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TMI Blog2017 (4) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case, the ld CIT(A) has erred in deleting the addition to Rs. 90400000/- and Rs. 656104/- made on account of unexplained investment for purchase of plot and cost of super structure respectively in respect of Plot No. M-10m NDSE Part-II, new Delhi as the assessee has failed to rebut the findings given in the valuation report." 4. The brief facts of the case is that the assessee is a partnership firm consisting of Hariyani Group on which search and seizure operation were conducted on 26.02.2002. Notice u/s 158BC was served upon the assessee on 09.04.2003 and the assessee filed its return of income on 24.04.2003 at Nil income. During the assessment proceedings a sum of Rs. 3519810/- was added to the income of the assessee on account of alleged sale of stock of Rs. 10413641/- on account of gross profit worked out @33.8% related to new departmental store which showed lesser gross profit compared to existing store. A further addition of Rs. 90400000/- was also made on account of the valuation report of DVO with respect to value of land at Rs. 11.49 crores compared to sale consideration shown by the assessee of Rs. 2.25 crores. The difference in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2,16,08,0007-respectively declared by the assessee. Copy of the DVO's report was given to the assessee by the A.O. It was contended by the assessee before the A.O. relying on the judgement of Hon'ble Supreme Court in the case of Amiya Bala Paul Vs. CIT 130 Taxman 511(SC) that in this case it has been held that section 5SA of the Act cannot be supposed to be a reference u/s 131 of the Act and as such the reference to the Valuation Cell is illegal. As per the A.O., according to this judgement of the Hon'ble Supreme Court it has been held that reference u/s 55A of the I.T. Act cannot be made for the purposes of determining cost of construction for the purposes of working out the capital gains. According to the A.O., the Court has no where held that the A.O. cannot make reference u/s 131(l)(d) for determining the valuation of plot of land. With reference to the contention of the assessee that the firm has purchased plot in Nov/Dec. 199$ whereas the DVO has relied on the sale instance effected in April,1998, as per the A.O., the DVO has not relied on the sale instance which is affected after the purchase made by the assessee but had relied on a sale instance which is effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed income" as per section 158B(b) of the Act. It was further argued by the Ld. AR that the scope and ambit of Chapter XIVB is limited to the material found during the course of search. In the appellant's case the impugned assessment order is silent as to any material found during search conducted u/s 132 which could show the value of the land more than one shown by the assessee. There is a conspicuous absence of any such material found at search which could prove the higher price of the land or building paid by the assessee to purchase the same and was more than what was shown by the assessee in the books of account available to the department. Mere fact that the DVO estimated the value of land/building at a higher figure by itself was not the material which could be said to have been found on search conducted on the assessee u/sec. 132(2) of the Income Tax Act. To substitute the opinion of DVO for the actual price of the property for which it was purchased and recorded in the books of account of the assessee supported by the registered Sale deeds, the revenue not only exceeded its jurisdiction to proceed against the assessee u/s!32 but also went further wrong in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 6.56 lakhs with respect to difference in valuation of property. In the result the solitary ground of appeal of revenue is dismissed. 10. Now we come to the appeal of the assessee. 11. The ld AR submitted at the outset that ground No. 3 of the appeal is not pressed and ground No. 1 of the appeal is general in nature therefore, ground No. 1 and 3 of the appeal of the assessee are dismissed. this leaves us to ground No. 2 of the appeal of the assessee which relates to addition of Rs. 3519810/- on account of gross profit on sales outside the book. During the course of search and seizure it was found that stock of Rs. 10413614/- is short based on trading account for the period 01.04.2001 to 26.02.2002. According to the trading account the closing stock should have been Rs. 21079094/- whereas as per the physical verification it was found at Rs. 16110956/- and therefore, a difference of Rs. 10413641/- was short. The statement of one of the partner was also recorded who confirmed with the valuation and stated that the physical inventory of the stock was also taken in the right manner. The ld Assessing Officer adopted the 33.8% of the gross profit and thereafter add the addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. as under:- 1. That the g.p. rate of 33.8% adopted was not correct as the store has worked ; for about seven months during financial year 2000-01. 2. That during the financial year 2001-02 there was general ' recession in the trade which was due to 9th Sept.,2001 USA blast and earth quake in Gujrat in January, 2002. It is further stated that this has resulted in lower sales and margin and it was not possible to maintain the above said g.p. rate. Further heavy discount on sales were given and clearance sale from July to August, 2001 and again from 25tfa Dec., 2001 to 28th Feb.,2002 was made which resulted into disposal of stock at heavy discount and even at a loss to clear the stock and as such g.p. rate dropped substantially. The assessee accordingly contended that it is not possible to maintain the g.p. rate @ 33.8%. As per the A.O. the assessee's contention that there was recession in the market due to various factors is without any merits. According to the A.O. the sales of the assessee are better than earlier year and the total sales as on the date of search i.e. (as on 26-2-2002). for 11 months were to the tune of Rs.3,00,04,059/-. The physical stock i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of 11.81%. Moreover, there is absolutely no material on record to show that the sales of over a crore of rupees were made by the assessee as assumed by the learned AO. The assumption that the assessee sold stock worth Rs. 1,04,13,6417- being unsupported by any material or evidence, found during the course of search proceedings, there was absolutely no justification on the part of the learned AO to make addition of Rs. 35,19,8107- merely by permuation and combination. According to the Ld. AR, different Benches of the Tribunal and also the High Courts have held that section 145 cannot be applied for the purpose of working out the undisclosed income within the meaning of Chapter XIVB of the I.T.Act. The exercise done by the learned AO to estimate the income' outside the books is purely a matter of conjecture. 3.3 I have gone through the assessment order and the written submissions made by the Ld. AR. It is seen from the records that the firm was constituted in the year 1999-2000 relevant to A.Y. 2000-01. It is also a matter of record that for A.Y. 2000-01 the firm carried on business for nearly eight months as the firm was constituted on 2.7.99. The G.P. declared by the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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