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2021 (9) TMI 1220 - AT - Income TaxProceedings u/s 153C - Addition of purchase price of land AND Cost of acquisition of land - Addition on the basis of the incriminating material found during the course of search or not? - Assessee argued that assessment year 2006 07 is a concluded assessment on the date of the search and no addition could have been made in the hands of the assessee in absence of any incriminating material found during the course of search - Assessment year 2006 07 - HELD THAT - In the order of the ld AO as well as the ld CIT(A), we do not find that any incriminating material found during the course of search which even remotely shown that assessee has made a payment beyond what is recorded in her books of account for purchase of land and shown in the purchase deed of the property. The total addition made by the ld AO based on the report of the DVO. Further, the addition on account of cost of construction was also made on the basis of estimation of DVO determining the cost of construction. Hon'ble Delhi High Court in CIT Vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT categorically stated that in concluded assessment no addition could have been made in the hands of the assessee in absence of any incriminating material found during the course of search. The ld CIT(A) also called for remand report where the ld AO records that no incriminating material was found during the course of search. We delete the addition made on account of purchase price of land as well as the addition on account of cost of construction for the reason that there is absence of any incriminating material found during the course of search supporting the above addition. - Decided in favour of assessee. Addition based on the DVO s report - Assessment Year 2010-11 - HELD THAT - Reference to learned DVO was made without first verifying the cost of construction shown by the assessee and without first making a specific observation that assessing officer does not have any confidence in the cost of construction submitted by the assessee. Unless the assessee is found to have incurred some additional expenditure which are not recorded in the books of accounts or for which source of withdrawal from the bank or the cash available with the assessee is found to be not reliable, then only the learned assessing officer would have been justified in referring the matter to the learned DVO. This is also the dictum of the decision relied upon by the learned authorised representative. No reason to sustain the addition made by the learned assessing officer of difference in house property cost of construction. Accordingly, the orders of the lower authorities are reversed and the appeal of the assessee is allowed.
Issues Involved:
1. Initiation of proceedings under Section 153C and 153A. 2. Reference to the Valuation Department for cost of land and construction. 3. Consideration of the Valuation Report from the Government Registered Valuer. 4. Reasonable opportunity and consideration of objections by the assessee. 5. Infirmities in the Valuation Officer's report. 6. Taxation of investment in residential property. Issue-wise Detailed Analysis: 1. Initiation of Proceedings under Section 153C and 153A: The assessee challenged the initiation of proceedings under sections 153C and 153A. The Tribunal noted that the search took place on 10.11.2010, and the assessment year 2006-07 was a concluded assessment. No incriminating material was found during the search to justify the addition made by the AO. The Tribunal relied on the Delhi High Court's decision in CIT Vs. Kabul Chawla, which stated that in the absence of incriminating material, no addition could be made in a concluded assessment. Consequently, the Tribunal deleted the additions for the assessment years 2006-07, 2007-08, 2008-09, and 2009-10. 2. Reference to the Valuation Department for Cost of Land and Construction: The AO referred the matter to the District Valuation Officer (DVO) to ascertain the market value of the property and the cost of construction. The Tribunal observed that the AO made this reference without finding any infirmity in the cost of construction and land acquisition cost disclosed by the assessee. The Tribunal emphasized that the reference to the DVO should be made only if there is evidence of unaccounted income or discrepancies in the declared cost. 3. Consideration of the Valuation Report from the Government Registered Valuer: The assessee contended that the AO did not consider the valuation report obtained from the Government Registered Valuer. The Tribunal noted that the DVO's report had several infirmities and discrepancies pointed out by the assessee, such as the overestimation of costs for certain items and the failure to account for cash withdrawals used for construction. The Tribunal found that after making necessary adjustments, the actual cost incurred by the assessee was higher than the DVO's estimated cost, indicating no basis for the addition. 4. Reasonable Opportunity and Consideration of Objections by the Assessee: The assessee argued that the AO did not provide a reasonable opportunity to present objections and evidence. The Tribunal found merit in this argument, noting that the AO did not properly consider the objections and evidence submitted by the assessee, including the bills and actual costs incurred for construction. The Tribunal emphasized the need for a fair opportunity to be given to the assessee to present their case. 5. Infirmities in the Valuation Officer's Report: The Tribunal identified several infirmities in the DVO's report, such as the overvaluation of certain construction costs and the inclusion of items not relevant to the actual construction. The Tribunal highlighted specific examples, including the overestimation of costs for the staircase, architect fees, and horticultural work. The Tribunal concluded that these infirmities rendered the DVO's report unreliable for making additions. 6. Taxation of Investment in Residential Property: The assessee contended that the investment in the residential property was also taxed in the hands of the assessee's spouse, leading to double taxation. The Tribunal noted that the spouse had already offered additional income for taxation under the Vivaad Se Vishwas scheme. The Tribunal found that the investment should not be taxed again in the hands of the assessee, and the addition made by the AO was unjustified. Separate Judgments: The Tribunal delivered a common order for all the assessment years involved, addressing the issues collectively. The Tribunal allowed the appeals for all the assessment years, deleting the additions made by the AO and confirming that no incriminating material was found during the search to justify the additions. Conclusion: The Tribunal allowed the appeals for the assessment years 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, and 2011-12, deleting the additions made by the AO based on the DVO's report and emphasizing the absence of incriminating material found during the search. The Tribunal highlighted the importance of providing a fair opportunity to the assessee and considering the objections and evidence submitted.
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