure outside the books of accounts. The guess-work could be resorted to as per the decision of Hon'ble Delhi High Court in the case of Smt. Dayawanti Gupta (390 ITR 496). In the case of Chetan Das Lachman Das (254 CTR 392), it was held that seized material could be relied upon to draw inference that there could be similar transaction....
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....nt witnesses signed various pages of the statement and the statement was verified to be given without any pressure. Therefore, the retraction was mere after-thought. This recorded statement u/s 132(4) would have great evidentiary value as per the decision of Hon'ble Rajasthan High Court in the case of Roshan Lal Sancheti (150 Taxmann.com 227). Unless the admission is not successfully withdrawn, it is the best evidence. In terms of decision of Hon'ble Punjab & Haryana High Court in Rakesh Mahajan (214 CTR 218), it was held that the admission constitute best evidence. The other arguments as raised by the assessee were also rejected and the addition of Rs. 108 Lacs was confirmed. 4.19 On the issue of mechanical approval u/s 153D, it was held that the approval was accorded after due examination of relevant record and verification by the range head. Further, the approval was in the nature of administrative power. The range head while examining the matter u/s 153D does not examine to adjudicate upon the rights or obligations of the assessee but only consider whether the AO has fulfilled the requirements of Sec.153A. This condition was duly satisfied in the present case. Finally, the a....
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....already sub-judice before Hon'ble Apex Court and therefore, this issue has been kept open. In Ground No. 10, the assessee state that impugned order was passed without giving reasonable opportunity of hearing. However, no such fact has been demonstrated before us during the course of hearing. Therefore, this ground stand dismissed. Ground No.11 is general in nature. Since all the grounds assails twin quantum additions on merits as well as on legal grounds and are inter-connected with each other, the same are disposed-off collectively. In the above background, the grounds of appeal are adjudicated as under. 6. From the facts, it emerges that the assessee is engaged in construction of real estate projects. The assessee entity was incorporated on 17-08-2010. The impugned assessment stems from search action by the department on the assessee-group on 21-01- 2021 at the business as well as residential premises. The assessee-company was also covered under that search. Post-search proceedings, notice u/s 153A was issued to the assessee on 09-02- 2022 and in response thereto, the assessee filed return of income on 11-03-2022 declaring income of Rs. 246.43 Lacs which was subjected to impug....
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....criminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. Approving the decision of Hon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573) as well as the decision of Hon'ble Gujarat High Court in Saumya Construction (P.) Ltd. (387 ITR 529), it was held by Hon'ble Court that in respect of completed assessments / unabated assessments, no addition could be made by Assessing Officer in the....
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....gh Court in the case of Anil Arora (ITA No. 340/2015); the decision in Abhinav Kumar Mittal (30 Taxmann.com 357); the decision in Nishi Mehra (56 Taxmann.com 89) also supports the same view. The facts of the present case would show that Ld. AO do not have any cogent material with him to support the allegation of unaccounted expenditure by the assessee for AY 2013-14. In such a case, the reference u/s 142A could not be held to be a valid one and such a reference could not be held to be justified on the facts of the case. Accordingly, it was to be concluded that unless evidence of unaccounted expenditure for this year was found, no reference to Ld. DVO could have been made by Ld. AO. 7. Proceeding further, guided by cash flow statement for the month of July, 2020 as seized during search, Ld. AO has assumed incurrence of similar expenditure in this year and to ascertain the correct value of various expenditure in the ongoing projects during AY 2013-14, he referred the valuation to Ld. DVO at fag-end of time limit available to pass the assessment order. The fact on record would show that the last date to pass the assessment order for AY 2013-14 was expiring on 31-03-2022 whereas the....
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....for personal supervision. As against this, the assessee has furnished valuation report from an independent approved valuer who has valued the expenditure at much lower figures which are quite close to the expenditure as reflected by the assessee in its regular books of accounts. The said report has been discarded merely on the ground that no adverse comment has been made on DVO valuation as referred to by Ld. AO. However, the valuation exercise is in the nature of independent estimation only and there is no such requirement under law to point out fault in the report of other valuer. The assessee already furnished detailed bills and documents in support of expenditure which have not been taken into account by Ld. DVO. Many flaws have been pointed out by the assessee in the valuation of Ld. DVO which has not been considered by lower authorities. Admittedly, no draft report was ever prepared by Ld. DVO and the same was never confronted to the assessee despite the fact that the same would have substantial bearing on determination of assessee's total income. So much so, even the final report has also not been served by Ld. DVO upon the assessee as statutorily mandated u/s 142A(6). It is....
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....brought out in CBDT Circular No.1/2015 dated 21-01-2015, is as under: - "43. Estimate of value of assets by Valuation Officer and time limit for completion of assessments where reference made 43.1 The provisions contained in section 142A of the Income-tax Act, before its amendment by the Act, provided that the Assessing Officer may, for the purpose of making an assessment or reassessment, require the Valuation Officer to make an estimate of the value of any investment, any bullion, jewellery or fair market value of any property. On receipt of the report of the Valuation Officer, the Assessing Officer may after giving the assessee an opportunity of being heard take into account such report for the purposes of assessment or reassessment. 43.2 Section 142A of the Income-tax Act does not envisage rejection of books of account as a pre-condition for reference to the Valuation Officer for estimation of the value of any investment or property. Further, the said section 142A does not provide for any time limit for furnishing of the report by the Valuation Officer. 43.3 Accordingly, section 142A has been substituted so as to provide that the Assessing Off....
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....ssment. The said requirement of furnishing of report by DVO to the assessee within the statutory time period of 6 months is not shown to have been fulfilled in the present case. This requirement of furnishing of valuation report by DVO to the assessee is not mere empty formality but a mandatory statutory requirement which would enable the assessee to contest the same and assail the valuation so made by DVO since the same would have material bearing on determination of income of the assessee. When the statute mandates an authority to act in a particular specified manner then it has to be done in that manner only particularly when it would affect substantive rights of the assessee. In the absence of fulfillment of such mandatory requirement / condition, the assessee could not be fastened with such huge impugned addition as made by Ld. AO. 10. It could further be ascertained that the provisions of Sec. 142A(1) allows the Assessing Officer to refer valuation of any 'asset' or 'property' or 'investment' to a Valuation Officer with a view to determine the value of investments, bullion, jewellery or other valuable articles, or the fair market value of property whether or not the AO is ....
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.... vested in DVO is quasi-judicial in nature and therefore, the report is not mere a report but an order in itself. When the report of DVO is time barred, Ld. Ld. AO could not have taken cognizance of the same and the addition so made on the basis of invalid valuation report would be illegal. The valuation is nothing but mere estimation exercise. If this report is discarded, nothing would be left with Ld. AO to support the impugned addition in the hands of the assessee. Another aspect of the matter is that sub-section (6) of Sec.142A mandates the DVO to submit his report within six months to the AO and the assessee. But if the DVO does not submit his valuation report within 6 months, there is no unlimited extension of time limit as provided under clause (v) of Explanation-1 to Sec.153. This clause exclude time period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer u/s 142A(1) and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer. However, such reference could not provide unlimited extension of specified time period. To contend that mere reference to DVO u/s 142A may provide unlimit....
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....IT [2011] 197 Taxman 203/[2010] 328 ITR 513/[2009 (10) TMI 569 - SC ORDER] and in the case of CIT v. Nirmal Kumar Agarwal [2018] 99 taxmann.com 292/259 Taxman 320 (SC)/[2018 (10) TMI 2002 - SC ORDER]. Admittedly, in the present case, the valuation report is dated 28-10-2016 which is beyond the prescribed time of 30-9-2016. Hence, it is evident that the said valuation report of Id. DVO is barred by limitation and, hence, cannot be relied upon by either party in the eyes of law. Consequentially, in our view, no addition per se can be made by the Revenue by placing reliance on an invalid valuation report. 11. The Ld. Counsel has taken alternative plea that the valuation report considered by the CIT(A) cannot be relied upon as the DVO report which has been made on the basis of CPWD rated instead of PWD rates (APB, Pg. 43 para 8.3). The Ld. Counsel in this regard, placed reliance upon the binding judgment of Hon'ble Supreme Court in the case of Sunita Mansingha (supra) wherein, it has been held that for the purpose of valuating the property, the local rate should be applied and not CPWD rates and normally, there is difference of about 25% with respect to rate of CPWD and PW....
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....ted on merits also. We order so. The corresponding grounds as raised by the assessee stand allowed accordingly. 16. So far as the addition of Rs. 5 Lacs is concerned, the same would not survive since we have quashed the assessment order. Even otherwise on merits, we find that the said addition is on account of certain projects which has been carried out by separate group entity viz. M/s Dream City Private Ltd. which has come into existence only on 18-09-2017. This project has been started only in AY 2018-19 and not in AY 2013-14. It is unconceivable that the assessee has received advances for such a project during AY 2013-14 on behalf of an entity which never existed in AY 2013-14. Nothing has been shown that this project was ever started by the assessee. Therefore, the addition to that extent could not be sustained on merits also. 17. Similarly, the addition of Rs. 103 Lacs would not survive on legal grounds. Since arguments have been made on the merits also, we deal with the same. The addition of Rs. 103 Lacs is primarily based on the retracted statement of accountant Shri Amit Goyal. It has also been disputed that the cash column never existed in the software which was bei....
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....d not fall within the ambit of "asset" as defined in Explanation-2. Therefore, the assumption of jurisdiction was vitiated. We order so. The assessee succeeds in its respective grounds of appeal. The other legal grounds viz. mechanical approval as urged by Ld. AR has been rendered infructuous. 19. In the result, the appeal of the assessee stands partly allowed in terms of our above order. The Ld. AO is directed to re-compute the income of the assessee. ITA No.482/Chandi/2025 for AY 2017-18 & ITA No.484/Chandi/2025 for AY 2018-19: M/s Credo Assets Private Ltd. 20. The facts in AY 2017-18 are, admittedly, substantially the same and the assessee is in further appeal before us on similar grounds of appeal. The assessment for AY 2017-18 has been framed u/s 143(3) r.w.s. 153A of the Act on 11-11-2022. This assessee was also covered under search action. The regular return of income was filed by the assessee u/s 139(1) and this year was also unabated year. Pursuant to notice u/s 153A dated 21-10-2021, the assessee furnished return of income on 15-11-2021. Alleging that this assessee also made unaccounted investment in its project, Ld. AO made a reference to DVO for valuation on 30....