M/s Khanna Infrabuild Pvt. Ltd., Ludhiana V. DCIT, CC-2, Ludhiana

ITA 133/CHANDI/2023

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0819 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-08-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 12-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Fair market value; Valuation report
• Section: 68; 132; 153A; 69B; 250; 143(2); 64; 48; 13; 22; 153C

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ,चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “A” CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA Nos.133,134&135/CHANDI/2023 Ǔनधा[रण वष[ / Assessment Years: 2013-14, 2015-16 & 2016-17 M/s Khanna Infrabuild Pvt. Ltd. 200/1A, Sukhdev Nagar, Ferozepur Road, Ludhiana. बनाम DCIT, CC-2, Ludhiana èथायी लेखा सं./PAN NO: AAFCK0050Q अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Sudhir Sehgal, Adv राजèव कȧ ओर से/ Revenue by : Shri Rohit Sharma, CIT-DR स ु नवाई कȧ तारȣख/Date of Hearing : 16.08.2023 उदघोषणा कȧ तारȣख/Date of Pronouncement : 12.10.2023 आदेश/ORDER Per Sanjay Garg, Judicial Member: The captioned appeals have been preferred by the assessee against the separate orders all dated 27.02.2023 of the Commissioner of Income Tax (Appeals)-5, Ludhiana [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 ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 2 of 20 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 noted that earlier a separate search action was carried out in the case of another party i.e. M/s Royal Builders on 29.11.2018, during the course of which, certain incriminating documents were found at the premises of the said third party. That document no.58 found from the premises of M/s Royal Builders showed project wise detail on 12.02.2016, which included the project of M/s KhannaInfrauild Pvt. Ltd. (assessee). He observed that the said document showed that the assessee company had remitted cash payment of Rs.5,81,00,000/- including cheque payment of Rs.1,15,00,000/- to M/s Royal Builders on account of construction of the hotel ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 3 of 20 building upto 12.02.2016. He noted as per said document, the assessee had made payments aggregating to Rs.6,76,00,000/- to the Royal Builders, whereas, the assessee company had shown in his account, the total cost at Rs.6,14,92,469.59/- including cheque payment of Rs.1,15,00,000/-. The Assessing Officer allowed the rebate of expenditure @10% on account of self-supervision and further @7.5% for discount on self-procurement of construction material and thereafter the Assessing Officer bifurcated the said total investment determined by the DVO into different years and made the impugned additions on account of difference in the value of investment on construction of hotel building shown by the assessee in the books of account as compared to the value of investment estimated by the DVO. The details of which is given as under: F.Y. Declared by the Assessee Estimated by Valuation Cell Rebate @17.5% Net Valuation Year wise Unexplained Investment A B C D(C*D/100) E (C-D) F (E-B) 2012- 13 65,07,890.00 2,13,96,100.0 0 37,44,318.00 1,76,51,782.5 0 1,11,43,893.00 2013- 14 - - - - - 2014- 15 2,72,08,989. 00 8,94,55,400.0 0 1,56,54,695.0 0 7,38,00,705.0 0 4,65,91,716.00 2015- 16 1,55,41,673. 81 5,10,96,600.0 0 89,41,905.00 4,21,54,695.0 0 2,66,13,021.00 2016- 17 1,22,33,916. 78 4,02,21,700.0 0 70,38,798.00 3,31,82,902.5 0 2,09,48,986.00 Total 6,14,92,469. 59 20,21,69,800. 00 3,53,79,715.0 0 16,67,90,085. 00 10,52,97,615.0 0 The Assessing Officer further noted that the assessee company was incorporated on 21.11.2012. He in this ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 4 of 20 respect observed that till the time the operation of hotel business of the assessee company commenced, there has been no source of income or availability of own generated funds with the assessee company, other than the contribution made 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 anartificial 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 assessee observing that it was immaterial as to whether the assessee company had commenced its ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 5 of 20 business or not when, the undisclosed investments were found in the hands of the assessee company. 4. We have heard the rival contentions and gone through the record. At the first instance, the ld. Counsel for the assessee has submitted that admittedly no incriminating material was found during the course of search action at the premises of the assessee. He has submitted that in the absence of incriminating material found during the search action, the reference to the DVO for determining the estimated cost of construction was not valid. He has further submitted that so far as the reference to some incriminating documents from the office premises of a third party i.e. M/s Royal Builders during an earlier search in the case of the said party was concerned, neither the said documents were brought to the knowledge of the assessee nor the same was confronted to the assessee. He, therefore, has submitted that the reference to the DVO, merely, on the basis of cost shown in the balance sheet of the assessee, without any other incriminating material found during search action, was bad in law. He in this respect has relied upon the latest decision of the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. [2023] 149 taxmann.com 399 (SC). He in this respect has made the following written submissions also: “7. We have as per our ground of appeal by way of ground number one to have challenged the jurisdiction of the DDI to refer to the case of valuation cell without there being any incriminating material found during the course of search from the premises of the assessee, either ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 6 of 20 from Hotel or from the residential premises of the promoters and for which our contention are as under:- (i) It is a fact that the no incriminating material was found from the assessee and as such the reference to the valuation cell was uncalled for. The Ld. CIT(A) has referred to the certain document as seized from third party namely M/s Royal Builders during search in his case on 29.11.2018 and a further held that the reference to the valuation cell may not on the basis of incriminating document, but was within the powers of the AO as per section 142A, without there being any incriminating material in hand as well. (ii) The Ld. CIT(A) has referred to some judgements at page 16, but 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 individual cases as passed by the Ld. A0 and the copy of said document is at the page 26 of the paper book. (iv) The reliance is being placed on the judgement of the Delhi High Court in the case of Sh. Abhinav Kumar and, which have been followed by the Chandigarh Bench in the case of Smt. Harbhajan Kaur as per copy placed at page 64 to page 67 and page 51 to page 63, both were the search assessment and judgement is securely applicable. ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 7 of 20 (v) The finding of the CIT(A), thus, are not applicable to the fact of the case and without confronting the document to the assessee during assessment proceedings and straight away relying on the third party evidence, the conformation of addition by the Ld. CIT(A) is not a correct observation in view of the judgement of the Apex Court and of the Chandigarh Bench ITAT. The said document cannot be said to be incriminating, in so far, as the assesses is concerned in view of the judgement of the Apex Court and further the finding of the Ld. CIT(A) at page 17, that there is no requirement of incriminating material for the purpose of assessment u/s 153A is devoid of any valid reasoning. In view of the direct judgment of Apex Court, Delhi High Court. (vi) Reliance in being place on the judgement of Delhi High Court in the case of CIT vs Concorde Capital Management Company Ltd. reported in (2011) 334 ITR 346, that when no incriminating documents were found during course of search, the additions cannot be sustained on the basis of third party statements, independent of the search. In our case, they was no parallel search as the search was conducted on the Vishal Bhatia on 29.11.2018 and the search on the assessee was on 21.02.2019. (vii) The finding of the CIT(A) on section 292C in not relevant, since the said document was not found the assessee, but from the third party and under what circumstances the said document have been prepared by third party is not known to the assessee and merely that some cheque transactions total tallies with the assessee cannot amount to the addition, as the document may have been prepared by the third party, with the ulterior motives and the fact of the matter is that the document have been not been confronted to the assessee and reliance on that the statement at the back of the assessee without giving any opportunity to the assessee, the whole basis of forming in devoid any valid consideration. We had cited the 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. ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 8 of 20 (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 that CPWD rates are much higher and in the case of Sh. RaieshMahaian, the Hon'ble Punjab and Haryana High Court has held that CPWD rate are higher by 30% and besides that for personal supervision, the benefit of 15% to be allowed as against 7.5 allowed by the DVO and thus the ld. AO has only allowed a benefit 7.50% on ad hoc basis and which is not proper, The said report has been challenged as defective as per our objection raised during the assessment proceedings.” 5. The ld. Counsel has further contended that as observed by the Assessing Officer also, since during the year under consideration the business operation of the company has not commenced and the company did not have any source of income, what to say of any undisclosed source of income, therefore, the action of the CIT(A) in converting the protective addition made by the Assessing Officer into substantive addition was not justified. The ld. Counsel in this respect has made the following written submissions: “9. By way of ground number 7, we have challenged the finding by the CIT(A) by holding substantive addition in hands of the company and, for that, the issue has been discussed by the CIT(A) on page 20 onwards and, for that, the CIT(A) has relied on the judgement of the Hon'ble Punjab and Haryana High Court as per page 22 of his order and held that substantive addition was liable to be made in the hands of the ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 9 of 20 company. The finding of the CIT(A) is not correct because the following reasons (i) The said judgement has been relied upon by the CIT(A) related to the case, where certain amount was introduced in the books of account of the assessee in the form of share capital/ loan and it was held that provision of section 68 are applicable. Similarly the Calcutta High Court judgment has been cited by the CIT(A) is not relevant, because that also dealt with certain credit introduced in the books of account of the assessee. (ii) In the case before us, there is no case of introduction of cash credit in the books of the assessee as is apparent from the facts of the case and the A0 had made the addition on account of undisclosed investment and, thus, the converting of protective addition into substantive addition by the CIT(A) is not proper and the CIT(A) has wrongly applied the case of Punjab and Haryana High Court. 10. Further, the confirmation of substantive addition by the CIT(A) is bad on law because 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. ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 10 of 20 (iii) Reliance is also being placed in following other decision on the same issue: - (a) Commissioner of Income Tax vsJaiswal Grain Stores (Allahabad) 272 ITR page 136 (b) Janta Coal Depot vs Income Tax Officer (Allahabad) 19 TTJ page 445 (c) India Rice Mills vs Commissioner of Income Tax (Allahabad) 85 TAXMAN page 227 (d) Surendra Prasad Misravs Income Tax Officer (Lucknow) 104 TTJ page 292 (e) Surendra Mahan Seth vs Commissioner of Income Tax (Allahabad) 221 ITR 239 In view of the above the addition has confirmed by the CIT(A) is against the facts and circumstances of the case. 11. The last ground of appeal is about the mechanical approval accorded by Addl. Commissioner of Income Tax without applying his mind and for which reliance has been placed on the various case law including of Allahabad High Court, as copies of the same placed in the judgement set. Thus, it is appeal of the assessee be allowed.” 6. The ld. DR, on the other hand, has relied upon the findings of the ld. CIT(A) and has submitted that the ld. CIT(A) has rightly confirmed the additions on account of undisclosed investment on the hotel building. 7. We have considered the rival contentions and gone through the record. The peculiar fact to be noted in this case is that no incriminating material was found during the course of search action at the premises of the assessee. The time period for initiating original scrutiny assessment u/s 143(3), by issue of notice u/s 143(2) of the Act, in this ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 11 of 20 case has already lapsed on the date of search action, which means that the original assessment in this case stood completed and not abated on the date of search. The Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. (supra) has settled the proposition of law that in case of no incriminating material is found during the course 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. 7.1. Now, the question before us is as to whether the report of the DVO obtained after search action can be based for making the impugned additions in this case in the absence of any incriminating material during the course of search action. We note that the report of the DVO is purely based on estimation basis. The assessee had filed various objections against the said report. One of the important objections of the assessee was 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 ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 12 of 20 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 construction. The issue has been settled by the various Hon’ble High Courts, who have been unanimously on the point that if during the course of search, no incriminating material was found exhibiting unexplained investment by an assessee, merely, on the basis of DVO’s report, the addition cannot be made. The Ahmedabad Bench of the Tribunal in the case of ACIT vs. ShriJayantilal 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); ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 13 of 20 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)” 7.3. 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 ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 14 of 20 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 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 ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 15 of 20 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.” 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 ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 16 of 20 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.” 7.4. Even the Hon’ble Delhi High Court in the case of CIT vs. Abhinav Kumar Mittal, reported in (2013) 351 ITR 0020, has taken the similar view. 7.5. So far as the reliance by the Assessing Officer to the document found from the premises of third party i.e. M/s Royal Builders was concerned, admittedly the said document was never confronted to the assessee, either during the search action or during the assessment proceedings. The ld. CIT(A), himself, in the impugned order has mentioned that the additions in the case of the assessee have been made on the basis of report of the DVO, rather than, on the basis of documents impounded from the premises of M/s Royal Builders. The ld. CIT(A) has observed that the said documents were a trigger point for reference of the valuation to the valuation officer. However, the facts of the case do not speak so. The search action was carried out in the case of M/s Royal Builders on 29.11.2018. The first contention of the ld. Counsel for the assessee in this respect is that 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 ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 17 of 20 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 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 assessee. As per the facts on the file, the matter was referred to the DVO after the search action at the premises of the assessee and admittedly, no incriminating material whatsoever was found during the search action, however no incriminating ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 18 of 20 material was found, which could have been stated to be a trigger point to refer the matter to the DVO. 7.7. The other important point in this case is that the report of the DVO is based on pure estimation of investment. The DVO has taken the CPWD rates and as noted above, the CPWD rates are on more than 25% higher side as compared to the state-PWD. there is force in the contention of the ld. AR that a very high profit rate of the contractor is embedded in the departmental rates and further a lot of difference in expenditure occurs between a work got done through government contractor and the work got done under self-supervision and self-purchasing of the material. In view of the above discussion, as per the settled law, neither reference to the DVO in this case was valid in view of the various decisions of the Hon’ble High Courts as noted above nor the addition in this case was justified based purely upon the report of the DVO which was a work of pure estimation of cost based on government rates. 8. Even otherwise, since the assessee company’s business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. The issue is ITA Nos.133,134&135/CHANDI/2023 Assessment Years: 2013-14, 2015-16 & 2016-17 M/s KhannaInfrabuild Pvt. Ltd. Page 19 of 20 squarely covered by the various decisions including the decision of the Hon’ble Apex Court in the case of “CIT vs Bharat Engineering & Construction Co.” (supra) as referred to above by the ld. Counsel for the assessee in the written submissions. The action of the CIT(A) in reversing the view point of the Assessing Officer on this issue, therefore, cannot be held to be justified. In view of this, the additions made in the case of the assessee cannot be held to be justified and the same are accordingly ordered to be deleted. 13. Since, facts and issues involved in all the appeals are identical, hence, our findings given above will mutatis mutandis apply to ITA No.134&135/CHANDI/2023 also. 14. In the result, all the captioned appeals of the assessee are hereby allowed. Order pronounced in the Open Court on 12 th October, 2023. Sd/- Sd/- (VIKRAM SINGH YADAV) लेखा सदèय/ Accountant Member (SANJAY GARG) ÛयाǓयक सदèय/ Judicial Member Dated: 12.10.2023. RS आदेशकȧĤǓतͧलͪपअĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकरआय ु Èत/ CIT 4. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयआͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[फाईल/ Guard File