TMI Blog2014 (2) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... erial and solely on the basis of the report of the DVO, there cannot be any finding with regard to the undisclosed income - No material has been found at the time of search for initiating proceedings under Section 158-BD of the Act. Rectification of mistake u/s 154 of the Act – Held that:- Solely on the basis of the Valuation report, block assessment cannot be made - it is not open to the appellant to tax again in the guise of undisclosed income – Relying upon the decision in the case of M/s. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA]- the undisclosed income unearthed as a result of search - The scope and its ambit is limited in that sense to materials unearthed during the search - The Appellate Authority as well as the Tribunal after considering the matter in detail corrected the mistake committed by the Assessing Officer – thus, there was no infirmity or irregularity in the order passed by the Appellate Authority and the Tribunal – Decided against Revenue. - ITA NO.369/2007 - - - Dated:- 30-1-2014 - Dilip B Bhosale And B Manohar, JJ. For the Appellant : Sri K V Aravind, Adv. For the Respondent : Smt Vani H, Adv. JUDGEMENT:- The revenue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure incurred for the construction of buildings, referred the matter to the District Valuation Officer (for short DVO'). The DVO submitted a report estimating the cost of construction of two buildings at Rs.64,71,483/- and Rs.4,72,426/- respectively. The Assessing Officer taking into consideration the difference of cost of construction of the buildings as undisclosed income at Rs.20,97,351/-and assessed to tax for the Block assessment period by its order dated 28-06-2002. 3. The assessee being aggrieved by the order passed by the Assessing Authority preferred an appeal before the Appellate Authority in ITA No.236/2002-03, contending that the order passed by the Assessing Authority is contrary to law. The report submitted by the DVO is also contrary to law. The Appellate Authority after considering the matter in detail held that the difference between the valuation adopted by the assessee and the DVO was a matter of opinion based upon which, the undisclosed income computed on such opinion cannot be brought to tax in the block period. Accordingly by its order dated 16-09-2002 allowed the appeal in part and set aside the order insofar as the block assessment period is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment period. In support of her contention, she relied upon the judgment reported in (2010) 321 ITR 362 (SC) in the case of ASSISTANT COMMISSIONER OF INCOME TAX V/S HOTEL BLUE MOON; (2001) 247 ITR 448 (Bombay) in the case of COMMISSIONER OF INCOME TAX v/s VINOD DANCHAND GHPDAWAT; (2007) 294 ITR 143 (Delhi) in the case of COMMISSIONER OF INCOME TAX v/s ASHOK KHETRAPAL; and (2009) 29 DTR 229 (Gauhati) in the case of COMMISSIONER OF INCOME OF TAX v/s BIMAL AUTO AGENCY and sought for dismissal of the appeal. 7. The above appeal was admitted for considering the following substantial questions of law: 1. Whether the Appellate Authorities were correct in setting aside the Block Assessment based on the material detected in the course of search in the case of the partner who had informed that undisclosed income had been contributed by him in putting up Vasudev Towers which building on being valued by the District Valuation Officer, disclosed that there was difference in the cost of construction from that which has been declared which had been brought to tax in the block period correctly by the Assessing Officer ? 2. Whether the Appellate authorities were correct in procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nating documents were traced. However, certain documents like bills of materials purchased, labour charges paid and some cheques issued by the Firm were seized. The assessee- Firm has only two partners i.e. Nagendra Baliga and his wife. Construction of two buildings is the maiden project of the assessee-Firm. As on the date of search, the building was not completed and there was no income from the building. There was no positive comments from the DVO with regard to suppression of material facts by the assessee which would amount to undisclosed income. The Managing Partner of the Firm is primarily a Jeweller by profession, constituted a Firm to take up the work of construction of the buildings. The difference in the cost of construction cannot constitute undisclosed income for the block period. On verification of the revised report submitted by the DVO, the differences between the valuation of the assessee- Firm and the DVO is less than 15%. There is no specific finding by the Assessing Officer with regard to any concealment. Further, there was no material found during the search indicating that there were expenses incurred on construction by the assessee that were not recorded in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition under Section 132A of the Act. Further, in a judgment reported in (2009)29 DTR 229 (supra), the Gauhati High Court held that, the report of DVO does not constitute a material or information to the search. Paragraph 13 of the judgment reads as under: Admittedly, no evidence or materials was discovered in the course of the search of the premises of the group to which the assessee belongs. The undisclosed income insofar as the building is concerned was solely made on the basis of the report of DVO as obtained by the search party. The report of the DVO does not constitute materials or information relatable to the search. Such a view have been recorded in the judgments of the Madhya Pradesh High Court in CIT v/s Khushlal Chand Nirmal Kumar (supra) and Delhi High Court in CIT v/s Manoj Jain (supra) and CIT v/s Ashok Khetrapal (supra). While expressing our respectful agreement with the said views, it has to be held that the determination of undisclosed income of Rs.40,04,369/- in respect of the building in question being solely on the basis of the report of the DVO was rightly interfered with by the learned Tribunal. The said conclusion of the learned Tribunal, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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