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2016 (9) TMI 759 - ITAT PUNE

2016 (9) TMI 759 - ITAT PUNE - TMI - Unexplained investment - reference to DVO - Held that:- We do not find any reason as to why the entire undisclosed income should not be allowed as being available to the assessee to meet the cost of investment towards the farm house/bungalow. There is no material at the disposal of the revenue that the additional income disclosed has been utilised otherwise. Under these circumstances and considering the totality of the facts of the case and considering the fa .....

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7 and 2009 rates which were available in public domain is concerned, we also find some force in the above. Admittedly, the construction of the building has started during the period from 2006-07 which continued till 2010-11 and thereafter. Therefore, adoption of 1992 schedule of rates and multiplying the same by cost inflation index as against the available rate of 2007 or 2009 will give a distorted figure. The Ld. Counsel for the assessee filed a chart showing that because of these faulty metho .....

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ng 1992 rates and multiplying the same by cost inflation index the DVO could have adopted the current schedule of rates prescribed by CPWD and brought it down or made suitable adjustments. Since the assessee during the course of search in his statement recorded u/s.132(4) has also made a statement that the investment in the bungalow is about ₹ 12 crores, therefore, the valuation report filed by him from a registered valuer under the facts and circumstances of the case cannot be accepted. I .....

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cal errors as pointed by the Ld. Counsel for the assessee, the details of which are already reproduced at Para 27 comes to ₹ 1,30,01,048.81. Similarly, the difference due to adoption of 1992 rates as against 2009 guidelines gives a difference of ₹ 1,29,31,475/-. Thus, according to the Ld. Counsel for the assessee the differences comes to ₹ 2,59,32,523.81 (i.e. ₹ 1,30,01,048.81 +1,29,31,475. Since the investment in the property has been estimated in absence of maintenance .....

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377; 2,41,35,800/- as against ₹ 2,59,32,523/- calculated by the Ld. Counsel for the assessee. This in our opinion will meet the ends of justice. We hold and direct accordingly. - Addition made by the AO u/s.40A(3) - Held that:- We have also considered the various decisions cited before us. We find the assessee before completion of the assessment on 28-03-2013 vide his letter dated 18-03-2013 had submitted before the AO that undisclosed income disclosed by him for the A.Yrs. 2005-06 to .....

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n the construction of the farm house which is a capital expenditure and therefore provisions of section 40A(3) are not applicable. We find merit in the above submission of the Ld. Counsel for the assessee. In the preceding paragraphs, we have already held that the additional income disclosed by the assessee is available to him for investment in farm house/bungalow. Thus, the expenditure is capital in nature. It has been held in various judicial decisions that provisions of section 40A(3) are not .....

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valued at ₹ 19,50,000/- in the name of Sweta V. Bire, daughter of the assessee. Further in our opinion some relief should have been granted to the assessee on account of jewellery belonging to different family members in the light of the CBDT Instruction No.1916 dated 11-05-1994. Merely because the assessee has made the claim towards the fag end of the assessment proceedings, the same cannot be a ground to reject the plea of the assessee for giving appropriate relief. The Hon’ble Bombay Hi .....

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mate taxes due are collected. In view of the above discussion, we restore the issue to the file of the AO with a direction to decide the issue afresh in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground by the assessee is accordingly allowed for statistical purposes - ITA Nos.1036 to 1041/PN/2014 - Dated:- 5-8-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Jayant G. Pendse and Shri Shantanu .....

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the grounds of appeal relate to the order of the CIT(A) in sustaining the addition of ₹ 1,30,31,201/- on account of investment in the bungalow. 3. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of Builders and Developers under the name and style of the proprietary concern M/s. Sneha Construction. He had filed his return of income for different assessment years, the details of which are as under : Asst. Year Date of filing of return Income de .....

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rn Income declared Agricultural income 2006-07 30-09-2011 1,57,90,687/- 79,020/- 2007-08 30-09-2011 97,18,671/- 59,700/- 2008-09 30-09-2011 1,43,21,943/- 2009-10 30-09-2011 1,27,98,327/- 29,482/- 2010-11 30-09-2011 2,52,20,651/- 29,482/- 5. The AO issued notice u/s.143(2) and notice u/s.142(1) along with questionnaires etc. to which the assessee responded and filed various submissions on different dates. From the various details furnished by the assessee the AO noted that assessee has offered fo .....

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he approved valuer Shri Ravindra Bapat gave valuation report according to which the property was valued at ₹ 24,82,49,207/- which included the cost of plot at ₹ 9,52,87,500/- and cost of construction at ₹ 15,29,61,707/-. However, as per the records maintained by the assessee, the investment in bungalow was shown at ₹ 3,20,08,627/- as on 31-03- 2010 including the cost of the land. The issue of valuation done by the approved valuer Shri Ravindra Bapat was raised at the time .....

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ails of which are as under : F.Y. Rs. 2005-06 1,70,26,504/- 2006-07 54,91,686/- 2007-08 6,43,49,709/- 2008-09 1,45,91,834/- 2009-10 1,92,19,267/- Total 12,06,79,000/- 7. In the valuation report, the DVO has stated that the following are not included in the estimate : (a) the movable items like furniture & fittings, chairs, tables, cots, light fittings, wall handing paintings etc. (b) The cost of land. (c) The small structure in memory of the assessee s parents, said to be built prior to star .....

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d plants and equipments as declared/provided details of which are as given in the Annexure. 8. In view of the above report, the AO asked the assessee to explain as to why the difference between the year-wise cost of construction as per the DVOs report and the investment/expenditure shown by the assessee should not be brought to tax as undisclosed income of the assessee. The year-wise difference as noted by the AO is as under : F.Y. Year-wise Estimated cost of construction as per DVO s Valuation .....

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esponse to the above submitted that : 1. Rate considered for cost of construction (RCC) is on very higher side. The construction was started in the year 2006, the weight age for the same is not given while calculation of cost of construction. The cost of construction considered while calculation is ₹ 2,382/- per sq.ft. You are kindly requested to look into the matter. 2. RCC compound wall structure is valued at ₹ 132.33 (93.75+8.40_22.02+8.16) against 65.13, which is almost twice of .....

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the cost of construction to the assessee by using experience of the assessee himself and his family members and free of cost use of shuttering and construction equipments available with them as they all are engaged in construction and development business activities. Further, the allowance given for supervision work is very less, i.e. only 3%, in normal case it should be at least 15% to 20%. We further demand to reduce the costing on account of architecture fees as assessee is engaged in the con .....

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d for determining the rate for cost of construction. The assessee was present at the time of valuation by the DVO and he has not raised any such issue before the DVO. As regards the objection of the assessee to the value of RCC compound wall structure as per the report of the valuation made by Government Registered valuer Shri S.R. Nimbal is concerned, the AO noted that the basis of the valuation made by Shri S.R. Nimbal is not provided by them. He observed that the assessee has failed to show h .....

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mand that allowance should be given at the rate of 15% to 20% for self supervision work. No scientific and or technical basis for this payment made by them was provided. The assessee has also not specified as to what are the additions made after the date of search which need to be excluded from the valuation. He accordingly rejected various objections raised by the assessee in his letter. 11. The AO further noted that a magnificent bungalow has been constructed by the assessee which was valued b .....

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he valuation report of the DVO, cost of construction of the bungalow is ₹ 12,06,79,000/-. Therefore, he noted that there is no merit in assessee s version that the valuation report is wrong. In view of the above, the AO held that the year-wise investment figure worked out by the DVO has to be adopted while determining the undisclosed income of the assessee under this head. Considering the above, the AO made addition of ₹ 1,70,26,504/- to the total income of the assessee on account of .....

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834 38,73,523 1,07,18,311 2010-11 1,92,19,267 50,96,500 1,41,22,767 13. Before CIT(A) it was submitted that the report prepared by the approved valuer Shri Ravindra Bapat, which was prepared hurriedly and reflected the cost of the construction of the farm house/bungalow at exorbitantly high value of ₹ 24,82,49,000/-, was obtained and used by the department to pressurize the assessee to disclose the amount of ₹ 9 crores in the statement recorded on 14-10-2010 u/s.132(4) of the I.T. Ac .....

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was ₹ 7.10 crores. It was submitted that it is clear from the report of the DVO itself that the AO did not even forward the said report to the DVO. It was submitted that such rejection of the report of M/s. S.R. Nimbal and Associates was grossly unjustified and this was done because the said report was not satisfying the condition of the I.T. Department as regards to disclosure to be obtained on account of bungalow at Khanapur, i.e. ₹ 9 crores. It was submitted that the AO being a q .....

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s which have been considered by the DVO in his report were fixed/constructed/developed subsequent to 31-03-2010, i.e. date upto which the DVO has estimated value of construction of the bungalow. The assessee filed various details of bills and vouchers which were incurred on the bungalow/farm house pertaining to the period after 31-03-2010 but taken into account by the DVO as having been invested prior to 31-03-2010. The total of such expenditure was to the tune of ₹ 1.89 crores. 15. The as .....

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ntage of his technical knowledge, knowledge of availability of cheap labour, quality of material, discount on bulk purchases etc. to achieve considerable economy in construction cost. However, the DVO did not take into account all these factors and had allowed 3% as self supervision charges. It was argued that the prices and rates utilized by the DVO are very exorbitant and he has taken the highest market value. It was argued that considering the business of the assessee as Promoter and Develope .....

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rutiny. Before accepting the DVOs valuation, the AO should have cross verified by reference to the source of income unearthed during the search and seizure operation and whether sufficient sources were available to the assessee for making investments in the impugned property to the extent estimated by the DVO. It was argued that the AO has not rejected the assessee s books of account which is a pre-requisite condition of making a reference to the DVO u/s.142A. This shows that he has partly accep .....

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ational Society reported in 339 ITR 588. Various other decisions were also cited by the assessee before the CIT(A). 17. However, the CIT(A) was not fully satisfied with the arguments advanced by the assessee. After considering the submissions made by the assessee he noted that the DVO has included all costs as per plinth area rates upto the time of valuation, i.e. early 2013 and spread the same over F.Y. 2005-06 to 2009-10. After considering the various details submitted by the assessee he direc .....

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s against 3% allowed by him. Thus, he rejected all other arguments before him and sustained an amount of ₹ 6,52,99,320/- for various years, the details of which are as under: A.Y. Amount added by AO Less: Relief allowed @3% of Cost (See Para 12.35) Less: Relief allowed on account of Expenditure after 31-03- 2010 (see Para 12.31) Less : Set off for income disclosed in 153A return (see para 12.46) Addition sustained 2005-06 Nil Nil Nil Nil Not Applicable 2006-07 1,70,26,504/- 6,81,900/- 11,0 .....

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owever, the Revenue has not filed any appeal. 20. The Ld. Counsel for the assessee strongly objected to the order of the CIT(A) in sustaining the addition on account of undisclosed investment in the Bungalow for different assessment years. Referring to the statement of facts and grounds of appeal filed before the Ld.CIT(A) for the A.Y. 2006-07 he submitted that the acquisition of land was going on till 26-03-2006 and the assessee had paid ₹ 22,08,656/- in the month of March as Nazarana cha .....

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T(A), the Ld. Counsel for the assessee drew the attention of the Bench to the submission made before the CIT(A) wherein the above facts were narrated. However, he has not considered the same. He submitted that the assessee has started only developing the hilly portion of the land by way of constructing approachable road to reach the top of the hill and levelling the top of the said hill during F.Y.2005-06. However, there was no development work like construction of retaining walls, water coolers .....

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he construction of the approach road to reach the hill top and the levelling work etc. which has been carried out towards the fag end of F.Y.2005-06 relevant to A.Y. 2006-07. Therefore, no addition is called for during A.Y.2006-07. 22. So far as the addition sustained by the Ld.CIT(A) on the basis of valuation report given by the DVO is concerned, he submitted that there are serious lapses in the said report of the DVO. He submitted that despite the availability of guidelines for valuation of im .....

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specifications or 2009 specification cannot be a ground for sustaining the addition when the construction of the farmhouse/bungalow has taken place during the period 2006-07 to 2012-13. 23. He submitted that the DVO inspected the farm house/bungalow on 23-01-2013 and submitted his report on 28-02-2013. At the time of the inspection of the DVO the construction activity was still going on. However, he has given his report regarding the construction of the bungalow upto F.Y. 2009-10 and has conside .....

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elief of ₹ 60,33,950/- only. 24. The Ld. counsel for the assessee submitted that the assessee in his return of income filed in response to notice u/s.153A has disclosed the additional income for different assessment years starting from 2006-07 to 2010-11. He submitted that although the assessee has declared additional income of ₹ 3,43,23,198/- for different assessment years the Ld.CIT(A) has given relief of only ₹ 1,81,20,667/- as set off for income disclosed in 153A return. He .....

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construction of the farm house/bungalow 25. The Ld. Counsel for the assessee submitted that the assessee has maintained proper books of account and has disclosed the investment towards the construction of the farmhouse/bungalow and year-wise investment was shown in the balance sheet. The books of account of the assessee were not rejected. Therefore, the AO could not have made a reference to the DVO without rejecting the book results. For the above proposition, he relied on the following decision .....

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luminium Co. Ltd. reported in 303 ITR 256 26. Referring to page 158 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the return of income for A.Y. 2011-12 and submitted that the assessee has suo-moto disclosed an amount of ₹ 7,20,95,852/- as voluntary disclosure. He submitted that since the construction activity was going on, therefore, it is quite possible that certain expenses remained payable and the assessee can be considered to have paid a part of .....

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a taken is 182.74 sqmt. Hence the actual cost should be ₹ 5,57,277.73 instead of ₹ 7,72,838/- (further reduction 32.5% for extra services+ deduction of indexation +5% for interior location). Hence, excess valuation comes as follows: 212,213 Particulars As per DVO Actual Area Excess valuation Dome Area for valuation 182.74 131.77 50.97 Basic Value 772,838.00 557,277.73 215,560.27 Add for extra services @32.5% 251,172.35 181,115.26 70,057.09 Sub Total 1,024,010.35 738,392.99 285,617.36 .....

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sqm totalling to 1792.0 sqm. At the rate adopted by DVO of ₹ 141.65 the excessive valuation is as under : (further deduction of indexation +5% for interior location) 213 & 200 Particulars As per DVO Revised Value Net Effect Basic Rate Adopted 141.65 141.65 - Area 22,500.00 1,792.00 20,708.00 Value 3,187,125.00 253,836.80 2,933,288.20 Add for indexation @(336/100) 10,708,740.00 852,891.65 9,855,848.35 Add for interior location @5% 535,437.00 42,644.58 492,792.42 Total Valuation 11,244, .....

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8.81 28. He submitted that the assessee himself is a Builder/Contractor. He knows where the quality materials are available at cheap rate. Since he is an expert in this line of business, he is expected to know how to construct his own farm house/bungalow at cheap rate. He submitted that the DVO had granted only 3% self supervisions charges which was accepted by the AO. The Ld.CIT(A) enhanced the rate to only 6%. He submitted that when the valuation of construction of building is estimated, the a .....

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benefit of rates of those items. He accordingly submitted that if all these things are considered, then no addition is called for on account of unexplained investment in the construction of the farm house/bungalow at Khanapur, Sinhaghad Panshet Road, Pune. 30. The Ld. Departmental Representative on the other hand heavily relied on the order of CIT(A). He submitted that the Ld.CIT(A) has already granted substantial relief and the Department is not in appeal. Therefore, his order being in consonan .....

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e on 12-10-2010. During the course of search, it was noticed that the assessee has made substantial investment in farm house/bungalow at Manewadi, Khanapur, Sinhagad Panshet Road, Taluka Haveli, District Pune. At the time of search, the Department hired the services of an approved valuer who valued the bungalow at ₹ 24,82,49,207/- which included the cost of plot at ₹ 9,52,87,500/- and cost of construction at ₹ 15,29,61,707/-. Since the assessee in his balance sheet as on 31-03- .....

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ining the investment by the assessee in the farm house at ₹ 12,06,79,000/- from F.Y. 2005-06 to 2009-10. Since the assessee had shown investment of ₹ 3,20,08,627 including the cost of land at ₹ 45,15,912/-, the AO made addition of ₹ 9,31,86,279/- being the difference between the valuation determined by the DVO and the investment declared by the assessee from A.Y. 2006-07 to 2010-11, the details of which are already given at Para 8 of this order. 32. We find before CIT(A) .....

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additional income declared in the return filed in response to notice u/s.153A the Ld.CIT(A) granted relief of ₹ 1,81,20,667/-. Various other objections of the assessee were rejected by the CIT(A) for which the assessee is an appeal before us. It may be pertinent to mention here that the revenue has not filed any appeal. 33. It is the submission of the Ld. Counsel for the assessee that the AO could not have referred the matter to the DVO without rejecting the books of account. It is also hi .....

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e return u/s.153A. Apart from the above, it is also the submission of the Ld. counsel for the assessee that the DVO s method of valuing the property is erroneous in view of certain glaring computational error and application of the 1992 rates as against 2009 rates available. 34. So far as the argument of the Ld. Counsel for the assessee that the AO could not have referred the matter to the DVO is concerned, we find the said argument is not applicable to the facts of the present case. The various .....

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e fact that the assessee in its balance sheet as on 31-03- 2006, a copy of which is placed at paper book page 8 read with page 12, has shown the cost of land at Khanapur at ₹ 45,15,912/- and no investment on account of construction of the same has been disclosed. We find before the Ld.CIT(A) the assessee has made the following submission which has been reproduced by the Ld.CIT(A) at para 12.12 of the order: 2.12 During appellate proceedings, the appellant, vide detailed written submissions .....

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21,62,556/- (challan dated 09/03/2006) as per Revenue laws applicable in Maharashtra. Enclosed letter of Tahasildar dated 15/05/2006 and copy of Index II dated 04/08/2000. The said land has around 6 acre road level and around 4.5 acre elevated location and the balance land is unusable. In this manner the appellant incurred a total cost of ₹ 41,46,556/- (Rs. 19,84,000/- + ₹ 21,62,556/-) on the land. 2. The appellant has started developing the hilly portion of the land by way of constr .....

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nd actual work on foundation of the bungalow was commenced in the year of 2008 which is evident from the architect's plan drawn up by Monish Shah & Associates dated 26/07/2008. The said plan has been approved by Grampanchayat Manerwadi Tal Haveli, Dist. Pune on or after 26/07/2008, from which date foundation of bungalow commence. (copy of approved plan is enclosed herewith). 4. The appellate respectfully state that till the actual sanction of Grampanchayat, site development wok was carri .....

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g etc. 6. The Income tax Department appointed Mr. Ravindra Bapat a Registered Valuer to estimate the value of the bungalow; who visited the site along with search tea of the Income tax Dept. on 13/10/2010. Subsequently Mr. Ravindra Bapat submitted valuation report certifying the cost of the plot and construction of the farm house / bungalow at Rs,24,82,49,000/- Which was on the basis of many assumptions, limitations etc. The cost was worked out taking into account on the basis of recent transact .....

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cuments. No responsibility will be accepted to any third party, who may acquire and choose to make use of or rely on, the whole or any part of the report contents. It seems that Mr. Bapat himself did not want to be used his report to be used by any external person/authority other than Income Tax Department and the said report was prepared with one visit to site and same was submitted within 5 days from the date of visit. The said report of Mr. Bapat has been used by the search team to obtain and .....

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hat the appellant was orally pressurized on the basis of Mr. Bapat s report which was exorbitantly highly valued to record additional disclosure of ₹ 9 crore from the appellant. Otherwise has the IT Dept. accepted the said report then it would have very difficult to establish the difference between disclosure obtained and valuation of the Mr. Bapat of ₹ 3 crore why same was waived off. Hence, said report was not accepted and it was solely utilize to get additional disclosure from the .....

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lso clear proof that the Dept. has recorded statement of the assessee to exploit his ignorance and the circumstances at the same time of search to get predetermined disclosure of ₹ 15 crore either from himself or his family members. This fact is on the page No.11 and 12 which are the photo copies of the statement recorded by the search team which are inserted and used in the assessment order for the period from A. Y. 2006-07 to A. Y. 2010-11 9. Subsequent to Mr. Bapat s report and after th .....

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of counts, measuring tapes weights etc. His report has provided detailed calculations of cement bags, area measurements for painting etc. and also adding 7% contingencies and worked out 7.10 crore as the cost of the bungalow including land. The said report was submitted to learned AO but learned AO and DVO did not accept the same. Further, the learned AO has totally ignored the Registered Valuer report and not even single word was mentioned about this report in the assessment orders. 11. An arb .....

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uction of bungalow. Further learned AO at feast should have carried out comparisons between two valuation report as regards to method adopted by Registered Valuer M/s S.R. Nimbal & Associates and learned DVO to appreciate which method provides appropriate calculation of cost of construction. Learned AO being quasi judicial authority, it is imperative upon him to follow rules of natural justice hence, he should have been adopted comparisons of two reports before taxing that amount which is es .....

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e has been accepted or rejected and why the reference to the DVO has been preferred. The DVO himself bring this fact on record on page No.3 stating as follows : …. As the assessee has not responded to the notice and telephonic contacts, the undersigned proposed for the inspection of the property as there were reminders and pressure from the AO s (and his superiors) side from November onwards to complete the valuation immediately (the reason for sending the reference only in April 2012 to .....

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partment. However, the details etc. obtained through the assessee/valuer provided as stated by the valuer were not forwarded to this office in spite of repeated requests to the AO (ACIT/DCIT/JCIT). The valuation report submitted by the assessee was also not forwarded to this office….. This indicates that learned AO desperately and with malafide intention suppressed Registered Valuer M/s. S.R. Nimbal & Associates valuation report. It is clear that the learned AO was polluting the mind .....

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pellant. 13. The learned DVO had started work of valuation by visiting the site on 23/01/2013 and submitted report on 28/02/2013. In between he had called the appellant to produce details about title documents of the land, any valuation report and bills of expenditure all of which was submitted by the appellant on 14/01/2013 and 23/01/2013. The appellant draws your kind attention that the appellant only submitted the report of M/s. S.R. Nimbal s report to DVO. 14. The appellant respectfully brin .....

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of 1992 mathematically worked out/calculated/estimated on the basis of weighted average cost indexed value of construction at ₹ 12,06,79,000/- under the assumption that the work started from 1/00/2005 and was completed on 31/3/2010. This fact of starting commencement of work is not correct since actual construction work was started in the middle of 2007. As stated here above on the date of visit to the site by DVO the finishing work of bungalow was going on. 16. Had the DVO used CPWD indi .....

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r and developer and promoted for past 25 years). Further the appellant had taken the advantage of having knowledge of availability of cheap labour and best quality material which was purchased at low cost since he could take advantage of bulk purchase of construction materials. Further the appellant being from Rajasthan he has full knowledge of availability of specialized workers from Rajasthan at low cost. These facts have not been correctly appreciated by the DVO while estimating the cost of c .....

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erials. Further the appellant respectfully states that the appellant being a builder, Developers and contractor and having done construction work on large scale in the surrounding area he has taken the advantages of bulk purchase of construction materials and low cost of labour. Therefore the bungalow cost is much lesser to the appellant than had this bungalow been constructed by any other person than the appellant. 18. Further learned DVO has inappropriately used closing balance of construction .....

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t calculated cost of construction on the basis of availability of many other factors to the appellant and the valuation report is not correct to the extent it is back dated calculation as on 31/03/2010 after the approx. 3 years gap. This fact has been recorded by learned DVO in his report that the calculations need to be adjusted for the cost of construction worked out by him; since the same was calculated upto the date of report, i.e. Feb 2013. 20. The learned AO has mechanically accepted DVO s .....

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the working of cost of construction. The learned AO has not commented on what grounds M/s. S.R. Nimbal & Associates report was not considered and it is very much evident from AO s order that he was happy to get DVO s report of ₹ 9 crore additions than the book recorded value and to hush up the matter. Further he has totally misguided and relied on the appellant s statement recorded by the search team which was obtained by misuse of Mr. Bapats report, which in turn has not been relied u .....

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DVO and added the income to appellants return income for the various assessment years. These additions are based upon inappropriate judicious scrutiny and not providing sufficient proper opportunity to the appellant to confront DVO s report and to establish correctness of the valuation report submitted by the appellant. 22. Further the appellant respectfully states that before accepting DVOs valuation report as a base for addition to the returned income of the appellant he should have been foun .....

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invest in a construction of the bungalow. 36. However, we find despite the above submission before the Ld.CIT(A) he has not deliberated upon on this issue and has gone by the report of the DVO which has been accepted by the AO. Since the submission of the assessee has not been rebutted at any place, therefore, we find merit in the submission of the Ld. Counsel for the assessee that construction activity cannot start until and unless the land is released by the Haveli Tahsildar office. Since the .....

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e to notice u/s.153A for A.Y.2005-06 and 2006-07. Therefore, we are of the considered opinion that ₹ 1,30,30,201/- towards construction of the bungalow which the Ld.CIT(A) sustained out of the addition of ₹ 1,70,26,504/- made by the AO is uncalled for. We accordingly direct the AO to delete the addition of ₹ 1,30,30,201/- from A.Y. 2006-07. 37. Now coming to the argument of the Ld. Counsel for the assessee that the DVO has considered the entire expenditure incurred up to his da .....

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79/- being the difference between the value declared by the assessee in his balance sheet as on 31-03-2010 and the value determined by the DVO. He has completely ignored the investment made after 31-03-2010 till the date of search and thereafter till the date of visit of the DVO. 38. From the various details furnished by the assessee in the paper book, we find the assessee in his balance sheet as on 31-03-2011, a copy of which is placed at paper book page 161, has disclosed such investment at &# .....

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pport of his claim that an amount of ₹ 1.89 crores was incurred on the farm house/bungalow. 39. As mentioned earlier, from the details furnished by the assessee in the balance sheet, the assessee has made investment of ₹ 3,90,59,712/- between 01-04-2010 to 31-03-2011 as per the balance sheet filed. However, the same cannot be fully allowed under the facts and circumstances of the case. Considering the totality of the facts of the case, benefit of ₹ 2,00,00,000/- on estimate on .....

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es where material and labour is available at cheap rate. Therefore, he is most likely to save substantial amount on account of material and labour cost as compared to an ordinary person. The various Benches of the Tribunal are granting self supervision charges varying from 10% to 15%. Considering the fact that the assessee himself is a Buildercum- Promoter, therefore, he is supposed to have substantial savings on this account. In view of the above, we are of the considered opinion that the relie .....

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ee gets relief of ₹ 1,14,64,505/- being the difference between the self supervision charges given as per this order and the self supervisions charges granted by the DVO. 41. Further, we find the assessee in his return in response to notice u/s.153A has declared additional income for different assessment years totaling to ₹ 3,43,24,198/-, the details of which are as under : Asst. Year Additional income Other income 2006-07 22,12,000/- NIL 2007-08 8,79,000/- 10,01,810/- (sale of flat) .....

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vestment towards the farm house/bungalow. There is no material at the disposal of the revenue that the additional income disclosed has been utilised otherwise. Under these circumstances and considering the totality of the facts of the case and considering the fact that the assessee has declared additional income of ₹ 3,43,24,198/- during the period from A.Y. 2006-07 to 2010-11 in his returns filed in response to notice u/s.153A the same in our opinion should be available to the assessee fo .....

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Therefore, adoption of 1992 schedule of rates and multiplying the same by cost inflation index as against the available rate of 2007 or 2009 will give a distorted figure. The Ld. Counsel for the assessee filed a chart showing that because of these faulty method adopted by the DVO, the difference comes to ₹ 1,82,41,436/-. However, since the assessee has not maintained any books of account on day-to-day basis towards the investment in the bungalow, therefore, the property has to be valued by .....

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ement recorded u/s.132(4) has also made a statement that the investment in the bungalow is about ₹ 12 crores, therefore, the valuation report filed by him from a registered valuer under the facts and circumstances of the case cannot be accepted. In view of the various lacunae pointed out by the Ld. Counsel for the assessee due to non adoption of the current schedule of rate and due to some calculation error the report filed by the DVO also cannot be accepted. In our opinion the investment .....

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e of ₹ 1,29,31,475/-. Thus, according to the Ld. Counsel for the assessee the differences comes to ₹ 2,59,32,523.81 (i.e. ₹ 1,30,01,048.81 +1,29,31,475. Since the investment in the property has been estimated in absence of maintenance of proper books of account, therefore, there is bound to be some difference in the estimation. The amount calculated by the Ld. Counsel for the assessee at ₹ 2.59 crores cannot be accepted in toto. However, it also cannot be rejected because .....

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nt in the property can be determined as under : Amount determined by the DVO 12,06,79,000 Less : investment shown by the assessee upto 31-03-2010 (excluding the cost of land 2,74,92,715 9,31,86,285 Less: set off of additional income as per para 42 of this order 3,43,24,198 5,88,62,087 Relief on account of expenditure after 31-03-2010 as per para 39 2,00,00,000 3,88,62,087 Less : Relief on account of self supervision charges as per Para 40 1,14,64,505 2,73,97,582 Less: Mistakes/Calculation errors .....

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.08% 4,59,259/- 2010-11 50,96,500/- 18.54% 6,04,734/- 2,74,92,715/- 100 32,61,782/- 46. The AO shall verify the above computation and make suitable adjustment if any calculation mistake is found. He shall restrict the addition as directed. The ground raised by the assessee for A.Y. 2006- 07 is thus allowed and for other years partly allowed as per the table above. 47. The next issue raised by the assessee in the grounds of appeal for A.Yrs. 2006-07, 2008-09 and 2010-11 relate to the order of the .....

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disclosure. For A.Y. 2008-09, ₹ 4 lakhs is the amount of such cash expenditure and for A.Y.2010-11 the amount is ₹ 7,40,483/-. The AO invoking the provisions of section 40A(3) of the I.T. Act disallowed 20% of such expenditure being ₹ 1,11,000/- for A.Y. 2006-07, ₹ 4 lakhs for A.Y. 2008-09 and ₹ 7,40,483/- for A.Y. 2010-11. The AO further noted that on 19-03- 2013 the assessee has filed a letter dated 18-03-2013 in Tappal contending that undisclosed income disclosed .....

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vardhan and has also acquired several other immovable properties. Therefore, the possibility of the assessee using the cash collected for purchase of these immovable properties cannot be ruled out. In absence of any credible evidence the AO rejected the version of the assessee and accordingly made addition u/s.40A(3) as mentioned above. 49. Before the CIT(A) it was submitted that under the provisions of section 40A(3) disallowance can only be made when an assessee incurs expenditure which is oth .....

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ansactions is no longer acceptable in view of the decision of Hon ble Gujarat High Court in the case of CIT Vs. Hynoup Food and Oil Industries Ltd. reported in 290 ITR 702, the decision in the case of Hon ble A.P. High Court in the case of S. Venkata Subba Rao Vs. CIT reported in 173 ITR 340, the decision of Hon ble Punjab and Haryana Court in the case of CIT Vs. Sai Metal Works reported in 241 CTR 377 and the decision of the Mumbai Bench of the Tribunal in the case of ITO Vs. D.D.Hazare reporte .....

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that provisions of section 40A(3) cannot be applied where the AO applies net profit rate in computing the income of the assessee. 53. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 54. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee before completion of the .....

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allowance u/s.40A(3) can be made. 55. It is the submission of the Ld. Counsel for the assessee that the amount involved in question has been invested in the construction of the farm house which is a capital expenditure and therefore provisions of section 40A(3) are not applicable. We find merit in the above submission of the Ld. Counsel for the assessee. In the preceding paragraphs, we have already held that the additional income disclosed by the assessee is available to him for investment in fa .....

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-12 relates to the order of the CIT(A) in confirming the rejection of relief on account of excess disclosure in gold amounting to ₹ 37,24,917/-. 57. Facts of the case, in brief, are that during the course of search and seizure in the case of the assessee jewellery valued at ₹ 1,65,60,991/- was found out of which jewellery valued at ₹ 1,36,61,002/- was seized. The assessee in the return filed for A.Y. 2011-12 has offered an amount of ₹ 67 lakhs for taxation on account of d .....

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o reconcile the seized jewellery itemwise. It was submitted by the assessee that item-wise reconciliation is not possible due to departmental valuer not doing item-wise valuation. However, item-wise valuation was done just before the release of jewellery against bank guarantee. With this valuation report the assessee could have done item-wise reconciliation with the purchase bills. However, the same has not been done. He further noted that although the assessee has disclosed an additional income .....

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tted that the AO has not appreciated the basic presumption as regards the streedhan of each married female in the family that 500 gms gold ornaments should be allowed as investment not belonging to the assessee. It was submitted that in the assessee s case there are two married ladies, namely wife and daughter in law of the assessee. This way around 1000 gms gold ornaments and jewellery should be treated as received during the marriage time as per the guidelines issued by CBDT. Similarly, 100 gm .....

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it was submitted that the minimum amount of above quantity has been received by female members during the course of the marriage. Therefore, the value of such jewellery amounting to ₹ 37 lakhs which was inadvertently disclosed in the return for A.Y. 2011-12 should be given credit. It was submitted that the assessee during the course of search proceedings as well as at the time of assessment proceedings has informed to the department that the gold and ornaments belonging to his married daug .....

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nt. CBDT Instruction No.1916 dated 11-5-1994 states that in the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gm. per married lady, 250 gm per unmarried lady and 100 gm per male member of the family need not be seized. The relevant of this instruction while completing assessments in search cases has been a matter of dispute. In Nem Chand Daga v. ACIT [2005] 1 SOT 515 (Delhi), ITAT Delhi pointed out that the instruction nowhere states that such jewe .....

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ant. 53.4 In the present case, however, the claim put forward by the appellant is inadmissible on facts. It is noteworthy that in the present case no addition as such has been made by the AO on account of excess jewellery. What the appellant is seeking to claim is relief out of the income he himself had declared in his return of income as Disclosure in Excess Gold . In this regard, it is noteworthy that the search action in this case took place on 12/10/2010, the return of income was filed on 30 .....

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Vs. CIT (2006) 284 ITR 323 (SC) is also against him. As such, this ground of appeal is hereby dismissed. 60. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 61. The Ld. Counsel for the assessee referring to Page 759 of the paper book drew the attention of the Bench to the list/inventory of jewellery found and submitted that the same includes jewellery/gold ornaments of his daughter Shweta V. Bire valued at ₹ 19,50,000/-. Further, entire jewellery has been adde .....

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he rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case jewellery valued at ₹ 1,65,60,991/- was found at the time of search out of which jewellery valued at ₹ 1,36,61,002/- was seized. The assessee in the return filed for the A.Y. 2011-12 has offered an amount of ₹ 67 lakhs for taxation on account of disclosure .....

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jewellery item wise. We find before CIT(A) the assessee requested to allow appropriate relief on account of jewellery belonging to different family members as per CBDT Instruction. However, the CIT(A) rejected the claim of the assessee on the ground that CBDT Instruction No.1916 dated 11-05-1994 only states for non seizure of jewellery and instruction does not say that such jewellery found should be treated as explained and no addition towards the same should be made. He further observed that in .....

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roximately ₹ 19,50,000/- have been shown in the name of his daughter Sweta V. Bire. Further, some relief should have been granted to the different family members in the light of the CBDT Instruction No.1916 dated 11- 05-1994. 64. We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the Panchanama, copy of which is placed at page 759 of the paper book, shows that the list/inventory of jewellery shows jewellery/gold ornaments valued at ₹ 19,50,000 .....

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