TMI Blog2015 (12) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer is not justifiable and the same was rightly deleted by CIT(A). Hence, on this issue, we decline to interfere in the order of learned CIT(A) - Decided in favour of assessee. Deduction claimed by the assessee u/s 80IA(4) disallowed - deduction u/s 80IA(4) is not allowable in case of a contractor and the assessee is a contractor and therefore, this deduction claimed by the assessee is not allowable to the assessee - Held that:- In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not be controverted by learned DR of the revenue and therefore, this tribunal order rendered in the case of Koya & Co. (2012 (5) TMI 158 - ITAT HYDERABAD ) is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his order, as reproduced above. Considering this factual and legal position, we find no infirmity that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directly purchased by the assessee and then renovated and photograph of the building before renovation and after renovation was submitted before the Assessing Officer and the said investment was duly disclosed by the assessee in its income tax returns but the DVO report does not say that there is an extra investment over and above the declared amount. His report is only an estimate of the fair market value and not an estimate of investment. He has given a finding that the DVO’s valuation report is based on fair market value and this fair market value is relevant for Wealth Tax purposes but under section 69, the term used is unexplained investment in the property. He has given example that if investment is made of ₹ 1,00,000 in April, 2003 and the fair market value of the same building in December, 2003 becomes then no addition can be made of ₹ 45,000/- being difference between investment in April, 2003 and fair market value in December, 2003. Learned D. R. of the Revenue could not point out any defect in this finding of CIT (A) on merit also and considering the totality of facts, we find no infirmity in the order of CIT (A) on this issue also. - Decided in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2008-09 and in that year, when the A. O. asked the assessee to explain, it was submitted by the assessee before the Assessing Officer that cash payments were not made to one single person on one single day and there was no bar under the provisions of IT Act for multiple payments being made to different persons which were less than ₹ 20,000/- for each person. The CIT(A) has noted down some instances also that amount of ₹ 85,894/- has been stated to have been made in cash consisting of payments of ₹ 19,894 + ₹ 20,000 + ₹ 18,000 + ₹ 15,000 + ₹ 15,000. Regarding one more payment of ₹ 1.05 lac, it was noted by CIT(A) that this is not a single payment to one party but is being paid to various parties and in support, copies of accounts are enclosed. Similarly payment of ₹ 1,10,000/- and ₹ 10,01,420/- was made but it was stated the same is duly recorded in the books of accounts being paid to various persons as per books of accounts produced. Considering these facts that the cash payment in excess of ₹ 20,000/- was not made to a single person on single date, we decline to interfere in the order of learned CIT(A) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om various places and commission paid there on are mentioned. The total amount of demand drafts prepared are for ₹ 79,87,900/- on different dates and the amount of bank commission is ₹ 24,963/-. The total of these two figures comes to ₹ 80,12,863/- In this regards it was submitted that the said paper was prepared by the accountant for the reconciliation purposes. Cash is being remitted from head office to meet the day to day expenses at the site, as the assessee is not having signing authorities at all the sites. In order to make the payments to various persons, drafts were got prepared by the cashier in the name of the suppliers on different occasion and the source of such drafts was out of cash received from the head office as mentioned there in. 6.2 As far as the source of cash is concerned the same was given out of cash withdrawals from the bank accounts. During the course of assessment proceeding the assessee provided the details of cash given on 5.3.2005 and 9.3.2005 as the dates were mentioned against the transaction. As in case ₹ 45,00,000/- received by the cashier the date is not mentioned so it could not be verified from the books. The Ld AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose persons, and since total amount on those loose sheets indicated a very small amount, those loose papers alone would have to be considered as dumb papers having no evidentiary value and no addition could be sustained - Held, yes Assistant Commissioner of Income-tax v. Dr. Kamla Prasad Singh [2010] 3 ITR (TRIB.) 533 (PAT.) I. Section 158B of the Income-tax Act, 1961 Block assessment in search cases - Undisclosed income - Block period 1991-92 to 2000-01 Where documents found and seized and relied upon for making addition under appeal by revenue had neither date nor name of assessee, it could not be assumed or presumed as to when and by whom noting were recorded: no addition could be made on basis of such dumb documents [In favour of assessee] Neither any enquiry report nor any document procured either before or after the search can be considered while computing the undisclosed income. Similarly, it is also settled law that any document found during the course of search has to be interpreted literally and nothing can be added or subtracted. Where the documents found and seized and relied upon for making the addition under appeal by the revenue had neit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned. .......... 4.1 From the above entries, it is clear that these are entries relating to receipts through DDs against cash payments. On page 95, first entry dated 7/3/2005 reveals that demand draft of ₹ 7,85,000/- was arranged from Sultanpur through one Jhaji for which Jhaji was paid ₹ 7,87,639/- which included commission of ₹ 2639/- (probably charged by the bank). Similar facts also emerge from other entries also. Vide questionnaire dated 08-02-2013 and subsequent queries, that assessee was required to explain nature and detail of such entries and how the same are recorded in the books of accounts. In explanation, the assessee stated that, This is working paper made by the cashier of Sultanpur to reconcile the cash received by him on payments made. The amount of ₹ 74,00,000/- was received over a period of time from head office at Lucknow which is being sourced out of the cash available in the books of the assessee. Since no dates are mentioned against the amount of ₹ 45 lacs so it is not possible to get it reconciled with the books. However, the other two entries are duly recorded in books. It is a general practice that cash was be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars of its income on this account and furnished inaccurate particulars thereof, penalty proceedings u/s 271(1)(c) is also being initiated separately. Added: ₹ 1,16,50,863/- According to the assessee these seized paper pages 95 and 97 are Annexure B-10 is a working paper made by the cashier of Sultanpur to reconcile the cash received by him and payments made. The amount of ₹ 74,00,000/- was received over a period of time from head office at Lucknow which is being sourced out of cash available in the books of the assessee but it is seen that the assessee has not been able to demonstrate from his books of account as from where the cash has been withdrawn i.e. from which bank A/cs and to whom draft was given i.e. which parties and for which work site, the assessee has not establish any link of these papers. These documents found during search are not dumb paper these are speaking papers and reflect all the details about the transactions of the assessee, these documents does bear the names like Sri Abusaad Ji ( major shareholder and director and promoter of the assessee company), Jha Ji and Vikas Singh both are working for the assessee. Hence, after consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... howing bank draft receipts. Hence, there is no infirmity in the order of CIT (A) on this issue. Accordingly, this issue is decided against the assessee. Ground No. 1 for assessment year 2005-06 is rejected. 6. The second issue is regarding disallowance made by the Assessing Officer on ad hoc basis to the extent of 1% of total expenses debited by the assessee in profit loss account. This disallowance was made by the Assessing Officer in all the seven assessment years which are before us i.e. assessment year 2005-06 to 2011-12 and in all these years, this disallowance has been deleted by CIT(A) and Revenue has raised this issue in all its seven appeals for these assessment years. In assessment year 2005-06 to 2008-09, this issue was raised as per ground No. 1 whereas in assessment year 2009-10, this issue has been raised as per ground No. 6, in assessment year 2010-11 this issue has been raised as per ground No. 7 and in assessment year 2011-12 as per ground No. 5. 7. On this issue, Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT(A). 8. We have considered the rival submissions. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned thereon and in this year also, the disallowance was deleted by CIT(A) on the same basis. 10. So is the case for assessment year 2007-08 because in this year also, the Assessing Officer made similar disallowance of ₹ 88,05,015/- being 1% of total expenses of ₹ 8805.01 lac with same observations and in this year also, this disallowance was deleted by CIT(A) on the same basis. 11. In the remaining years also, the facts are identical. After considering the facts of the present case on this issue and the orders of the authorities below on this issue, we find no infirmity in the order of CIT(A) because on the basis of general observations, without pointing out even a single specific defect in the vouchers or books of accounts, ad hoc disallowance made by Assessing Officer is not justifiable and the same was rightly deleted by CIT(A). Hence, on this issue, we decline to interfere in the order of learned CIT(A). Accordingly, issue no. 2 is decided in favour of the assessee. 12. The issue No. 3 4 are in respect of deduction claimed by the assessee u/s 80IA(4). This claim was not allowed by the Assessing Officer for two reasons. The first reason is that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are same therefore, I follow my order for A.Y. 2010-11 and A.Y. 2011-12 in which I had allowed the assessee s claim because the Assessing Officer failed to consider the amendment made by the legislature to the section 80IA(4) of the l.T.Act, from a close reading of the two contracts agreement entered by the appellant with NHAl and UP PWD, it is seen that the appellant was engaged in development of road and is not a mere contractor as he had deployed his own capital used his own management and expertise in maintenance and had to bear the risk and defect correction. That as per the provisions contained in the agreement, the assessee had given guaranty for the road and bridges and other construction work, done by the assessee, for one year referred to as Defect Liability Period , during which period any defect was to be removed by the assessee as per the need. My attention was drawn to the March 2012 case of Hon ble ITAT Hyderabad Bench case of Koya Co. Construction (P)Ltd. vs. Asstt, Commissioner of Income Tax wherein they have discussed in detail about the 801A deduction which is as below: ... Section 80-lA of the Income-tax Act, 1961 - Deductions - Profits and / gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure after completion and, hence, it was to be allowed as deduction under section 80-IA(4). The lower authorities were of the opinion that the assessee had not undertaken the infrastructure activities and it did not own the infrastructure itself. According to them the assessee was only a contractor carrying on construction of the infrastructure and, therefore, was not eligible for deduction under section 80-IA(4). Accordingly, deduction under section 80-1A(4) was denied by the lower authorities to the assessee. On second appeal: HELD The provisions of section 80-IA(4), when introduced afresh by the Finance Act, 1999, the provisions under section 80-IA(4A) were deleted from the Act, The deduction available for any enterprise earlier under section 80-IA(4A) are also made available under section 80-IA(4) itself. Further, the very fact that the Legislature mentioned the words (i) developing or (ii) operating and maintaining1 or (iii) developing, operating and maintaining clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-tax Act. Where an assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture facility. It is the assessee s responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and, thereafter, developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assesses. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee s duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. [Para 24] The decision in the case of Laxmi Civil Engineering (P.) Ltd. v. Addl. CIT [IT Appeal No. 766 (Pn) of 2009, dated 8-6-2011] squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 80- IA. Section 80-IA intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80-IA, which ultimately culminated into amendment under section 80-fA, in the Finance Act 2001, to give effect to the aforesaid circulars issued by the CBDT. To avoid misuse of the aforesaid amendment, an Explanation was inserted in section 80-IA, in the Finance Act 2007 and 2009, to clarify that mere works contract would not be eligible for deduction under section 80-IA. But, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce a new infrastructure facility which is in the nature of road details are below.... ...8. We have heard the rival submissions of the parties and perused the record. The assessee company is in the business of Developing and Execution of infrastructure contracts. It is necessary to examine the terms of the contract with the Govt. of Rajasthan. The assessee has filed the Paper Book and a copy of agreement/contract with the Gov. of Rajasthan dated 15.12.2000 which is placed at page no. 70 to 79. As per the title to the Agreement, it is mentioned that IMPROVEMENT AND STREGTHENING OF HANUMANGARH-SURATGARH ROAD VIA PILIGANGA KM. 0/0 TO 26/0 ON BOT BASIS . The said Agreement is in the form of lease of land as mentioned in the recital. It is asserted that lessor Govt. of Rajasthan is desirous to entrust Improvement and strengthening of Hanumangarh-Suratgarh Road via Pilibangan on BOT basis. The Bid document as well as Project report are made a part of the Agreement/Contract. As per the document on record, the length of the road is shown as 26 Km and the project cost is shown at ₹ 643.02 Lacs. The necessity for carrying out the improvement and strengthening of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note here that the project report which is the part of the agreement clearly suggest that the existing road was not capable of taking the increased load of the vehicles and hence, there was necessity for strengthening as well as widening the said road. It is not the case that merely some minor work like carpeting has been done to be done but the additional lane of 1 mtr. widening with 12 cm increased thickness has been done. ...11. In the case of Tata Hydro Electric Power Supply Co. (Supra) the old irrigation dam was strengthened by using modern technique. On the expenditure incurred for strengthening of the dam, the assessee claimed the development rebate with the plea that it was a new plant. As per the provisions of law Development Rebate was allowable on a new plant. When the matter reached before Hon ble High Court, the issue was decided in favour of the assessee and Hon ble High Court held that the assessee incurred a huge expenditure which resulted into increasing the life of the existing dam and it was the work of the creation of new plant and the assessee was entitled for the Development Rebate. It is true that the parameters for the development rebate are different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. This circular has been issued after the Finance Act 2009 and has clarified that the widening of an existing road in an infrastructure facility by an enterprise entitles the enterprise for deduction U/S 80IA(4)(i). It is a settled position in Law that the CBDT circulars are binding on the Assessing Officer reference is invited to the case of [Azadi Bacchao Andolan (Supreme Court)] as CBDT circulars are contemparanea expositio. This deduction U/S 80IA(4)(i) is available to any company which has entered into an agreement with the government or other government bodies/corporation, the appellant company falls under this. After considering the CBDT Circular 4/2010 case laws of Koya Company and Rohan and Rajdeep Infrastructure and as well as the facts at pages 40 to 42 of this order. The appellant company has widened the road from 2 lane to 4 lane in case of agreement with NHAI and at the same time constructed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 10,34,06,532/ is hereby deleted and this ground of appeal is allowed. 14.1 From the above paras, reproduced from the order of CIT(A), we find that a categorical finding has been given by CIT (A) that the assessee company is not a mere work contractor but has developed the road from existing 2 lane to 4 lane and while doing so, the assessee company has also made substantial investment by itself and also executed the development works and carried out civil-works on its own by using its own material and expertise and no material consumed in the roads and bridges were provided by the NHAI and UP PWD. This is also noted by CIT(A) that the maintenance of the existing facility during the period of development also was of the assessee company and so also was the risk during this period to maintain the infrastructure and after the completion of development of road and its handing over to the Government, the risk period of the assessee company was of 12 months for maintenance of the road. As per explanation below sub section (4) of section 80IA, infrastructure facility includes a road including toll road, bridge or a rail system. This is not in dispute that the assessee has widened th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc. 22. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word it denotes the enterprise carrying on the business. The word it cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word it is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. 23. The next question is to be answered is whether the assessee is a developer or mere works contractor. The Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract and he is not eligible for deduction under section 80IA (4) of the Act. Whether the assessee is a developer or works contractor is purely depe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80IA (4) of the Act. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. 24. We also find that as per the provisions of the section 80IA of the Act, a person being a company has to enter into an agreement with the Government or Government undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entities who does only mere works contact or subcontract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before us that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. Further, the order of Tribunal in the case of B.T.Patil cited supra is prior to amendment to sec 80IA(4), after the amendment the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the tax benefit under section 80IA. 26. The above order was followed in subsequent assessment years 2007-2008 2008-09 in ITA Nos. 1312 1313/Mds/2011 vide order dated 18.11.2011 in the case of the same assessee. 27. Further in the case of R.R. Constructions, the Chennai Bench of Tribunal in I.T.A. No. 2061/Mds/2010 for assessment year 2007-08 vide order dated 3.10.2011 held as follows: 28. Being so, we are inclined to partly allow the ground relating to claiming of deduction u/s. 80IA. 4.2 From the above Para of this tribunal order, it comes out that if the contracts involves design, development, operating maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under s. 80IA and profit from the contracts which involves design, development, operating maintenance, financial involvement, and defect correction and liability period is to be accepted as development and cannot be said to be contract simplicitor to apply the explanation. In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d return of ₹ 3,79,90,641/- and the appellant had also claimed 80IA deduction for ₹ 103406532/-, The time limit to revise the return was till 31/03/20U i.e. after the date of search but because of search the assessee could not file revise return he could file return in response to notice u/s 153A on 31-03-2012, therefore the claim for 80IA is within time limit. 16.1 In assessment year 2010-11 also, this issue has been decided by CIT (A) in favour of the assessee on the basis of similar observations but in assessment year 2007-08 and 2008-09, this issue has been decided by CIT (A) against the assessee by making following observations: I have perused the facts stated in the assessment order as well as assessee s submission. For this Assessment year 2007-08 due date for filing of Income Tax Return was 15.11.2007 but the appellant had filed the Income Tax Return before i.e. on 27.10.2007 vide acknowledge no. 3583111271007 and no claim of 80IA was made. Later on in response to notice u/s 153A (dated 17.02.2012 which was received by the appellant on 03.03.2012), the appellant had filed return of ₹ 3,54,95,203/- on 31.03.2012 by claiming 80IA for ₹ 2,31,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time available for filing the revised return of income and till the date of search, due date of filing the return has not expired. Considering these facts that in these two years i.e. A.Y. 2007 08 08 09, where the time available for filing the revised return has expired before the date of search, CIT(A) has held that the claim made for deduction u/s 80IA(4) in the return filed by the assessee u/s 153A is not acceptable but in the later two years i.e. assessment year 2009-10 and 2010-11, since the time was available for filing the revised return/return of income u/s 139 (5)/ 139 (1) and the assessee could not file the revised return of income within the available time because of search, the return furnished in response to notice issued by the Assessing Officer u/s 153A should be considered as a return filed u/s 139(1) of the Act and therefore, on this issue also, we find no infirmity in the order of CIT(A) and therefore, this issue is decided in favour of the assessee in two assessment years i.e. assessment year 2009-10 and 2010-11 whereas in the earlier two years in which this issue has been raised by the assessee in its C.O. in assessment year 2007-08 and 2008-09, this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following facts: That the assessee is maintaining regular books of accounts which are part of the seized record and there was nothing contained in the seized material which could suggest that the assessee has not accounted for the investment in the office premises at 5/21 Vishal Khand Gomti Nagar, Lucknow. The section 142A(1) of I.T.Act 1961, read as under: For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the values of any bullion, jewellery or other valuable article referred to in section 69A or section 689B (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 an estimate of such value and report the same to him. Your honour will appreciate that the property under reference does not fall within the provisions of section 69, 69A, 69B and 56(2) of the I.T. Act. This is because under section 69, 69A and 69B, the first condition which is to be satisfied is that the investment either should not be recorded in the books of accounts or if rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 57,94,600/-. However, the assessee had purchased the same for ₹ 58,00,000/- which was more than the value taken by the Stamp Authorities for the purpose of section 50C of the I.T. Act. Thus the cost of land and building purchased earlier stands fully disclosed in the books of accounts. Therefore, this cost of land and building cannot be disputed before any authority functioning under the Income Tax Act. The assessee should be allowed credit of the same, for the purpose of valuation. 3. The assessee after purchasing the said building did the construction in the year 2008-09 relevant to A.Y. 2009-10. Copy of the construction accounts has already been filed. The Ld. DVO had applied the rate of construction relevant to February, 2013 and an amount of ₹ 89,47,687/- had been added by the DVO to the cost of construction, stating Add cost of index 183 to bring the valued as on dated Feb.2013=8947,887.00 . But as the construction was carried out in between September, 2008 and March, 2009, the index taken by the DVO is incorrect. The same may kindly be substituted with correct figures. 4. That the assessee is engaged in the construction business and the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction had taken place between September 2008 and March 2009 so the average rate for this period should be taken. As per the CPWD circular (copy enclosed) the index rate for March 2009 was 113. So instead of 183 taken by the DVO 113 should be token. c. The %age cost for services should be taken on the value of construction for 377.49 sq mts. only. d. Credit for self supervision and assessee being into construction activities should also be given which is about 8 to 10%. If only the area and index rates are corrected in the DVO report the cost of investment shall be ₹ 66,83,271/-against which the assessee had shown an investment of ₹ 95,96,116/-. In view of above the valuation done by the DVO is not correct and should not be relied upon. The aforesaid objections were forwarded to the Valuation Officer vide this office letter dated 22.03.2013. The valuation officer in his comments vide his letter dated 26.03,2013 reiterated his findings in the valuation report and rejected the objections raised by the assessee stating as under:- Parawise reply on Assessee s objections dated 22.03.2013 are as following:- 1. No comments are required from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property was rejected and value of construction is taken as that estimated by the DVO vide his report dated 26.03.2023 prepared on the basis of his inspection of the property on 19.02.2013. So far as assessee s claim of construction of the property in financial year 2008-09 i.e. the year under consideration is concerned the same is accepted and the value estimated the DVO i.e. ₹ 2,20,62,200/- taken as correct cost of investment in the house property. As observed by the Ld. DVO the present structure is not possible without dismantling entirely the old structure, the whole building is taken as constructed during the year in question anew. In its reply dated 22.03.2013 the assessee has claimed investment of ₹ 95,96,126/- in the construction of the impugned building after its purchase in September, 2008 and furnished copy of new office maintenance account as per its books of accounts to support reconstruction/furnishing of the said building. However, as per the new office maintenance account enclosed the disclosed expenditure is at ₹ 80,38,180/-only. And, after considering this amount of ₹ 80,38,180/-, the undisclosed investment in the construction of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report cannot possibly arise. It was so held by the Supreme Court in Sargam Cinema v. CIT (2010) 328 ITR 513 in the context of the categorical finding of the Tribunal that where the books were not rejected, reference to departmental Valuation Officer is misconceived. It is on this view that the Supreme Court set aside the High Court judgment to the contrary restoring the decision of the Tribunal... There are other case Laws on similar facts which are as under: (1) CIT vs BAJRANG LAS BANSAL [2011] 335 ITR 572 (DELHI) UNDISCLOSED INVESTESTMT- ADDITION ON BASIS OF REPORT OF DISTRICT VALUATION OFFICER- NO EVIDENCE SUGGESTING ASSESSEE MADE ANY PAYMENT ABOVE CONSIDERATION MENTIONED IN RETURNBOOKS OF ACCOUNT NOT REJECTED-ADDITION NOT PERMISSIBLE-INCOME TAX ACT,1961,s.69B 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 ₹ 99,33,000/- under section 69B of the Income tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation given by the DVO, In any event, the opinion of the DVO, per se, is not an information and cannot be relied upon without the books of account being rejected which has not been done in the present case. Moreover, in the present case, no evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed. A reading of the AO s order does not disclosed that the assessee had made any admission in her alleged statement under s. 132(4), In fact, no such statement has been produced. It is also pertinent to mention that no adjustment on account of sales consideration has been made by the Revenue in the case of the seller. Consequently, no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed-KP Varghese Vs.ITO (1981) 24 CTR (SC) 358; (1981) 131 ITR 597 (SC), CIT vs. Smt. Shakuntala devi (2009) 224, CTR (Del) 79; (2009) 316 1TR 46 (Del), Sargam Cinema vs CIT (2011) 241 CTR (SC) 179 and Asstt. CIT vs. Dhariya Construction Co. (2010) 236 CTR (SC) 226; (2010) 47 DTR (SC) 288 followed. (3)CIT vs. Lahsa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial property forming part of business assests- Cost of construction recorded in the accounts maintained by the assessee- DVOs report estimating construction cost at higher figures-Addition for unexplained investment could not be made without rejecting books of accounts. Even on the merit the appellant has a strong case as the appellant has pointed various defects in the valuation report as evident from pages 16 to 18 and 30 to 33 of this appeal order, which has not been adjudicated by the Assessing Officer. He has simply relied on DVO s technical expertise. Had this been so legislature would not have provided further opportunity to the assessee granted by the Assessing Officer to give comments. He has not considered that this property was directly purchased by the assessee and then renovated and photograph of the building before renovation and after renovation was submitted before the authorities and the said investment was duly disclosed by the assesses in their income tax returns regularly submitted with the I.T. department. Further, the DVO report does not say that there is an extra investment over and above the declared amount. His report is only an estimate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind no infirmity in the order of CIT (A) on this issue also. This issue is decided in favour of the assessee. 20. The issue No. 6 is regarding disallowance u/s 14A, which has been deleted by CIT (A). This issue has been raised by the Revenue vide ground No. 8 in assessment year 2009-10 and 2010-11. 21. Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT (A). 22. We have considered the rival submissions. We find that the disallowance was made by the Assessing Officer u/s 14A as per Rule 8D in assessment year 2009-10 and 2010-11 and the same was deleted by CIT (A) on this basis that since there was no exempt income in these two years, no disallowance u/s 14A can be made. While holding so, CIT(A) has followed the judgment of Hon ble Allahabad High Court rendered in the case of DCIT vs. Shivam Motors (P) Ltd. in I.T.A. No.17/Lkw/2012. We have taken a view in various judgments after considering this judgment of Hon ble Allahabad High Court in the case of Shivam Motors (supra) on this basis that since the judgment of Hon ble Apex Court rendered in the case of Rajendra Prasad Moody 115 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned the section of I.T. Act in which he has disallowed whether it is section 69C or 37 etc. and books of accounts were also not rejected and therefore, the disallowance was deleted. We are of the considered opinion that the order of CIT (A) is not sustainable because although section 69C is not mentioned by the Assessing Officer, this comes out from the language of Para 7 of the assessment order that the assessee could not explain as to how this payment found recorded in the seized paper was recorded in the books of accounts. If the assessee fails to establish by bringing evidence that the entry of expenses found in seized material was recorded in books of accounts or that the same was paid out of known sources of fund, addition has to be made u/s 69C and deduction for corresponding expenditure is not allowable. Since the assessee could not establish by bringing evidence on record before us or before lower authorities that the expenditure noted in the seized material was in fact recorded in the books of accounts or was paid out of known sources of fund, the addition made by the Assessing Officer is to be considered as addition u/s 69C and since before CIT(A) or before us also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted by the assessee before the Assessing Officer that cash payments were not made to one single person on one single day and there was no bar under the provisions of IT Act for multiple payments being made to different persons which were less than ₹ 20,000/- for each person. The CIT(A) has noted down some instances also that amount of ₹ 85,894/- has been stated to have been made in cash consisting of payments of ₹ 19,894 + ₹ 20,000 + ₹ 18,000 + ₹ 15,000 + ₹ 15,000. Regarding one more payment of ₹ 1.05 lac, it was noted by CIT(A) that this is not a single payment to one party but is being paid to various parties and in support, copies of accounts are enclosed. Similarly payment of ₹ 1,10,000/- and ₹ 10,01,420/- was made but it was stated the same is duly recorded in the books of accounts being paid to various persons as per books of accounts produced. Considering these facts that the cash payment in excess of ₹ 20,000/- was not made to a single person on single date, we decline to interfere in the order of learned CIT(A) on this issue. Accordingly, Issue No. 8 is decided in favour of the assessee. 29. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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