Income Tax Appellate Tribunal - Lucknow
M/S Neel Sarovar Buildtech Pvt. ... vs Dcit/Acit(Central)-2, Lucknow on 6 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW 'A' BENCH, LUCKNOW
BEFORE SH. KUL BHARAT, VICE PRESIDENT
AND
SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER
IT(SS)A No.752/LKW/2024
A.Y. 2016-17
M/s Neel Sarovar, vs DCIT/ACIT, Central -2, Income
Buildtech Pvt. Ltd., 3/117, Vivek Tax Office, Lucknow
Khand, Gomti Nagar, Lucknow
PAN-AADCN1533B
(Appellant) (Respondent)
ITA No.520/LKW/2024
A.Y. 2017-18
M/s Neel Sarovar, vs DCIT, Central -2,
Buildtech Pvt. Ltd., 3/117, Vivek Lucknow
Khand, Gomti Nagar, Lucknow
PAN-AADCN1533B
(Appellant) (Respondent)
Assessee by: Sh. Mahendra Kumar, FCA & Sh. Raghunath
Mishra, Adv
Revenue by: Sh. R.K. Agarwal, CIT DR & Sh. R.R.N. Shukla,
Addl CIT DR
Date of hearing: 18.03.2026
Date of pronouncement: 6.04.2026
ORDER
PER NIKHIL CHOUDHARY, A.M.
These two appeals have been filed against the separate orders of the ld. CIT(A), both dated 27.05.2024 under section 250 of the Income Tax Act, wherein the ld. CIT(A) has dismissed the appeals of the assessee against the order passed by the Assessing Officer under section 153A r.w.s. 153(3) for the A.Y. 2016-17 and under section 143(3) for the A.Y. 2017-18. The grounds of appeal are as under:-
IT(SS)A No.752/LKW/2024 "1. Because, the appellate order passed by Ld. CIT (A) is contrary to law, facts and circumstances of the case. The appellate order is liable to be revised.1
IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
2. Because, the Ld. CIT(A) has erred in rejecting the objections filed by the appellant in connection with the valuation report of DVO in respect of valuation of the property at Plot No. 40, Khasra NO. 99, situated at Cantt. Road, Lucknow of the appellant and confirming the difference in valuation made by the DVO and as per books of the appellant of Rs. 1,91,76,007/-. The addition of Rs 1,91,76,007/-confirmed by the Ld. CIT (A) is liable to be deleted.
3. Because, the Ld. CIT (A) has erred in not allowing investment made by the appellant in construction of the property Plot No. 40, Khasra No. 99, situated at Cantt. Road, Lucknow of Rs. 1,71,35,496/- invested by the appellant during the F.Y. 2017-18. The investment made during the F.Y. 2017-18 of Rs. 1,71,35,496/- has been duly recorded in the books of accounts and considered in regular assessment u/s 143(3) of the Act for A.Y. 2018-19 is liable to be considered while calculating the cost of constructions of the assesse when the property was inspected by the DVO after 31.03.2018.
4. Because, the Ld. CIT (A) has erred in not entertaining the other technical objections raised the report of DVO and also on the merits of the case.
5. Because, the Ld. CIT (A) has erred in rejecting the appeal of the assessee without providing the assessee with a due and proper opportunity of hearing and therefore the impugned order deserves to be set-aside being bad in law.
6. Because, the Ld. CIT(A) has erred in rejecting the appeal of the assessee purely on the basis of conjectures and surmises and hence bad in law and liable to be set-aside and quashed.
7. The humble appellant craves for leave to add/amend any other ground with the prior permission of your honors."
ITA No. 520/LKW/2024"1. Because the appellate order passed by Ld. CIT (A) is contrary to law facts and circumstances of the case. The appellate order is liable to be revised.
2. Because, the Ld. CIT (A) has erred in rejecting the objections filed by the appellant in connection with the valuation report of DVO in respect of valuation of the property at Plot No. 40, Khasra No. 90, situated at Cant Road, Lucknow of the appellant and confirming the deforence in valuation made by the DVO and as per books of the appellant of Rs. 2.49,51,931/- the addition of Rs. 2.49.53.931/- confirmed by the Ld. CTT(Appeals) is liable to be deleted.
3. Because, the Ld. CIT (A) has also erred in not allowing investment made by the appellant in construction of the property Plot No 10, Khasra No. 99, situated at Cant Road, Lucknow of Rs. 1,71,35,496/-invested by the appellant during the Y 2017-18. The investment made during the FY 2017-18 of Rs. 171,35,496/-has been duly recorded in the books of accounts and considered in regular assessment U/s 143(3) of the Act for A.Y. 2018-19 is liable to be considered while calculating the cost of constructions of the assesse when the property was inspected by the DVO after 31.03.2018.2
IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
4. Because, the Ld. CIT(Appeals) has also erred in not entertaining the other technical objections raised against the report of DVO and also on the merits of the case.
5. Because, the Ld. CIT (A) has grossly erred in rejecting the appeal of the assessee without providing the assessee with a due and proper opportunity of hearing and therefore the impugned order deserves to be set aside being bad in law
6. Because, the Ld. CIT (A) has grossly erred in rejecting, the appeal of the assessee purely on the basis of conjectures and surmises and hence bad in law and liable to be set aside and quashed.
7. The humble appellant, craves for leave to add/amend any other ground with the prior permission of your honours."
2. At the very outset, it is observed that the appeal in IT(SS)A/LKW/2024 is delayed by 140 days, while the appeal for the assessment year 2017-18 is delayed by approximately 28 days. Condonation petitions have been filed by the assessee in both cases. In the A.Y. 2016-17, it has been submitted that the Director Sh. Virendra Gupta, who looks after the legal and tax matters was seriously ill during the period 20.07.2024 and was advised bed rest and therefore, he could not file the appeal in time and it was delayed by 144 days. A medical certificate was also submitted in support of the ailment. For the A.Y. 2017-18, it was submitted that the Sh.Vishu Gupta Son of Virendra Kumar Gupta, who was looking after the taxation matters for the A.Y. 2017-18 was suffering from Spondelytis from 15.07.2024 and had been recommended complete bed rest and therefore, could not meet the concerned counsel for the preparation of the appeal until his recovery on or about 17.08.2024 and this caused the delay. It was prayed that the delay, not being intentional may kindly be condoned and the appeal be admitted for hearing. In considering these condonation applications, we observe that in the interest of justice, the assessee deserves to be heard on merits and considering the certificates submitted by the medical practitioners alongwith the petitions, we admit the cases for hearing.
3. The facts of the case in both years are identical. A search and seizure operation under section 132 of the Income Tax Act was carried out on M/s Neelkanth Sweets Pvt. Ltd. and others on 15.12.2016. The ld. AO records that 3 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
during the course of search and survey operations, several incriminating documents were found regarding the bills, estimates, details of cash payments regarding purchase of building material for construction of hotel built over freehold Plot No. 40, Khasra No. 99 (Part), in Mohalla 24, Cantt Road, Rakabganj Jaidid, Lucknow, that was purchased by the assessee vide a sale deed on 16.04.2010. The assessee was asked to file replies in respect of year wise investments made in the hotel building, but the ld. AO records that replies were not filed within a reasonable time. Further, since a number of incriminating documents evidencing cash expenditure over and above the declared cost of construction was found and seized and since accounts of construction activities were not found during the course of the search and the assessees could not offer any satisfactory explanation with regard to the same, the matter was referred to the District Valuation Officer, Kanpur for estimating the year wise cost of investment under section 142A of the Income Tax Act, 1961 for the A.Ys. 2011-12 to 2017-18. The DVO, Kanpur vide his report dated 13.03.2019 estimated the cost of construction as under: -
Sr. No. Financial Declared by the Estimated by DVO Difference in Year Assessee (Rs) (Rs) cost (Rs)
1. 2014-15 48,41,033/- 57,97,200/- 9,56,167/-
2. 2015-16 11,43,49,925/- 13,69,35,200/- 2,25,85,275/-
3. 2016-17 12,63,42,669/- 15,12,96,600/- 2,49,53,931/-
Total 24,55,33,627/- 29,40,29,000/- 4,84,95,373/-
4. Accordingly, the assessee was asked to explain why the difference in the cost of assessment should not be added back as unexplained investment in the hotel building project for the relevant assessment year and a copy of the DVO's report was given to the assessee for its comments. Vide its' submissions dated 22.04.2019, the assessee's company filed an objection to the DVO's report in which it was pointed out that the DVO's report was based on plinth area rates 2012 as enhanced with rated cost index of 127 which was not correct in the light of OM dated 31.10.2018 issued by the Chief Engineer (NZ)-II, CPWD Lucknow as the 4 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
weighted cost index of 127 was only effective from 1.04.2018. In support of its objection, it filed comments from an approved valuer. It also objected to the reduction of rates in respect of several extra items. These objections were forwarded by the AO, the DVO, Kanpur for his comments. The DVO, Kanpur rejected the objections made by the assessee and held that the Valuation Report had been prepared as per the CPWD PAR, 2012 enhanced with appropriate weighted cost index as approved by the competent authority on 18.03.2013, effective from 1.10.2012. It was further pointed out that cost indices had been calculated with the help of interpolation of approved cost indices for figuring the weighted cost index for the purpose of financial year wise expenditure. Detailed reply was submitted to the assessee's objection in respect of the extra items. In response, the assessee filed a rejoinder to the comments of the DVO in which it again raised various objections. However, the ld. AO rejected the objections made by the assessee for the detailed reasons recorded by him in paragraph 9 & 10 of his assessment order. The ld. AO also pointed out various shortcomings in the books of the assessee by pointing out that many of the incriminating documents that had been recovered during the search relating to the construction of this hotel had not been accounted for in the books of the assessee. The assessee objected to these inferences, but the ld. AO held that it was fairly clear that the assessee had not recorded the entire investment in the construction of the hotel building in its books. Therefore, invoking the provisions of section 69, he made an addition of Rs. 1,91,53,310/- on account of the difference in the DVO report and the investment declared by the assessee in the assessment year 2016-17 and addition of Rs. 2,49,53,931/- in the A.Y. 2017-18.
5. Aggrieved by these additions, the assessee went in appeal to the ld. CIT(A)-2, Lucknow. It was submitted that the alleged incriminating material was in the shape of old estimates and kacha parchas and because nothing concrete could be explained about it, therefore, to buy his peace, the Director of the company Sh. Virendra Gupta had surrendered a sum of Rs. 44,12,383 /- on this 5 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
account over the assessment years 2016-17 and 2017-18 in the Settlement Application made before the Income Tax Settlement Commission. However, during the course of assessment, the matter had been referred to the DVO and the DVO had estimated the cost of construction of Rs. 28,96,63,565/- over three financial years. However, as per the books and supporting documents maintained by the assessee company, the year wise breakup of investment made in the construction of the hotel was as under:-
S. No. F.Y. Amount of Investment (Rs)
1. 2014-15 48,41,033/-
2. 2015-16 11,43,49,925/-
3. 2016-17 12,63,42,669/-
4. 2017-18 17135496
As such, the difference between the cost of construction as estimated by the DVO and the actual investment made by the assessee company was only 9.31%, which difference was very normal and was liable to be ignored and the investment declared and recorded in the books of the assessee of Rs. 26,26,69,123/- was fit to be accepted, in view of various Court decisions which held that if the difference between the estimate of the DVO and the investment disclosed by the assessee is less than 10%, the difference should be ignored and investment declared by the assessee should be accepted. The following case laws were cited in support of its contentions as under:-
a. M/s Tulsiani Constructions and Developers (Ltd) (2014) 42 taxman.com 410 (All) b. Dr. Bhim Rao Ambedkar Educational Society, ITA No. 658/LKW/2012 c. CIT vs. Ambience Developers and Infrastructure P. Ltd. 25 taxman.com 210 Delhi d. CIT vs. Abeson Hotels P. Ltd. (2004) 191 CTR MP 263 e. DCIT, Range-2 Lucknow vs. Sanjay Seth, ITA No. 597/LKW/2013 f. ITO vs. Pramila Agarwal 88 TTJ 91 6 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
6. The ld. CIT(A), thereafter went through the order of the ld. AO and recorded the fact of discrepancies noted by the AO in the various seized materials and the books of the assessee. He pointed out that the reference to the DVO had been made on account of these discrepancies in the rough documents against the figure disclosed by the assessee for the year under consideration. Before the ld. CIT(A), among other things, the assessee had submitted that it was apparent from the valuation report of the DVO that the DVO's report pertained to a complete building. Nowhere in the valuation report, had it been recorded by the DVO that the building was incomplete. However, the building had been completed on 31.03.2018 while the DVO had taken the cost over a period three financial years. After examining such arguments, the ld. CIT(A) held that the AO was justified in referring the matter to the Valuation Officer. He also pointed out that as per the DVO's report, the cost of construction was spread over three years whereas the assessee had declared the cost of construction over four years, which was not tenable as the construction activities had been taken to be completed during the F.Y. 2016-17 by the DVO. Thus, the contention of the assessee that total investment of Rs. 1,71,35,496/- made during F.Y. 2017-18, had not been considered by the AO in arriving at the total value declared by the assessee cannot be accepted since the matter was referred for valuation upto F.Y. 2016-17 only and the DVO had worked out the value for that period to Rs. 28,96,65,565/-. The ld. CIT(A) held that none of the case laws that had been cited by the assessee held good in the facts of the asseseee's case because the difference in cost as declared by the assessee and as valued by the DVO was more than 10%. Accordingly, she dismissed the appeals of the assessee.
7. The assessee is aggrieved at this dismissal of its appeal and has accordingly come before us. Sh. Mahendra Kumar, FCA and Sh. Raghunath Mishra, Advocate, (hereinafter referred to as the ld. ARs) argued the appeal on behalf of the assessee. It was submitted that the property had been inspected by the DVO on 29.12.2018 and the valuation report had been rendered on 13.03.2019. The 7 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
valuation report given by the Valuation Officer had been given for a complete building taking the same to have been completed before 31.03.2017, as the period of reference for construction of the hotel building had been referred up till F.Y. 2016-17 only. However, the building was not completed on that date and was unfinished. A copy of the valuation report prepared by the registered valuer dated 1.04.2017, which was placed at page no. 24 of the paper book were highlighted wherein the registered valuer who had inspected the property on 28.03.2017 and 29.03.2017 had certified that work was in progress as on 31.03.2017. It was submitted that the assessee had incurred expenditure of Rs. 1,71,00,000/- in the completion of the hotel in F.Y. 2017-18 and it was only after the hotel was completed that it had been valued by the DVO. When queried by the Bench, the ld. AR submitted that the evidence of the expenditure being incurred in the F.Y. 2017- 18 was recorded in the duly audited books of accounts which were contained in the audit report filed alongwith the returns on 31.10.2018. The ld. AR submitted that if the investment made by the assessee during the F.Y. 2017-18 was taken into account, then the difference between the cost of valuation estimated by the DVO and as recorded in the books of accounts of the assessee was less than 10% which, as per various court decisions was deserving of being ignored. When queried again by the Bench, the ld. AR accepted that the complete accounts relating to the construction had not been submitted before the DVO as the valuation only been done for the period up till 31.03.2017, but was in a position to submit these accounts for examination presently. He, therefore, prayed that the matter may kindly be restored to the file of the AO so that the assessee could demonstrate that a sum of Rs. 1,71,00,000/- out of the construction had been done in F.Y. 2017-18 and the remaining difference in the estimated cost and the declared cost was negligible.
8. Responding to the said arguments of the ld. AR, Sh. R.K. Agarwal, CIT DR and Sh. R.R.N. Shukla, Addl CIT DR (hereinafter referred to as the ld. DRs) submitted that this argument by the assessee had already been considered and 8 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
rejected by the ld. CIT(A) and since the difference was more than 10%, the addition deserves to be confirmed in his hands. They therefore, prayed that the additions may kindly be confirmed.
9. We have duly considered the facts and circumstances of the case. Upon finding of certain documents, relating to construction that were apparently not recorded in the regular books of accounts of the assessee and on not finding a detailed construction account, the ld. AO had referred the matter to the DVO, Kanpur for making an estimate of construction for the period F.Y. 2014-15 to F.Y. 2016-17. The DVO inspected the premises on 29.13.2018 when the premises was completed and gave a report on 13.03.2019 in which he has estimated the cost of construction of the completed hotel building at Rs. 28,96,63,565/-. However, the assessee submits that the valuation report is incorrect because it spreads this expenditure over a period of three financial years, whereas it had actually taken place over a period of four financial years, the evidence for which are the books of the assessee company for the F.Y. 2017-18, that had been audited and reflected in the audited financial statements of F.Y. 2017-18 that were filed on 4.09.2018. It has been submitted that expenditure to the extent of Rs. 1,71,00,000/- was made after 31.03.2017 which have been duly recorded in its books and if that sum is added to the year wise expenditure declared by it, then the difference between the expenditure estimated by the DVO and declared by the assessee would be below 10% and required to be ignored for addition purposes as held by various Courts and Tribunals and per the provisions of the law. We have duly considered this argument. We observe that the assessee did not present its detailed accounts to the DVO at the time of valuation. We also note that the registered valuer who had inspected the property on 28th and 29.03.2017 had pointed out that the property was still incomplete on that date and therefore, in the light of these two pieces of evidences and also the fact that the expenditure had been recorded in the books of the assessee and form part of the audited financials filed before the date of inspection made by the Valuation Officer, we think it appropriate in the interest of 9 IT(SS)A No.752/LKW/2024 A.Y. 2016-17 ITA No.520/LKW/2024 A.Y. 2017-18 M/s Neel Sarovar Buildtech Pvt. Ltd.
justice that the matter should be restored back to the file for the ld. AO for a fresh look at the claim of the assessee for the year wise expenditure on the construction of the hotel. The assessee may present the complete accounts of the same to the AO, who after obtaining the opinion of the DVO and examining the accounts for correctness and completeness, may pass fresh orders as the facts may warrant, in accordance with law. Accordingly, both appeals i.e. IT(SS)A No. 750/LKW/2024 and ITA No. 520/LKW/2024 are restored to the file of the ld. AO for de novo assessment as above.
10. In the result, both the appeals of the assessee are held to be allowed for statistical purpose.
Order pronounced on 6.04.2026 in the open Court.
Sd/- Sd/-
[KUL BHARAT] [NIKHIL CHOUDHARY]
VICE PRESIDENT ACCOUNTANT MEMBER
DATED: 6/04/2026
Sh
Copy forwarded to:
1. Appellant -
2. Respondent -
3. CIT DR, ITAT,
4. CIT,
5. The CIT(A)
By order
Sr. P.S.
10