TMI Blog2019 (9) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... urces for investment in land and building in their hands, there is no case for making addition u/s 68 of the Act in the hands of the company and if at all any unexplained investment remained, the same required to be examined in the hands of individual share holders / co-owners in the respective assessment years of investment. - Decided against revenue. Capital gain computation - validity of valuation report and the assessment made by the AO on the basis of the report of Departmental Valuation Officer (DVO) - CIT(A) held that the report submitted by the DVO is non-est in law and has no value in the eyes of the law. Accordingly deleted the addition made by the AO - HELD THAT:- Though the assessee raised objection before the AO, the AO ignored the objection raised by the assessee and discussed the issue of time limit available for completion of assessment and justified the assessment without considering the actual objection raised by the assessee. Since there is no extension of time for submission of report is allowed under the Act and no concession was made available to the DVO for non cooperation of the assessee, the report submitted by the DVO beyond the time limit is invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue : Shri D.K.Sonowal, CIT DR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam dated 24.01.2019 for the Assessment Year (A.Y.)2015-16 and 2016-17 and the cross objections are filed by the assessee. Since the issues involved in these appeals are common, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under. 2. The revenue has filed appeal in Form No.36 originally and subsequently filed revised form in the correct format which is applicable as per the amended rules. 3. A search u/s 132 was conducted on 21.12.2015 in the group cases of Sri Alla Siva Reddy, Guntur. During the course of search, certain incriminating material was available in the premises of the searched person, therefore, the Assessing Officer (AO) has issued the notice u/s 153C of the Act and completed the assessment u/s143(3) r.w.s. 153C vide order dated 27.09.2018. 4. For the A.Y. 2015-16, the revenue has filed as many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Sec 142A(7) and Explanation 1(v) to Section 153A are read harmoniously. The Valuation report has been received by the AO within the time available to him for completing the assessment. 3b. The CIT(A) ought to have appreciated that the time limit of 6 months is only an outer limit prescribed by the statute for submitting, the report and that the said provision does not disqualify the contents of the Valuation Report, if received beyond that date and therefore, the finding of the CIT(A) is not correct in treating the DVO's Valuation Report as non-est. 3c. The Ld.CIT(A) ought to have appreciated that the AO has not fully relied upon the DVO's Valuation report, but taken it as a guidance document, copy of which was sent to the assessee objections were called for and considered by the AO in the assessment order. The finding of the CIT(A) that the valuation report is non-est and the action of the AO thereon cannot be upheld is contrary to the law. 3d. The Ld.CIT(A) ought not to have allowed further allowance of 7.5% self-supervision since the DVO has already allowed 7.5% on account of self-supervision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Siva constructions as per page No.4 of the assessment order is as under : Sl. No. Name of the Director Investment in land-1 (F.Y.2010-11 Investment in land-2 (F.Y.2012-13 Investment in construction (F.Y.2013-14 Investment in construction (F.Y.2014-15 Total Investment A.Y.2011-12 A.Y.2013-14 A.Y.2014-15 A.Y.2015-16 1. Alla Rajya Lakshmi 4703335 2346923 2923614 600432 10574304 2. Alla Siddhartha 4703335 2346923 0 824742 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Tiruveedula Pradeep 2445825 1220546 1700000 0 5366371 13. Y.Srinivasa Rao 940825 469626 660364 0 2070815 14. Y.Subrahmanyam 940825 469626 660364 0 2070815 15. YV Subba Rao 940825 469626 660364 370416 2441231 Total 37628030 18777493 21833889 518 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10574304 (-)26,99,304 78,75,000 2. Alla Siddhartha 7875000 0 78,75,000 3. Alla Siva Reddy 14845053 (-)69,70,053 78,75,000 4. Alla Nagarjuna 11003850 (-)31,28,850 78,75,000 5. Chadella Manideep 2205000 0 22,05,000 6. K.Kiran Kumar 1890000 0 18,90,000 7. Potti Venkateswarlu 3150000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reddy and the partnership firm and all the returns of Alla Siva Reddy and family were filed before conducting the search u/s 139(1). In respect of investments of Manideep for ₹ 22,05,000/- and Sri T.V.S.Ramesh for ₹ 37,88,000/-, the AO treated the investment as unexplained and made the addition u/s 68 of the Act. The AO has issued letter to the assessee company requesting to produce 11 Directors including Chadella Manideep and TVS Ramesh Babu to examine the identity and genuineness of the transactions. Out of the 11 directors requested to be produced, the assessee failed to produce Sri P.Venkateswarlu, Smt.Sakala Sujatha, Sri Dileep Tiriveehula and Sri Subrahmanyam Yakkala for examination. Therefore, the AO made investment of following investors aggregating to ₹ 2,38,17,377/- as unexplained investment u/s 68 of the Act as per the details given below : Sl. Name Investment (Rs.) i. Sri P.Venkateswarlu 31,50,000 ii. Smt.Sakala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Alla Siddhartha 4703335 2346923 0 824742 7875000 3. Alla Siva Reddy 4703335 2346923 6366561 1428234 14845053 4. Alla Nagarjuna 4703335 2346923 3353158 600444 11003850 5. Chadella Manideep 1317075 657356 200000 30569 2205000 6. K.Kiran Kumar 1128950 563493 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 37628030 18777493 21833889 5180256 83419668 (ii) Year-wise break up of investments made by Alla Siva Reddy family members : Sl.No. Name of the person F.Y.2013-14 (in Rs.) F.Y.2014-15 (in Rs.) Total (in Rs.) 1. Alla Rajya Lakshmi 0 5,00,000 5,00,000 2. Alla Siddhartha 0 5,00,000 5,00,000 3. Alla Siva Reddy 14,87,500 5,00,000 19,87,500 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sakala Sujatha 4970764 0 37,80,000 9. S.Venkateswara Rao 5984898 (-)30,80,662 40,95,000 10. T.V.S.Ramesh Babu 3780000 0 37,80,000 11. Tiruveedula Dileep 5191567 0 37,80,000 12. Tiruveedula Pradeep 5366371 (-)26,82,938 40,95,000 13. Y.Srinivasa Rao 2070815 0 15,75,000 14. Y.Subrahmanyam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors which clearly establishes that the co-owners have invested the amounts for acquiring the land and construction of the building and the same was explained in the hands of the directors of the company. The Directors have filed the returns of income and explained the sources for acquiring the land and construction of the building in their individual returns. The said land and building was constructed in the earlier years and transferred to the assessee company. In lieu of the transfer of land and building, the assessee company has settled the consideration partly in the form of cash and partly in the form of kind i.e. by transfer of shares. Therefore, there is no infusion of cash in the company for which the source required to be explained. The land and building was received from the promoters of the company and settled the dues payable to the directors in the form of cash and allotment of shares. The source for the investment in land and construction of the building was explained in the individual hands of the directors which was assessed to tax in their individual hands. Therefore, there is no case for explanation of the source again in the hands of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order, the burden of the assessee got discharged and shifted to the AO. The AO has not conducted the enquiries, did not give any finding that the company infused cash credits in the books and made the investments from unexplained sources. In the instant case, since all the promoter directors / co-owners are assessed to tax, explained the sources for investment in land and building in their hands, there is no case for making addition u/s 68 of the Act in the hands of the company and if at all any unexplained investment remained, the same required to be examined in the hands of individual share holders / co-owners in the respective assessment years of investment. Thus the case law relied upon by the Ld.CIT(A) is squarely applicable in this case. Hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. 11. The next issue in this appeal in ground No.3a to 3c is related to the validity of valuation report and the assessment made by the AO on the basis of the report of Departmental Valuation Officer (DVO). During the assessment proceedings, it is observed that the AO referred the cost of construction of the building to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52,10,883 3. 2014-15 409,62,680 295,92,573 113,70,107 4. Total till the date of incorporation 769,38,858 597,42,272 171,96,586 5. 2015-16 556,28,379 4,23,04,671 133,23,708 6. 2016-17 612,00,089 4,79,33,765 132,66,324 7. 2017-18 46,35,674 39,49,707 6,85,967 8 Total 19,84,03,000 15,39,30,415 444,72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of DVO should have been submitted by 31.03.2018. The report was submitted by DVO on 30.05.2018. The issue was raised by the appellant before the Assessing Officer also. The Assessing Officer discussed the issue in the order at pare 7.3 of the order. The Assessing Officer instead of discussing the issue raised by the appellant concluded that the order passed by the Assessing Office is not barred by the Limitation. The issue raised by the appellant regarding validity of DVO report which is submitted beyond the time allowed is not adjudicated. The amended provision of Sec. 142A is as under: The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or sub-section (5), as the case may be, to the Assessing Officer and the assessee, within a period of six months from the end of the month in which a reference is made under sub-section (1). The provision stipulates that the DVO shall submit report within 6 months, even if the assessee does not co-operate. The DVO is supposed to give best judgement report. In this case the basic fact is that report was sought is September, 2017 and report was received in May, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessment was framed on the basis of the DVO s report. This fact is evidenced from para no 7.5 of the order of the AO. For the sake of clarity we extract para No.7.5 of the order of the AO which reads as under: S.No. Financial Year Cost of construction as per the DVO (Rs.) Cost of construction as per the books of accounts of the assessee (Rs.) Difference (Rs.) 1. 2012-13 38,01,059 31,85,463 6,15,596 2. 2013-14 321,75,119 269,64,236 52,10,883 3. 2014-15 409,62,680 295,92,573 113,70,107 4. Total till the date of incorporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Ld.CIT(A), the assessee has challenged the order of the AO on validity of the DVO s report as well as requested for deductions with regard to CPWD rates for self supervision and also reduction on bank loans as alternate grounds without conceding the validity of the assessment. The Ld.CIT(A) is bound to dispose off all the grounds raised by the assessee. Thus, the Ld.CIT(A) rightly adjudicated the grounds raised by the assessee both on validity of assessment made on invalid valuation report and also on rebates requested by the assessee. Thus we do not find any error in the order of the Ld.CIT(A) in adjudicating the alternate grounds. In this regard, we confine ourselves in holding that the Ld.CIT(A) is right in adjudicating the alternate grounds, but we are not going into merits of the order of the Ld.CIT(A) with regard to allowances granted by the Ld.CIT(A) in respect of rebate for rate differences, savings for self supervision etc. and the said issues are kept open. 18. Since we have held that the additions made on the basis of invalid report are unsustainable, we uphold the order of the Ld.CIT(A) and dismiss the appeals of the revenue. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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