M/s Bansal Extraction & Export P Ltd, Bhopal V. DCIT,Central-1, Bhopal

ITA 165/Ind/2022

AI Insights

The case involves multiple appeals related to the assessment year 2012-13 concerning undisclosed investments in construction by M/s. Bansal Extraction & Exports (P) Ltd. A search under section 132 of the Income Tax Act in June 2011 led to the discovery of these investments. The Deputy Commissioner of Income Tax (DCIT) made an addition of Rs. 7,30,52,899 to the assessee's income, which was partially relieved by the CIT(A) in subsequent appeals. The Tribunal's decision focused on the validity of the DVO's report used for the assessment and the allowability of depreciation on the added investment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130402 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2022
• Other Referred Cases: Fakir Mohmed Haji Hasan Vs. CIT (2001) 247 ITR 290 (Gujrat HC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Value adopted by valuation officer; Depreciation; Valuation report
• Section: 32; 132; 143(3); 153A; 69B; 250; 145(3)

Judgement Text

Page 1 of 11 आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No. 82/Ind/2020 Assessment Year: 2012-13 DCIT (Central)-1 Bhopal बनाम/ Vs. M/s. Bansal Extraction & Exports (P) Ltd., Bhopal (Appellant / Revenue) (Respondent / Assessee) PAN: AADCB 7521 M ITA No. 172/Ind/2020 & ITA No. 165/Ind/2022 Assessment Year: 2012-13 M/s. Bansal Extraction & Exports (P) Ltd., Bhopal बनाम/ Vs. DCIT (Central)-1 Bhopal (Appellant / Assessee) (Respondent / Revenue) PAN: AADCB 7521 M Assessee by Shri Anil Khabya, AR Revenue by Shri P.K. Mishra, CIT-DR Date of Hearing 22.02.2023 Date of Pronouncement 15.05.2023 आदेश / O R D E R Per B.M. Biyani, A.M: These are three appeals, namely (i) IT(SS)A No. 82/Ind/2020 and ITA No. 172/Ind/2020 are the cross-appeals by revenue and assessee against the appeal-order dated 27.02.2020 passed by learned CIT(Appeal), Bhopal, which in turn arise out of assessment-order dated 27.03.2014 passed by learned DCIT, Central, Bhopal [“Ld. AO”] u/s 143(3) for assessment year M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 2 of 11 [“AY”] 2012-13, and (ii) ITA No. 165/Ind/2022 is an appeal by assessee against the appeal-order dated 27.04.2022 passed by CIT(Appeal)-3, Bhopal, which in turn arise out of assessment-order dated 22.05.2020 passed by Ld. AO u/s 143(3) read with section 250 of the act. 2. Heard the learned representatives of both sides and case records perused. 3. Briefly stated the facts are such that a search u/s 132 was conducted upon assessee in June, 2011 and the case of assessee for AY 2012-13 under consideration was assessed u/s 143(3) vide a consolidated assessment-order dated 27.03.2014 wherein the Ld. AO made an addition of Rs. 7,30,52,899/- on account of undisclosed investment in building and shed u/s 69B. Being aggrieved, the assessee went in first-appeal to Ld. CIT(A). The Ld. CIT(A) passed appeal-order dated 27.02.2020 wherein he deleted addition to the extent of Rs. 2,80,83,845/- and upheld the remaining addition of Rs. 4,49,69,054/-. Now, the revenue and assessee both have come in second appeal before us respectively through IT(SS)A No. 82/Ind/2020 and ITA No. 172/Ind/2020 assailing this appeal-order dated 27.02.2020. Further, pursuant to the aforesaid appeal-order dated 27.02.2020, Ld. AO passed a consequential assessment-order dated 22.05.2020 giving appeal-effect by which the assessee was again aggrieved to some extent and went in a separate appeal before Ld. CIT(A). The said appeal has also been decided vide order dated 27.04.2022 of CIT(A). The assessee is now aggrieved by the order dated 27.04.2022 of CIT(A) as well and has come in ITA No. 165/Ind/2022 before us. Since all these appeals relate to same AY 2013-13 and are connected, they were heard together and are being disposed of by this common order for the sake of convenience and better clarity. 4. The grounds raised by parties are as under: M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 3 of 11 Revenue’s IT(SS)A No. 82/Ind/2020: “1. On the fact and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,80,83,845/- made by the AO on account of undisclosed investment in building & shed.” Assessee’s ITA No. 172/Ind/2020: “1. That the Ld. CIT(A) erred in maintaining addition of Rs. 74,69,054/- (Rs. 4,49,69,054/- less Rs. 3,75,00,000/-) made by the AO u/s 69B of Act on account of alleged excess of cost of construction of factory building relying on the report of DVO. 2. That the Ld. CIT(A) erred in using the report of DVO as binding without addressing several objections raised by appellant particularly DVO relying on CPWD rates in preference to State PWD rates. 3. That the Ld. CIT(A) erred in not giving direction to AO to compute deprecation on extra cost of construction added by him as per report of DVO.” Assessee’s ITA No. 165/Ind/2022: “1. That the Ld. CIT(A) erred in holding that depreciation on extra cost of construction added by AO as per report of VO(P&M) is not allowable to assessee under the provisions of Act as addition on account of undisclosed investment has been made u/s 69B of the Act.” Revenue’s IT(SS)A No. 82/Ind/2020 and Assessee’s Ground No. 1 & 2 in ITA No. 172/Ind/2020: 5. In these grounds, the revenue claims that the CIT(A) has erred in deleting addition of Rs. 2,80,83,845/- out of total addition of Rs. 7,30,52,899/- made by AO on account of undisclosed investment in building & shed u/s 69B. As against this, the assessee claims that the CIT(A) has erred in sustaining the addition of Rs. 74,69,054/- (Remaining addition of Rs. 4,49,69,054 (-) Surrender by assessee of Rs. 3,75,00,000). 6. Facts apropos to this addition are such that during search proceeding, the authorities found that the assessee has made investment in construction of shed and building of soya plant at Plot No. 11, Industrial Area, Mandideep, District – Raisen. The search-authorities seized certain documents/loose-papers marked as “LPS-4/3-Page 7 TO 9”, “LPS-A1/3/1- Page 30”, “LPS-1-Page 1 to 7”, “LPS-4-Page 1-126” and “LPS-7-Page 1 to M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 4 of 11 150”, the details are mentioned by AO in para 11.4 of assessment-order. The search-authorities also made a reference to Registered Valuer (RV) for finding the value of investment made by assessee. The RV reported investment at Rs. 9,42,00,000/-. Thereafter, during assessment-proceeding, the AO examined this issue. Initially, he made another reference dated 01.08.2013 to Departmental Valuation Officer (DVO) u/s 142A read with section 131(1)(d) for estimation of the value of investment but the DVO did not submit report till completion of assessment. Therefore, the AO noted in assessment-order “Since this case shall get barred by limitation on 31/03/2014, therefore, this assessment-order is being passed. However, after receiving the valuation report from DVO, if anything adverse is found, then remedial action shall be taken as per law.” Ultimately, the AO computed undisclosed investment at Rs. 7,30,52,899/- [Value estimated by RV at RS. 9,42,00,000 (-) Investment already disclosed by assessee in books of account at Rs. 2,11,47,101]. The AO also found that the assessee had made a surrender/offer of Rs. 3,75,00,000/- in return of income. Finally, the AO made addition of Rs. 7,30,52,899/- on the basis of RV report and allowed credit of surrender of Rs. 3,75,00,000/-. 7. During first-appeal, the CIT(A) examined the seized documents, considered submissions of assessee and finally held as under: 5.2.11 Another addition has been made by the ld. AO on account of difference in investment in construction of building and shed of establishment of soya plant estimated by registered valuer and value shown by the appellant in its books of accounts. The appellant has v vehemently challenged the legality of making reference to Departmental Valuation Officer u/s 142A of the Act and using the same as evidence for sustaining impugned addition towards unexplained investment in building and shed at 11, 11-A, new industrial area, Mandideep, Raisen, Bhopal u/s 69B of the act. The appellant has challenged various aspects of the valuation exercise e.g. from making reference for valuation to the methodology of valuation, to the mechanical adoption of the valuation report by the ld.AO for making addition while passing assessment order etc. Key facts relevant to resolve this controversy as emerging from the records as below :- i) During assessment proceedings u/s 153A of this assessee, a reference to Departmental Valuation Officer was made u/s 142A M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 5 of 11 of the act by the AO vide letter dated 01.08.2013 for estimation of the value of investment in construction of building and shed at 11 & 11A, new industrial area Mandideep, Raisen, Bhopal in A.Y. 2009-10 to 2011-12. ii) Departmental Valuation Officer has submitted his report on 27.08.2014 without inviting any objections by the assessee. Thus valuation done by Departmental Valuation Officer cannot be used as a conclusive evidence because it has laced with discrepancies, contradiction & mistake as well as and based on subjective judgment and personal opinion of Departmental Valuation Officer. iii) There was search & seizure operation conducted at the business premises of present assessee and Bansal group resulting into seizure/impounding of loose papers/documents/incriminating material. Departmental Valuation Officer, Bhopal was referred by the ld.AO to estimate actual investment in construction of Building and Shed at 1-H new industrial area, Mandideep, Raisen, Bhopal and the report was submitted by DVO on 27.08.2014. iv) There is no denying of the fact that appellant has maintained its books of accounts regularly which were subjected to Audit as well. On perusal of relevant audit report it is apparent that auditors have not made any adverse remarks about any discrepancy or under valuation noted by them about investment in Building & shed at above-mentioned location. Further, the books of accounts of the appellant have not been rejected before making reference to Departmental Valuation Officer and not even after receipt of valuation report of registered valuer and voluntary surrender of assessee despite observing huge difference in value of investment estimated by registered valuer vis-à-vis value/investment shown by the assessee. Without prejudice, this goes without saying that the invoking the provisions of sec. 145(3) of the Act i.e. rejection of book results, ld. AO is required to demonstrate defects/discrepancies noticed by him in maintenance of regular books of accounts. Obviously, this is not the case here. v) Appellant was never supplied with copy of Departmental Valuation Officer’s report and hence deprived of proper opportunity of being heard. However, during appellate proceedings, same was obtained from AO and supplied to the assessee. The AO has not specifically addressed/replied to the legal objections raised by appellant about the valuation report by the appellant inspite of the fact that such huge additions have been made based on the Departmental Valuation Officer’s report; 5.2.12 In the instant case the additions have been made on the basis of report of the registered valuer Shri Nilesh Mathrani who estimated the cost of M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 6 of 11 building and shed at Rs. 9,42,00,000/-. However, reference was also made to Departmental Valuation Officer on 01.08.2013. No report was received from Departmental Valuation Officer, Bhopal and the assessment was getting time barred. Therefore, the AO held report of the registered valuer as milestone and made addition of the difference amount as estimated by registered valuer and as declared by the appellant to the income of the appellant in A.Y. 2012-13. During the course of appellate proceedings, the appellant submitted that the Departmental Valuation Officer has submitted his report to the AO. Therefore, the AO vide letter dated 08.02.2018 was directed to provide copy of Departmental Valuation Officer’s report. The AO vide letter dated 09.02.2018 submitted copy of Departmental Valuation Officer’s report and a copy of Departmental Valuation Officer’s report, the comparative picture of estimate cost of construction of building and shed made by the Departmental Valuation Officer and shown by the appellant during A.Y. 2012-13 is as under :- A.Y. Declared by the assessee Estimated by the DVO 2012-13 20000000 64969054 5.2.13 The AO on the other hand has taken value of investment in construction of shed and building at Rs. 9,42,00,000/- which was estimated by registered valuer. The DVO on other hand has estimated cost of construction at Rs. 6,49,69,054/-. The Departmental Valuation Officer is a person with expertise in its field and have estimated cost of construction of building and shed as per prevailing norms of the department. Therefore, the report of the DVO is considered as final. The appellant during A.Y. 2012-13 has shown investment in construction of building and shed at Rs. 2,00,00,000/- in its books of accounts. Therefore, there is a difference of Rs. 4,49,69,054/- in value shown by the appellant in its books of accounts and as determined by the Departmental Valuation Officer which only needs to be sustained. Thus, addition made by the Ld. AO amounting to Rs. 4,49,69,054/- in A.Y. 2012-13 is Confirmed and appellant gets relief of Rs. 2,80,83,845/-”. 8. On perusal of same, we find that the AO made addition on the basis of RV report for the reason that DVO report was not available till completion of assessment, but during first-appeal the DVO report was available and considering the same, Ld. CIT(A) finally upheld addition to the extent of Rs. Rs. 4,49,69,054/- and allowed relief of Rs. 2,80,83,845/-. Consequently, the net addition in the hands of assessee came down to Rs. 74,69,054/- (Rs. 4,49,69,054 (-) Surrender by assessee of Rs. 3,75,00,000/-). Now, both sides are having rival claims before us. M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 7 of 11 9. We first deal with grievance of revenue. Ld. DR submits that the AO made addition of Rs. 7,30,52,899/- on the basis of RV’s report as well as seized-documents; but the CIT(A) has granted partial relief on the basis of DVO’s report which is not proper. Ld. DR submits that the addition made by AO ought to have been upheld fully. Per contra, Ld. AR submitted that this claim of revenue is patently wrong. Ld. AR carried us to the noting made in assessment-order whereby the AO has himself admitted “Since this case shall get barred by limitation on 31/03/2014, therefore, this assessment- order is being passed. However, after receiving the valuation report from DVO, if anything adverse is found, then remedial action shall be taken as per law.” Ld. AR submitted that it is not understandable as to how the revenue is aggrieved by the relief given by CIT(A) on the basis of DVO’s report, when the AO himself made addition on the basis of RV report subject to DVO’s report. We find substantial merit in the contentions raised by Ld. AR. Firstly, we find that the AO has himself made addition on the basis of RV report subject to DVO’s report. Secondly, we take note of the fact that the DVO is a Govt. officer appointed by revenue whereas the RV was a mere registered valuer. That is why the AO has given supremacy to DVO’s report and the CIT(A) has also noted “The DVO is a person with expertise in its field and have estimated cost of construction of building and shed as per prevailing norms of the department.” Being so, we do not find any infirmity in the order of Ld. CIT(A) whereby he has adopted the DVO’s estimation in preference to RV’s estimation and accordingly granted relief to assessee. We upheld the relief granted by CIT(A) and dismiss the sole ground / appeal of revenue which is devoid of any merit. 10. Now we turn to assessee’s grounds wherein the assessee claims that the CIT(A) has erred in maintaining addition of Rs. 74,69,054/- (Rs. 4,49,69,054 (-) Rs. 3,75,00,000) on the basis of DVO’s report without addressing several objections raised by appellant particularly DVO’s relying on CPWD rates in preference to State PWD rates. On perusal of Para No. M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 8 of 11 5.2.11 of order of CIT(A), reproduced earlier, we find that the assessee raised several objections on DVO’s report, both legal and factual, before Ld. CIT(A) which the CIT(A) has himself noted in serial numbers (i) to (v) of that Para. Further, the DVO’s report was not available before AO, the same was available during first-appeal only. Therefore, the assessee is well within his right to raise those objections before Ld. CIT(A). Going further to Para No. 5.2.13 of the order of CIT(A), reproduced earlier, we observe that the CIT(A) has applied DVO’s estimation without resolving assessee’s objections noted by himself. Therefore, it is manifest that the objections raised by assessee remained unaddressed. In that view of matter, we find weightage in the grounds raised by assessee. Therefore, we remand these grounds of assessee back to the file of Ld. CIT(A) who will resolve the assessee’s objections qua DVO’s report and pass a speaking order thereon. These grounds of assessee are, thus, allowed in terms indicated here. Assessee’s Ground No. 3 in ITA No. 172/Ind/2020 and Assessee’s ITA No. 165/Ind/2022: 11. Both of these grounds relate to the assessee’s claim for allowability of depreciation on extra cost of construction of building and shed added as unexplained investment u/s 69B. 12. On perusal of order of first-appeal involved in ITA No. 172/Ind/2020, we observe that although the assessee raised this claim during first-appeal but the Ld. CIT(A) has not adjudicated assessee’s claim and not given any direction to AO. Further, on perusal of order of first-appeal involved in ITA No. 165/Ind/2022, we observe that Ld. CIT(A) has rejected assessee’s claim by relying upon the decision in Fakir Mohmed Haji Hasan Vs. CIT (2001) 247 ITR 290 (Gujrat HC). Ld. AR submitted that the CIT(A) has not understood the claim of assessee and mis-placed reliance on the decision of Hon’ble Gujrat High Court. According to Ld. AR, in the case before Hon’ble Gujrat High Court, the department made addition of deemed-income u/s 69A/69B/69C on account of unexplained investment, etc. and the assessee M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 9 of 11 demanded claim of deductions against such deemed-income itself whereupon the Hon’ble Gujrat High Court held that deemed-income is taxable as a separate item under the scheme of act and hence no deduction is allowable against such deemed-income. But in the present case, the assessee’s claim is to allow depreciation u/s 32 against regular business- income based on the quantum of unexplained investment in building and shed assessed as deemed-income u/s 69B. Ld. AR submits that the assessee is not claiming any deduction against deemed-income itself as was the case before Hon’ble Gujrat High Court. Ld. AR submits that undisclosed income in building and shed, though taxed u/s 69B, is a part of building and shed which was used by assessee for regular business, therefore the assessee rightfully deserves the deduction of depreciation against regular business income. Ld. DR dutifully defended the orders of CIT(A). After a mindful consideration, we note three peculiar aspects of the issue, namely (i) In the order of first-appeal involved in ITA No. 172/Ind/2020, the CIT(A) has not adjudicated assessee’s claim and not given any direction to AO; (ii) In the order of first-appeal involved in ITA No. 165/Ind/2022 though the CIT(A) has rejected claim of assessee following the decision of Hon’ble Gujrat High Court but the assessee is claiming that the said decision is not applicable to assessee’s case; and (iii) The quantum of addition finally sustainable u/s 69B on account of investment in building & shed is still uncertain for the reason that we have remanded the same to CIT(A) in foregoing paragraph of this order. Therefore, looking into such a scenario, we think it fit to remand this issue also to Ld. CIT(A) who will look into the claim of assessee once again and take a final call. In doing so, we expect that the Ld. CIT(A) would remain uninfluenced by his earlier decision. The ground/appeal of assessee is, thus, allowed in terms indicated here. M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 10 of 11 13. Resultantly, Revenue’s Appeal is dismissed. Both of the Assessee’s Appeals are allowed for statistical purposes in terms mentioned above. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on....../....../2023. Order pronounced in the open court on 15/05/2023. Sd/- Sd/- (CHANDRA MOHAN GARG) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 15.05.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench,Indore 1. Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the approved draft is placed before other Member M/s Bansal Extraction & Exports (P) Ltd. ITA No. 82/Ind/2020, 172/Ind/2020, 165/Ind/2022 Assessment years 2012-13 Page 11 of 11 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order