TMI Blog2023 (11) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... eration for making the addition HELD THAT:- Admittedly, the sole basis of the addition is only the valuation report furnished by the DVO which has been obtained by the Id. AO during the course of search assessment proceedings. As per the provisions of section 142A (6) of the Act, it apparently clear that the valuation report has to be furnished by the Id. DVO within six months from the end of the month in which reference is made by the Id. AO. This issue is now well settled in case of Sargam Cinema [ 2009 (10) TMI 569 - SC ORDER ] and in the case of CIT vs. Nirmal Kumar Aggarwal [ 2018 (10) TMI 2002 - SC ORDER ] - Admittedly, in the present case, the valuation report is dated 28.10.2016 which is beyond the prescribed time of 30.09.2016. Hence, it is evident that the said valuation report of Id. DVO is barred by limitation and, hence, cannot be relied upon by either party in the eyes of law. Consequentially, in our view, no addition per se can be made by the Revenue by placing reliance on an invalid valuation report. Alternative plea that the valuation report considered by the CIT(A) cannot be relied upon as the DVO report which has been made on the basis of CPWD rated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in adopting the value estimated by the DVO ignoring the fact that the same has been made by taking into consideration CPWD rates instead of PWD rates. 5. That the Ld. CIT(A) has erred in not appreciating the fact that the difference in valuation has been calculated without taking into consideration amount paid by Abdul Majid Sheikh on behalf of the assessee to M/s Bacha Construction Co. against which reopening has been directed u/s 150 of the Income Tax 1961. 6. That the Ld. CIT(A) has erred in rejecting the objections of the assessee in summary manner ignoring the binding decision of Hon'ble Supreme Court in the case of Sunita Mann Singh as reported in 393 ITR 121. 7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off. 3. Grounds of appeal in ITA No. 265/Asr/2023: 1. On the facts and circumstances of the case, the Ld. CIT(A) vide order u/s 250(6) dated 11.05.2022 has erred in confirming the addition to the tune of Rs. 898783/- made u/s 69A by the learned AO on account of amount of expenditure incurred towards hotel expenditure. 2. That the Ld. CIT(A) has erred in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction activity. The AO stated that that the payments which are received through banking channel only relates to it and the payments made in cash by Sh. Abdul Majeed Sheikh to various parties including one of the directors, does not relate to it, have no justification and does not hold good because M/s. Baccha Infrastructure had confirmed in its reply that the payments were received from M/s. Abdul Majeed Sheikh in connection with construction on the site of the assessee company and this fact has been admitted by the assessee company but it was not sure of quantum of payment made by Sh. Abdul Majeed Sheikh to M/s Baccha Infrastructure. Further, Sh. Muzaffar Ahmad Dar had also admitted that the documents and the transactions mentioned therein, relates to the assessee company, except one entry of Rs. 50,000/-. Further payment of Rs. 13 lacs mentioned in the document on different dates received by the assessee in its bank through Sh. Hakim Mohammad Ashraf was shown as unsecured loan in its books which had been admitted by the assessee in his reply dated 31.03.2021 which also proves the genuineness of the documents and confirms the transactions mentioned therein. As per the AO, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was made by the assessee as accepted by M/s. Bacha Infrastructure also. The AR also refers to the reference made to the DVO and report given by him estimating the cost of construction at Rs. 2,26,29,300/- as on 31.02.2014 as against the value shown in the books of accounts at Rs. 2,04,55,325/- and argued that if AO's version was accepted then why this difference was not added by the AO as pointed out by the DVO. The AR also refers to the statement of Sh. Muzaffar Ahmad Dar recorded in Hindi, and claimed that he was not knowing Hindi well. As per the AR, on accounting treatment also, the addition is not sustainable because it will increase the 'building WIP' on asset side and 'unsecured loan' on liability side of the balance sheet and further argued that the loose papers was found at someone else file and cannot made basis for addition. On legal technical ground, the AR submitted that the addition cannot be made either u/s 69A or section 69B of the Income Tax Act, 1961 and argued that the same be deleted. The AR has filed the copies of the submissions filed before the AO at the time of assessment, wherein it was stated that the suit was filed by Mrs. Atiqa B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of the transactions were also verified through notice issued u/s 133(6) to M/s. Bacha Infrastructure Pvt. Ltd. who confirmed that they were awarded work for construction of guest house/hotel in the name of Golden Tulip Hospitality Pvt. Ltd. for an amount of Rs. 9 core but work to the tune of Rs. 93 lacs only have been carried out and the payment of this amount of Rs. 93 lacs was made by Mr. Abdul Majeed Sheikh. The document was also confronted to Sh. Muzaffar Ahmad Dar one of the director whose statement was recorded under oath u/s 131 where he clarified the issues and confirmed the payments and genuineness of the documents. These transactions were not recorded in the books of company although relates to the construction of Hotel building of the assessee company. The AO has point-wise discussed reply on the objections raised by the assessee and mentioned the actual facts of the case in the assessment order and also enumerated the reasons why the contention of the assessee were not acceptable. It is established that the document in question has transaction related to the assessee, these are payments for construction and other payments and that the transactions were ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Financial Year 2013-14 at Rs. 2,26,29,300 and the cost declared by the assessee in its books at Rs. 2,04,55,325 for Financial Year 2013-14, which comes to Rs. 21,73,975/-. Hence, the addition to the extent of Rs. 21,73,975/- is sustained and the appellant gets relief of the balance amount. 8. The learned council for the assessee has submitted that the Ld. CIT(A) has erred in not appreciating the fact that the overall difference in the valuation report for all the years taken together is less than 10% and cannot be taken as a base for making the addition as the valuation report is just an estimate and cannot be taken into consideration for making the addition; that he has erred in adopting the value estimated by the DVO ignoring the fact that the same has been made by taking into consideration CPWD rates instead of PWD rates; that the Ld. CIT(A) has erred in not appreciating the fact that the difference in valuation has been calculated without taking into consideration amount paid by Abdul Majid Sheikh on behalf of the assessee to M/s Bacha Construction Co. against which reopening has been directed u/s 150 of the Income Tax 1961 and that he has erred in rejecting the objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dul Majid Sheikh. [Refer para no 4 on page no 22-25 of the PB] b) The Ld. AO has even failed to appreciate that the seized document itself refers that the expense was made by Abdul Majeed Sheikh. Refer page 23 of PB. The relevant snapshot is reproduced as under: - c) That Sh. Abdul Majeed Sheikh has filed a case in Srinagar Court and had claimed a sum of Rs. 57180100/- receivable against the appellant. Refer page 26 of the paper book relevant para no.3 d) During the assessment proceedings, the Ld. AO confronted with the ledger account in which total amount due from the appellant was to the tune of Rs. 38827500/-. Refer page 26 of the paper book relevant para no.3 e) During the assessment proceedings, notice u/s 133(6) was issued to M/s Bachcha Construction and he has acknowledged that the amount was received from M/s Sheikh Suppliers prop. Abdul Majeed Sheikh and that none of the payments was received from the appellant company Refer Page no 27- 28 of the PB. [Refer para no.4.1.1 of assessment order placed at page no 27 and 28 of paper book] 12. That on the basis of submissions, the Ld. CIT(A) has directed the AO u/s 150 to open the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end 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). Particulars Date Date of reference 29.12.2020 vide letter dated ITBA/AST/S/77/2021/1029316164 Page no 40 DVO valuation report 12.08.2021 Page no 40-48 Date of assessment order 12.04.2021 Page no 20-39 From the above factual matrix, your Honor will find that the valuation report relied upon by the CIT(A) was barred by limitation and as such, no cognizance is required on the said report. In this regard, reliance is being placed upon the following case laws: - a) [2021] 126 taxmann.com 158 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Assistant Commissioner of Income Tax, Central Circle-1 (3), Kolkata v. Narula Educational Trust In the aforesaid facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVO dated 18-12-2014 is kept aside for the legal infirmities discussed (supra), there is no other evidence to support the addition, so the addition made by the Assessing Officer in all the assessment years from Assessment year 2008-09 to Assessment year 2013-14 has to be deleted and Commissioner (Appeal)'s action cannot be faulted and the same is confirmed the reasons given supra, [Para 22] f) 2023 (8) TMI 431 - ITAT DELHI KAY JAY PROJECTS PVT. LTD. VERSUS DCIT, CENTRAL CIRCLE, NOIDA Assessment u/s 153A - Addition towards the cost of construction of the building - Reference made to Id. DVO u/s 142A -HELD THAT:- Admittedly, no incriminating material has been found during the course of search qua this addition towards cost of construction. This fact is evident from the perusal of the orders of the lower authorities. Sole basis of the addition is only the valuation report furnished by the DVO which has been obtained by the Id. AO during the course of search assessment proceedings Then, the said report cannot constitute incriminating material found during the course of search. Hence, we have no hesitation to hold that no addition could be made by plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was settled principle of law that in place of Central Public Works Department rates local Public Works Department' rates were to be applied and adopted to determine cost of construction-Held' it was settled principle of law that in place of Central Public Works Department rates local Public Works Department rates were to be applied and adopted to determine cost of construction-ln view of fact that Section 142A was inserted by, Finance (No.2) Act. 2014 (23 of 2004) and subsequently again substituted by Finance Act, 2010 (14 of 2010) and Finance (No.2) (225 of 2014) as proviso to sub-section (3) of Section 142A as it existed-during relevant period, reference to Departmental Valuation Officer could be made because assessment in present case had not become final and conclusive because appeal preferred by Revenue under section 260A was pending before Rajasthan High Court- However, in view of finding recorded by Tribunal that local Public Works Department rates were to be applied and adopted in place of Central Public Works Department rates. High Court did not find any good ground to interfere in impugned judgment on this issue on merits-Revenue s Appeal dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in both the appeals pertains to addition made to the income of the assessee on account of difference in cost of construction of Hospital declared by the assessee and that determined by the DVO. During the course of hearing, the Ld.AR for the appellant claimed that the difference between the value declared by the assessee and determined by the DVO is less than 10%. He made the calculations by taking the value determined by the DVO as base. This is not in order. The amount shown by the assessee is the base and the percentage is to be computed on this. The chart submitted by the Ld. AR on page 12 of his broad submissions in appeal no. 261/ASR/2023, as it pertains to the two assessment years under consideration, should be as below: FY Declared by the assessee Adopted by the DVO Difference Percentage difference A B C=B-A D=C/A % 2013-14 2,04,55,325 2,26,29,300 21,73,975 10.63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 8.3). The Ld. Counsel in this regard, placed reliance upon the binding judgment of Hon ble Supreme Court in the case of Sunita Mansingha as reported in 393 ITR 121, wherein, it has been held that for the purpose of valuating the property, the local rate should be applied and not CPWD rates and normally, there is difference of about 25% with respect to rate of CPWD and PWD rates. Thus, the addition has been made without providing the benefit of rate difference between CPWD and PWD rate. 12. Considering the factual matrix of the case and judicial pronouncements, we hold that the order passed by the Ld. CIT(A) is infirm and perverse to the facts on record in confirming the addition based on invalid report of DVO and further without allowing benefit of the difference in the value as per law. Accordingly, the addition of Rs. 21,73,975/- sustained by the Ld. CIT (A) is bad in Law and as such, same is deleted. 13. The facts and issue in ITA No. 265/Asr/2023 are exactly identical to facts and issue in ITA No. 264/Asr/2023. Therefore, our observation and finding given in ITA No. 264/Asr/2023 shall be applicable to the case in ITA No. 265/Asr/2023 in mutatis mutandis, ordered accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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