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TMI Blog2023 (8) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... r our consideration. On the basis of issues involved in the aforesaid appeals filed by the revenue, these appeals can be separated in two parts, Part one for unabated years i.e. ITA Nos. 188-191/RPR/2019 for the assessment years 2012-2013, 2013-2014, 2014-2015 & 2015-2016 and Part two for abated years i.e. ITA Nos. 192-193/RPR/2019 for the assessment years 2016-17 & 2017-18. 4. Part one : Since similar and identical issues have been raised by the revenue in, ITA Nos. 188-191/RPR/2019 for the assessment years 2012-2013, 2013-2014, 2014-2015 & 2015-2016, except difference in quantum, therefore, for the sake of convenience and brevity, we shall first take into consideration, the appeal of the revenue in ITA No.188/RPR/2019 for the A.Y.2012-2013 as a lead case and the result of the same will apply mutatis mutandis to the other appeals for the unabated assessment years also. The sole ground raised by the revenue in ITA No.188/RPR/2019 is read as under: - 1. "On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the additions made by the Assessing Officer of Rs. 2,28,39,650/- on account of undisclosed investment without appreciating fact that the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hand of society for the A.Y. 2017-18. After being given proper opportunity of being heard, the case was centralized to the central circle- 1, Raipur (CG) under section 127 of the income tax Act 1961, vide order dated 20.02.2017 of the Commissioner of Income Tax (Exemption) Lucknow. Consequently, notice u/s 153A of the Act was issued on 08.05.2017 for AY 2011-12 to 2016-17. The assessee in reply, filed returns of income for AYs 2011-12 to 2016-17 on 08.05.2017 declaring the returns of income for the relevant assessment years as under:- A.Y. Date of filing of return u/s 139(1) Returned income (In Rs.) Date of Notice u/s 153A issued to the assessee Income declared in return u/s 153A (Rs.) Additional income offered by the assessee (In Rs.) 2011-12 27/09/2011 Nil 08/05/2017 Nil Nil 2012-13 28/09/2012 Nil 08/05/2017 Nil Nil 2013-14 27/09/2013 Nil 08/05/2017 Nil Nil 2014-15 30/09/2014 Nil 08/05/2017 Nil Nil 2015-16 30/09/2015 Nil 08/05/2017 Nil Nil 2016-17 04/10/2016 Nil 08/05/2017 Nil Nil 2017-18 30/10/2017 31,47,030/- - -- - 7. During the course of assessment proceedings, copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age cost of investment @ Rs. 1847/- derived including interest on cost of borrowed fund involved to the tune of Rs. 16/- crore, Ld AR also made a request not to refer the matter to DVO u/s 142A of the Act, but was failed to furnish any valuation report from an approved valuer. The AO also observed that the submission of the assessee was without any support in terms of documentary evidences which could substantiate the claim of assessee with regard to value of the investment as depicted in the Audit Report. AO further have mentioned that during the search proceedings one paper marked as page no 18 LP-1 was found from the business premises of the assessee, it was a certificate dated 07.04.2015 issued by a Chartered Accountant, showing investment in building at Rs. 4913.24 lacs, which is different from the investment shown in the audited balance sheet for the AY 2015-16. AO, thus has referred the matter to DVO for estimating the fair value of purchase and cost of construction u/s 142A of the Act. The report of DVO vide letter no DVO/BPL/IT-29/2017-18/489 dated 15.12.2018 was received. DVO has presented an investment comparison in its report which shows value of investment as declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of ITAT Jabalpur in in the case of Prince Rai v. Income- tax Officer, Ward-Damoh, (M.P.), reported in (2021) 130 Taxmann.com 463 (Jabalpur-Trib.), wherein, it has been held that "Where assessee had filed return on presumptive tax basis under section 44AF and he had not maintained books of account and Assessing Officer made reference to DVO with regard to construction cost incurred by assessee and made additions on account of valuation difference between cost incurred as per DVO's report and as claimed by assessee, since question of validity of reference made by Assessing Officer to DVO without rejecting assessee's books of account and other issues raised by assessee were not adjudicated upon by Commissioner (Appeals), matter was to be remanded for fresh consideration". In view of the decision cited, it is further submitted that since in the present case also certain grounds of appeal with respect to validity of reference made to DVO by Ld AO without rejecting books of accounts of the assessee was not adjudicated by the LD CIT(A) the matter is suitable to be restored back to the files of AO for fresh consideration. 13. To counter the arguments of the department, for un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CA has considered both the capitalized and un-capitalized amount 017 account of building as he was required to certify the total investment made by appellant. Considering both the figures disclosed in books, the amount certified by CA is more than the figure disclosed in regular books and so there is no case that any evidence was found to the effect that actual investment is more than that disclosed in books. It may kindly be noted that the AO refereed the matter of valuation to DVO stating that the certificate of CA certified a higher amount of investment in buildings. The above explanation shows that such conclusion of AO is actually incorrect and the reference made to DVO is on wrong premise, ii) Assuming without admitting that there is difference in figures, it is submitted that the certificate issued by a Chartered Accountant is not an evidence of investment and the same cannot be considered to be an incriminating material. 4. The search look place on 01.10.2016. The details of dale of filing return u/s 139 are mentioned in the fable given 077 page 3 of assessment order. As per these dates, the assessments upto AY 2015/16 remained un-abated while AY 2016/17 and 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t quality reports ore prepared The above guidelines clearly demonstrate the intention of legislature in providing time-limit of 6 months in sub-section (6) of sec. 142A. 11 is also submitted that in absence of any time-limit, lot of inconvenience would be caused to assessees which will ultimately result into injustice to the assessees, which, as per the above decision of Hon'ble Supreme Court, is a consideration to be kepi in mind to decide as to whether a particular condition is mandatory or not. Therefore, considering all the above facts, it comes out that provisions of sec. 142A(6) are mandatory in nature and non-compliance of such mandatory provision will result into the report of DVO not capable of being considered for the purpose of assessment 4 On page 7, para 7(ii) of assessment order, it is mentioned that reference to DVO was made on 04.01.2018. Therefore, as per mandatory condition of sec. 142A(6), the DVO was required to prepare his valuation report by 31.07.2018 and also to forward a copy of the same to the assessee and the AO by 31.07.2018. As against this, the valuation report submitted by DVO is dated 15.12.2018, which was made available to the assessee on 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 28.08.2015.- 380 ITR 573 (Del): "Summary of the legal position" 37. In a conspectus of Section 153A(J) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under.: I) Once a search takes place under section 132 of the Act, notice U/S 153A(J) will have to be mandatorily issued to the persons searched requiring him to file returns for six AYs immediately preceding the previous year relevant 10 the AY in which the search lakes place. II) Assessments and reassessments pending on the date of the search shall abate. The total income for such ATs will have 10 be computed by the AOs as a fresh exercise. III) The A0 will exercise normal assessment powers ill respect of the six years previous 10 the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax.*" IV) Although Section 153A does not say that additions should be strictly made on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) viii) CIT V/s. IBC Knowledge Park (P) Ltd. (2016) 3851TR 346 (Kar.) ix) PCIT V/s.Ms. Lata Jain (2016) 384lTR 543 (Del.) x)ClT Vis. Gurinder Singh Bawa (2017)79 taxmann.com 398 (Bom.) xi) PClT V/s. Meeta Gutgutia (2017) 395 lTR 526 (Del) xii) ClT V/S. SKS lspat & Power Ltd. (20l7) 398 1TR 584 (Bom.HC) xiii) CIT V/s. Deepak Kumar Agrawol &Ors. (.2017) 299 .CTR 62 (Bom.HC) (xiv) CIT Vs. Jaya Ben Ratila Sorathia Dated 02.07.2013 Tax Appeal No. 914 of212 (Guj -HC) (xv) ACIT Vis. Budhia Marketing Pvt. Ltd -173 TTJ 649. (xvz) MukeshSangla Vis. DClT - 21 IT] 172 (Ind) (xvii) Amandeep Singh Bhatia Vis. ACIT - 29 IT] ] (Ind) (xviii)Sanjay Agarwal Vis. DCIT -169 TT] 2821291 (Hyd) (xix) Himanshu B Kanakiya - 46ITR (Trib) 756 (Mum) (xx) Anant Steel Pvt Ltd t//s. ACIT - 28 IT] 47 (Ind) (xxi) DeIT Vis. Kalani Brothers (Indore) Pvt Ltd - (2016) 27 ITJ 286 (Ind-Trib) (xxii) Chandrabhan lalchandani Versus ACIT-1 (1), 'Bhopal - ITA No.lT(SS)A Nos. 121 to 126/lnd/2015 order dated 28.10.2016 (xxiii) Rawal Das Jaswani Versus ACIT (2015) 43 CCH 606 (Raipur- Tnb) (xxiv) In- the case of Pr. CIT vs Lata Jain (Delhi HC dated 29.04.2016) (2016) 384 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal bench of Indore have held that "these appeals for assessment years 2009-10 to 2012-13 are concluded and no abate assessments. The AO has not time to issue notice u/s 143(2) of the Act and until and unless there is an incriminating material found during the course of search no addition can be made. Nowhere in the assessment order shows that additions are based on the incriminating material even in the order of the Ld. CIT(A). Additions are only made during the course of assessment proceedings by calling the assessee for various details such as books of accounts various documents and assessment was completed. Therefore once the assessments are concluded/non- abated, addition cannot be made unless there is on incriminating material found during the course of scorch. This legal aspect has already been considered by us in the above appeals in 1T(SS) A No 277 to 281/Ind/2017. In view of our decision above the same is to apply in to in all the other present appeals also. We therefore in view of our decision in those appeals, the orders of the Ld. CIT(A) are reversed and the appeals filed by the assessee are allowed. ". (xxxi) In the case of DCIT(Central)-1 Indore v/s M/s. MCS Tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent decisions in the cases of CIT Vis. Mahesh Kumar Gupta 2016*:-TIOL-2994-HC-Del and CIT-9 V/so Ram Avtar Verma in ITA No. 6112017 & 6212017 Dtd. 7.02.2017 and Pr.CIT v/s Meeta Gutgutia in ITA No. 30612017 dt, 25.05.2017 (Del). In the case of Pr. CIT V/s, Meeta Gutgutia (supra) after considering a catena of judgments on the scope of search assessments u/s.l53A, Hori'ble Delhi High Court has held that Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re- open at least six years of assessments earlier to the year of search, It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re- opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AY s would be justified. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly deleted by the Ld CIT(A) and the same deserves to be upheld. Our decision for unabated AY's: 2012-13 to 2015-16: 15. We have considered the rival submissions. Admittedly the search took place in the premises of assessee trust on 01.10.2016 and thus the AY 2012-13 to 2015-16 were unabated years. It is also well explained by the assessee and adjudicated by the Ld CIT(A) that no incriminating material was found during the search and seizure operations and the impugned additions made by the Ld AO based on material already available on record leading to additions of regular nature, on presumptive basis or without any cogent material are not sustainable according to the principle of law laid down by the hon'ble Delhi High court in the case of Kabul Chawla (supra) followed in catena of judgments / decisions / cases later reported and referred to supra. 16. Considering the facts and judicial discipline accorded by the higher courts, we are of the considered opinion that Ld CIT(A) has examined and issued in light of the factual matrix of the case and legality of the applicability of the provisions of section 153A for reopening of the assessment for unabated years or years for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years 2012-2013 to 2015-2016 arising out of ITA Nos. 188-191/RPR/2019, wherein the assessee has raised similar and identical grounds. Therefore, for the sake of convenience we shall take up the cross objection of the assessee in CO No.05/RPR/2022 for the A.Y.2012-2013, wherein the assessee has raised the following grounds :- 1. Ld. CIT(A) erred in not adjudicating upon ground no. 1 of appeal taken before him relating to addition of Rs. 2,28,30,649/- made by AO on account of difference between cost of construction debited in books and as estimated by DVO. The addition of Rs. 2,28,30,649/- made by AO is illegal, baseless and not sustainable on merits also. 2. In the facts of the case, Ld. CIT(A) erred in not adjudicating upon ground no. 2 of appeal taken before him relating to validity of reference made by AO to DVO u/s 142A. The reference made to Valuation Officer is illegal and consequent addition made in assessment is also illegal and not sustainable. 3. Ld. CIT(A) erred in not adjudicating upon ground no. 4 of appeal taken before him relating to validity of assessment order based on report of DVO which was submitted beyond stipulated statutory time period. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment of Rs. 10,22,98,836/- in aggregate for these two years. Copy of the valuation report was provided to the assessee and confronted to explain the reasons for such differences, assessee was also show caused as to why the difference in investment should not be treated as deemed income of the assessee for the respective years. It is further submitted that, the Assessee replied through its counsels / AR's before the AO had made various allegations that the time available for study the DVO's report was very short in terms of technicalities involved in the report. Certain technical discrepancies with respect to CSR rates, PWD SOR rates were also pointed out by the valuer of the assessee in DVO's reports. As per ld CITDR, these were only vague arguments of the assessee, the same should not be adhered to and therefor the Ld AO has rightly disregarded the contention and submission of the assessee and concluded that no technical discrepancy is pointed out in the report of DVO, thus, the same is appropriate and can be relied upon. In view of these submissions Ld CITDR has requested to set aside the order of Ld CIT(A) to restore the findings given under the assessment order by Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y including adoption of CSR rates in place of local rates and the rates which should have been applied are PWD SOR rates and not CSR rates. However, The AO did not find the explanation acceptable and submitted that no technical discrepancy is pointed out in the report of DVO and therefore, the same is appropriate and can be relied upon. Discussion and appellate decision: 4.4.2 1 have considered the facts of the case, contention raised by the appellant and findings of the AO. The appellant has taken a plea that reference made for valuation of investment made in Medical college and Hospital building of appellant to DVO u/s 142A of the Act was bad in law as well as use of such valuation report as an evidence in assessment proceedings was also bad in law for making addition of Rs. 3,59,80,960/- in AY 2016-17 and Rs. 6,94,64,900/- in AY 2017-18 on account of alleged excess cost of investment by the assessee from undisclosed sources and argument that impugned addition was not proper, justified and' was totally unwarranted. 4.4.3 The Key relevant facts emerging from the issue of making reference for valuation report to DVO and the valuation report used by AO for assessment ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of undisclosed investment-in the property by comparing value of investment estimated by DVO vis- a-vis declared by the assessee in his books of accounts, which shows a total lack of any application of mind of his own; vii) There is no denying of the fact that, appellant has maintained its books of accounts regularly which were subjected to Audit as well. On perusal of relevant audit reports it is apparent that auditors have not made any adverse remarks about any discrepancy or under valuation noted by them about investment in the said project. Further, the books of accounts of the appellant have not been rejected before making reference to DVO and not even after receipt of valuation report despite this AO has made huge addition based on difference in value of investment estimated by DVO vis-a-vis value/investment shown by the assessee. Although requirement of rejection of book results before making reference to DVO has been done away with by) making amendment in the stature book by Finance Act 2014 w.e.f 01.10.2014, still before making addition, the A.O. need to bring some cogent material to prove unaccounted investment in building and reject the books of accounts may be aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appellant and the addition made thereafter was bad-in-law because same was done without rejecting books of accounts. Further the DVO while submitting valuation report exceeded his jurisdiction and submitted the valuation report for the period which was not even included in the reference. With this factual back-drop, legal aspect of the issue are discussed in forthcoming paras. The law with respect to the reference for valuation has gone through huge litigation before and after introduction of section J42A of the Act. Before section 131(1)(d) were held to be non maintainable by the Supreme Court in the Amiya Bala Paul [2003] 130 TAXMAN 511 (Se) case: Section 55A of the income-tax Act, 1961 - Capital gains - Reference to Valuation Officer - Assessment Years 1982-83 and 1983-84 - Whether a Valuation Officer appointed under Wealth-tax Act can neither be called upon nor he would have jurisdiction 10 give a report either to Assessing Officer under Income-tax Act except when a reference is made under and ill terms of section 55A, or to a competent authority except under section 269L - Held, yes - In income-tax returns, assessee disclosed certain amounts which she had invested in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of on assessment mode on or before the 30th day of September 2004, and where such assessment has become final and conclusive on or before that date} except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. Explanation: in this section "valuation Officer" has the same meaning as in clause (r) of section (2) of the of the Wealth Tax Act 1957 (27 of 1957) Amended w.e.f 01.10.2014 For section 142A of the Income-tax Act the following section shall be substituted with effect from the 1st day of October, 2014, namely;- '142A. Estimation of value of assets by Valuation Officer. - (1) The Assessing Officer may, or the purposes of assessment or reassessment, make 0 reference to Valuation Officer to estimate the value, including fair market value, of any asset property or investment and submit a copy of report to him. (2) The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. (3) The Valuation Officer, on reference mode under sub-section (1), shale for the purpose of estimating the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) without rejection of books of accounts was in accordance to the prevailing provision of law and nothing was illegal about such reference and ratio of the judgment pronounce by Hon'ble Supreme Court in the case of Sargam Cinema vis CIT (2010) 328 ITR 513 (SC) and other case laws is not applicable to the facts of this case in view of changed legal scenario. 4.4.6 The position of law with respect to methodology adopted for preparing valuation report; The two method which are adopted by the DVO's for valuation are (i) Detailed or item wise method' and (ii) Plinth area rate ad Cost Index method, as prescribed in "Guidelines for Valuation of Immovable Properties 2009" duly notified by CBDT. The Detailed or Itemwise method is adopted when the detailed construction drawings or completion drawings are available with DVO and as per Guidelines for Valuation of Immovable Properties 2009 this method should be given preference over all the other methods. However, the Plinth area rate and Cost Index method is a commonly used method for determining the cost of a building by comparing with the known cost of building. The cost. of building depends on various major factors (i) the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the 'Plinth area rate' adopted by the DVO is 'Standard DPAR 2007 approved by DG, CPWD, New Delhi (have been adopted) in conformity with CBDT instruction no 1671, with due adjustments'. Thus the plinth area rates adopted by the DVO are for New Delhi to the year 2007. Further the DVO has not given the details of adjustments made in the standard plinth area rate on account of superior/inferior specifications. The cost of water and sanitary fittings have been considered at 15% as per CPWD rates, however, as per the local PWD rates the same should have been taken @ 7% to 8%. (iii) Cost index:- This is the most crucial and multi-dimensional factor affecting the valuation of irremovable property. The DVO has adopted two cost index i.e. (i) For all buildings (other than auditorium and shed) at 176.36% and (ii) For auditorium and shed at 894.15%. The DVO as adopted at par rates, applicable in New Delhi, in the case of appellant. The valuer of the appellant has collected data from the open market and obtained quotations for various building materials for construction of buildings and it was found that the cost index for FY 2018-19 came approx. 140-150%, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be determined in this appeal is "Whether the Assessing Officer is entitled to resort to section 69B of the Act and, consequently, refer the matter to the Departmental Valuation Officer, when the books of account were not rejected ?" 5. The main plea taken by the learned counsel for the assessee is that the onus probandi lies on the Assessing Officer to establish that the assessee has understated or concealed the actual cost of construction and without discharging the onus, the Assessing Officer is not empowered to rely upon the valuation given by the Departmental Valuation Officer, when the books of account were never rejected. 6. The learned standing counsel for the Revenue is not disputing the fact that the books of account furnished by the assessee were never rejected by the Department. 7. In the case on hand, it is beyond any cavil that the books of account furnished by the assessee were never rejected. No explanation was called for from the assessee stating that there was concealment or understatement of amount in the books of account. The initial burden cast on the Department to prove that there was understatement or concealment of income has not been discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that was recorded in the assessee's books. The Tribunal had not found that the books maintained by the assessee were not credible. Therefore, the Tribunal was not right in not accepting the valuation of house property submitted by the assessee." 9. In view of the findings recorded above and the law enunciated in the decisions referred to supra, this appeal deserves to be allowed. (3) CIT Vs. Khusha J Chand Nirmal Kumar 263 ITR 77(M.P.)- Section 158BC of the Income-tax Act, 1961 - Block assessment in search cases - Procedure for - Block period 1-4-1986 to 31-3- 1996 - Whether no additions could be made in income of assessee merely on basis of report obtained from Departmental Valuation Officer, whose evidence was not found during course of search - Held, yes - Whether, in instant case, since nothing was found during search in assessee's premises with regard to investment in house, Tribunal was justified in deleting additions made by Assessing Officer on account of unexplained investment in construction - Held, yes (4) ClT VS. Manoj Jain 287 ITR 285(Delhi)- Section 158BC of the Income-tax Act, 1961 - Block assessment in search cases - Procedure for - Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the sale deeds signified a rate of Rs. 8,500/- per sq. yd., which appeared to be low to the assessing officer and, therefore, he referred the matter of valuation to the DVO. The DVO submitted his report and indicated that in his opinion the total fair market value ought to be Rs. 3,41,33,000/- as against the declared value of Rs. 59,50,000/-. The difference of Rs. 2,81,83,000/- was added by the assessing officer by invoking the provisions of Section 69B of the said Act. 3. Being aggrieved by the said addition the respondent assessee preferred an appeal before the CIT (Appeals) who deleted the said addition after referring to the decision K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (SC). The Commissioner of Income Tax (Appeals) held that the addition had been made on the basis of the valuation report without there being any other material to indicate that any extra consideration had passed in respect of the said purchase of property. Thereafter, the revenue, being aggrieved by the order passed by the CIT (Appeals), preferred an appeal before the Tribunal which has been dismissed by the Tribunal by confirming the deletion made by the CIT (Appeals). The revenue is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the value as given in the valuation report of the DVO. 5. The law seems to be well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of the DVO cannot form the basis of any addition on the part of the revenue. In the present case there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition. In these circumstances, the question which has been framed is decided in favour of the assessee and against the revenue. The appeal is dismissed. (6) ClT VS. Lahsa Construction Pvt. Ltd 357 ITR 671 (Delhi) -, Section 142A of the Income-tax Act, 1961 - Estimate made by Valuation Officer - Assessment year 1999-2000 - Whether addition can be made solely relying upon report of Departmental Valuation Officer - Held, no [Para 5] [In favour of assessee] 1. Revenue in this appeal under Section 260A of the Income Tax Act, 1961 ("Act" for short) impugns order dated 25.06.2010, passed by the Income Tax Appellate Tribunal in the case 'M/s. Lahsa Construction Pvt. Ltd.' on the ground of perversity. The appeal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal does not require Interference. No substantial question of law arises. The appeal is accordingly dismissed. (7) CIT Pratap Singh Amrosingh Rajendra Singh 200 ITR 788 Held, that there was no dispute that the assessee maintained proper books of account and the same have been accepted in the past and no defects were pointed out in the books. The expenses were fully supported by the vouchers. Full details were also mentioned in respect of each item in the books. Simply because the valuation report was of a higher amount, the books could not be said to be unreliable. The Tribunal, was, therefore, justified in deleting the addition of Rs. 55,780/- (8) CIT v/s Vijay Kumar D Gupta (2014) 3651TR 470 (Guj) " ..... Moreover, it is apparent that the only reason for making the addition under section 69 of the Act is that there is a difference in the cost of construction as determined by the Valuation Officer and as shown by the assessee. At no stage of the assessment proceedings does the Assessing Officer appear to have mentioned that the books of account are defective or that the cost of construction as shown in the books of account is not the true cost of construction. Thus, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has to apply his mind on the information, if any, collected and must form a belief thereon for re-opening of assessment-there has to be something more than the report of DVO for the belief of AO. By observing so, hon'ble court dismissed the appeal of revenue. 4.4.8 Considering the aforesaid fact and circumstances of the matter and the law as interpreted by several High Courts and the Hon'ble Supreme Court - the findings on this issue in respect of peculiar facts of this case are as below; i) Admittedly, the assessee company maintained its regular books of accounts supported by bills/vouchers and other records which were subjected to Audit. The AO has neither pointed out any defect in books nor brought any positive material all record to establish alleged unaccounted investment in different projects of appellant. Most importantly, AO has not even rejected the books of accounts even after receipt of valuation report. In view of these facts, valuation report obtained from DVO cannot form a foundation ipso facto for making addition towards alleged suppression or cost of investment. Neither DVO nor AO has pointed out that certain expenditure on certain items/construction was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 of construction provided b:y DVO. One should not lose sight of the fact that at the end of the day, cost derived by DVO in his report is nothing but an 'estimate' which is bound of have some amount of estimation, guess work & opinion involved and estimate cannot be 'exact'. After all it is an estimate done by an expert and it is a popular maxim 'to err is human'. It is evident from the very fact that; appellant has raised various discrepancies in the DVO's report. However, A.O. did not find it appropriate to invite counter comments of DVO on objections raised by the assessee. Although, it is a settled legal position that valuation report submitted by DVO is not binding upon AO, but in the present case AO has adopted and used the valuation report as if it is binding on him. Appellant has pointed out several glaring mistakes and omissions in valuation report, on which AO has maintained a conspicuous silence which is unbecoming of a quasi-judicial authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 1 am of the view that addition made merely on the basis of DVO's report is not sustainable. viii) The valuation report of DVO is not binding on the AO because it is merely an opinion of an expert. In the context of the controversy in issue, it may also be germane to notice the expression used by. legislature i.e. "estimate". Thus, resort can be made to the said provision by the AO for the purpose of "estimating" the value of any investment, bullion, jewellery or any valuable article etc. However, this is settled legal position that addition cannot be made solely on the basis of valuation report which is only give an estimate as held by various High Courts, discussed earlier. ix) It is apparent from record that assessing officer has not brought any material on record to establish that the assessee had made any unaccounted investment in construction of the buildings in question and that books of accounts do not reflect the correct cost of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loose paper LP-1 found during the course of search, a certificate by the Chartered Accountant certifying Investments of the trust is not fully reflected in the books of accounts of the assessee trust was a wrong presumption of the AO without appreciating the facts correctly. Ld CIT(A) has observed that the difference in amount of investment in Building in the Fixed assets of the assessee trust and the certificate of chartered accountant was on account of WIP (Work in Progress) of Rs. 2233.77 Lacs which was not taken into account by the Ld AO. As per books of accounts examined by Ld CIT(A) from balance sheet as on 31.03.2015 total fixed assets of the assessee was Rs. 3583.79/- Lacs and WIP building was at Rs. 2233.77 Lacs, which clearly shows that investment shown by the appellant is more than that of the amount shown in loose paper relied upon by the Ld AO. Ld AR submitted that this clearly shows that AO has taken the decision of referring the matter to DVO without properly appreciating the facts of the case. Ld AR therefor submitted that the AO has no reason to refer the matter to DVO, no incriminating material was unearthed during the search which leads the Ld AO to form a belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation was done is situated at Raipur, such adoption of rates applicable for a place entirely dissimilar in all respect from the place where actual property is located and investment was made, cannot be accepted. As per valuer of the assessee after collecting data from open market, the cost index for various building material for construction is worked out at 140%-150% as against 176.36% by the DVO, thus estimation of the DVO was on higher side. It is the submission that, since the additions made by the Ld AO were entirely based on the valuation report of the DVO without bringing any material or cogent evidence to establish that any investment, as alleged, was made out of the books. This is submitted that, as per settled law the additions made solely on the basis of valuation report is not sustainable in law, moreover, reliance on a valuation report with errors / mistakes and defects was a miscarriage of the justice. On this aspect, Ld AR relied upon various of judgments referred to supra. It was the prayer of the Ld AR, that the order passed by the Ld AO is void-ab-initio being based on a valuation report prepared on inapplicable, unjustified and unreasonable factors which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements by High Courts and coordinate benches of the ITAT, thus, in our considered opinion the same is on right footing. We therefore do not see any convincing reason to interfere with the findings of the CIT(A). Consequently, the appeals of the revenue in ITA 192- 193/RPR/2019 for AY 2016-17 are dismissed. 27. Appeals of the assessee for AY 2016-2017 and 2017-18 being IT(SS)A No. 16-17/RPR/2019 were also directed against the same common order of CIT(A)-3, Raipur dated 17.06.2021. Identical grounds were raised, except figures, as under: 1. Ld. CIT(A) erred in confirming addition of Rs. 91,33,327/- out of the addition of Rs. 3,59,80,962/- made by the AO on account of difference between cost of construction as per books and that estimated by Valuation Officer. The addition confirmed by Id. CIT(A) Rs. 91,33,327/- is arbitrary and is not justified and he ought to have deleted entire addition. 2. Without prejudice to ground no. 1, Ld. CIT(A) erred in confirming addition of Rs. 91,33,327/- out of the addition of Rs. 3,59,80,962/- without providing due and proper opportunity of hearing. Ld. CIT(A) was not justified in passing the appellate order ignoring request of appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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