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TMI Blog2021 (11) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... iated u/s 153C of the Act for the AY 2013-14 to 2015-16 being non-abated and completed assessments (considering the date of search for proceedings u/s 153C of the Act as 15.11.2016) deserves to be quashed, since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153C of the Act for these years. Moreover, no addition was made by the Ld. Assessing Officer himself while passing the assessment order on the basis of the so-called incriminating material which formed the very basis for initiation of proceedings u/s 153C of the Act. We, therefore, set aside the findings of Ld. CIT(A) on this ground and conclude that proceedings initiated in the case of the assessee for AY 2013-14 to 2016-17 are without jurisdiction and consequently, assessments framed for these years are quashed and set aside. Accordingly, Ground No. 3 of the assessee s appeal is allowed. Undisclosed investment in construction of project - addition to the total income of the assessee on account of undisclosed investment in construction of project solely on the basis of valuation report of the DVO - HELD THAT:- We find that there were various discrepancies in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uite excessive. No addition was justified to the total income of the assessee on account of undisclosed investment in construction of project. We, thus, value the cost of construction at the actual cost of 23,69,68,970/- shown by the assessee. Accordingly, we set aside the findings of Ld. CIT(A) to the extent the Ld. CIT(A) confirmed the addition on account of undisclosed investment in construction of project. Hence, the assessee gets further relief in AYs 2013-14 to 2016-17 which is over and above the relief already allowed by the Ld. CIT(A) - Decided in favour of assessee. Unexplained cash received from Smt. Sunita Rai - CIT(A) in treating the additional income admitted by the assessee during the course of survey under the head income from other sources as against taxability of such income by invoking of the provisions of section 69B - HELD THAT: Assessing Officer also did not specifically comment whether the additional income declared was a part of regular books of accounts or not more so when section 69B of the Act can be invoked only for income which is not fully disclosed in books of accounts and not in respect of income which is already incorporated in the books of accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of ₹ 12,39,521/- out of the total addition of ₹ 94,71,070/- as made by the assessing officer to the total income of the appellant by referring the matter to the DVO for estimation of the cost of construction/development incurred in the project without pointing out any specific defects and also without rejecting the regular books of accounts as maintained by the appellant. 5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintain the addition f₹ 12,39,521/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self-supervision. 6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of ₹ 32,11,330/- to the total income of the appellant on account of additional cost of construction/development incurred in the project after allowing margin of only 30% (25% for difference in CPWD and PWD rates and 5% for self-supervision) even when margin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision. 6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings. 7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act. 8. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it. IT(SS)ANo.61/Ind/2019 - Assessee's appeal "1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding that validity of notice as issued under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings. 7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act. 8. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it. IT(SS)ANo.62/Ind/2019 - Assessee's appeal "1.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) concurred with the assessing officer and erred in considering the date of search as 05.10.2015 and no notice was issued u/s 153C of the Act even when date of search in case of other person is the date on which information from the assessing officer of the person searched is passed on to the assessing officer of the other person i.e. date of search in the present case shall be 15.11.2016 which falls in the assessment year 2017-18. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of assessment order as passed u/s 143(3) of the Act for the year under consideration by treating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgin of 30% is allowable on account of difference in CPWD and PWD rated and margin of 10-12.5% is allowable for self- supervision. 9. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not allowing relief to the appellant on account of specific discrepancies in the report of the DVO as pointed out by the appellant during the course of assessment as well as appellant proceedings. 10. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act. 11. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it. IT(SS)ANo.80/Ind/2019 - Departmental appeal "1.That on the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of ₹ 1,70,14,750/- made by the Assessing officer on account of undisclosed investment u/s 69B of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 2,53,555/- made by the Assessing Officer on the basis of unexplained cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details were called for by the Assessing Officer which were replied by the assessee. During the course of assessment proceedings, reference was made to Valuation Officer (in short the 'DVO') on 06.04.2017 for determination of cost of construction of project undertaken by the assessee. The DVO submitted his report on 17.08.2017. The assessee challenged the CPWD rates adopted by the DVO for valuation purpose. The assessee also pointed out various discrepancies in the valuation report submitted by the DVO. However, the assessee failed to find any favour from the Ld. Assessing Officer and the Ld. Assessing Officer completed assessment u/s 153C r.w.s. 143(3) of the Act for AY 2012-13 to 2015-16 and u/s 143(3) of the Act for AY 2016-17 after making the following additions: Amount (Rs.) S.No. Nature of additions AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 1 Addition on account of undisclosed investment in construction of project 94,71,070 2,02,26,080 3,96,64,189 3,28,86,624 2 Addition on account of unexplained cash received from Smt. Sunita Rai - 2,53,555 3,74,000 - Total additions 94,71,070 2,04,79,635 4,00,38,189 3,28,86,624 3. Aggrieved asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s 153C of the Act ought to have been issued and assessment order ought to have been passed u/s 153C r.w.s. 143(3) of the Act for the AY 2016-17. 9. The Ld. Counsel for the assessee also relied upon the following written submission: 3.4.1] That date of receipt of documents by the assessing officer of the other person is the date of search in the case of the other person as is also held by various judicial precedents. That relevant extracts from few of the judicial precedents are reproduced as under: 3.4.2.1] That Hon'ble Delhi High Court in the case of CIT Vs RRJ Securities Limited [Appeal No ITA No 164/2015 dated 30.10.2015 ] has held that : "24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year." 3.4.2.2] That Hon'ble ITAT Delhi Bench in the case of Rajeev Behl Vs DCIT [Appeal Nos ITA Nos 1927 to 1931/Del/2015 dated 29-06- 2016 has also expressed similar view in para 34 of its order which is reproduced as under: "34. The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned decision of Hon'ble Delhi High Court in the case of RRJ Securities Ltd. (supra)we hold that assessment for AY 2007-08 was outside the ambit of the block period and the AO had no jurisdiction to make assessment of the assessee's income for that year. Accordingly, assesse's appeal for AY 2007-08 is allowed." 3.4.2.3] That Hon'ble ITAT Delhi Bench in the case of M/s R L Allied Industries Vs ITO as reported in [2015] 54 taxmann.com 222 (Delhi-Trib.)/[2015] 37 ITR(T) 507 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has challenged the finding of Ld. CIT(A) upholding the validity of assessment order passed u/s 143(3) of the Act for the AY 2016-17 instead of section 153C r.w.s. 143(3) of the Act. We notice that the sole contention of the assessee in these grounds of appeal is that AY 2016-17 fell within the purview of section 153C of the Act and hence, notice ought to have been issued u/s 153C of the Act and assessment order ought to have been passed u/s 153C r.w.s. 143(3) of the Act for AY 2016-17. There is no dispute regarding the fact that search action at the premises of other persons of the group was conducted on 05.10.2015. Further, it is also an uncontroverted fact that documents seized during the course of search were handed over to the Assessing Officer of the other person i.e. to the Assessing Officer of the assessee only on 15.11.2016 and thereafter notices were issued u/s 153C of the Act. The provision of section 153C of the Act reads as under: 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. From perusal of the above provision, we find that proviso to subsection (1) of section 153C of the Act provides that the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f person other than the searched person. Respectfully following the aforementioned decision of Hon'ble Delhi High Court in the case of RRJ Securities Ltd. (supra)we hold that assessment for AY 2007-08 was outside the ambit of the block period and the AO had no jurisdiction to make assessment of the assessee's income for that year. Accordingly, assesse's appeal for AY 2007-08 is allowed. ………… ………… 51. If we closely analyze the provisions of section 153C, we find that by incorporating second proviso to section 153C, the date of search has been deferred to the date of transfer of assets/ documents etc. to the AO having jurisdiction over other persons. The consequence of this would be to reckon the block period from this date. Therefore, legislature has incorporated section 153C(2) as per which, assessment u/s 153A/153C is to be made only if conditions contemplated in either of clause (a),(b) or (c) u/s 153C(2) are fulfilled. All these clauses contemplate various situations where assessment has to be treated as completed assessment. However, in respect of pending assessment no such provision has been made. Therefore, for pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph 2 of his order, the seized material was received on 12th March, 2009 from ACIT, Central Circle-17. Thus, the year in which seized material was seized is previous year 2008-09 relevant to AY 2009-10. The preceding six years would be AY 2008-09, 2007-08, 2006-07, 2005-06, 2004-05 and 2003-04. Therefore, after considering the facts of the assessee's case and combined reading of Section 153C as well as Section 153A, in our opinion, the issue of notice under Section 153C for AY 2001-02 & 2002-03 is barred by limitation. Accordingly, we quash the same and consequentially, the assessment order passed in pursuance to the notice issued under Section 153C is also quashed." 15. In light of the facts re-iterated above and after going through the findings of the Hon'ble High Court and Coordinate Benches cited supra, we are of the considered view that AY 2016-17 fell within the purview of provisions of section 153C of the Act in light of first proviso read with sub-section (2) of section 153C of the Act and accordingly, assessment order for AY 2016-17 ought to be treated as framed u/s 153C r.w.s. 143(3) of the Act and not u/s 143(3) of the Act AY 2016-17. Accordingly, Ground Nos. 1 & 2 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that assessment years till AY 2015-16 were non-abate assessment years and therefore, no addition was called for to the total income of the assessee in these years in absence of any incriminating documents found and seized during the course of search. The Ld. Counsel for the assessee also relied upon the following written submission: 1.1] The appellant in this ground of appeal has claimed that notice as issued under section 153C of the Income Tax Act was invalid since nothing incriminating relating to the appellant was found and seized from the possession of the person searched. 1.2] That search was executed at the residential premises of Shri Rasmeet Singh Malhotra and his other family members on 05-10- 2015 and survey was executed on the business premises of the appellant. 1.3] The relevant extract of provision of section 153C of the Income tax Actis reproduced as under for the sake of understanding: "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer has not referred to any documents which were found in possession of the person searched and not found recorded in the regular books of accounts. That it is primary condition prior to the issuance of notice under section 153C of the Act that certain documents related to the other person are found in possession of the person searched and these documents are also incriminating in nature. 1.4.4] That this is a jurisdictional issue in the issuance of notice under section 153C of the Actsince the assessing officer failed to discuss these papers in the search assessment order and the fact that documents are required to be found in possession of the person searched and that thesedocuments do not actually pertain to the person searched but the same pertains to the assessee and these documents are also not found recorded in the regular books of accounts of the assessee. However, in this case, no documents were referred by the assessing officer and hence, present notice as issued by the assessing officer and assessment as framed by the assessing officer was wholly without jurisdiciton. The entire proceedings as initated based on such illegal notice are bad in law and liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t during the course of search as executed under section 132 of the Act and therefore the assessing officer was not having valid jurisdiction over the case of the appellant. The assessment order as passed under section 153C r.w.s. 143[3] of the Act was therefore without jurisdiction and the same now requires to be quashed. ……………. 3.5.1] That it is a settled position of law that in absence of any incriminating material, no addition can be made to the total income of the assessee in case of non-abate assessment. 3.5.2] That in the present case in hand, addition was made merely on the basis of valuation report as obtained from the Departmental Valuation Officer which in any case is not justifiable since the year under consideration was a non-abate assessment year. 3.6.1] That Hon'ble Delhi High Court in the case of CIT Vs Anil Kumar Bhatia [Appeal Nos 1626,1632,1998,2006,2019,2020/2010 dated 07-08-2012] has discussed the similar issue in detail in para 20 and 23 and held that: "20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the seller. Consequently, we find that no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed." 3.6.3]That Hon'ble Delhi High Court in the case of CIT vs Naveen Gera reported in 328 ITR 516 has held that (Refer Para 9): "9. We do not find merit in the submission made by Ms. Suruchii Aggarwal that the concealed income was detected during the course of search or any evidence was found which would indicate such concealment. The seized material containing the sale deeds of the properties, which have been relied upon to make reference to DVO, had already been declared to the Revenue by the respondent-assessee under VDIS. We are also in agreement with the submission made by Mr. Piyush Kaushik that it is settled law that in the absence of any incriminating evidence that anything has been paid over and above than the stated amount, the primary burden of proof is on the Revenue to show that there has been an under-statement or concealment of income. It is only when such burden has been discharged, would it be permissible to rely upon the valuation given by the DVO. Further, the opinion of DVO, per se, is not an information and canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order i.e. lease transaction categorized as sale transaction. The fact that the aforesaid issue bears no relation to the any of the material / documents / records found and seized during the search action on 16.04.2009. Ld. CIT (A) has relied upon the Circular No. 7 of 2003 which clarifies the position of the pending appeals as on the date of the search. The relevant portion is produced herewith - "The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate…." Accordingly, as far as completed assessments are concerned, they do not abate. The AO cannot proceed to make the same addition in the block assessment without any incriminating material found in the course of search. The said view prevents the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot produced or not already disclosed or made known in the course of original assessment. In all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCIT; Madugula vs. DCIT; CIT vs. ChetandasLaxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora; 367 ITR 517 relied on by the learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particular issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were found relating to purchase of property as well as incriminating material for undisclosed investment in construction of property which was sufficient enough for the Assessing Officer to initiate the assessment proceedings for the assessment year 2007-08 to assess the correct income of the assessee. We, therefore, set aside the findings of the learned Commissioner of Income Tax (Appeals) and hold that the assessment for the assessment year 2007-08 u/s 153A r.w.s. 143(3) of the Act was valid. The relevant grounds of the revenue for the assessment year 2007-08 are allowed." 3.7] That in view of the above, it is submitted that the assessing officer was not justified in making additions to the total income of the appellant merely on the basis of valuation report and in absence of any incriminating documents found during the course of search so as to prove the excess investment in the construction of the Duplex as constructed by the appellant. ADDITION DURING THE COURSE OF SEARCH MERELY ON THE BASIS OF VALUATION REPORT 3.8] That in case of search assessment , there was no justification for making addition to the total income of the appellant merely on the basis of valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equence Held, yes. Whether, therefore, appellate authorities were justified in deleting impugned addition made by Assessing Officer Held, yes [Para 6]" 10. Similarly, in the case of Nishi Mehra (Supra) it was heldthat no addition can be made merely only on the basis of DVO's report in the absence of any corroborative evidence. (APB, 86-89). No decision to the contrary has been cited before us. 11. In view of the above, we hold that the AO could not tax the said amounts merely based upon the DVO's report in the absence of any corroborative material to point out under-valuation of the property in question. Therefore, we accept the grievance of the assessee as justified. Accordingly, the impugned orders of the ld CIT (A) are reversed and the additions are hereby deleted, for all the Assessment Years, i.e., from A.Y. 2007-08 to 2013-14. Nothing, else remains to be adjudicated." 3.8.2] That Hon'ble Delhi High Court in the case of CIT vs. Bajrang Lal Bansal [2011] 335 ITR 572/12 taxmann.com 88 (Delhi) directed for deletion of the addition made on the basis of the report of the DVO holding that the report of the DVO alone is not an information warranting addition in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cannot be relied upon in absence of other corroborative evidence Held, no. Whether where due disclosure of acquisition of properties had been made in course of regular assessments by assessee and those valuations had been accepted by income tax authorities as well as wealth tax authorities, Assessing Officer could not tax said amounts merely based upon DVO's report in absence of any material pointing to undervaluation in block assessment proceedings Held, yes." 3.8.5] That Hon'ble Gujarat High Court in the case of CIT v. Berry Plastics (P.) Ltd. [2013] 35 taxmann.com 296/217 Taxman 39 (Guj.) (APB, 93) has held that- "Section 69B, read with section 142A of the Income-tax Act, 1961 - Undisclosed investments [Investment in land and buildings] - Assessment year 2006-07 - During relevant year, assessee made some investment in land and building - Assessing Officer referred matter to DVO who valued land and building at a higher amount - In view of difference between disclosed investment of assessee in purchase of property and DVO's estimation of its fair market value, Assessing Officer added certain amount to taxable income of assessee under section 69B - Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agrawal HUF in the books of accounts of the assessee placed on Page No. 470 of the paper book. Therefore, it seems that the loose papers referred to by the Ld. Assessing Officer in the satisfaction notes were not incriminating in nature. Further, it is uncontroverted finding of fact that no addition was made by the Ld. Assessing Officer in respect of these loose papers which formed the very basis for initiation of proceedings u/s 153C of the Act in the case of the assessee. We also notice that the issue of validity of addition made in the proceedings initiated u/s 153C of the Act in absence of incriminating material came up before the Hon'ble Supreme Court of India in the case of CIT-III, Pune v. Sinhgad Technical Education Society reported in [2017] 397 ITR 344 (SC) wherein Hon'ble Supreme Court of India dismissed the appeal of the revenue and held that: "18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail." 21. In light of the facts re-iterated above and after going through the findings of the Hon'ble Supreme Court of India and Hon'ble Jurisdictional High Court (supra) and decision of Hon'ble Delhi High Court in case of Kabul Chawla (2016) 380 ITR 573 (Del) and also decision of Meeta Gutgutia (2017) 395 ITR 526 (Del), we are of the considered view that proceedings initiated u/s 153C of the Act for the AY 2013-14 to 2015-16 being non-abated and completed assessments (considering the date of search for proceedings u/s 153C of the Act as 15.11.2016) deserves to be quashed, since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153C of the Act for these years. Moreover, no addition was made by the Ld. Assessing Officer himself while passing the assessment order on the basis of the so-called incriminating material which formed the very basis for initiation of proceedings u/s 153C of the Act. We, therefore, set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer on account of undisclosed investment in construction of project. 25. Now the assessee is in appeal before us in respect of the additions confirmed by the Ld. CIT(A) whereas the revenue is in appeal before us in respect of the additions deleted by the Ld. CIT(A). 26. The Ld. Counsel for the assessee submitted at the outset that cost of construction considered by the Ld. Assessing Officer to the tune of ₹ 22,25,64,347/- was factually incorrect since the correct amount of cost of construction actually incurred by the assessee was of ₹ 23,69,68,970/-. The Ld. Counsel submitted that the difference arose mainly due to cost of construction of ₹ 6,45,09,766/- considered by the Ld. Assessing Officer as against actual cost of construction of ₹ 7,75,17,766/- incurred by the assessee during the AY 2016-17. A table showing the amount of actual cost of construction, cost of construction considered by the Ld. Assessing Officer, cost of construction considered by the DVO, difference in cost worked out by the Ld. Assessing Officer and correct amount of difference was relied upon which is as under: S. No Asst Year Actual cost of construction [in Rs] Cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-15 3,64,89,754 3,64,89,754 5,67,15,834 2,02,26,080 2,02,26,080 3,97,01,084 32,11,330 4 2015-16 7,16,50,723 7,16,50,723 11,13,14,912 3,96,64,189 3,96,64,189 7,79,20,439 62,69,716 5 2016-17 7,75,17,766 6,45,09,766 9,73,96,390 3,28,86,624 1,98,78,624 6,81,77,473 NIL 6 2017-18 3,33,43,300 3,19,46,677 4,64,94,366 1,45,47,689 1,31,51,066 23,69,68,970 22,25,64,347 33,93,59,999 11,67,95,652 10,23,91,029 The Ld. Counsel for the assessee argued that the DVO applied CPWD rates applicable for residential bungalows even when the assessee constructed only duplex row houses for sale. The Ld. Counsel further argued that the DVO was not justified in determining the cost of construction on the basis of Plinth Area Method or Cost Indexed Method even when the assessee maintained day-to-day records of construction expenses actually incurred by it along with the copy of supporting bills and vouchers which were provided to the Ld. Assessing Officer as well as to the DVO. The Ld. Counsel for the assessee also brought this fact to our notice that cost of construction considered by the DVO was even higher than the sale price as per guideli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- whereas expenses as actually incurred by the appellant were of ₹ 5,49,090/- 5,74,575 2.6 Expenses on account of Vitrified Floor Tiles of ₹ 71,16,693/- even when the cost of tiles was already included in the estimated amount of construction cost 71,16,693 2.7 Expenses on account of Overhead Tank of ₹ 25,00,000/- and Sump Well of ₹ 20,00,000/- totaling to ₹ 45,00,000/- whereas expenses as actually incurred by the appellant were of ₹ 16,00,000/- 29,00,000 2.8 Expenses on account of Bore well of ₹ 7,50,000/- whereas expenses as actually incurred by the appellant were of ₹ 2,50,000/- 5,00,000 2.9 Expenses on account of M S Gate of ₹ 8,47,000/- even when the cost of M S Gate was already included in the estimated amount of construction cost 8,47,000 2.10 Expenses on account of construction of Swimming Pool of ₹ 20,00,000/- whereas expenses as actually incurred by the appellant were of ₹ 15,00,000/- 5,00,000 2.11 Expenses on account of construction of boundary wall for full brick work and half brick work of ₹ 1,75,00,000/- and ₹ 90,00,000/- totaling to ₹ 2,65,00,000/- wherea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate as charged by the DVO was higher by ₹ 1,900/- per SqMtrs which in percentage terms is higher by 15.32%. This being an apparent mistake of adopting the wrong rate needs to be rectified by the DVO and valuation as done requires to be reduced by 15.32%. 5.10.2]That valuation rate of ₹ 12,400 per SqMtrsis applicable for independent bungalows constructed by CPWD. However, in the case of the appellant, duplex row houses were constructed wherein one wall is a common wall and therefore rebate for the same separately requires to be allowed in the valuation report. 5.10.3] That the DVO adopted the rate of ₹ 18,179/- per SqMtrs [Refer Abstract of Cost in the Valuation Report] at the time of valuation of club house building whereas rate in case of non- residential double storeyed building was ₹ 14,300/- per SqMtrs [Inner page No 5 of CPWD rate book]. Hence, corresponding rebate in the valuation of club house also requires to be allowed to the appellant. 5.10.4]That the DVO adopted the rate of ₹ 16,364/- per SqMtrs [Refer Abstract of Cost in the Valuation Report] at the time of valuation of temple whereas rate in case of commercial double storeyed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in view of the above, it is evident that corresponding rebate of excess cost of material as consumed also requires to be allowed while calculating the cost of construction of the duplex row houses of the appellant. REFERENCE TO THE DVO 5.11.1] The appellant has challenged the reference as made to the DVO for valuation of the duplex row houses. That reference to the DVO is not justified until and unless the assessing officer has cogent material in his possession. However, in the present case in hand, the assessing officer without any cogent material in his possession simply referred the matter to the DVO so as to determine the cost of construction as actually incurred by the appellant in the construction of the duplex row houses. 5.11.2]That Hon'ble ITAT Lucknow Bench in the case of Deputy CIT VsRohtas Projects Ltd. as reported in (2010) 133 TTJ (Lucknow)(UO) 89 and the Tribunal held (Head Note) as under : "It is true that for the purpose of making addition towards unexplained investment, the AO was under legal obligation to verify the books and vouchers maintained by the assessee in support of the cost of construction shown by the assessee and at the same time, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record to show that the assessee in the first place has made such investment outside the books or the investment so made by him is not fully disclosed in the books of account and once this condition is satisfied, the quantum of such investment made can be ascertained by the Assessing Officer by making a reference under section 142A in order to make the addition under section 69 or 69B, whichever is applicable. In the present case, the relevant property was purchased by the assessee during the year under consideration for ₹ 15 lakhs and the amount of the said consideration was paid out of its disclosed sources as accepted even by the Assessing Officer in the reassessment. A perusal of the assessment order, however, shows that there was no reference whatsoever made by the Assessing Officer to any material/evidence/ information on the basis of which it could be said that the said consideration shown by the assessee was understated and that anything above what was disclosed by the assessee had actually been paid as consideration. The condition precedent for making a reference to the DVO by invoking the provisions of section 142A thus was not satisfied in the present case and neit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not correct or not reliable. The use of the word 'require' is not superfluous but signifies a definite meaning, whereby formation of mind even preliminary on objective basis by the AO is very much necessary. From the bare reading of assessment order, it does not suggest that there is any material which indicates that the assessee has paid any amount over and above the declared consideration for the purpose of making addition of unexplained investment u/s. 69 or 69B of the Act. In the absence of the same, the CIT(A) has rightly deleted the addition. We confirm the same. This issue of revenue's appeal is dismissed." 5.11.6] That Hon'ble Delhi High Court in the case of CIT Vs Anil Arora [ITA No 340/2015] dated 22-05-2015has held that: "Having heard the Ld Counsel for the Revenue, we find the contentions argued in the appeal to be wholly misplaced. It is fairly conceded (at bar) by the Counsel for the Revenue that the reference to DVO for estimation of the market value of the property in Punjabi Bagh was not based on any material discovered or seized during the search operations. The Counsel, however, referred to the case of another property in District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards any investment that was made by the appellant over and above what was disclosed in the regular books of accounts. 5.13] That in view of the above, the assessing officer was not justified in referring the matter to the DVO for estimating the cost of construction without rejecting the books of accounts as maintained by the appellant and without pointing out any defects in the books of accounts of the appellant. The difference as calculated by the DVO was also explained properly and therefore there was no justification for making addition on account of difference in the cost of construction as estimated by the DVO and as declared by the appellant. The addition so made requires to be deleted in full. WITHOUT PREJUDICE TO THE ABOVE 5.14.1] That during the course of search assessment proceedings, addition was made on account of undisclosed investement in construction incurred in the project as per DVO report. That nothing incriminating was found in possession of the person searched related to the appellant and hence, notice as issued under section 153C of the Act was neither proper nor legal. Moreover, in this case, addition was made merely on the basis of DVO report which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is engaged in the real estate business and constructed duplex row houses for sale. The cost of construction as declared by the appellant was properly incorporated in its regular books of accounts and was duly considered for calculating the profit on sale of these duplex row houses. 5.16.2] The cost of construction as estimated by the DVO was even more than the sale price of duplex as per Collector/Sub-registrar guidelines. Hence, it is apparently clear that the cost of construction was estimated at exorbitantly high rates by the DVO in his report. 5.16.3] That the appellant calculated the amount of net profit on the basis of cost of construction as shown by it in its regular books of accounts. However, if the cost of construction is increased on the basis of report of the DVO, in that case, profit as declared by the appellant also requires to be adjusted." 28. On the other hand, the Ld. DR supported the findings of Ld. Assessing Officer. 29. We have heard the rival contentions and perused the record placed before us and also gone through the judgments and decisions referred to and relied upon by the Ld. Counsel for the assessee. We find that the assessee was engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at ₹ 14,853/- Per Sq Mtr which in terms of Sq Ft calculated comes to ₹ 1,380/- per Sq Ft even when the registrar office expects cost of construction in village Piparia to be ₹ 8,500/- Per Sq Mtr which in terms of Sq Ft calculated comes to ₹ 790/- only. Hence, the cost of construction as adopted by Departmental Valuation Officer was merely on the basis of CPWD DSR-2012 and DPAR-2012 which was very excessive 2 The appellant provided complete bills of material purchased which included bills for cement, steel, sand and other material purchased and consumed for development of the colony and for construction of bungalows. However, the Departmental Valuation Officer totally ignored the entire details and supporting bills and adopted the standard rate as prescribed by CPWD 3 The guideline value of bungalow as sold by the appellant was also less than the cost as estimated by the Departmental Valuation Officer 4 The cost as incurred by the appellant is duly supported with all the bills and vouchers and the same is also verifiable 5 The material as purchased by the appellant i.e. steel, cement, sand, bricks all are duly vouched and are also verifiable 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,75,00,000/- and ₹ 90,00,000/- on account of construction of boundary wall for full brick work and also for half brick work totaling to ₹ 2,65,00,000/- whereas only 412 running Sq Mtrs boundary wall was constructed and by considering the rate of ₹ 3,000/- per running Sq Mtrs, the cost of Boundary wall calculated comes to ₹ 12,36,000/- as against cost of boundary wall estimated by the valuation officer of ₹ 2,65,00,000/-. Hence, additional cost of ₹ 2,52,64,000/- was considered by the DVO in his report which was not justified. Moreover, individual boundary wall of the row houses has already been considered in the cost of construction of row houses. Hence, separate addition on account of boundary wall of ₹ 2,65,00,000/- as suggested by the DVO was not justified 6.12 The DVO in his report based on his estimated cost of construction calculated consultancy fees of ₹ 34,38,339/- whereas actual expenses as incurred by the appellant were of ₹ 25,31,532/- only 31. We have also gone through the valuation report of the DVO, CPWD rate book and valuation report obtained by the assessee from the Government approved registered valuer. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books maintained by the assessee. Hence, additions made by AO is not sustainable in law being based merely on valuation report received from DVO. ii) The A.O. has not mentioned any reason in the assessment order or in the reference to the valuation, that he had any incriminating material which led to form his belief that the appellant had under stated the cost of construction referred for valuation. It is very relevant to understand that the appellant was subjected to search and seizure action u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment in the different projects of appellant. Lack of any incriminating material/evidence regarding under reporting of cost of construction being pointed out by the A.O., in spite of search and seizure action addition simply made on the basis of DVO's report is even more unjustified and unwarranted. iii) During appellate as well as assessment proceedings, appellant raised several objections with regards to methodology adopted by DVO as well as valuation aspect, but AO has totally failed to consider the same. He has mechanically adopted the estimate of value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about savings in cost of construction for other reasons as well i.e. self-supervision, consultancy charges etc. however, AO failed to allow any benefit to the assessee on any of the count which is not justified. v) I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts of the assessee. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 4.2.6 of this order, it is pertinent to refer to the decision of ITO v/s Dreamland Enterprises 80 Taxman 143 (ITAT Abd) wherein it was held that when the cost of construction declared by the assessee was supported by regular books of accounts and vouchers, correctness of which was not disturbed by the AO or DVO by bringing any specific material on record, the CIT(A) was fully justified in holding that no addition could be validly made on account of any understatement of cost of construction merely because of difference as estimated by the DVO. Hence, on this count, I am of the view that addition made merely o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warilal Adhukia 75 Taxmann.com 302 (2016) • ITO vs Rajeshwar nath Gupta (Appeal No 4295/Del/2005 dated 04.05.2008) • DCIT vs Rohtas Projects Ltd (2010) 133 TTJ 89 (Lucknow)(UO) • CIT vs Anil Arora (ITA No 340/2015 dated 22.05.2015) (Delhi HC) • DCIT vs Bithalnath Malia (ITA NO 15/Kol/2013 dated 20.02.2015) Kol ITAT) • ITO vs CR Selvaraj (ITA 100/Mds/2015 dated 22.05.2015) (ITAT Chennai) 4.2.10 In view of the above discussion, the comparative picture of investment shown by the assessee and that estimated by the DVO after allowing margin of 30% ( 25% for difference in CPWD and PWD rates and 5% for self supervision) comes out as under:- A.Y. Declared by Assessee (Rs.) 70% of estimate made by the DVO Difference 2013-14 17967427 19206948 1239521 2014-15 36489754 39701084 3211330 2015-16 71650723 77920439 6269716 2016-17 64509766 68177473 3667707 Thus, from the above the difference in investment as mentioned in the above table are confirmed. Hence, the additions made by the AO amounting to ₹ 12,39,521/- in AY 2013-14, ₹ 32,11,330/- in AY 2014-15, ₹ 62,69,716/- in AY 2015-16 and ₹ 36,67,707/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are situated in Village Pipariya, rates taken for the purpose of valuation are quite excessive. 34. We also find that the Hon'ble Jurisdictional Bench in the case of Shri Anil Kataria, Ratlam Vs. DCIT (Central)-1, Indore [IT(SS)A Nos. 163, 164 & 165/Ind/2016] has categorically discussed the similar issue at length and has held that: "22………….Apart from the above four mistakes pointed out by the learned counsel for the assessee, our attention was also drawn to the deduction given by the learned Commissioner of Income Tax (Appeals) towards CPWD/PWD rates adopted for valuation. The learned counsel for the assessee referring to various judgments of the Tribunal submitted that deduction up to 30% has been provided in similar type of cases whereas the learned Commissioner of Income Tax (Appeals) has given only 15% deduction. Similarly, as regards supervision charges in the decisions of the Tribunal deduction upto 12.5% of self supervision charges was held to be justified whereas the Departmental Valuation Officer has given deduction of 2.5% only. 23. As observed by us in the preceding paragraphs wherein facts emanating out of the submissions made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent the Ld. CIT(A) confirmed the addition on account of undisclosed investment in construction of project. Hence, the assessee gets further relief in AYs 2013-14 to 2016-17 which is over and above the relief already allowed by the Ld. CIT(A) and therefore, the assessee gets relief of ₹ 12,39,521/- in AY 2013- 14, ₹ 32,11,330/- in AY 2014-15, ₹ 62,69,716/- in AY 2015- 16 and ₹ 36,67,707/- in AY 2016-17. Accordingly, Ground Nos. 5 to 9 of the assessee's appeal are allowed. 37. Ground No. 10 raised by the assessee challenges the action of the Ld. CIT(A) in upholding the chargeability of interest u/s 234A and 234B of the Act. The Ld. Counsel for the assessee did not press this ground of appeal during the course of hearing since chargeability of interest under these sections is consequential and mandatory in nature. Accordingly, Ground No. 10 of the assessee's appeal is dismissed as not pressed. 38. In the result, appeal of the assessee vide IT(SS)A No. 62/Ind/2019 for AY 2016-17 is partly allowed. Since, appeals of the assessee vide IT(SS)A No. 59/Ind/2019 for AY 2013-14, IT(SS)A No. 60/Ind/2019 for AY 2014-15 and IT(SS)A No. 61/Ind/2019 for AY 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Smt Sunita Rai. Appellant during the course of appellate proceedings has strongly contended that the cash receipt from Smt Sunita Rai was against the agreement for purchase of duplex build at plot no 77 by Smt Sunita Rai. The appellant has also taken an alternate plea that amount received as advance from customer is not taxable as income of the appellant until and unless sale is actually executed. After considering the entire factual matrix and evidence/material on record inter alia written submissions filed, I reach to conclusion that impunged addition was made on the basis of assumption and presumption which neither sustainable on facts nor in law. The AO has reached to conclusion that appellant has received the cash of ₹ 2,53,555/- in AY 2014-15 and ₹ 3,74,000/- in AY 2015-16 from Smt Sunita Rai against purchase of duplex no 77. Appellant during appellate proceedings has strongly contented that the deal with Smt Sunita Rai did not materialized and the advance received from Smt Sunita Rai was adjusted against the cement and steel invoices of the firm of Smt Sunita Rai. The amount as shown payable against the purchase of material by the firm was paid separately. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the duplex was never registered in the name of Smt. Sunita Rai and the amount of advance was adjusted against the material supplied by the assessee to the firm of Smt. Sunita Rai which was duly recorded in the books of accounts. The Ld. Assessing Officer neither examined Smt. Sunita Rai nor did he conduct any independent inquiry from other government agencies to establish the veracity of his contention. We therefore do not find any infirmity in the finding of Ld. CIT(A) and the same needs to be confirmed. In the result, Ground No. 2 of the revenue's appeal in in IT(SS)A No. 80/Ind/2019 and IT(SS)A No. 81/Ind/2019 stands dismissed. 44. Ground No. 2 raised by the revenue in IT(SS)A No. 82/Ind/2019 challenges the action of the Ld. CIT(A) in treating the additional income of ₹ 2,95,00,000/- admitted by the assessee during the course of survey under the head "income from other sources" whereas the assessing officer had rightly taxed the additional income admitted by the assessee during the course of survey u/s 69B of the Act. 45. Ld. DR vehemently supported the order of Ld. Assessing Officer. Per contra Ld. Counsel for the assessee supported the findings of Ld. CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have made the investments or is found to be the owner of any bullion, jewellery or valuable articles; (ii) Based on the material facts, the AO finds that the amount expended on such investment actually exceeds the amount recorded in the books of account (iii) The assessee either offers no explanation about the nature and source of investment or the explanation offered is not satisfaction in the opinion of the AO; (iv) The satisfaction of the AO can not be arbitrary and subjection but has to be based on the relevant material. The investment made by the assessee have been duly shown in the books of account and the findings of the AO are arbitrary and not subjective and are also not based on relevant material. The AO ought to have stressed upon some independent and arbitrary material which could establish that the income offered by the appellant is not fully recorded in books of account. The only point which lies in the favour of the AO is that he has alleged that appellant failed to provide any satisfactory explanation regarding the investment. Appellant during the course of survey has disclosed additional income on account of construction material. 4.4.2 The AO in his a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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