TMI Blog2021 (4) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... d. A.O - Decided against revenue. Unexplained investment u/s 69 in Purchase of land at Sernari Kalan - Assessee offered ₹ 225 lakhs as voluntary disclosure towards investment in land in a general manner without any reference to any specific land - HELD THAT:- CIT(A) has given telescoping benefit to the assessee against the income surrendered during the course of search. Revenue failed to prove that the alleged surrender for ₹ 225 lakh was given with regard to a specific transaction. It was a general surrender not having any nexus with any specific transaction to land and therefore Ld. CIT(A) has rightly given the credit for income declared in such declaration. We therefore confirm the finding of Ld. CIT(A) deleting the addition for₹ 21,50,000/- treating it to be a part of surrender of ₹ 225 lakh made by the assessee during the course of search. Thus Ground No.3 of the revenue stands dismissed. Disallowance u/s 40A(3) - cash paid against purchase of land at Semri Kalan, Bhopal - HELD THAT:- The cash payment of ₹ 4,90,000/- was made at the time of registering purchase deed. The payment made is duly recorded in the books of accounts as well as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the Id. CIT(A) erred in Directing the Assessing Officer to provide deduction/set off of the addition made u/s 698 of the Income Tax Act,1961 In view of the spirit of section 115BBE of the Income Tax Act, 1961. (3) On the facts and in the circumstances of the case, the Id.CIT(A) erred in allowing relief of ₹ 21,50,000/- to the assessee against the addition made by the Assessing Officer on account of unexplained investment u/s 69 of the Income Tax Act,1961 in Purchase of land at Sernari Kalan without appreciating the fact that the assessee offered ₹ 225 lakhs as voluntary disclosure towards investment in land in a general manner without any reference to any specific land. (4) On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of ₹ 4,90,000/- made by the Assessing Officer u/s 40 A(3) of the Income Tax Act, 1961 for Payment of sale consideration of ₹ 4,90,000/- in cash against purchase of land bearing Khasra No. 55/1/1/1 at Sernari Kalan.Bhopal. (5) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal. 3. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of real estate, builders and developers. The assessee during the relevant period was developing a residential complex in the name of Virasha Heights. The expense incurred on the purchase of land and construction expenses on the project were the business expenses of the assessee. The assessee had maintained regular books of account in which all the expenses including the cost of construction were duly recorded. These books were presented before the AO during the course of assessment proceedings and were duly checked by him and no deficiency was found in the books of account or the records maintained. No evidence was found during the course of search or after words during post search enquiry or pre assessment enquiries to suggest that the assessee has incurred any unrecorded expense. However, the assessee has offered ₹ 2.25 crores in the return as surrendered in the statement recorded u/s 132(4). During the course of the assessment proceedings a reference was made to the DVO to estimate the cost of construction of the project who gave a highly inflated valuation taking into account unsubstantiated rates and adopting vague procedures. The assessee raised various objections t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to by Ld. Counsel for the assessee. Revenue s sole grievance through Ground No.1 raised in its appeal for Assessment Year 2012-13 to 2014-15 is with regard to the finding of Ld. CIT(A) deleting the addition on account of undisclosed investment u/s 69B of the Act which was made by the Ld. A.O towards the difference in cost of investment in the projects Signature Residency shown in the books of accounts vis-a-vis estimated by the Departmental Valuation Officer calculated at ₹ 2,73,48,559/-,₹ 5,32,58,155/- and ₹ 4,38,32,956/- for Assessment Years 2012-13, 2013-14 2014-15 respectively. 45. We observe that during the course of search one of the project namely Signature Residency situated Near JK Hospital, Kolar Road, Bhopal was valued by the registered valuer on 30.01.at ₹ 50.46 crores. This fact was confronted before Ld. A.O by Shri Vipin Chouhan, partner of the firm who stated that the actual cost incurred in the project has been shown in the books of the firm at Approx. ₹ 29.08 crores. As regards the difference he stated that since the valuation was done on the basis of estimation, the detailed explanation regarding difference will be submitted af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant extract of Ld. CIT(A) finding is reproduced below:- 5.8 As far as merit of this issue is concerned AO made addition of ₹ 99,82,487/-, ₹ 2,73,48,559/-, ₹ 5,32,58,155/- and ₹ 4,38,32,956/- in the year A.Y 2011-12 to 2014-15 towards difference in cost of investment in the project Signature Residency shown in the books vis-a-vis estimated by ova. This is an undisputed fact that the impunged addition was made solely on the basis of valuation report and A.O. did not bring any positive material or cogent evidence to establish that actually assessee made investment out of books i.e. over and above the amount of investment shown in the books. This is settled law that addition made solely on the basis of valuation report is not sustainable in law. This proposition finds support from the following case laws:- (1) CIT Vs. Chouhan Resorts359 ITR 394 (P H )- Section 698 of the Income-tax Act, 1961 - Undisclosed investments - Assessment year 2007-08 - No addition could be made on account of undisclosed investment in construction of building on basis of report of CVO without books of account being rejected, wherein every expenditure relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inema v. CIT {2010/328 ITR 513[2011]197 Taxman 203, the Supreme Court has held as under (page 514) : In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the ova was misconceived. (emphasis supplied) (ii) Following the above decision of the supreme Court, a Division Bench of the Delhi High Court in CIT v. 8ajrang Lal 8ansal [20111335 ITR 572/200 Taxman 188 (Maq.}/12 taxmann.com 88, has held as under (headnote) : The primary burden to prove understatement or concealment of income was on the Revenue and it was only when such burden was discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. The opinion of the District Valuation Officer, per se, was not an inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Assessing Officer on basis of report of valuation Officer in regard to twO of properties purchased by assessee - Whether in view of clear finding of fact by Tribunal no substantial question of law arose for consideration - Held, yes (5) (IT Vs. Sadhna Gupta352 ITR 595 (DelhiJ- section 69B of the Income-tax Act, 1961 - Undisclosed investments llnvestment in property] - Assessment year 2007-08 _ Whether, where there was no other material to indicate that any extra consideration had passed from assessee, over and above declared value in respect of purchase of property, addition under section 69B could be made based merely on report of District Valuation Officer - Held, no [Para 4] [In favour of assessee] Badar Durrez Ahmed, J. _ This appeal has been filed by the revenue under section260A of the income T Act, 1961 (hereinafter referred to as the said Act) being aggrieved by the order dated 30.11.2011 passed by the Income Tax Appellate Tribuna1 in ITA No.5266 (Del/2010 relating to assessment Year 2007 08. It appears that this had been admitted for hearing by an order passed by this, Court on 30.07.2012. However, learned counsel for the parties pointed out that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the matter to the DVO for an opinion with regard to the fair market value of the property and once that opinion has been rendered, the some has to be taken into account and if mot were to be so, the addition of ₹ 2,81,83,000/- would be fully justified. Consequently, it was submitted by the learned counsel for the revenue that the Tribunal had erred in deleting the addition. On the other hand the learned counsel for the respondent referred to a Division Bench decision of this Court in the case of CIT v, Puneet Sabharwal (2011) 338 ITR 485 16 taxmann.com 320 /(2012) 204 Taxman16 (Delhi) (Mag.) In that decision a specific question had been raised as to whether the Income Tax Appellate Tribunal was right in holding that notwithstanding the report of the DVO the revenue had to prove that the assessee had received extra consideration over and above the declared value of the same. That question was answered by this Court in favour of the assessee and against the revenue. The Division Bench in the case of Puneet Sabharwal (supra) had also placed reliance on the decision of Supreme Court in K.P. Varghese (supra) as also on another decision of a Division Bench of thisCourt in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our individuals had sold 50 of the property in favour of Mrs. Madhu Arora and her husband Mr. Om Prakash Arora. 3. It is stated by the counsel for the respondent that Revenue had accepted the order of the Tribunal in the case of said four individual as addition was mad' solely on the report of the Departmental Valuation Officer,. This statement is not controverted or' accepted by the counsel for the Revenue as he has no information.. 4. The Departmental Valuation Officer had opined that the value of the property at the time of purchase was ₹ 2,84,72,600/- and this became the basis of the addition made by the assessing officer. The respondent/assessee had disclosed sale consideration of as ₹ 39,00, 000/- for sale of their 50% share, in the property o Mrs. Madhu Arora and Mr. Om Prakash Arora paid an amount of ₹ 44,00,000/- to the four individual co-owners for purchase of the balance 50% share. Thus, in all they had shown sale consideration of ₹ 83, 00,000/-, instead of Rs..2,84,72,600/-, as opined by the Departmental Valuation Officer. This property was sold in the period relating to the Assessment Year 2004-05 for ₹ 1,00,00,000/- No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had made any unaccounted investment in the construction of the building in question and that books of account do not reflect the correct cost of construction. Under the circumstances, there was no occasion for the assessing officer to make a reference to the Valuation Officer. As held by the Supreme Court in the case of Sargam Cinema (supra) unless the books of accounts are rejected, the assessing officer cannot make a reference to Valuation Officer. The reference made to the Valuation Officer, not being in consonance with the provision of law, was, therefore, invalid. Accordingly, the report made by the Valuation Officer pursuant to such an invalid reference could not have been made the basis for addition under section 69 of the Act. 9 Whether an addition can be made solely and simply on the basis of the valuation report submitted by DVO, is no longer res integra and is covered by the various decision of Hon'ble Courts mentioned below:- CIT v S.K. Construction Co. (2008) 167 Taxman 171 CIT V Navin Gera (2010) 328 ITR 516/(2011) 198 Taxman93 (Delhi) CIT v Smt. Suraj Devi (2010) 328 ITR 604/(2011) 197 Taxman 173 (Delhi) (Mag.) CIT v Bajrang Lal B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of construction referred for valuation. It is very relevant to understand that the appellant was subjected to search and seizure ac1ion u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment in the project Signature Residency . Lack of any incriminating material/evidence regarding under reporting of cost of construction being pointed out by the A.O .. in spite of search and seizure action addition simply made on the basis 01 OVO's report is even more unjustified and unwarranted. iii) During assessment proceedings, appellant raised several objections with regards to methodology adopted by DVO as well as valuation aspect but AO has totally failed to consider the same. He has mechanically adopted the estimate of value of construction provided by DVO. One should not lose sight pf the fact that at the end 01 the day, cost derived by DVO in his report is nothing but an 'estimate' which is bound of have some amount of estimation, guess work opinion involved and estimate cannot be 'exact'. After all it is an estimate done by an expert and it is a popular maxim 'to err is human ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assesse. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 5.8 of this order. it is pertinent to refer to the decision of ITO v Is Dreamland enterprises 80 Taxmen 143 (ITAT Ahd)wherein it was held that when the cost of construction declared by the assessee was supported by regular books of accounts and vouchers, correctness of which was not disturbed by the AO or DVO by bringing any specific material on record, the CIT{A) was fully justified in holding that no addition could be validly made on account of any understatement of cost of construction merely because of difference as estimated by the DVO. Hence, on this count. I am of the view that addition made merely on the basis of DVO's report is not sustainable. vi) The valuation report of DVO is not binding on the AO because it is merely an opinion of an expert. In the context of the controversy in issue, it may also be germane to notice the expression used by legislature i.e. estimate . Thus, resort can be made to the said provision b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat addition to income could not be made on the basis of the report of the Valuation Officer. 5.11 As far as case laws relied upon by the A.O. are concerned, on perusal it is seen that none of the case laws relied upon by the A.O. are applicable to the facts of this case. The case laws referred by AO are as under:- a. CIT v omprakash Bagaria (HUF) 2871TR 523 (MP) In this case the AD issued a commission under s. 131(1)(d) to District Valuation Officer on 23rd Aug , 1996, to determine the cost of construction of the building for the purpose of making on estimate of the investment referred to in s, 69, additions were mode on this basis and the assessee had filed on appeal before the higher authorities challenging that reference to valuation officer is permissible only u/s 55A of the act to determine the market value of capitol asset and no reference can be mode u/s 131(1)(d), the appeal was pending before the High Court. During the pendency of the appeal before the High court the Finance Act 2004 mode amendment in section 142A providing the AO with power to make a reference to the DVO for estimating the value of investment and the amendment was made effective with retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the authorities below, the some should be accepted and no interference should be called for by the High Court Thus it would be seen that the issue before the High court was, entirely different 5.12 In view of the above discussion, I do not find any merit in the addition 01 ₹ 99,82.487/-, ₹ 2,73.48,559/-, ₹ 5,32,58,155/- and as. 4,38,32,956/- in A.Y 2011-12 to 2014.15 merely made on the basis of Valuation Report which is nothing but an estimate of valuation of 'cost of investment' and DVO's report cannot be taken as a conclusive proof of undisclosed investment made in the project Signature Residency of the assessee firm. Therefore appeal on this ground is allowed. 48. From perusal of the above detailed finding of Ld. CIT(A) and various case laws referred and relied by the Ld. Counsel for the assessee we are of the considered view that the ratio laid down by the decision referred herein above are squarely applicable to the issue and facts raised before us by the revenue authorities with regard to the addition made for unexplained investment u/s 69B of the Act for the amount incurred for construction of the project and addition made so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition made by Ld. A.O u/s 69B of the Act this common ground No.2 raised for Assessment Years 2013-14 and 2014-15 becomes infructuous and thus deserves to be dismissed. We accordingly dismiss Ground No.2 for Assessment Years 2013-14 and 2014-15 raised by the revenue. 9. Ground No.3 raised by the revenue for Assessment Year 2013-14 is general in nature which needs no adjudication. 10. Now we take up revenue s remaining grounds for Assessment Year 2014-15. As regards Ground No.3 revenue has challenged the finding of Ld. CIT(A) allowing relief of ₹ 21,50,000/- against the addition made by the Assessing Officer on account of unexplained investment u/s 69 of the Income Tax Act,1961 in Purchase of land at Sernari Kalan considedring the fact that the assessee offered ₹ 225 lakhs as voluntary disclosure towards investment in land in a general manner without any reference to any specific land. 11. Brief facts relating to this ground are that during the course of search, page no.10 of LPS-2 was found and seized from the residential premises of Shri Vipin Chouhan which contains details of purchase of land at Semari kalan, Bhopal. The AO during assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h implies that the said land was being offered tor sale withoul commission. No broker would agree to make any transaction on behall 01 any customer without commission and thus the explanation 01 the assessee is not acceptable. Further a commission of ₹ 9.60 lac and ₹ 11.50 lakh is offered on a land purchased tor ₹ 27.15 lakh and ₹ 30.50 lakh making the commission at app 30. Brokerages of these high amounts are not generally paid and the assessee has failed to bring on record any special circumstances justifying such heavy offer of commission. The assessee has purchased the land in January 2014 and the loose paper under reference was seized on 29.01.2014. The assessee has failed to explain the circumstances warranting him to decide that the project cannot be commenced on these lands in such a short of period of time. 'Thus the explanations of the assessee are not convincing and the AO is correct in holding that the amounts mentioned against (C) represent payments made in cash for purchase of the corresponding lands. It is however seen that (c) is mentioned against total amounts of ₹ 21.10 lakh only as against the addition of ₹ 43,60,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributed to the disclosure made and no separate addition is warranted to be made for ₹ 21,50,000/confirmed in the above Para. This ground # 5 of AY 2014-15 of appeal is allowed. 13. From perusal of the above finding we observe that Ld. CIT(A) has given telescoping benefit to the assessee against the income surrendered during the course of search. Revenue failed to prove that the alleged surrender for ₹ 225 lakh was given with regard to a specific transaction. It was a general surrender not having any nexus with any specific transaction to land and therefore Ld. CIT(A) has rightly given the credit for income declared in such declaration. We therefore confirm the finding of Ld. CIT(A) deleting the addition for₹ 21,50,000/- treating it to be a part of surrender of ₹ 225 lakh made by the assessee during the course of search. Thus Ground No.3 of the revenue stands dismissed. 14. As regards Ground No.4 raised by the revenue relating to disallowance u/s 40A(3) of the Act made by the Ld. A.O towards cash paid against purchase of land at Semri Kalan, Bhopal, we find that Ld. CIT(A) after examining the facts of the case deleted the disallowance u/s 40A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue which remains for adjudication is whether a genuine recorded transaction undertaken in cash in the best interest of the business and otherwise allowable can be disallowed only on a mere technical default. Reference in this regards is made to the decision of the Hon ble Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO 59 taxmann.com 11 wherein the object of insertion of section 40A(3) and rule 6DD was explained by the Hon ble Court as under: The terms of section 40A (3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A (3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment .. Relying on these observation of the Supreme Court Hon'ble Rajasthan High Court in the case of Harshila Chordia vs. ITO 298 ITR 349 has held that list of exceptions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade of ₹ 4,90,000/- is directed to be deleted. In view of the above discussion ground of appeal # 6 of AY 2014- 15 is allowed. 15. On perusal of the finding of Ld. CIT(A) and on examining the facts of the case we observe that the cash payment of ₹ 4,90,000/- was made at the time of registering purchase deed. The payment made is duly recorded in the books of accounts as well as in the purchase deed which was registered before the registering authority. It is not the case of the revenue that the assessee had attempted to evade any tax liability by making payment in cash. Genuineness of the transaction is not in doubt. Assessee being in the business of real estate has entered into such transaction for business and commercial expediency. We therefore are of the considered opinion that Ld. CIT(A) has rightly deleted the disallowance in light of settled judicial precedence and the decisions referred by him in his appellate order, which do not call for any interference. Accordingly Ground No.4 raised by the revenue is dismissed. 16. Ground No.5 is general in nature which needs no adjudication. 17. In the result both the appeals filed by the revenue for Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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