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TMI Blog2022 (5) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... sity in the order of the Ld. CIT(A) on this issue, we uphold his findings and dismiss the ground raised by the Department. Addition on account of difference in cost of construction as per the books of account and as per the report of the DVO - As it is an undisputed fact on record that no incriminating material or evidence was found during the course of search which could indicate that the assessee had made investment towards cost of construction outside the regular books of account. We also note that the Ld. CIT(A) had deleted the addition in this year by following the order of the Ld. CIT(A) for the immediately preceding assessment year. Since no material was found in the search and seizure operations which could justify the Assessing Officer's action in referring the matter to the DVO for his opinion on valuation of the said properties, then the valuation arrived at by the DVO would be of no consequence. Accordingly, in view of the above cited judicial precedents as well as the factual finding recorded by the Ld. CIT(A) in assessment year 2016-17, which, in our opinion, is both sound as well as logical, we have no hesitation in upholding the same. Accordingly, the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs. 85,82,593/- on account of unexplained investment in the construction of show room by following the first appellate order in assessee's own case for AY 2016-17, wherein a similar addition had been deleted. The Ld. CIT(A), however, upheld the addition of Rs. 3,80,035/- on account of gross profit pertaining to sales outside the books of account. 2.2. Aggrieved, the Revenue has approached this Tribunal challenging the deletion of additions by the Ld. CIT(A) and following grounds have been raised by the Revenue in this appeal:- 1. Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition made on account of unaccounted investment in stock amounting to Rs. 3,58,753/- by applying stock turnover ratio @ 7.08% especially when the said turnover ratio rate @ 7.08% has been declared by the assessee in its audited balance sheet? 2. Whether upon the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition made on account of unaccounted investment in stock amounting to Rs. 3,58,753/- by applying stock turnover ratio @ 7.08% especially when the Ld. CIT(A) has upheld the addition made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which was the minimum statutory limit for a Departmental appeal to be maintainable before this Tribunal, why should the Departmental appeal not be dismissed at the very threshold itself. In response to the query, the Ld. AR submitted that subsequent to the passing of the impugned order by the Ld. CIT(A), a notice u/s. 154 of the Act was issued by the Assessing Officer proposing charging of tax @ 60% in terms of section 115BBE of the Act on the addition of Rs. 85,82,693/-. It was further submitted that, thereafter, the AO passed the order u/s. 154 of the Act by calculating the tax on addition of Rs. 85,82,593/- @ 60% which amounted to Rs. 64,36,945/-. It was submitted by the Ld. AR, that apparently, the Departmental appeal had been filed after the passing of the aforesaid order u/s. 154 of the Act and, therefore, prima facie, the tax effect involved was above the statutory limit of Rs. 50,00,000/-. 3.1. However, it was the contention of the Ld. AR that the appeal of the Department was not maintainable because as on the date of passing of the order u/s. 154 of the Act i.e. 16.06.2021, the addition of Rs. 85,82,593/- already stood deleted by the order of the Ld. CIT(A) which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- because, undoubtedly, some investment of stock was required in making the undisclosed sales and stock turnover ratio was the best yardstick to compute the same. It was submitted by the Ld. CIT DR that this addition of Rs. 3,58,753/- should be restored. 6.1. With respect to the addition of Rs. 85,82,593/- pertaining to unexplained investment in the construction of show room, the Ld. CIT DR referred to the relevant paragraphs in the assessment order wherein the AO had referred to the report of the Departmental Valuation Officer (DVO) and submitted that as per the DVO's report, a rebate of 7.5% had already been allowed for self-supervision but the assessee's claim of allowing benefit upto 15% for self-supervision was unsupported by any bills or settled legal precedent. The Ld. CIT DR submitted that the Ld. CIT(A) had incorrectly deleted the addition by relying on the order of the Ld. First Appellate Authority for the immediately preceding assessment year in assessee's own case (i.e. for AY 2016-17) by observing that since the difference in cost of construction as per books of account and as per DVO's report was less than 10%, the same deserved to be deleted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2016-17 on the basis of which the Ld. First Appellate Authority had deleted the addition in the captioned year and it was submitted that if the assessee is allowed a complete benefit of self-supervision @ 7.5% and, thereafter, a comparison is made with the investment as disclosed in the regular books of account, the difference comes to 9.24%, which is below the accepted allowable norm of deviation of 10%. The Ld. AR placed reliance on numerous judicial precedents wherein it had been held that a deviation upto 10% between the cost as per the DVO's report and the cost as per the books of account was acceptable. 8. We have heard the rival submissions and have also gone through the paper books filed by the assessee as well as the copies of various judicial precedents which have been relied upon by the assessee. As far as the deletion of addition of Rs. 3,58,753/- pertaining to undisclosed investment in stock is concerned, the entire controversy has arisen on account of certain loose documents found during the course of search which indicated that there were undisclosed sales of Rs. 50,67,360/-. However, we note that as per the order of the Ld. CIT(A), in page 9, the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition on account of undisclosed investment in stock, which is relatable to undisclosed sales, cannot be sustained. Finding no perversity in the order of the Ld. CIT(A) on this issue, we uphold his findings and dismiss the ground raised by the Department. 8.2. As regards the deletion of addition of Rs. 85,82,593/- pertaining to addition on account of difference in cost of construction as per the books of account and as per the report of the DVO, it is an undisputed fact on record that no incriminating material or evidence was found during the course of search which could indicate that the assessee had made investment towards cost of construction outside the regular books of account. We also note that the Ld. CIT(A) had deleted the addition in this year by following the order of the Ld. CIT(A) for the immediately preceding assessment year. The relevant observations and findings in the order of the Ld. First Appellate Authority for AY 2016-17 are being reproduced herein under for a ready reference:- The AR was asked to produce the bills in respect of the construction and in response the AR produced the ledger of building construction account along with the bills which were got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 25.10.2021, wherein it had been held that in assessment framed u/s. 153A of the Act, addition could only be made on the basis of some incriminating material and since no incriminating material had been found in respect of the construction activity, no addition could be made on the basis of the report of the DVO. In these two cases, the coordinate Bench of ITAT, Chandigarh had followed the judgment of the Hon'ble Delhi High Court in the case of Abhinav Mittal reported in 351 ITR 20 (Delhi), wherein the Hon'ble Delhi High Court had held that since no material was found in the search and seizure operations which could justify the Assessing Officer's action in referring the matter to the DVO for his opinion on valuation of the said properties, then the valuation arrived at by the DVO would be of no consequence. Accordingly, in view of the above cited judicial precedents as well as the factual finding recorded by the Ld. CIT(A) in assessment year 2016-17, which, in our opinion, is both sound as well as logical, we have no hesitation in upholding the same. Accordingly, the ground raised by the Department on this issue also stands dismissed. 9. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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