Income Tax Appellate Tribunal - Indore
M/S. Golden Realities Pipariya, ... vs The Acit Central-Ii, Bhopal on 4 October, 2021
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE HON'BLE RAJPAL YADAV, VICE PRESIDENT
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
VIRTUAL HEARING
IT(SS)A Nos.59 to 62/Ind/2019
Assessment Years: 2013-14 to 2016-17
M/s Golden Realities,
Bhopal
PAN:AAKFG88276G : Appellant
V/s
ACIT(Central)-II
Bhopal : Respondent
IT(SS)A Nos.80 to 82/Ind/2019
Assessment Years: 2014-15 to 2016-17
ACIT(Central)-II
Bhopal : Appellant
V/s
M/s Golden Realities,
Bhopal
PAN:AAKFG88276G : Respondent
Revenue by Shri S.S. Mantri, CIT-DR
Respondent by S/Shri S.N. Agrawal & Bhavesh
Agrawal, CAs
Date of Hearing 05.08.2021
Date of Pronouncement 04.10.2021
ORDER
Golden Realities (SS)59 of 2019 and others
PER MANISH BORAD, A.M
The above captioned appeals filed at the instance of the Assessee & Cross Appeals by the Revenue for Assessment Years 2013-14 to 2016-17 are directed against the orders of Ld. Commissioner of Income Tax(Appeals) (in short 'Ld. CIT(A)],-3 Bhopal dated 08.02.2019 which are arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the 'Act') dated 12.01.2018 framed by ACIT(Central)-II, Bhopal.
The Assessee has raised following grounds of appeal in IT(SS)ANo.59/Ind/2019:
"1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding that validity of notice as issued under section 153C of the Income Tax Act 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 the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of 2 Golden Realities (SS)59 of 2019 and others 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 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 fRs.12,39,521/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self-supervision.
6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings.
7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act.
8. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it.
IT(SS)ANo.60/Ind/2019 - Assessee's appeal "1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding that validity of notice as issued under section 153C of the Income Tax Act 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.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 3 Golden Realities (SS)59 of 2019 and others only on the basis of incriminating documents as found and seized.
4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of Rs. 32,11,330/- out of the total addition of Rs. 2,02,26,080/- as made by the assessing officer to the total income of the appellant by referring the matter to the DVO for estimation of the cost of construction/development incurred in the project without pointing out any specific defects and also without rejecting the regular books of accounts as maintained by the appellant.
5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintain the addition of Rs. 32,11,330/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision.
6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings.
7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act.
8. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it.
IT(SS)ANo.61/Ind/2019 - Assessee's appeal "1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding that validity of notice as issued under section 153C of the Income Tax Act 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 4 Golden Realities (SS)59 of 2019 and others 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 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. 62,69,716/- out of the total addition of Rs. 3,96,64,189/- as made by the assessing officer to the total income of the appellant by referring the matter to the DVO for estimation of the cost of construction/development incurred in the project without pointing out any specific defects and also without rejecting the regular books of accounts as maintained by the appellant.
5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintain the addition of Rs. 62,69,716/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision.
6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings.
7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act.
8. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it.
IT(SS)ANo.62/Ind/2019 - Assessee's appeal "1.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 date of search as 05.10.2015 and no notice was issued u/s 153C of the Act even when date of search in case of other person is the date on which information from the assessing officer of the person searched is passed on to the assessing officer of the other person i.e. date of search in the present case shall be 15.11.2016 which falls in the assessment year 2017-18.5
Golden Realities (SS)59 of 2019 and others
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 assessment order as passed u/s 143(3) of the Act for the year under consideration by treating this year as the year of search even assessment was ought to be framed under section 153C r.w.s. 143(3) of the Act for this year and not under section 143(3) of the Act.
3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding that validity of assessment even when nothing incriminating was found and seized related to the appellant from the possession of the person in whose case search was executed.
4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of assessment even when the notice was issued under section 153C of the Act without proper recording of satisfaction in dual capacity.
5. 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.3,28,86,624/- 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 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/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision.
9. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the 6 Golden Realities (SS)59 of 2019 and others DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings.
10. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act.
11. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it.
IT(SS)ANo.80/Ind/2019 - Departmental appeal "1.That on the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.1,70,14,750/- made by the Assessing officer on account of undisclosed investment u/s 69B of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.2,53,555/- made by the Assessing Officer on the basis of unexplained cash received from Smt. Sunita Rai.
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.
IT(SS)ANo.81/Ind/2019 - Departmental appeal "1.That on the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.3,33,94,473/- made by the Assessing officer on account of undisclosed investment u/s 69B of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.3,74,000/- made by the Assessing Officer on the basis of unexplained cash received from Smt. Sunita Rai.
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.
IT(SS)ANo.82/Ind/2019 - Departmental appeal "1.That on the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of 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 7 Golden Realities (SS)59 of 2019 and others 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 conducted at the business premises of the assessee. Subsequently, notices u/s 153C of the Act were issued on 15.11.2016 for AY 2012-13 to 2015-16.
Notices u/s 143(2) & 142(1) of the Act were issued and duly served upon the assessee. Various details were called for by the Assessing Officer which were replied by the assessee. During the course of assessment proceedings, reference was made to Valuation Officer (in short the 'DVO') on 06.04.2017 for determination of cost of construction of project undertaken by 8 Golden Realities (SS)59 of 2019 and others the assessee. The DVO submitted his report on 17.08.2017. The assessee challenged the CPWD rates adopted by the DVO for valuation purpose. The assessee also pointed out various discrepancies in the valuation report submitted by the DVO.
However, the assessee failed to find any favour from the Ld. Assessing Officer and the Ld. Assessing Officer completed assessment u/s 153C r.w.s. 143(3) of the Act for AY 2012-13 to 2015-16 and u/s 143(3) of the Act for AY 2016-17 after making the following additions:
Amount (Rs.) S.No. Nature of additions AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 Addition on account of undisclosed 1 94,71,070 2,02,26,080 3,96,64,189 3,28,86,624 investment in construction of project Addition on account of 2 unexplained cash - 2,53,555 3,74,000 -
received from Smt. Sunita Rai Total additions 94,71,070 2,04,79,635 4,00,38,189 3,28,86,624
3. Aggrieved assessee preferred an appeal before the Ld. CIT(A) and partly succeeded. As regards the addition on account of undisclosed investment in construction of project, the relief 9 Golden Realities (SS)59 of 2019 and others allowed and additions confirmed by the Ld. CIT(A) are tabulated as under:
Amount (Rs.) S.No. AY Additions made by Relief allowed by Additions the Ld. Assessing the Ld. CIT(A) confirmed by the Officer Ld. CIT(A) 1 2013-14 94,71,070 82,31,549 12,39,521 2 2014-15 2,02,26,080 1,70,14,750 32,11,330 3 2015-16 3,96,64,189 3,33,94,473 62,69,716 4 2016-17 3,28,86,624 2,92,18,917 36,67,707
4. As regards the addition on account of unexplained cash received from Smt. Sunita Rai, the Ld. CIT(A) deleted the addition made by the Ld. Assessing Officer. Against the order passed by the Ld CIT(A) both 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.
10Golden Realities (SS)59 of 2019 and others
7. Brief facts relating to this issue are that date of search in the case of the group was 05.10.2015. The documents related to the assessee found during the course of search from the various premises of the group were handed over to the Ld. Assessing Officer of the assessee on 15.11.2016. The Ld. Assessing Officer however did not issue any notice u/s 153C of the Act for the AY 2016-17 and passed assessment order u/s 143(3) of the Act for the year under consideration.
8. The Ld. Counsel for the assessee submitted that no search was carried out at the business premises of the assessee and that the documents related to the assessee were found during the course of search carried out at the various other premises of the group. The Ld. Counsel contended that date of initiation of search in case of other person is the date on which books of accounts or documents or assets seized during the course of search are handed over to the Assessing Officer of the other person which in the present case was 15.11.2016 and not 05.10.2015 and accordingly, notice u/s 153C of the Act ought to have been issued and assessment order ought to have been passed u/s 153C r.w.s. 143(3) of the Act for the AY 2016-17.
11Golden Realities (SS)59 of 2019 and others
9. The Ld. Counsel for the assessee also relied upon the following written submission:
3.4.1] That date of receipt of documents by the assessing officer of the other person is the date of search in the case of the other person as is also held by various judicial precedents. That relevant extracts from few of the judicial precedents are reproduced as under:
3.4.2.1] That Hon'ble Delhi High Court in the case of CIT Vs RRJ Securities Limited [Appeal No ITA No 164/2015 dated 30.10.2015 ] has held that :
"24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person.
It is contended by the Revenue that the relevant six assessment years would be 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 12 Golden Realities (SS)59 of 2019 and others 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 jurisdiction to make an assessment of the Assessee's income for that year."
3.4.2.2] That Hon'ble ITAT Delhi Bench in the case of Rajeev Behl Vs DCIT [Appeal Nos ITA Nos 1927 to 1931/Del/2015 dated 29-06- 2016 has also expressed similar view in para 34 of its order which is reproduced as under:
"34. The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned decision of Hon'ble Delhi High Court in the case of RRJ Securities Ltd. (supra)we hold that assessment for AY 2007-08 was outside the ambit of the block period and the AO had no jurisdiction to make assessment of the assessee's income for that year. Accordingly, assesse's appeal for AY 2007-08 is allowed."
3.4.2.3] That Hon'ble ITAT Delhi Bench in the case of M/s R L Allied Industries Vs ITO as reported in [2015] 54 taxmann.com 222 (Delhi-Trib.)/[2015] 37 ITR(T) 507 (Delhi-Trib.)/[2015] 167 TTJ 20 (Delhi -Trib.) (UO) has held that:
"8. Thus, as per Section 153A(1)(b), the Assessing Officer is empowered to assess or reassess the total income of the six assessment years immediately preceding the assessment year relevant to the assessment year in which search is conducted. Thus, in other words, he has to assess the search year and six preceding years. As per proviso to Section 153C, for the purpose of Section 153C, the date of receiving the books of account or documents shall be considered the date of search. Therefore, with the combined reading of proviso to Section 153C and Section 153A(1)(b), it is clear that in the case of the person in whose case action is required under Section 153C, the Assessing Officer is empowered to take action under Section 153C for the year in which 13 Golden Realities (SS)59 of 2019 and others 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 executed on the person searched i.e. on 05-10- 2015. Hence, additions made till the Asst Year 2015-16 in absence of any incriminating material in possession of the assessing officer were not justified.
10. Per contra Ld. DR vehemently argued supporting the finding of both lower authorities.
11. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by both the sides. Through Ground Nos. 1 & 2, the assessee has challenged the finding of Ld. CIT(A) upholding the validity of 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. We notice that the sole contention of the assessee in these grounds of appeal is that AY 2016-17 fell within the purview of section 153C of the Act and hence, notice ought to have been issued u/s 153C 14 Golden Realities (SS)59 of 2019 and others of the Act and assessment order ought to have been passed u/s 153C r.w.s. 143(3) of the Act for AY 2016-17. There is no dispute regarding the fact that search action at the premises of other persons of the group was conducted on 05.10.2015. Further, it is also an uncontroverted fact that documents seized during the course of search were handed over to the Assessing Officer of the other person i.e. to the Assessing Officer of the assessee only on 15.11.2016 and thereafter notices were issued u/s 153C of the Act. The provision of section 153C of the Act reads as under:
153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,--
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer 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 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 15 Golden Realities (SS)59 of 2019 and others the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :
Provided further that the Central Government may by rules13 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated.
(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year--
(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or
(b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or
(c) assessment or reassessment, if any, has been made, 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.
From perusal of the above provision, we find that proviso to sub-
section (1) of section 153C of the Act provides that 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 16 Golden Realities (SS)59 of 2019 and others assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. Further, sub-section (2) of section 153C of the Act provides that where books of accounts or documents or assets seized or requisitioned as referred to in sub-
section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 and in respect of such assessment year, no return of income has been furnished by such 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 17 Golden Realities (SS)59 of 2019 and others the Act. Further, the documents seized during the course of search were handed over to the Assessing Officer of the assessee after the due date for furnishing the return of income for the AY 2016-17 and in respect of AY 2016-17, no return of income was furnished by the assessee and no notice under sub-section (1) of section 142 was issued before the date of receipt of the documents by the Assessing Officer having jurisdiction over the assessee i.e. on 15.11.2016. Therefore, on a conjoint reading of the provisions contained in section 153C of the Act, it seems that the Assessing Officer should have issued notice u/s 153C of the Act and should have assessed total income of the assessee of AY 2016-17 in the manner provided in section 153A of the Act.
12. We also notice that the issue of scope of section 153C of the Act came up before the Hon'ble Delhi High Court in the case of CIT-7 v. RRJ Securities Ltd. reported in [2016] 380 ITR 612 (Delhi) wherein Hon'ble High Court held that:
"24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 18 Golden Realities (SS)59 of 2019 and others 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be 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 searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year."
13. We further would like to refer to the judgment of Hon'ble ITAT Delhi 'F' Bench in the case of Rajeev Behl Vs. DCIT Central Circle-15, New Delhi (ITA nos. 1927 to 1931/Del/2015) wherein 19 Golden Realities (SS)59 of 2019 and others Hon'ble Coordinate Bench discussed the aforesaid issue at length and held that:
"34. The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned decision of Hon'ble Delhi High Court in the case of RRJ Securities Ltd. (supra)we hold that assessment for AY 2007-08 was outside the ambit of the block period and the AO had no jurisdiction to make assessment of the assessee's income for that year. Accordingly, assesse's appeal for AY 2007-08 is allowed. ............
............
51. If we closely analyze the provisions of section 153C, we find that by incorporating second proviso to section 153C, the date of search has been deferred to the date of transfer of assets/ documents etc. to the AO having jurisdiction over other persons. The consequence of this would be to reckon the block period from this date. Therefore, legislature has incorporated section 153C(2) as per which, assessment u/s 153A/153C is to be made only if conditions contemplated in either of clause (a),(b) or (c) u/s 153C(2) are fulfilled. All these clauses contemplate various situations where assessment has to be treated as completed assessment. However, in respect of pending assessment no such provision has been made. Therefore, for pending assessments AO has to pass assessment order u/s 143(1)/ 143(3). If we accept the contention advanced by ld. counsel, then section 153C(2) will be rendered otiose. This section has been incorporated in view of the deeming provision contained in second proviso. Had the intention of legislature was that assessment orders in respect of assessment years prior to the date of construed search are to be passed u/s 153A/153C, then it could incorporate provisions identical to first proviso to section 153A for passing assessment orders. But that has not been done. In this regard it is pertinent to note that no incriminating document is likely 20 Golden Realities (SS)59 of 2019 and others to be found on date 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 the purpose of Section 153C, the date of receiving the books of account or documents shall be considered the date of search. Therefore, with the combined reading of proviso to Section 153C and Section 153A(1)(b), it is clear that in the case of the person in whose case action is required under Section 153C, the Assessing Officer is empowered to take action under Section 153C for the year in which the seized document is received by him and the preceding six years. In the case under appeal before us, as mentioned by the Assessing Officer in paragraph 2 of his order, the seized material was received on 12th March, 2009 from ACIT, Central Circle-17. Thus, the year in which 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 21 Golden Realities (SS)59 of 2019 and others limitation. Accordingly, we quash the same and consequentially, the assessment order passed in pursuance to the notice issued under Section 153C is also quashed."
15. In light of the facts re-iterated above and after going through the findings of the Hon'ble High Court and Coordinate Benches cited supra, we are of the considered view that AY 2016-17 fell within the purview of provisions of section 153C of the Act in light of first proviso read with sub-section (2) of section 153C of the Act and accordingly, assessment order for AY 2016-17 ought to be treated as framed u/s 153C r.w.s. 143(3) of the Act and not u/s 143(3) of the Act AY 2016-17. Accordingly, Ground Nos. 1 & 2 of the assessee's appeal are allowed.
16. Ground No. 3 raised by the assessee challenges the findings of the 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 Officer. Brief facts relating to this issue are that documents pertaining to the assessee were seized from the premises of Shri Ajit Singh Malhotra and Shri Rasmeet Singh 22 Golden Realities (SS)59 of 2019 and others Malhotra at Alka Compound, Nehru Ward, Pipariya, 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 that document found from 23 Golden Realities (SS)59 of 2019 and others the mobile phone of Shri Rasmeet Singh Malhotra represented the balance of Rajesh Agrawal HUF which was duly incorporated in the books of accounts of the assessee. The Ld. Counsel for the assessee also strongly contended that no addition whatsoever was made by the Ld. Assessing Officer in respect of the so-called incriminating documents related to the assessee which were found during the course of search and therefore, the Ld. Assessing Officer did not assume valid jurisdiction u/s 153C of the Act. The Ld. Counsel further submitted that assessment years till AY 2015-16 were non-abate assessment years and therefore, no addition was called for to the total income of the assessee in these years in absence of any incriminating documents found and seized during the course of search. The Ld. Counsel for the assessee also relied upon the following written submission:
1.1] The appellant in this ground of appeal has claimed that notice as issued under section 153C of the Income Tax Act was invalid since nothing incriminating relating to the appellant was found and seized from the possession of the person searched. 1.2] That search was executed at the residential premises of Shri Rasmeet Singh Malhotra and his other family members on 05-10-
2015 and survey was executed on the business premises of the appellant.
1.3] The relevant extract of provision of section 153C of the Income tax Actis reproduced as under for the sake of understanding:
"Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,--24
Golden Realities (SS)59 of 2019 and others
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if that Assessing Officer 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 nature, record his satisfaction and then issue notice under section 153C of the Act 1.4.2] That in the present case in hand, the assessing officer referred the loose papers as found and seized during the course of survey from the business premises of the assessee itself. That nothing incriminating was found and seized from the premises of the person searched. That in Para 7.1 on inner Page No 4 of the assessment order, the loose papers as found during the course of survey was referred. Hence, notice now issued under section 153C of the Income Tax Act was prima facie not correct. 1.4.3] That in the present case in hand, the assessing officer has not referred to any documents which were found in possession of the 25 Golden Realities (SS)59 of 2019 and others person searched and not found recorded in the regular books of accounts. That it is primary condition prior to the issuance of notice under section 153C of the Act that certain documents related to the other person are found in possession of the person searched and these documents are also incriminating in nature.
1.4.4] That this is a jurisdictional issue in the issuance of notice under section 153C of the Actsince the assessing officer failed to discuss these papers in the search assessment order and the fact that documents are required to be found in possession of the person searched and that thesedocuments do not actually pertain to the person searched but the same pertains to the assessee and these documents are also not found recorded in the regular books of accounts of the assessee. However, in this case, no documents were referred by the assessing officer and hence, present notice as issued by the assessing officer and assessment as framed by the assessing officer was wholly without jurisdiciton. The entire proceedings as initated based on such illegal notice are bad in law and liable to be quashed as without jurisdiction. 1.5] That Hon'ble Apex Court in the case of CIT Vs Sinhgad Technical Education Society as reported in 397 ITR 344 has dealt with the said issue in detail and approved the finding of the Hon'ble ITAT and Hon'ble High Court by stating that:
"18) The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions 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 2000-01 and 2001-02 was even time barred.26
Golden Realities (SS)59 of 2019 and others
19) We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy."
1.6] That in view of the above discussion, it is clear that even in the present case in hand, nothing incriminating was found pertaining to the appellant during the course of search as executed under section 132 of the Act and therefore the assessing officer was not having valid jurisdiction over the case of the appellant. The assessment order as passed under section 153C r.w.s. 143[3] of the Act was therefore without jurisdiction and the same now requires to be quashed. ................
3.5.1] That it is a settled position of law that in absence of any incriminating material, no addition can be made to the total income of the assessee in case of non-abate assessment. 3.5.2] That in the present case in hand, addition was made merely on the basis of valuation report as obtained from the Departmental Valuation Officer which in any case is not justifiable since the year under consideration was a non-abate assessment year. 3.6.1] That Hon'ble Delhi High Court in the case of CIT Vs Anil Kumar Bhatia [Appeal Nos 1626,1632,1998,2006,2019,2020/2010 dated 07-08-2012] has discussed the similar issue in detail in para 20 and 23 and held that:
"20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 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 27 Golden Realities (SS)59 of 2019 and others 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] That Hon'ble Delhi High Court in the case of CIT vs Smt Suraj Devi reported in 328 ITR 604 has held that (Refer Para 7):
"7. Moreover, in the present case, no evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed. A reading of para 3.4.1 of the AO's order does not disclose that the respondent-assessee had made any admission in her alleged statement under s. 132(4) of Act, 1961. In fact, no such statement has been produced before us. It is also pertinent to mention that no adjustment on account of sales consideration has been made by the Revenue in the case of the seller. Consequently, we find that no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed."
3.6.3]That Hon'ble Delhi High Court in the case of CIT vs Naveen Gera reported in 328 ITR 516 has held that (Refer Para 9):
"9. We do not find merit in the submission made by Ms. Suruchii Aggarwal that the concealed income was detected during the course of search or any evidence was found which would indicate such concealment. The seized material containing the sale deeds of the properties, which have been relied upon to make reference to DVO, had already been declared to the Revenue by the respondent-assessee under VDIS. We are also in agreement with the submission made by Mr. Piyush Kaushik that it is settled law that in the absence of any incriminating evidence that anything has been paid over and above than the stated amount, the primary burden of proof is on the Revenue to show that there has been an under-statement or concealment of income. It is only when such burden has been discharged, would it be permissible to rely upon the valuation given by the DVO. Further, the opinion of DVO, per se, is not an information and cannot be relied upon in 28 Golden Realities (SS)59 of 2019 and others the absence of other corroborative evidence [See K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 59 (SC), Asstt. CIT vs. Dhariya Construction Company, Civil Appeal No. 9468 of 2003 [reported as (2010) 236 CTR (SC) 226.Ed.], decided by the apex Court on 16th Feb., 2010, CIT vs. Smt. Shakuntala Devi (2009) 224 CTR (Del) 79 : (2009) 316 ITR 46 (Del), CIT vs. Ashok Khetrapal (2007) 211 CTR (Del) 576 : (2007) 294 ITR 143 (Del) and 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 have decided the issue that in absence of any incriminating material or documents seized during the course of search, the Assessing Officer cannot pass order u/s 153A r.w.s. sec. 143(3) of the I.T. Act in the case of Kalani Bros. in IT(SS)A No.71/Ind/2014 and others. The relevant portion of the order is reproduced hereunder:
"8. In respect of 153A bad in law on the ground that original assessment proceedings u/s 143(3) was completed on 29.12.2006 (hereinafter referred as "original assessment order for ease of reference), the AO treated the said lease transaction as sale transaction and taxed the total security deposit receivable as sale consideration of sale of land. The addition made in the search assessment order pertained to the issue already dealt in the original assessment order i.e. lease transaction categorized as sale transaction. The fact that the aforesaid issue bears no relation to the any of the material / documents / records found and seized during the search 29 Golden Realities (SS)59 of 2019 and others action on 16.04.2009. Ld. CIT (A) has relied upon the Circular No. 7 of 2003 which clarifies the position of the pending appeals as on the date of the search. The relevant portion is produced herewith -
"The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate...."
Accordingly, as far as completed assessments are concerned, they do not abate. The AO cannot proceed to make the same addition in the block assessment without any incriminating material found in the course of search. The said view prevents the AO to undo what has already been completed and has become final in the original assessment proceedings.
9. We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/s 132 of the Act or a requisition has been made u/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 of search. The assessments were completed u/s 143(3) of the Act read with section 153A/153C of the Act after the search. There was no abatement of any proceedings in these cases for these assessment years in terms of second 30 Golden Realities (SS)59 of 2019 and others proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In a recent decision, Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/s 153A of the Act, only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the course of original assessment. In all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCIT; Madugula vs. DCIT; CIT vs. ChetandasLaxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora; 367 ITR 517 relied on by the learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particular issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR 192. Respectfully following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly."
17. We, respectfully following the same, we allow the appeals on the ground of sec. 153A of the I.T. Act wherein we have already held that in absence of any incriminating documents found 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 31 Golden Realities (SS)59 of 2019 and others 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 incriminating material was found pertaining to assessment year 2007-08 and only the purchase documents in the shape of registered sale deed were found which were duly disclosed in the regular books of accounts. The Assessing Officer could not have reopened the assessment if in case the assessment has been completed earlier u/s 143(3) of the Act for the assessment year 2007-08 but this is not so in the case of the assessee because for the assessment year 2007-08 the return of the assessee was merely processed u/s 143(1)(a) of the Act which by no canon can be Anil Kataria IT(SS)A Nos.177 to 179,984, CO 49 & 163 to 165/2017 accepted as regular assessment and, therefore, the Assessing Officer had no occasion to examine the related transactions for the assessment year 2007-08. During the course of search, documents were found relating to purchase of property as well as incriminating material for undisclosed investment in construction of property which was sufficient enough for the Assessing Officer to initiate the assessment proceedings for the assessment year 2007-08 to assess the correct income of the assessee. We, therefore, set aside the findings of the learned Commissioner of Income Tax (Appeals) and hold that the assessment for the assessment year 2007-08 u/s 153A r.w.s. 143(3) of the Act was valid. The relevant grounds of the revenue for the assessment year 2007-08 are allowed."
3.7] That in view of the above, it is submitted that the assessing officer was not justified in making additions to the total income of the appellant merely on the basis of valuation report and in absence of any incriminating documents found during the course of search so as to prove the excess investment in the construction of the Duplex as constructed by the appellant.
ADDITION DURING THE COURSE OF SEARCH MERELY ON THE BASIS OF VALUATION REPORT 3.8] That in case of search assessment , there was no justification for making addition to the total income of the appellant merely on the basis of valuation report. The addition so made was therefore neither legal nor proper. The same now requires to be quashed. 3.8.1] That Hon'ble ITAT Agra Bench in the case of Raj Kumar Mittal Vs DCIT as reported in 87 taxmann.Com 344 has held that:
32Golden Realities (SS)59 of 2019 and others "8. We have heard the rival contentions and have perused the material on record. The AO alleged that the assessee 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 recorded in its books of accounts, either during the course of search of the assessee's residence and business premises, or thereafter during the course of assessment proceedings or even in the DVO's enquiry proceedings.
9.1 In the case of Abhinav Kumar Mittal (Supra), it was held that:
".......referred question of valuation of properties to DVO. On receipt of valuation report, Assessing Officer took into account difference in values as declared by assessee and as determined by DVO and added same to income of assessee as unexplained investments under section 69.The Appellate authorities deleted impugned addition made by Assessing Officer as no material was found in search and seizure operations to justify reference to DVO and the DVO's valuation was based on incomparable sales. Whether valuation arrived at by DVO was of no consequence Held, yes. Whether, therefore, appellate authorities were justified in deleting impugned addition made by Assessing Officer Held, yes [Para 6]"
10. Similarly, in the case of Nishi Mehra (Supra) it was heldthat no addition can be made merely only on the basis of DVO's report in the absence of any corroborative evidence. (APB, 86-89). No decision to the contrary has been cited before us.
11. In view of the above, we hold that the AO could not tax the said amounts merely based upon the DVO's report in the absence of any corroborative material to point out under-valuation of the property in question. Therefore, we accept the grievance of the 33 Golden Realities (SS)59 of 2019 and others assessee as justified. Accordingly, the impugned orders of the ld CIT (A) are reversed and the additions are hereby deleted, for all the Assessment Years, i.e., from A.Y. 2007-08 to 2013-14. Nothing, else remains to be adjudicated."
3.8.2] That Hon'ble Delhi High Court in the case of CIT vs. Bajrang Lal Bansal [2011] 335 ITR 572/12 taxmann.com 88 (Delhi) directed for deletion of the addition made on the basis of the report of the DVO holding that the report of the DVO alone is not an information warranting addition in the absence of any incriminating evidence discovered during search. 3.8.3] That Hon'ble Delhi Bench of ITAT in the case of Dy. CIT (Central Circle ) v. Abhinav Kumar Mittal, in ITA No. 4460/Del/2010, by order Dated 29.06.2012, wherein the ITAT, Delhi Bench has deleted the addition as was made in the case of the assessee based solely 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 impugned addition made by Assessing Officer No material was found in search and seizure operations to justify reference to DVO DVO's valuation was based on incomparable sales Whether valuation arrived at by was of no consequence Held, yes Whether, therefore, appellate authorities were justified in deleting impugned addition made by Assessing Officer Held, yes [Para 6]"
3.8.4]That Hon'ble Delhi High Court in the case of CIT Vs Nishi Mehra[2015] 56 taxmann.com 89/232 Taxman 111 (Delhi) deleted the addition emphasizing that no addition can be made only on the basis of report of DVO in absence of any corroborative evidences and held that:
"Section 69B, read with section 158BA, of the Income Tax Act, 1961 Undisclosed investment (Immovable properties assessment 34 Golden Realities (SS)59 of 2019 and others in search cases) Block period 1986-87 to 1995-96 Whether opinion of DVO, per se, is not an information and cannot be relied upon in absence of other corroborative evidence Held, no. Whether where due disclosure of acquisition of properties had been made in course of regular assessments by assessee and those valuations had been accepted by income tax authorities as well as wealth tax authorities, Assessing Officer could not tax said amounts merely based upon DVO's report in absence of any material pointing to undervaluation in block assessment proceedings Held, yes."
3.8.5] That Hon'ble Gujarat High Court in the case of CIT v. Berry Plastics (P.) Ltd. [2013] 35 taxmann.com 296/217 Taxman 39 (Guj.) (APB, 93) has held that-
"Section 69B, read with section 142A of the Income-tax Act, 1961
- Undisclosed investments [Investment in land and buildings] - Assessment year 2006-07 - During relevant year, assessee made some investment in land and building - Assessing Officer referred matter to DVO who valued land and building at a higher amount - In view of difference between disclosed investment of assessee in purchase of property and DVO's estimation of its fair market value, Assessing Officer added certain amount to taxable income of assessee under section 69B - Commissioner (Appeals) deleted addition holding that valuation report of DVO could not be a conclusive evidence and there had to be some clinching evidence in form of proof to show that additional consideration had passed between buyer and seller - Tribunal confirmed order of Commissioner (Appeals) -Whether DVO's report may be 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 35 Golden Realities (SS)59 of 2019 and others 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 Officer in the satisfaction note.
We have gone through the satisfaction notes recorded by the Assessing Officer of the person searched and by the Assessing Officer of the assessee which have been placed on Page No. 420- 422 of the paper book. We have also gone through the loose papers seized during the course of search and inventorized as LPS-2 and LPS-7 which were referred to in the satisfaction notes and which have been placed on Page No. 424-469 of the paper book. These papers contain permissions and diversion letters in respect of project undertaken by the assessee which have no financial impact in the case of the assessee. Further, the document found from the mobile phone of Shri Rasmeet Singh Malhotra represents the balance of Rajesh Agrawal HUF which was duly incorporated in the books of accounts of the assessee.
This fact is duly verifiable from the ledger account of Rajesh 36 Golden Realities (SS)59 of 2019 and others Agrawal HUF in the books of accounts of the assessee placed on Page No. 470 of the paper book. Therefore, it seems that the loose papers referred to by the Ld. Assessing Officer in the satisfaction notes were not incriminating in nature. Further, it is uncontroverted finding of fact that no addition was made by the Ld. Assessing Officer in respect of these loose papers which formed the very basis for initiation of proceedings u/s 153C of the Act in the case of the assessee. We also notice that the issue of validity of addition made in the proceedings initiated u/s 153C of the Act in absence of incriminating material came up before the Hon'ble Supreme Court of India in the case of CIT-III, Pune v.
Sinhgad Technical Education Society reported in [2017] 397 ITR 344 (SC) wherein Hon'ble Supreme Court of India dismissed the appeal of the revenue and held that:
"18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions 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, 37 Golden Realities (SS)59 of 2019 and others 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 Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy."
20. We further find that the similar issue also came up for consideration before the Hon'ble Jurisdictional High Court in the case of CIT v. Mechmen 11-C reported in [2016] 380 ITR 591 (Madhya Pradesh) wherein Hon'ble Jurisdictional High Court held that:
"23. In the present case, the concurrent finding of fact recorded by the Appellate Forums is that, no satisfaction has been recorded by the Assessing Officer before issuing of notice under section 153C. Further, none of the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail."
21. In light of the facts re-iterated above and after going through the findings of the Hon'ble Supreme Court of India and Hon'ble Jurisdictional High Court (supra) and decision of Hon'ble Delhi 38 Golden Realities (SS)59 of 2019 and others High Court in case of Kabul Chawla (2016) 380 ITR 573 (Del) and also decision of Meeta Gutgutia (2017) 395 ITR 526 (Del), we are of the considered view that proceedings initiated u/s 153C of the Act for the AY 2013-14 to 2015-16 being non-abated and completed assessments (considering the date of search for proceedings u/s 153C of the Act as 15.11.2016) deserves to be quashed, since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153C of the Act for these years. Moreover, no addition was made by the Ld. Assessing Officer himself while passing the assessment order on the basis of the so-called incriminating material which formed the very basis for initiation of proceedings u/s 153C of the Act. We, therefore, set aside the findings of Ld. CIT(A) on this ground and conclude that proceedings initiated in the case of the assessee for AY 2013-14 to 2016-17 are without jurisdiction and consequently, assessments framed for these years are quashed and set aside. Accordingly, Ground No. 3 of the assessee'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 39 Golden Realities (SS)59 of 2019 and others 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 Cost of construction Cost of construction Year declared by assessee 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 3,19,46,677 464,94,366 Accordingly, the Ld. Assessing Officer worked out the excess cost of construction incurred by the assessee in various years as under:40
Golden Realities (SS)59 of 2019 and others Assessment Excess cost of construction incurred as estimated by Year DVO 2013-14 94,71,070 2014-15 2,02,26,080 2015-16 3,96,64,189 2016-17 3,28,86,624 The assessee filed detailed objections before the Ld. Assessing Officer pointing out various discrepancies in the report submitted by the DVO. The assessee also challenged the CPWD rates adopted by the DVO in his report. However, the assessee failed to find any favour from the Ld. Assessing Officer who made additions of the above-mentioned amounts to the total income of the assessee u/s 69B of the Act on account of undisclosed investment in construction of project not recorded in books of accounts.
24. Aggrieved assessee carried the matter before the Ld. CIT(A) who partly deleted the addition made by the Ld. Assessing Officer on account of undisclosed investment in construction of project.
25. Now the assessee is in appeal before us in respect of the additions confirmed by the Ld. CIT(A) whereas the revenue is in appeal before us in respect of the additions deleted by the Ld. CIT(A).
41Golden Realities (SS)59 of 2019 and others
26. The Ld. Counsel for the assessee submitted at the outset that cost of construction considered by the Ld. Assessing Officer to the tune of Rs.22,25,64,347/- was factually incorrect since the correct amount of cost of construction actually incurred by the assessee was of Rs.23,69,68,970/-. The Ld. Counsel submitted that the difference arose mainly due to cost of construction of Rs.6,45,09,766/- considered by the Ld. Assessing Officer as against actual cost of construction of Rs.7,75,17,766/- incurred by the assessee during the AY 2016-17. A table showing the amount of actual cost of construction, cost of construction considered by the Ld. Assessing Officer, cost of construction considered by the DVO, difference in cost worked out by the Ld. Assessing Officer and correct amount of difference was relied upon which is as under:
S Asst Actual cost Cost of Cost of Difference Correct . Year of construction construction as per AO amount of N construction as declared as per DVO [in Rs] difference o [in Rs] by the [in Rs] [in Rs] appellant and considered by the AO [in Rs] 1 2012-13 NIL NIL NIL NIL NIL 2 2013-14 1,79,67,427 1,79,67,427 2,74,38,497 94,71,070 94,71,070 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 42 Golden Realities (SS)59 of 2019 and others 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 Construction
expenses as Expenses as
incurred considered by
the AO
1 Construction Expenses as incurred 23,69,68,970 22,25,64,347
2 Cost of construction as estimated by 33,93,59,999 33,93,59,999
the DVO
3.1 Difference in cost of construction as 10,23,91,029 11,67,95,652
estimated by the DVO as shown by the
appellant
3.2 % of difference in the cost of 30.17% 34.42%
construction
The Ld. Counsel for the assessee further submitted that the Ld. CIT(A) during the course of first appellate proceedings allowed rebate to the extent of 30% i.e. 25% on account of CPWD and PWD rates and 5% on account of self-supervision and confirmed the balance amount of addition made by the Ld. Assessing Officer. The Ld. Counsel relied upon a table wherein additions confirmed by the Ld. CIT(A) vis-a-vis the correct position if the actual amount of cost of construction had been considered was computed and summarized as under:43
Golden Realities (SS)59 of 2019 and others S.No Asst Actual Cost of Cost of Differenc Correct Cost as Differenc Year cost of construct construct e as per amount estimat e as construct ion as ion as AO of ed by maintain ion [in declared per DVO [in Rs] differenc the ed by Rs] by the [in Rs] e CIT(A) CT(A) appellant [in Rs] and considere d by the AO [in Rs] 1 2012- NIL NIL NIL NIL NIL NIL NIL 13 2 2013- 1,79,67,4 1,79,67,4 2,74,38,4 94,71,070 94,71,070 1,92,06, 12,39,521 14 27 27 97 948 3 2014- 3,64,89,7 3,64,89,7 5,67,15,8 2,02,26,0 2,02,26,0 3,97,01, 32,11,330 15 54 54 34 80 80 084 4 2015- 7,16,50,7 7,16,50,7 11,13,14, 3,96,64,1 3,96,64,1 7,79,20, 62,69,716 16 23 23 912 89 89 439 5 2016- 7,75,17,7 6,45,09,7 9,73,96,3 3,28,86,6 1,98,78,6 6,81,77, NIL 17 66 66 90 24 24 473 6 2017- 3,33,43,3 3,19,46,6 4,64,94,3 1,45,47,6 1,31,51,0 18 00 77 66 89 66 23,69,68, 22,25,64, 33,93,59, 11,67,95, 10,23,91, 970 347 999 652 029 The Ld. Counsel for the assessee argued that the DVO applied CPWD rates applicable for residential bungalows even when the assessee constructed only duplex row houses for sale. The Ld. Counsel further argued that the DVO was not justified in determining the cost of construction on the basis of Plinth Area Method or Cost Indexed Method even when the assessee maintained day-to-day records of construction expenses actually incurred by it along with the copy of supporting bills and vouchers which were provided to the Ld. Assessing Officer as well as to the DVO. The Ld. Counsel for the assessee also brought this fact to our notice that cost of construction considered by the DVO 44 Golden Realities (SS)59 of 2019 and others was even higher 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 45 Golden Realities (SS)59 of 2019 and others account of rebate of CPWD and PWD rates and self-supervision to substantiate that actual cost incurred by the assessee towards construction of the project was higher than the cost estimated by DVO as adjusted with the specific discrepancies pointed out there in and also on account of rebate of CPWD and PWD rates and self-supervision which is as under:
S.No Particulars Amount Amount [Rs]
[Rs]
1 Valuation of cost of construction as considered by the 33,93,60,000
DVO
Less Additional cost as considered by the DVO in the list of extra items in his report which were either not incurred or incurred but at a lower quantum 2.1 Expenses on account of leveling even when no such 40,95,329 expenses were incurred 2.2 Expenses on account of Sewer estimated at Rs 15,00,008 23,70,980/- whereasexpenses as actually incurred by the appellant were of Rs 8,70,972/-
2.3 Expenses on account of Storm water drain expenses of Rs 9,16,060 9,16,060/- even when no such expenses were incurred 2.4 Expenses on account of horticulture of Rs 8,62,175/- 4,78,259 whereas expenses as actually incurred by the appellant were of Rs 3,83,916/-
2.5 Expenses on account of inter locking of Paver Block of Rs 5,74,575 11,23,665/- whereas expenses as actually incurred by the appellant were of Rs 5,49,090/-
2.6 Expenses on account of Vitrified Floor Tiles of Rs 71,16,693 71,16,693/- even when the cost of tiles was already included in the estimated amount of construction cost 2.7 Expenses on account of Overhead Tank of Rs 25,00,000/- 29,00,000 and Sump Well of Rs 20,00,000/- totaling to Rs 45,00,000/- whereas expenses as actually incurred by the appellant were of Rs 16,00,000/-
2.8 Expenses on account of Bore well of Rs 7,50,000/- 5,00,000 whereas expenses as actually incurred by the appellant were of Rs 2,50,000/-
2.9 Expenses on account of M S Gate of Rs 8,47,000/- even 8,47,000 when the cost of M S Gate was already included in the estimated amount of construction cost 2.10 Expenses on account of construction of Swimming Pool of 5,00,000 Rs 20,00,000/- whereas expenses as actually incurred by the appellant were of Rs 15,00,000/-
2.11 Expenses on account of construction of boundary wall for 2,52,64,000 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 46 Golden Realities (SS)59 of 2019 and others 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 2.12 Expenses on account of consultancy fees of Rs 9,06,807 4,55,98,731 34,38,339/- whereas expenses as actually incurred by the appellant were of Rs 25,31,532/- only Valuation of DVO as per CPWD after reduced the 29,37,61,269 additional cost as estimated but not actually incurred 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 3,00,43,707 30,04,37,074 Deduction on account of CPWD rates @30% 9,01,31,122 12,01,74,829 Valuation as per DVO after considering rebate on 18,14,98,245 account of self supervision and CPWD Valuation as declared by the appellant 23,69,68,970 The Ld. Counsel for the assessee also argued that addition on account of undisclosed investment in construction of project was made by the Ld. Assessing Officer solely on the basis of valuation report of the DVO more so when no incriminating material was unearthed during the course of search and seizure action which itself makes the addition unsustainable. The Ld. Counsel for the assessee relied upon the following written submission:
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RATE AS APPLIED BY THE DVO AND OTHER SPECIFIC DEFECTS IN THE VALUATION REPORT 5.10.1] The Departmental Valuation Officer in his valuation report considered the valuation of duplex row houses as constructed by the appellant as per DPAR-2012. The Departmental Valuation Officer applied the rate as applicable for residential six storeyed building of Rs 14,500/- per SqMtrs[Inner page No 3 of CPWD rate book]whereas rate of residential duplex as constructed by the 47 Golden Realities (SS)59 of 2019 and others appellant was akin to Type-IV quarters and therefore applicable rate wasRs 12,400 per SqMtrs[Inner page No 5 of CPWD rate book]. Thus, the rate as charged by the DVO was higher by Rs 1,900/- per SqMtrswhich in percentage terms is higher by 15.32%. This being an apparent mistake of adopting the wrong rate needs to be rectified by the DVO and valuation as done requires to be reduced by 15.32%.
5.10.2]That valuation rate of Rs 12,400 per SqMtrsis applicable for independent bungalows constructed by CPWD. However, in the case of the appellant, duplex row houses were constructed wherein one wall is a common wall and therefore rebate for the same separately requires to be allowed in the valuation report.
5.10.3] That the DVO adopted the rate of Rs 18,179/- per SqMtrs[Refer Abstract of Cost in the Valuation Report] at the time of valuation of club house building whereas rate in case of non- residential double storeyed building was Rs 14,300/- per SqMtrs[Inner page No 5 of CPWD rate book]. Hence, corresponding rebate in the valuation of club house also requires to be allowed to the appellant.
5.10.4]That the DVO adopted the rate of Rs 16,364/- per SqMtrs[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 2,50,000/- only.Hence, corresponding rebate on account of Bore well also requires to be allowed to the appellant.48
Golden Realities (SS)59 of 2019 and others 5.10.8]That expenses on account of construction 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/- were considered by the DVO in his report 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/- only.Hence, credit of additional cost of Boundary wall of Rs 2,52,64,000/- requires to be allowed to the appellant.
5.10.9] That rate of material consumed as considered while calculating the CPWD rates are as under:
S.No Items CPWD rates Actual Differen Differen [refer Annexure 4 - average ce ce [in 'Proforma for rate [in rate] %] calculation of Cost Index' of CPWD rate book] 1 Bricks 3,867 per 1000 piece 2,580 per 1287 49.88 1000 piece 2 Cement 587 per 100 kg 463.12 per 123.88 26.75 100 kg
3 Steels 4,669 per 100kg 3,964 per 100 705 17.79 kg 4 Tiles 467 per SqMtrs 338 per 129 38.17 SqMtrs 5 Aggreg 1350 per m3 888 per m3 462 52.03% ate (Gitti) 6 Sand 1293 per m3 438 per m3 855 195.21% 5.10.10] That in view of the above, it is evident that corresponding rebate of excess cost of material as consumed also requires to be allowed while calculating the cost of construction of the duplex row houses of the appellant.
REFERENCE TO THE DVO 5.11.1] The appellant has challenged the reference as made to the DVO for valuation of the duplex row houses. That reference to the DVO is not justified until and unless the assessing officer has cogent material in his possession. However, in the present case in hand, the assessing officer without any cogent material in his possession simply referred the matter to the DVO so as to determine the cost of construction as actually incurred by the appellant in the construction of the duplex row houses.
49Golden Realities (SS)59 of 2019 and others 5.11.2]That Hon'ble ITAT Lucknow Bench in the case of Deputy CIT VsRohtas Projects Ltd. as reported in (2010) 133 TTJ (Lucknow)(UO) 89 and the Tribunal held (Head Note) as under :
"It is true that for the purpose of making addition towards 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 cost of construction carried on by the assessee and this report also suffers from material defects as pointed out by the CIT(A) in para 9 of the impugned order. The Revenue has also not pointed out a single instance to show that the assessee has actually incurred expenditure more than that recorded in the books of account. Consequently no addition is called for.- K.K. Seshaiyer vs. CIT (2001) 166 CTR (Mad) 527 : (2000) 246 ITR 351 (Mad) and CIT vs. Hotel Joshi (1999) 157 CTR (Raj) 369: (2000) 242 ITR 478 (Raj) relied on."
5.11.3] That Hon'ble Gujarat High Court in the case of Anand BanwarilalAdhukia Vs DCIT as reported in 75 taxmann.com 301 [2016] has held that:
"Where Assessing officer had no cogent material available to satisfy himself about requirement of section 69, reference to valuer under section 142A could not have been made."
5.11.4] That Hon'ble ITAT Delhi Bench in the case of ITO Vs Rajeshwar Nath Gupta [Appeal No ITA No. 4295/Del/2005 dated 04.05.2008] has held that:
"15. A perusal of the aforesaid provisions shows that section 142A is attracted, inter alia, where the assessee is found to have made investment outside the books of account or where any such 50 Golden Realities (SS)59 of 2019 and others investment made by him is not fully disclosed in the books of account. The condition precedent for making the reference by invoking the provisions of section 142A thus is that there should be something on record to show that the assessee in the first place has made such investment outside the books or the investment so made by him is not fully disclosed in the books of account and once this condition is satisfied, the quantum of such investment made can be ascertained by the Assessing Officer by making a reference under section 142A in order to make the addition under section 69 or 69B, whichever is applicable. In the present case, the relevant property was purchased by the assessee during the year under consideration for Rs. 15 lakhs and the amount of the said consideration was paid out of its disclosed sources as accepted even by the Assessing Officer in the reassessment. A perusal of the assessment order, however, shows that there was no reference whatsoever made by the Assessing Officer to any material/evidence/ information on the basis of which it could be said that the said consideration shown by the assessee was understated and that anything above what was 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 words the full value of consideration in respect of the transfer is shown at a lesser figure than that actually received by the assessee as alleged, is on the Revenue. Following the said decision of the hon'ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597, the hon'ble High Court of Delhi has held in the case of CIT v. Gulshan Kumar [2002] 257 ITR 703 that there being no material on record to show that the sale consideration was Shri Bithalnath Malia AY. 2008-09 understated or that the assessee had received anything directly or indirectly over and above the declared value of the shares, the 51 Golden Realities (SS)59 of 2019 and others addition made on account of deemed capital gains was not sustainable."
5.11.5] That Hon'ble ITAT Kolkata Bench in the case of Bithalnath Malia, Asansol Vs DCIT [Appeal No ITA No 15/ Kol/2013 dated 20- 02-2015] has held that:-
"7. From the above discussion on the facts of the case and case laws considered by us, we are of the view, that in the present case the revenue could not establish that there is any material suggesting that the assessee paid any amount over and above the declared consideration. In term of the provisions of section 142A of the Act the reference to DVO can be made only when there is a requirement by the AO for making such reference and such requirement would arise when there is some material with the AO to show that whatever estimate or consideration declared by assessee is not correct or not reliable. The use of the word 'require' is not superfluous but signifies a definite meaning, whereby formation of mind even preliminary on objective basis by the AO is very much necessary. From the bare reading of assessment order, it does not suggest that there is any material which indicates that the assessee has paid any amount over and above the declared consideration for the purpose of making addition of unexplained investment u/s. 69 or 69B of the Act. In the absence of the same, the CIT(A) has rightly deleted the addition. We confirm the same. This issue of revenue's appeal is dismissed."
5.11.6] That Hon'ble Delhi High Court in the case of CIT Vs Anil Arora [ITA No 340/2015] dated 22-05-2015has held that:
"Having heard the Ld Counsel for the Revenue, we find the contentions argued in the appeal to be wholly misplaced. It is fairly conceded (at bar) by the Counsel for the Revenue that 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 52 Golden Realities (SS)59 of 2019 and others 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 [ITA No 100/ Mds/2015 dated 22-05-2015] has discussed the similar issue in detail and held that:
"13. Thus in our opinion, in this case the assessee maintained books of accounts and duly furnished before the Assessing Officer and he has not appreciated the same and only on presumption that cost of construction was very low, he referred the matter to DVO without properly rejecting the books of accounts maintained by the assessee. In our opinion, reference to DVO u/s.142A(3) of the Act could be made when books of accounts are rejected by pinpointing defect therein. In other words, if the books of accounts are found to be correct and complete in all respect and no defect is pointed out therein and the cost of construction of building is recorded therein, addition referred u/s.142A (2) is not appropriate. Accordingly, we are of the considered view that in the present case when the Assessing Officer has not rejected the books of account by pin pointing any defects in the books of account reference to the DVO is not valid and, therefore, DVO's report could not be utilized for framing assessment even if such a report is considered to be obtained u/s.142A of the Act. Since reference to DVO being held as invalid, the assessment thereafter based on that DVO report also be invalid."
5.12] That from the above discussion ,it is evident that the assessing officer utterly failed in referring the matter to the DVO without pointing out towards any investment that was made by the appellant over and above what was disclosed in the regular books of accounts.
5.13] That in view of the above, the assessing officer was not justified in referring the matter to the DVO for estimating the cost of construction without rejecting the books of accounts as maintained by the appellant and without pointing out any defects in the books of accounts of the appellant. The difference as calculated by the DVO was also explained properly and therefore there was no justification for making addition on account of difference in the cost of construction as estimated by the DVO and as declared by the appellant. The addition so made requires to be deleted in full.
WITHOUT PREJUDICE TO THE ABOVE 53 Golden Realities (SS)59 of 2019 and others 5.14.1] That during the course of search assessment proceedings, addition was made on account of undisclosed investement in construction incurred in the project as 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 construction/development as estimated by the DVO is considered as cost actually incurred by the appellant, in that case, corresponding profit as declared by the appellant in these years also requires to be adjusted and corresponding demand as created in the assessment order also requires to be reduced accordingly.
5.15.1] The appellantmaintained day to day books of accounts and expenses as incurred were duly incorporarted in its regular books of accounts. The authorized officer at the time of search and the assessing officer during the course of search assessment proceedings failed to pin point any defects in the books of accounts as maintained by the appellant. Hence, there was no justification to refer the matter to the DVO for determination of the cost of construction.
5.15.2] Hon'ble Supreme Court in the case of Sargam Cinema Vs CIT [2010] 328 ITR 513 (SC) wherein their Lordship has held as under:
" In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High 54 Golden Realities (SS)59 of 2019 and others Court. In the circumstances, reliance placed on the report of the DVO was misconceived."
5.16.1] The appellant is engaged in the real estate business and constructed duplex row houses for sale. The cost of construction as declared by the appellant was properly incorporated in its regular books of accounts and was duly considered for calculating the profit on sale of these duplex row houses.
5.16.2] The cost of construction as estimated by the DVO was even more than the sale price of duplex as per Collector/Sub-registrar guidelines. Hence, it is apparently clear that the cost of construction was estimated at exorbitantly high rates by the DVO in his report.
5.16.3] That the appellant calculated the amount of net profit on the basis of cost of construction as shown by it in its regular books of accounts. However, if the cost of construction is increased on the basis of report of the DVO, in that case, profit as declared by the appellant also requires to be 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 55 Golden Realities (SS)59 of 2019 and others 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 submitted on 17.08.2017 valued the cost of construction at Rs.33,93,59,999/-.
The Ld. Assessing Officer accordingly made the following additions to the total income of the assessee on account of undisclosed investment in construction of project:
Assessment Excess cost of construction incurred as Year estimated by DVO 2013-14 94,71,070 2014-15 2,02,26,080 2015-16 3,96,64,189 2016-17 3,28,86,624 During the course of assessment proceedings as well as first appellate proceedings, the assessee pointed out various 56 Golden Realities (SS)59 of 2019 and others discrepancies and raised objections for the alleged mistakes committed by the DVO thereby resulting in excessive valuation of cost of construction. However, the assessee partly succeeded as the Ld. CIT(A) allowed rebate of 25% on account of difference in CPWD and PWD rates and rebate of 5% on account of self-
supervision thereby resulting in the following:
S.No. AY Additions made Relief allowed by Additions by the Ld. the Ld. CIT(A) confirmed by Assessing Officer the Ld. CIT(A) 1 2013-14 94,71,070 82,31,549 12,39,521 2 2014-15 2,02,26,080 1,70,14,750 32,11,330 3 2015-16 3,96,64,189 3,33,94,473 62,69,716 4 2016-17 3,28,86,624 2,92,18,917 36,67,707
30. We further find that the during the course of hearing, Ld. Counsel for the assessee drew our attention to the following glaring mistakes committed by the DVO in his valuation report which in our view, are correctly pointed out:
S. No Reasons 1 Cost of construction was estimated at Rs 14,853/- Per Sq Mtr which in terms of Sq Ft calculated comes to Rs 1,380/- per Sq Ft even when the registrar office expects cost of construction in village Piparia to be Rs 8,500/- Per Sq Mtr which in terms of Sq Ft calculated comes to Rs 790/- only. Hence, the cost of construction as adopted by Departmental Valuation Officer was merely on the 57 Golden Realities (SS)59 of 2019 and others basis of CPWD DSR-2012 and DPAR-2012 which was very excessive 2 The appellant provided complete bills of material purchased which included bills for cement, steel, sand and other material purchased and consumed for development of the colony and for construction of bungalows. However, the Departmental Valuation Officer totally ignored the entire details and supporting bills and adopted the standard rate as prescribed by CPWD 3 The guideline value 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 of inter locking of Paver Block of Rs 11,23,665/- whereas actual expenses as incurred by the 58 Golden Realities (SS)59 of 2019 and others appellant were of Rs 5,49,090/-
6.6 The DVO in his report estimated an amount of Rs 71,16,693/- on account of Vitrified Floor Tiles. That when construction expenses were considered for 100% or even in case of partial construction, the cost of tiles was already included in it and hence, separate addition further made on account of additional cost for Vitrified tiles is not justified. The appellant did not incur separate expenses for Vitrified tiles as the same was included in the construction cost 6.7 The DVO estimated additional expenses on account of Overhead Tank of Rs 25,00,000/- and Sump Well of Rs 20,00,000/- totaling to Rs 45,00,000/- whereas actual expenses as incurred by the appellant were to the tune of Rs 16,00,000/-
6.8 The DVO in his report estimated expenses for Bore well of Rs 7,50,000/- whereas actual expenses as incurred by the appellant were of Rs 2,50,000/- only 6.9 The DVO in his report also estimated an amount of Rs 8,47,000/- on account of M S gate which was used in duplex row houses and had already been considered in the construction cost as estimated by the DVO. Hence, separate addition for MS Gate is not justified 6.10 The DVO has estimated expenses on account of Construction of Swimming Pool of Rs 20,00,000/- whereas actual expenses as incurred by the appellant were of Rs 15,00,000/-only 6.11 The DVO in his report also added an amount of Rs 1,75,00,000/- and Rs 90,00,000/- on account of construction of boundary wall for full brick work and also for half brick work totaling to Rs 2,65,00,000/- whereas only 412 running Sq Mtrs boundary wall was constructed and by considering the rate of Rs 3,000/- per running Sq Mtrs, the cost of Boundary wall calculated comes to Rs 12,36,000/- as against cost of boundary wall estimated by the valuation officer of Rs 2,65,00,000/-. Hence, additional cost of Rs 2,52,64,000/- was considered by the DVO in his 59 Golden Realities (SS)59 of 2019 and others report which was not justified. Moreover, individual boundary wall of the row houses has already been considered in the cost of construction of row houses. Hence, separate addition on account of boundary wall of Rs 2,65,00,000/- as suggested by the DVO was not justified 6.12 The DVO in his report based on his estimated cost of construction calculated 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 60 Golden Realities (SS)59 of 2019 and others considering the CPWD rates for residential bungalows completely ignoring the fact that the assessee was engaged in construction of duplex row houses for sale and not in construction of residential bungalows.
32. We also notice that the Ld. Assessing Officer made addition to the total income of the assessee on account of undisclosed investment in construction of project solely on the basis of valuation report of the DVO which in itself is unsustainable in light of the fact that no incriminating material was found during the course of search thereby warranting such addition to the total income of the assessee. We find that the Ld. CIT(A) dealt with the said issue at length by observing as follows:
"Considering the aforesaid fact and circumstances of the matter and the law as interpreted by several High Courts and the Hon'ble Supreme Court - the findings on this issue in respect of peculiar facts of this case are as below;
i) Admittedly, the assessee company maintained its regular books of accounts supported by bills/vouchers and other records which were subjected to Audit. The AO has neither pointed out any defect in books nor brought any positive material on record to establish alleged unaccounted investment in project of appellant. Most importantly, AO has not even rejected the books of accounts even after receipt of valuation report. In view of these facts, valuation report obtained from DVO cannot form a foundation ipso facto for making addition towards alleged suppression of cost of investment. Neither DVO nor AO has pointed out that certain expenditure on certain items/construction was incurred which was not recorded in the books maintained by the assessee.61
Golden Realities (SS)59 of 2019 and others Hence, additions made by AO is not sustainable in law being based merely on valuation report received from DVO.
ii) The A.O. has not mentioned any reason in the assessment order or in the reference to the valuation, that he had any incriminating material which led to form his belief that the appellant had under stated the cost of construction referred for valuation. It is very relevant to understand that the appellant was subjected to search and seizure action u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment in the different projects of appellant. Lack of any incriminating material/evidence regarding under reporting of cost of construction being pointed out by the A.O., in spite of search and seizure action addition simply made on the basis 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, on which AO has maintained a conspicuous silence which is unbecoming of a quasi-judicial authority.
iv) It is important to note that DVO has prepared his report based on DPAR-2012 after applying cost index with base 100. Interestingly, DVO has applied same rate for cost of construction of the project even though the investment is spread over many years. As per appellant, DVO should have adopted MPPWD rates after making certain adjustment for the construction done by the assessee in different assessment years. Hon'ble Allahabad High Court in the case of CIT v/s Raj Kumar 182 ITR 436 (All) has held that value of property under PWD rates is much lower than the cost of value of property as per CPWD rates. Similarly, in the case of CIT v/s Prem kumara Murdiya 296 ITR 508 (Raj) wherein hon'ble 62 Golden Realities (SS)59 of 2019 and others court refused to interfere in the order of ITAT holding that appropriate to be taken into consideration would be PWD rates and holding difference between CPWD rates and PWD rates at 20-25%. Similar views have been expressed in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur). In view of this, a difference of 20-25% between cost shown in books and estimated by DVO falls within 'tolerance band' as held by various courts. Further, appellant purchased material on wholesale basis which brings 'economy of scale' into construction cost which as per appellant would result into savings upto 25-30%. AO has acknowledged this aspect but did not provide any relief while making addition. Appellant has also argued about savings in cost of construction for other reasons as well i.e. self-supervision, consultancy charges etc. however, AO failed to allow any benefit to the assessee on any of the count which is not justified.
v) I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts of the assessee. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 4.2.6 of this order, it is pertinent to refer to the decision of ITO v/s Dreamland Enterprises 80 Taxman 143 (ITAT Abd) wherein it was held that when the cost of construction declared by the assessee was supported by regular books of accounts and vouchers, correctness of 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 question and that books of 63 Golden Realities (SS)59 of 2019 and others accounts do not reflect the correct cost of construction. It is evident that only reason for making the addition u/s 69B of the Act is that there is a difference in the cost of construction as estimated by the valuation officer and as shown by the assessee in its books of accounts.
4.2.8 It is interesting to note that valuation of the property under consideration was done by the DVO after applying cost index on the basis of DPAR-2012 (as base). It is settled law that DPAR rates adopted by DVO are higher than PWD rates. Hon'ble High Court of Rajasthan in the case of CIT v/s Prem Kumari Murdiya 296 ITR 344 (Raj) refused to interfere in the order of ITAT holding that appropriate rate to be taken into consideration would be PWD rates and holding difference between CPWD rates and PWD rates at 20-25%. Similarly, in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur) held after relying on the decision of Tek Chand v/s ITO 51 TTJ (JPR) 607 that there is variation in local PWD rates and CPWD rate by margin of 20-25%. It has been held in the case of CIT v/s lahsa Construction (P) Ltd (2013) 357 ITR 671 (Delhi) that no addition can be made solely on the basis of valuation report of DVO. Ld AR also placed reliance on the decision of CIT v/s VS Pratap Singh Amro Singh (1993) 200 ITR 788 (Raj) that addition to income could not be made on the basis of the report of the Valuation Officer. 4.2.9 In addition to above, appellant has also placed reliance on the following judgments:-
• DCIT vs Anand Banwarilal Adhukia 75 Taxmann.com 302 (2016) • ITO vs Rajeshwar nath Gupta (Appeal No 4295/Del/2005 dated 04.05.2008) • DCIT vs Rohtas Projects Ltd (2010) 133 TTJ 89 (Lucknow)(UO) • CIT vs Anil Arora (ITA No 340/2015 dated 22.05.2015) (Delhi HC) • DCIT vs Bithalnath Malia (ITA NO 15/Kol/2013 dated 20.02.2015) Kol ITAT) • ITO vs CR Selvaraj (ITA 100/Mds/2015 dated 22.05.2015) (ITAT Chennai) 4.2.10 In view of the above discussion, the comparative picture of investment shown by the assessee and that estimated by the DVO after allowing margin of 30% ( 25% for difference in CPWD and PWD rates and 5% for self supervision) comes out as under:-
A.Y. Declared 70% of estimate Difference
by Assessee made by the DVO
(Rs.)
64
Golden Realities (SS)59 of 2019 and others
2013- 17967427 19206948 1239521
14
2014- 39701084 3211330
15 36489754
2015- 77920439 6269716
16 71650723
2016- 68177473 3667707
17 64509766
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 assessee referring to various judgments of the Tribunal submitted that deduction up to 30% had been provided in similar type of cases whereas the Ld. CIT(A) had given only 25% deduction. Similarly, as regards self-
65Golden Realities (SS)59 of 2019 and others supervision charges, it was contended that deduction upto 10- 12.5% had been provided in similar type of cases whereas the Ld. CIT(A) had given only 5% deduction. The Ld. Counsel relied upon the following judgments in support of his contention:
S. Reference 1. Citation Rebate allowed for No 3. 4. Supervision CPWD rate 1 ITO vs Nitesh 138 TTJ 116 (JP) 12% 20% Maheshwari 2 Rajeev Mewara 35 SOT 001 (Indore) 10% 25% 3 ITO vs Prakash 94 TTJ 0631 (Indore) 25% Chand Soni 4 Shri Jagmohan (2008) 10 ITJ 187 (Trib- 10% 30% Jaiswal Indore) 5 Kalpana Surana (2016) 28 ITJ 277 (Trib.- 25% Indore) 6 Nandu Atmaram ITA No.1036 to 1041/ 12.5% 20% Rajput vs. DCIT, PN/2014 dt05.08.2016 Pune 7 Biswa Mitra Singh (2014) 23ITJ 413, (Indore 25% vs Dy. CIT Bench) 8 DCIT Vs Anil IT(SS)A Nos 10% 25% Kataria 177,178,179/Ind/2016 dt 31-05-2018 9 Society for ITA No. 537/LUC/09 25% Advancement of dated 23.02.2010. 66 Golden Realities (SS)59 of 2019 and others Environmental Services vs. Addl. CIT
As observed by us in the preceding paragraphs wherein facts emanating out of the submissions made by the Ld. Counsel for the assessee, valuation report prepared by the Government approved registered Valuer as well as by the DVO clearly depict that the valuation of investment in construction of the project has been overstated and looking to the fact that the impugned row houses are situated in Village Pipariya, rates taken for the purpose of valuation are quite excessive.
34. We also find that the Hon'ble Jurisdictional Bench in the case of Shri Anil Kataria, Ratlam Vs. DCIT (Central)-1, Indore [IT(SS)A Nos. 163, 164 & 165/Ind/2016] has categorically discussed the similar issue at length and has held that:
"22.............Apart from the above four mistakes pointed out by the learned counsel for the assessee, our attention was also drawn to the deduction given 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 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.67
Golden Realities (SS)59 of 2019 and others
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 and respectfully following the judgment of the Hon'ble Jurisdictional Bench (supra), find it justified to calculate the valuation of cost of construction after giving rebate of 25% on account of CPWD/PWD rates and rebate of 10% on account of self-supervision charges against total valuation made by the DVO in the following manner:
S. Particulars Amount [Rs] Amount [Rs]
No
1 Valuation of cost of construction as considered 33,93,60,000
by the DVO
Add Supervision Charges credit allowed by DVO 79,11,805
2 Correct Valuation as per report of DVO plus 34,72,71,805
supervision charges before allowing rebate for CPWD/ PWD rates and self-supervision charges Less Deduction for supervision charges @ 10% 3,47,27,181 (average of percentage held to be justified by the Coordinate Bench) Deduction on account of difference in 8,68,17,951 12,15,45,132 68 Golden Realities (SS)59 of 2019 and others CPWD/PWD rates @25% (Looking to the place of construction as well as percentage of deduction held to be justified by various Coordinate Benches consistently) 3 Correct valuation after considering rebate on account of difference in CPWD/ PWD rates @ 22,57,26,673 25% and on account of self-supervision charges @ 10% 4 Correct cost of construction shown by the 23,69,68,970 assessee 5 Difference on account of unexplained NIL investment in construction of project
36. We accordingly hold that no addition was justified to the total income of the assessee on account of undisclosed investment in construction of project. We, thus, value the cost of construction at the actual cost of Rs.23,69,68,970/- shown by the assessee. Accordingly, we set aside the findings of Ld. CIT(A) to the extent the Ld. CIT(A) confirmed the addition on account of undisclosed investment in construction of project. Hence, the assessee gets further relief in AYs 2013-14 to 2016-17 which is over and above the relief already allowed by the Ld. CIT(A) and therefore, the assessee gets relief of Rs.12,39,521/- in AY 2013- 14, Rs.32,11,330/- in AY 2014-15, Rs.62,69,716/- in AY 2015- 16 and Rs.36,67,707/- in AY 2016-17. Accordingly, Ground Nos.
5 to 9 of the assessee's appeal are allowed.
69Golden Realities (SS)59 of 2019 and others
37. Ground No. 10 raised by the assessee challenges the action of the Ld. CIT(A) in upholding the chargeability of 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 70 Golden Realities (SS)59 of 2019 and others 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 of the Act. We have already adjudicated this issue at length while deciding Ground Nos. 5-9 of the assessee's appeal in IT(SS)A No. 62/Ind/2019 wherein we have held that no addition was justifiable to the total income of the assessee on account of undisclosed investment u/s 69B of the Act. Hence, we have no hesitation in holding that the addition made by the Ld. Assessing Officer on account of undisclosed investment u/s 69B of the Act was rightly deleted by the Ld. CIT(A). Accordingly, Ground No. 1 of the revenue's appeals in IT(SS)A No. 80/Ind/2019, IT(SS)A No. 81/Ind/2019 and IT(SS)A No. 82/Ind/2019 are dismissed.
40. Ground No. 2 raised by the revenue in IT(SS)A No. 80/Ind/2019 and IT(SS)A No. 81/Ind/2019 challenges the action of the Ld. CIT(A) in deleting the addition of Rs.2,53,555/- and Rs.3,74,000/- made by the Ld. Assessing Officer on account of unexplained cash received from Smt. Sunita Rai in these years respectively.
71Golden Realities (SS)59 of 2019 and others
41. Ld. DR vehemently supported the order of Ld. Assessing Officer. Per contra Ld. Counsel for the assessee supported the findings of Ld. CIT(A).
42. We have heard rival contentions and perused the records placed before us. Revenue is aggrieved with the finding of Ld. CIT(A) in deleting the addition of Rs.2,53,555/- and Rs.3,74,000/- made by the Ld. Assessing Officer on account of unexplained cash received from Smt. Sunita Rai in these years respectively. We find that the impugned addition was deleted by Ld. CIT(A) observing as follows:
"4.3.2 I have considered the facts of the case, material evidence on record and findings of the AO. During the course of search loose papers bearing no 4 to 6 of LPS-1 were found and seized. As alleged the seized paper contain details of cash receipt by the appellant from Smt Sunita Rai. Appellant during the course of appellate proceedings has strongly contended that the cash receipt from Smt Sunita Rai was against the agreement for purchase of duplex build at plot no 77 by Smt Sunita Rai. The appellant has also taken an alternate plea that amount received as advance from customer is not taxable as income of the appellant until and unless sale is actually executed. After considering the entire factual matrix and evidence/material on record inter alia written submissions filed, I reach to conclusion that impunged addition was made on the basis of assumption and presumption which neither 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 72 Golden Realities (SS)59 of 2019 and others 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 was executed ...................................................... ...................................................... ......................................................
4.3.6 In view of the above discussion, material evidences of record and case laws cited, firstly, the AO ought to have examined Smt Sunita Rai in order to ascertain true and correct fact of the case. Secondly, the AO ought to have brought some other cogent evidence in support of his allegation. Thirdly, the AO should have conducted independent enquiry from other government agencies such as registrar office, whether the duplex was actually sold or not. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justified in making addition of Rs. 2,53,555/- in AY 2014-15 and Rs. 3,74,000/- in AY 2015-16 as unexplained cash. Thus, the addition made by the AO amounting to Rs. 2,53,555/- in AY 2014-15 and Rs. 3,74,000/- in AY 2015-16 is Deleted. Therefore appeal on these grounds is Allowed."
43. The above detailed finding of Ld. CIT(A) has not been controverted by the Ld. DR by bringing any contrary material on record. The facts discussed above squarely reveal that the assessee duly explained the nature of loose paper on the basis of which these additions were made to the total income of the assessee. The assessee had categorically explained that the deal did not materialize and that the duplex was never registered in the name of Smt. Sunita Rai and the amount of advance was adjusted against the material supplied by the assessee to the firm 73 Golden Realities (SS)59 of 2019 and others of Smt. Sunita Rai which was duly recorded in the books of accounts. The Ld. Assessing Officer neither examined Smt. Sunita Rai nor did he conduct any independent inquiry from other government agencies to establish the veracity of his contention. We therefore do not find any infirmity in the finding of Ld. CIT(A) and the same needs to be confirmed. In the result, Ground No. 2 of the revenue's appeal in in IT(SS)A No. 80/Ind/2019 and IT(SS)A No. 81/Ind/2019 stands dismissed.
44. Ground No. 2 raised by the revenue in IT(SS)A No. 82/Ind/2019 challenges the action of the Ld. CIT(A) in treating the additional income of Rs.2,95,00,000/- admitted by the assessee during the course of survey under the head "income from 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. 74 Golden Realities (SS)59 of 2019 and others 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 of section 69B which states as under:-
"69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year."
4.4.1 Provisions of section 69B clearly states that any investment made in bullion, jewellery or other valuable article is found in possession of appellant and that to in excess of amount recorded in books of account which was not in the case of appellant. The AO has not specifically commented on the fact that whether the additional income declared was part of regular books of account or not. The reclassification of income u/s 69B can only be done for income not fully disclosed in books of account and not to the income already shown in books of account. Hon'ble Jurisdictional tribunal in the case of Mukesh Sangla HUF vs DCIT (2016) 27 ITJ 172 (Trib Indore) has stated that section 69B of the Act is applicable on cumulative satisfaction of the following conditions
(i) The assessee should have made the investments or is found to be the owner of any bullion, jewellery or valuable articles;
(ii) Based on the material facts, the AO finds that the amount expended on such investment actually exceeds the amount recorded in the books of account 75 Golden Realities (SS)59 of 2019 and others
(iii) The assessee either offers no explanation about the nature and source of investment or the explanation offered is not satisfaction in the opinion of the AO;
(iv) The satisfaction of the AO can not be arbitrary and subjection but has to be based on the relevant material.
The investment made by the assessee have been duly shown in the books of account and the findings of the AO are arbitrary and not subjective and are also not based on relevant material. The AO ought to have stressed upon some independent and arbitrary material which could establish that the income 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 ITAT Indore in the case of Mukesh Sangla HUF vs DCIT (supra) the AO was not justified in reclassification of declared income of the assessee u/s 69B of the Act. The AO is directed to treat the income of the appellant as income from other sources as declared by the assessee in regular return of income. Therefore, appeal on this ground is Allowed."
47. The above detailed finding of Ld. CIT(A) has not been controverted by the Ld. DR by bringing any contrary material on record. The facts discussed above squarely reveal that the assessee made voluntary disclosure of undisclosed investment in construction to the tune of Rs.2,95,00,000/- in AY 2016-17 76 Golden Realities (SS)59 of 2019 and others which was also offered for tax while filing return of income for AY 2016-17. The assessee contended that provisions of section 69B of the Act would not be applicable since it was not found in possession of any bullion, jewellery or other valuable article as stated u/s 69B of the Act. The Ld. Assessing Officer also did not specifically comment whether the additional income declared was a part of regular books of accounts or not more so when section 69B of the Act can be invoked only for income which is not fully disclosed in books of accounts and not in respect of income which is already incorporated in the books of accounts. In view of the detailed findings of the Ld. CIT(A) and reliance placed on the decision of the Hon'ble Jurisdictional Bench in the case of Mukesh Sangla HUF vs DCIT, we do not find any infirmity in the finding of Ld. CIT(A) and the same needs to be confirmed. In the result, Ground No. 2 of the revenue's appeal in in IT(SS)A No. 82/Ind/2019 stands dismissed.
48. Ground No. 3 of these appeals is general in nature and requires no adjudication.
77Golden Realities (SS)59 of 2019 and others
49. In the result, Revenue's appeals in IT(SS)A No. 80/Ind/2019 for AY 2014-15, IT(SS)A No. 81/Ind/2019 for AY 2015-16 and IT(SS)A No. 82/Ind/2019 for AY 2016-17 are dismissed.
50. Finally, appeals filed by the assessee are partly allowed whereas that filed by the Revenue are dismissed.
The order pronounced as per Rule 34 of ITAT Rules, 1963 on 04.10.2021.
Sd/- Sd/-
(RAJPAL YADAV) (MANISH BORAD)
VICE PRESIDENT ACCOUNTANT MEMBER
दनांक /Dated : 04.10.2021
!vyas!
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By Order,
Asstt.Registrar, I.T.A.T., Indore
78