Income Tax Appellate Tribunal - Chandigarh
Anil Talwar, Chandigarh vs Acit, Chandigarh on 8 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'A' CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND SHIR B.R.R.KUMAR, ACCOUNTANT MEMBER
ITA Nos. 722,723,724,725,726/CHD/2013
( A.Y. : 2005-06, 2006-07,2008-09, 2009-10)
The DCIT, Vs. Shri Anil Talwar,
Central Circle-II, # SCF 14-15, Sector 22D,
Chandigarh. Chandigarh.
PAN No. : AAPPT2603R
&
ITA Nos. 586,587,588,589 & 590/CHD/2013
( A.Y. : 2005-06, 2006-07,2007-08,
2008-09 & 2009-10)
Shri Anil Talwar, Vs The ACIT,
S/o Shri S.P.Talwar, Central Circle-II,
# SCF 14-15, Sector 22D, Chandigarh.
Chandigarh.
PAN No. : AAPPT2603R
(Appellant) (Respondent)
Department by : Dr. Gulshan Raj, CIT-DR
Assessee by : Shri Ved Jain
Date of hearing : 11.12.2017
Date of Pronouncement : 08/02/2018
ORDER
PER BENCH These appeals and cross appeals (totaling 10 in number, 5 by the Revenue and 5 by the assessee) pertaining to 2005-06 to 2009-10 assessment year are being decided by a common order for the sake of convenience.
2. It was the stand of the parties before the Bench that the issues raised in the respective appeals are identical except for one separate independent ground raised by the assessee (ground No. 13 in ITA 583 in 2007-08 assessment year). Accordingly the parties have taken the stand that the arguments in support of the respective grounds would remain identical in each of these appeals.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 2 of 57
3. Addressing the grounds the Ld. AR submitted that Ground No. 1 & 3 in each of the appeals filed by the assessee are not pressed. In support of the said submission the Ld. AR on instruction of the assesseee has noted the same under his signature in the respective appeals filed by the assessee. Accordingly the ground Nos. 1 to 3 in each of the appeals of the assessee are dismissed as not pressed.
4. Considering the record we note that in the respective appeals common facts are involved accordingly accepting the submissions of the parties we propose to address the facts as set out in 2005-06 assessment year which is the base appeal. The respective grounds raised by the assessee and the Revenue in ITA/586/CHD/2016 and 723/CHD/2013 in 2005 - 06 assessment year read as under :
ITA 586/CHD/2016 :Assessee's Appeal :
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the appellant that the proceedings initiated under Section 153A and assessment framed under Section 153A/143(3) a,re in violation of the statutory conditions and the procedure prescribed under the law and as such the same is bad and liable to be quashed.
3. On the facts and circumstances of the case, the proceedings initiated under 153A and assessment framed thereafter under Section 153A are bad in the eye of law in the absence of any incriminating material being found during the course of the search.
4(i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the addition of Rs. 1,28, 01,1 01 /- on account of unexplained investment in the construction and furnishing of house No. 346, Sector -9, Chandigarh.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in ignoring the cost of construction determined by a scientific process by the Valuation Officer under Section 142(2A) of the Income Tax Act.
5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in estimating the total cost of construction at Rs. 8, 35, 50,000/-as against Rs. 2, 23, 92, 375/- declared by the assessee.
6(i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in estimating the total cost of construction at Rs. 6, 45, 00, 000/-by assuming Rs. 3000/- per sq. ft. cost for the total area of 21 ,500 sq. ft.
i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.300/- per sq. ft. as additional cost for the stone work and that too for the entire area of 21500 sq. ft.
(iii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.200/- per sq. ft. as additional cost for the wood work and that too for the entire area of 21500 sq. ft..
(iv) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.50/- per sq. ft. as additional cost for plaster of Paris and that too for the entire area of 21500 sq. ft..
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 3 of 57
(v) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.100/- per sq. ft. as additional cost for sanitary work and that too for the entire area of 21500 sq. ft..
(vi) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.200/- per sq. ft. as additional cost for electrical work and that too for the entire area of 21500 sq. ft..
(vii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.100/- per sq. ft. as additional cost for boundary wall and that too for the entire area of 21500 sq. ft..
(viii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in adding a sum of Rs.500/- per sq. ft. as additional cost for architectural design, vastu compliance, etc.
7. In the alternative and without prejudice to the above, the total of the above still is not Rs.3000 per sq. ft. as assumed by the CIT(A).
8(i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in estimating an amount of Rs.1,88,50,000/- on account of furnishing of the house.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of air conditioning at Rs.31 Lac.
(iii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of generator set at Rs.8 Lac.
(iv) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of gymnasium at Rs.12 Lac.
(v) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of swimming pool at Rs.8.5 Lac.
(vi) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of furniture at Rs.51 Lac.
(vii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of electronic gadgets at Rs.10 Lac.
(viii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of painting at Rs.30 Lac.
(ix) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of landscaping at Rs.19 Lac.
(x) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of billiard room at Rs.3 Lac.
(xi) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of bio matrix at Rs.3 Lac,
(xii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of lift at Rs.8 Lac.
(xiii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in estimating the cost of discotheque at Rs.5 Lac.
9. On the facts and circumstances of the case, the various additions confirmed by the CIT(A) are multiple additions of the same item.
10(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in proportionately allocating the estimated cost of construction for the year under consideration without there being any material or evidence of assessee having made such investment in the year under consideration.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in making an addition in the year under consideration despite the fact that no material whatsoever has been found, nor any evidence indicating that the assessee has incurred any expenditure over and above what has be stated in the return of income.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 4 of 57 11(i) On the facts and circumstances of the case, the additions confirmed in the year under consideration on account of furnishing is untenable in view of the fact that no such furnishing has taken place during the year under consideration.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in ignoring the contention of the assessee that addition on account of the furnishing of the house cannot be spread over the period of construction of the house as construction and furnishing are two different activities and furnishing takes place only after the house has been constructed.
12. On the facts and circumstances of the case, the additions confirmed by the learned CIT(A) is untenable in view of the provisions of Section 69B of the Act whereby the addition on account of unexplained investment can be made only in the year in which the assessee is found to be the owner of such investment.
13. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in ignoring the fact that the assessment for the year under consideration have been scrutinized under Section 143(3) and as such the learned CIT(A) was not justified in reviewing its own order. 14(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in charging interest under Sections 234A, 234B, 234C and 234D of the Act.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in charging interest under Section 234B from the 1st day of the assessment year as against from the date of the regular assessment in terms of Section 234B(3) of the Act.
15. The appellant craves leave to add, amend or alter any of the grounds of appeal.
ITA 722/CHD/2013 : Revenue's Appeal :
I) That the Ld. CIT (A) has erred in law as well as fact of the case by restricting the addition on account of unexplained investment in construction and furnishing of the House No. 346, Sector 9, Chandigarh to Rs 6,09,57,623/-
instead of unexplained investment of Rs 20,08,57,623/- spread over from A.Yrs. 2005-06 to 2009-10.
II) That the Ld. CIT(A) has erred in law as well as on fact by revising the amount of unexplained investment worked out by the Assessing Officer when the assessee has failed to furnish any documentary evidence or bills regarding expenses incurred towards construction, decoration and furnishing of the house.
III) That the Ld. CIT(A) has erred in law as well as on facts by adopting the rate of civil construction including finishing work at Rs 3000- per sq ft. instead of Rs 7500/- per sq ft adopted by the AO and that too without any documentary evidence.
IV) That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.
5. The relevant facts of the case are that a search operation under section 132 (1) of the Income Tax Act, 1961 was carried out on 24/07/2009 at the residential/business premises of the Talwar group of cases which included the case of the assessee. For the year under consideration, the assessee had returned an income of Rs. 47,25,447/- under section 139 of the Income Tax Act on 31/10/2005 which was considered and accepted by an order under section 143 (3). In response ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 5 of 57 to the notice under section 153A(1) the assessee again returned an income of Rs. 47,25,447/- including agricultural income of Rs. 31,500/-. The AO on account of reasons set out hereinafter made the addition under challenge on account of investment made in House No. 346 Sector-9,Chandigarh. The specific reason set out in unnumbered page-4 of the assessment order is extracted hereunder :
"4. Investment in construction of H. No. 346 Sector-9, Chandigarh During the course of search proceedings carried out in house of the assessee on 24.07.2009, it was found that H. No. 346, Sec- 9D, Chandigarh was built by the assessee. The house is spread over an area of 3067 Sq yards (6 Kanals), three and half storeyed palatial house having covered area of 21,500 Sq feet. Undoubtedly this is a house of dream and has been built with huge investment in last three to four years. After seeing the videography made on the date of search, the questions which emerged:-
* Have you seen house with Biomatrix central locking system with Touch Screen Facility operated jay only four members of the House?
* Have you seen a house) with lush green lawn, landscape designed by famous landscape artist Smt. Geeta Singh running into 4 ½ Kanals having beautiful gardens, elegant parking place and a green paradise?
* Have you seen a house with gym with modern training equipment, bar, swimming pool, discotheque, Jacuzzi, steam bath, massage parlour, billiard rooms and a splendid terrace garden full of beautiful flowers as well as plants- yellow allemandes, petunia, marigold and phoenix palms?
* Have you seen a house spread into 6 kanals, three and half storeyed built with modern architecture, five star facilities and having Italian marbles, latest gadgets, music system and latest upholstery exquisite paintings.?
If you haven't, please go through the photographs and videography annexed with this assessment order. And, if you have observed these videography and photographs, it is quite unbelievable) that the entire house with furnishing has just required an investment of barely 2 Crores.
Before you read the discussion in my assessment order, you must see the photographs and videography and they are evidences on which I plan my discussion to arrive at the value of this magnificent house. The photographs and videographs are annexed at Annexure A-1 (Part -I) and Part-ll and Annexure A-2 respectively. You would be surprised that such a magnificent splendid looking house has been built, afresh for just over Rs 2 Crores, as shown in the books of account of the assessee. Such is state of affairs where concealment of a large extent in building a house has been detected when the Income Tax Department conducted a search operation u/s 132 of the I.T. Act, 1961 in H.No 346, Sector-9 on 24.07.2009. Some of the photographs taken during the search are reproduced below or reference -"
5.1 For the sake of completeness, the following extract of the assessment order is reproduced hereunder from unnumbered page 8 of the same :
5. The exclusive feature of the house as visible in the videography and photographs are highlighted below:-
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 6 of 57
(a) The house has been illuminated with numerous crystal chandeliers, dining room chandeliers, pendant lights, island lights, wall sconces and light fixtures have been installed in this house. Chandeliers or pendant lights with spotlights and down lights have been used to illuminate particular objects or accent certain areas of a room. Down lights have been extensively used to accent the Billiard table and other decorative pieces and surface. Spotlights have been used to bring out the full beauty of special works of art, which are found in almost every nook and corner of the house.
(b) There are more than 40 paintings of the renowned artist, having original art work. A look at the paintings reveals that the apparels in the paintings are done with semi-precious stone, laces and threads having exclusive prices. There are, for instances, Budha statues made in marble. In some of the paintings gold foil has been used.
Paintings in Classic, Antinque and Embossed Style adorn the walls of the house. There are several Tanjore Paintings.
(c) The bathrooms have been fitted with every expensive accessories. Costly mirror having geometrical designs have been fitted with illuminating lights. Decorative accessories have been used lavishly. The bathrooms have been portioned with clear glass cubicles fitted with frosted-glass bath and shower doors. The wall tiles and floor tiles are of expensive variety. Italian marbles have been extensively used. Teakwood has also been extensively used in wooden floorings furniture and fixtures are of the highest quality.
6. The photographs of the H. No. 346 Sector-9/D, Chandigarh which were taken on the dated of search i.e., 24.07.2009, by the Investigation Wing which are 228 (two hundred twenty eight) are part of this order and enclosed as Annexure "A" (in two parts).
7. The videography of the H. No. 546, Sector-9, Chandigarh was done on 24.07.2009 by the investigation Wing, Chandigarh at the time of the search. ACD containing the videography of the said house is enclosed as Annexure "B"
5.2 An inventory of furniture and fixtures addressed in para 8 the assessment order made by the Investigation Wing confronted to the assessee is also reproduced hereunder :
8. During the course of search operation an inventory of furniture and fixtures was prepared with is as follows:-
Mother's room (lounge) Sr. No. Name of Article Quantity Make • Flat TV 52" 1 Sony • DVD 1 Sony • Flat TV 28"(Guest Room) 1 Samsung Dining Room • TV Plazma 38" 1 Samsung • AC Split 1 ¼ tone 1 Dakin Mr. Dhruv Talwar • TV Plazma 46" (3 series) 1 Samsung • Play Station 1 Sony • DVD 1 Philips • LCD 42" (Lounge) 1 Samsung Mr. Vikram's Room (son) • LCD 42" 1 Samsung • DVD 1 Philips Mr. Anil Talwar's Room • TV Plazma 40" 1 Samsung • LCD 38" 1 Samsung ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 7 of 57 • LCD 34" (Guest Room) 1 LG Mr. Anil Talwar's Office • Monitor 19" 1 Samsung • CPU 1 Intex (Pentium) • Printer 1 HP Laser Jet P-1007 Personnel Zim • Bench Press 1 Matrix • Leg Extension 1 Matrix • Jaggar 1 Matrix • Treat Mill 1 Matrix (MX-T5) • Let Pull 1 Matrix • Chest Press 1 Matrix • A C Split 1 Dakin • Music system 1 • Pool Table 1 5.3 On the basis of these facts, the Assessing officer required the assessee to explain and provide the complete breakup of cost of material used for constructing the specific house and the cost of labour payments.
Show cause notice dated 14.12.2011 was issued to the assessee to explain the investment. The facts are referred to in para 10 of the assessment order at unnumbered pages 10 to unnumbered page 30 wherein the assessing officer sums up the show cause notice and the responses of the assessee during the search and given in the course of the proceedings setting out the reasons why they were still required to be addressed. He drew attention of the assessee to the fact that in the course of the search the assessee was required to explain the investment made in the construction of the house wherein the following breakup was given:
F. Y. Amount of Investment
2004-05 Rs. 47,80,000/-
2005-06 Rs. 63,20,500/-
2006-07 Rs. 60,32,750/-
2007-08 Rs. 49,43,450/-
2008-09 Rs. 3,15,675/-
TOTAL Rs. 2,23,92,375/-
5.4 Considering the above, the assessing officer calculated that the
assessee claimed that year-wise percentage of investment was as under :
F. Y. Amount of Investment Percentage of investment made 2004-05 Rs. 47,80,000/- 21% 2005-06 Rs. 63,20,500/- 28% 2006-07 Rs. 60,32,750/- 27% 2007-08 Rs. 49,43,450/- 22% 2008-09 Rs. 3,15,675/- 2% TOTAL Rs. 2,23,92,375/- 100% ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 8 of 57 5.5 A perusal of the show cause notice extracted in the assessment order shows that the assessee was put to notice of the fact that as per details filed by the assessee, the assessee had got the said house constructed with the help of contractor M/s SP construction a partnership firm of Mr Harpal Singh considered to be assessee's close associate. Considering the details filed it was noted that they suggest that M/s SP construction used to receive cheque from the assessee and payments were made for purchase of construction related items. The bills were claimed to be retained at the site in the cupboard.
5.6 Statement of Sh. Harpal Singh recorded on 29/11/2011 was referred to. For ready reference the extract is reproduced from the assessment order hereunder :
"Q7 Please explain the manner of transactions as well as mode of transactions with Sh. Anil Talwar, Ans. Modes of transactions was by way of Cheque and disbursement was by means of cheque or cash, decided jointly between Mr, Anil Talwar and me but invariably on directions of Sh. Anil Talwar after reconciliation of details at site. The cheque used to be deposited in our working account. The statement of cheques received over the period 2004 to 2008 has been submitted to you.
Q 8 Please produce the details of persons to whom disbursement were made regarding construction of house no. 346, Sec-9/D, Chandigarh along with relevant bills? Ans The bills were retained at the site in the cupboard rn the custody of Sh. Anil Talwar.
The disbursement details made through account payee cheques can be made out from account and shall be submitted shortly. Since the account was held as an imprest account, once the account, v.'as reconciled weekly or fortnightly with Mr. Anil Talwar. No further detail was retained by me.
Q. 9 When the details will be provided by you about disbursement of cheque?. Ans. I will submit the details regarding disbursement made through cheques transactions by 06, 12.2011.
Q. 11. I am showing you page numbering 1 to 12 of the document marked A-1 seized from H. No. 598, Sector~8, Chandigarh in course of search operation on 24.07.2009. Can you specify whom these documents belong to and nature of transactions entered on these pages? Ans. The documents page no 1 to 9 are not related to the expenses made through my imprest account. These are probably expenses made through Mr. Bedi (Cousin of Mr. Talwar) before the final handing over of the house for the work of tilling from gate to road on from & rear side as well as certain fabrication works for Gas Caze & Gamla stand etc. Page 10,11 & 12 were part of tho final accounts prepared against which a final amount of Rs 7 lacs was pad on 18.02.2008 to the outstanding parties and the sheets 10,11 & 12 were retained by Mr. Anil Talwaror Mr. Bedi as they both were sitting there for settling of accounts. It is informed that these payments of Rs 7 lacs were also made on directions of Mr. Anil Talwar.
Q 12 On perusal of page 10,11 S 12 of the document A~1, it is observed that transactions entered on these pages is far more than Rs 7 lacs, what you claim that has been disbursed finally. Please explain?
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 9 of 57 Ans. These details probably total amounts of the workers & suppliers for a period which was not settled, out of which amounts paid already had to be deducted by Sh. Anil Talwar from his record and the balance amount of Rs 7 lacs was given to me for disbursement as per his directions. The details of the payments made to these parties prior to this are not available with me.
Q 13 Please reconcile the accounts of (he parties mentioned on the page 10,11 & 12 of document A-1?
Ans. Since all the records were retained by Mr. Ta/war, / am not in position either to reconcile or reconstruct the transactions."
5.7 The statement of Sh. Harpal Singh was also recorded on 08.12,2011, the relevant extract is as follows:-
"Q. 2 Please state the names of other agencies, contractors, persons involved in the construction work?
Ans. The construction work was done on daily wage basis. As far as I remember, there was no other contractor.
Q. 3 What was the total area of land on which construction was made. Also state the covered area of construction?
Ans. The plot size was told to be six canals. The covered area was about 21500 sq. feet. Q. 4 Please state the number of floors and rooms etc. constructed in the said building? Ans. The house consists of one basement, two and half storey and one servant area. It has 26 rooms, two kitchens on the ground, first and second floor. The basement may be considered as one unit and servant unit can also be considered as another unit. But all these are covered in the area of 21500 sq. feet already stated above. There is one swimming pool and a billiards room.
Q. 10 Please furnish the details of payments made by you for construction of the house including furniture and fixtures installed in the house?
Ans. As already stated I was only the imprest account holder for Sh. Anil Talwar out of personal association. The detailed account was taken by him at regular intervals after squaring up every installment of the imprest account. As such these details are not lying with me. They can be had from Sh. Anil Talwar.
Q. 11 In reply to question no. 9 of your statement recorded on 29.11.2011, you have stated that the details regarding disbursement made through cheques will be submitted to this office by 06.12.2011. Please furnish the details?
Ans. Since details have to be prepared only on the basis of my bank account statement and cheque book. I am personally scrutinizing the details and preparing the detailed statement which shall be submitted in 2-3 days time. The delay in this is sincerely regretted. Q. 12 Who did the job of landscaping and construction of boundary wails? Ans. The boundary wall was constructed by daily wage labour and paid for from the imprest account. The landscaping was done by the own arrangement of Mr. Anil Talwar. Apart from this, some work was done by Mr. Hitesh Bedi as I have stated in response to question No. 11 of my statement recorded on 29-11-2011.
Q.15 Please state the total number of labours employed and man days involved in construction of hour?
Ans. All the details are with Mr. Anil Talwar. No details of payments made to labour & number of labours employed are available with me.
Q.16 Please state the quantity of bricks, cement, steel, and other construction materials used for the construction of house?
Ans. The Details are not with me. I can not furnish the details.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 10 of 57 Q.18 You have handled the construction workofH.No. 346, Sec-9, Chd. As you have stated earlier the total covered is 21500 sq feet. Please provide the break up of cot of construction material used of labour payments?
Ans. These details are with Sh. Anil Talwar as stated earlier. It may please be noted that I have handled the imprest account for the construction as have guided Mr. Anil Talwar for construction."
The photocopies of the statement given by Sh. Harpal Singh are enclosed for your reference. 5.8 On a perusal of the above the AO concluded as under:
The above statement given by Sh. Harpal Singh suggests that the breakup of 2,23,92,375/- is only "imprest account" and there have been separate payments not filed here as regards to labour, fittings and fixtures, landscaping, installation of lift, provision of swimming pool, wood work, glass work etc. where details are yet to be furnished. Copies of the statements of Sh. Harpal Singh are enclosed. The main facts which emerges from the statement of Sh. Harpat Singh are as follows -
i) All the bills and vouchers relating to construction of H. No. 346, Sector - 9, Chandigarh are with Sh. Anil Talwar
ii) The Construction of the house took place between 01.04.2004 to February 2008.
iii) Plot size was 6 kanal and total covered area was 21500 Sq. feet.
iv) House consists of 3 % storey including one basement. It has 26 rooms, two kitchens, one swimming pool, one Billiards Room, one servant unit etc
v) The old construction on the plot was demolished and new structure was got constructed.
vi) The boundary wall was got constructed by labours on daily wage basis.
The strong corroborative evidences of huge investment made in the house in some of the bills were found and seized from the residence of Sh. Hitesh Bedi, cousin of Sh. Anil Talwar. Pages 1- 12 of Annexure'A-1' seized from the residence of Sh. Hitesh Bedi found in the form of slip, expenses bills, ledgers etc. clearly establish that investment for construction of house were done in cash. The statement Sh. Hitesh Bedi was recorded u/s 132(4) in course of the search proceedings. The relevant extracts of his statement are produced below:-
Q.No.15 During the course of search operation u/s 132 of the I. T. Act the following incriminating documents are found which are given as under as per Annexure A-l from page No. 1 & 19 Sr. Page Amount involved Remarks No. No. 1 1 100910.25 Payment made in case premises sanitary agreny 2 5. 31381.97 Payment made in cash Sh. Akhilesh Contranctor
3. 10 15,93,690,00 Cash payment made some various party 3A 10 20,00,000.00 Some rough work in pencil 4 11-12 28,28,987,00 Cash payment made some to various party 5 13 25,000,00 Rough work 6 14 55000.00 Cash payment made to Arvinder Electronic Pvt. Ltd. 7 16 to 1,08,000.00 Cash payment made to Jee Kay Vision (P) Ltd 19 1,08,000.00 authorize dealer of samsung 1,08,000.00 57,000.00 Please explain your position in respect of S. No. 1 to 7 Ans. With reference to the queries at S. No. 1 I am not in a position to answer the same.
However Mr. Anil Talwar can explain better in this regard, against whom the bill has been raised. In regard to S. No. 2 at page 5 of Annexure A-l the amount is involved in relate to some contract work in connection with construction of H.No. 346 Sec- 9 Chandigarh and the contents of this question can well explained by Mr Ani! Talwar.
In regard to queries at S. No. 3, I can not explain the exact position whether this in cash payment made to various parties or it is an estimate. The exact position can be explained by Sh. Anil Taiwar ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 11 of 57 In regard to queries at S. No. 3A also I can not explain the exact position and exact position can be explained by Anil Talwar as it pertains to the construction of residential building No. 346 Sec- 9 Chandigarh My answer is the same as above in regard as the queries at S. No. 4, this payment might have been made in respect of purchase of some items in the construction of above residential building. It may be verified from the regular books of accounts of the firm as well as personal books of accounts of Sh. Anil Talwar In regard to the queries at S. No. 6 these payment relates to purchase of two fridges for the business purposes of the firm M/s Talwar son Jewellers. The bill has been raised in my name because generally I carry out out door duties of the firm. The cash payment amounting to Rs. 55,0007- (Fifty five thousand) may b got verified from the books of accounts of the firm. In regard to queries at S. No. 7, I am unable to explain anything in this regard."
5.9 The assessing officer thereafter scanning the seized documents described as FA - 1 page number 1; FA1 page No. 2 FA 1 page No. 2 backside; FA 1 page No. 3 FA 1 page No. 4 to FA 1 page No. 12 and FA 1 page No. 14,to'FA 1 page No. 19 concludes as under :
The above referred pages alone amount of bills of Rs. 56,81,004/-. Please note that these bills are not exhaustible but only indicate the some of the bills found in construction of the house and not reflected in the cash-flow statement submitted by you.
5.10 He further on unnumbered page 37 of his order also goes on to note that in the course of the search proceedings bills in respect of purchases made by the assessee's wife Smt. Neena Talvar from the showroom of M/s Floor and Furnishings (I) private limited were found and seized from the assessee's residence. These bills consisting the seized documents have also been scanned and reproduced from unnumbered pages 38 to 40 of the assessment order described as Party Number C A - 1 page No. 60; Party Number C A -1 page number 62; Party Number C A - 1 page No. 63. Thereafter the AO makes a reference at page 41 of the assessment order that on test check basis summons were issued to one of the entity with whom transactions appeared in the seized documents namely M/s Floor and Furnishings (I) Private Limited and notes that the total bills raised in the name of Mrs Neena Talwar were of Rs. 6,14, 529/-.
5.11 The assessee was accordingly show caused to explain the same. The AO was of the view that the expenditure had not been part of the cash flow statement submitted by the assessee. Accordingly in the absence of any details maintained the case was referred to the Valuation Cell. For ready reference the relevant extract is reproduced from the assessment order page 41. Copy of the document is available at Paper Book page 41 onwards.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 12 of 57 The case was referred to Valuation Cell u/s 142(A) for determining the investment made towards construction of the said house. The DVO has submitted his report with the following remarks -
"The valuation report has been prepared form the expenditure flow statement given by the Assessee, which is required to be verified at your end. In case, any major variation is found in the expenditure flow statement as given in Annexure-IV of the report in any particular year in your office or intimated subsequently by the Assessee, this valuation worked out by this office is liable to change. Hence the report should be referred back to this office for recalculating the valuation amount, if required.
The assessee has filed an affidavit dated 21.01.2011. In which he claimed in para 3 & 4 as under:
Para (3) That old structure already existing at the site having covered area of about 2000 Sq. Feet (198.90 Sq. Meter) was partly utilized in the new construction and partly was demolished. The scrap value so obtained was also utilized towards the construction of the new house.
Para (4) That the boundary wall and gate already existed at the site at the time of its purchase form the seller of the said property. The same was got repaired where ever required.
Only new structure constructed by assesses has been valued. Relief on account of salvage value of existing structure be accounted for at your end please."
5.12 However the valuation Report was discarded by the assessing officer on the following reasons:
The valuation of the said house wa.3 therefore, done by District Valuation Officer, Chandigarh on the basis of expenditure flow statement and affidavits filed by you. There was no independent technical input from the valuation cell. Hence the valuation cell. Hence the valuation made by the DVO, Chandigarh is not reliable and has 10 relevance.
In course of assessment proceedings you were asked vide the questionnaire dated 16.09.2011, order sheet noting 21.-i1.2011 and the letter dated 09.12.2011 to provide the complete break-up of cost of materials used for construction and furnishings of the said house along with details of labour payments. But no such details was provided by you giving sufficient opportunities. 5.13 The AO accordingly issued a final opportunity to the assessee to offer its explanation holding as under:
Now, a final opportunity is hereby accorded to you to furnish the following information -
i) To file complete break up of all the material used for construct/on of house (both quantity wise and cost wise) i.e. bricks, cement, steel, stone, marbles, tiles and woods.
ii) Building design and approved plan / map of the constructed house. The approved plan submitted to the Estate office, Chandigarh and duly approved by them
iii) Name and address of the architect along with the payments made to him duly supported with documentary bills / vouchers- Also furnish proof of TDS deducted.
iv) Names and complete addresses of the labour contractors, payments made to them along with bills / vouchers. Also furnish proof of TDS deducted.
v) Cost of furniture / fixtures i.e. curtains, sofas, paintings, designer furniture in drawing rooms, bed rooms, rest rooms, balconies etc. installed at the house along with supporting bills and vouchers.
vi) Name and complete address of the plumber contractor along with the payments made to him duly supported with documentary bills /vouchers ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 13 of 57
vii) Name and complete address of the interior decorator and designer along with the payments made to him duly supported with documentary bills /vouchers
viii) Cost of electrical fittings installed in the house along with bills and vouchers
ix) Cost of construction involved in swimming pool along with the details of the persons hired for designing and construction of swimming pool,
x) Cost of landscaping and construction of outer area along with bills and vouchers
xi) Materials used in modular kitchen fittings, bathrooms, swimming pool etc.
xii) Power load which has been sanctioned from the Electricity Department along with security deposit and installation fees. If there is any power back up like generator set. If yes, its capacity and cost.
xiii) Cost of central air conditioning system.
If no details along with supporting documents are filed, I will be constrained to assess the cost of construction and cost of furnishing on the best judgment basis (tieJd in the case of Dr. S, Surendranafh Reddy Vs ACIT (2000) 72 /TO 205 (Hyd) and the decision of the Hon'ble Supreme Court in the case of CST Vs KM. Esufali H.M. Adoulali [1973] 90 ITR 271 to establish that estimation is warranted as part of assessment in appropriate cases) as per the prevalent market cost of such types of construction and based on the unaccounted documents found during the search. It may be noted that the cost statement given by you is highly inadequate and would not even cover the cost of basic raw structure. Before any decision on this issue is taken in fair, equitable and reasonable manner, please provide the details as called for."
5.14 A further perusal of page 43 para 11 of the assessment order takes note of the fact that initially there was no response to the notice dated 14/12/2011 as a result of which a final show cause notice was issued on 22/12/2011 which was replied to on 26/12/2011 by the assessee. The reply of the assessee was found to be unacceptable by the AO on account of the following reasons as set out in para 11 of unnumbered page 43 of the assessment order. Since the specific finding has been assailed before the CIT-A and is heavily relied upon by the Revenue in these appeals it is deemed and necessary to reproduce the same hereunder for ready reference The_reply of the assessee_has been perused and found to.be unacceptable on the following grounds:-
c) The assessee did not file any details regarding cost of materials used, cost of furniture and fixtures, payments to labour contractor, architecture, interior designer, cost of electrical fittings, power back up etc as sought in the reply but assessee had tried to avoid filling the details on one pretext or another. Even in the final reply it was stated by the assessee that no bills vouchers of materials purchased, labour' payments etc. were preserved by the assessee.
b) In its reply the assessee has contended that the house does not have 24 rooms but has only 9 bed rooms. In his reply the assessee has simply stated that there are 9 bed rooms, no mention has been made by the assessee regarding total number of rooms. Whereas the contractor Sh. Harpal Singh partner of M/s S. P. Constructions has categorically admitted that there are 24 rooms in this house.
Moreover, it has been observed watching videography that every living room has three distinct attachment namely drawing room, dining room and a kitchen fitted with modular facilities and latest chimney and hence 9 bedrooms would have 24 rooms as contended by Sh. Harpal Singh.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 14 of 57
c) The contention of the assessee that no investment has been made outside the books of accounts is totally wrong. The assessee has only shown an amount of Rs. 2,23,92,375/- whereas from the evidence found at the residence of Sh. Hitesh Bedi and statement of Sh. Harpal Singh clearly suggests that the assessee had understated the value of investment made in the house.
d) The assessee has contended that the services of M/s S. P. Construction were taken only to control the leakage of funds and to utilize their expertise in the construction business is not accepted on the ground that Sh. Harpal Singh has admitted in his statement that the funds were utilized through an 'Imprest Account which was directly controlled by Sh. Anil Talwar. It was stated by Sh, Harpal Singh in his statement that he had no control over the funds but only to supervise the construction work.
e) The contention of the assessee that the entire old furniture and fixture was got renovated / repaired by using the scrap material left out of construction is not correct. All the old furniture and fixtures were left at H. No. 149, Sector-8 Chandigarh where the assessee used to live before shifting to H. No. 346, Sector- 9, Chandigarh.
f) With regard to the contention of the assessee regarding the valuation made by the DVO it may be mentioned that the DVO himself has stated that "The valuation report has been prepared form the expenditure flow statement given by the Assessee, which is required to be verified at your end. In case, any major variation is found in the expenditure flow statement as given in Annexure- IV of the report in any particular year in your office or intimated subsequently by the Assessee, valuation worked out by this office is liable to change. Hence the report should be referred back to this office for recalculating the valuation amount, if required." In these circumstances, the report of the DVO can not be relied upon.
g) The landscaping has been done by famous land artist Mrs. Geeta Singh of Chandigarh. She is an exclusive artist expert in landscaping and charges around Rs 25-30 lacs for making such beautiful green paradise of that magnitude. The assessee failed to file any documentary proof of payments having been made to Mrs. Geeta Singh on this account.
h) In his reply the assessee contended that this is a simple house and photography and videography cannot justify anything, as the photographs tend to make an 'ugly' also as 'beautiful'. This is only to distract our attention from the available evidences. In this regard, Annexure A (Part -I & Part-ll) may please be seen and the volume of undisclosed investment can be easily ascertained.
i) The house has Biomatrix central locking system which can be operated by touch finger of Sh. Anil Talwar, his wife and his tw.' sons. Even servants cannot operate this.
j) The house has lift facilities and the assessee has failed to file any cost incurred in this regard.
k) The gymnasium facilities loaded with latest art and technology can be seen. It is fitted with matrix treadmills, cross trainer and whole gymnasium has teakwood floors but the assessee has not provided any break-up of such expenses incurred.
l) This house has Jacuzzi and all around is expensive stones and the assessee did not provide any break up of expenses made in this regard.
m) The assessee has submitted layout plan for the house duly approved by the Government authority. The perusal of the layout plan and drawing plan clearly establish that the old structure was demolished and new structure was created. Hence the plea of the assessee is also not acceptable and liable to be rejected.
n) Besides this, the assessee failed to provide details of investment made in the house as regards to electrical fittings, various glass windows, bathrooms fittings, expenses incurred on account of curtains, wall design, ceilings, modular kitchen, sofasets, lamps, glass tiles, ceiling lights various designers' pots etc. The assessee also failed to provide the expenditure incurred in regard to the construction of the swimming pool, party room, stem and sauna.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 15 of 57
o) In its reply the assessee explained that new furniture and fixture are nothing but renovation of old furniture and fixture. This is not true. The old furniture and fixtures were left in the olf4 house and all the furniture and fixtures were brought new. The assessee has surrendered u/s 132{4) of the I.T. Act 1961 a sum of Rs 8,27.5731- for F.Y 2008-09 pertaining to the A.Y 2009-10 on account of investment in furniture and fixtures. This is highly inadequate. There are more than 30 sofa sets, 30 centre tables, 40 side tables, 40-50 side lamps, 20 cupboards all made of teak wood and hence undisclosed investment of more than One Crore is not ruled out.
p) The assessee vide his reply dated 26.12.2011 admitted that the percentage of the investment made in the F.Y 2004-05, 2005-06, 2006-07 and 2007-08 should be taken as 21.65%, 28.63% , 27.32% and 22-04 % respectively. It has been submitted that the house under reference was completed in 4 years and cannot be, compared with the current cost of construction. The plea of the assessee is totally unacceptable and therefore for civil construction, we have taken rate of Rs 1500/-sq feet and for furnishing we h.-.ve taken rates of Rs 6,000/-- sq feet which in 'today time totally doubled up. A house built in year 2011 costs nothing less than Rs 2500-3000 sq feet and similarly other expenses. The detailed assessment, therefore, is based on the market rates as prevailed in the FYs 2005-06, 2006- 07 and 2007-08.
q) The assessee has since not preserved any bill/vouchers of the material purchased ' towards the construction of the said house and neither has preserved any record of the labour payments, as admitted by the assessee, we have no room but to assess the value at the rates which prevailed in years of construction.
r) The submission of the assessee that boundary wall of the house was renovated and got repaired wherever required is totally false, baseless and without any documentary proof. This is more so evident from the approved plan made by AADARSHILA submitted to us, depicting new structures demolishing the old one. The valuation made by D.V.O. is totally unreliable, as has already been discussed.
s) As far as judgments of Hon'ble Supreme Court and ITAT Hyderabad are concerned the ratio may not be exactly applicable but they are pointing to the conclusion on existing law relating to "the best judgment". In this regard -
* the scope of best judgment assessment under the income tax law came up for consideration before the Judicial Committee as early as 1937 in CIT Vs Laxminarain Badridas (1937) 5 ITR 170 (PC). Therein Lord Russell of Killowen , speaking for the Judicial Committee, observed:
"The Officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for (his purpose tie must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee's and all other matters which he thinks wilt assist him in arriving at a fair and proper estimate; and sense, too, the assessment must be to some extent arbitrary."
In Raghubar Mandal Harihar Mandal vs. State of 3ihar (1957) 8 STC 770 (SC), a case arising under the Bihar Sales Tax Act, 1944, the law relating to "best judgment" assessment was examines at length by this Court. Therein, S.K. Das J., speaking for the Court, observed:
"No doubt it is true that when the returns and the books of account are rejected, the AO must make an estimate, and to that extent he must make a guess; but the estimate must be related to soma evidence or material and it must be something more than mere suspicion. To use the words of Lord Russell of Killowen again, 'he must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must take into consideration such material as the AO has before him, including the assessee's circumstances knowledge of ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 16 of 57 previous returns and all other matters which this AO thinks will assist him in arriving at a fair and proper estimate."
Hence, the valuation on the best judgment has been arrived. Therefore, based on the findings of the search team based on the photographs made at the time of search, based on the videography, based on various annexure of goods inventorized at the time of search, based on the corroborative evidences in some of the bills/ /vouchers found and seized from the residence of employee of the assesse and the statement given by the partner of M/s. S, P. Construction Mr. Harpal Singh and subsequent show cause notice issued and independent market report of similar kind of houses, the following assessments of the mentioned house are being worked out.
Assessment of H. No. 346, Sector -9, Chandigarh (Based on the Market rate of financial years, 2005-06, 2006-07and 2007-08) (6 Kanal covering constructed area 21500 Sq. Ft. (approx.)) S. No Description of Work Area in Rate in Amount in Rs Sq.tt Rs
1. Civil construction (semi finished) including foundation, 21500 1500 3,22,50,000/-
brick work, RCC work, plastering (Internal&external) external) etc, also including Public Health & Sanitary work, Electrical (internal & External) work etc. 2 Finishing work including Italian marble flooring, wooden 21500 6000 12,90,00,000/-
flooring, false ceiling with design & cove lights , P.O.P on walls & teak wood fancy jail for lights, texture paints, plastic paints, polish work, teak wooden joinery (chowkets, doors, windows etc). .Tiles/Granites in bathrooms and kitchen, Bathroom fitting and fixtures (Fancy), Fancy, Cupboards, Modular Kitchen, Fancy designs on walls and columns etc. 3 Providing and Installing Centrally air conditioning system L.S* L.S* 1,00,00,000/-
including ducting in the building/house.
4 Providing and installing G.D Set including electric panel and L.S* L.S* 50,00,000/-
electrical connections / switches / wiring etc. 5 Gymnasium hall including interior and equipments L.S* L.S* 25,00,000/- 6 Swimming pool including equipment for cleaning and disposal L.S* L.S* 25,00,000/-
of water.
7 Furniture - There are about 30 sofa sets. There are also 40 side 1,00,00,000/-
tables, 30 centre tables, 10 double beds, 20 cupboards all made of teakwood along with carvings made thereon. There are costly lamp sets and chandeliers.
8 Electronic Gadgets {TVs, DVD players and Music Systems, 10,00.000/-
Cameras etc.) 9 Painting and murals, Fancy glass and crystal glass cost etc. 2,00,00.000/-
There are more than 20 big painting worth more than Rs 5 lacs each and 20 paintings for worth more than Rs 50,000/-each. Murals must also be worth Rs50,00,000/-
10. Landscaping on entire area of 4 ½ kanals, parking area, main 35,00,000/-
gates, green paradise, greeneries, plants on the roof top etc. ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 17 of 57
11. Billiards Room with Billiard sticks. 15,00,000/-
12' Biomatrix lock system 25,00,000/-
13 Lift 10,00,000/-
14 Discotheque along with lights, floors etc. 25,00,000/-
TOTAL 22,32,50,000/-
LS_signifies_Lump sum
In view of the above observations, the total investment in the residential house comes to Rs.22,32,50,000/- out of which the assessee has already accounted for a sum Rs.2,23,92,375/- in his return of income. Therefore the assesses has made an unaccounted investment of Rs. 20,08,57,625/- (22,32,50,000-2,23,92,375) which is treated as unexplained investment of the assesses in terms of section 69B of the Income tax Act, 1961 since the investment is not fully disclosed in books of accounts of the assessee. For sake of convenience the provisions of section 69B are reproduced below:-
"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. "
As the assessee has made the construction from the FY 2004-05 to FY 2008-09. The apportionment of the undisclosed investment made in the residential house is calculated as under:-
F. Y. Percentage of Investment Amount of Undisclosed investment made 2004-05 21% Rs. 4,21,80,100/-
2005-05 28% Rs. 5,62,40,133/- 2006-07 27% Rs. 5,42,31,560/- 2007-08 22% Rs. 4,41,88,680/- 2008-09 2% Rs. 40,17,150/- TOTAL 100% Rs. 20,08,57,623/-
Therefore a sum of Rs 4,21,80,1007- is added back as unexplained investment towards construction and furnishing of H. No. 346, Sec.9 , Chandigarh u/s 69B in the hands of the assessee for the F.Y. 2004-05 pertinent to A.Y. 2005-06.
I am satisfied that the assessee has not fully disclosed investment in construction of house. I therefore initiate penalty proceeding as per provisions of section 271(1)(c) read with Explanation 5A by issue of a notice u/s 274.
(Addition:- Rs. 4,21,80,100/-
Income declared by the assessee Rs. 47,25,447/-
6. These additions were challenged in appeal before the CIT(A). The Ld.AR carrying us through the submissions recorded in the impugned order and the arguments recorded in the said order submitted that they were self explicit. Addressing the facts it was his submission that no addition was maintainable. The adhoc relief granted by the CIT(A) instead of deleting the entire addition it was submitted was contrary to settled legal jurisprudence. The CIT(A) remanded the submissions to the AO and still maintained part additions contrary to law. Before we proceed to address these arguments it is considered to necessary for the sake of completeness ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 18 of 57 to reproduce the facts as summed up by the CIT(A) before remanding the submissions to the AO:
5.2. The AO, after refuting each of the assessee's contention, since no details as called for, nor any bills/vouchers were furnished, proceeded to determine the cost of investment in the house based on the materials on record. It is observed from the impugned order that the cost of civil construction was taken @ Rs. 1,500/- sq feet and the furnishing/ finishing work @ Rs. 6.000/- sq feet considering the prevailing market rates in F.Y. 2005-06 to 2007-08. The rate of construction in the year 2011, is stated to be not less than Rs. 2,500- 3,000 per sq feet. Similarly, the position in respect of other expenses, were almost doubled. It is further observed that for estimating the cost of centrally air-
conditioning system; the fittings including GD sets; the gymnasium; the swimming pool; landscaping; biometric system; paintings and murals; lifts; discotheque etc., the cost has been taken on lump sum basis. Reliance for assessing the cost of construction and cost of furnishing on best judgement basis were drawn from Dr. S. Surendranath Reddy Vs. AC1T (2000) 72 1TD 205 (Hyd); the decision of the Hon'ble Supreme Court in the case of CST Vs H.M. Esufali H.M. Addulali[1973] 90 1TR 271, CIT Vs, Laxminarain Badrid;is (1937) 5 ITR 170 (PC) and Raghubar Mandal Harihar Manda! vs. State of Bihar (1957) 8 STC 770(SC). Consequently the total investment in the house was worked out to Rs. 22,32,50,000/- as against the sum of Rs. 2,23,92,37S/-declared by the assessee. The unaccounted investment of Rs. 20,08,57,625/-, after deducting the cost declared by the assessee, was added u/s 69B, which was apportioned year-wise as under:
F.Y. Percentage of Amount of undisclosed
Investment investment made
2004-05 21% Rs.4,21,80,100/-
2005-06 28% Rs.5,62,40,133/-
2006-07 27% Rs.5,42,31,560/-
2007-08 22% Rs.4,41,88,680/-
2008-09 2% Rs.40.17.150/-
Total 100% Rs.20,08,57,623/-
5.2.1 For sake of clarity and ready reference, the declaration by the assessee of total cost of construction of this house at Rs.2,23,92,375/- is as under:-
A.Y. Amount of Investment (Rs.)
2005-06 47,80,000/-
2006-07 63,20,500/-
2007-08 60,32,750/-
2008-09 49,43,450/-
2009-10 3,15,675/-
Total 2,23,92,375/-
5.2.2 The estimation by the DVO at Rs. 2,41,42,000/- spread over five years is as under:-
A.Y. Amount of Investment (Rs.)
2005-06 52,27,174/-
2006-07 69,11,790/-
ITA 722,723,725,726/CHD/2013 &
ITA 586 to 590/CHD/2013
Page 19 of 57
2007-08 65,97,121/-
2008-09 54,05,915/-
2009-10 --
Total 2,41,42,000/-
6.1 It was submitted that the submissions advanced before the CIT-A
were remanded to the assessing officer as would be evident from para 5.4 of the impugned order. The remand report of the AO it was submitted has also been extracted in the order from pages 17 to 25 and it was also confronted to the assessee. The rejoinder thereto it was submitted has been filed and has also been extracted in para 5.5 of the impugned order from pages 26 to 39. Considering the same the CIT(A) come to the following conclusion in para 5.6 to 5.15 at pages 40 to 53 which is challenged by the assessee in the present proceedings . A perusal of the same shows that the CIT(A) in para 5.6 of his order addresses the issues in the following manner.
5.6 1 have carefully considered the impugned order and the submissions of the assessee as well as the remand report and the rejoinder. 1 have also seen the video attached as annexure to the impugned order and the still photographs in two volurnns. 1 also find that some photographs have also been scanned and placed in the body of the order. The house is spread over an area of 3067 sq. yards (6 kanals) and is a 3/1/2 storied house having covered area of 21500 sq.ft. The assessee has 100% ownership. As per the facts emerging from the impugned order the assessee has not maintained any accounts nor the details of the expenditure incurred item-wise. The assessee has submitted the total amount of the expenditure of Rs.2,23,92,375/- as incurred on the house on the basis of the withdrawals from his bank accounts. In the absence of any details, the matter was referred by the AO to the District Valuation Officer who has estimated the total cost at Rs.2,41,42,000/- as per the details given in the valuation report. The AO, however, being not satisfied with the valuation report made his own estimate with respect to the cost of construction and major items as regards the house on gross basis as elucidated in the impugned order.
5.7 The assessee's contention is that the estimate made by the AO ignoring the valuation report is not justified and further there is no basis for the gross rate applied by the AO in respect of each of the items. The assessee has further contended that there is no reason for drawing any adverse inference for not maintaining books of account as under the law he is not required to do so as the house is assessee's personal propert.
5.8. On the issue whether the assessee is required to maintain books of account, 1 am in agreement with the legal contention of the assessee that the books of accounts are required to be maintained under Section 44A only in respect of the business or profession carried on by the assessee and no books of accounts are required to be maintained while incurring expenditure including expenditure on the construction of own house, for which no deduction is being claimed under the Income Tax Act. However, the assessee was subject to search action in which his residential premises was also ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 20 of 57 covered, in the course of which the Investigation wing took a videography of the house, both interior and exterior, apart from some still photographs. Consequently notice for filing the returns of income for the years under consideration under the provisions of section 15 3 A was initiated so that assessment of the correct income of the assessee could be determined. Thus, the fact remains that in the absence of any accounts/ details ofexpens.es incurred, the assessee will still be required to explain the source of investment including the expenditure incurred in the construction of the house. In other words, it becomes the onus of the assessee to furnish the primary facts when called upon by the AO by issuance of statutory notices and show causes. It naturally follows that the factual and legal inferences can only be drawn from such primary facts, In this case the assessee has pleaded that he has incurred a particular amount of expenditure as covering each and every expenditure incurred on the construction of the house. Either, he has to prove that only Rs. 2,08,57,623f- was incurred or else come clean with the information to which only he is privy to. The expanse of the house, the videography which gives a graphic picture, apart from bills found in the house of his associate Shri Hitesh Bedi, whose statement along with that of Shri Harpal Singh, the bills of furnishings from M/s Floor and Furnishings, belies the claim of the assessee. It is also observed that assessee in the rejoinder while tackling the specific items of lump sum additions in particular, continues to refrain from stating the actual costs. Thus nothing has been forthcoming on the part of the assessee in providing any details relating to the construction of the house as well as the other additions made by the AO.
(Emphasis Provided) 6.2 Referring to the order it was submitted that the CIT-A upheld the decision of the AO to refer the matter to the valuation cell in the absence of accounts or details of expenditure with the assessee. He further noted that as per the valuation report dated 1st December, 2011 submitted by the DVO, after carrying out an inspection of the property on 15.10.2011 and 19.10.2011, valued the cost of construction at Rs.2,41,42,000/-, the details of which and the basis thereof are given in Annexure II [Abstract Cost] of the valuation of report. Holding the Report as unreliable it was submitted the CIT(A) also concluded that estimate by the AO was necessitated. The following conclusion of the CIT(A) which is challenged by both the parties is reproduced hereunder:
5.9.2 On a perusal of the report No. DVO/1T/CHD/2011-12/119 dated 01.12.2011, it is evident that (to quote), the valuation report has been prepared from the expenditure flow statement given by the assessee, which is required to be verified at your end,... That the assessee has filed an affidavit dated 21.10.2011 in which he claimed in paras 3 & 4 as under:
Para (3) That the old structure already existing at the site having covered area of about 2000 sq ft (198.90 sq meter)was partly utilized in the new construction and partly was demolished. The scrap so obtained was also utilized towards the construction of the new house.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 21 of 57 Para (4) That the boundary wall and gate already existed at the site at the time of its purchase from the seller of the said property. The same was got repaired wherever required.
Only the new structure constructed by the assessee has been valued. Relief on account of salvage value of existing structure be accounted for at your end please..."
5.9.3 It is therefore evident that that the DVO has proceeded to evaluate from a certain surmises i.e the affidavit and the expenditure flow statement for allocating the cost year-wise. It is also evident from para 2.3 of Annexure-1 of the Valuation report that the assessee submitted only year-wise expenditure, photo-copy of site plan & affidavit. Be that as it may, valuation of property by the DVO is only advisory and the AO is not duty bound to adopt the valuation especially when the basis of valuation has been found unreliable. In any case, the DVO report has not taken into consideration all the features of the house either as is also apparent. The contention of the assessee that the AO was not justified in rejecting the valuation report is therefore not tenable.
6.3 Reading from the order it was submitted that the CIT(A) thereafter addresses some of the claims and counterclaims of the parties on the issues in para 5.10 of his order and finally after addressing the factual aspect in para 5.10 to 5.11.1 justifies the decision to arrive at an estimate based on the decision of the Apex Court in the case of Kachwala Gems versus JCIT (2006) 206 CTR (SC) 585 for the proposition that in a best judgment assessment there is always an element of guesswork. For ready reference the relevant paragraphs challenged by the assessee are reproduced hereunder :
5.10. The issue boils down to the correctness in the determination of the cost of construction and the investment made in the house. To reiterate the only way out for the AO was to estimate the cost of investment to the best of his knowledge, in the absence of the assessee persistently furnishing non-committal answers. The At) in this regard has made a reference that the estimation of the expenses incurred on construction and furnishing of the house was on the basis of the evidences found and gathered in the course of the search in particular the bills found and seized from the residence of Hitesh Bedi, the statements of Shri Harpai Singh, Partner of MJs S,V. Construction and Shri Hitesh Bedi. The aggregate of these seized documents comes to Rs.56,81,D04/- as recorded by the AO in the impugned order. These documents refer to some running bills of the construction of the house which were found not reflected in the cash flow statement submitted by the assessee as well as bills for fridges, LCD, Plasma TVs, gamlas etc. The assessee has shown the total cost of Rs.2,23,92,375/- and has pleaded that this total expenditure includes amount of the expenditure as per the seized documents and no adverse inference need to be drawn on the basis of these isolated papers. No attempt was made to correlate the same though so as to refute the contention of the AO. The statements recorded of Shri Mr Harpai Singh and also of Shri Hitesh Bedi, clearly suggest that some of the expenses have not been accounted for. Answers given have been evasive. Even the rate ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 22 of 57 of cost of construction has not been stated by Shri Harpai Singh despite specific query for the second time [refer Q. no 6, 7 and 14 of statement dated 08,12.2011) Some furnishing bills from M/s Floor and Furnishings(I) Pvt Ltd, which is an high-end shop, were also found and information had been requisitioned by the AO from the shop too. In fact even in the number of rooms, the assessee has not been forthcoming, stating that it has 9 bed rooms, as against 26 rooms, two kitchens on the ground, first and second floor, with basement having a swimming pool and a billiards room mentioned by the AO based on the information given by Shri Harpai Singh (refer Q. no 4 of statement dated 8.12.2011). No doubt there is no dispute so far as the total built up area is concerned which is 21500 sq. ft., but surely the number of rooms will have a bearing in calculating the direct and the indirect costs. In fact the most important piece of evidence is the videography of the house, both interior and exterior, plus the still photographs. Since the assessee has chosen not to file details/information as requisitioned by the AO, the only alternative left was to make an estimation of the total expenditure incurred to find out the investment made by the assessee in the construction of the house. 5.11. It is observed that the AO has rejected the explanation of the assessee that the old furniture and fixture of the house no.149, Sector 8, Chandigarh, where the assessee was residing earlier, have been repaired and used in the new house. In this regard I notice that the statement of Mr. Harpal Singh recorded on 8.12.2011 in continuation to statement dated 29.11.2011 and 4.9.2011, does mention that his work included demolishing of the structure including boundary wall and gate for cleaning and reuse and also repair of old furniture, fittings/ fixture for reuse. However and importantly Shri Harpal Singh could not substantiate how and through whom the works were got done. Even the salvage value has not been indicated. Thus, the AO is held to be correct in this assumption. 5.11.1, From the above facts and circumstances of the case, it is crystal clear that assessee has not come forth with anything material in the course of appeal proceedings and even during the deliberation when the AO was also present The assessee has only been harping that the estimate of the AO besides being arbitrary was without any basis. I also find that the estimations by the AO is rather on the high side. On the other hand the claim of the assessee that Rs. 2.2 crores covers the cost of construction as well as the furniture/fittings, the landscape etc is also too nominal, given the visual images in particular of the house under consideration. Hence, relying on a plethora of cases as cited in the records, I am also constraint to make an estimate of the cost of investment to the best of my judgement as held in the case of Kachwala Gems vs JC1T, [2006] 206 CTR (SC) 585, wherein the Apex Court at para 7 has held as under:
7. It is well settled that in a best judgement assessment there is always a certain degree of guesswork. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgement assessment, and should not act totally arbitrarily, but there is necessarily some amount of guesswork involved in a best judgement assessment, and it is the assessee himself who is to be blamed as he did not submit proper accounts.
In our opinion, there was no arbitrariness in the present case on the part of the IT authorities. Thus, there is no force in this appeal, and it is dismissed accordingly. No costs.
[emphasis supplied] ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 23 of 57 6.4 Addressing the order it was submitted that the part relief granted and denied to the assessee is challenged by the Revenue and the assessee in the respective appeals. The reasoning set out in para 5.12 and 5.13 of his order under challenge in the present proceedings by both the parties is reproduced hereunder from pages 45 to 46 of the impugned order :
5.12. Cost of civil construction and the finishing work:
5.12.1There is no dispute about the total built up area i.e. 21500 sq. ft. The Assessing officer has applied a rate of Rs.7500 per sq. ft. comprising of two parts i.e. Rs. 1500 per sq. ft. for the civil construction and Rs.6000 per sq.ft. for finishing work. As against this trie DVO has computed the cost of civil construction at Rs.2,41,42,000/-, which gives a rate of approximately Rs.1123/- per sq.ft The rate taken by the assessee is about Rs.1045/-per sq ft. The rates given by the assessee and DVO are found to inadequate for reasons already discussed in aforesaid paras. The expanse of the house located in one of the posh colonies of Chandigarh cannot be disregarded. The construction is spread leisurely over a period of five years which, in the absence of any evidence of dearth of funds (assessee's concern M/s Talwarsons is into jewellery business; uses the vehicles of the firm which are all high-end vehicles- refer assessment records of the firm ( BMW. Sports car, Mercedes, CRV Honda...] as no personal vehicles are maintained by either the assessee or his wife; Children studied abroad), would imply that the assessee and his family enjoys a rather high standard of living and have diligently and elaborately gone about the construction of one of a kind house. After going through the facts on record. the impugned order and importantly the video film of the house, 1 am in agreement with the contention of the AO that this house cannot be build up with such a low cost as declared by the assessee. The DVO's valuation has already been rejected.
5.12.2. The AO has however applied a rate of Rs.7,500 per sq .ft. comprising of two components i.e.Rs.1,500 per sq.ft. for civil construction and Rs.6,000 per sq.ft for the finishing work. Needless to say the cost of construction can vary from 700 sq ft to over 3,000 sq ft. and as one would say the sky is the limit. No doubt the AO proceeded on the basis of independent market report for similar kind of houses, besides the materials already on record. The issue was also deliberated during the hearing on 06.3.2013, when Shri MK Singh, the AO was also present. Extrapolating the unaccounted expenses of Rs. 56 lakhs will also be incorrect as the seized document mainly pertain to fabrication and filling work from front to rear gates. Hence, I am afraid the rate adopted by the AO cannot be sustained. However, considering the facts of d case, as already stated, 1 am also constraint to arrive at an estimation which I consider reasonable.
Cost of construction would mean the direct expenses which form the shell ol the building which contains cost of foundation (i.e the ground work) and super- structure [i.e the building) which includes the columns, slabs, walls, stairs etc. The costs also includes cost of cement, aggregate of course, sand , labour, bricks, bazri, bitumen, MS Steel, etc. Here there is no indication of the depth of the foundation. Suffice to say that the house is for personal use and seeing the size of the construction, the foundation will be well founded.
5.12.3. As for the extra work and finishing etc, it is apparent from the videography that a lot of stone work has been done in the house. Normally, such ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 24 of 57 good quality of stones would cost around Rs. 300 per sq. ft. These quality stones have been used by mixing the same with the normal stones and at some places wooden carpentry has also been done. This may result into a little lesser cost. As the assessee has not indicated anything, I add Rs. 300/- per sq ft as additional cost. Similarly the wood used in the house may be Burma teak, Nagpur teak, ivory coats which varies in prices. At the same time, in the video, it is seen that panel doors are also used alongwith wooden teak doors in the house which nominally reduces the cost. At several places on the walls and columns it is seen that veneer or sun-mica has been pasted on wooden doors to give an exclusive view. Externally, small tiles have been used which may also be considered as cost effective. Thus Rs 200/- per sq feet may be taken the cost of the same. The video also show plaster of Paris (POP) work has also been done which definitely costs more. So an extra cost of about Rs. 50 per sq. ft inclusive of material cost seems to be reasonable.
Keeping in view the large area of the house of 21,500 sq ft, it would mean involving a lot of sanitary work & Electrical work which can cost upto Rs. 100 sq ft & Rs. 200 sq ft respectively. There will be at least 9 bathrooms attached to each of the bedrooms, besides the kitchens on each floor, the terrace, the gates, boundary walls, garden, parking, the discotheque, swimming pool to name some. Further, boundary wall was also constructed on all sides of plot, size 3067 sq. yds, which may cost Rs. 21.5 lacs which comes at Rs. 100 per sq ft ( approx) on 21,500 sq ft. The contention that the old gates were reused does not have any merit as assessee nor his associates (refer to the statements) were able to come up with even one iota of proof.
5.13. However and importantly besides above, the high quality and the decor cannot be overlooked. Neither the soft costs viz. architectural design, vastu compliance, supervisory costs etc as well as other pre and post construction expenses have also not been considered which are an integral part of any construction in particular a house of such magnitude, which may be as high as Rs. 500/- to Rs. 800/- per sq ft for this type of lavish construction. 1 am very aware that I have been using words like "one of a kind", "expanse", "magnitude" "posh" to describe the house, and having seen the photographs and the videography of the house as was the case of the AO, it is not with a biased mind. The photographs and the videography are proof that the house is palatial. Even a layman will see that the house could not have been constructed with only Rs. 2 -2 and 1/2 crores. Hence, 1 am compelled to view that the rate of cost of construction may be reasonably estimated at Rs. 3000/- per sq. ft. keeping all the above workings and discussion in mind. Accordingly, 1 direct the AO to apply a rate of Rs.3000 per sq. ft, for determining the cost of construction, [Reference GharExpert website; Indian Real Estate forum.com {IREF); The Tribune, March 2011 and local news] 6.5 Reading from the order the cost of Furniture and fixtures etc as was worked out in para 5.14 of the order was assailed. The said conclusion also challenged by the parties is reproduced hereunder for ready reference:
5.14 Costs of features/ furniture/fixtures etc. (1) The AO has estimated a sum of Rs.l crore for providing and installing central air conditioning system in the house. The assessee has strongly contended that there is no central air conditioning system. No doubt there are two Daikin air conditioner mentioned as installed in the dining room [a split AC of 1.14 ton] and gym in the impugned order. However there is no inventory of ACs for the other rooms. Surely the other rooms are not ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 25 of 57 shorn of any air conditioners. There is clearly a lot of ducting as evident from photographs, reference is drawn to si 58 of Annexure -A, Part 1 view of sofa set centre table alongwith paintings'; SI 203 of Part II 'view of wooden side-board'; si 179 Part II View of cupboards'; si 134 of Part II' view of drawing table ( lobby)'. So some mechanism has been put in place to ensure that the rooms are facilitated with some air conditioning system.
Assessee has vehemently stated that the house is not centrally air- conditioned, but at the same time has chosen not be furnish the power/electricity load sanctioned nor the capacity of the generator sets as asked in the show-cause issued by the AO. AC plant for centrally air conditioning would cost a minimum of Rs. 25 lakhs.
So in the absence of an AC plant in the video, but the existence of a lot of ductings, I proceed in this fashion. Normally a 1.5 Ton AC can cover an area of 150 sq.ft. and costs Rs.35,000/- approx. ( having three star certification] . There is no dispute to the effect that the house has open area, swimming pool, kitchen, bathrooms, etc where no air conditioning will be required. Out of 21,500 sq ft, the areas used for air conditioning can be taken at 9000 sq ft , remaining will be for area defined before. Taking into consideration that 60 air conditioners may be required to cover 9,000 sq ft and applying the rate of Rs.35,000 per 1.5 Ton AC the cost of air conditioning will be Rs.21 Lac only. The additional cost on account of ducting at several places cannot be ignored. Ducting increases cost of ceiling and use of more aluminium which will definitely increase the costs. Accordingly AO is directed to add Rs. 10 lakhs, thereby taking the total cost to Rs.31,00,000/- and not Rs.l crore as estimated.
(2) The AO has estimated the cost of the generator set at Rs.50 Lac. No basis has been given in the assessment order by the AO. The assessee has contended that there are only two generator sets of 65.5 KVA each. Out of these two generators, one is stated to be about 8-10 years old which was shifted from the old house. As regards the other generator set it has been contended that it costs only Rs.2 Lac and the cost of which has been included in the cost estimate submitted by the assessee. This contention is not acceptable. A generator set of 125 KVA costs around Rs.8 Lac. which generates power equivalent to 98 KWA. Commercially, 80% of maximum capacity (i.e 78.4 KWA) is considered normal output. This 78.4 KVA which is sufficient to run more than 50 air conditioners which as discussed earlier is sufficient to cover whole covered area of the house. However, it is also true that all A/cs will not be used at all times simultaneously. Apart from Air conditioning, use of light, fans, tvs, etc will also be there. Accordingly keeping in view the magnitude of the house and the external portion of the premises 1 am of the view that use of 125KVA is sufficient Such DC set costs Rs. 8 Lac approx. inclusive of its earthing work [copper wiring] and installation. This also takes into consideration the explanation of the assessee that one of the generator sets was old and shifted from the old house, though the same is without any evidence. (3) The AO has further estimated a sum of Rs.25 Lac on account of the gymnasium hall including the interior and equipment. Gymnasium hall is part of the house built up area. The AO lias made a general estimate of Rs.25 Lac without giving any breakup. On going through the submission of the asscsscc, the Gym equipment includes following items:-
i) Bench press 1 No. Matrix
ii) Leg extension 1 No. Matrix
iii) Jaggar 1 No. Matrix
iv) Tread mill 1 No. Matrix
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v) Leg pull 1 No. Matrix
vi) Chest press 1 No, Matrix
In the absence of any basis stated in the assessment order, the cost of these items is estimated at Rs. 12 Lac i,e. average Rs.2 Lac each item. The site of the brand "matrix1 was seen. Since the cost of the finishing has been included as add-ons items to the cost of construction there is no justification for making a separate addition on this account. The AO is directed to take Rs.12 Lac on this account instead of Rs.25 Lac. (4) The AO has estimated a sum of Rs.25 Lac for swimming pool. Just for clarity, as against this the DVO in his report has estimated cost of Rs.4,80,000/-. Assessee has objected to estimation of Rs 25 lac by the AO. The assessee is relying upon DVO report. Taking into consideration the overall facts 1 consider that the cost estimated by the AO is on the higher side. I estimate the same at Rs.8.5 Lac due to:
(a) The cost of basic construction of swimming pool was already considered during structure construction cost as explained already.
However additional cost for swimming pool area must be incurred to protect the swimming pool area from damages including tiles installed immediately outside the swimming pool to avoid slippage and
(b) Cost of pumps and additional machinery used for pump in and out water from the swimming pool
(c) View of swimming pool with Jaccuzi as in sI. 15, part l of Ann-A of photographs, from which is quite evident that the pool and the ambience is of quality.
AO is directed to take cost of swimming pool at Rs.8.5 Lac instead of Rs.25 Lac.
(5") The AO has further estimated a sum of Rs. l Crore on account of the furniture. In this regard the AO has stated that there about 30 sofa sets, 40 side tables, 30 central tables, 10 double beds, 20 cupboards and there are also lamp shades and chandeliers. The AO, however, has not given any bifurcation and the basis for estimating the value at Rs. l Crore. The assesses on the other hand has contended that inventory of the valuable items were made at the time of the search and since this was old furniture shifted from the old house, where the assessee was earlier residing, there is no justification for making any further addition and further in any case the assessee has shown the total amount of the expenditure in the construction of the house it will include expenditure incurred on these items as well. After going through the facts 1 am of the view instead of making a lump-sum estimate on there a need to estimate the cost of each of the items which comes as under:-
SI. No, Item Price each (Rs,) Total cost (Rs.)
1. 30 sofa sets 25,000 7,50,000
2. 40 side tables 10,000 4,00,000
3, 30 central tables 15,000 4,50,000
4. 10 double beds 50,000 5,00,000
5. 20 Cup Boards 75,000 15,00,000
6. Lamp Shades / 5,00,000
Chandeliers
7. Miscellaneous 10,00,000
Total 51,00,000
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AO is directed to take cost accordingly at Rs. 51,00,000/- instead of Rs. l Crore on account of the furniture.
(6) The AO has further estimated a sum of Rs.10 Lac on account of the electronic gadgets such as TVs, DVD Players, Music System, Cameras, etc. The children would definitely have Iaptops/I-pads and other gadgets. The assessee has contended that no basis whatsoever has been given about the rate, value and the brand and the AO has ignored the list of the valuable inventory prepared at the time of the search. After considering the totality of the facts I find that the estimation made by the AO of Rs.10 Lac is reasonable and the same is upheld.
[7] The AO has further made an estimation of Rs.2 Crore on account of the paintings and murals, fancy glasses and crystals, etc. In this regard the assessee has submitted that the estimate made by the AO is absolutely arbitrary, that a search has been carried out on the premises of the assessee where list of each and every valuables found during the course of the search was prepared and that these paintings were not originals but just photographs and pictures which have been framed very well and that it cannot be compared and valued as original paintings. 1 have gone through the facts of the case and also the video film. No doubt these paintings look attractive but at the same time the same cannot be considered to be originals without bringing evidence to this effect. It is also a fact that a list of valuables was prepared which has also been quoted by the AO in the impugned order, looking at the video and photographs, it is apparent that all "valuables" have not been inventorised. There is no mention of the numerous displays of the declaration pieces comprising of amongst others the ornamental bone- china / cut crystal vases in particular. The AO has also not given any basis for estimating the same at Rs.2 Crores, even in the remand report also. Considering the totality of the facts, I am of the view that an estimate of Rs.30 Lacs on this account will be sufficient. The AO is directed to take Rs.30 Lacs instead of Rs.2 Crore.
(8) The AO has further made an estimate of Rs.35 Lac on account of the landscaping of garden/ open spaces. However the AO has not given any basis for arriving at a figure of Rs.35 Lac. The assessee has objected to such estimation and has contended that this work was done in- house and services of any professional like Ms Geeta Singh has not been utilized. On going through the impugned order I do notice that the AO made reference to one very famous artist, Mrs. Geeta Singh who charges an amount of Rs.25 to 30 Lacs but the AO has not brought any material that this work was done by Mrs. Geeta Singh. Generally, major cost of landscaping consists of sand, mud plants and grass used. Considering the overall facts of the case, I am of the view that the cost of landscaping can be estimated at Rs.2 Lac per kanal and for the total 4.5 kanals, the same will be Rs.9 Lac. However considering the nature of the landscaping done with such precision and aesthetic display, I am compelled to add another Rs, 10 lacs; thereby taking the total at Rs. 19 lacs as against Rs.35 Lac estimated by the AO. 1 order it accordingly. [9] The AO has further estimated the cost of billiard room with billiard sticks at Rs.15 Lac. No basis has been given in the impugned order. The assessee has contended that it is a pool table measuring 9 ft. x 4.5 ft. A tournament classic table with Italian slates cost Rs, 1.65 lacs approx. along with accessories such as balls, tips master, cues sticks, triangle, etc I am of the view that the entire cost of can be considered at Rs.3 Lac as against Rs.25 Lac estimated by the AO. AO is directed to take Rs.3 Lac instead of Rs.25 Lac.
(10) The AO has further estimated a sum of Rs.25 Lac for the Bio Matrix Lock System. The AO has not given any basis for the same. The assessee in the written submission has also raised this issue. Bio Matrix ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 28 of 57 Lock system is a normal security system being fitted in almost all flats and in offices too these days and costs between Rs.2,000/- to Rs.10,000/- per lock system, Considering the totality of the facts 1 estimate the cost of customized Bio Matrix Lock system at Rs3 Lac as against Rs.25 Lac considered by the AO as the system are not used in kitchens, common area and toilets. The main doors, the entry gate points and perhaps the bedrooms may be places where bio-matrix lock system could have been installed. AO is therefore directed to take Rs.3 Lac instead of Rs.25 Lac. (11) The AO has further estimated the cost of lift at Rs.10 Lac. No basis has been given in the impugned order nor in the remand report for applying a rate of Rs.10 Lac on account of the lift. A lift carrying 4 persons costs around Rs. 6 to 8 Lac including installation cost and making of machinery room in basement as well as on top floor. 1 accordingly estimate the cost of the lift on this account at Rs.8 Lac. AO is directed to take Rs.8 Lac instead of Rs.10 Lac.
(12) The AO has further estimated a sum of Rs.25 Lac on account of discotheque along with lights and floors, etc, The AO has not given any basis for the same. The assessee ha.-: objected to this estimate and has stated that these are of hardly few thousand rupees. The cost of construction, finishing and wood work has already been considered in the overall finishing cost in aforesaid paras. The cost of the extra items like special lights, special floor, etc. may cost Rs.5 Lac and accordingly I estimate the same at Rs.5 Lac as against Rs.25 Lac estimated by the AO. AO is directed to take Rs.5 Lac instead of Rs.25 Lac.
6.6. The issues in view of the above it was submitted had been summed up by the CIT(A) in para 5.15 which conclusion has been challenged by both the parties. The relevant fact is reproduced hereunder:
5.15 To sum up, the cost of construction is taken at Rs. 3,000/- per sq, ft [ref. para 5.13] and the extra items as per para 5.14 (1) to (12) be added to it. Thereafter, the allocation year-wise is directed to be made as done in the impugned order. Accordingly, Ground nos. 12 to 21 are disposed off accordingly and AO is directed to recompute the cost of investment as per the direction given herein above.
7. Aggrieved by this finding both the Assessee and the Revenue are in appeal before the ITA T.
8. The Ld. AR inviting attention to the grounds raised by the assessee in the appeals submitted that the relief granted by the CIT-A is under challenge both by the assessee and the Revenue. Carrying us through the findings and the observations made in the assessment order it was submitted that without giving up the issue that there was no requirement for the assessee to maintain record of the cost of construction of his residential house as no expenses were being claimed in regard thereto which issue assessee need not belabor in view of the accepted legal position. It was his submission that the additions have been made and sustained entirely on the basis of presumptions ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 29 of 57 conjectures and surmises . It was submitted that no expenditure of the said construction has been claimed. The expenditure it was submitted was not a business expenditure of the assessee thus the insistence of the Revenue to look into the same with a magnifying glass is not necessary. The arguments have been considered and also accepted in part by the CIT-A however despite that on the basis of hyperbole and suspicions created by the video recording and flowery language of the AO the additions have been partly sustained. Carrying us through the arguments advanced on behalf of the assessee before the assessing officer; the interactions with the DVO and the AO; the findings challenged in appeal before the CIT(A) the arguments advanced on behalf of the assessee to the remand report and reply to the remand report of the assessing officer and arguments advanced in the rejoinder of the assessee alongwith the copies of the seized documents scanned on record and available in the paper book filed it was submitted have all been addressed by the assessee and in the present case even the DVO's report sought by the Department supports the case of the assessee. In the circumstances it was his submission that addition could not have been made or sustained. The conclusion of the AO approved by the CIT(A) that the DVO's report was not reliable it was submitted only because it supports the case of the assessee was assailed. The AO discarded the Report it was submitted only on this ground and proceeded to estimate the additions to be made wherein admittedly he was not an expert. In the facts the present case it was submitted the addition has been made by the AO and partly sustained by the CIT(A) ignoring the factual and legal aspects.
8.1 It was submitted that the fundamental issue which the tax authorities need to address is that once the DVO's report has been sought by the assessing officer on what basis can it be discarded by the assessing officer and he be allowed to estimate the additions to be made. It was his submission that had the assessing officer been capable of estimating the cost of construction then there would have been no occasion to refer the matter to the valuation cell. Having referred the matter it was submitted the AO was bound to accept it. In case he wanted to vary then the AO should have brought something on record to show that the Report of the valuation officer of the Department itself is not reliable. Had that been the case after setting out the reasons he ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 30 of 57 should have sought the help of another expert instead of resorting to estimate himself wherein he was most definitely not an expert. The conclusion of the CIT-A in the circumstances that the valuation report of the valuation expert was considered by the Assessing Officer to be unreliable and thus and had to be varied was also assailed. Attention was invited to paragraph 5.9.1 5.9.2 and para 5.9.3 of the CIT-A and said that the CIT(A) has also proceeded on surmises. Referring to the order of the CIT(A) specifically the conclusion that the report of the valuation officer was only advisory and the DVO has not considered all the features of the house accordingly it was unreliable was vehemently assailed as being biased and contrary to the settled legal position.
8.2 It was submitted that the departmental attitude is surprising and shocking because if the report of the valuation officer is unreliable then the assessing officer or for that matter the CIT-A should have referred the same to some valuation expert to rebut their own valuation report. The decision to proceed to estimate the additions by a non - expert was contrary to all settled legal principles.
8.3 The contradictions and confusions in the CIT-A's order it was submitted are further evident from para 5.11 of the impugned order where it is accepted that the claim of demolition of the old construction was supported by the statements recorded of Mr Harpal Singh on 08/12/2011 in continuation to statement dated 29/11/2011 and 04/09/2011 and the CIT(A) still proceeds to deny appropriate relief. The letter of the DVO relied upon by the CIT(A) and still to misread the same ignoring that the DVO clearly in the letter states that AO may give necessary relief on this ground was assailed as a selective reading. The said letter it was argued is noted both by the AO as well as the CIT(A) selectively.
8.4 Inviting attention to paragraph 5.8 of the impugned order it was submitted that the CIT-A knows and accepts the fact that for the said expenditure the assessee was not required to maintain any books of accounts as it was not an expenditure claimed by the assessee however he still proceeds to justify the action of the assessing officer.
8.5 Addressing the scanned documents reproduced in the assessment order pertaining to the furnishing and flooring etc it was submitted that ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 31 of 57 the Department has lost sight of the fact that it is the issue of construction which was being considered the construction it was submitted admittedly stood majorly concluded in the first few years. The documents relied upon and referred to in the assessment order it was submitted itself demonstrates this fact and total at best to Rs. 56,81,0004/- that also have been included in the cost of construction. Similarly the furnishing expenses of the assessee's wife Smt. Neena Talwar pertaining to curtains etc. itself are of the last year and total of Rs. 6,14,529/- and could not have been the basis for general overall addition in all the years.
8.6 Similarly the expenditure on account of AC etc it was submitted evidently could have been incurred in the later years and that too limited to the number of AC's mentioned in the Inventory prepared at the time of the search.
8.7 In the facts of the present case it was his submission that when the hyperbole and flowery language used while considering the facts as considered in the assessment order and the CIT(A)'s order are removed it would show that what is appearing to be very surprising and shocking to the assessing officer are infact very routine and normal features in house. For instance the tax authorities have deliberated at length on the paintings and murals; glass ware etc. and presumed everything to be original and new relying upon photographs taken. Attention was invited to the Inventory taken in the course of the search which has been reproduced in the assessment order itself and confronted to the assessee by way of a show cause notice. In these circumstances it was his submission that in the Inventory taken there is no reference to any original paintings and murals; glass ware or any valuable items. The suspicious and conjectures it was submitted have prevailed in the minds of the AO as well as the CIT(A).
8.8 Similarly the suspicion on account of landscaping etc stated to have been done by a professional like Ms Gita Singh supposedly some expensive consultant it was submitted is not supported by any fact or evidence on record even after carrying out a search and has been made purely on suspicions.
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 32 of 57 8.9 The assessing officer in the facts of the present case it was submitted has also waxed eloquent on biometrics Lock system. It was his submission that the said machinery is available for a few thousand rupees easily and readily available in cheap mobiles; at every Government or private office; factory etc. to mark presence, attendance or unlock data etc. The presumption that it is high end technology had led the assessing officer to make an addition of Rs. 25 lakh based on no fact or evidence which the CIT-A appeals has been kind enough to reduce to 3 Lacs but even that amount it was submitted is preposterously high considering the cheaply available technology.
8.10 Similarly for cost of lift; discotheque; billiard room made by the assessing officer at Rs. 10 lakh 25 lakh and 25 lakh at random has kindly been reduced by the CIT-A at 8 lakh, 5 lakh, and 3 lakh but even the said addition it was submitted is on a higher side and has been fully shown by the assessee in its working. In fact there was no billiard table it was a cheap pool table. Inviting attention to the DVO's report it was conceded that the cost of lift and AC ducting etc. has not been included.
8.11 The addition made on account of furniture to the extent of one crore by the assessing officer though on facts has been reduced to 51 lakh by the CIT-A it was submitted was again contrary to facts and law. The Department it was submitted should be confined to the Inventory of furniture and fixtures made by the Search Team at the time of the search which has been included in the assessment order itself. Thus the occasion to travel beyond that it was submitted is contrary to all settled legal principles. Attention was invited to the DVO's Report placed at Paper Book page No. 233 to 243 alongwith Annexures to. It was his submission that once the Department has carried out the ultimate weapon which it has that is a search and intruded into the privacy of the assessee by making a video recording Inventorising the Furniture's fixtures and valuable etc. taken multiple photographs appended the seized documents in the assessment order itself in these circumstances it was submitted the occasion then to travel beyond the seized material and the valuation report available on record which has been sought by the revenue itself should not be permitted. It was his submission that search is the biggest weapon which the Department has. Apart from this Department can issue summons under section 131; seek information ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 33 of 57 under section 133 (6) carry out survey and ultimately carry out a search and seizure operations which has been done. In these circumstances the Department ought not to be allowed to deviate from the Inventory prepared and quoted in the assessment order itself and the valuation expert's report available on record simply because it is in conformity with the claim of the assessee.
9. The Ld. CIT-DR in reply to the arguments advanced in assessee's appeal and in support of the grounds raised in the departmental appeal invited attention to the assessment order and submitted that the construction has been carried out by the assessee with the help of Shri. Harpal Singh of M/s SP construction. The DVO's report alongwith forwarding letter dt. 01/12/2011 at page 233 of the assessee's Paper Book it was submitted for the reasons set out in the orders was found to be not reliable. Carry us through the same it was submitted that the facts as set out in the order by the assessing officer necessitated that the cost of construction had to be estimated by the AO as the assessee had not maintained record and the DVO had only verified the claim of assessee's fund flow statement over the years for the construction of the house. The DVO's Report was accordingly unreliable. The DVO's report it was reiterated was made in the light of the fund flow statement of the assessee placed before the assessing officer who made it available to the DVO as a result of this the DVO proceeded to consider the claim of the assessee in regard to the fund flow made available and thus on account of this fact an error had occurred in the DVO's report. The assessee it was submitted had been confronted with this fact the reply of the assessee has also been considered and the reasons are set out in para 11 of the assessment order which succinctly and completely address the issues. It was submitted that the Revenue is heavily relying upon it.
9.1 It was also his submission that no doubt an Inventory has been prepared by the Search Team however the fact that these were paintings and murals which have been ignored in the inventory as would be evident from the photographs of the said premises included as part of the assessment order itself on account of this fact that the CIT(A) was not justified to grant relief in an adhoc manner. In the facts of the scanned documents seized in the search which have been included in the assessment order itself it was his submission that the assessing officer ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 34 of 57 was justified to make the additions. The estimate of the CIT-A in the facts of the present case it was submitted is assailed by the Revenue. It was submitted that no basis for ad hoc relief to the assessee which is challenged by the Revenue has been given.
9.2 Referring to the order it was submitted that fundamentally and principally the CIT(A) has upheld the reasoning and the conclusion of the AO on which heavy reliance was being placed by the Revenue namely that the assessee was required to justify the expenditure even though it was not a business expenditure being claimed and the fact that it's explanation was not acceptable has also been upheld; the fact that the DVO's report was not reliable are issues which have been held in favour of the assessing officer by the CIT(A) himself. In these circumstances the CIT-A it was submitted was not justified to grant relief to the assessee which is under challenge in the present proceedings.
10. The Ld. AR in reply submitted that the ratio of the cost of construction in the respective years has been maintained by the DVO as well as the assessing officer 21% in 2004-05 Assessment Year, 28% in 2005-06 Assessment Year, 27% in 2006-07 Assessment Year, 22% in 2007-08 Assessment Year and 2% in 2008-09 Assessment Year. Thus it thereby suggests that the major expenditure was incurred in the initial years as compared to the subsequent years. The additions it was submitted have been made purely on the basis of suspicions and to justify the search as there is nothing on record on the basis of which the additions have been resorted to despite part relief granted by the CIT-(A).
11. It was a common stand of the parties that the submissions advanced in 2005-06 AY would address the remaining appeals also as the basis of the addition in the respective years remains the same on account of which fact a common order has been passed by the CIT(A). Accordingly the submissions advanced in 2005-06 it was summed up by the parties except Ground No. 13 in 2007-08 AY agitated by the assessee which would be separately argued the remaining issues in the appeals would remain the same.
12. We have heard the submission of the parties and perused the material available on record. On a consideration of the rival stand of the parties before the Bench and considering the grounds raised by the ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 35 of 57 parties in their respective appeals we are of the view that for the sake of clarity it would be appropriate to first briefly re-capitulate the admitted facts on record. These undisputed facts on record are that the assessee's premises were subjected to search on 24/07/09 alongwith Talwar group of cases. It is an admitted fact that during this search a video recording of the specific house No. 346, sector 9 D, Chandigarh was made. In the present group of appeals the cost of construction in the respective years of this specific house is a subject matter of consideration. The said premises were also photographed and some of the photographs form part of the assessment order. It is also an admitted fact that during the search an Inventory of the items found on the premises on the date of the search was also made by the tax authorities which also forms part of the assessment order. The said Inventory was also a subject matter of issuance of show cause notice to the assessee. It is also an admitted fact that the assessee's claim of cost of construction shown spread over in 5 years totaling Rs. 2,23,92,375/- in the following manners was considered to be very low by the assessing officer:
F. Y. Amount of Investment
2004-05 Rs. 47,80,000/-
2005-06 Rs. 63,20,500/-
2006-07 Rs. 60,32,750/-
2007-08 Rs. 49,43,450/-
2008-09 Rs. 3,15,675/-
TOTAL Rs. 2,23,92,375/-
12.1 It is a matter of record that the assessing officer in the course of the assessment proceedings made a reference under section 142 A to the Valuation cell for working out the cost of construction of the said house. It is also an admitted fact that the DVO's report was made available to the assessing officer wherein the cost of construction spread over the 5 years was worked out at Rs. 2,41,42, 000/- in the following manners. Same is also reproduced again for ready reference:
5.2.2 The estimation by the DVO at Rs. 2,41,42,000/- spread over five years is as under:-
A.Y. Amount of Investment (Rs.)
2005-06 52,27,174/-
2006-07 69,11,790/-
2007-08 65,97,121/-
2008-09 54,05,915/-
ITA 722,723,725,726/CHD/2013 &
ITA 586 to 590/CHD/2013
Page 36 of 57
2009-10 --
Total 2,41,42,000/-
12.2 The assessee has consistently claimed that the ratio of expenditure over the 5 assessment years as claimed by the assessee has been accepted by the DVO as well as the assessing officer however the extent of the expenditure in the respective years is disputed. The said submission we note from the percentage of expenditure incurred as calculated by the AO is more or less correct and we note that consequently it has not been rebutted by the Department in the present proceedings. The issues which thus remain for consideration is the extent of expenditure incurred by the assessee for construction of the house in the respective years. It is also a matter of record that certain documents was siezed from Mr. Hitesh Bedi stated to be relatable to the construction of this house which according to the Revenue had not been accounted for as opposed to assessee's claim that they stood included in assessee's cost of construction. It is also a matter of record that certain documents in the name of the assessee's wife Smt. Nina Talwar was also found from the premises of the assessee and in regard to them also the stand of the Revenue has been that they were not included in the cost of construction shown and the stand of the assessee has been that these are included.
12.3 It is also an admitted fact that the DVO as per his report stated that the cost of construction did not include the cost of furniture, fixtures, Linen, air conditioners, A/C ducting, water pumps; lift;
generators set etc. The assessee as per its claim states that these items have been included to the extent necessary in it its cost of construction as some of these have been carried from the old premises. It is a matter of record that the DVO's report was not accepted by the assessing officer on the reasoning that the valuation report has been prepared from the expenditure flow statement given by the assessee. The said reasoning has been disputed by the assessee on the grounds that the reference had been made for estimating the cost of construction as otherwise it would have no relevance.
12.4 Addressing the forwarding letter of DVO it has been the submissions of the assessee that it clearly mentioned that the Report ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 37 of 57 was for cost of construction and if it was considered to be not accurate then the DVO had suggested that it could be referred back. The relevant extract form the forwarding letter of the DVO heavily relied upon by the assessee is reproduced hereunder:
"The valuation report has been prepared form the expenditure flow statement given by the Assessee, which is required to be verified at your end. In case, any major variation is found in the expenditure flow statement as given in Annexure-IV of the report in any particular year in your office or intimated subsequently by the Assessee, this valuation worked out by this office is liable to change. Hence the report should be referred back to this office for recalculating the valuation amount, if required.
(Emphasis Provided) 12.5 It is also a matter of record that the assessing officer has not accepted the assessee's claim that there was an old structure which was demolished and the salvage was used. The CIT-A appeals it is noticed has taken note of this argument made before her as well as before the assessing officer also as the statement of Mr Harpal Singh of M/s SP construction has been reproduced in the order which shows that in the statement recorded over the months he has accepted the fact that construction was carried out on the site where there was an old construction which was stated to be partly demolished as boundary walls and gate etc. were retained and repaired the salvage was used in the construction. The statement which was also supported by the affidavit of the assessee already on record. However the CIT-A does not accept the assessee's version though the explanation is taken note of on the grounds that the relevant claim could not be supported by any evidence. The statements of Mr. Harpal Singh have been considered by the assessing officer as evasive and the CIT-A also does not give much credence to those statements. It is noticed that apart from this observation in the orders these statements available on record which have also been extracted in the earlier part of this order have not been rebutted by the Revenue by any concrete evidence.
12.6 On a perusal of the same we note that the statements available in the assessment order supports the consistent stand of the assessee. The assessee has consistently stated that details have not been retained as it was not a business expenditure being claimed. Mr. Harpal Singh states that he was handling the imprest account of the assessee and all payments were made through him and the Bills etc. have been handed ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 38 of 57 back to the assessee once the accounts were finally settled Thus we are unable to understand how can the said statement of facts be called to be evasive. At best it can be said that the person does not know It is seen that Mr. Bedi as per record clearly accepts that some of the documents pertain to the firm as would be evident from the following statement extracted in the assessment order itself:
In regard to the queries at S. No. 6 these payment relates to purchase of two fridges for the business purposes of the firm M/s Talwar son Jewellers. The bill has been raised in my name because generally I carry out out door duties of the firm. The cash payment amounting to Rs. 55,0007- (Fifty five thousand) may b got verified from the books of accounts of the firm.
12.7 Apart from that the documents seized from Mr. Bedi noted in the assessment order as per narrations of the AO in some have been described as "rough works," "rough work in pencil" etc. are documents which it is stated could be explained by the assessee as Mr. Bedi is entrusted only with "out door duties". The documents have been siezed the assessee has been required to explain. The explanation that these are included in the cost of construction have not been accepted. However the lack of knowledge of Mr. Bedi cannot be termed to be evasive as at best he is ignorant.
12.8 The issues which falls for consideration in the circumstances is can the lack of knowledge by the persons handling imprest account and carrying out outdoor duties for the firm be made the basis of doubting the assessee's explanation. We note that it is also a matter of record that the DVO whose report is available at page 233 to 243 of the paper book has prepared the same after carrying out Inspections on 15/10/2011 and 19/10/2011 when measurements of the specific house property etc. have been taken. He has categorized the quality of floor types and calculated the actual floor area of different types of floors as tiled, wooden tiles; marble etc. ceiling heights on different floors are measured and given which is a matter of record as would be evident from papers 237-238 which is Annexure II of the DVO's Report and Annexure III also of the DVO Report pages 241 to 242 further shows that the Report is based on actual site visits and contemporary data. Discussion in the assessment order itself addresses the fact that this specific house was spread over an area of 3067 square yard (6 kanals). It is also an admitted fact that the house is a three and half story including basement ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 39 of 57 having a covered area of 21,500 square feet which fact though corroborated by the DVO's Report is not in dispute. The fact that it had a total number of 26 rooms as noted by the DVO and 9 bedrooms as argued by the assessee is a matter of semantics as there are observation that each bed room had a bathroom attached and there were 2 kitchen living rooms etc. The fact that total covered area was 21,500 sq. feet is not in dispute. The fact that it has been measured by the DVO is evident from record wherein the category of area has been described and rates applied to the quality of flooring, ceiling etc. by the DVO is a matter of record. It is also an admitted fact that the assessee is not maintaining any record of this construction as construction of houses etc. was not the business of the assessee. There is also no dispute that there was no requirement for the assessee under the law to maintain accounts of the construction. The assessee has given his version of expenditure in the respective years which has been explained to the DVO also and on cross verification his version of facts has not been upset by the statements of Mr Harpal Singh and Mr Hitesh Bedi relied upon by the Revenue. The DVO's Report sought by the assessee is available on record. It is also a matter of record that the assessing officer was not an expert for estimating the cost of construction for which purposes he had made a reference to the DVO. The conclusion that the AO was not an expert at valuation of properties (if required to be demonstrated) is evident from this fact itself as had he been personally qualified to estimate the cost of construction there would have been no need for him to refer the issue for Valuation to the DVO for estimating the cost of construction. Even otherwise we note no such claim has been made by the Revenue also. It is also a matter of record that the valuation officer's report was not upset either by the assessing officer or by the CIT-A by a making a reference to another valuation expert or reverting back to the same DVO. It is also a matter of record that the assessing officer has not carried out any effort to work out the market value of the cost of construction as there is no such discussion in the orders. It is seen that in para 5.13 of the impugned order the CIT(A) makes a reference to Ghar Expert website referred to in the Tribune March 2011 as a reference used however reliance thereon is misplaced as the period referred to therein is 2011 whereas in the facts of the present case the cost of construction in F.Y. 2004-05 and F.Y. 2008-09 was being considered hence even if the said ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 40 of 57 reference was used it is inappropriate and incorrect. The assessee has referred to facts as available with him at the relevant point of time and has not made any reference to any material so as to suggest what was the market rate of cost of construction of the type category of house constructed at the relevant point of time. The AO in the absence of reliable details made a reference to the DVO. Thus the issue for consideration for the AO was whether the claim put forth by the assessee that the construction in the specific period was as per the assessee's claim was correct or not which was to be addressed. For the said purpose the AO made a reference to the DVO. His Report is available. A perusal of the same shows that quality of construction has been categorized the actual areas of the different types of floor, ceiling etc. have been categorized and measured; the rates applicable to the different categories of flooring, surfaces etc. have been given. The correctness of these calculations either area wise, quality description wise or for that matter rate wise has not been upset either by the AO or the CIT(A) and neither by CIT DR by any evidence. The assessing officer in the facts of the present case has admittedly proceeded to propose and make the additions persuaded and possibly overwhelmed by the video recording/ photography etc dehorse the valuation officer's report without caring to either upset the measurements / qualities of flooring-tiled, glazed tiles, marble, wooden tiles etc. or ceiling quality or height or category of construction / flooring etc. There is no reference to any contemporary data or information as evidence in support of the conclusion that the rates applied by the DVO were incorrect. In the said background having duly noted on the basis of record available which we have referred to and considered if the conclusions / decision that the DVO's Report was not for only consider the expenditure of assessee but was for working out the estimate of cost of construction of the said premises still needs to be further supported we extract hereunder the relevant extracts from the directions issued by the assessing officer on 21/09/2011 to the DVO to carry out the exercise for a specific purpose spelled out in unequivocal terms under section 142A for "determining the investment made in the construction of the residential H.No. 346, Sector 9D Chandigarh". The relevant document is available at Paper Book page no. 141 and is reproduced hereunder :
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 41 of 57 12.9 A perusla of Annexure -I of the DVO's Reports also brings out the fact that the DVO in terms of the AO's directions has made a Report for "Estimating the Cost of Construction" as arleady set out in para 1.3 of the Report extraced hereinafter and para 3.2 also of Annexure I of the DVO's Report (copy available at Paper Book page 236) brings out the specific dates of the site visits and para 2.3 also of the said Annexure brings out the fact that the site plan and affidavit of the assessee were available. These extracts are reproduced hereunder:
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 42 of 57 12.10 The Anneuxre II to the DVO's Report extracted hereinafter further clearly brings out addressed the fact that the Report was prepared after actual measurement were taken on site inspections. For ready Reference the relevant extract of Annexure II of the DVO's Report is reproduced hereunder( copy available at assessee's Paper Book page 237 & 238):
Continued on page 43 ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 43 of 57 Continued on page 44 ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 44 of 57 12.11 It would not be out of place to also extract Annexure III of the DVO Report which shows that on the basis of site visits; the actual working; and reasons for classification are already set out by the DVO in his report.
Continued on page 45 ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 45 of 57 Continued on page 46 ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 46 of 57 12.12 Thus the conclusions of the AO and the CIT(A) consquently the CIT DR that the Report was for a limited purpose and the inferences that consequently it was not reliable is not borne out from the record. A perusal of the above unambiguously demonstrates that site inspections were made, acutal measurments were taken and classifications of the type of floor, well, ceiling, etc. were done. Rates applied, basis etc were all given. The ultimate cost of construction minus the items specifically menitoned in the covering letter was estimated at Rs. 2,41,42,000/-. The break up for the respective years as per copy available at paper book page 243 extracted is as under
whrein the assessee's estimate is also given:
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 47 of 57 12.13 Thus On a reading of the above it is seen that contrary to assessee's claim the said Report does not support the assessee's claim in regard to the cost of construction of the said premises. There is a differnce in each of the years. Since these all are estimates and not actual the fact that the two estimates roughly co-incide also cannot be outrightly ruled out.
12.14 In the said background we also deem it appropriate to address certain relevant facts which appear to have been ignored/alternately not given adequate credence to by the tax authorities First and foremost of which being the taxpayer has consistently stated that the furniture and fittings etc from the earlier residence of the assessee had also been included in the new premises. The new premises have been photographed and video recorded . The said argument has out rightly been discarded by the assessing officer without assigning any ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 48 of 57 reason whatsoever . We are of the view that the claim put forth by the taxpayer is not a far-fetched impossible stand even if the premises have been photographed and video recorded. No doubt the premises appear to be well furnished however this fact alone cannot lead to the conclusion that the explanation offered does not have any credence whatsoever. It Is not the case of the tax authorities that the taxpayer was living in impoverished circumstances prior to the construction of this house and only on account of winning a jackpot/a lottery etc the circumstances of the taxpayer have changed dramatically. The fact that such a submission was advanced is evident from the following discussion in the assessment order itself extracted from unnumbered page 13 of the assessment order:
e). The contention of the assessee that the entire old furniture and fixture was got renovated / repaired by using the scrap material left out of construction is not correct.
All the old furniture and fixtures were left at H. No. 149, Sector-8 Chandigarh where the assessee used to live before shifting to H. No. 346, Sector- 9, Chandigarh. ...
...
o. In its reply the assessee explained that new furniture and fixture are nothing but renovation of old furniture and fixture. This is not true. The old furniture and fixtures were left in the olf4 house and all the furniture and fixtures were brought new. The assessee has surrendered u/s 132{4) of the I.T. Act 1961 a sum of Rs 8,27.5731- for F.Y 2008-09 pertaining to the A.Y 2009-10 on account of investment in furniture and fixtures. This is highly inadequate. There are more than 30 sofa sets, 30 centre tables, 40 side tables, 40-50 side lamps, 20 cupboards all made of teak wood and hence undisclosed investment of more than One Crore is not ruled out.
12.15 We further note that the tax authorities have misdirected themselves possibly as a result of the impact of the overall finish of the residential premises which may have created a semblance of an overtly luxurious ambience as recorded in the photographs and the video recording. This conclusion is further fortified by the fact that the assessing officer has presumed to conclude and make exorbitant additions on the grounds that there were valuable original paintings/murals as well as fancy glass and crystal glassware etc over and above the Inventory prepared by the search team. There is nothing on record to suggest that Inventory list was incomplete. In fact the list has been the basis of issuance of show cause notice to the assessee by the AO himself. The fact that the said premises had valuables over and above the Inventory on record would tantamount to suggesting that there were lapses by the search team. We note that no such arguments making any such suggesting have been advanced by the Revenue. Thus merely ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 49 of 57 based on innuendoes the Inventory prepared cannot be discarded as a meaningless scrap of paper. In the circumstances the occasion to go beyond the Inventory list on record does not arise. The fact that apart from the Inventory no valuables were found is a matter of record. The taxpayer has consistently argued that the presumption of the AO that there were original paintings is incorrect and dehors facts as these were photographs framed and not original paintings/murals. In the absence of any discussion in the Inventory recorded at the time of the search we find that the assessing officer has proceeded on conjectures and surmises to consider them as valuable paintings etc. The said arbitrary exercise flies in the face of the standard protocols of Inventorising the valuables noticed on the date of the search. The very purpose of making an inventory of items at the time of the search would be defeated if it is to be ultimately ignored to the extent that over and above the Inventory existence of valuables can be lawfully added. Inventory of items at the time of the Search is to ensure that all the valuable items and furniture etc which were required to be explained by the assessee should be summed up at the first instance itself instead of leaving a grey area and giving cause to claims and counter claims as to what was found at the time of the search. The fact that the search team did not care to include them demonstrates the fact that either they were not valuable or that the items were brought over from the earlier residence and hence not required to be included in the Inventory. The correctness of the said decision of the Search Team is not under challenge in the present proceedings Be that as it may the fact that the search team does not record any original paintings or valuables found over and above what has been referred to in the Inventory is a matter of record and cannot be discarded by the assessing officer or the tax authorities or for that matter any judicial forum at its whims and fancies purely based on conjectures and surmises.
12.16 We further take note of the fact that the tax authorities have not given any credence to the claim of the existence of boundary wall and gate which were claimed to have been repaired and retained consequently the availability and the reuse of the salvage of the demolished existing premises which has been claimed as having been used in the new construction has not been accepted. The assessing ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 50 of 57 officer has refused to accept this claim and in the challenge posed before the CIT-A benefit of this claim has been denied to the assessee on the reasoning that the evidence in support thereof could not be filed. In the facts of the present case it needs to be kept in mind that as per law the assessee was not required to maintain the details of the expenditure incurred for the construction of the house as it was not a business expenditure of the assessee which was being claimed however this also does not mean that any and every claim of the taxpayer put forth has to be necessarily discarded under law on the grounds that the highest possible acceptable evidences are not available because the fact remains that the assessee was not required to retain the same. No doubt the onus is upon the taxpayer in the peculiar facts of the present case to explain the expenditure the assessee as per record has put forth its claim whatever maybe it's worth . This specific claim is supported by an affidavit of the assessee and even in the statements recorded of Mr Harpal Singh of M/s SP construction and Mr. Hitesh Bedi employee of assessee's firm which have been extracted in the assessment order and form part of the present order we note that this claim has been consistently supported by these two persons also. In these peculiar facts and circumstances the said claim cannot be outrightly discarded.
12.17 We further note that in the facts of the present case the assessing officer has been persuaded by the overwhelming impact of the photographs and the video recording and concluded that necessarily the cost would be much higher. As an illustration although the examples are manifold the following extract of his valuation is reproduced hereunder:
Finishing work including Italian marble flooring, wooden 21500 6000 12,90,00,000/- flooring, false ceiling with design & cove lights , P.O.P on walls & teak wood fancy jail for lights, texture paints, plastic paints, polish work, teak wooden joinery (chowkets, doors, windows etc). .Tiles/Granites in bathrooms and kitchen, Bathroom fitting and fixtures (Fancy), Fancy, Cupboards, Modular Kitchen, Fancy designs on walls and columns etc. 12.18 He has ignored the fact that the DVO as per his report has actually measured, Inspected the premises and carried out measurement even in regard to the specific category of flooring; wall ceiling etc in terms of the quality of work and estimated the expenditure as per his Report ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 51 of 57 available on record for ready reference. Before proceeding to attempt adhoc estimate it was incumbent on the AO to assail the correctness of the measurements, quality / category etc. by carrying out actual site visits with a technical Expert Annexure II and III extracted in the earlier part of the order demonstrates the fact that a detailed Report was made by DVO and the correctness of the Report remains unchallenged by any fact or evidence on record.
12.19 Since the conclusion of the assessing officer is not based on any actual inspection or physical inspection of the premises confronted to the assessee as opposed to the report of the DVO on record which is based on site visits wherein the actual quality of construction in regard to its categorization and description and area measurements etc which we note has not been rebutted by the assessing officer or by the CIT-A we are unable to persuade ourselves as to how the said report can be discarded based on conjectures and surmises of the assessing officer which have been upheld by the CIT-A in part. We note that the tax authorities have proceeded on the footing that the DVO's Report was for considering the cash flow statement of expenditure and hence not for estimating the cost of construction. However the said presumption is contrary to facts the specific direction of the AO as per his letter dated 21/09/2011 available in the Paper Book and extracted in the order demonstrates that presumption / inference was incorrect. The terms of reference are clear and categorical the AO directs by stating " During the course of search conducted at the residence of Sh. Anil Talwar under section 132 of the Income Tax Act, it was found that H.No. 346, Sect-9/D, Chandigarh belongs to Sh. Anil Talwar has an approximate area of 3857 Sq. Yar (6 Kanal). The house property is being used by the assessee as his residence. This case is being referred to your under section 142A of the I.T. Act 1961 for determining the investment made in construction of the residential H.No. 346, Sector 9/D, Chandigarh. The assessment in this case will get covered by limitation on 31.12.2011."
12.20 It is further evident that even in regard to the gardening and the landscaping etc the assessing officer makes a reference to the payments made to a Mrs G Singh considered to be an expensive consultant however in the facts of the present case we find that there is no reference to the said consultant either by the search team nor has any document been referred to by the AO the CIT(A) or by the CIT DR as a document found in the course of the search or any statement of any person in support of the said presumption. As opposed to that we note ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 52 of 57 from the record that in the questions put forth to Mr Harpal Singh dated 18/12/2011 for whatever its worth the stated stand on record is that the gardening was done under the supervision of the assessee itself. The relevant extract from the assessment order is reproduced hereunder:
Q. 12 Who did the job of landscaping and construction of boundary wails? Ans. The boundary wall was constructed by daily wage labour and paid for from the imprest account. The landscaping was done by the own arrangement of Mr. Anil Talwar. Apart from this, some work was done by Mr. Hitesh Bedi as I have stated in response to question No. 11 of my statement recorded on 29-11-2011.
12.21 Be that as it may we find that in the facts of the present case the department has been overwhelmingly persuaded by presumptions conjectures and surmises so as to enter into the arena of estimation without any justifiable reasons. The case law referred to in the orders and relied upon by the parties have been taken into consideration. On considering the ratio laid down consistently by the Courts we hold that the act of the Tax authorities to resort to ad-hocism ignoring the DVO's Report was not in accordance with the settled legal principles. We hasten to add that this conclusion is not to say that the assessee's version of facts is necessarily correct what it tantamounts to concluding is that in the facts as they stand the occasion to venture to estimate the cost of construction ignoring the DVO's Report without any justifiable reason whatsoever and travelling beyond the Inventory on record again without any justification is not permissible under law.
12.22 Accordingly on account of the reasons set out herein above and for the reasons to be elaborated hereinafter we are of the view that in the peculiar facts and circumstances of the case it is seen that as opposed to the assessee's claim that the cost of construction was to be distributed between F.Y. 2004 to 2009 we are of the view that in the absence of any rebuttal on the correctness of the valuation officer's report available on record we note that subject to the modifications which may result consequent to the additions on account of the items left out by the DVO;
the seized documents addressed in the assessment order and the Inventory prepared by the Search team which we propose to address hereinafter the estimated cost of construction as worked out by the DVO has to be upheld and the spread over as opposed to 5 years as claimed by the assessee is to be restricted to 4 years namely F.Y. 2004-05 to 2007-08 (i.e; A.Y. 2005-06 to 2008-09) ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 53 of 57 12.23 Addressing the seized documents found and confronted to Mr. Har Pal Singh of M/s SP Construction totaling Rs. 56,81,004/- we note that the assessee has claimed that it is included in its working however noting that some of the documents refer to sanitary, electrical electronics etc. in the absence of any justification for its deletion same is directed to be included in the cost of the said premises in F.Y 2008-09 (A.Y. 2009-10). While coming to the said conclusion we are guided by the fact that these appear to be expenses for furnishing of the constructed premises hence expenses relatable to the final stages.
12.24 Similarly considering the seized documents recovered from the residence of the assessee in the name of Smt. Nina Talwar wife of the assessee which admittedly refer to furnishing expenditure, we further note that on considering the dates mentioned in the said documents also they also need to be included as the cost of furnishing the premises and thus directed to be also added in F.Y. 2008-09 (i.e A.Y. 2009-10) 12.25 Addressing the specific items which have been excluded by the DVO namely AC's and Air conditioning ducting etc. water pumps, generator sets etc the addition needs to be separately made over and above the DVO's Report. Thus we note that whereas the assessing officer has estimated the air conditioning etc. at the total cost of Rs. 1 crore presuming the house to be centrally air conditioned. The CIT(A) has been reduced it to 31 lakh as no centralized AC unit is found by the search team. On considering the inventory available on record which makes a mention of only two split AC's 1 in the dining room and another in the personal gym we are of the view that estimate of addition on account of AC's and AC ducting costs etc. should be restricted to the extent of 15 lakh which would more than adequately addresse the arguments and the facts. We have arrived at the conclusion after considering the Inventory available on record which makes a mention of only two split AC's when considered along with the cost of AC ducting etc we deem it appropriate to direct that addition of Rs. 15 lakh would more than adequately address the issue. The addition is directed to be made in F.Y. 2008-09 (A.Y 2009-10) as again it would be an expense incurred in the final stages.
12.26. We also note that addition for the generator and lift has been made by the AO at Rs. 50 Lacs and 10 Lacs respectively. The CIT(A) has ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 54 of 57 sustained those to the extent of Rs. 8 lakh and Rs. 8 lakh respectively. On considering the reasoning of the CIT(A) and submissions advanced on behalf of the assessee the estimate of Rs. 8 Lakh for the gensets is upheld as the argument that one genset was old. However qua the estimate of lift in the absence of any justification for estimating cost of lift at Rs. 8 lakh considering the departmental submissoins it is deemed appropriate to direct that the cost of lift be estimated at Rs. 10 Lakh by the AO is retained.
12.26.1 Addressing the issue of allocation of these expenses we direct that whereas cost of acquisition of generator is to be included in F.Y. 2008-09 (A.Y. 2009-10) as it would be a near end stage expenditure. However the cost for lift is directed to be bifurcated in 2007-08 and 2008-09 F.Y i.e. (2008-09 and 2009-10 Assessment Years) as the said expense is a near final cost and not necessarily the cost incurred at the end stage itself.
12.27. Addressing the addition for gym equipment on account of which addition to the extent of Rs. 25 Lakh has been made by the assessing officer which has been reduced by the CIT-A to the extent of 12 lakh the Ld. AR in the course of the arguments has invited attention to the specific items mentioned in the Inventory prepared which would show that the equipment consists of Bench press space, Leg extension, jogger, treadmill, Lat pull, Chest press etc. Noting the arguments that these are routine gym equipment and cost of 12 Lacs is too high we hold that the estimated addition of Rs. 18 lakh would address the arguments advanced. We note that nothing has been brought to our notice by the Revenue to justify the estimate of the AO or the CIT-A whereas the Ld. AR has insisted that cost of the specific gym equipments would not exceed Rs. 4 to 5 Lacs and printed evidence in regard thereto was stated to be readily available in the public domain. Since the said evidence has also not been filed nor made available on record the above estimate it is considered would be fair and just considering the submissions and the facts on record. The same is directed to be included in the expenditure incurred in 2008-09 Financial Year (2009 - 10 A.Y.) for the reason that it is a cost which would be incurred at the final stages.
12.28 Addressing the cost incurred for Electronics items like TV, DVD music systems etc. for which separate addition of Rs. 12 lakh has been ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 55 of 57 made by the CIT-A appeals. Considering the submissions of the parties the same is reduced to Rs. 10 Lakh as the seized documents from Mr. Harpal Singh also make a reference to electronics. The said is directed to be included in the expenditure incurred in 2008 - 09 F.Y (2009-10 A.Y.) 12.29 It is seen that for landscaping the CIT-A has estimated the expenditure at Rs. 19 lakh as opposed to Rs. 35 Lakhs by the AO. No document relatable to Mrs. G. Singh is found on record on the contrary statements extracted in the AO show that it has been claimed that it was overseen by the assessee. However the fact that even for the said purposes plants, fertilisers, and labour costs of malli etc. would have been incurred accordingly considering the arguments submissions and facts on record it is deemed appropriate that these costs are estimated at a figure of Rs. 12 lakh and directed to be spread over in 2006 - 07 to 2008 - 09 F.Y. (AY2007-08 to 2009-10) in the ratio 20% in 2006 - 07 FY and 40% each in the following two financial years 12.30 The estimated costs for billiard room and discotheque at 3 lakh and 5 lakh arrived at by the CIT-A are not interfered with except for the direction that these are to be included in 2008 - 09 FY (2009 - 10AY) 12.31 Considering the arguments and facts qua the soft costs pertaining to the paintings and murals which have been estimated by the CIT(A) at Rs. 30 lakh wherein the assessee has claimed that these were not original paintings or murals and these were infact framed photographs. The argument has been supported on the reasoning that had these been high-end original paintings then they would necessarily have been inventorized in the course of the search as mere photographing these would not demonstrate the authenticity or originality of the paintings. Accordingly considering the submissions available on record which have been extracted in the earlier part of this order and the reasoning based on the facts available on record we deem it appropriate that in the peculiar facts and circumstances of the present case that it would be appropriate to estimate the costs of professionally framing and making fit for displaying the well displayed paintings which were not original painting but paintings of ordinary street artists/photographs/prints etc we estimate the cost at Rs. 15 Lacs which is directed to be included in 2008-09 FY (2009-10A.Y).
ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 56 of 57 12.32 We further note that for furniture etc. the CIT(A) has estimated the expenditure at Rs. 51 Lakh. On a perusal of Annexure II of the DVO's report it is seen that that cost of cupboard has been estimated at Rs. 7,74,591 and as noted earlier we find that no specific rebuttal qua the same has been given. Accordingly in the circumstances we deem it appropriate to direct that the same to be reduced from the furniture and fixture cost estimated by the CIT-A at 51 lakh rupees. Same is directed to be included in 2009-10 A.Y. as it again would be an end stage cost.
12.33 It is further seen that as opposed to the addition of Rs. 25 lakh for biometric entrance/security system the CIT-A has estimated the same at Rs. 3 lakh. Whereas nothing has been placed by the Revenue in support of the estimate of Rs. 25 lakh or Rs. 3 Lakh the Ld. AR on the other hand has vehemently argued that this is a readily and cheaply available technology on ordinary phones for permitting the usage of the handset and in offices for marking attendance etc. However considering the submissions facts and evidences on record and noting that the security system would necessarily come alongwith cameras recording system and a memory it is deemed appropriate to reduce the estimate to the extent of Rs. 2 Lakh. The same is directed to be included in FY 2008-09 (2009 - 10 AY) 12.34 It is noted that the AO has estimated the cost of swimming pool at Rs. 25 Lakhs. The CIT(A) has reduced the same to Rs. 8.5 Lakh. Taking note of the fact that the DVO has also factored in the construction cost and the CIT(A) has considered the maintenance and functioning cost aspects. The addition is retained with the direction that it be divided in equal expenditure for 2007-08 and 2008-09 F.Y.
13. Accordingly for the detailed reasons given herein above after considering the peculiar facts and circumstances of the present case in the respective years the submissions available on record and the findings arrived at in the impugned order in the light of the decisions cited by the assessee the Department and the tax authorities the grounds raised by the assessee and the revenue are partly allowed in the respective years
14. Addressing the sole issue which remains for adjudication in 2007 - 08 assessment year in ITA 588/Chd/2013 that is ground No. 13 pertaining to the education expenses of Sh. Dhruv Talwar on considering ITA 722,723,725,726/CHD/2013 & ITA 586 to 590/CHD/2013 Page 57 of 57 the material available on record we note that the issue has been discussed by the assessing officer in the last 3 unnumbered pages of his order wherein he notes that the son of the assessee had gone to USA for doing a course of Graduate in Diamonds and Jewellery business Management with the Gemological Institute of America, California for a period of one year. The assessee was required to explain the expenditure wherein the specific name of the course; the expenses incurred for fooding, lodging, travelling the tuition fees duration of stay etc were required to be given. In response to the same the assessee explained vide letter dated 19/10/2011 and which has been extracted in the assessment order which was further elaborated by another letter dated 21/11/2011 the relevant extract therefrom has also been reproduced in the order justified the expenses. Not convinced with the explanation offered addition of Rs. 10 lakh was made in the hands of the assessee. The said addition was challenged in appeal before the CIT-A by filing ground No. 20. However the Ld. CIT(A) while passing the order did not adjudicate upon the said ground. Considering the submissions of the parties and the material available on record in the peculiar facts and circumstances of the case it is deemed appropriate to set aside the issue back to the file of the CIT-A with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard
15. In the result the appeals of the revenue are partly allowed and the appeals of the assessee in 2005-06, 2006-07, 2008-09 and 2009-10 A.Y. are partly allowed and the ITA 588/Chd/2013 in 2007-08 Assessment year of the assessee is partly allowed for statistical purposes.
Order pronounced in the Open Court on 08/02/2018.
Sd/- Sd/-
(B.R.R. KUMAR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Poonam/AG
Copy to: 1.The Appellant,
2. The Respondent,
3.The CI T,
4.The CI T(A),
5. The DR