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TMI Blog2023 (11) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 2014-15 by taking into consideration the book value at Rs. 20455325/- as against Rs. 22629300/- estimated by the valuation cell. 3. That the Ld. CIT(A) has erred in not appreciating the fact that the overall difference in the valuation report for all the years taken together is less than 10% and cannot be taken as a base for making the addition as the valuation report is just an estimate and cannot be taken into consideration for making the addition. 4. That the Ld. CIT(A) has erred in adopting the value estimated by the DVO ignoring the fact that the same has been made by taking into consideration CPWD rates instead of PWD rates. 5. That the Ld. CIT(A) has erred in not appreciating the fact that the difference in valuation has been calculated without taking into consideration amount paid by Abdul Majid Sheikh on behalf of the assessee to M/s Bacha Construction Co. against which reopening has been directed u/s 150 of the Income Tax 1961. 6. That the Ld. CIT(A) has erred in rejecting the objections of the assessee in summary manner ignoring the binding decision of Hon'ble Supreme Court in the case of Sunita Mann Singh as reported in 393 ITR 121. 7. That the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case the income tax matters were looked after by the director who was admitted in AAIMs hospital New Delhi for endovascular surgery. Following honourable apex court judgment on condonation of delay in filing the appeal on account of exceptional circumstances citation [1956] 29 ITR 607; the said delay is condoned, and appeal is admitted for hearing on merits of the case. 6. Briefly the facts are that the assessee the assessee was engaged in construction activity. The AO stated that that the payments which are received through banking channel only relates to it and the payments made in cash by Sh. Abdul Majeed Sheikh to various parties including one of the directors, does not relate to it, have no justification and does not hold good because M/s. Baccha Infrastructure had confirmed in its reply that the payments were received from M/s. Abdul Majeed Sheikh in connection with construction on the site of the assessee company and this fact has been admitted by the assessee company but it was not sure of quantum of payment made by Sh. Abdul Majeed Sheikh to M/s Baccha Infrastructure. Further, Sh. Muzaffar Ahmad Dar had also admitted that the documents and the transactions mentioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O did not reject the books of accounts and Mr. Abdul Majeed Sheikh had stated different things at different times and has claimed that as per the ledger accounts the amount due from M/s. Golden Tulip Hospitality Pvt. Ltd. was Rs. 3,88,27,500/- during financial year 2013-14 whereas as per the slip the amount due from the company is Rs. 1,32,32,100/-. As per the AR, the expenditure was made in cash and not recorded in the books because no payment was made by the assessee as accepted by M/s. Bacha Infrastructure also. The AR also refers to the reference made to the DVO and report given by him estimating the cost of construction at Rs. 2,26,29,300/- as on 31.02.2014 as against the value shown in the books of accounts at Rs. 2,04,55,325/- and argued that if AO's version was accepted then why this difference was not added by the AO as pointed out by the DVO. The AR also refers to the statement of Sh. Muzaffar Ahmad Dar recorded in Hindi, and claimed that he was not knowing Hindi well. As per the AR, on accounting treatment also, the addition is not sustainable because it will increase the 'building WIP' on asset side and 'unsecured loan' on liability side of the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s three brothers wanted to enter into partnership agreement with Mr. Abdul Majeed Sheikh, however they opted for incorporation of the company and the same was incorporated on 02.07.2013 under the name of M/s. Golden Tulip Hospitality Pvt. Ltd. which is also confirmed from the first entry of Rs. 2.50 lacs mentioned in the said document. The AO made the addition on the basis of a document which was duly confronted to the assessee and the genuineness of the transactions were also verified through notice issued u/s 133(6) to M/s. Bacha Infrastructure Pvt. Ltd. who confirmed that they were awarded work for construction of guest house/hotel in the name of Golden Tulip Hospitality Pvt. Ltd. for an amount of Rs. 9 core but work to the tune of Rs. 93 lacs only have been carried out and the payment of this amount of Rs. 93 lacs was made by Mr. Abdul Majeed Sheikh. The document was also confronted to Sh. Muzaffar Ahmad Dar one of the director whose statement was recorded under oath u/s 131 where he clarified the issues and confirmed the payments and genuineness of the documents. These transactions were not recorded in the books of company although relates to the construction of Hotel buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Year 2013-14 at Rs. 2,26,29,300 and the cost declared by the assessee in its books at Rs. 2,04,55,325 for Financial Year 2013-14, which comes to Rs. 21,73,975/-. Hence, the addition to the extent of Rs. 21,73,975/- is sustained and the appellant gets relief of the balance amount. 8. The learned council for the assessee has submitted that the Ld. CIT(A) has erred in not appreciating the fact that the overall difference in the valuation report for all the years taken together is less than 10% and cannot be taken as a base for making the addition as the valuation report is just an estimate and cannot be taken into consideration for making the addition; that he has erred in adopting the value estimated by the DVO ignoring the fact that the same has been made by taking into consideration CPWD rates instead of PWD rates; that the Ld. CIT(A) has erred in not appreciating the fact that the difference in valuation has been calculated without taking into consideration amount paid by Abdul Majid Sheikh on behalf of the assessee to M/s Bacha Construction Co. against which reopening has been directed u/s 150 of the Income Tax 1961 and that he has erred in rejecting the objections of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no 4 on page no 22-25 of the PB] b) The Ld. AO has even failed to appreciate that the seized document itself refers that the expense was made by Abdul Majeed Sheikh. Refer page 23 of PB. The relevant snapshot is reproduced as under: - c) That Sh. Abdul Majeed Sheikh has filed a case in Srinagar Court and had claimed a sum of Rs. 57180100/- receivable against the appellant. Refer page 26 of the paper book relevant para no.3 d) During the assessment proceedings, the Ld. AO confronted with the ledger account in which total amount due from the appellant was to the tune of Rs. 38827500/-. Refer page 26 of the paper book relevant para no.3 e) During the assessment proceedings, notice u/s 133(6) was issued to M/s Bachcha Construction and he has acknowledged that the amount was received from M/s Sheikh Suppliers prop. Abdul Majeed Sheikh and that none of the payments was received from the appellant company Refer Page no 27- 28 of the PB. [Refer para no.4.1.1 of assessment order placed at page no 27 and 28 of paper book] 12. That on the basis of submissions, the Ld. CIT(A) has directed the AO u/s 150 to open the case of Sh. Abdul Majeed Sheikh and the same are placed at page no 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5), as the case may be, to the Assessing Officer and the assessee, within a period of six months from the end of the month in which a reference is made under sub-section (1). Particulars Date Date of reference 29.12.2020 vide letter dated ITBA/AST/S/77/2021/1029316164 Page no 40 DVO valuation report 12.08.2021 Page no 40-48 Date of assessment order 12.04.2021 Page no 20-39 From the above factual matrix, your Honor will find that the valuation report relied upon by the CIT(A) was barred by limitation and as such, no cognizance is required on the said report. In this regard, reliance is being placed upon the following case laws: - a) [2021] 126 taxmann.com 158 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Assistant Commissioner of Income Tax, Central Circle-1 (3), Kolkata v. Narula Educational Trust In the aforesaid facts and circumstances, it is held that the DDIT (inv.) could not have referred the question of cost of construction/valuation of the assessee's building to the Valuation Officer in the year 2014; and thereafter, since the DVO did not present the valuation report after Assessing Officer has referred the valuation vide lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be faulted and the same is confirmed the reasons given supra, [Para 22] f) 2023 (8) TMI 431 - ITAT DELHI KAY JAY PROJECTS PVT. LTD. VERSUS DCIT, CENTRAL CIRCLE, NOIDA Assessment u/s 153A - Addition towards the cost of construction of the building - Reference made to Id. DVO u/s 142A -HELD THAT:- Admittedly, no incriminating material has been found during the course of search qua this addition towards cost of construction. This fact is evident from the perusal of the orders of the lower authorities. Sole basis of the addition is only the valuation report furnished by the DVO which has been obtained by the Id. AO during the course of search assessment proceedings Then, the said report cannot constitute incriminating material found during the course of search. Hence, we have no hesitation to hold that no addition could be made by placing reliance on the said valuation report while framing the assessment u/s 153A of the Act in the hands of the assessee This issue is now well settled by the recent decision of Sargam Cinema vs. [2009 (10) TMI 569 - SC ORDER] and in the case of CIT vs. Nirmal Kumar Aggarwal [2018 (10) TMI 2002 - SC ORDER] as referred to supra in the contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermine cost of construction-ln view of fact that Section 142A was inserted by, Finance (No.2) Act. 2014 (23 of 2004) and subsequently again substituted by Finance Act, 2010 (14 of 2010) and Finance (No.2) (225 of 2014) as proviso to sub-section (3) of Section 142A as it existed-during relevant period, reference to Departmental Valuation Officer could be made because assessment in present case had not become final and conclusive because appeal preferred by Revenue under section 260A was pending before Rajasthan High Court- However, in view of finding recorded by Tribunal that local Public Works Department rates were to be applied and adopted in place of Central Public Works Department rates. High Court did not find any good ground to interfere in impugned judgment on this issue on merits-Revenue's Appeal dismissed." b) [2013] 35 taxmann.com 179 (Madras) HIGH COURT OF MADRAS Commissioner of Income-tax, Coimbatore v. K. Jayakumar Section 69 of the Income-tax Act, 1961 - Unexplained investments [Immovable properties] - Assessment year 1998-99 - Assessee constructed a shopping cum residential complex - Assessing Officer on basis of valuation done by DVO, adopted CPWD rates and compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking the value determined by the DVO as base. This is not in order. The amount shown by the assessee is the base and the percentage is to be computed on this. The chart submitted by the Ld. AR on page 12 of his broad submissions in appeal no. 261/ASR/2023, as it pertains to the two assessment years under consideration, should be as below: FY Declared by the assessee Adopted by the DVO Difference Percentage difference A B C=B-A D=C/A % 2013-14 2,04,55,325 2,26,29,300 21,73,975 10.63 2018-19 84,56,217 93,55,000 8,98,783 10.63 In view of the above this contention and ground of the assessee does not hold good and deserves to be rejected. 2. Further the Ld. AR claimed that the discount/rebate on account of self supervision, allowed by the DVO @ 3.50% was too low as compared to much higher ratio allowed by various judicial authorities. In this regard it is submitted that the ratio of this allowance may vary from case to case on the basis of facts of the case. In the instant case, the construction has been supervised by third parties which includes an individual-Mr. Abdul Majid Sheikh and a contractor/builder named M/s Bachcha Construction. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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