TMI Blog2017 (12) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 25-26/Rjt/2011 - - - Dated:- 5-10-2017 - Shri S. S. Godara, Judicial Member And Shri Manish Borad, Accountant Member Assessee by : Shri Chetan Agarwal, AR Revenue by : Smt. Usha N. Shrote, Sr DR ORDER Per Manish Borad, Accountant Member ITA Nos. 33 42/Rjt/2011 are the cross appeals filed by the Revenue and assessee respectively against the order of the Commissioner of Income-tax (Appeals)-III, Rajkot dated 15.11.2010 for AY1998-99. ITA Nos. 34 43/Rjt/2011 are the cross appeals filed by the Revenue and assessee respectively against the order of the Commissioner of Income-tax (Appeals)-III, Rajkot dated 15.11.2010 for AY1999-2000.On receipt of notice in the Revenue s appeal for AYs 1998-99 and 1999-2000, the assessee-respondent has have filed Cross-Objections bearing Nos. 25 26/Rjt/2011.Since all these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. At the time of hearing before us, the assessee did not press the cross- objections bearing CO Nos. 25 26/Rjt/2011; hence, they are dismissed being not pressed. 3. So far as the appeals of the Revenue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1999-00 being unexplained expenditure under Section 69C of the Act. 8. Aggrieved by the order of the Assessing Officer, assessee went in appeal before the ld. CIT(A), who after considering the submissions of the assessee, restricted the addition to ₹ 12,41,579/- and ₹ 1,22,980/- for AYs 1998-99 and1999-2000 respectively, after considering the 25% deduction for State PWD rates and the deduction on account of architecture fees etc.. 9. Aggrieved by the aforesaid order of the ld. CIT(A), the assessee is further in appeal before us. 10. We have heard the rival contentions, perused the material placed before us and gone through the record carefully. Before us, the ld. Counsel for the assessee pointed out that, for the assessment year 1998-99, the addition made u/s 69C towards cost of construction on the basis of DVO report is allowable as deduction u/s 37(1) as business expenditure. In support of his claim, he placed reliance on the following judgments in this regard:- i. Krishna Textiles vs. CIT, 310 ITR 227 (Guj) Where the revenue contends that any amount found with another person belongs to assessee, the burden was on revenue to prove t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Section 69-C, then the fact that deduction could not be allowed under Section 37(1) was obvious and automatic then there was no need of amending Section 69-C by adding the proviso which has come into force w.e.f. 01.04.1999, and is relevant to assessment year 1999-2000 onwards and has not been made retrospective in operation. The assessment year under consideration is admittedly 1987-88 to which the effect of this amendment will not be applicable. Thus, taking into consideration the totality of the facts and circumstances of the case, the revenue authorities are not justified in making and/or confirming the disputed addition in as much as even if the assessee did incur expenditure of ₹ 1,92,261/- in purchasing coal, lignite etc. from GMDC, the equivalent debit in the profit and loss account would neutralize each other and no addition could be made. [para 21] ii. Amit Estate Organizer vs. ITO in ITA No.414/Ahd/2005 (ITAT, Ahmedabad) He further placed reliance on the judgment of Hon ble jurisdictional High Court in the case of CIT vs. Star Builders, reported in [2007] 294 ITR 338 (Gujarat), wherein it was held as under:- Section 69 of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven facts and circumstances of the case, delete the addition of ₹ 12,41,579/- and accordingly allow this ground of appeal for Assessment Year 1998-99. 12. With regard to the addition of ₹ 3,72,732/- made by the Assessing Officer u/s. 69C of the Act for Assessment Year 1999-2000 on account of unexplained expenditure, the ld. CIT(A) sustained the same to ₹ 1,22,980/- by re-worked out the cost of construction at ₹ 7,49,255/- instead of the cost of construction estimated by the DVO at ₹ 9,99,007/-. 13. At the time of hearing before us, ld. Counsel for the assessee submitted that the books results were accepted by the Assessing Officer for the year under consideration and did not point out any defects in the books of accounts of the assessee. Thus, he pleaded that the reference to the DVO is invalid as the books of accounts were not rejected by the Revenue Authorities. To support his contentions, he also placed reliance on the following judgments:- i. Sargam Cinema vs. CIT, 328 ITR 513 (SC) In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined by the Valuation Officer andthe actual cost as shown by the assessee, the Assessing Officer has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of thebuilding in question and that the books of account do not reflect the correct cost of construction. Under the circumstances, there was no occasion for the Assessing Officer to make a reference to the Valuation Officer. As held by the Supreme Court in the case of Sargam Cinema(supra),unless the books of accounts are rejected, the Assessing Officer cannot make a reference to the Valuation Officer. The reference made to the Valuation Officer, not beingin consonance with the provisions of law, was, therefore, invalid. Accordingly, the report made by the Valuation Officer pursuant tosuch an invalid reference could not have been made the basis for addition under section 69 of the Act. iii. CIT vs. Vijaykumar D. Gupta, 365 ITR 470 (Guj) Addition made by AO under Section 69B for unexplained investment in house property on the basis of Valuation Officer s report without rejecting books of assessee was invalid 14. From the perusal of above judg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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