TMI Blog2023 (8) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the provisions of section 153A for AY 2012-13 to 2015-16 could not be substantiated by the revenue, assumption of jurisdiction for these years was not justified. No reason to disturb the finding of the Ld CIT(A) on this ground. Whether rejection of books of account is mandatory or not for making a reference to DVO u/s 142A? - This has been discussed, deliberated and decided by the Ld CIT(A) without leaving room for any ambiguity, we therefor of the view that, ratio of law emanated by the order of ITAT Jabalpur in the case of Price Rai [ 2021 (7) TMI 1421 - ITAT JABALPUR] could not be applied in the present case, so the contentions of the revenue to restore the matter back to AO for fresh adjudication is not acceptable on this ground. Addition on the basis of DVO report - revenue contention that the Ld AO has validly invoked the provisions of section 142A of the act and therefore the additions made based on the report of the DVO by the Ld AO reduced by the Ld CIT(A) was an error and same needs to be corrected by setting aside the order of Ld CIT(A) and restoring back the order of the Ld AO - HELD THAT:- CIT(A) has decided the issues with a finding that the there were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 made by the Assessing Officer were based on an incriminating material marked as LP-l, page no. 18 duly scanned in the assessment order. 5. Part Two : For AY 2016-17 and 2017-18, the one and only ground of appeal of the department is different than that of for AY 2012-13 to 2015-16, though the same is similar and identical for these two abated years, therefore, the issue raised by the revenue in, ITA Nos. 192- 193/RPR/2019 for the assessment years 2016-2017 and 2017-18 which is identical, except difference in quantum, for the sake of convenience and brevity, we shall take into consideration the appeal of the revenue in ITA No. 192/RPR/2019 for the A.Y. 2016-17 and the result of the same will apply mutatis mutandis to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 of seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed to refer the matter to District Valuation Officer (DVO) for arriving at a fair value of the investment made in such purchase and construction. A question was also put by the Ld AO before the assessee that why the case should not be referred to DVO for estimation of cost of purchase and investment in immovable property for the period from 01.04.2010 to 31.03.2017. Assessee responded to the said query through its authorised representative, submitted explanations for cost involvement in acquisition of land at circle rate prescribed by the State Government and average 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, whereas the CA certificate marked as LP- 1, page 18, unearthed during the course of search proceedings, duly scanned in the assessment order was very much an incriminating material suitable to construct a foundation for reopening of assessment u/s 153A of the Act for unabated AY s i.e. AY 2012-13 to 2015-16, therefore, the order of Ld CIT(A) is liable to be quashed and the additions made by the order of AO deserves to be restored. In order to strengthen the argument of the revenue to restore the matter back to Ld AO, Ld CIRDR place his reliance on the judgment of coordinate bench 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 rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance sheet of AY 2015/16 and therefore, the case was referred to DVO. In this regard, it is submitted that :- i) We are enclosing herewith the schedule of fixed assets and of loans advances as on 31.03.2015 (page no.75 76) wherein the investment in buildings is reflected at Rs. 2740.41 lacs while in the schedule of loans advances, WIP is reflected at 2298.30 lacs. The amount of Rs. 2298.30 represents payments made against which capitalization was pending and so it was included in fixed assets while the figure of Rs. 2740.41 is the capitalized amount. While certifying the investment, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a time bound manner. As a result, the cases are decided in a hurry due to acute shortage of time and thus quality gets adversely affected In view oj this, it would be better if the cases aye referred. to Valuation Cell round the year so that Valuation Officers ore able 10 prepare high quality estimates. iii) A perusal of above guidelines shows that CBDT was concerned about references made by AOs to DVO belatedly and proper time being not available with the DVO for carrying out estimation of cost of construction and this is why provisions of sec. 142A(6) were incorporated in the Statute la provide time limit of 6 months so that 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for that particular year. 4.1.1 Ld AR of the appellant has strongly contended that provision of sec 153A of the Act provides that the assessment or re- assessment relating to any assessment year falling within the period of six assessment years, if pending on the dale of initiation of search shall abate whereas with regard to scope of provision of sec 153A that where no incriminating material was found indicating any undisclosed income, no additions or disallowance can be made for that particular year. Reliance has been place on the decision of Hon ble Delhi High Court in the case of CIT v/s Kabul Chawla of Delhi High Court in ITA No. 707/2014 dated 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sine qua non for making addition in assessment order passed u/s 153CI153A of the Act. The relevant case laws are as under:- i) Jai Steel (India), Jodhpur V/s. ACIT reported in (2013) 36 taxmann. cam 523 (Raj) ii) CIT (Central) V/s. M/s.Murli Agro Products reported in (2014) 49 taxmann.com 172 (Bom.) iii) CIT V/s. Continental Warehousing Corporation reported in (2015) 374lTR 645 (Born) iv) CIT V/s, Kabul Chawla reported in (2015) 380 1TR 573 (Del) v) PCIT V/s. Kurele Paper Mitts Ltd. reported in (2015) 3801TR 571 (Del) vi) PCIT V/s. Saumya Construction (P.) Ltd. (2016) 387 ITR 529 (Guj.) vii) CIT V/s. Lancy Constructions (2016) 66 ta.xm 'aJ777.com 264 (Kar.) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 289 to 291/Ind/2017; The jurisdictional tribunal bench of Indore have held that We therefore in the given facts and circumstances of the case and respectfully following the judgments referred and relied by the Id. Counsel for the assessee are of the considered view that no addition/ disallowance was called for assessment year 2008-09 to 2010- 11 as no incriminating material was found during the course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act. Accordingly all the three appeals of the assessee are allowed. (xxx) In the case of Omprakash Gupta vis ACIT (Centrall-ll, Bhopal IT(SS) Nos. 277 to 281/Ind/2017; the jurisdictional tribunal 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 stands dismissed. 4.1.3 It has been held in the case of CIT VIs Kabul Chawla (supra) that in absence of any incriminating material, the completed assessment cannot be reopened and reassessment cannot be made. The word 'assess' in section 153A is relatable to abated proceedings and the word 'reassess' to completed assessment proceedings. Completed assessments can be interfered with by the Assessing Officer, while u/s.153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Decision of Kabul Chawla (Supra) has been followed in 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption basis or without any cogent material, therefore, the impugned additions are also not sustainable in view of the case laws cited above, Ground No. 3 of A.Y 2012-13 to 2015- 16 is decided in the favour of the assessee and be treated as Allowed. 14. Ld AR has further submitted that in view of various judicial precedence setup by the higher judicial forums as relied upon by the assessee in its submissions (supra), since no incriminating material was found during course of search and seizure operation relating to assessment years for which assessments were already completed, the same cannot be reopened and reassessed by invoking the provisions of section 153A. It was therefor the prayer that the additions made by the AO for the unabated assessment years from 2012-13 to 2015-16 are 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgment pronounce by Hon'ble Supreme Court in the case of Sargam Cinema v/s 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. 18. As the issue, whether rejection of books of account is mandatory or not for making a reference to DVO u/s 142A has been discussed, deliberated and decided by the Ld CIT(A) without leaving room for any ambiguity, we therefor of the view that, ratio of law emanated by the order of ITAT Jabalpur in the case of Price Rai (supra) could not be applied in the present case, so the contentions of the revenue to restore the matter back to AO for fresh adjudication is not acceptable on this ground. 19. Now, we shall decide cross objections filed by the assessee in CO Nos. 05-08/RPR/2012 for the 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 adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset to argue the case on behalf of the revenue, Ld CITDR reiterated its submission as argued in the aforesaid para s. According to Ld CITDR, Ld AR has made the assessment with his utmost application of mind, Ld AO has observed that the assessee had made huge investment in purchase and construction of immovable property for medical college and hospital, thus, to ascertain the fair value of such investments, he referred the matter to Departmental Valuation Officer (DVO) u/s 142A of the Act. Contention of the AO was proved when a report of the DVO with comparison between the actual investment in the books of assessee and estimate made by the DVO have reflected a huge difference in the amount for Rs. 3,59,80,962/- and Rs. 6,63,17,874 for AY 2016-17 and 2017-18 respectively, which finally has revealed an enormous hidden investment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared by Assessee (Rs.) As per Valuation Report Difference (Rs.) 2016-17 53511154 89492116 35980962 2017-18 98628433 164946307 66317874 Total 152139587 254438423 102298836 4.4.1 Copy of valuation report was provided to the appellant and confronted to the assessee and was required to explain the difference between the value of investment shown in the books of account vis-a-vis cost of investment estimated by D.V.O. Assessee was also required to show cause as to why the difference in investment should not be' treated as deemed income of assessee of the respective year. In reply, the assessee submitted that the time available for study of DVOs report is too short, especially when a technical matter is involved. The appellant further submitted that the valuer of the assessee on perusal of report of the DVO has pointed out various discrepancy including adoption of CSR rates in place of local rates and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted the valuation report on 15.12.2018, against which various objections have been raised by appellant. Main objections being that valuation done by DVO cannot be used as an evidence because it has laced with discrepancies and based on subjective judgment of DVO; iv) There was search seizure operation conducted at the business premises of present assessee resulting into seizure/impounding of loose papers/documents/incriminating material. The AO has made reference of a certificate dated 07.04.2015 of M/s Abhishek Raja Associates showing investment in land and building of Rs. 4913 .24 lacs which is the only basis for making reference to the DVO. v) The period for which the valuation is required to be done as mentioned by the DVO in his report is from F.Y 2007-08 till 31.08.2018; vi) In the assessment order, the A.O. has not given any reason for making addition on account of differences in valuation of the building except relying solely on DVO's report and A.O. has not referred to any incriminating/seized materia1 except value estimated by the DVO in the valuation report. In other words, the AO has worked out the amount of undisclosed investment-in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptable ex-facie. Facts on record do not demonstrate any application of mind on the part of AO who has simply rested his decision on DVO s valuation report. The AO has placed total reliance on valuation report of the DVO as if that was gospel truth and binding on him. xi) Last but not the least, the AO has totally failed to bring any positive and tangible evidence to corroborate the allegation of excessive unexplained investment made in the building over and above the cost disclosed in the books of accounts. It has been held in the case of Smt. Amar Kumari Surana v/s CIT (1996) 89 taxman 544(Raj) that the burden is on the revenue to prove that real investment exceeded the investment shown in books of accounts of assessee. In the instant case, the AO has failed to discharge his onus of brining the necessary 'evidence on record. 4.4.4 The position of law with respect to reference for valuation and whether it is binding on the A.O. and whether addition can be made solely on the basis of valuation report; The main legal contention of the appellant remained to be that reference to DVO u/s 142A of the Act to determine cost of investment in projects of appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is most appropriate to refer to the relevant provision of sec 142A of the Act as existed before amendment and after amendment w.e.f 01.10.2014: Pre-amended: (1) For the purpose of making on assessment or reassessment under this Act, where the estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 698 [or fair market value of any property referred to in sub- section (2) of section 56] is required to be made, the assessing officer may require the valuation officer to make on estimate of such value and report the some to him. (2) The valuation officer to whom a reference is made under sub- section (1) shall, for the purpose of dealing with such reference, hove 011 the powers that be has under section 38 of the wealth tax Act 1957 (27 of 1957) (3) On receipt of the report from the valuation officer, the assessing officer may after giving the assessee an opportunity of being heard, take into account such report in making such assessee or reassessment 69A or section 69. Provided that nothing contained J this section shall apply in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957) On careful reading of amended provision, it is abundantly clear that before 01.10.2014, AO was not empowered to make reference to DVO u/s 142A(1) of the Act without expressing his dissatisfaction about correctness and completion of books of accounts and thus AO could make reference to DVO only after rejecting books of accounts. In the present case, reference to DVO was made u/s 142A LW.S 131(1)(d) of the Act vide letter dated 04.01.2018 to ascertain the cost of investment made in different projects of appellant. Since, the relevant provision of sec 142A of the Act has been amended w.e.f 01.10.2014 (as discussed herein before) which does not require the rejection of books of accounts as pre- condition 'for making reference 10 valuation officer.. Thus, in view' of amended legal provision, it is absolutely clear that the Assessing Officer can make a reference to Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. In view of this, I agree with the views expressed by A.O. in assessment order that reference made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Medical Science showing plans and front elevations of Hospital building, Architectural drawings of medical college Raipur Institute of Medical Science showing roads and building proposed location etc, Architectural .drawings of quarter Raipur Institute of Medical Science showing ground floor up to third floor plan, valuation 'method which is authentic and accurate as held by Hon'ble Rajasthan High Court in the case of CIT vs Hotel Joshi (supra), On the contrary the DVO adopted plinth area rate and cost index method which involves three major factors (i) Plinth area of the property, (ii) Plinth area rate and (iii) Cost index, 0) Plinth area of property:- The appellant has strongly contended that there are differences in plinth area as worked out by DVO vis-a-vis worked out by valuer of the appellant. For instance, appellant has pointed that the area of security cabin and panel room (item no 1.8 of DVO s report has been computed by DVO at 95,77 sqm whereas such area is nil as per report of valuer of the appellant. Similarly, the total area of shed computed by DVO is at 1822.80 sqm, however, the same is ]284.60 sqm as per report of valuer of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chouhan Resorts 359 ITR 394 (P H)- Section 698 of the income-tax Act, 1961 - Undisclosed investments - Assessment year 2007--08 - No addition could be made on account of undisclosed investment in construction of building on basis of report of DVO without books of account being rejected, wherein every expenditure relating to construction was recorded (2) Family of S.S.S. P- Subramanium Chetiar Vs. /TO 372 ITR 203(Mad) - Section 69B of the Income-tax Act, 1961 - Undisclosed investments (Valuation by DVO) - Assessment year 1996-97 - Whether primary burden to prove under statement or concealment of income is on revenue and it is only when such burden is discharged that it would be permissible to rely upon valuation given by District Valuation Officer (DVO) - Held, yes - Whether opinion of DVO, per se, is not an information and cannot be relied upon without books of account being rejected - Held, yes - Whether in instant case, since matter was referred to DVO without rejecting books of account of assessee, Assessing Officer was not entitled to resort to section 69B - Held, yes [Paras 8 and 9][In favour of assessee] 4. Even though this appeal was admitted on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 188 (Mag.)/12 taxmann.com 88 , has held as under (headnote) : The primary burden to prove understatement or concealment of income was on the Revenue and it was only when such burden was discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. The opinion of the District Valuation Officer, per se, was not an information and could not be relied upon without the books of account being rejected which had not been done in the assessee's case. Moreover, there was no evidence found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the return of the assessee. (Emphasis1 Supplied) (iii) In K. K. Seshaiyer v. CIT [ 2000] 246 ITR 351/[2001] 114 Taxman 353 (Mad.), a Division Bench of this court held as under (headnote) : When the actual cost of construction was duly recorded by the assessee and that cost also was set out in the agreement with the contractor, specifying the rates, and which rates had been accepted by the Tribunal, and there was no finding that the building was larger than the assessee had claimed or had better quality of construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 260A of the Income Tax Act, 1961 (hereinafter referred to as the said Act) being aggrieved by the order dated 30.11.2011 passed by the Income Tax Appellate Tribunal in ITA No.5266(Del)/2010 relating to assessment year 2007-08. It appears that this appeal had been admitted for hearing by an order passed by this Court on 30.07.2012. However, learned counsel for the parties pointed out that there is some typographical error in the question of law which has been framed. Consequently, we reframe the substantial question of law as under:- Whether the Tribunal fell in error in not placing reliance on the district valuation officer's report under section 142A and thereby deleting the addition of Rs. 2,81,83,000/- made by the assessing officer under section 69B of the Income Tax Act, 1961? 2. We have heard learned counsel for the parties. The facts are that the assessing officer made an addition of Rs. 2,81,83,000/- under section 69B of the said Act on the basis of a valuation report which he received from the District Valuation Officer (DVO). This was in respect of purchase of a property by the respondent/assessee at 2-B, Goela Lane, Under Hill Road, Civil Line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVO the revenue had to prove that the assessee had received extra consideration over and above the declared value of the same. That question was answered by this Court in favour of the assessee and against the revenue. The Division Bench in the case of Puneet Sabharwal (supra) had also placed reliance on the decision of Supreme Court in K.P. Varghese (supra) as also on another decision of a Division Bench of this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604/[2011] 197 Taxman 173 (Delhi) (Mag.) wherein this Court held that the primary burden of proof with regard to concealment of income was on the revenue and it was only when the said burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this Court in the same vein. One such case being the case of CIT v. Vinod Singhal (IT Appeal No.482/2010 decided on 05.05.2010) where, again, reliance was placed on the very same decision of the Supreme Court in K.P. Varghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala Devi [2009] 316 ITR 46. It was observed that there must be a finding that the assessee had received an amount over and above t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition made by the assessing officer. The respondent/assessee had disclosed sale consideration of as Rs. 39,00,000/- for sale of their 50% share, in the property to Mrs. Madhu Arora. Mrs. Madhu Arora and Mr. Om Prakash Arora paid an amount of Rs. 44.00.000/- to the four individual co-.owners for purchase of the balance 50% share. Thus, in all they had shown sale consideration of Rs. 83,00,000/-, instead of Rs. 2,84,72,600/-, as opined by the Departmental Valuation Officer. This property was sold in the period relating to the Assessment Year 2004-05 for Rs. 1,00,00,000/-. No addition was made by the Assessing Officer on this sale consideration. 5. Whether an addition can be made solely and on the basis of the report of the Departmental Valuation Officer, is no longer res integra and is covered by the decision of this court in CIT v. S.K. Construction Co. [2008] 167 Taxman 171 , CIT v. Navin Gera [2010] 328 ITR 516/[2011] 198 Taxman 93 (Delhi) , CIT v. Smt. Suraj Devi [2010] 328 ITR 604/[2011] 197 Taxman 173 (Delhi) (Mag.) , and CIT v. Bajrang Lal Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 taxmann.com 88 (Delhi) . It has been repeatedly held that addition cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the report made by the Valuation Officer pursuant to such an invalid reference could not have been made the basis for addition under section 69 of the Act. (9) Whether an addition can be made solely and simply on the basis of the valuation report submitted by DVO is no longer 'res integra' and is covered by the various decision of Hon'bIe Courts mentioned below:- CIT v. S.K. Construction Co. [2008] 167 Taxman 171, ClT v. Navin Gera [2010] 328 ITR 516/[2011] 198 Taxman 93 (Delhi), CIT v. Smt. Suroj Devi[2010] 328 ITR 516/[2011] 197 Taxman 173 (Delhi)(Mag) CIT v. Bojrong Lal Bansal [20111 335 ITR 572/200 Taxman 188 (Mag)/12 taxmann.com 88 (De/hi) It has been repeatedly held that addition cannot be justified solely relying upon the valuation report. Decision of the Supreme Court in the case oj K.P. Varghese v. ITO {19811131 ITR 597/7 Toxmon 13. Nirpo/singh vis ClT (2013) 359 ITR 398 (P H) Roghuroj Agro Industries (P}Ltd (2013) 38 Toxmonn.com 318(AII). (10) ClT V/I,' Vridnaban Real estate (P) Ltd. (2012) 254 CTR (All) 10. Although above cited case pertains to re-opening of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch capitalization was pending and so it was not included in fixed assets while the figure of Rs. 2740.41 is the capitalized amount. While certifying the investment, the CA has considered both the capitalized and un-capitalized amount on account of building as he 'was required to certify the total investment made by appellant. On perusal of copy of balance sheet as on 31.03.2015 it was observed that fixed asset shown by the appellant was at Rs. 35,83,79,872/- and WIP Building at Rs. 22,33,77,614/- which clearly shows that the investment shown by the appellant is more than that shown in loose paper found during the course of search. iii) The A.O. has not mentioned any reason in the assessment order or in the reference to the valuation, that he had any incriminating material which led to form his belief that the appellant had under stated the cost of construction referred for valuation. 11 is very relevant to understand that the appellant was subjected to search and seizure action u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment ill the different projects of appellant. Lack of any incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20-25%. Similar views have been expressed in the case of ITO vis Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur). In view of this, a difference of 20-25% between cost shown in books and estimated by DVO falls within 'tolerance band' as held by various courts. Further, appellant purchased material on wholesale basis which brings 'economy of scale' into construction cost which as per appellant would result into savings upto 25-30%. AO has acknowledged this aspect but did not provide any relief while making addition. Appellant has also argued about savings in cost of construction for other reasons as well i.e. self-supervision, consultancy charges etc. however, AO failed to allow any benefit to the assessee on any of the count which is not justified. vii) I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts of the assessee. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 5.8 of this order, it is pertinent to refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 that there is variation in local PWD rates and CP\VD rate by margin of 20-25%.lt has been held in the case of CIT vis lahsa Construction (P) Ltd (2013) 357 ITR 671 (Delhi) that no addition. can be made solely on the basis of valuation report of DVO. Ld AR also placed reliance on the decision of CIT v/s VS Prata p Singh Amro Singh (1993) 200 ITR 788 (Raj) that addition to income could not be made on the basis of the report of the Valuation Officer. 4..4.10 In view of the above discussion, the comparative picture of investment shown by the assessee and that estimated by the DVO after allowing margin of 30% (25% for difference in CPWD and PWD rates and 5% for self supervision) comes out as under:- A.Y. Declared by Assessee (Rs.) 70% of estimate made Different 2016-17 53511154 62644484 9133327 2017-18 98628433 115462415 16833982 Thus, the addition made by the AO amounting 10 Rs. 91,33,327/- in AY 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod should have been given preference over all the other methods. In this regard Hon‟ble Rajathan High Court in the case of CIT vs Hotel Joshi (2000) 242 ITR 478 (Raj.) has held that item wise detailed method of valuation is most accurate, authentic, reliable and desirable. This is submission of Ld AR that in view of this finding that the DVO has not adopted a method duly notified by CBDT it self held the report of DVO unreliable and no assessment or addition can be made relying on the same. Further the DVO has committed several other errors while preparing its report under (i) Plinth Area Rate Method and (ii) Cost Index Method, such mistakes were pointed out in para 4.4.6 of the order of Ld CIT(A). According to the Ld AR the area of the security cabin and shed were wrongly taken by DVO in its report at higher quantities. With regard to the plinth area rate also it was submitted by the AR that DVO has adopted Standard DPAR 2007 approved by DG, CPWD, New Delhi‟ as per CBDT instruction no 1671, with due adjustments but no details of such adjustment were provided, also no adjustment on account of superior/inferior specifications have been made. Cost of water and sanitary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le issue raised by the revenue and contested by the assessee for AY 2016-17 is On the facts and in the circumstances of the case the Ld CIT(A) erred in deleting the additions of Rs. 2,68,47,635/- out of the total addition of Rs. 3,59,80,960/- made by the Assessing Officer on the basis of DVO report. , similar ground and facts with difference in figures have raised by the revenue for AY 2017-18 also. The revenue has the contention that the Ld AO has validly invoked the provisions of section 142A of the act and therefore the additions made based on the report of the DVO by the Ld AO reduced by the Ld CIT(A) was an error and same needs to be corrected by setting aside the order of Ld CIT(A) and restoring back the order of the Ld AO. 26. On perusal of the order of Ld CIT(A), wherein he has categorically adjudicated all the grievances raised by the appellant with proper discussion, deliberation and appreciation of the issues, facts and circumstances of the case in light of the judicial discipline guided by various Hon ble high courts. Ld CIT(A) has decided the issues with a finding that the there were discrepancies in the report of DVO with respect to rates adopted by the DVO on a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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