M/s. Chankya Developers, Surat V. The Dy,CIT.,Circle-3, Surat

ITA 2595/AHD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0418 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Assessee Lawyers: KETHAN H SHAH
• Keywords: Value adopted by valuation officer; Unexplained expenditure; Business income; Income from undisclosed sources; Additional evidence; Corroborative evidences; Valuation report; Retraction
• Section: 69C; 133A; 80IB; 133(6); 68; 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2595 & 2729/AHD/2011 ASSESSMENT YEAR :2008-2009 M/S. CHANAKYA DEVELOPERS PLOT NO. 109, NR. PARAM ROW HOUSES, ADAJAN OLD ROAD, SURAT DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, INCOME-TAX OFFICER, GHOD DOD ROAD, SURAT V/S . V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, INCOME-TAX OFFICER, GHOD DOD ROAD, SURAT M/S. CHANAKYA DEVELOPERS PLOT NO. 109, NR. PARAM ROW HOUSES, ADAJAN OLD ROAD, SURAT PAN NO. AA F FC3554N (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI D. P. GUPTA, CIT D.R. /BY ASSESSEE SHRI KETHAN H. SHAH, A.R. /DATE OF HEARING 15.03.2013 /DATE OF PRONOUNCEMENT 22.03.2013 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE IN ITA NOS. 2595/AHD/11 & 2729/AHD/11 RESPECTIVELY WHICH H AS EMANATED FROM THE ORDER OF CIT(A)-II, SURAT, DATED 24.08.2011 FOR ASS ESSMENT YEAR 2008-2009. BOTH CROSS APPEALS WERE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE EFFECTIVE GROUNDS OF BOTH CROSS APPEALS ARE AS UNDER: ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 2 THE EFFECTIVE GROUNDS OF ITA NO. 2595/AHD/2011 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 10,34,275 OUT OF THE ADDITION OF 1,75,30,000 MA DE ON ACCOUNT OF UNEXPLAINED EXPENDITURE IN THE CONSTRUCT ION WORK. 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT MAT TER CAN REFERRED TO THE VALUATION CELL WITHOUT REJECTING TH E BOOKS OF ACCOUNT AND CONSEQUENTLY USING THE VALUATION REPORT S OF D.V.O). TO MAKE THE ENHANCEMENT OF RS. 1,44,66,770/- 3. THE LEARNED CIT(A) OUGHT TO HAVE NOT REJECTED TH E BOOKS OF ACCOUNTS AS NO MATERIAL WAS ON RECORD TO SHOW TH AT THERE WAS ANY DEFECTS IN THE ACCOUNTS. 4. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING DED UCTION U/S 80IB IN RESPECT OF EXCESS STOCK (WORK IN PROGRESS) FOUND ALONG WITH THE NORMAL STOCK AT THE TIME OF SURVEY. THE L EARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT AS THE ADDITION IS W ITH RESPECT TO WORK IN PROGRESS THE SAME WILL ASPECT THE BUSINESS INCOME AND THEREFORE CORRESPONDING DEDUCTION IS AVAILABLE. THE EFFECTIVE GROUNDS OF ITA NO. 2729/AHD/2011 [1]. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.23,00,000/- , MADE ON ACCOUNT OF UNEXPLAINED CAS H CREDIT U/S. 68 OF THE I.T. ACT WITHOUT APPRECIATING THE FACT TH AT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON HIM, TO PROV ING THE IDENTITY AND CREDITABILITY OF THE PERSON FROM WHOM DEPOSITS ARE TAKEN. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.13,75,874/- , MADE ON ACCOUNT OF CESSATION OF LI ABILITY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO D ISCHARGE THE ONUS CAST UPON HIM, TO PROVING THE IDENTITY, CREDIB ILITY AND GENUINENESS OF THE CREDITORS. ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 3 [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.1,75,30,000/- , MADE ON ACCOUNT OF DISCLOSURE MA DE DURING THE COURSE OF SURVEY U/S. 133A OF THE I.T. ACT ON 0 9.08.2007 BUT SUBSEQUENTLY RETRACTED BY FILING AFFIDAVIT DATED 24 .02.2010 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO E STABLISH THAT AMOUNT OF RS.1,75,30,000/- CREDITED TO ITS BOOKS OF ACCOUNTS AS INCOME FROM OTHER SOURCES, WAS GENERATED FROM ITS CONSTRUCTION BUSINESS AND DEDUCTION U/S.80IB, IN RESPECT OF THIS AMOUNT, IS NOT ALLOWED. 2. THE FACTUAL MATRIX OF THE CASE IS THAT THE APPEL LANT FILED E-RETURN FOR A.Y. 08-09 DECLARING TOTAL INCOME NIL ON 30.09.2008. TH E CASE WAS SCRUTINIZED U/S. 143(2) OF THE IT ACT. DURING THE YEAR UNDER CONSID ERATION, THE APPELLANT CONSTRUCTED THE PROJECT IN THE RIVER HEIGHTS ON N ON-AGRICULTURAL LAND ADMEASURING 6604 SQ.MTR., OPP. SARITA HOUSE, ADAJAN , SURAT BY THE APPELLANT. ONE OF THE FIVE PARTNERS OF THE FIRM, MR. ARVINDKUM AR RAMNIKALA RAVAL, HAS TRANSFERRED HIS FOREFATHER LAND TO THE PARTNERSHIP FIRM U/S.45(3) OF THE IT ACT, 1961, DURING FINANCIAL YEAR 2006-07. THE PROJECT W AS APPROVED BY THE SMC VIDE ORDER DATED 12.12.2006 AND FSI WAS 11522.26 SQ . MTRS. THEREAFTER PLAN WAS REVISED BY THE SMC VIDE ORDER DATED 01.01.2009 AND FSI WAS ALLOWED 14369.81 SQ. MTRS. THE PROJECT CONSISTED OF THREE TOWERS DETAILS OF WHICH ARE AS UNDER:- TOWER:- A: THERE ARE 14 FLOORS, (OUT OF WHICH GROUND FLOOR AND FIRST FLOOR BEING SPACE ALLOTTED FOR PARKING), 2 FLATS ON EACH FLOOR I.E. 26(13 X 2) FLATS IN TOTAL. EACH FLAT IS ADMEASURING 1493 BUILT UP SQ.FTS. ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 4 TOWER: - B: THERE ARE 13 FLOORS, (OUT OF WHICH GROUND FLOOR AN D FIRST FLOOR BEING SPACE ALLOTTED FOR PARKING), 4 FLATS ON EACH FLOOR I.E. 48 (12 X 4) FLATS IN TOTAL. EACH FLAT IS ADMEASURING 1176 BUILT UP SQ.FTS. TOWER: - C: THERE ARE 14 FLOORS, (OUT OF WHICH GROUND FLOOR AN D FIRST FLOOR BEING SPACE ALLOTTED FOR PARKING), 4 FLATS ON EACH FLOOR I.E. 52 (13 X 4) FLATS IN TOTAL. EACH FLAT IS ADMEASURING 1065 BUILT UP SQ.FTS. IT IS FURTHER STATED THAT THE PROJECT IS ENTITLED T O DEDUCTION U/S. 80IB OF THE I.T. ACT. THERE WAS A SURVEY U/S. 133A OF THE IT ACT ON 09.08.2007 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COUR SE OF SURVEY, STATEMENT OF SHRI AMAR ARVINDBHAI RAVAL WAS RECORDED U/S. 133A O F THE IT ACT. IN REPLY TO QUESTION NO.18, HE HAD DISCLOSED AN AMOUNT OF RS. 1 ,75,30,000/- ON ACCOUNT OF UNACCOUNTED EXPENSES CONSTRUCTION EXPENSES WHICH WERE NOT RECORDED IN HIS BOOKS OF ACCOUNTS. THESE UNACCOUNTED RECEIPTS CLAIMED TO HAVE BEEN INVESTED IN WIP. AS PER THE STATEMENT OF MR. RAVAL BIFURCATION OF TOTAL INVESTMENT MADE IN THE PROJECT AND EXPENSES RECORDE D IN THE BOOKS OF ACCOUNT IS AS UNDER: CONSTRUCTION EXPENSES OF TOWER-B, TOTAL AREA OF 538 08 SQ.FT. X RS.500/- PER SQ.FT. 2,69,00,000 CONSTRUCTION EXPENSES OF TOWER - A 15,10,000 CONSTRUCTION EXPENSES OF TOWER-C 21,20,000 TOTAL: 3,05,30,000 LESS: CONSTRUCTION EXPENSES RECORDED IN THE REGULAR BOOKS OF ACCOUNT 1,30,00,000 EXPENSES NOT RECORDED IN THE REGULAR BOOKS WHICH ARE DISCLOSED DURING SURVEY PROCEEDINGS. 1,75,30,000 ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 5 HE FURTHER OBSERVED THAT IT WAS STATED BY MR. RAVAL IN HIS STATEMENT THAT AMOUNT OF RS.1,75,30,000/- WAS IN FACT RECEIVED BY THE FIRM AND NOT ACCOUNTED IN THE BOOKS OF ACCOUNT AND THAT THE ADVANCE TAX WO ULD BE PAID ON THIS UNACCOUNTED RECEIPT. IN FACT, ASSESSEE DID PAY AMO UNT OF RS.19,00,000/- AS ADVANCE TAX. THE LD. A.O. GAVE THE SHOW CUSE NOTIC E BY LETTER DATED 10.12.2010 AND ASKED TO EXPLAIN THE SOURCES / DETAI LS AND ACQUISITION OF AMOUNT OF RS.1,75,30,000/- DISCLOSED DURING THE SUR VEY. HE ALSO GAVE SHOW NOTICE FOR ESTIMATING THE INCOME @ 20% ON A SALE OF FLATS AT RS.1,15,66,500/-. THE APPELLANT REPLIED VIDE LETTER DATED 09.09.2010 BY WHICH THE WIP OF OPENING, PURCHASED AND WIP CLOSING HAD BEEN SHOWN A S UNDER: W.I.P. 01.04.2006 TO 31.03.2007 RS.19540677 PERIOD 01.04.2007 TO 09.08.2007 PURCHASE RETAIL RS.6490805 PURCHASE TAX RS.1683729 W.I.P. RS.1780064 RS. 9954598 UP TO THE DATE OF SURVEY TOTAL RS. 29495275 THE APPELLANT ALSO FILED COPY OF THE BANK STATEMENT AS EVIDENCE FOR CALCULATING THE CLOSING WIP AS ON THE DATE OF SURVEY. THE APPE LLANT HAD CLAIMED BEFORE THE A.O. THAT PRIMA FACIE THE WIP HAD CALCULATED ON THE DATE OF SURVEY AT RS.3,05,30,000/- WAS GROSS MISUNDERSTANDING WHICH D ID NOT TALLY WITH THE FACTS AND FIGURES. THUS, THE SAID MISTAKEN PRODUCTS WERE NEVER REQUIRED TO BE TAKEN INTO CONSIDERATION DURING THE COURSE OF FILIN G OF THE RETURN OF INCOME. THE APPELLANT ALSO CHALLENGED THE APPLICABILITY OF SECTION 69/69C VIDE LETTER DATED 16.12.2010. THE APPELLANT CLAIMED THAT ON TH E DATE OF SURVEY WHATEVER ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 6 WIP HAD BEEN DISCLOSED IN THE FLOPPY WAS TALLIED WI TH REFERENCE TO WORK CARRIED OUT. HE FURTHER ASKED TO SUPPLY THE COPY O F THE VALUATION REPORT, IF ANY, TO MEET OUT THE DIFFERENCES. THE APPELLANT FU RTHER CONTENDED BEFORE THE A.O. THAT SOLE STATEMENT RECORDED U/S. 133A CANNOT BE THE BASIS OF ADDITION. IT HAD TO BE CORROBORATED BY OTHER EVIDENCES. THE STA TEMENT HAD ALREADY BEEN RETRACTED AND IT HAS NO EVIDENTIARY VALUE. HE ALSO CHALLENGED THE DIFFERENCE CALCULATED BY THE A.O. AT RS. 175 LACS OVER AND ABO VE THAT HAD SHOWN ACCOUNTED FOR IN BOOKS. HE FURTHER CLAIMED BEFORE THE A.O. THAT THERE WAS NO SALE OF FLATS DURING THE A.Y. 07-08. ONLY FLATS WE RE BOOKED AND ADVANCES HAD BEEN RECEIVED. THEREFORE, HE CHALLENGED THE NET PR OFIT @ 20%. IF IT IS ESTIMATED, HE CLAIMED DEDUCTION U/S.80IB (10) OF TH E IT ACT ON IT. THE APPELLANT HAD ARGUED BEFORE THE A.O. THAT WHATEVER FIGURE FOUND IN THE CD HAD BEEN RECONCILLED IN WHICH CERTAIN ENTRIES ON EXPEND ITURE MADE WERE TO BE BASED ON THE BASIS OF CONTRACT WORK DONE BY THE CON TRACTOR AND CONSTRUCTION MATERIAL WAS RECEIVED FROM THE SUPPLIER. IT IS FAC T THAT BOOKS WERE NOT COMPLETE AT THE TIME OF SURVEY WHICH WAS NOT POSSIB LE IN ANY KIND OF BUSINESS. MR. AMAR A. RAWAL FILED AN AFFIDAVIT DTD. 24.02.201 0 MAKING FOLLOWING STATEMENT IN PARA 7 & 8 OF THE AFFIDAVIT: 7. THAT IN ANSWER TO QUESTION NO.18, I HAVE STATED THAT THE AMOUNT INVESTED IN THE PROJECT TILL THE DATE OF SUR VEY IS RS.30530000. I CLARIFY THAT AFTER GOING THROUGH THE STATEMENT, I CANNOT UNDERSTAND AS TO HOW THE AFORESAID AMOUNTS HAS BEEN WORKED OUT . I CAN ALSO NOT UNDERSTAND AS TO HOW THE AUTHORITY HAS RECORDED MY STATEMENT REGARDING UNDISCLOSED INCOME OF THE FIRM. THE FIRM IS FORMED ONLY IN FINANCIAL YEAR 2006-07 AND THERE IS NO SALE OF ANY BUILDING SO THERE ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 7 IS NO POSSIBILITY OF EARNING ANY UNDISCLOSED INCOME DURING THE PERIOD OF THE DATE OF SURVEY. 8. IN VIEW OF THE AFORESAID FACTS, I STATE THAT MY STATEMENT RECORDED DURING THE SURVEY HAS BEEN GIVEN UNDER MIS UNDERSTANDING AND WITHOUT UNDERSTANDING THE FACTS PROPERLY. THE LD. A.O. ANALYZED THE FACT OF THE AFFIDAVIT AND REJECTED THE SAME HAS FILED MORE THAN TWO YEARS TO RETRACT THE STATEMENT RECORD ED DURING THE SURVEY. THE LD. A.O. ALSO PLACED RELIANCE ON FOLLOWING CASES: MANHARLAL KASTURCHAND CHOKSI VS ACIT 61 ITD (AHMADABAD TRIBUNAL), HOTEL K IRAN VS CIT 82 ITD 453 (PUNE) & 40 ITD 180 (JAIPUR BENCH) ITO VS BD DAL & OIL MILL. HE FURTHER CONCLUDED THAT THE APPELLANT DID NOT SUBMIT THE DET AILS AND SOURCE OF UNACCOUNTED INCOME AT RS.1,75,30,000/-. WHEN THERE IS NO SOURCE OF INCOME HAS BEEN DISCLOSED BY THE APPELLANT, THEN, NO DEDUC TION CAN BE ALLOWED CORRESPONDING TO SUCH SURVEY OF THE DEDUCTION. THE A.O. OBSERVED THAT THIS UNACCOUNTED INCOME OF RS.1,75,30,000/- IS NOT COVER ED WITH ANY HEAD OF INCOME THEN IT WOULD BE COVERED U/S. 68, 69,69A, 69 B & 69C OF THE IT ACT. HE FURTHER RELIED IN CASE OF FAKIR MOHAMED HAJI HASAN VS CIT (2001) 247 ITR 290 ( HONBLE GUJARAT HIGH COURT). LD. A.O. REFERRED U/S . 142A VIDE LETTER DATED 02.11.2010 TO DVO ON FOLLOWING ISSUES: 9. IT IS PERTINENT TO MENTION THAT A REFERENCE U/S .142A HAS BEEN MADE VIDE THIS OFFICE LETTER NO. SRT/DCIT/CIR-3/VAL .CD/142A/2010- 11 DTD. 02.11.2010 TO THE DISTRICT VALUATION OFFICE R ON FOLLOWING ISSUES. (I) BUILT UP AREA OF EACH FLAT IN EACH TOWER INCLUD ING THE BALCONY, WASHING AREA AND FLOWER BED AREA. ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 8 (II) YEAR-WISE AND MATERIAL-WISE BIFURCATION OF CON STRUCTION COST AS ON 31.03.07, 31.03.08 AND 31.03.09. (III) MARKET VALUE OF FLAT AS ON 31.3.2007, 31.3.20 08 & 31.3.2009. 9.1 A FURTHER REFERENCE U/S.131(1)(D) WAS ALSO MADE VIDE THIS OFFICE LETTER DTD. 28.12.2010 TO DETERMINE THE FOLL OWING ISSUES. 1. TOTAL AREA OF LAND. 2. TOTAL MARKET VALUE OF THE LAND. 3. TOTAL COMMERCIAL AREA CONSTRUCTED BY THE ASSESS EE. 4. BUILT UP AREA OF EACH FLAT IN EACH TOWER INCLUDI NG THE BALCONY, WASHING AREA AND FLOWER BED AREA. 5. YEAR-WISE AND MATERIAL-WISE BIFURCATION OF CONST RUCTION COST AS ON 31.3.2007, 31.3.2008 & 31.3.2009. 6. MARKET VALUE OF FLAT AS ON 31.3.2007, 31.3.2008 & 31.3.2009. BUT THE REPORT FROM THE DVO HAD NOT BEEN RECEIVED B Y THE A.O. THEREFORE, IT HAD BEEN CLARIFIED IN ASSESSMENT ORDER, NECESSARY R ECTIFICATION IN THE ASSESSMENT WOULD BE MADE U/S. 148/263/154 OF THE IT ACT. HOWEVER, LD. A.O. DENYING THE DEDUCTION U/S. 80IB(10) OF RS. 1,75,30, 000/- BUT TAXED IT UNDER THE HEAD INCOME FROM OTHER SOURCE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD PARTLY ALLOWED THE APPEAL. THE APPELLANT ALSO FILED VARIOUS REPLIES BEFORE THE CIT(A) I.E. V IDE LETTER DATED 24.02.2011 & 24.03.2011 ALONGWITH THE EVIDENCES WHICH HAD BEEN F ORWARDED TO THE A.O. BY THE LD. CIT(A) TO GIVE THE REPORT ON EVIDENCE FURNI SHED BY THE APPELLANT BEFORE THE CIT(A). LD. A.O. SUBMITTED THE REMAND REPORT V IDE LETTER DATED 24.06.2011 BEFORE THE CIT(A) AND COPY OF THE SAME WAS MADE AVA ILABLE TO THE APPELLANT VIDE LETTER DATED 21.06.2011 WHICH WAS RESPONDED BY THE APPELLANT VIDE LETTER ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 9 DATED 05.07.2011. AFTER EXAMINING ALL THE EXPLANAT ION AND EVIDENCE, HE ADMITTED THE ADDITIONAL EVIDENCE OF THE APPELLANT W HICH WAS AGAINST THE REFERENCE MADE TO THE VALUATION OFFICER U/S. 142A O F THE IT ACT, FOR ESTIMATING THE COST OF INVESTMENT / COST OF CONSTRUCTION IN TH E PROJECT RIVER HEIGHTS STARTED BY THE APPELLANT AND SITUATED AT TPS NO.10, ADAJAN, FP NO. 109, OPP. SARITA HOUSE, SURAT. THE APPELLANT CLAIMED BEFORE THE CIT(A) THAT ON AN UNEXPLAINED EXPENDITURE WHEREAS ALL THE MATERIALS R EQUIRED, HAD BEEN DULY PURCHASED AND EXPENDITURE IN RESPECT OF THE SAME IS DEBITED IN THE BOOKS OF ACCOUNT. LD. A.O. HAD NOT EXAMINED THE BOOKS OF AC COUNT AND NO DEFECT IN THE INVOICES / VOUCHERS ETC HAD BEEN POINTED OUT, A ND THERE WAS NO MATERIAL TO REJECT THE BOOKS AND THE SAME HAD BEEN REJECTED WIT HOUT GIVING AN APPROPRIATE FINDING, THEREFORE, THE A.O. CANNOT REF ER SUCH A CASE FOR VALUATION U/S. 142A OF THE IT ACT, WHICH CAN BE INVOKED FOR M AKING ADDITION U/S. 69/69A/69B ONLY, AND THERE IS NO REFERENCE TO SECTI ON 69C IN SECTION 142A OF THE ACT. HE FURTHER ARGUED THAT SECTION 142A CAN B E INVOKED ONLY WHEN AN ASSESSMENT IS PENDING. THE REPLY OF THE APPELLANT ON CHALLENGING THE VALIDITY OF THE REFERENCE MADE TO THE DVO WAS NOT FOUND CONV INCING TO THE CIT(A). THEREFORE, HE HAS CONCLUDED THAT BEFORE REFER RING THE CASE TO THE DVO, THE BOOKS OF ACCOUNT ARE NOT REQUIRED TO BE REJECTED, AS THERE IS NO PRE-REQUISITE CONDITION. HE FURTHER CONCLUDED T HAT ONLY ON RECEIPT OF THE REPORT OF THE DVO, AN OPPORTUNITY OF BEING HEAR D IS TO BE PROVIDED TO THE APPELLANT AS PER SUB-SECTION (3) OF THE SECTION 142A OF THE IT ACT. THUS, HE DISMISSED THE ADDITIONAL GROUND TAKEN BY THE APPELLANT BEFORE HIM. ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 10 THE APPELLANT CLAIMED BEFORE THE CIT(A) THAT STATEM ENT RECORDED DURING THE COURSE OF 133A SURVEY PROCEEDING HAS NO EVIDENTIARY VALUE AS HAS STATEMENT U/S. 132(4) OF THE IT ACT. LD. CIT(A) ALSO RELIED UPON VARIOUS CASE LAWS ON RECORDING OF STATEMENT BY THE REVENUE: I. SURJEET SINGH CHHABRA VS. UNION OF INDIA (AIR 19 97 SC 2560) II. DR. S.C. GUPTA VS. CIT (170 CTR 421) III. ITO VS. B.D. DAL & OIL MILLS (40 ITD 180), IT AT JAIPUR BENCH. AFTER CONSIDERING THE DECISIONS, THE LD. CIT(A) HEL D THAT THE RETRACTION MADE BY THE PARTNER OF THE FIRM VIDE AFFIDAVIT DATED 24.02. 2010, HAS NO COGNIZANCE AS THE SAME HAD BEEN MADE AFTER TWO AND HALF YEARS APP ROXIMATELY, AFTER THE RECORDING OF THE STATEMENT DATED 09.08.2007, WHEREI N SHRI RAWAL MADE DISCLOSURE OF RS. 1,75,30,000/-. THE APPELLANT SUB MITTED BEFORE THE CIT(A) THAT TOTAL WORK AS PER THE CD FOUND DURING THE COUR SE OF SURVEY, WIP WAS AT RS.2,94,95,275/-, IF THE COST OF LAND OF RS.95,50,0 00/- IS REDUCED FROM THE WIP, THE REMAINING AMOUNT WAS RS.1,99,45,275/- WHER EAS AT THE TIME OF SURVEY, THE WIP HAS BEEN TAKEN BY THE SURVEY TEAM A T RS. 1, 30,00,000/-. HE FURTHER CALCULATED THE DIFFERENCE BETWEEN CONSTRUCT ION EXPENSES CALCULATED ON THE DATE OF SURVEY AT RS.3,05,30,000/- AND WIP SHOW N IN THE CD AT RS. 2,94,95,275/-. THE NET RECEIPT OF RS. 10,34,725/- IS REMAINED AS DISCLOSURE ON THE DATE OF SURVEY. THE FURTHER FINDINGS OF THE LD . CIT(A) IN PARAGRAPH NO.1.6.11, IS REPRODUCED AS UNDER: ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 11 1.6.11 IN VIEW OF THE ABOVE MATERIAL EVIDENCES IMP OUNDED DURING THE COURSE OF SURVEY, I HOLD THAT IRRESPECTI VE OF THE DISCLOSURE MADE DURING THE COURSE OF SURVEY, THE ASSESSING OFF ICER HAS TO TAKE INTO ACCOUNT THE MATERIAL IMPOUNDED DURING THE COUR SE OF SURVEY, WHEREIN THE EXPENSES INCURRED UP TO THE DATE OF SUR VEY HAS BEEN RECORDED. I, THEREFORE, DIRECT THE ASSESSING OFFIC ER TO TAKE THE WIP, AS ON THE DATE OF SURVEY, WHICH AS PER BOOKS OF ACC OUNTS WAS RS. 2,94,95,275/-. ACCORDINGLY, THE EXPENSES NOT RECOR DED IN THE REGULAR BOOKS IS TO THE WORKED OUT AS UNDER: CONSTRUCTION EXPENSES OF TOWER A, B, C AS - RS. 3, 05,30,000 WORKED OUT DURING THE COURSE OF SURVEY LESS: CONSTRUCTION EXPENSES RECORDED IN THE - RS. 2 ,94,95,275 REGULAR BOOKS OF A/C, INCLUDING CD IMPOUNDED DURING THE COURSE OF SURVEY _____________ EXPENSES NOT RECORDED IN THE REGULAR BOOKS - RS. 1 0,34,725 THUS, THE AMOUNT OF DISCLOSURE MADE BY SHRI AMAR AR VINDBHAI RAWAL, IS TO DETERMINED AFTER TAKING INTO CONSIDERA TION THE MATERIAL IMPOUNDED DURING THE COURSE OF SURVEY, WHICH THE AS SESSING OFFICER HAS NOT DISPUTED, AND AS PER THE SAID IMPOUNDED DOC UMENTS, THE TOTAL EXPENDITURE IN THE PROJECT AS ON THE DATE OF SURVEY COMES TO RS.2,94,95,275/-. THE AMOUNT OF DISCLOSURE SHALL A CCORDINGLY GET ADJUSTED TO RS. 10,34,725/-. THE ASSESSING OFFICER SHALL TAX THIS AMOUNT AS THE AMOUNT OF DISCLOSURE, UNDER THE HEAD UNACCOUNTED INCOME DISCLOSED DURING THE SURVEY. THE APPELLANT GETS RELIEF OF RS.1,64,95,275/-. SUB GROUND OF APPEAL NO. (I), (I I) & (IV) OF GROUND OF APPEAL NO. 1 ARE, THEREFORE, PARTLY ALLOWED. IN EFFECT, GROUND OF APPEAL NO. 1, IS PARTLY ALLOWED. ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 12 4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT FILED PAPER BOOK NOS. I TO IX. LD. COUNSEL FOR THE APPEL LANT CONTENDED THAT THERE IS NO BASIS OF DETERMINING THE COST OF EXPENSES ON THE DATE OF SURVEY AT RS. 3,05,30,000/-. DURING THE COURSE OF SURVEY, THESE FACTS HAVE BEEN INCORPORATED IN THE STATEMENT RECORDED BY THE OFFIC ER IN QUESTION NO. 18 OF THE STATEMENT DATED 09.08.2007. THE CONSTRUCTION EXPEN SES RECORDED IN THE REGULAR BOOK OF ACCOUNT HAD ALSO BEEN TAKEN AT RS.1 .3 CRORE WITHOUT ANY BASIS. DURING THE COURSE OF SURVEY, PEN DRIVE WAS IMPOUNDED BY THE SURVEY TEAM. AS PER THIS PEN DRIVE, PURCHASE FROM 01.04.2 007 TO 09.08.2007 HAD SHOWN UNDER THE HEAD PURCHASE RETAIL, PURCHASE TAX AND WIP AT RS. 99,54,598/-. THE OPENING WIP AT RS. 1,95,40,677/- HAD NOT BEEN TAKEN INTO CONSIDERATION AT THE TIME OF SURVEY. THUS, UP TO T HE DATE OF SURVEY, THE TOTAL WIP WAS AT RS.2,94,95,275/-. THE ASSESSEES CASE I S AUDITED U/S. 44AB OF THE IT ACT. THE APPELLANT HAD RECEIVED ADVANCES AG AINST THE BOOKING OF FLAT AT RS.1,15,66,500/-. THE APPELLANT HAD RETRACTED FROM THE DISCLOSURE MADE DURING THE COURSE OF SURVEY BY NOT FILING ANY INCOM E IN THE RETURN AS WELL AS BY FILING AN AFFIDAVIT. LD. COUNSEL CONTENDED THAT TH E STATEMENT RECORDED U/S. 133A HAS NOT EVIDENTIARY VALUE AS HELD IN CASE OF CIT VS. S. KHADER KHAN SON (2012) 79 DTR 184 (SC), WHEREIN IT WAS HELD THAT ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY UNDER SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH AND THUS ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE. THEREFORE, ANY ADMISSION MAD E DURING SUCH STATEMENT CANNOT, BY ITSELF, BE MADE THE BASIS FOR ADDITION. THEREFORE, REVENUES APPEAL HAS BEEN DISMISSED BY THE HONBLE APEX COURT. HE F URTHER ARGUED THAT EVEN ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 13 STATEMENT MADE U/S. 132(4) OF THE IT ACT IS REBUTTA BLE, IF THE STATEMENT IS NOT SUPPORTED WITH ANY EVIDENCE. THEREFORE, THE LD. CO UNSEL CLAIMED THAT THE STATEMENT RECORDED ON THE DATE OF SURVEY IN APPELLA NTS CASE HAS NO EVIDENTIARY VALUE. HE FURTHER ARGUED THAT THE LD. A.O. HAD NOT REJECTED THE BOOK RESULT U/S. 145 OF THE IT ACT BEFORE REFERRING THE CASE TO DVO U/S. 142A OF THE IT ACT. HE RELIED UPON IN CASE OF SARGAM CINEMA VS. CIT 328 ITR 513 (SC). HE FURTHER RELIED IN CASE OF ITO VS. VIJETA EDUCATIONAL SOCIETY 118 ITD 385 (LUK). IT WAS HELD IN THIS CASE THAT ASSESSMENT ON THE BAS IS OF DVO REPORT, EVEN NO DEFECTS POINTED OUT BY THE A.O. IN ACCOUNTS OF ASSESSEE, THEREFORE, THE VALUATION REPORT IS INVALID. FURTHE R IN CASE OF RAJHANS BUILDERS VS. DCIT 41 SOT 331, CO-ORDINATE ITAT A BENCH, AH MADABAD, HELD THAT THE ASSESSEE HAS REGULARLY MAINTAINED THE BOOKS OF ACCO UNT AND ON VARIOUS RECORDS ALONGWITH SUPPORTING EVIDENCE OF VARIOUS RA W MATERIALS LIKE CEMENT, STEEL, BRICKS, SAND, WOOD, LABOUR COST ETC. WAS FIL ED, BUT THE A.O. HAS NOT FOUND OUT ANY DEFECTS IN THE BOOKS/ RECORDS/BILLS ETC., A ND HAS NOT REJECTED BOOKS OF ACCOUNT. WITHOUT REJECTING BOOKS OF ACCOUNT, THERE IS NO REASON TO ADD ANY AMOUNT ON THE PRESUMPTION THAT COST/INVESTMENT IN C ONSTRUCTION IS LOW ADDITION CANNOT BE MADE ONLY ON THE BASIS OF DVO REPORT. FU RTHER, LEGISLATURE HAS NOT INCLUDED UN-EXPLAINED EXPENDITURE STIPULATED IN SEC TION 69C FOR INVOCATION OF PROVISIONS OF SECTION 142A OF THE IT ACT. IN CASE OF CIT VS. BAJRANGLAL BANSAL 335 ITR 572 (DELHI), IT HAS BEEN HELD THAT THE REPORT OF DVO, PRIMARY BU RDEN TO PROVE UNDERSTATEMENT OF INCOME IS ON THE REVENUE AND IT IS ONLY WHEN SUCH BURDEN IS DISCHARGED THAT IT IS PERMISSIBLE TO RELY UPON THE VALUATION MADE BY THE DVO. IN ANY EVENT, THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 14 AND CANNOT BE RELIED UPON WITHOUT REJECTING THE BOO KS OF ACCOUNT. MOREOVER, NO EVIDENCE, MUCH LESS ANY INCRIMINATING EVIDENCE, WAS FOUND AS A RESULT OF SEARCH TO SUGGEST THAT THE ASSESSEE HAS MADE ANY PA YMENT OVER AND ABOVE THE CONSIDERATION MENTIONED IN THE RETURN. IN CASE OF CIT VS. BINDAL APPARELS 332 ITR 410 (DELHI), WHEREIN REFERENCE TO SECTION 69 & 145(3) IN REFEREN CE TO GP RATE, HELD THAT NO INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SURVEY AND NO ADVERSE COMMENTS BY THE C.A. OR A.O., NO COMPARABLE CASE LAW BROUGHT ON RECORD, THEREFORE NO GP ADDITION. L D. A.R. ALSO PLACED RELIANCE ON ITAT, AHMADABAD, HONBLE B BENCH DECISION IN C ASE OF M/S FASHION WORLD VS. ACIT, CIR.-12, AHMADABAD IN ITA NO. 1634/ AHD/2006 FOR A.Y. 02- 03, WHEREIN IDENTICAL ISSUE WAS INVOLVED AND HELD AGAIN ST THE REVENUE. THE APPELLANT FURTHER RELIED IN CASE OF ACIT VS. NANA G PATEKAR 27 SOT 8, ITAT, MUMBAI G BENCH, VISHAL INFRA LTD. VS. ACIT 104 ITD 537, ITAT, HYDRABAD A BENCH, CIT VS. SAS HOTELS & ENTERPRISE S LTD. 334 ITR 0194 (MADRAS), DCIT VS. ROHTAS PROJECT LTD. 133 TTJ 89, ITAT, LUCKNOW B BENCH & CIT VS. R.P. APARTMENT PVT. LTD. 319 ITR 276 (DEL ). THEREFORE, WITHOUT REJECTING THE BOOKS RESULT U/S. 145, THE REFERENCE MADE BY THE A.O. IS INVALID AND NO ADDITION CAN BE MADE BY THE A.O. AS WELL AS CIT(A). LD. COUNSEL ARGUED THAT IN CASE OF SHRI ABBAS NABI SHAIKH VS. ACIT IN ITA NO. 366/AHD/2009 FOR A.Y. 05-06, CO-ORDINATE D BENCH, ITAT, AHMADABAD, WHEREIN IDENTICAL DISCLOSURE AT RS. 1.51 CRORE HAD BEEN MADE BY THE APPELLANT WHO HAD PAID TAX ON DISCLOSURE OF RS. 1.06 CRORE. LD. A.O. MADE ASSESSMENT AT RS. 1.12 CRORE WHEREAS IN THIS CASE, THE RETRACT ION MADE BY THE ASSESSEE AFTER 2.5 YEARS. THE CO-ORDINATE BENCH HELD AS UND ER: ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 15 12. CONSIDERING THE TOTALITY OF THE FACTS AND RESP ECTFULLY FOLLOWING THE DECISIONS OF HIGH COURT STATED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE, THE ADDITIONS ARE BA SED ON THE STATEMENT RECORDED AT THE TIME OF SURVEY U/S. 133A WHICH HAVE BEEN LATER ON RETRACTED BY THE ASSESSEE. THE A.O. HAS N OT BROUGHT ANY CORROBORATIVE EVIDENCE AND MATERIAL ON RECORD TO JU STIFY THE ADDITION. THE A.O. HAS NOT BROUGHT ANY INDEPENDENT EVIDENCE O R GIVEN ANY FINDING TO SUBSTANTIATE THE DECLARATION MADE AT THE TIME OF SURVEY. IN VIEW OF THESE FACTS WE ARE OF THE VIEW THAT NO ADDI TION CAN BE MADE ONLY ON THE BASIS OF ADMISSION DURING THE COURSE OF SURVEY. WE THUS DIRECT THE DELETION OF THE ADDITION MADE. THUS THI S GROUND OF THE ASSESSEE IS ALLOWED. FURTHER, HONBLE A BENCH, AHMADABAD, IN ITA NO. 961/AHD/2009 IN CASE OF ACIT, CIRCLE 2, SURAT VS. M/S. HAREKRISHNA EXPORTS FOR A.Y. 06-07 , WHEREIN THE MANAGING PARTNER DECLARED U/S. 132(4) AT RS. 9 CRORE, WHICH WAS RETURNED IN INCOME AT RS. 7.2 CRORE. THE LESS DISCLOSURE WA S OF RS.1.8 CRORE. THEREFORE, DISCLOSURE OF THE RETURN INCOME HAS BEEN ACCEPTED BY THE CO- ORDINATE BENCH. HE FURTHER ARGUED THAT THE STATEME NT RECORDED DURING THE COURSE OF SURVEY IS TO BE READ AS A WHOLE AND CANNO T BE ACCEPTED OR REJECTED IN PART. THE DVO REPORT WAS NOT GIVEN FOR THE APPE LLANT BY THE A.O. BUT WAS GIVEN BY THE CIT(A) VIDE LETTER DATED 25.04.2011 TO THE APPELLANT FOR AFFORDING ANY REPLY ON IT. LD. DVO MADE INSPECTION AFTER FOU R YEARS AND NO COMPARATIVE CASE HAD BEEN CITED BY HIM IN VALUATION REPORT. TH ERE WAS NO REMAND REPORT ON VALUATION REPORT ASKED BY THE CIT(A) FROM THE LD . A.O. THE BOOKS OF ACCOUNT WERE REJECTED BY THE CIT(A) AFTER GETTING T HE VALUATION REPORT FROM THE D.V.O. THE D.V.O. HAS ESTIMATED TOTAL COST OF CONS TRUCTION AT RS.2525 CRORE OF 17,868 SQ.MTR. THEREFORE, THE AVERAGE RATE IS W ORKED OUT BY THE DVO @ ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 16 14134 PER SQ. MTR. WHEREAS, AS PER THE ASSESSEES B OOKS OF ACCOUNT, IT WAS 7834 SQ. MTR. THE APPELLANT FILED COMPLETE INVOICE S, VOUCHERS, DETAILS OF ACCOUNTS, BILLS, CHEQUE PAYMENTS. THE COPY OF ACCO UNT OF ALL THE PURCHASE PARTIES WITH ADDRESS BEFORE THE A.O. AS WELL AS BEF ORE THE CIT(A). THIS FACT HAS NOT BEEN DISPUTED BY THE BOTH AUTHORITIES. THE LD. CIT(A) HAS FOUND ONLY DEFICIENCY OF RS. 96,476/- WHICH HAS BEEN RECONCILE D BY THE APPELLANT BEFORE THE CIT(A), WHICH WAS PERTAINED TO A.Y. 07-08 NOT Y EAR UNDER CONSIDERATION. THE APPELLANT FURTHER RELIED IN CASE OF CIT VS. BALKISHAN PODDAR IN TAX APPEAL NO. 2284 OF 2009, ORDER DATED 20/06/2011, WHEREIN HONBLE GUJARAT HIGH COURT HELD THAT IN REFERENCE TO SECTION 142A, NO AD DITION CAN BE MADE ON THE BASIS OF DVO REPORT BEFORE INVOKING SECTION 69B. I T WAS HELD THAT IT IS INCUMBENT UPON THE DEPARTMENT TO PROVE THAT INVESTM ENT MADE BY THE ASSESSEE, WAS MORE THAN WHAT HAD BEEN RECORDED IN T HE BOOKS OF ACCOUNT AND THUS SHIFTING THE ONUS ON THE DEPARTMENT. IN C ASE OF GOODLUCK AUTOMOBILES (P) LTD. VS. ACIT IN TAX APPEAL NO. 148 OF 2000, ORDER DATED 7 TH AUGUST, 2012, (2012) 78 DTR (GUJ) 104, WHEREIN THE HONBLE GUJARAT HIGH COURT HELD THAT FIRST THE A.O. REQUIRED TO REJECT T HE BOOK BEFORE MAKING ANY REFERENCE TO DVO AND DVOS REPORT CANNOT FORM THE F OUNDATION FOR THE REJECTION OF THE ACCOUNTS. THE LD. COUNSEL FURTHER ARGUED THAT ALTERNATIVE IF APPELLANTS EXPLANATION IS NOT FOUND SATISFACTORY T HEN DEDUCTION U/S. 80IB(10) IS TO BE ALLOWED TO THE APPELLANT. THE APPELLANT H AD ALREADY FILED THE REQUIRED AUDIT REPORT DURING THE COURSE OF ASSESSMENT PROCEE DING. LD. A.R. CONTENDED THAT 89 TTJ 98 (AGRA) (2004) BALDEO COLD STORAGE, WHEREIN IN REFERENCE TO SECTION 131(1)(D), IT WAS HELD THAT THE REJECTION O F BOOKS OF ACCOUNTS IS ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 17 MANDATORY. FURTHER, IN THE CASE OF 197 CTR 78 (DELHI) IN CIT VS. INDO CENYAN INDUSTRIAL ENTRERPRISE , WHEREIN IT WAS HELD THAT REFERENCE MADE TO DVO U/S.131(1)(D) FOR DETERMINATION OF COST OF CONSTRUC TION WAS ILLEGAL. FURTHER, LUCKNOW BENCH IN 88 TTJ 913 IN THE CASE OF SMT. PRAMILA AGARWAL , HELD THAT THE A.O. HAS NOT JURISDICTION TO CALL FOR REPORT FR OM DVO AND DVO HAS NOT JURISDICTION TO ESTIMATE THE COST OF CONSTRUCTION U /S.131(1)(D). THE APPELLANT ALSO FILED RECONCILIATION STATEMENT AND CLAIMED THA T PURCHASE OF RAW MATERIAL OF RS.26,86,306/- WAS NOT CONSIDERED BY THE A.O. AND C IT(A) FOR WHICH NECESSARY EVIDENCES WERE FILED BEFORE BOTH THE AUTH ORITIES. IT IS SUBMITTED THAT IN ADVANCE FOR PURCHASE OF RAW MATERIAL WAS MA DE THROUGH ACCOUNT PAYEE CHEQUE FOR VARIOUS PARTIES. THE APPELLANT HA S REGULAR PURCHASES TRANSACTION, EVEN OPENING BALANCES ARE GIVEN IN THE BOOKS OF ACCOUNT. THEIR PAN NO., NAME AND ADDRESS HAVE BEEN GIVEN TO THE BO TH AUTHORITIES BUT NO INQUIRY HAS BEEN MADE BY THE A.O. AND ALSO NOT CALL ED ANY REMAND REPORT BY THE CIT(A) (PAGE NO. 32, 33 & 34 OF PAPER BOOK VOLU ME NO. VI). 5. AT THE OUTSET, LD. CIT D.R. VEHEMENTLY ARGUED TH AT REFERENCE WAS MADE U/S. 131(1)(D) AND THERE IS NO REQUIREMENT IN LAW T O REJECT THE BOOKS OF ACCOUNTS. HE FURTHER RELIED IN CASE OF CIT VS. JHAVERI INFOTECH PVT. LTD. IN TAX APPEAL NO. 1891 OF 2009, WHEREIN CIT U/S.263 HAS NOT GIVEN SPECIFIC FINDING THAT ORDER OF THE A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. BUT, THE OBSERVATION MADE BY THE CIT U/S. 263 CONST RUED THAT THE ORDER OF THE LD. A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE. HE FURTHER RELIED IN CASE OF ITO VS. BALRAM JHANWAR IN ITA NO. 401 (JODH.) OF 20 08 FOR A.Y. 05-06, ORDER DATED JUNE 30, 2006, WHEREIN THE REFERENCE WAS MADE BY ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 18 THE LD. A.O. WITHOUT REJECTING THE BOOKS, BUT HONB LE ITAT HAS CONCLUDED THE BOOKS OF ACCOUNT, AT THE TIME OF SURVEY WERE INCOMP LETE AND THERE WAS A DIFFERENCE IN THE BALANCE SHEET SUBMITTED ALONGWITH THE RETURN. THUS, THE REFERENCE MADE BY THE LD. A.O. IN THIS CASE U/S. 13 1(1)(D) READ WITH SECTION 142A IS VALID. HE FURTHER RELIED IN CASE OF DCIT VS. SHUBHAM INDUSTRIES [2007] 104 ITD 126 (LUCK.) (TM), WHEREIN IT WAS HELD THAT IF THE A.O. EXERCISES POW ER U/S. 142A R.W.S. 131, THE REFERENCE IS VALID, EVEN WITHOUT REFERRING THE SECTION 131(1)(D), THE REFERENCE TO THE DVO U/S. 142A IS VA LID. THE LD. CIT D.R. FURTHER RELIED UPON IN CASE OF INDIRA HOSPITAL RESEARCH & DIAGNOSTIC CENTRE V. ACIT [2012] 19 TAXMANN.COM 130 (KAR.), WHEREIN IT WAS HELD THAT IT WAS APPARENT FROM THE RECORD THAT TRIBUNAL HAS TAKEN SP ECIFIC VALUE THAT THE MATTER WAS REFERRED TO THE DVO ONLY AFTER IT WAS FOUND THA T ACCOUNT HAD NOT BEEN PROPERLY MAINTAINED WHICH WOULD NECESSARILY MEAN TH AT ACCOUNT OF ASSESSEE HAD BEEN REJECTED, IN WHICH HONBLE SUPREME COURT DECISION IN CASE OF SARGAM CINEMA VS. CIT (SUPRA) HAD BEEN CONSIDERED B Y THE HONBLE KARNATAKA HIGH COURT. THEREFORE, HE REQUESTED TO C ONFIRM THE ADDITION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND EXAMINE THE PAPER BOOK SUBMITTED AND CAS E LAWS REFERRED. UNDISPUTEDLY, AT THE TIME OF SURVEY, NO BOOKS OF AC COUNTS WERE FOUND, EXCEPT, DOCUMENTS AS PER ANNEXURE B-1, AMAR LOOSE PAPER FIL ED CONTAINING 111 PAGES, AMAR OFFICE FILE CONTAINING 112 PAGES AND CO MPUTER BACK UP IN PEN DRIVE INCLUDES BOOKS OF ACCOUNTS WERE FOUND AND IMP OUNDED. AS PER THIS PEN DRIVE, TOTAL PURCHASE OF RAW MATERIAL HAD BEEN SHOW N AT RS.72,68,292/-, BUT NO BILLS OF PURCHASE OF RS. 26,86,306/- WAS FOUND. THUS, TOTAL PURCHASES WERE ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 19 CALCULATED BY THE APPELLANT AT RS. 99,54,598/- AFTE R EXCLUDING OPENING WIP AT RS. 1,95,40,677/-. THE TOTAL COST OF CONSTRUCTION IS WORKED OUT AT RS. 2,94,95,275/- AS ON DATE OF SURVEY I.E. 09.08.2007. IN STATEMENT RECORDED U/S. 133A, IT WAS CALCULATED AT RS. 3,05,30,000/- AND EX PENSES RECORDED IN REGULAR BOOKS HAVE BEEN SUBTRACTED AT RS. 1.3 CRORE BY THE A.O. AND A DIFFERENCE HAS BEEN CALCULATED AT RS.1.75 CRORE AND THE SAME HAD B EEN TAKEN AS DISCLOSURE. LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS. 10,34, 725/- AFTER ACCEPTING THE ASSESSEES COST OF CONSTRUCTION AT RS. 2,94,95,275/ -. THUS, THE CIT(A) HAD ACCEPTED THE EXPLANATION SUBMITTED BY THE APPELLANT REGARDING RS.26,86,306/-. HOWEVER, WE HAVE CAREFULLY PERUSED THE DETAIL OF PU RCHASES MADE BEFORE THE DATE OF SURVEY. ON EXAMINATION, IT IS EVIDENT ON F ACE OF RECORD A SUM OF RS. 1.7 LACS WAS INCURRED IN CASH. THE CASH PURCHASE A S CLAIMED HAS NOT BEEN DULY SUPPORTED DURING THE HEARING. THEREFORE, OUR CONSIDERED OPINION THE ADDITION WHICH HAD BEEN CONFIRMED BY THE CIT(A) OF RS.10,34,725/- IS HEREBY RESTRICTED TO RS. 1.7 LACS. 6.1 THE APPELLANT CHALLENGED THE COST OF CONSTRUCTI ON TAKEN AT RS.3,05,30,000/- AS ON DATE OF SURVEY AND ALSO CHAL LENGED REFERRING THE CASE TO THE DVO EITHER U/S. 131(1)(D) OR U/S. 142A AS NO BOOKS OF ACCOUNT HAVING BEEN REJECTED BY THE A.O. BEFORE REFERRING THE CASE TO THE DVO. THE DVO ESTIMATED THE COST OF CONSTRUCTION AS ON 31.03.2008 NOT ON THE DATE OF SURVEY (PAGE NO. 299 OF THE PAPER BOOK, VOLUME-VI). THE T OTAL WIP FOR THE YEAR UNDER CONSIDERATION 31.03.2008 HAS BEEN ESTIMATED AT RS.3 ,32,15,672/- BY THE DVO WHICH IS EXCLUDING COST OF LAND STAMP DUTY, REGISTR ATION CHARGES AND PRE- OPERATING EXPENSES. HOWEVER, THE ASSESSEE HAD DECL ARED BEFORE THE ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 20 VALUATION OFFICER, THE COST OF CONSTRUCTION AT RS.1 ,77,14,117/- EXCLUDING COST OF LAND AND OTHER CHARGES FOR THE YEAR UNDER CONSID ERATION. BOTH, THE APPELLANT AS WELL AS THE DVO HAD NOT INCLUDED OPENING STOCK O F WIP IN ESTIMATING THE COST OF CONSTRUCTION. THE APPELLANT HAD SUBMITTED THE VALUATION REPORT OF GOVERNMENT APPROVED VALUER FOR THE YEAR UNDER CONSI DERATION TO THE A.O. ON 30 TH DECEMBER, 2010, WHEREIN THE COST OF CONSTRUCTION H AS WORKED OUT UP TO THE DATE OF SURVEY AT RS. 98,50,000/-, WHICH HAS NO T BEEN CONSIDERED BY THE A.O. AT THE TIME OF ASSESSMENT PROCEEDING. THE APP ELLANT ALSO HAD FILED REQUIRED PAPERS BEFORE THE DVO DURING THE COURSE OF VALUATION PROCEEDING POSSIBLE DETAILS AS PER PARA 3.3 OF DVO REPORT. TH E SURVEY TEAM HAS ESTIMATED THE COST OF CONSTRUCTION AT RS. 3.05 CROR E WITHOUT ANY BASIS AS NO INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED DU RING THE COURSE OF SURVEY. THE ONLY BASIS WAS THE STATEMENT RECORDED OF SHRI AMAR ARVINDBHAI RAWAL, BUT WHICH HAS NO EVIDENTIARY VALUE AS HELD I N CASE OF CIT VS. S.KHADER KHAN SON (SUPRA) BY THE HONBLE APEX COURT AS WAS N OT SUPPORTED WITH ANY INCRIMINATING DOCUMENTS. IF THE ARGUMENTS OF THE A .O. IS CONSIDERED AND DISCLOSURE OF RS.1,75,30,000/- IS CONSIDERED INCOME IN THE PRESENT YEAR WITHOUT ANY SALE OF THE CONSTRUCTED AREA MADE BY TH E APPELLANT. IT WOULD BE AGAIN PART OF WORK IN PROGRESS OF THE PROJECT. WHE N SALE WOULD BE MADE THE DISCLOSURE AMOUNT CONSIDERED BY THE A.O. IN A.Y. 08 -09 WOULD AUTOMATICALLY BE REDUCED FROM THE PROFIT ON THE COMPLETION OF THE PROJECT. FURTHER, THE LD. A.OS. ARGUMENT THAT THE APPELLANT HAD RECEIVED ON MONEY AT THE TIME OF BOOKING OF FLAT, HAS NOT ANY BASIS AS NEITHER NO DO CUMENTARY EVIDENCE OF ON MONEY WAS FOUND DURING THE COURSE OF SURVEY, NOR LD . A.O. HAD PROVED THIS ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 21 ASPECT WITH ANY EVIDENCE. THE ASSESSEES CLAIM U/S .80IB(10) IS ALSO PREMATURE AS NO SALE HAD BEEN MADE BY THE APPELLANT AND ALSO NOT HAS ARRIVED ANY INCOME FROM THE CONSTRUCTION ACTIVITY D URING THE YEAR UNDER CONSIDERATION. IN THE LIGHT OF ABOVE LEGAL DISCUSS ION ALTHOUGH THE ADDITION AS CONFIRMED BY THE CIT(A) IS NOT TO BE UPHELD BUT BEC AUSE OF THE REASON A SUM OF RS.1.7 LACS COULD NOT BE ESTABLISHED. HENCE, TO THAT EXTENT, THE ADDITION IS CONFIRMED AND REST IS DELETED. 7. THE ENHANCEMENT MADE BY THE LD. CIT(A) AT RS. 1, 44,66,770/- ALSO DOES NOT HAVE ANY BASIS EXCEPT VALUATION REPORT OF THE DVO. BOTH THE AUTHORITIES I.E. LD. A.O. AS WELL AS CIT(A) HAD NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT OF THE APPELLANT AND HAD NOT REJEC TED THE BOOK ACCOUNT U/S.145(3) OF THE IT ACT. RECENTLY, HONBLE APEX C OURT DECISION IN CASE OF SARGAM CINEMA VS. CIT (SUPRA) HAS HELD THAT WITHOUT REJECTING THE BOOKS RESULT OF THE APPELLANT, THE REFERENCE TO THE DVO I S INVALID. THEREFORE, FOLLOWING THE RECENT HONBLE JURISDICTIONAL HIGH CO URT DECISION IN CASE OF GOODLUCK AUTOMOBILES (P) LTD. VS. ACIT (SUPRA), IN WHICH HONBLE APEX COURTS DECISION IN CASE OF SARGAM CINEMA VS. CIT (SUPRA) HAS BEEN FOLLOWED, ON THIS ISSUE, WE HAVE CONSIDERED VIEW TH AT LD. CIT(A) WAS NOT JUSTIFYING IN ENHANCING THE INCOME ON THE BASIS OF DVO REPORT. ACCORDINGLY, WE DELETE THE ENHANCEMENT MADE BY CIT(A). 8. IN THE RESULT, GROUND NO.1 TO 4 OF THE ASSESSEE S APPEAL IS PARTLY ALLOWED AND GROUND NO.3 OF THE REVENUE IS ALSO PART LY ALLOWED. ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 22 REMAINING GROUNDS OF REVENUES APPEAL IN ITA NO. 27 29/AHD/2011 9. THE FIRST GROUND OF REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 23 LACS MADE ON ACCOUNT OF UNEXPLAINED CASH CRE DITORS U/S.68 OF THE IT ACT. THE A.O. OBSERVED THAT THE APPELLANT HAS SHOW N VARIOUS DEPOSITS IN TOTALING OF RS. 42,76,000/- OUT OF THIS, RS.23 LACS WAS RECEIVED BY THE FOLLOWING PERSONS: SR. NO. NAME OF THE DEPOSITOR AMOUNT (RS.) 1. RAJESH GANDHI 16,00,000 2. NARESH ATHWAWIA 3,00,000 3. POKHRAJ BHANDARI 1,00,000 4. SOBHA MALHOTTRA 2,00,000 5. VINDOBHAI SHETH 1,00,000 TOTAL -- 23,00,000 THE A.O. GAVE SHOW CAUSE NOTICE ON THIS ISSUE, WHIC H WAS REPLIED BY THE APPELLANT ALSO. THE APPELLANT HAS CLAIMED THAT THE SE ARE NOT DEPOSITS BUT BOOKING AMOUNT OF FLAT PURCHASES. THEIR NAME, ADDR ESS AS WELL AS PAN NO. HAD BEEN GIVEN TO THE A.O. IF THE A.O. HAS ANY REA SON TO DOUBT ON THIS DEPOSIT, HE CAN ISSUE NOTICE U/S. 133(6) OF THE IT ACT TO VERIFY THE GENUINENESS. THE LD. A.O. DID NOT ISSUE ANY NOTICE TO THESE DEPOSITORS BUT CONCLUDED THAT THESE CASH CREDITORS ARE UNEXPLAINED AND ADDED U/S.68 OF THE IT ACT. 10. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHO HAD DELETED THE ADDIT ION. THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED AS UNDER: 2.4.1 I HAVE DULY CONSIDERED THE SUBMISSION OF TH E APPELLANT AND FIND THAT THE ASSESSING OFFICER HAS NOT CONSIDE RED THE SUBMISSION OF THE APPELLANT THAT THE AMOUNT OF RS.2 3,00,000/- ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 23 RECEIVED DURING THE YEAR WAS BOOKING DEPOSITS, HENC E, THERE IS NO QUESTION OF PRODUCING REGISTERED AGREEMENT OF SALE, AND DESPITE THE REQUEST MADE DURING THE COURSE OF ASSESSMENT PROCEE DINGS THAT DEPOSITORS CAN BE VERIFIED U/S. 133(6) OF THE ACT, THE ASSESSING OFFICER DID NOT CARRY OUT ANY INQUIRY AND ADDED THE ABOVE AMOUNT U/S.68 OF THE ACT. I ALSO FIND THAT THE APPELLANT HAS FURNISHED PAN AND ADDRESS OF THE ABOVE PERSONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AND FILED COPY OF SALE DEED SUBSEQUENT LY EXECUTED WITH THE BUYERS. I, THEREFORE, HOLD THAT THE ASSES SING OFFICER HAS WITHOUT BRINGING ON RECORD SUFFICIENT MATERIAL REJE CTED THE SUBMISSION OF THE APPELLANT AND MADE THE ABOVE ADDITION, AND D ELETE THE SAME. THE SECOND GROUND OF APPEAL IS ALLOWED. 11. NOW THE REVENUE IS BEFORE US. LD. CIT D.R. VEH EMENTLY CONTENDED THAT THE APPELLANT HAD NOT FILED THE COPY OF BANK A CCOUNT, COPY OF IT RETURN AND CREDITWORTHINESS OF THESE PARTIES HAD NOT BEEN ESTABLISHED. THEREFORE, HE REQUESTED TO CONFIRM THE ADDITION. AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT HAS RELIED UPON THE ORDER OF THE CIT(A) AND REQUEST ED TO UPHELD THE ORDER OF THE CIT(A). 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT HAD FURNISHED THE NAME AND A DDRESS WITH PAN NO. OF THE DEPOSITORS OF THE FLAT PURCHASER BEFORE THE A.O . THE SALE AGREEMENT HAD NOT BEEN EXECUTED AS CONSTRUCTION HAD NOT BEEN COMP LETED BY THE APPELLANT. THUS, CIT(A) WAS RIGHT IN DELETING THE ADDITION MAD E BY THE A.O. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND . 13. THE SECOND GROUND OF APPEAL IS AGAINST DELETI NG THE ADDITION OF RS.13,75,874/- MADE ON ACCOUNT OF CESSATION OF LIAB ILITY WITHOUT APPRECIATING ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 24 THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON HIM TO PROVE THE IDENTITY, CREDITABILITY AND GENUINENESS OF THE CREDITORS. THE A.O. OBSERVED THAT THE APPELLANT HAD SHOWN 14 CREDITORS IN THE BO OKS OF ACCOUNT. THE A.O. ASKED TO FURNISH THE CONFIRMATION OF THE CREDITORS, COPY OF BANK STATEMENT, PAN NO. AND ACKNOWLEDGEMENT OF THE RETURN FILED BY THE CREDITORS. THE APPELLANT REPLIED VIDE LETTER DATED 30.12.2010 BY W HICH HE HAD FILED THE CONFIRMATION, NAME, ADDRESS AND COPY OF ACCOUNT. H E FURTHER REQUESTED TO THE A.O. TO ISSUE NOTICE U/S. 133(6) OF THE IT ACT IN C ASE ANY ADVERSE INFERENCE TO THE CREDITORS. THE LD. A.O. ANALYZED THE BUSINESS TRANSACTION IN THREE CASES WITH THESE CREDITORS AND CONCLUDED THAT THE CREDITO RS OF RS.13,75,874/- SHOWN AS PAYABLE WAS NOT FOUND GENUINE AND ADDED THE SAME AS UNACCOUNTED INCOME OF THE ASSESSEE OR ON ACCOUNT OF CESSATION O F LIABILITY. 14. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHO HAD DELETED THE ADDIT ION BY OBSERVING AS UNDER: 3.4.1 I HAVE DULY CONSIDERED THE ABOVE SUBMISSION OF THE APPELLANT AND FIND THAT HE HAS NOT GIVEN PROPER FIN DING IN RESPECT OF THE CREDITORS TO THE EXTENT OF RS.13,75,874/- ADDED BY HIM. THE ENTIRE ADDITION HAS BEEN MADE FOR THE REASON THAT O UT OF SO MANY DETAILS CALLED FOR BY HIM, VIZ. CONFIRMATION OF CRE DITORS, THEIR BANK STATEMENTS AND PAN AND COPY OF ACKNOWLEDGEMENT OF R ETURNS FILED BY THEM, THE APPELLANT WAS NOT ABLE TO FURNISH ONE OF THE DETAILS, WHICH IN ONE CASE WAS COPY OF ACKNOWLEDGEMENT OF RE TURN. HOWEVER, THE PRIMARY DETAILS OF CREDITORS, THAT IS THEIR NAMES AND ADDRESSES AND PAN WERE FURNISHED BY THE APPELLANT W HICH HAS NOT BEEN DISPUTED IN THE ASSESSMENT ORDER. FURTHER, TH E ASSESSING OFFICER HAS MADE THE ENTIRE ADDITION ON THE BASIS O F THIS OBSERVATION MADE IN THE CASES OF M/S ARIHANT ENTERPRISES, D.D. RETIWALA AND ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 25 KHODAL CORPORATION. IN ALL THE ABOVE 3 CASES, THE ASSESSING OFFICER, AFTER EXAMINING THEIR LEDGER A/CS, HAS INSTEAD OF C OMING TO A PROPER FINDING BY WAY OF BRINGING ON RECORD TANGIBLE EVIDE NCES, OR BY EXAMINATION OF THESE PARTIES, DRAWN INFERENCES, WHI CH HE HIMSELF HAS MENTIONED IN THE ORDER; EITHER THE PURCHASES TO THE EXTENT OF THE AMOUNT SHOWN IN THE ACCOUNTS ARE BOGUS, OR PAYMENT HAS BEEN MADE BY THE APPELLANT OUT OF ITS UNACCOUNTED INCOME OR THE LIABILITY OF THE OUTSTANDING AMOUNT IN THEIR ACCOUNTS HAS CEA SED TO EXIST, AS ON 31.3.2008. I, THEREFORE, FIND THAT THE ASSESSIN G OFFICER HIMSELF IS NOT SURE AS TO THE REASON FOR MAKING THE ABOVE ADDI TION. IT IS ALSO RELEVANT TO NOTE THAT THE ABOVE ADDITION MADE BY TH E ASSESSING OFFICER IS CONTRARY TO THE ADDITION MADE BY HIM ON A/C OF UNACCOUNTED INCOME OF RS. 1,75,30,000/-, DISCLOSED BY THE APPELLANT DURING THE COURSE OF SURVEY AND REPRESENTED BY UNEX PLAINED DIFFERENCE IN WIP AT THE TIME OF SURVEY VIS--VIS T HE BOOKS OF ACCOUNTS. CONSIDERING THE ABOVE FACTS, I DELETE TH IS ADDITION AND ALLOW THE THIRD GROUND OF APPEAL. 15. NOW THE REVENUE IS BEFORE US. THE LD. CITD.R. VEHEMENTLY ARGUED THAT THE APPELLANT HAD NOT DISCHARGED HIS ONUS AS R EQUIRED INFORMATION HAD NOT BEEN FURNISHED BEFORE THE A.O. THUS, HE ARGUED TO CONFIRM THE ADDITION, WHEREAS LD. COUNSEL FOR THE APPELLANT HAD RELIED UP ON THE ORDER OF THE CIT(A) AND REQUESTED TO UPHOLD THE ORDER OF THE CIT(A). 16. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT HAD GIVEN NAMES AND ADDRESSES OF THE CREDITORS WITH PAN NO. IT HAD BEEN ALSO REQUESTED BEFORE THE A.O. IN CASE OF ANY DOUBT THE LD. A.O. CAN ISSUE NOTICE U/S.133(6) OF THE IT ACT FOR VERIF ICATION WHICH HAS NOT BEEN DONE BY THE A.O. THUS, PRIMARY BURDEN HAS BEEN DIS CHARGED BY THE ITA NO. 2595 & 2729/AHD/2011 A.Y. 08-09 PAGE 26 APPELLANT, THEREFORE, NO ADDITION IS WARRANTED. AC CORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). 17. IN THE COMBINED RESULT, THE ASSESSEES AND REVE NUES APPEALS ARE PARTLY ALLOWED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 22.03.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * <