TMI Blog2012 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.05.2010. The grounds raised in the revenue s appeal read as under :- 1. The order of the Ld. CIT (Appeals) is not correct in law and facts. 2. On the facts and in the circumstances, the Ld. CIT (A) has erred in law and on facts in deleting addition of Rs.60,79,673/- towards unexplained investment in land and construction made by the A.O. on the basis of valuation report of the land in and construction made by the A.O. on the basis of valuation report of the DVO in pursuance of reference u/s 142A whereas there is no material before the Ld. CIT (A) to rebut the report of the DVO on the basis of any cogent evidence or material. 3. On the fact and circumstances of the case, the Ld. CIT (A) has erred in law and on facts in deleting addition of Rs.60,79,673/- even though there is no adverse adjudication of valuation reference u/s 142A and there is no material in support of the claim of the assessee to substantiate the valuation/ investment as disclosed before the A.O. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. The ground raised in assessee s cross objection reads as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard may use the report of the valuation officer for the purpose of determining the unexplained investment and addition can be made. 3. CIT (A) granted the relief by relying on the decision of ITAT in the case of Dinesh Jain vs. DCIT (2009) 34 SOT 444 and the decision of jurisdictional High Court in the case of CIT vs. Prem Nath Nagpal (2007) 214 CTR 51 (High Court Delhi) wherein the relief was granted by holding that no document was found indicating the understatement of purchase price. There was no document found which could indicate understatement of cost of improvement. No assessment of undisclosed income could be made on alleged understatement on the basis of DVO s report. In the case of CST vs. Ashok Khetrapal 294 ITR 143 (Del.), the Hon'ble Delhi High Court also held that during the search under section 132 no incriminating material was found indicating that assessee had made higher investment in property than disclosed. No undisclosed income could be assessed on the basis of difference between investment declared in sale deed and value estimated in the DVO s report. 5. In the cross objection, the assessee has challenged the validity of reference to the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 142A of the Income-tax Act, 1961 does not confer any unfettered discretion on the Assessing Officer to make a reference for the sole reason that the assessee has shown investment in a property. The basic and fundamental principle of law requires that while exercising the powers by Assessing Officer, there must be existence of certain pre-conditions which are necessary for judicious application of the provisions of law. The Assessing Officer cannot make a reference u/s 142A for making roving and fishing enquires. He also relied on the decision of Hon'ble Rajasthan High Court in the case of Pratap Singh Amro Singh vs. Rajender Singh Deepak Kumar reported in 200 ITR 788 wherein the Hon'ble High Court has emphasized that without rejecting the books in which cost of construction has been recorded as defective, untrue and wrong, it is not permissible to make a reference. Thus, judicious application of mind is sine qua non for a valid reference and this action does not permit roving and fishing enquiries. This principle has been enunciated in the cases of Sri Har Sarup Cold Storage General Mills vs. ITO 27 ITD 1 (Delhi) (TM), ACIT vs. Smt. P. Appayamma 66 Taxman 104 (Mag.)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ITAT Chandigarh) 12 / 131 Taxman 186 (Mag) (viii) Kasat Textiles Private Limited v Assistant Commissioner of Income tax [1998] 66 ITD 510 (ix) Selvaraj v Income tax officer [2002] 258 ITR (AT) 82 (Mad) Finally, he also relied on the decision of ITAT, Delhi Bench A in the case of ACIT, Central Circle 16, New Delhi vs. Ambience Developers Infrastructure (P.) Ltd. (2011) 13 Taxman 150 (Delhi Trib). He also pleaded that it is the primary duty of the Assessing Officer prior to referring to the DVO to prove that there is under-statement / concealment of income and only after this burden, which lies on the revenue, is completed, addition can be made on the basis of DVO s report. For this proposition he relied on the following decisions :- (i) CIT vs. Ramesh Kakkar ITA 1550 /2010 (ii) CIT vs. Madan Lal Dawar ITA 1554/2010 (iii) CIT vs. Bhagirath Aggarwal ITA 1551 /2010 1555 / 2010 (iv) CIT vs. Manoj Jain (2006) 287 ITR 285 (Del.) (v) CIT vs. Shakuntala Devi (2009) 316 ITR 46 (Del.) (iv) CIT vs. Bajrang Lal Bansal (2011) 335 ITR 572 (Del.) (vi) CIT vs. Mahesh Kumar (2011) 196 Taxman 415 (Del.) 6. On the other hand, the learned DR relied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the VO is bad in law. However, since the appellant gets relief in the Ground No 1, this Ground of Appeal becomes academic in nature, hence does not require any comments. Thus, the CIT (A) granted the relief on this ground also by holding that the Assessing Officer has not followed the basic steps for making the reference u/s 142A and the reference was made without any objective basis and also without any material on record. Hence, the reference made by the Assessing Officer to the DVO is bad in law. However, the CIT (A) held that since he has allowed the relief on ground no.1, therefore, the same is academic in nature. It is also a fact that books of account or the documents in which the investment has been shown by the assessee has not been rejected. The Hon'ble Rajasthan High Court in the case of CIT vs. Pratapsingh Amrosingh Rajendra Singh held as under :- In respect of investment made in property, there can be only two methods to find out the correct position (i) examination of books of account which have been maintained properly and (ii) valuation report. If the assessee has maintained proper books of account and all details are mentioned in such books of account, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Lal Bansal, Hon'ble High Court of Delhi held as under :- A search was conducted at the assessee s residence by the Department and unexplained cash and fixed deposit receipts were found. During the search, no evidence was found suggesting a higher valuation for the property. However, the Assessing Officer solely on the basis of the report of the District Valuation Officer made an addition of Rs.99,33,000/- under Section 69B of the Income-tax Act, 1961 on account of undisclosed investment. The Commissioner (Appeals) deleted the addition. The Tribunal upheld this decision. On appeal : Held, dismissing the appeal, that the primary burden to prove understatement or concealment of income is on the revenue and it is 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 consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment was made and the Assessing Officer made additions on the basis of the report of the Valuation Officer in regard to two of the properties purchased by the assessee. The Tribunal deleted the additions holding that no evidence of concealment of income had been discovered as a result of the search, that the Assessing Officer himself was not an expert; that the valuation of the property was a technical matter and that the Assessing Officer was not entitled to make statements on technical matters for which there was no material on record, particularly when no evidence was found as a result of action under section 132(1) of the Income-tax Act, 1961. On appeal to the High Court : Held, that the additions were not justified. In our considered view, the issue is covered in favour of assessee by various decisions of Hon'ble jurisdictional High Court. In view of these facts, we allow the cross objection filed by the assessee. 8. In the revenue s appeal, the only issue involved is deleting the addition of Rs.60,79,673/- made by the Assessing Officer as unexplained investment in land and construction on the basis of valuation report of the DVO. 9. The CIT (A) has allowed the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimation of value of land by the VO is situated at other place than that of the land of the appellant. The sale instances cleared by Appropriate Authority cannot be considered as valid indicator as the appellant purchased the said property in November, 2003 and the said Chapter XXC of the Income tax Act, 1961 dealing with Purchase of property by Central Government is not applicable on and after 01.07.2002. Also the purpose of valuation for Chapter XXC is altogether different from valuation for the purpose of section 142A of the Income tax Act, 1961 as the first is for the purpose of purchase of property by the Central Government to curb tax evasion and black money. So, the single sale instance cleared by Appropriate Authority cannot be basis of estimation of value of land. On the other hand, I find force in the submission made by the appellant that the valuation of land as per the registered valuer is more proper, reliable and scientific as he has considered three sale instances of the similar locality and then further appreciated and depreciated the value of land as per the norms of valuation for time gap and location advantage and then taken average mean rate for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order or mentioning any reasons as to why the contentions of the appellant is not tenable. Since the AO has not reasoned for such addition, I hereby grant relief of Rs 10% of cost of construction on account of self supervision, Rs 59133/- on account of marble flooring as included in plinth area rate, Rs 43,600/-on account of toilet as included in plinth area rate and Rs.2,993/- on account of architect fee on horticulture as the AO has already not considered the value of horticulture in making assessment. The AO has himself estimated cost of construction of boundary wall as he found that estimate of cost of boundary wall made by the VO is not reasonable. Since, the AO himself doubted the correctness of report of VO, I hereby rely on the valuation of boundary wall estimated by the registered valuer as just and reasonable and grant relief the appellant of Rs 2,93,540/- being difference of estimation of cost of construction estimated by the registered valuer and VO in respect cost of construction of Boundary wall. I have considered the rival position carefully. In the case of Dinesh Jain v DCIT [2009] 34 SOT 444 (ITAT Delhi) the jurisdictional IT AT (Delhi) held as under: "We have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Khetrapal [2007} 294 ITR 143 observed that by referring to the report of valuation officer in the absence of any incriminating documents found in the course of a search no addition could be made by treating investment as undisclosed on the basis of any DVO's report. The decision in CIT v Mano} Jain [2006} 287 ITR 285 (Delhi) is also to the same effect. In CIT v Shivakami Co. (P.) Ltd. [l986} 159 ITR 71 (SC), their Lordships have once again retreated that onus whether the assessee had received more consideration than what was stated in the documents of transfer, rested on the revenue and in the absence of that burden having been being discharged, it would be legally impermissible to make any inferences against the assessee. In view of the above discussion, we do not find any merit in the addition made by the Assessing Officer under the head 'Unexplained investment' on account of various properties purchased by the assessee during the block period on the basis of fair market value as estimated by the Assessing Officer. All these additions are directed to be deleted. " Moreover, the jurisdictional High Court of Delhi in the cases of Commissioner of Income tax v Prem Nath Nagpal [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage of three sale instances of the nearby locality. There is no evidence against these sales instances that these were at depressed rate. Average of three sale instances shall be more reliable or say near to accuracy then only one sale instance. Therefore, we hold that the DVO report was not reliable and accurate for valuing the land. The valuation report prepared by the valuation officer was more accurate and reliable for valuing the land value. As far as the valuation of the building is concerned, during the hearing, we observed that in the sale deed, the description of the building which has been purchased by assessee is given at page no.9 of sale deed. The details of the property purchased by the assessee as given in sale deed are as under : AND WHEREAS the Vendor for her bonafide needs and requirements has agreed to sell and the Vendees have agreed to purchase the Said Property i.e. Agricultural land measuring 13 Bighas, bearing Mustail No.20, Kila No.8(2 10), Mustail No.101, Killa Nos.1/1(6 5) 2(1 1 ) and 3 (3 4) with Boundary Wall, Tube-Well, Electric Connection, Farm House and other fittings and fixtures situated in Village Mehrauli, Tehsil Hauz Khas, New Del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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