TMI Blog2023 (12) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... of search action and the assessment stood completed and not abated for that assessment year, then no addition can be made in the absence of any incriminating material found during the course of search action. Validity of reference to the DVO - We note that as per the relevant provisions of the Act, if the department wanted to act on the said document, the proceedings could have been initiated u/s 153C of the Act against the assessee by recording satisfaction by the Assessing Officer of the searched person. Thereafter, after receipt of the documents from the Assessing Officer of the searched person, the Assessing Officer of the assessee could have initiated the proceedings u/s 153C of the Act. However, the department did not act on the said documents. Even otherwise, the said slip was a third party document, which was never confronted to the assessee. The difference of the amount mentioned in the said slip was also meager as compared to the additions made by the Assessing Officer. Thirdly, since the said document was not sufficient enough to base additions in this case, the said document at the most could have been a trigger point to initiate search action in the case of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udhiana [hereinafter referred to as CIT(A) ] passed u/s 250 of the Income Tax Act (hereinafter referred to as the Act ). The facts and issues involved in all the appeals are identical and are pertained to the same search action, therefore, all the captioned appeals have been heard together and are being disposed of by this common order. The assessee s appeal ITA No.133/Chd/2023 is taken as the lead case for the purpose of narration of facts. 2. ITA No.133/Chd/2023 The brief facts of the case are that the assessee is involved in the business of running a hotel. A search and seizure operation, u/s 132 of the Act, was carried out at the hotel premises of the assessee on 21.02.2019. It was noticed from the balance sheet of the assessee company that the assessee company had shown total amount spent on construction of hotel building in different years at Rs. 6,14,92,469/-, whereas the value of the building was more. The matter was referred to Departmental Valuation Officer (DVO) for calculating the investments made by the company in the hotel building. The DVO gave the report estimating the cost of construction in various years totaling Rs. 20,21,69,800/-. The Assessing Officer further n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the directors themselves as share capital and unsecured loans introduced. The Assessing Officer, therefore, observed that since the assessee company did not have any source of earning then the amount invested in the construction of the hotel building could have only be funded by the shareholders/directors, who had the interest/ownership rights in the land/building of the assessee company. He observed that the assessee company, being an artificial juridical person, could not have earned, itself, any income prior to the commencement of business or operation of hotel in the instant case. He, therefore, held that the unaccounted investment in the hotel building was made by the three directors/shareholders of the assessee company. He accordingly made the substantive addition in the hands of the directors of the company on proportionate basis. However, he made the impugned addition in the hands of the assessee company on protective basis. 3. Being aggrieved by the said order of the Assessing Officer, the assessee company preferred appeal before the CIT(A). The ld. CIT(A) however confirmed the additions so made by the Assessing Officer, rather, on substantive basis in the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all Such judgement are not applicable due to the recent judgement of the Supreme Court M/s Abhisar Buildwell Pvt. Ltd. as per copy placed at page 27 to 48 and which judgement has again been followed in the case of PCIT vs Kind Buildcon Pvt. Ltd. by the Apex Court, copy placed at page 49 to 50 of the paper book. (iii) As regard, to the said incriminating document, it may be stated that the said document as mentioned by the AO in the assessment order was never confronted during the course of assessment proceedings as is evident of the discussion at page 11 of the assessment order and we came to know only, when the assessment order was received and obtained a copy thereof and the same is evident from the content of the assessment order and neither any statement of Sh. Vishal Bhatia was confronted to us and we had before the Ld. CIT(A) in para 12 at page 10 of the said order mentioned this fact and cited the case of Andaman Timber Industries and others in this context and further, stated that no addition could be made on the basis of third party evidence and thus, no reliance could be placed on such documents and copy of the document was copied from the assessment order in the individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Andaman Timber Others that no addition could be made in such circumstances. (viii) The reliance on the judgement at page 20 by the CIT(A) in the case of VC Shukla and Smt. P K Noorjahan is not correct, since the document as found from the third party is in independent search and has been challenged because of the facts as stated above and further there is so many other names in the said document and hence the observation of the CIT is not correct. Further, the Royal Builders is not our group case as he was searched separately. (ix) Besides, that for the sake of argument though not admitting, it may be stated that as per the Assessing Officer the total amount mentioned in the seized document is Rs. 6,96,00,000/- against which the assessee has debited an amount of Rs, 6,14,92,469/- and thus there is a minor difference only Rs. 81,00,000/-and thus even on this account, the huge addition as made cannot survive. 8. Further, the reference was made in the name of the company by department to the valuation cell as in evident page 3 of the assessee and the DVO forwarded the valuation report in the name of the company and the applicant filed his objections to the A0 and also stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause of the following reasons. (i) It is a fact that the Ld. AO by framing the assessment had given a finding of fact that the company did not had any business income till 07.01.2017 and that finding is undisputed and, thus, no addition could not be made in the hands of the company on account of the alleged difference in the cost of construction of Hotel Building and the Ld. CIT(A) has misled himself in applying the judgement of Punjab and Haryana High Court, since that related to section 68, where certain share capital have been introduced in the books of account of the company. (ii) Reliance is being placed in the judgement of the Apex Court in the case of CIT vs Bharat Engineering Construction Co. reported in 83 ITR Page 187 in which, it was held that though, the assessee's explanation in respect of the cash credit was found in their account was not true, those entries could not represent income of the assessee as they were very soon after company commenced its activities of construction business. In our case the facts are more stronger, since the company had not carried out it operations at all. (iii) Reliance is also being placed in following other decision on the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the DVO had taken the rates of construction as per the Central Public Works Department (CPWD) rate. It was submitted that the property was situated in the State of Punjab. That the DVO, subject to a other objections, was otherwise required to take the prescribed rates of State Public Works Department (PWD rates). It was submitted before the Assessing Officer that there was difference of at least 25% in the rates of construction released by the CPWD as compared to PWD rates. It was also submitted that no discrepancy was found in the books of account of the assessee. It was also submitted that even otherwise, a very higher profit rate is embedded of the contractor in the Government departmental rates i.e. CPWD/PWD, whereas, the assessee has got construction of the work in self supervision and even the material was purchased at discounted rates, and that the concession given by the Assessing Officer, in this respect was very less. 7.2. We, further, note that no incriminating or corroborating evidence was found during the course of search action at the office premises of the assessee prompting the search party/Assessing Officer to get the report of the DVO regarding the cost of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this Court in the case of CIT v. Puneet Sabharwal [2011] 338 ITR 485. 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 this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604 wherein this Court held that the primary burden of proof with regard to concealment of income was on the revenue and it was only when the said burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this Court in the same vein. One such case being the case of CIT v. VinodSinghal (IT Appeal No.482/2010 decided on 05.05.2010) where, again, reliance was placed on the very same decision of the Supreme Court in K.P. Varghese (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of the valuation of the assessee's valuer, on the basis of which he filed the return. 9. Coming to the question of addition towards purchase of land, the Commission of Income-Tax (Appeals) as well as the Tribunal both have examined the issue on the basis of the material available on record. It is noted that the assessee had made no disclosure towards the purchase of land in his statement during the search proceedings. The addition was made merely on the basis of the DVO s report without there being any other material. Moreover, the DVO had also substantially relied on jantri rates and had made other reference's for arriving at the valuation. 10. Both the issues are based primarily on factual aspects. No question of law, therefore, these appeals are dismissed. 10. Similarly, in the case of CIT Vs. Berry Plastics P. Ltd., (2013) 35 taxmann.com 296 (Guj), the Hon ble Gujarat High Court has made following observations: 9. We are of the opinion that CIT( Appeals) as well as the Tribunal committed no error in deleting the additions made by the Assessing Officer. It is undisputed that the sole basis for making the addition was the DVO's report. DVO's report may be a u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said statement was never acted upon by the department and even neither confronted to the assessee either during the course of search action or even during the assessment proceedings. Secondly, there was a difference of only Rs. 50,00,000/- regarding the cost of construction mentioned in the said document as compared to the cost of construction accounted for by the assessee in the books of account. That the amount mentioned in the said slip was 6.76 crores, whereas, the amount booked by the assessee in the books of account was 5.14 crores and there was a meagre difference noted. 7.6. We note that as per the relevant provisions of the Act, if the department wanted to act on the said document, the proceedings could have been initiated u/s 153C of the Act against the assessee by recording satisfaction by the Assessing Officer of the searched person. Thereafter, after receipt of the documents from the Assessing Officer of the searched person, the Assessing Officer of the assessee could have initiated the proceedings u/s 153C of the Act. However, the department did not act on the said documents. Even otherwise, the said slip was a third party document, which was never confronted to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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