ACIT CENTRAL CIRCLE 1(3) AHMEDABAD, AHMEDABAD V. KETAN BIPIN GALA, AHMEDABAD

ITSSA 8/AHD/2025

AI Insights

The case involves multiple appeals by the Revenue against Ketan Bipin Gala and Kalpesh H. Gala concerning assessments for various assessment years. The core issue revolved around the legality of the proceedings initiated under Section 153C of the Income Tax Act, based on digital data and documents seized during a search operation. The Tribunal examined whether the materials constituted incriminating evidence against the assessees and whether the additions made based on the Departmental Valuation Officer's report were justified. The Tribunal concluded that the evidence did not directly implicate the assessees and that the DVO's report alone could not substantiate the additions made under Sections 69B and 69C of the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 790184 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 18-02-2025
• Other Referred Cases: CIT vs. Jindal Steel & Powers Ltd., Mehta Parikh & Co. vs. CIT, ACIT vs. Narula Educational Trust, CIT vs. Abhinav Kumar Mittal, PCIT vs Abhisar Buildwell Pvt. Ltd., GSG Abode LLP and others v. DCIT, Sargam Cinema v. CIT, Champaklal S. Kasat v. DCIT, Kay Jay Projects Pvt. Ltd. vs. DCIT, DCIT vs. Suraj Ltd., CIT vs. Nirmal Kumar Aggarwal, CIT vs. Jayendra N. Shah, CIT vs. Berry Plastics P. Ltd., CIT vs. VinodSinghal, CIT vs. Smt. Jatinder Kaur, Smt. Harbhajan Kaur, CIT vs. Abhinav Kumar Mittal, CIT vs. Vasudev Construction, CIT vs. Ashok Khetrapal
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: ASEEM THAKKAR
• Keywords: Set aside; Capital asset; Question of law; Corroborative evidences; Unexplained investment; Sale consideration of property below Jantri Value; Fair market value; Document seized; Documents seized; Onus to prove; Retraction; Principle of natural justice; Search and seizure; Valuation report; Block assessment; Loose papers; Value adopted by valuation officer
• Section: 143(3); 132; 153A; 131; 69; 133(6); 69C; 50C

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0012ायपीठ “बी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD \u0015ी संजय गग\u001a, \u0012ाियक सद\u001b एवं \u0015ी मकरंद वसंत महादेवकर, लेखा सद\u001b क े सम!। ] ] Before Shri Sanjay Garg, Judicial Member And Shri Makarand V. Mahadeokar, Accountant Member Sl. No(s) आयकर अपील सं/ IT(SS)A No(s) िनधा \u0010रण वष\u0010/ Assess- ment Year(s) Appeal(s) by : अपीलाथ# / $%थ# / Appellant बनाम/vs. Respondent 1. 5/AHD/2025 2016-17 The ACIT Central Circle- 1(3) Ahmedabad – 380 009 (Revenue) Ketan Bipin Gala Navneet House Gurukul Road Ahmedabad – 380 052 PAN: ACZPG 9115 B 2. 6/Ahd/2025 2018-19 By Revenue Ketan Bipin Gala 3. 7/Ahd/2025 2019-20 By Revenue Ketan Bipin Gala 4. 8/Ahd/2025 2020-21 By Revenue Ketan Bipin Gala 5. 9/Ahd/2025 2014-15 By Revenue Kalpesh Harakhchand Gala Navneet House Gurukul Road Memnagar Ahmedabad – 380 052 PAN: ACZPG 9114 A 6. 10/Ahd/2025 2019-20 By Revenue Kalpesh Harakhchand Gala Assessee by : Shri Aseem Thakkar, AR Revenue by : Shri R.P. Rastogi, CIT-DR सुनवाई की तारीख/Date of Hearing : 03 /09/2025 घोषणा की तारीख /Date of Pronouncement: 28 /11/2025 Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 2 आदेश/O R D E R Per Sanjay Garg, Judicial Member: The captioned appeals have been preferred by the Revenue against the separate orders of the Commissioner of Income Tax (Appeals), Ahmedabad [hereinafter referred to as ‘CIT(A)’] pertaining to different Assessment Years (AYs). Since common facts and issues are involved in all these appeals, these were heard together and are being disposed of by a consolidated order. Revenue’s appeal in IT(SS)A No. 5/Ahd/2025 for AY 2016-17 is taken as a lead case for the purpose of narration of facts. IT(SS) A No.5/Ahd/2025 :- 2. The Revenue in this appeal has taken the following grounds of appeal: \"1) The Ld. CIT(A) has erred in law and on facts by quashing the assessment proceedings under Section 153C,despite the fact that the additions made were based on incriminating seized digital data found during the search, which clearly falls within the ambit of material that justifies the issuance of a notice under Section 153FC. 2) The Ld. CIT(A) has erred in not deciding the appeal on merit. 3) Revenue craves leave to add/alter/amend and/or substitute any or all of the grounds of appeal.\" 3. The brief facts of the case are that the Assessee is a resident individual, who is a partner in various firms engaged in the business of construction and finance. Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 3 For the assessment year under consideration, the assessee filed his original return of income on 27.07.2016 declaring a total income at Rs. 65,10,730/-. 3.1. A search and seizure action u/s. 132 of the Act was carried out on 15.10.2019 in the case of the Land Broker and Financier Group of assessees, particularly in the case of Shri Suresh R. Thakkar, who is engaged in the business of land dealing and brokerage. During the course of the said search action, various incriminating materials, documents, and digital data were found and seized from the mobile phone of Shri Suresh Thakkar, which related/pertained to the assessee. These materials pertained to purchases of various pieces of land situated at Pipan, Nani Devti, Moti Devti, and Modasar by various members of the Gala Family, including the present assessee. On the basis of the aforesaid material found during the said search action, satisfaction note was prepared u/s. 153C of the Act for initiation of proceedings in the case of the assessee for the Assessment Years 2014-15 to 2020-21. Notice u/s. 153C of the Act was issued and in response to the same, the assessee filed return of income on 10.08.2021 declaring total income at Rs.65,10,730. 4. The alleged incriminating material relied upon by the Assessing Officer consisted of transcriptions of WhatsApp chats and digital images found and seized during the search action from the mobile phone of Shri Suresh R. Thakkar. These images and chats were stated to be related to purchases of various pieces of land situated at villages Pipan, Nani Devti, Moti Devti, and Modasar by various members of the Gala family. The digital data included details of land survey numbers, outstanding premium details, details of pending purchase of land, list Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 4 of pending land for purchase with various survey numbers, and WhatsApp chat between Sanjay Agrawal and Suresh Thakkar in respect of payment allegedly made to Kalpesh Gala for land deal. 5. During the course of post-search inquiry, Shri Suresh R. Thakkar in his statement recorded on oath under section 131 of the Act on dates 29-30.11.2019 and 02-06.12.2019 confirmed that the various transactions noted in the aforesaid images and chats were in respect of various pieces of land situated at Pipan, Nani Devti, Moti Devti, and Modasar villages. In his statement, Shri Suresh Thakkar stated that he had facilitated sale of land of around 45 to 50 bighas approximately of land from the farmers of these villages to the Gala group and that the average cost of purchase of land was around 50 lakhs per bigha. He further stated that Sanjay Agrawal was the main person who had facilitated the purchase of land from the farmers of these villages to Gala Group. With specific reference to page number 187, Shri Suresh Thakkar stated in his statement that this page was related to working of land purchased by Gala Group situated in Pipan, Modasar, Nani Devti, and Moti Devti villages through him and Sanjay Agrawal, and that this page had been sent to him by Sanjay Agrawal. He further stated that the total area of the land purchased by the Gala Group was 311 bighas for total sale consideration of Rs.766.22 crores and further that purchase of land around 45 to 50 bighas had been facilitated by him and the purchase of balance land had been facilitated through Shri Sanjay Agrawal. He clarified that the notings made on both the pages were made in coded form and the figures were actually in crores. He explained that for example, the amount of Rs.166.22 written on the page was actually Rs.166.22 crores. Subsequently, during the Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 5 course of post-search inquiry, Shri Suresh Thakkar vide his letter dated 27.02.2020 filed before the Deputy Director of Income Tax (Investigation) furnished page-wise explanation of the digital data. 6. Based on the aforesaid material found during the search and the statements recorded, the Assessing Officer issued show cause notice and called upon the assessee to explain the alleged unaccounted investment in land. The assessee filed detailed reply objecting to the very invocation of section 153C proceedings and also furnished detailed explanation on merits. The assessee raised preliminary objection that the alleged incriminating evidence had been found during the course of search of a third person and the same was neither in the handwriting of the assessee nor bore the signature of the assessee or his employees. The assessee contended that no corroborative evidence had been found in support of the transactions stated to have been noted in the incriminating material found from the search proceedings in the case of Shri Suresh Thakkar. The assessee pointed out that only selective extracts of the statement had been provided of Shri Suresh Thakkar and that the complete statement had not been made available and therefore the context in which the statement had come to be given was not known. 6.1. The assessee further pointed out serious fallacies in the coding and decoding of the various figures mentioned in the loose papers. It was pointed out that the loose papers which were found and which formed the basis of addition neither contained any details such as name of assessee, survey number, area of the land, name of land owner, date of alleged transaction and so on. The Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 6 assessee further submitted that the interpretation of digital data by Shri Suresh Thakkar furnished in his post-search statement could not be stated to be reliable as he had furnished an affidavit dated 05.05.2021, wherein, he deposed that the statement was given under stress and was recorded in English and he not being conversant therein was not completely aware of the contents thereof. It was submitted that satisfaction u/s 153C of the Act in the case of the assessee had come to be recorded on 16.06.2021 which was subsequent to the retraction affidavit of Sh. Suresh Thakkar, though no mention of the said affidavit had been made while recording satisfaction to initiate proceedings under section 153C of the Act. 6.2. The assessee further furnished another affidavit of Shri Suresh Thakkar dated 23.07.2021, wherein, he had furnished clarification with relation to page number 187 of the document, which has been made the basis by the AO to make the impugned additions. He had clarified that he was not aware of any land purchased by Gala Group and that his limited involvement was to the extent of a small portion of land (45 to 50 bighas) and not the entire land parcel and therefore, the digital images found from his devices were of not much significance. Apart from this, the assessee also placed on record affidavits of the land owners who had affirmed on oath that the lands had been purchased at the documented/sale deed price only and no additional amount or on-money had been received by them. Summons had been issued to the farmers/land owners under section 131 and their statements had also been recorded, wherein, they admitted to have sold the land at sale deed price. Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 7 6.3. The assessee had also placed on record documents indicating the comparable rate at which land deals had been executed in that area to demonstrate the justification of the rate at which land was purchased. The assessee contended that he had purchased land on the prevailing Jantri rate/collector rate and there was no stamp duty violation. Independent valuation reports of government-approved valuers had also been placed on record vide letter dated 10.09.2022 which demonstrated that the land was purchased by the assessee at the prevailing market rates of that time. The assessee also contended that overwhelming evidences had been placed on record to demonstrate that the notings in the loose papers and digital data on the basis of which section 153C proceedings had come to be invoked were not reliable. The assessing officer, since was not having in possession of conclusive evidence of payment of any on-money by the assessee over and above the sale deed price, he therefore to ascertain the market price of the land referred the matter to the Departmental Valuation Officer (DVO). 7. The Departmental Valuation Officer submitted his report wherein he estimated the fair market value of the land parcels purchased by the assessee at rates higher than the rates reflected in the books of accounts and the sale agreements. Based on the report of the Departmental Valuation Officer, the Assessing Officer made additions under section 69B of the Act treating the difference between the value estimated in the report of the Departmental Valuation Officer and the value reflected in the books of accounts as unexplained investment in land. For the assessment year 2016-17, addition of Rs.1,83,26,487 was made under section 69B of the Act. The Assessing Officer also made addition Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 8 under section 69C of the Act of Rs.1,98,807/- by presuming the brokerage paid on the purchase of land at the rate of 0.5 percent of the value as estimated in the report of the Departmental Valuation Officer. Similar additions were also made for assessment years 2017-18, 2018-19, and 2019-20. For assessment year 2017-18, addition of Rs.75,50,600 was made under section 69B and Rs.73,748 under section 69C of the Act. For assessment year 2018-19, addition of Rs.1,05,15,206 was made under section 69B and Rs.94,856 under section 69C of the Act. For assessment year 2019-20, addition of Rs.1,05,52,058 was made under section 69B and Rs.79,360 under section 69C of the Act. 8. Being aggrieved by the assessment orders passed by the Assessing Officer, the assessee filed appeals before the learned Commissioner of Income Tax (Appeals). Before the learned Commissioner of Income Tax (Appeals), the assessee raised various grounds challenging both the jurisdiction to issue notice under section 153C of the Act as well as on the merits of the additions made. The assessee contended that the learned Assessing Officer had erred in issuing notice under section 153C of the Act and passing the impugned assessment order without relying upon the material found and seized from the searched party being Land Broker and Financier Group. On merits, the assessee challenged the addition made under section 69B of the Act contending that the learned Assessing Officer had erred in making the addition being unexplained investment in land, only on the basis of the difference between the value estimated in the report of the Departmental Valuation Officer. Similarly, the assessee challenged the addition made under section 69C of the Act contending that the learned Assessing Officer had erred in making the addition by presuming Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 9 the brokerage paid on the purchase of land at the rate of 0.5 percent of the value as estimated in the report of the Departmental Valuation Officer. 9. The Ld. CIT(A) found force in the assessee's contention that the alleged incriminating evidence found during the search of a third person (Shri Suresh Thakkar) neither bore the assessee’s name, nor handwriting nor signature. The ld. CIT(A) observed that the AO had relied on selective extracts of Shri Thakkar’s statement without providing the complete copy or granting cross-examination, thereby violating principles of natural justice. He also noted that the alleged incriminating documents did not bear the name of the assessee, date of transaction, identification of the land purchased including survey numbers, name of seller, date of payments and so on. Further, the aforesaid image had been downloaded from the WhatsApp chats of Shri Suresh Thakkar and further that these WhatsApp chats had not been made with the assessee group, but, in fact, made with independent third parties who were complete strangers to the assessee. That the AO had tried to link the contents of these WhatsApp chats of the searched party with third parties and attempted to associate the same with the purchase of land made by the assessee group only on the basis of the fact that such lands had been ultimately purchased by the family members of the assessee group. On that basis only, an inference was drawn by the AO that the difference between the rates mentioned in the alleged incriminating material being notings made in the WhatsApp chat and the documented price denoted undisclosed investment in land. Furthermore, Shri Thakkar had retracted his initial statement via affidavits dated 05.05.2021 and 23.07.2021, explaining that the original statement was given under stress and language barriers, and clarifying Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 10 that the notings were merely \"anticipated prices\" rather than actual transactions. The ld. CIT(A) noted that the AO failed to address these affidavits or the fact that the satisfaction note dated 16.06.2021 ignored these retractions. The ld. CIT(A) further observed that the assessee produced overwhelming rebuttal evidence, including affidavits and Section 131 statements from land owners confirming sales at documented sale-deed prices, independent valuation reports, and evidence that purchases matched prevailing Jantri rates and other third-party transactions in the same/nearby area. The Ld. CIT(A) observed that during the course of search proceedings in the case of Shri Suresh Thakkar, no other corroborative evidence had been found by which it could be inferred that the assessee had made unaccounted investments in the purchase of land. On the contrary direct inquiries had been conducted by the revenue to ascertain the correctness of the investment made by summoning the land owners who had also accepted the payments received as reflected in the sale agreements. Therefore, now the only reason for making the additions was the value as reported in the report of the Departmental Valuation Officer and not on the basis of any incriminating material. Under such circumstances it stood established beyond doubt that there being no incriminating material found during the course of search proceedings to show that the assessee had made unaccounted investments in land the initiating of proceedings under section 153C of the Act was illegal and bad in law. The AO did not discredit this evidence but instead referred the matter to the Departmental Valuation Officer (DVO). The ld. CIT(A) held that this reference to the DVO led to the irretrievable conclusion that the AO himself doubted the reliability of the alleged incriminating material. Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 11 Consequently, the assessment was based solely on the DVO’s report, not on material found during the search. 9.1. The Ld. CIT(A) further relied upon the decisions of the Hon'ble Supreme Court in the cases of “CIT vs. Jindal Steel & Powers Ltd.” (460 ITR 162) and “Mehta Parikh & Co. vs. CIT” (30 ITR 181) to hold that the reliance on retracted statements without cross-examination was unjustified. Furthermore, the Ld. CIT(A) relying upon the decision of the Income Tax Appellate Tribunal, Kolkata Bench in the case of “ACIT vs. Narula Educational Trust’ (126 taxmann.com 158) and of the decision of the Hon'ble Delhi High Court in the case of “CIT vs. Abhinav Kumar Mittal” (351 ITR 20) to hold that the DVO’s report obtained post-search inquiries would not constitute \"incriminating material\" found during the search. Since no direct evidence (cash receipts, MOUs) linked to the assessee showing any undisclosed investments was found, hence, the ld. CIT(A) concluded that the additions were made on a standalone basis using the DVO report, rendering the invocation of Section 153C illegal. 9.2. Further, the Ld. CIT(A) noted that the main search action was conducted on 15.10.2019 under section 132 of the Act in the case of Shri Suresh R. Thakkar. However, by virtue of the proviso to section 153C of the Act, the deemed date of search in the case of assessee was construed to be on 16.06.2021 i.e. the date of recording of satisfaction note. Therefore, on the date of the deemed search being on 16.06.2021, the limitation date for issuance of notice under section 143(2) of the Act had already got barred on 30.09.2020 for the assessment year 2019-20 and earlier years including the impugned assessment year 2016-17. He observed Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 12 that as per the judicial precedents of various courts, it was a settled legal position that the assessment already deemed to have been completed for the assessment year 2016-17, which was unabated or concluded assessment on the date of search, deserved to be left undisturbed in the absence of any incriminating material found in the course of search action and accordingly no fresh addition could be made thereon under section 153C of the Act. Following the ratio laid down by the Hon’ble Supreme Court in the case of “ PCIT vs Abhisar Buildwell Pvt. Ltd.” (454 ITR 212), the ld. CIT(A) held that no addition can be made in unabated assessments in the absence of any incriminating material found during the search. He observed that as the DVO report was not an incriminating search material, the jurisdictional conditions for Section 153C were not met. The Ld. CIT(A) observed that in the case of the assessee there was no direct material implicating the assessee of having made any investments outside the books of accounts. Accordingly, the ld. CIT(A) quashed the assessment order and deleted the additions under Sections 69B and 69C for AY 2016-17, as well as for AYs 2017-18, 2018-19, and 2019-20. 10. Being aggrieved by the said order of the Ld. CIT(A), the revenue has come in appeal before us. 11. During the hearing before us, the Ld. DR placed strong reliance on the digital evidence and the statement of Shri Suresh Thakkar to contend that on- money had exchanged hands. 12. The Ld. AR, on the other hand, has relied upon the order of the Ld. CIT(A) and further drew our attention to the order of the co-ordinate Ahmedabad Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 13 Bench in the group cases of “ GSG Abode LLP and others v. DCIT [IT(SS)A No. 21/Ahd/2024 and others dated 18.09.2025], wherein, identical issues were adjudicated, with reference to the same land broker, the same nature of digital evidence, and similar use of a DVO report, however, the Co-ordinate Bench ruled in favour of the assessee. 13. We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. The effective legal issue arising in these appeals is whether the learned Commissioner of Income Tax (Appeals) was justified in quashing the assessment orders passed under section 143(3) read with section 153C of the Act on the ground that the jurisdictional conditions for invoking section 153C of the Act were not satisfied as there was no incriminating material found during the course of search pertaining to the assessee; On merits, whether the DVO’s report on standalone basis can be made basis to hold that on- money has exchanged hands in the land sale transactions in question. These issues involves both jurisdictional as well as factual aspects. 13.1. We find that the entire foundation of the assessment proceedings under section 153C of the Act rests on the digital data found from the mobile phone of Shri Suresh R. Thakkar. The so-called incriminating material consisted of WhatsApp chats between Shri Suresh R. Thakkar and third parties including Sanjay Agrawal and some digital images containing notings and details of land transactions. A careful perusal of the seized material reveals that none of the documents or notings or images bear the signature of the assessee or are in the handwriting of the assessee or any of his employees. The documents primarily Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 14 consist of WhatsApp chats between third parties and loose papers with broad notings. Crucial aspects such as survey numbers, identity of land sellers, details of cash flow, or specific mention of the assessee or his entities are conspicuously absent from the relevant seized materials. We further find that the person from whose possession the digital data was recovered, namely Shri Suresh R. Thakkar, retracted from the statements made during post-search investigation and categorically clarified by way of affidavits about both the context and veracity of the notings and chats referred to by the department. In particular, we note that Shri Suresh R. Thakkar filed an affidavit dated 05.05.2021,wherein, he stated that the statement was given under stress and was recorded in English and he not being conversant therein was not completely aware of the contents thereof. Subsequently, he filed another affidavit dated 23.07.2021, wherein, he clarified with reference to page number 187, which formed the basis of additions, that he was not aware of any land purchased by Gala Group and that his limited involvement was to the extent of a small portion of land and not the entire land parcel. It is significant to note that the satisfaction note in the case of the assessee was recorded on 16.06.2021 which was subsequent to the affidavit dated 05.05.2021, though no mention of the affidavit was made while recording satisfaction to initiate proceedings under section 153C of the Act. Additionally, the request for cross-examination of Shri Suresh R. Thakkar was denied by the department, despite the explicit demand made during the assessment proceedings. Such a denial to cross examine the searched person, whose retracted statement was relied upon by the department , stands contrary to the Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 15 principles of natural justice and has a severe damaging effect on the validity of such additions. 13.2. We find that as regards the land transactions in question, all necessary evidence was furnished by the assessee, including affidavits of landowners confirming that only the documented sale-deed price was received and that no on-money changed hands. Third-party verification was also undertaken by issuance of summons to sellers under section 131 of the Act, who deposed in favour of the assessee's version, and no evidence to the contrary was either found or confronted to the assessee. Further, the transactions declared in the return of income and the purchase prices recorded in the sale agreements were never found to be at variance with prevailing Jantri rates being circle rates and were fully supported by valuation reports furnished from government-approved valuers. The Departmental Valuation Officer, upon reference made by the Assessing Officer, estimated higher market rates, but such estimation relied on assumptions of future commercial potential as well as adjustments on account of horizontal development, while disregarding contemporaneous sale instances and the state of development at the time of acquisition, as well as the comparable rates submitted by the assessee. In this respect, the following observation of the coordinate bench in the case of “ GSG Abode LLP” (supra) is relevant and applicable: “The alleged incriminating material was allegedly recovered from the mobile of Sh. Suresh Thakkar, who admittedly was not a party to any of the transactions in question. More particularly, the alleged WhatsApp chat relied upon by the AO was not between the parties to the transaction, rather the same was between the original potential buyer and another third party. Though a copy of the MOU was Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 16 recovered from the phone of the searched person, however, the said MOU did not pertain at all to the assessee. Even in the alleged WhatsApp chat, the assessee was not a party. Even the said WhatsApp image or the so-called 'loose paper' did not contain any name, land description or any indication connecting the said document to any of the assessees.” ……. “The AO had summoned all the sellers and examined them on oath however each person categorically denied receipt of any on-money for the land transaction in question. Under the circumstances, the alleged loose sheets or digital notes without clear linkage of the same to the assessee or the transaction in question, and without any cash flow traced, could not constitute credible or reliable evidence in law for making the impugned additions.” 13.3. The bench further dealt with the DVO aspect as: “The DVO had valued the land in the year 2022 whereas, the sale transaction was made on 30/10/2018 and at that time the land was barren. Though, the DVO had estimated the fair market value of the land as on 30.10.2018, however, at the time of valuation in the year 2022, the real estate project was already executed and significant improvements in land had already taken place. Therefore, the CIT(A) in our view was right in observing that the chances of higher valuation of the land by the DVO influenced by the aforesaid circumstances, cannot be ruled out.” 13.4. The ratio decidendi of the coordinate bench in the cases of “ GSG Abode LLP” (supra), as well as the consistent view of higher courts that such DVO reports, unsupported by concrete evidence, cannot be invoked in completed assessments or to sustain an addition under section 69B, squarely governs the issue on hand. The essential jurisdictional condition under section 153C of the Act for issuing notice and making additions for an unabated assessment year, as in this case, is the existence of incriminating material unearthed in the course of search, which has a direct bearing on determination of undisclosed income of the Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 17 assessee. In the absence of such nexus and in the absence of incriminating material having bearing on determination of total income, the very initiation of assessment proceedings u/s 153C of the Act was bad in law. The additions made in the present case rest solely on estimated differences from the report of the Departmental Valuation Officer, not on any reliable document or specific transaction unearthed during the course of the search that could be characterized as incriminating within the meaning conferred by law and numerous binding precedents including the decision of the Hon'ble Supreme Court in the case of “Abhisar Buildwell Private Limited” (supra) . The co- ordinate bench in the cases of “GSG Abode” (supra) in the exact and identical circumstances in respect of the aforesaid legal issue of invocation of jurisdiction u/s 153C of the Act has observed as under: “ 10.13. Shri Biren Shah, the Ld. AR of the Assessee GSG Abode, has further contended that even the impugned addition was not legally sustainable as the very initiation of proceedings under Section 153C of the Act was bad in law, as there was no incriminating material found relating to the assessee during the search action in the case of third party. No doubt, it has been held time and again that in respect of completed/non abated assessment years, no addition u/s 153A/153C can be made in the absence of any incriminating material found during the course of search action. However, in this case, the assessment for the assessment year under consideration was not completed, hence, the AO could have carried out the assessment u/s 143(3) of the Act by issuing notice u/s 143(2) of the Act. However, we note that the case of the assessee was not selected for scrutiny assessment u/s 143(3) of the Act. The assessment in this case was initiated u/s 153C of the Act, allegedly on the basis of incriminating material found during the course of search action in case of third party. However, admittedly, none of the seized material/data pertained or belonged to the assessee. The AO on the basis of seized documents/data pertaining to the deal between the sellers and Dhiren Bharwad has presumed that the assessee might have paid the on-money in subsequent deal. Even the alleged WhatsApp message exchanged between third parties, which otherwise has no evidentiary value, did not mention either the name assessee GSG Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 18 Abode nor of any of the sellers and even there was no mention of any details of land or sale deed. Thus, the initiation of assessment u/s 153C, in this case was not based on any incriminating material pertaining or belonging to the assessee, hence was bad in law.” 14. The ld. counsel for the assessee has further submitted that so far as the I.T.(S.S.)A. No.9/Ahd/2025 for Assessment Year- 2014-15 is concerned, the reopening under the provisions of Section 153C of the Act was beyond the prescribed period of six years from the date of deemed search on 17.06.2021. He in this respect has submitted that though, the search action u/s 132 of the Act was carried out in the case of Shri Suresh Thakkar on 15.10.2019, however, the satisfaction in the case of the assessee u/s 153C of the Act was recorded on 17.06.2021 and the notice u/s 153C of the Act was issued to the assessee on 21.06.2021. He, therefore, has submitted that in view of the provisions of Section 153C of the Act, the date of search shall be construed as date of receiing books of account or documents seized or requisitioned. He, therefore, has submitted that the six years shall be taken for reopening u/s 153C of the Act which fall immediately from the date of the deemed search action on 17.06.2021 and that the A.Y. 2014-15 will be beyond the prescribed period of six years from the date of deemed search. He, therefore, has contended that the assessment order u/s 153C of the Act is otherwise void. 15. The ld. DR, on the other hand, has submitted that in this case, that the addition made by the AO for A.Y. 2014-15 is more than 50 lakhs, hence the fourth proviso to Section 153A read with Explanation 1 to fourth proviso read with Section 153C of the Act would be attracted and hence the AO would be justified Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 19 to make assessment u/s 153C of the Act beyond six years but not later than ten assessment years from the date of deemed search action. 16. We have considered the rival contentions. The relevant part of the provisions of Section 153A, for the sake of ready reference, is reproduced as under: \"Section 153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years: ** ** Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part the thereof has escaped assessment for such year or years; and Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 20 (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purposes of this sub-section, the expression \"relevant assessment year\" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, \"asset\" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.\" 17. From the above reproduced provisions, it can gathered that reopening u/s 153A beyond six years but not later than ten years can only be made where the AO has documents/evidence in his possession revealing the escapement of income for relevant assessment years and he is satisfied that income escaped assessment with respect to the relevant assessment year is likely to Rs. 50 lacs or more. 17.1 In the case in hand no satisfaction was drawn by the AO that the A.Y. 2014- 15, though, fall beyond six years from the date of deemed search action, however, he was reopening the assessment of the said year as he was in possession of the documents or evidence showing the escapement of income which was likely to amount to 50 lacs or more. The AO in this case proceeded to reopen the assessment for A.Y. 2014-15 considering the relevant date of search as 15.10.2019, which in fact was the date of search action in case of Shri Suresh Thakkar. Therefore, the AO while proceeding u/s. 153C of the Act misconstrued Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 21 about the date of search action and, therefore, wrongly reopened the assessment for A.Y. 2014-15 which was beyond the scope of period covered u/s 153C of the Act, therefore, the assessment u/s 153C of the Act for A.Y 2014-15 was bad in law. Reliance in this respect can be placed on the decision of the Hon’ble Supreme Court in the case of “CIT vs Jasjit Singh” (2023) 155 taxmann.com 155 (SC) which has been followed by the co-ordinate Ahmedabad Bench of the Tribunal in the case of “DCIT vs. Suraj Ltd.” (2024) 165 taxmann.com 410(Ahd). 17.2. Even otherwise, the impugned addition made by the Assessing Officer for all the assessment years is on the basis of valuation report furnished by the DVO. The assessment years beyond six years but not more than ten years can be reopened u/s 153A of the Act only if the AO is in possession of evidence depicting the escapement of income of aggregating Rs. 50,00,000/- or more in such relevant assessment years beyond six years from the date of search. These provisions extending the assessment beyond six years and up to ten years put a stringent condition of possession of evidence with the AO of escapement of income of Rs. 50,00,000/- or more. Such provisions extending the scope of assessment beyond six years from the date of search has to be construed strictly and the evidence relied upon by the AO in such assessments of extended period must be tangible evidence. The DVO’s report, in our view, does not constitute incriminating document or evidence as defined in Explanation 1 to 4th Proviso to section 153A(1) of the Act. The evidence referred to in the Explanation 1 should be tangible evidence and the report obtained of the DVO after the search action, would not fall in the definition of evidence under 4th Proviso to section Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 22 153A(1). Under the circumstances, the reopening of the assessment for AY 2014-15, even otherwise is bad in law and the same is, hereby, quashed. 17.3. Further, the ld. AR of the assessee has relied upon various case laws to stress the point that even in the absence of any corroborating evidence, the addition solely on the basis of the report of the DVO cannot be made even in the normal course or even in case of abated assessment years on the date of search. He has further submitted that the report of the DVO was a mere estimation of investment and would not constitute as conclusive evidence of investment. That even the value of investment estimated by the DVO was highly disputed and cannot be formed basis for re-opening of the assessment u/s.153C of the Act. As noted above, it has been held time and again by various courts of law that the DVO's report on standalone basis without any corroborating material cannot be construed as incriminating material and hence the additions solely on the basis of the DVO's report are not sustainable. The co-ordinate bench in the cases of “GSG Abode” (supra) in the exact and identical circumstances in relation to identical additions made by the AO on the basis of DVO’s report pursuant to the same search action in the case of Shri Suresh Thakkar has observed as under: “ 10.10. Even the Ld. CIT(A) relying on various case laws has observed that a variation between the estimated fair value by DVO and the recorded sale consideration was minor and has to be considered within the acceptable margin and even that in itself did not give rise to presumption of underreporting or on- money payment. The assessee, in this case has explained before both the lower authorities that the DVO had arrived at fair market value of the land after making certain presumptions and estimates. The DVO had valued the land in the year 2022 whereas, the sale transaction was made on 30/10/2018 and at that time the land was barren. Though, the DVO had estimated the fair market value of the land as on 30.10.2018, however, at the time of valuation in the year 2022, the real estate Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 23 project was already executed and significant improvements in land had already taken place. Therefore, the CIT(A) in our view was right in observing that the chances of higher valuation of the land by the DVO influenced by the aforesaid circumstances, cannot be ruled out. The Ld. CIT(A) has also observed that the assessee had also provided similar market value instances in same TP area, wherein, it had purchased land in similar period to prove that the value of the land as mentioned in the registered sale-deed was reflecting fair market value of the land. 10.11. Therefore, the assessee, having explained the minor variation in the valuation of the DVO as compared to the sale consideration and there being no corroborative evidence available to the AO showing any extra consideration passing between buyer and seller, the AO was not justified in assuming unexplained investment and making addition u/s 69B of the Act. We, therefore, do not find any infirmity of the order of the CIT(A) in this respect, holding that the impugned additions, solely on the basis of DVO’s report were not justified. 10.12. Even otherwise, the AO on the one hand has relied upon the DVO’s report and on the other hand has presumed the payment of on-money of Rs. 25 Crore which is almost 5 times more of the variation in the sale price and DVO’s report which has neither been proved from any direct documentary evidence not from the circumstantial evidence in the shape of valuation report etc. Hence, the AO, thus, has been blowing hot and cold in the same stream. Once the AO had got the valuation of land done from the DVO, the AO having relied on such valuation, was not supposed to presume further that the assessee might have paid the amount over and above than the fair market value of the land assessed by the DVO. “ 17.4. Hence, for all the assessment years, even in case of abated assessment for A.Y. 2020-21, not only the initiation of assessment proceedings u/s 153C of the Act are bad in law but also, the impugned addition solely based on the DVO’s report are not sustainable in the eyes of law. The DVO’s report which is just an estimation work that too obtained on a future date and not on or during the time period of the actual transaction date, though can be used as corroborative or supporting evidence but not as a conclusive evidence. The sale deeds in these Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 24 cases have been executed at Circle Rate/Collector Rate and there is a presumption of law that circle rate/collector rate are the market rates , unless any other conclusive or reliable evidence to the contrary is brought on record. It this respect the relevant part of the provisions of section 50C of the Act is relevant, which for the sake of ready reference, is reproduced as under: Section 50C …….. “(2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer…….. ……… (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.” 17.5. A perusal of the above relevant provisions of section 50C of the Act would reveal that even in case the AO proposes to take the value of sale of a property as deemed sale value at stamp duty value/circle rate and the Assessee contends that the circle rate /stamp value rate determined by the authority are higher than the market value and the matter is referred to the DVO for determination of Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 25 market rates and as per the DVO’s report, the market rate found higher than the Circle/stamp value rate, even then the AO is bound to take the value at stamp duty/circle rate and not at the market rate determined by the DVO. Guidance can very well be taken in this case from the above reproduced provisions of section 50C of the Act. In the cases before us, the sale deeds have been effected on the stamp value /circle rate and hence, in the absence of any reliable or conclusive evidence of any on-money exchanging the hands over and above the sale -deed price, the addition on the value estimated by the DVO is not sustainable. The Hon’ble Supreme Court in Sargam Cinema v. CIT (328 ITR 513) has held that a DVO’s report cannot be relied upon unless the books of accounts are found to be incorrect. The Income Tax Act does not mandate blind reliance on a DVO’s report unless corroborated by substantive proof of undisclosed investment. Valuation reports are opinion-based and susceptible to variations due to differing methodologies, assumptions, and regional price fluctuations. The reliance in this respect can be placed on the following decisions: “(i) [Assistant Commissioner of Income Tax, Central Circle-1(3), Kolkata v. Narula Educational Trust [2021] 126 taxmann.com 158 (Kolkata - Trib.) (ii) Champaklal S. Kasat v. Deputy Commissioner of Income-tax, Cent. Cir. 1(3), Ahmedabad [2017] 82 taxmann.com 243 (Ahmedabad - Trib.) (iii) Kay Jay Projects Pvt. Ltd. Versus Dcit, Central Circle, Noida 2023 (8) Tmi 431: Assessment u/s 153A - Addition towards the cost of construction of the building - Reference made to ld. 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. [Refer para 13] Sole basis of the addition is only the valuation report furnished by the DVO which has been obtained by the ld. AO during the course of search assessment proceedings. Then, the said report cannot constitute incriminating material found during the course of search. Hence, Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 26 we have no hesitation to hold that no addition could be made by placing reliance on the said valuation report while framing the assessment u/s 153A of the Act in the hands of the assessee. This issue is now well settled by the recent decision of Sargam Cinema vs. (2009 (10) TMI 569 – SC ORDER] and in the case of CIT Vs. Nirmal Kumar Aggarwal (2018 (10) TMI 2002- SC ORDER] as referred to supra in the contentions of the ld. AR. (iv) The Dcit, Central Circle-1 Ludhiana Versus M/S Rajan Enterprises And Vice- Versa 2022 (5) Tmi 1376 Addition on account of difference in cost of construction as per the books of account and as per the report of the DVO - As it is an undisputed fact on record that no incriminating material or evidence was found during the course of search which could indicate that the assessee had made investment towards cost of construction outside the regular books of account. We also note that the Ld. CIT(A) had deleted the addition in this year by following the order of the Ld. CIT(A) for the immediately preceding assessment year. Since no material was found in the search and seizure operations which could justify the Assessing Officer's action in referring the matter to the DVO for his opinion on valuation of the said properties, then the valuation arrived at by the DVO would be of no consequence. Accordingly, in view of the above cited judicial precedents as well as the factual finding recorded by the Ld. CIT(A) in assessment year 2016-17, which, in our opinion, is both sound as well as logical, we have no hesitation in upholding the same. Accordingly, the ground raised by the Department on this issue also stands dismissed.[Para 8.3] (v) Commissioner Of Income Tax Versus Abhinav Kumar Mittal 2013 (1) Tmi 629 – (Delhi High Court: (2013] 351 Itr 20 Additions u/s 69 - search conducted u/s 132 - notice u/s 153C - valuation of properties referred to District Valuation Officer (DVO) - ITAT deleted the addition - Held that:- No reason to differ from the view taken by the Tribunal as no material was found in the search and seizure operations, which would justify the A0's action in referring the matter to the DVO for his opinion on valuation of the said properties. If that be the case, then the valuation arrived at by the DVO would be of no consequence. In any event, the Tribunal has also, on facts, held that the DVO's valuation was based on incomparable sales, which is not permissible in law - in favour of assessee. [Para 5] (vi) Smt. Jatinder Kaur, Smt. Harbhajan Kaur Versus The Dcit Cc-1, Ludhiana2021 (10) Tmi 1150 - Itat Chandigarh Assessment u/s 153A - Undisclosed investment in the residential buildup house - difference in values as declared by the assessee and as opined by the DVO, - Whether no incriminating evidence was found during the course of search relating to the part additions as confirmed by the Worthy CIT(A)? - Tribunal in the second appeal reversed the findings of the Ld. CIT(A) and deleted the addition holding that since no material was found during the search to justify the reference to the DVO, the action was not in accordance with law - HELD Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 27 THAT:- As in the present case, the authorities below have not pointed out any corroborative evidence to show that the assessee had made investment in question more than the amount declared by the her during assessment proceedings. Hence respectfully following the judgment of Abhinav Kumar Mittal [2013 (1) TMI 629 - DELHI HIGH COURT] we allow the appeal of the assessee and set aside the impugned order passed by the Ld. CIT(A).[Para 6& 7] (vii) 2021 (7) TMI 671 - ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1 (3), KOLKATA VERSUS M/S. JIS FOUNDATION AND (VICE-VERSA) Assessment u/s 153A - Unexplained investment u/s. 69 - valuation report of the District Valuation Officer (DVO) - Estimation of value of assets by Valuation Officer - HELD THAT:- As relying on M/S. NARULA EDUCATIONAL TRUST AND M/S. NARULA EDUCATIONAL TRUST VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1 (3), KOLKATA [2021 (2) TMI 459 - |TAT KOLKATA] From the perusal of panchnama and the assessment orders, it can be safely inferred that the reference made by DDIT (Inv.) for valuation of the properties was without any incriminating materials found during search [oral or documentary which could have suggested that the assessee has shown less investment in its books for building construction] Therefore, no addition was permissible in the assessment order u/s 153A of the Act in the case of un-abated assessments unless it is based on relevant incriminating material found during the course of search qua the assessee and qua the AY. - Decided in favour of assessee. [Para 15] (viii) 2013 (5) TMI 637 - ITAT DELHI ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-11, NEVW DELHI VERSUS MS. ASHA KATARIA Addition made upon the valuation done by the DVO - value of the property in this case as reflected in the registered sale deed was Rs. 33,00,000/-. Reference u/s. 142A was made to the DVO who determined the value of the property at Rs.63,74,700/- as against Rs. 33,00,000/- shown by the assessee. Hence, there was difference of Rs. 30,74,700/-. This was added to the income of the assessee. CIT(A) deleted the addition as there was no evidence of adverse material regarding payment of under hand consideration - Held that:- As no other incriminating material was found during the course of search CIT(A) is correct in this regard. Addition in this case has been made pursuant to search on the basis of Valuation Report of the DVO. It has been settled that in case of search in the absence of any incriminating material found during search, no addition can be made on the basis of Report of the DVO. See K.P. Varghese vs. ITO, Ernakulam&Anr. [1981 (9) TMI 1-SUPREME Court],C.I.T. vs. Abhinav Kumar Mittal [2013 (1) TMI 629 - DELHI HIGH COURT], C.I.T. Vs. Mahesh Kumar [2010 (8) TMI 64 - DELHI HIGH COURT]. Thus in the absence of any evidence that the assessee has invested more than value declared in the registered sale deed of property purchased, the addition in this regard on the basis of Valuation Report by the DVO is not sustainable. [Para 50] Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 28 (ix) 2015 (3) TMI 156 - DELHI HIGH COURTCOMMISSIONER OF INCOME TAX VERSUS NISHI MEHRA, ARUN MEHRA, SUSHIL MEHRA, SUBHASH MEHRA, SURBHI MEHRA, MANJU MEHRA Scope, power and jurisdiction of AO in block assessment proceedings and the term \"undisclosed income - AO concluded a comparison between declared value and the value determined by the DVO disclosed serious discrepancy and added the difference and brought them to tax in the block assessment orders – ITAT concluded that the A0 could not have brought to tax the amounts that he ultimately did merely based upon the DVO's report in the absence of any material pointing to under valuation - Held that:- As decided on CIT Versus. Naveen Gera (2010 (8) TMI 194 - Delhi High Court] it is settled law that in the absence of any incriminating evidence that anything has been paid over and above than the stated amount, the primary burden of proof is on the Revenue to show that there has been an understatement or concealment of income. It is only when such burden has been discharged, would it be permissible to rely upon the valuation given by the DVO. As apparent from the factual narrative, the materials collected in the search operations impelled the A0 to complete the block assessment in this case. Conspicuously, however, there was no material in the course of the search or collected during the proceedings post search, pointing to under valuation of the assessees' properties which were ultimately held to have been the subject of under valuation. Again, significantly the assessees had at relevant time when the actual purchases were effected disclosed the transactional value of those assets; the A0 has then unreservedly accepted them. Wealth Tax authorities too had accepted the valuation. - Decided in favour of assessee. (x) (2008] 166 Taxman 75 (Delhi) HIGH COURT OF DELHI Commissioner of Income- tax, Delhi-VII, New Delhi v. Ashok Khetrapal* Section 158B of the Income-tax Act, 1961 - Block assessment in search cases Undisclosed income - Assessment year 1999-2000- Whether where no incriminating material whatsoever was found during search that might show that assessee had made more investment in properties than their declared value, addition could not be made by treating investment as undisclosed on basis of any DVO's report - Held, yes (xi) Commissioner of Income-tax, Central Circle v. Vasudev Construction*2014] 44 taxmann.com 30 (Karnataka) Section 158BB of the income-tax Act, 1961 - Block assessment in search cases - Undisclosed income, computation of (DVO report) - Block period 1-4-1989 to 28-1-2000 - Assessee-firm was engaged in business of construction of building and development of properties - During search, certain documents like bills of materials purchased, labour charges paid, cheques relating to assessee-firm were found and seized - Notice was issued under section 158BD calling upon assessee to file return of undisclosed income for block period 1-4-1989 to 28- Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 29 1-2000 - Thereafter, valuation of cost of construction of buildings constructed by assessee- firm was referred to DVO, for valuation under section 133(6) - Assessing Officer added difference in valuation of cost of construction adopted by assessee-firm and DVO as undisclosed income - Whether since no material was found during search to indicate that assessee had not recorded expenses incurred on construction in books of account, in absence of any seized materials and solely on basis of DVO's report addition of undisclosed income under section 158BB could not be made - Held, yes [Para 10] [In favour of assessee] 11.1 It has further been held by Hon'ble Delhi High Court and Hon'ble Gujarat High Court that report of the DVO is not binding and no addition can be made in the basis of the standalone valuation report.” 17.6. As noted above, it has been held time and again by various courts of law that the DVO’s report on standalone basis without any corroborating material cannot be construed as incriminating material and hence the additions solely on the basis of the DVO’s report are not sustainable. The Ahmedabad Bench of the Tribunal in the case of “ACIT vs. Shri Jayantilal T. Jariwala” in IT(SS) A No.65/Ahd/2009 vide order dated 28.10.2015 has taken note of the following decisions of the Hon’ble High Courts in this respect: “ i) Hon’ble Gujarat High Court in the case of CIT Vs. Jayendra N. Shah, (2014) 52 taxmann.com 54 (Gujarat). ii) The Hon’ble High Court in the case of CIV Vs. Vasudev Construction (2014) 44 taxmann.com 30 (Kar.) iii) CIT Vs. Berry Plastics P. Ltd., (2013) 35 taxmann.com 296 (Guj) iv) CIT Vs. Sadhna Gupta (IT Appeal No.434 of 2012) (Delhi HC); v) CIT Vs. Lahsa Construction P. Ltd., (2014) 42 taxmann.com 549 (Delhi); vi) GookluckAutomobils P. Ltd. Vs. ACIT (2012) 26 taxmann.com 254 (Guj)” Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 30 17.7. The Coordinate Ahmedabad Bench of the Tribunal in the case of “ACIT vs. Shri Jayantilal T. Jariwala” (supra) taking note of the aforesaid decision of various High Courts, under similar circumstances, has decided the issue in favour of the assessee, observing as under: “8. We have duly considered rival contentions and gone through the record carefully. Before we embark upon an inquiry on the facts of the present case, we would like to take note of the finding recorded by the Delhi High Court in the case of CIT Vs. Sadhna Gupta (supra) on the issue whether merely on the basis of the DVO’s report, an addition can be made or not. The following finding is worth to note: “4. The only point to be considered is whether the valuation rendered by the DVO is to be taken into account or not. It has been argued by the learned counsel for the revenue that the assessing officer was justified in referring 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 same has to be taken into account and if that were to be so, the addition of Rs. 2,81,83,0007- 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. 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 (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala Devi [2009] 316 ITR 46. It was observed that there must be a Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 31 finding that the assessee had received an amount over and above the consideration stated in the sale deed and for this the primary burden was cast on the revenue. It is only when this burden is discharged by the revenue that it would be permissible to rely upon the value as given in the valuation report of the DVO. 5. The law seems to be well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of the DVO cannot form the basis of any addition on the part of the revenue. In the present case there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition. In these circumstances, the question which has been framed is decided in favour of the assessee and against the revenue. The appeal is dismissed.” 9. Similarly, it is pertinent to note the observations of the Hon’ble Gujarat High Court in the case of CIT Vs. Jayendra N. Shah (supra). The observations in para-8 and 9 are worth to note. They read as under: “8. We have no reason to interfere with the concurrent reasonings of the two authorities below. Firstly, taking the issue of cost of construction, it clearly emerges from the record that between the DVO's estimation of cost of construction without furniture and fixture and that of the assessee's valuer, there is a minor difference of Rs. 1.22 lakhs. When we are considering the total figure in the vicinity of Rs. 1.36 crores, this difference is insignificant. Even if, therefore, the Assessing Officer had accepted the DVO's report in its entirety, the total addition under the head could not have exceeded Rs. 1.22 lakhs. He instead made an addition of Rs. 27.69 lakhs, for which we see no basis whatsoever. Learned counsel, Shri K. M. Parikh, strenuously urged that the construction was carried out in three separate previous years relevant to different assessment years. The Assessing Officer had, therefore, divided the undisclosed investment in the cost of construction in these three years. Even if this be so, we fail to see how the total of these three years of expenditure could exceed Rs. 1.22 lakhs which was the difference between the DVO's valuation and 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.” Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 32 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 useful tool in the hands of the Assessing Officer, Nevertheless it is an estimation and without there being anything more, cannot form basis for additions under Section 69B of the Act. In absence of any other material on record, addition was correctly deleted. Tax Appeal is, therefore, dismissed.” 11. A perusal of the above judgments would indicate that mere valuation report is not sufficient to conclude that the assessee has made unexplained investment. From perusal of the assessment, nowhere it reveals that inspite of search, Revenue was in a position to lay its hands on any material exhibiting the unexplained investment made by the assessee, over and above one stated in the books of accounts. Further, we find that the ld. First Appellate Authority has deleted the addition by following the order of the ITAT in the case of Smt. Ilaben Bharat Shah in ITA No.839/Ahd/2007 dtd. 17-8-2007 for the Asstt. Year 2004-05. The ld. First Appellate Authority is of the opinion that the addition cannot be made merely on the basis of DVO’s report, and there should be some other incriminating material to support the case of the Revenue. The issue is also covered by the various decisions of the Hon’ble High Courts cited supra, and therefore, we do not find any reason to interfere in the order of the CIT(A), which is confirmed and the ground of appeal of the Revenue is dismissed.”. 17.8. Even otherwise, the Ld. AR has demonstrated that the difference of amount of sale-deed and in the DVO’s report is less than 15% and is liable to be ignored. The Hon’ble J&K High Court in “Honest Group of Hotels” (123 Taxman 464) has held that minor variations in valuation should not trigger additions under Section 69C in the absence of corroborative evidence. The Revenue failed Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 33 to establish that the assessee incurred unrecorded expenses. Considering the above facts and settled legal position, we hold that the addition made by the AO based solely on the DVO’s valuation was not justified. 18. The learned Commissioner of Income Tax (Appeals) after considering the facts in detail rightly quashed the assessment and deleted the impugned additions. We find no infirmity in the order passed by the learned Commissioner of Income Tax (Appeals) and the same is upheld. 19. The facts and issue involved in the captioned appeals are identical, hence our findings given above will accordingly apply to all the captioned appeals in addition to the additional findings given for IT(SS) No.9/Ahd/2025 for AY 2014-15, hence, all the captioned appeals of the Revenue are hereby dismissed. 20. In the result, all the six appeals of the Revenue are, hereby, dismissed. Order pronounced in the Open Court on 28 /11/2025. Sd/- Sd/- (Makarand V. Mahadeokar) Accountant Member ( Sanjay Garg ) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 28/11/2025 टी.सी.नायर, व.िन.स./T.C. NAIR & Nimisha, Sr. PSs Printed from counselvise.com IT(SS)A Nos.5-10/Ahd/2025 ACIT vs. Ketan Bipin Gala (4 appeals) & ACIT vs. Kalpesh H.Gala (2 appeals) 34 आदेश की $ितिलिप अ'ेिषत/Copy of the Order forwarded to : 1. अपीला थ# / The Appellant 2. $%थ# / The Respondent. 3. संबंिधत आयकर आयु* / Concerned CIT 4. आयकर आयु* ) अपील ( / The CIT(A)- 5. िवभा गीय $ितिनिध , अिधकरण अपीलीय आयकर , अहमदा बा द /DR,ITAT, Ahmedabad. 6. गा ड\u001a फा ईल / Guard file. आदेशा नुसा र/ BY ORDER, स ािपत ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by H-JM in his computer)) : 25.11.2025 2. Date on which the typed draft is placed before the Dictating Member. : 27.11.2025/28.11.25 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 28.11.25 7. Date on which the file goes to the Bench Clerk. : 28.11.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : Printed from counselvise.com "