Income Tax Appellate Tribunal - Delhi
Yudhishthira Kaur,, New Delhi vs Assessee on 28 May, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'I' : NEW DELHI)
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER
and
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.3653/Del./2010
(ASSESSMENT YEAR : 2004-05)
ACIT, CC - 5, vs. Shri Yudhishthira Kapur,
New Delhi. B - 34, Malcha Marg,
Chanakyapuri,
New Delhi - 110 055.
(PAN : AASPK5138K)
CO No.295/Del/2010
(in ITA No.3653/Del./2010)
(ASSESSMENT YEAR : 2004-05)
Shri Yudhishthira Kapur, vs. ACIT, CC - 5,
B - 34, Malcha Marg, New Delhi.
Chanakyapuri,
New Delhi - 110 055.
(PAN : AASPK5138K)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Adesh Kumar Jain, CA
REVENUE by : Dr. B.R.R. Kumar, Senior DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
The appeal filed by the revenue and the cross objection filed by the assessee arise out of the order of the CIT (Appeals)-I, New Delhi dated 28.05.2010. The grounds raised in the revenue's appeal read as under :- 2 ITA No.3653/Del./2010 CO No.295/Del/2010
"1. The order of the Ld. CIT (Appeals) is not correct in law and facts.
2. On the facts and in the circumstances, the Ld. CIT (A) has erred in law and on facts in deleting addition of Rs.60,79,673/- towards unexplained investment in land and construction made by the A.O. on the basis of valuation report of the land in and construction made by the A.O. on the basis of valuation report of the DVO in pursuance of reference u/s 142A whereas there is no material before the Ld. CIT (A) to rebut the report of the DVO on the basis of any cogent evidence or material.
3. On the fact and circumstances of the case, the Ld. CIT (A) has erred in law and on facts in deleting addition of Rs.60,79,673/- even though there is no adverse adjudication of valuation reference u/s 142A and there is no material in support of the claim of the assessee to substantiate the valuation/ investment as disclosed before the A.O.
4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal."
The ground raised in assessee's cross objection reads as under :-
"That on the facts and in the circumstances of the Respondent's case, the learned Commissioner of Income Tax (Appeals) erred in law in upholding validity of reference to Valuation Officer under section 142A of the Income Tax Act, 1961, to estimate the value of investment made on purchase of immovable property."
2. The assessee is an individual and proprietor of M/s. Y Kapur Enterprises which is engaged in the business of manufacturing and exporting readymade garments. A search and seizure operation was carried out under section 132 of the Income-tax Act at the residential and business premises of 3 ITA No.3653/Del./2010 CO No.295/Del/2010 the assessee on 14.02.2007. Notice under section 153A of the Income-tax Act was issued on 11.10.2007. Consequent upon notice u/s 153A of Income-tax Act, 1961, the return of income declaring income at Rs.1,01,62,825/- was filed on 30.07.2008. The assessment was finalized at the income of Rs.1,62,42,498/-. The sole addition made by the Assessing Officer was based on DVO report and sale deed amount for purchase of farm house at Village Mehrauli, Ram Mandir Road, New Delhi. The assessee purchased this farm house on 20.11.2003. The declared consideration for land and building as per sale deed was Rs.50 lacs. This property was also declared in the wealth tax return for assessment year 2004-05 and also in subsequent assessment years. No incriminating documents in respect of this farm house property were found or seized during search operation. Assessing Officer felt that the price declared in the sale deed for acquiring the property was on lower side. Assessing Officer made a reference to the DVO u/s 142A of the Income-tax Act. No evidence has been found and seized during the search operation in respect of this property which could show that the assessee has paid anything more than the amount shown in the sale deed. The Assessing Officer was of the view that this claim was not enough ground that no amount was paid in addition to amount declared in sale deed. He has also observed that it is not necessary that every single document or every single information is found during a search or that the importance of it is appreciated at that time when 4 ITA No.3653/Del./2010 CO No.295/Del/2010 the decision to seize or not seize a document is taken. Assessing Officer also referred to section 142A wherein it has been clearly spelt out that Assessing Officer, after giving the assessee an opportunity of being heard in this regard may use the report of the valuation officer for the purpose of determining the unexplained investment and addition can be made.
3. CIT (A) granted the relief by relying on the decision of ITAT in the case of Dinesh Jain vs. DCIT - (2009) 34 SOT 444 and the decision of jurisdictional High Court in the case of CIT vs. Prem Nath Nagpal - (2007) 214 CTR 51 (High Court - Delhi) wherein the relief was granted by holding that no document was found indicating the understatement of purchase price. There was no document found which could indicate understatement of cost of improvement. No assessment of undisclosed income could be made on alleged understatement on the basis of DVO's report. In the case of CST vs. Ashok Khetrapal - 294 ITR 143 (Del.), the Hon'ble Delhi High Court also held that during the search under section 132 no incriminating material was found indicating that assessee had made higher investment in property than disclosed. No undisclosed income could be assessed on the basis of difference between investment declared in sale deed and value estimated in the DVO's report.
5. In the cross objection, the assessee has challenged the validity of reference to the valuation officer u/s 142A of the Income-tax Act to estimate 5 ITA No.3653/Del./2010 CO No.295/Del/2010 the value of the investment in the purchase of the property. Since assessee had challenged the very basis of reference to the DVO which goes to the root of dispute, therefore, we will first decide the cross objection of the assessee. The learned AR submitted that it is an admitted fact that no incriminating documents were found and seized during the course of search operation with regard to the purchase of farm house. There was no evidence before the Assessing Officer prior to referring to DVO that the value of the property was under-stated in sale deed. It was only the Assessing Officer himself who felt that the price of the acquisition was on the lower side. This fact clearly shows that it was only a feeling of the Assessing Officer which was not based on any document or evidence. There was no document which could show or suggest that the value was under-stated in the registered document. The provisions of section 69B under which the addition can be made in respect of the amount of investment not fully disclosed in the books of account provides that when the Assessing Officer finds that the amount expanded on such investment or in acquiring such investment exceeds the amount recorded in the books of accounts maintained by the assessee from any source of income and assessee offers no explanation or the explanation offered is not satisfactory then the excess amount is deemed to be the income of the assessee in that particular year. In the assessee's case, there was no evidence found in search on which the Assessing Officer can find that the investment was not fully disclosed in 6 ITA No.3653/Del./2010 CO No.295/Del/2010 the books of account. Thus, the situation, as stated in section 69B, was not in existence in assessee's case. There is no evidence or no document on the basis of which the Assessing Officer could find that the amount of investment exceeded the amount recorded in the registered sale deed in respect of the property. Further, the Assessing Officer has not inquired into nor put up a question prior to referring to the DVO that the consideration was inadequate and the assessee has failed to offer an explanation or the explanation offered is not found satisfactory. In view of these facts, there was no justification for the Assessing Officer to make a reference under section 142A of Income-tax Act. He also pleaded that provisions of section 142A of the Income-tax Act, 1961 does not confer any unfettered discretion on the Assessing Officer to make a reference for the sole reason that the assessee has shown investment in a property. The basic and fundamental principle of law requires that while exercising the powers by Assessing Officer, there must be existence of certain pre-conditions which are necessary for judicious application of the provisions of law. The Assessing Officer cannot make a reference u/s 142A for making roving and fishing enquires. He also relied on the decision of Hon'ble Rajasthan High Court in the case of Pratap Singh Amro Singh vs. Rajender Singh & Deepak Kumar reported in 200 ITR 788 wherein the Hon'ble High Court has emphasized that without rejecting the books in which cost of construction has been recorded as defective, untrue and wrong, it is not 7 ITA No.3653/Del./2010 CO No.295/Del/2010 permissible to make a reference. Thus, judicious application of mind is sine qua non for a valid reference and this action does not permit roving and fishing enquiries. This principle has been enunciated in the cases of Sri Har Sarup Cold Storage & General Mills vs. ITO - 27 ITD 1 (Delhi) (TM), ACIT vs. Smt. P. Appayamma - 66 Taxman 104 (Mag.)(Hyd.), ITO vs. Dr. K. Rami Reddy - 48 ITD 377 (Hyd.), Sri Venketraju Modern Boiled & Raw Rice Mill vs. ACIT - 57 TTJ 493 and M. Selvaraj vs. ITO - 258 ITR 82 (Chennai). He also pleaded that first step is the consideration of the books of account, the second step for resorting to an estimate comes only when the books of account are rejected and without fulfilling the first step, the Assessing Officer has no power to straightaway jump to the next step of making an estimate. It is not justified to first obtain a report from the valuation cell and then inform the assessee that the admitted cost or investment is on lower side and the difference will be treated as unexplained investment. Without any material, the Assessing Officer cannot make a reference to the DVO. The provisions of section 69B make it clear that the addition can only be made when the Assessing Officer finds that the investment has been under-stated and the books of accounts are not reliable. For this proposition, he relied on the following decisions :-
(i) Subhash Chand Chopra vs. ACIT - 92 TTJ (Delhi) 1087;
(ii) ITO vs. Vijetra Educational Society - 118 ITR 382;8 ITA No.3653/Del./2010 CO No.295/Del/2010
(iii) Modern Construction Development and Project Promotion vs. ACIT - 63 ITD 235 (ITAT Calcutta)
(iv) CIT vs. Laxmi Narayan Saharan (High Court of Rajasthan at Jodhpur) He further submitted that the property has been declared in the books of account and wealth tax return was also filed declaring the property and Assessing Officer never doubted the correctness and accuracy and reliability of the books of account and did not reject the same. Hence, the reference to the DVO without rejecting the books of account of the assessee and the addition made on the basis of such valuation report is bad in law. For this proposition, he relied on the following decisions :-
(i) CIT vs. Lakhpat Film Exchange - 124 Taxman 807 (High Court
- Rajasthan)
(ii) Assistant Commissioner of Income tax v C Subba Reddy 2005 Tax LR 373 (Mad.)
(iii) Birmingham Properties Limited v Assistant Commissioner of Income tax [2006] 154 Taxman 199 (Kol) (Mag)
(iv) Assistant Commissioner of Income tax v J J Solvex Private Limited [2004] 1 SOT 304 (ITAT Chandigarh)
(v) Praveen Kumar v Income tax officer [2003] SOT 196 (Asr)
(vi) Commissioner of Income Tax v Hotel Joshi [2000] 242 ITR 478 (Rajasthan)
(vii) Income tax officer v Dr V K Bansal [2003] 79 TTJ (ITAT Chandigarh) 12 / 131 Taxman 186 (Mag)
(viii) Kasat Textiles Private Limited v Assistant Commissioner of Income tax [1998] 66 ITD 510
(ix) Selvaraj v Income tax officer [2002] 258 ITR (AT) 82 (Mad) 9 ITA No.3653/Del./2010 CO No.295/Del/2010 Finally, he also relied on the decision of ITAT, Delhi Bench 'A' in the case of ACIT, Central Circle 16, New Delhi vs. Ambience Developers & Infrastructure (P.) Ltd. - (2011) 13 Taxman 150 (Delhi - Trib). He also pleaded that it is the primary duty of the Assessing Officer prior to referring to the DVO to prove that there is under-statement / concealment of income and only after this burden, which lies on the revenue, is completed, addition can be made on the basis of DVO's report. For this proposition he relied on the following decisions :-
(i) CIT vs. Ramesh Kakkar - ITA 1550 /2010
(ii) CIT vs. Madan Lal Dawar - ITA 1554/2010
(iii) CIT vs. Bhagirath Aggarwal - ITA 1551 /2010 & 1555 / 2010
(iv) CIT vs. Manoj Jain - (2006) 287 ITR 285 (Del.)
(v) CIT vs. Shakuntala Devi - (2009) 316 ITR 46 (Del.)
(iv) CIT vs. Bajrang Lal Bansal - (2011) 335 ITR 572 (Del.)
(vi) CIT vs. Mahesh Kumar - (2011) 196 Taxman 415 (Del.)
6. On the other hand, the learned DR relied on the order of the Assessing Officer.
7. We have heard both the sides at length. It is undisputed fact that no incriminating documents were found and seized in the search operation with regard to the investment in the property, i.e., farm house at Ram Mandir Road, Village Mehrauli, New Delhi. The CIT (A) disposed of the ground no.2 in which this contention was raised by the assessee in para 7 of his order as under :-
10 ITA No.3653/Del./2010CO No.295/Del/2010
"7. I have considered the documents, facts and explanation submitted by the appellant against the reference made under section 142A of the Income tax Act, 1961 by the AO during the course of assessment proceedings. The appellant submitted that the reference made by the AO is bad in law as the AO made reference for valuation of the said property under section 142A of the Income tax Act, 1961 to the VO without judicious application of mind and in routine manner without rejecting the books of accounts and also without pointing out defects in such books of accounts before making reference. The appellant also submitted that AO has also failed to bring in any material or evidence on the basis of which the learned assessing officer felt requirement of reference the said property to valuation by VO under section 142A of the Income tax Act, 1961 without giving any opportunity of being heard before making such reference. I have also gone through the assessment order of the AO. On perusal of assessment order it is quite evident that the AO himself accepted the fact that he has not felt requirement for reference on any objective basis and the opinion formed for making reference is merely subjective satisfaction of the AO. He has no evidence with him which suggests the appellant has paid price over and above which has been paid by the appellant for purchase of property or any sale deed which suggest that the property in the vicinity has been sold in higher price. The appellant also submitted that the AO has made reference before he has asked for any explanation in respect of investment in the property made by the appellant in the said property. Keeping in view of the facts and cases cited by the appellant, in my opinion the AO has not followed the basic steps for making reference for making valuation under section 142A and the reference is made without any objective basis and also without any material on record, hence reference for valuation made by the AO to the VO is bad in law. However, since the appellant gets relief in the Ground No 1, this Ground of Appeal becomes academic in nature, hence does not require any comments.
Thus, the CIT (A) granted the relief on this ground also by holding that the Assessing Officer has not followed the basic steps for making the reference u/s 142A and the reference was made without any objective basis and also 11 ITA No.3653/Del./2010 CO No.295/Del/2010 without any material on record. Hence, the reference made by the Assessing Officer to the DVO is bad in law. However, the CIT (A) held that since he has allowed the relief on ground no.1, therefore, the same is academic in nature. It is also a fact that books of account or the documents in which the investment has been shown by the assessee has not been rejected. The Hon'ble Rajasthan High Court in the case of CIT vs. Pratapsingh Amrosingh Rajendra Singh held as under :-
" In respect of investment made in property, there can be only two methods to find out the correct position - (i) examination of books of account which have been maintained properly and (ii) valuation report. If the assessee has maintained proper books of account and all details are mentioned in such books of account, which are duly supported by vouchers and no defects are pointed out and the books are not rejected, the figures shown therein have to be followed. The valuation report can be taken into consideration only when the books of account are not reliable or are not supported by proper vouchers or the Income- tax Officer is of the opinion that no reliance can be placed on such books of account. It is true that the Income-tax Officer has no option but to rely on the valuation report which is a document prepared by an expert and is admissible, but there must be a finding by the Income-tax Officer that the books of account maintained by the assessee are defective or are not reliable. There may be a marginal difference in the actual investment and the report of the Valuation Officer for a number of reasons as the valuation report is prepared on the basis of norms prescribed by the C.P.W.D. for the construction of buildings and the difference may be with regard to quality of the materials, etc. .....
Held, that there was no dispute that the assessee maintained proper books of account and the same had been accepted in the past and no defects were pointed out in the books. The expenses were fully supported by vouchers. Full 12 ITA No.3653/Del./2010 CO No.295/Del/2010 details were also mentioned in respect of each item in the books. Simply because the valuation report was of a higher amount, the books could not be said to be unreliable. The Tribunal was, therefore, justified in deleting the addition of Rs.55,780/-."
Similarly, the Hon'ble jurisdictional High Court in various decisions has consistently held that the primary burden to prove the under-statement of income is on the revenue. It is a fact that prior to the reference to the DVO, the Assessing Officer was not having any incriminating document or information which could show that investment declared by the assessee in the books of account was not correct. Thus, in our considered view, revenue has failed to discharge the burden. As held by the Hon'ble jurisdictional High Court in various cases, cited supra, it was not permissible to rely upon the valuation given by the DVO, per se, was not an information which could be relied upon when the books of account were not rejected. Moreover, there was no evidence found as a result of search to suggest that assessee has made any payment over and above the consideration mentioned in the sale deed. In the case of CIT vs. Bajrang Lal Bansal, Hon'ble High Court of Delhi held as under :-
" A search was conducted at the assessee's residence by the Department and unexplained cash and fixed deposit receipts were found. During the search, no evidence was found suggesting a higher valuation for the property. However, the Assessing Officer solely on the basis of the report of the District Valuation Officer made an addition of Rs.99,33,000/- under Section 69B of the Income-tax Act, 1961 on account of undisclosed investment. The Commissioner (Appeals) deleted the addition. The Tribunal upheld this decision. On appeal :13 ITA No.3653/Del./2010 CO No.295/Del/2010
Held, dismissing the appeal, that the primary burden to prove understatement or concealment of income is on the revenue and it is only when such burden was discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. The opinion of the District Valuation Officer, per se, was not an information and could not be relied upon without the books of account being rejected which had not been done in the assessee's case. Moreover, there was no evidence found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the return of the respondent- assessee."
The Hon'ble Delhi High Court in the case of CIT vs. Mahesh Kumar held as under :-
"Unexplained investments - Assessment year 2004-05 - Assessee had purchased two plots for Rs.2 lakhs and Rs.3 lakhs, respectively - A search operation was conducted on assessee's premises - No incriminating document or material was found or seized during search operation in respect of aforesaid two plots purchased by assessee - However, Assessing Officer referred those two plots for valuation under section 142A - On basis of valuation report submitted by DVO, Assessing Officer made certain addition to assessee's income - On appeal, Commissioner (Appeals) deleted a part of that addition - On second appeal, Tribunal finding that instances of sale taken into account by Valuation Officer were not comparable as they were situated far away from location of plots purchased by assessee, deleted entire addition - Whether primary burden of proof regarding under-statement or concealment of income is on revenue and it is only when such a burden is discharged that it would be permissible to rely upon valuation given by DVO - Held, yes - Whether since, in instant case, no evidence, much less incriminating evidence, was found as a result of search to suggest that assessee had made any payment over and above consideration mentioned in registered sale deeds, Tribunal was justified in deleting entire addition - Held, yes."14 ITA No.3653/Del./2010 CO No.295/Del/2010
In the case of CIT vs. Ramesh Kakkar, Hon'ble High Court of Delhi held as under :-
"2. In the present case, the Assessing Officer has made an addition in the respondent-assessee's income solely on the basis of DVO's report. However, in Commissioner of Income Tax Vs. Shri Bajrang Lal Bansal, ITA No. 182/2010 decided on 20th August, 2010, this Court has held that it is settled law that the primary burden of proof to prove under-statement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO. It has been further held that in any event, the opinion of the DVO, per se, is not an information and cannot be relied upon without the books of account being rejected."
In the case of CIT vs. Manoj Jain, Hon'ble Delhi High Court held as under :-
" A search was carried out in the premises of the assessee. A block assessment was made and the Assessing Officer made additions on the basis of the report of the Valuation Officer in regard to two of the properties purchased by the assessee. The Tribunal deleted the additions holding that no evidence of concealment of income had been discovered as a result of the search, that the Assessing Officer himself was not an expert; that the valuation of the property was a technical matter and that the Assessing Officer was not entitled to make statements on technical matters for which there was no material on record, particularly when no evidence was found as a result of action under section 132(1) of the Income-tax Act, 1961. On appeal to the High Court :
Held, that the additions were not justified."15 ITA No.3653/Del./2010 CO No.295/Del/2010
In our considered view, the issue is covered in favour of assessee by various decisions of Hon'ble jurisdictional High Court. In view of these facts, we allow the cross objection filed by the assessee.
8. In the revenue's appeal, the only issue involved is deleting the addition of Rs.60,79,673/- made by the Assessing Officer as unexplained investment in land and construction on the basis of valuation report of the DVO.
9. The CIT (A) has allowed the appeal of the assessee by holding as under:-
"I have considered the documents filed by the appellant before the A.O. and placed on the records. ON perusal of the submission made before me, it is quite evidence that the learned assessing officer has not considered some objections put forth in the reply furnished by the appellant in respect of valuation of the property. I have also perused the details of working comparing head-wise investment as per valuation report of VO and valuation report of registered valuer filed by the appellant and placed at page no 220 of the paper book.
On perusal, it is quite evident that the appellant agreed with the estimation made by VO almost under all the heads except valuation in respect of land, construction expenses of Building - 2, Boundary wall, Superior fittings in building - 1, Architects fees @ 2%, Deduction of 10% on account of disputed property, Deduction of 10% on account of self - supervision, discount of 50% on account of marble floorings as included in plinth area rate, cost of toilet as included in the plinth area rate, architect fee @ 2% on horticulture and cost of horticulture.
The AO has considered the contention of the appellant in respect of horticulture in totality and in respect of cost of land and boundary wall partially. The AO has denied the contentions of appellant in respect construction expenses of Building -2 and Superior fittings in building - 1. The AO has not considered the contention in respect of Architects fees @ 2%, Deduction of 10% on account of self -supervision, discount of 50% on account of marble floorings as included in plinth area rate, cost of toilet as included in the plinth area rate and architect fee @ 2% on horticulture.
5. In my opinion, AO erred on relying upon valuation report of VO in respect of estimation of land cost @ Rs 32,98,286/- per acre on the 16 ITA No.3653/Del./2010 CO No.295/Del/2010 basis of only one sale deed which was cleared by the Appropriate Authority. In my opinion the value of land determined on the basis of single sale deed of a distant place could not be a comparable land instead of three sale instances of land in the vicinity referred by the registered valuer. It is a fact that single sale instance cannot be proper indicator of value of land in lieu of three sale instances referred by registered valuer for valuation of land of the appellant. The AO himself found that the land considered for estimation of value of land by the VO is situated at other place than that of the land of the appellant. The sale instances cleared by Appropriate Authority cannot be considered as valid indicator as the appellant purchased the said property in November, 2003 and the said Chapter XXC of the Income tax Act, 1961 dealing with Purchase of property by Central Government is not applicable on and after 01.07.2002. Also the purpose of valuation for Chapter XXC is altogether different from valuation for the purpose of section 142A of the Income tax Act, 1961 as the first is for the purpose of purchase of property by the Central Government to curb tax evasion and black money. So, the single sale instance cleared by Appropriate Authority cannot be basis of estimation of value of land. On the other hand, I find force in the submission made by the appellant that the valuation of land as per the registered valuer is more proper, reliable and scientific as he has considered three sale instances of the similar locality and then further appreciated and depreciated the value of land as per the norms of valuation for time gap and location advantage and then taken average mean rate for the purpose of valuation of land of the appellant. The VO has also failed to appreciate and depreciate the value of land as per the norms of valuation for time gap and location advantage. I hereby rely on the valuation of land estimated by the registered valuer as just, reasonable and scientific and grant relief the appellant of Rs 45,99,803/- being difference of estimation of cost of construction estimated by the registered valuer and VO after adjustments made by the AO in respect cost of land.
In my opinion, the AO erred in denying the explanation furnished by the appellant in respect of cost of construction of Building - 2 without any basis and only on the presumption and assumption that the Building - 2 was existed in the same condition at the time of purchase of the said property as found by the VO at the time of inspection. The appellant also furnished that the he has made investment of Rs 34.25 lacs approximately on dismantling of existing first floor roof slab, chase cutting of walls and erecting of new columns and beams and PI Laying of RCC cals at First floor as per existing and new columns from ground floor and laying of RCC sloping roof slab etc. He also submitted bills of contractors, material suppliers and photographs of old structure of Building - 2 before the VO and AO at the time of proceedings before them. Since, the VO has estimated the value as per the newly renovated superior quality of structure of building - 2, inspected by him and never inspected the old building, the estimation considering the building - 2 as fully constructed structure at the time of purchase without giving any credit for the 17 ITA No.3653/Del./2010 CO No.295/Del/2010 expenses incurred later on in the financial years 2008 -09 and 2009 - 10 is factually incorrect. I hereby rely on the valuation of Building-2 estimated by the registered valuer as just and reasonable and grant relief the appellant of Rs 5,17,756/- being difference of estimation of cost of construction estimated by the registered valuer and VO in respect cost of construction of Building - 2. The AO has not considered the explanation furnished by the appellant in respect of Deduction of 10% on account of self - supervision, discount of 50% on account of marble floorings as included in plinth area rate, cost of toilet as included in the plinth area rate and architect fee @ 2% on horticulture and simply ignored the submission made without passing any speaking order or mentioning any reasons as to why the contentions of the appellant is not tenable. Since the AO has not reasoned for such addition, I hereby grant relief of Rs 10% of cost of construction on account of self supervision, Rs 59133/- on account of marble flooring as included in plinth area rate, Rs 43,600/-on account of toilet as included in plinth area rate and Rs.2,993/- on account of architect fee on horticulture as the AO has already not considered the value of horticulture in making assessment. The AO has himself estimated cost of construction of boundary wall as he found that estimate of cost of boundary wall made by the VO is not reasonable. Since, the AO himself doubted the correctness of report of VO, I hereby rely on the valuation of boundary wall estimated by the registered valuer as just and reasonable and grant relief the appellant of Rs 2,93,540/- being difference of estimation of cost of construction estimated by the registered valuer and VO in respect cost of construction of Boundary wall.
I have considered the rival position carefully. In the case of Dinesh Jain v DCIT [2009] 34 SOT 444 (ITAT Delhi) the jurisdictional IT AT (Delhi) held as under:
"We have considered the rival contentions and carefully gone through the orders of the authorities below. From the record, we found that on the basis of sale deed found during the course of search in respect of purchase of various properties, the Assessing Officer found that assessee was in receipt of rental income in respect of these properties. As per Assessing Officer, the disproportionate yield of income from these properties indicates that the amount invested has been suppressed. Accordingly, he applied provisions of Rule 3 of Part (b) of the 3rd Schedule to the Wealth-tax Rules for the purpose of determining the fair market value of these properties. The Assessing Officer also made a reference to the DVO, as the reference was made one day prior to the framing of assessment, he was not in receipt of any DVO's report. It is undisputed fact that department has not referred any incriminating material having been found during the course of search and investigation made thereafter which indicate that assessee had paid anything more than what has been stated in the sale deeds. It was also not the allegation of the department that there was any difference in the value of the property as accepted by the sub-registrar for the purpose of stamp duty valuation. In view of the fact that no material was found indicating anything paid 18 ITA No.3653/Del./2010 CO No.295/Del/2010 over and above the registered sale price of the property so acquired, keeping in view of the decision of Hon'ble Supreme Court in the celebrated judgment of K.P. Varghese's case (supra) wherein it was held that onus lies on the department to prove that some consideration over and above the consideration stated in the sale deed have been invested, no addition can be made on presumptions and suspicions. In the latest case of CIT v. Smt. Shakuntala Devi [IT Appeal No. 345 (Delhi) of2001], Hon'ble Delhi High Court held "it may be relevant to note that a Division Bench of the court comprising Dr. Arijit Pasayat and Justice D.K Jain, as their Lordships then were reiterate that there must be a finding of the revenue that the assessee had received amounts over and above the consideration stated in the sale deed, following the ratio of KP. Varghese's case (supra). KP. Varghese's case (supra) has also been followed and applied by the Supreme Court in CIT v. Godavari Corpn. Ltd. [1993] 200 ITR 567. The Division Bench of Hon'ble Delhi High Court in CIT v. Ashok Khetrapal [2007} 294 ITR 143 observed that by referring to the report of valuation officer in the absence of any incriminating documents found in the course of a search no addition could be made by treating investment as undisclosed on the basis of any DVO's report. The decision in CIT v Mano} Jain [2006} 287 ITR 285 (Delhi) is also to the same effect. In CIT v Shivakami Co. (P.) Ltd. [l986} 159 ITR 71 (SC), their Lordships have once again retreated that onus whether the assessee had received more consideration than what was stated in the documents of transfer, rested on the revenue and in the absence of that burden having been being discharged, it would be legally impermissible to make any inferences against the assessee.
In view of the above discussion, we do not find any merit in the addition made by the Assessing Officer under the head 'Unexplained investment' on account of various properties purchased by the assessee during the block period on the basis of fair market value as estimated by the Assessing Officer. All these additions are directed to be deleted. "
Moreover, the jurisdictional High Court of Delhi in the cases of Commissioner of Income tax v Prem Nath Nagpal [2007] 214 CTR 51 (High Court - Delhi), has been held that during the search some papers indicating ownership of certain property were found. No document was found indicating understatement of purchase price. There was no document found which could indicate understatement of cost of improvement. No assessment of undisclosed income could be made on alleged understatement, on the basis of DVO's report and Commissioner of Income tax v Ashok Khetrapal [2007] 294 ITR 143 (High Court - Delhi) also held that during the search under section 132 no incriminating material was found indicating that assessee had made higher investment in property than disclosed. No undisclosed income could be assessed on the basis of difference between investment declared and that determined in D VO 's report. The above ratio are squarely applicable in the case of the appellant. I find merit in the contentions of the appellant that the AO failed to bring in any cogent evidence on record that the appellant has 19 ITA No.3653/Del./2010 CO No.295/Del/2010 paid any sum over and above which has been shown in the sale deed. The AO also failed to bring in any incriminating document which had been found during the course of search and seizure operation, which suggests that the appellant has made investment other than what has been shown in his Wealth tax Return. I also found that the AO has relied upon the estimate of valuation made by the VO for making addition, while he himself acknowledged that the valuation report of VO is erroneous.
Hence, the addition made by the AO is not tenable in law and facts. Therefore addition made on account of investment in property is liable to be deleted.
10. We have already allowed the relief while deciding the cross objection of assessee, however, we observe as under on revenue's appeal :-
We have heard both the sides on the issue in detail. The CIT (A) has granted the relief on the basis of relying on the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Ashok Khetrapal - 294 ITR 143, CIT vs. Prem Nath Nagpal - 214 CTR 51 and Dinesh Jain vs. DCIT 34 SOT 444. As far as the valuation of land by the DVO, we are of the view that the DVO has made the valuation only on the basis of one sale instance which was cleared by the appropriate authority by not passing order under section 269(1) of the Income-tax Act. The Valuation Officer who has prepared valuation on assessee's stance has taken average of three sale instances of the nearby locality. There is no evidence against these sales instances that these were at depressed rate. Average of three sale instances shall be more reliable or say near to accuracy then only one sale instance. Therefore, we hold that the DVO report was not reliable and accurate for valuing the land. The 20 ITA No.3653/Del./2010 CO No.295/Del/2010 valuation report prepared by the valuation officer was more accurate and reliable for valuing the land value.
As far as the valuation of the building is concerned, during the hearing, we observed that in the sale deed, the description of the building which has been purchased by assessee is given at page no.9 of sale deed. The details of the property purchased by the assessee as given in sale deed are as under :
"AND WHEREAS the Vendor for her bonafide needs and requirements has agreed to sell and the Vendees have agreed to purchase the Said Property i.e. Agricultural land measuring 13 Bighas, bearing Mustail No.20, Kila No.8(2 - 10), Mustail No.101, Killa Nos.1/1(6 - 5) 2(1 - 1 ) and 3 (3 - 4) with Boundary Wall, Tube-Well, Electric Connection, Farm House and other fittings and fixtures situated in Village Mehrauli, Tehsil Hauz Khas, New Delhi for a total consideration of Rs.50,00,000/- (Rupees Fifty Lakhs only).
The valuation report submitted by the DVO as well as by the VO states the constructed area as under :-
(i) Main Building 238.25 sqm. @ Rs.5443/- sqm.
(ii) Gen. Room, catering,
raw residential units (Cowshed) 320.99 sqm @ R.3569 sqm.
(iii) Staff qrts double storeyed 95.76 sqm. @ Rs.4750/-
Page 75 of the paper book
Para 12 of the sale deed also mentions that there is no poultry farm, ware house, cattle, live stock, raising or grass on the said property and the said property is an agricultural land.21 ITA No.3653/Del./2010 CO No.295/Del/2010
The completion certificate placed at page 30 of paper book is dated 10.06.1996 and the description of the construction as per this certificate is as under :-
1. Dining One
2. Bed Room One
3. Family Lounge One
4. Kitchen One
5. Toilet One There is also a receipt for payment of regularization fee placed at page 83 of paper book dated 23.01.2000 which shows that assessee has paid regularization of Rs.24,500/- for extra construction. Since we have granted relief to the assessee rather we have affirmed the relief granted by CIT (A) on the issue of reference to the District Valuation Officer, therefore, the issues raised in revenue's appeal are of academic in nature, therefore, we dismiss revenue's appeal.
12. To sum up : the appeal of the revenue is dismissed and the cross objection of the assessee is allowed.
Order pronounced in open court on this 6th day of January, 2012.
Sd/- sd/-
(DIVA SINGH) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 6th day of January, 2012
TS
22 ITA No.3653/Del./2010
CO No.295/Del/2010
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-I, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.