M/S BILASPUR INFRASTRUCTURE PVT I LTD, BILASPUR(CG) V. THE INCOME TAX OFFICER,1(1), BILASPUR(CG)

ITA 302/BIL/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5798 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 25-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Valuation report; Assessment record; Tax effect
• Section: 69; 144; 143(3); 143(2); 191; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER ं. / ITA No. 302/RPR/2016 / Assessment Year : 2012-13 M/s Bilaspur Infrastructure Pvt. Ltd. Rajiv Plaza, Opposite Axis Bank Bilaspur (C.G) PAN : AACCB4045M ....... Appellant / V/s. The Income Tax Officer-1(1) Income Tax Office, Mahima Complex, Vyapar Vihar Bilaspur (C.G) ...... ! / Respondent C.O. No. 01/RPR/2022 (arising out of I.T.A. No. 302/RPR/2016) Assessment Year – 2013-14 The Income Tax Officer Ward 1(1) Bilaspur (C.G) ....... Appellant V/s. Bilaspur Infrastructure Pvt. Ltd. Rajiv Plaza, Opposite Axis Bank Bilaspur (C.G) PAN : AACCB4045M ...... ! Respondent Assessee by : Shri G.S. Agrawal, Adv. Revenue by : Shri G.N Singh, Sr. DR 2 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 " # $ % / Date of Hearing : 09.06.2022 &' # $ % / Date of Pronouncement : 19 .07.2022 (े* / ORDER PER RATHOD KAMLESH JAYANTBHAI, AM: The appeal filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeal)- Bilaspur ( CG ) [ Here in after referred as Ld. CIT(A)] for the assessment year 2012-13 dated 30.03.2016 which in turn arises from the order passed by the assessing officer passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 27.03.2015 which is number as ITA No. 302/RPR/2016 and the CO of the assessee for assessment year 2013- 14 is arising out of an appeal filed by the revenue in ITA No. 186/RPR/2017 which was disposed off on 11.03.2022 on account of the low tax effect but the co survives. The appeal for A. Y. 2013-14 was filed by the revenue against the order of the Commissioner of Income Tax (Appeal)- Bilaspur ( CG ) [ Here in after referred as Ld. CIT(A)] for the assessment year 2013-14 dated 21.03.2017 which in turn arises from the order passed by the assessing officer passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 18.03.2016. 3 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 2. Both the Cross Objection and appeal of the assessee are heard together, as the issue are almost common and therefore, disposed off by this common order. 3. In ITA No. 302/BLP/2016, before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That under the facts and the law the ld. CIT(A) erred in rejecting explanation that provisions of Section 145(3) are not applicable. Prayed that books of accounts be not rejected. 2. That under the facts and the law, the ld. CIT(A) further erred in confirming the estimated addition of Rs. 1,50,000/- rejecting the explanation. Prayed to delete the addition of Rs. 1,50,000/-. 3. That under facts and the circumstances the ld. CIT(A) erred in rejecting the ground that estimation of cost of construction of ‘City Centre Project’ by the DVO was not according to law as the regular books of accounts have been kept & maintained with regard to cost of construction. Therefore, prayed that cost as per books of accounts be considered and the Report of the DVO be not considered. 4. That under the facts and the circumstances the ld. CIT(A) further erred in maintaining the addition of Rs. 10,44,000/- (Rs.92,39,209/- - Rs.81,95,210) on the basis of Report of DVO towards cost of construction of ‘City Centre Project’ rejecting the various explanations. Prayed that addition of Rs. 10,44,000/- be deleted.” 4. In CO No. 01/RPR/2022, before us the assessee has assailed the impugned order on the only on the following grounds: “1. That under the facts and the law, the learned CIT(A) erred in confirming that books of accounts have been rightly rejected by ld. AO though the appellant has kept proper books of accounts, receipts and expenses are supported and give true picture of assets and liabilities and are audited. Prayed that books of accounts be accepted, provisions of sec. 145(3) are not applicable, cost of building as per books be accepted.” 4 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 5. The ld. DR appearing on behalf of the assessee objected that since the appeal of the department is dismissed on low tax effect. The Cross Objection stands also dismissed. 6. At the same time ld. AR appearing on behalf of the assessee placed a reliance on the decision of ITAT, Bengalore Bench-C decision in the case of Sh. G. Somashekar Reddy vs. The Deputy Commissioner of Income Tax, Bangalore in ITA No. 1904/Bang/2018 and CO No. 120/Bang/2018 wherein Bench has held that the Cross Objection is required to be heard on merits in terms of the detail of observations made by the Co-ordinate Bench. Therefore, respectfully following the decision of the co-ordinate bench the Cross Objection is required maintainable as separate and an independent appeal of the assessee and is considered on the merits as per the grounds raised by the assessee. 7. The ld. AR of the assessee further submitted that the Cross Objection filed by the assessee is filed with a prayer for condonation of delay supported by an affidavit. The relevant contentions raised in condonation petition filed by the assessee are as under:- “In the above matter, it is respectfully submitted before your honour for the kind and the favourable consideration of your honour. 5 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 1. That the Income Tax Officer, Ward-1(1) has filed an Appeal on Form No. 36 vide Appeal No. 186/RPR/2017 against the Order of Ld. CIT (Appeals) dated 21.03.2017 in Appeal No. CIT(A)/BSP/51/2016-17 which is dated 21.03.2017. 2. That appeal before CIT(A), Bilaspur was represented by our counsel namely CA N.L Agrawal, Bilaspur. When the notice of hearing of above appeal filed by Ld. AO, Bilaspur before the Hon'ble Income Tax Appellate Tribunal Bench dated 28.02.2022 was received by us on 04.03.2022, we engaged CA G.S. Agrawal, Raipur to represent the case who advised us to file cross objection. 3. Accordingly, Form 36A is being now filed. 4. It is, therefore, prayed that there is reasonable cause for delay. Prayed that in interest of justice to condone the delay in filing of the Cross Objection. 5. An Affidavit in support is enclosed herewith. 6. Appellant will be obliged for this kind favour.” 8. Considering the fact presented in the affidavit and petition filed by the assessee, the delay in bringing the Cross objection in the present case is condoned, considering the decision of the Hon’ble Apex Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors., reported in (1987 AIR 1353) wherein the delay has been condoned in a meritorious matter for the ends of justice. 8.1 On the other hand, the Ld. DR with all his fairness has not raised any objection to such submissions made by the assessee’s counsel and judgment of the Hon’ble Apex Court in condoning the delay, if any, in regard to filing of appeals/petitions before the Court of law. 6 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 9. Having heard the Ld. Counsel appearing for the parties and having regard to the facts and circumstances of the case, we find that sufficient cause has been shown by the assessee for not been able to file the instant cross objection for assessment year 2013-14 before us in due time and the delay is considered and we consider this cross objection on its merits. We have respectfully following decisions of the Co-ordinate Bench of Bangalore. The cross objection is treated as separately appeal and decided on merits. 10. As the fact in the cross objection and in the appeal filed by the assessee having common issue. Therefore, the fact is culled out from the folder for Assessment Year 2012-13 and is considered as lead case. 11. The assessee company e-filed its return of income for the year under consideration on 16.10.2012 declaring total income at Rs. 6,10,480/-. The case was selected for scrutiny under CASS and accordingly notice u/s 143(2) was issued and served to the assessee. The assessee company is engaged in the civil construction work. During the financial under consideration, major work undertaken by the company was with regard to the construction of City Centre, Bilaspur. 7 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 The Assessing Officer on verifying the books of accounts stated that the books of accounts do not give a clear picture about the construction work. Each and every bill and voucher were not found produced for verification. The Assessing Officer further observed that under purchase expenses, entire direct and indirect expenses have been booked combinedly of two running projects viz. Rajeev Plaza site and C T Centre site. The Assessing Officer stated that in view of the fact that income and expenditure of each project is not clearly ascertainable. The Assessing Officer further observed that the assessee company has not produced any stock register reflecting the quantitative details of closing WIP. The Assessing Officer further quoted that tax audit of the company stated that due to nature of business quantitative details not mentioned. In the light of this fact, the Assessing Officer stated that due to non-production of complete vouchers and non-maintenance of quantitative details of stock, the books of accounts produced by the assessee company cannot be relied upon and therefore, he invoked provision of section 145(3) of the Income Tax Act and the income of the assessee company is estimated on the basis of information on record. 8 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 12. The Assessing Officer has observed that there were two running projects of the assessee company i.e. Rajeev Plaza site and C.T. Centre site. At C.T. Centre site only construction work commenced during the current financial year and Rajeev Plaza site work was completed where major portion of profit has been booked in earlier years. 13. The ld. Assessing Officer based on his observation/findings invoked the provision of section 145(3) and income of the assessee company estimated for Rajeev Plaza site at Rs. 1,50,000/- in addition to what has already been reflected in the books of account of the assessee company. 14. The ld. AO based on set of argument stated here in above taken a view that cost of construction shown by the assessee company cannot be relied upon. Thus, he has referred the matter to the Departmental Valuation Officer, Bhopal in respect of the site C. T. Center. The DVO, Bhopal vide his letter dated 27.03.2015 and estimated the total cost of construction was derived at Rs. 3,91,12,212/-. The copy of valuation report was provided to the 9 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 assessee company and the assessee company was asked to explain the following. “As per the said valuation report, the DVO, Bhopal has estimated the cost of construction at Rs. 3,91,12,212/- as against Rs. 3,38,60,926/- shown by you in the return of income filed. It is noticed that Rs.3,38,60,926/- includes indirect expenses of Rs. 39,87,923/-. If this amount is excluded, the actual cost of construction works out to Rs.2,98,73,003/- against which the DVO has estimated the cost of construction at Rs. 3,91,12,212/-. Thus, there exists a difference Rs.92,39,209/-. I propose to add back the difference of Rs.92,39,209/- as the undisclosed investment of the assessee company.” 15. In response, the assessee company submitted written reply stating that the rate adopted by the DVO for valuation of property is based on standard rate and not on actual rate. It was also stated by the assessee company that the cost of the labour and material are comparatively cheap at Bilaspur as compared with other big cities. 16. The assessee company further contended that the construction of project was on self-supervision and on account of which the DVO has given the benefit of 2% instead of 10% to 15% and thereby they have explained the reason for the difference in the alleged book result and valuation adopted by the DVO. The Assessing Officer has not accepted the contentions of the assessee company and stated that the valuation of property was done by a technical person and that too in the presence of representative of the assessee company. The assessee company has not come up with concrete evidence to prove 10 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 that the valuation done by the DVO is not proper and thereby, he made the addition as determined as under:- “Cost determined by the DVO in his report dated 27/03/15 - Rs. 3,91,12,212/- Less : Cost shown by the assessee before DVO Rs. 3,38,60,926/- Less : Indirect expenses Rs. 39,87,923/- Cost of construction as per assessee Rs. 2,98,73,003/- Rs. 2,98,73,003/- Difference in cost of construction Rs. 92,39,209/- 17. Against the assessment order the assessee marched an appeal before the first appellate authority but without sufficient success on the additions made by the ld. AO and therefore, this appeal before us. 18. The ld. AR of the assessee has in particular raised almost 3 issues and its related grounds of appeal before us. One is referring the matter to DVO for valuation without rejecting the books of accounts. Making the ad hoc addition without pinpointing any single defects in the books of account in respect of a project where work has been completed in earlier year and in the year under consideration only the opening stock has been sold by the assessee company. The third issue addition based on the difference between the book result shown and valuation made by the DVO where the AO made addition of Rs. 92,39,209/-, but based on the set of argument made by the assessee company CIT(A) has reduced it to Rs. 10,44,000/- only which is challenged before us. Thus, it is relevant to extract the findings of the 11 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 CIT(A) here in below on the three grounds of appeal which was also raised before him. Finding of CIT(A) on Rejection of books of accounts “Decision I have carefully considered the rival submission. It is undisputed fact that assessee has constructed Rajiv Plaza a commercial building and certain expenditures are yet to be adjusted against the running project of 2 nd site named as City Centre. The AO has mentioned that due to running of two projects entire direct and indirect expenses on both the sites having been booked, the income of the assessee is not ascertainable. Section 145(3) itself empowers the AO, if books of accounts are maintained in such a way that income cannot be ascertained, the AO having regard to the completeness or correctness or for not following accounting standard as notified the AO may estimate the income in the manner of section 144 of I.T. Act. In view of the observation of not producing all the vouchers of expenditures and also non maintenance of quantitative details and work in progress consisting of indirect expenses, I do not find any infirmity in the conclusion of the AO by which he rejected the books of accounts. Thus, the ground of appeal is dismissed. Finding of CIT(A) on ad hoc addition for Rajiv Plaza project Decision I have carefully considered the argument advanced by the Ld. AR. In earlier year revenue from operation of the company was Rs. 55,64,700/- whereas, during the instant year it had declined to Rs.33,33,000/- and so far as other income is concerned assessee in earlier year had shown Rs. 6,07,135/- wherein in the instant year it had reduced to Rs. 5,25,000/-, I have also given the thought to the booking of remaining part of Rajiv Plaza. So far as other income is concerned this year in the note at 15 of the balance sheet the assessee had mentioned miscellaneous income of Rs. 5,25,000/- whereas in earlier year it was form of interest on FDR, interest from the bank, interest on loans and advances and interest on TDR with municipal corporation. When pointed out to the Ld. AR about the very nature of this miscellaneous income he could only say that this is 'miscellaneous income' received as an item which had been return back in earlier years. Since the total expenditure in earlier year had been incurred only Rs. 46,91,427/- and Rs. 32,36,098/- during the instant year, the total inventory brought forward during the instant year left the assessee with approximately 1/3 of the profit after claiming the work-in-progress. The expenditure incurred on ongoing project of City Centre appears to be under reported and income component had been estimated by the AO. Since only income 12 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 component has been estimated by the AO, I do not find any inconsistency in the estimation regarding estimation of income of Rs. 1,50,000/-. The same is hereby confirmed and the ground of appeal raised by the assessee is hereby dismissed. Finding of CIT(A) on the addition sustained based on DVO’s report Decision - I have perused the valuation report submitted by District Valuation Officer to the Assessing Officer. On 19/03/2015, the date of visit by the DVO the total cost disclosed by the assessee for FY 2011-12 to F.Y. 2014-15 was reported by the assessee to him is to the extent of Rs. 22,90,54,539/-. The Valuation Officer has estimated the cost of investment for the same period at Rs. 25,73,03,817/-. The Ld. AR had not submitted the inspection report by the banking authority before me for F.Y 2011-12. The inspection report dated 13/03/2013 cannot be considered for F.Y 2011-12 because of the date mentioned therein. This report states that on the date 13/03/2013 cost of construction and material available at site was Rs. 11 crores which is not categorical whether it is combined for F.Y. 2011-12 and FY 2012-13 or only for FY. 2012-13. On 15/07/2013, the report states the cost of construction and material available at site amounted to Rs. 14.39 crores. The combined reading of both the visits by the bank authority clearly gives hint that between 13/03/2013 to 15/07/2013 the valuation difference amounting to Rs. 3.39 crores muy pertain to F.Y. 2012-13. The report of banking authorities cannot be accepted in the back ground given by me as hereinabove. The banking valuation appears to be lesser by Rs. 3.9 crores may be due to the most conservative approach adopted by the banking authorities. As creditor it appears to be reasonable for the bank to always undervalue the cost so as to leave the margin for realization of the Joan advanced if the recovery of loan is to commence. Further, the dates of visit by the banking authorities are not leading me to reach to any conclusion as 1" visit is dated 13/03/2013 and the 2nd visit is dated 15/07/2013. There is gap of 18 days for completion of the F.Y. 2012-13 so far as 1 report is concerned and even in this no reference for F.Y. 2011-12 is found. The 2 report is dated 15/07/2013 and this is again after lapse of 1 st quarter of the Financial Year. Thus, the valuation reports of the bank authorities as submitted by the Ld. AR are based with the view to the eventuality of recovery of loan with sufficient margin and cannot be relied for estimating the cost of construction for income tax purposes. The report of DVO which is placed in the assessment record shows that in F.Y. 2011-12 the assessee submitted expenditure to the extent of Rs. 3.38 13 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 crores. The cost of investment estimated by the DVO is Rs. 3,91,12,212/-. The DVO had given 4.5% benefit for procurement of material and 2% for self-supervision for arriving at the valuation. The civil work for F.Y. 2011-12 relevant to A.Y. 2012-13 submitted by the assessee before the DVO was Rs. 2.85 crores whereas, civil work estimated by him for the same period was Rs. 3.38 crores. The 2% self-supervision for the commercial building allowed by the valuation officer has been contended by the Ld. AR that it is very low and he argued that this benefit should be given up to 15%, on the basis of rulings by courts including the Hon'ble Apex Cour for the valuation purpose the profit of the contractor up to 10% is to be excluded from the valuation made by the DVO. The DVO has allowed 2% self supervision benefit on the gross value of investment which includes the direct expenses in the civil work and the difference after allowing the two benefits on gross value he reached to the figure of Rs. 3.38 crores. Respectfully following the findings given by the various Courts and ITAT Benches that minimum 10% benefit for self supervision should be allowed. I agree with the Ld. AR and allow 10% supervision benefit as per working of the DVO. The AO firstly has transgressed the expert opinion for which he had requested for helping him to reach at reasonable conclusion by reducing indirect expenses. Secondly, when he had already estimated the income of Rs. 1,50,000/- after rejection of books of accounts he is not permitted to again go back to the books of accounts for reducing indirect expenses as reported by the assessee. Thirdly, when cost has been determined by the DVO at Rs. 3.91 crores against Rs. 3.38 crores as disclosed by the assessee which includes the direct expenses as per Para-9,1 and Annexure forming part of the report of the DVO in the investment comparison mentioned by him, the direct expenses remain unaltered. Only civil work has shown in the DVO's report more as compared to the figures shown by the assessee. The assessing officer should have adhered to the civil works only which had been estimated by the DVO and could not alter the expenses disclosed by the assessee of Rs. 52.64 lakhs. Since the direct expenses had not been disturbed by the DVO and the AO has already estimated the profit of Rs. 1,50,000/- on account of indirect expense not being apportioned by the assessee so far as Rajiv Plaza and City Center is concerned, the addition made by the AO is to be confined in my opinion only to the civil works. Since I have allowed 10% benefit for the self supervision and 4.5% for the purchase of material has already been allowed by the DVO, the total benefit will rise to 14.5% and the Ld. AR should not have any grievance. Thus, the addition made by the AO is not in accordance with the estimation made by the DVO which leaves difference of only Rs. 52,51,286/- for F.Y. 2011 12. If 8% more benefit is given over and above of 2% as discussed hereinabove for self supervision, the difference is bound to be reduced more if the working adopted by the DVO is followed and it comes to round figure of Rs. 3,59,49,000/-. So far as request of the Ld. AR regarding ratio in case of Meera Panigrahi Vs. ITO, ITA No. 322/Cuttak/2006 dated 26/07/2007 and Capricorn Shopping Complex Vs. CIT 263 ITR 647 (Ker.) is concerned, I have carefully 14 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 seen the decision of Capricorn Shopping Complex of Hon'ble Kerala High Court as applicable to commercial building as the assessee is also engaged in the construction of commercial building. The similar issue had come up before my predecessor in case of M/s. Krishna Auto Riders Pvt. Ltd. in A.Y. 2011-12 wherein, after relying on the Hon'ble ITAT Cuttak Bench and Hon'ble High Court of Kerala my predecessor had applied the ratio as under: "It is seen that the first appellate authority after due consideration of all the relevant matters thought the average of the cost of construction can be fixed by adopting the average of the cost of construction furnished by the assessee and the cost of construction reported by the Department Valuer. The tribunal found that the AO was justified in referring the matter to the Valuation cell.” Respectfully following my predecessor, the alternative submission of the Ld. AR is acceptable because the Hon'ble Tribunal Cuttak Bench Cuttak applied the ratio in the case of Smt. Meera Panigrahi and the Hon'ble ITAT had directed the AO to adopt the cost of building by taking the average cost as declared by assessee and estimated by the DVO while computing the unexplained income/investment u/s 69 of the I.T. Act. The assessee had disclosed in his books of accounts the cost of investment of Rs. 3.38 crores as also found in report of DVO and cost of investment as estimated by the DVO as further reduced by 8% for self supervision the value shown by the DVO is reduced to Rs. 3,59,49,000/-. The average of cost of investment shown by the assessee of Rs. 3,38,61,000/- and estimated after adjustment of Rs. 3,59,49,000/- average comes to Rs. 3,49,05,000/-. Thus, the addition to the extent of Rs. 10,44,000/- made by the AO can be sustained in view of decisions of Hon'ble Kerala High Court and ITAT Bench Cuttak in case of Meera Panigrahi as mentioned hereinabove and the same is confirmed. Remaining amount added by the AO is hereby deleted. (Relief of Rs. 81,95,210/-). 16. Before us, the ld. AR of the assessee filed a detailed paper books and also filed the synopsis of arguments wherein AR of the assessee has contended that for the site Rajiv Plaza for which the AO has made an addition of a lump sum amount of Rs. 1,50,000/-. The work for this project commenced in the year 2003 and the construction was completed up to F.Y 2007-08. The complete project was sold out in the year under consideration and as on 31 st March, 2012 there is no stock 15 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 of this project whatever existed as opening stock has been sold for this project. Therefore, the addition made by the Assessing Officer merely as an ad-hoc amount of Rs. 1,50,000/- is purely arbitrarily in nature without any cogent evidence or default of the assessee and against the relevant set of facts available on record. The project has been commenced in 2003 and completed in 2007-08 and duly sold in the year 2012 completely. Thus, separate addition of Rs. 1,50,000/- in the year when the stock is reduced to Nil, is unwarranted, as the basis on which the addition is made is completed absent for this project. Even the ld. CIT(A) has not given any clear-cut reason so as to sustain the addition. The ld. AR of the assessee submitted that ad-hoc addition without pin-pointing any defect in the records, the addition should be deleted. The ld. AR of the assessee further submitted that the books of accounts are maintained and accepted in assessment order for Assessment Years 2008-09 and 2010-11 without pointing out any defect for this project and the project is already completed in those years and in the year under consideration there is no basis or reason to make a lumpsum disallowance. Only the balanced stock left is sold out, the ld. AO has not rejected opening stock reflected in the audited accounts. Not only that since the project is already completed what is the reason to make ad hoc addition on the findings which are clearly 16 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 contrary to the facts and that too without pointing out any specific defect in the records of the completed project. Thus, the addition made as an adhoc amount is required to be deleted. 17. Per contra, the ld. DR representing the revenue submitted that assessee has not presented the complete vouchers, stock registered is not maintained, based on the observation the AO invoked provision of section 145(3). The lump sum addition is made because the project was completed. As regards the other site C T Center the matter referred to valuation cell because the books are not correctly reflecting the expenditure incurred by the assessee and there is substantial difference in the valuation report and the ld. CIT(A) has already granted substantial relief to the assessee. Thus, ld. DR relied on the orders of the lower authorities. 18. We have heard the rival contentions, submission and decision placed before us driving the contentions raised by both the parties. The main grievance of the AO is that assessee company has not produced any stock register reflecting the quantitative details of closing WIP. He also observed that the auditor has mentioned in the report of the assessee that “due to nature of business quantitative details not mentioned”. He further observed that complete vouchers and non- 17 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 maintenance of quantitative details of stock, the books of account produced by the assessee company cannot be relied upon therefore, the same was rejected u/s. 145(3). Based on these observations he has estimated Rs. 1,50,000/- as income for the Rajeev Plaza and in respect of the other site C T Center he has referred the matter to DVO. The ld. AR of the assessee argued before us that there were two projects i.e. Rajiv Plaza and C.T. Centre. Rajiv Plaza was commenced in 2003 and completed the construction by 2007-08. The whole project is sold out in the assessment year under consideration. Therefore, the estimation of income by the AO without pointing out any single defect is incorrect. While estimating the income for the completed project the ld. DR failed to counter the fact that the closing stock is already accepted and is coming from the last so many years for which the method of accounting has already been accepted in the scrutiny assessment for A. Y. 2008-09 and 2010-11, the assessee company has merely sold stock from the opening stock and on that without pointing out any defect in the book result no estimate / ad hoc addition is survived. This bench has in so many cases held the view that in the absence of any specific defect pointed out in any part of the expenditure in question was either found to be bogus or fictitious nor was found to have not been incurred by the assessee wholly and exclusively for the purpose 18 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 of business no adhoc addition or estimate of income can be made. There was no mention of rationale in arriving at the figure of 1,50,000/- in the assessment order and ld.CIT(A) has failed to pin point how the lumpsum addition will survive. Under the law there is no power given to the lower authority to make arbitrary such addition and that too without referring any provision of Act. Merely based on the comments in the assessment order ld. AO invoked provision of section 145(3) but miserably failed to justify the adhoc estimate of income. The ld. AO did not corelate the findings so as to why and how the non-availability of voucher will affect the result of a site which is already completed and the sale is made from the opening stock. He has not commented that whether he found anything in the balance reflected in the opening stock is correct or not. Moreover, the department could not bring out any deprecative material on record to substantiate its conclusion as logical. Consequently, ad hoc estimate of income in its entirety deserved to be vacated. Thus, the addition of Rs. 1,50,000/- made by the assessing officer is deleted and thus, the ground no. 2 raised by the assessee is allowed. 19. The Ground no. 2 raised by the assessee is that based on the set of facts placed on record the cost as per books of accounts be 19 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 considered and Ground no. 3 is in relation to the addition made on account of the alleged difference for C. T. Center site based on the book result and DVO’s report is contrary to the facts on record. Since, the issue raised in both the grounds are interrelated the same is decided together. The ld. AO in para 4.1 of his order observed that the books of accounts of the assessee company rejected vide finding given in the assessment order, based on the fact that assessee company has not produced any stock register reflecting the quantitative details of closing WIP. He also observed that the auditor has mentioned in the report of the assessee that “due to nature of business quantitative details not mentioned”. He further observed that complete vouchers and non-maintenance of quantitative details of stock, the books of account produced by the assessee company cannot be relied upon. Therefore, the same was rejected u/s. 145(3) and the cost of construction shown by the assessee company based on these observations cannot be relied upon. In order to arrive at the actual cost of construction, the matter was referred to the Departmental Valuation Officer (DVO) to arrive at the actual cost of construction. The DVO Bhopal has estimated the cost of construction at Rs. 3,91,12,212/-. The copy of the valuation report was provided to the assessee for his comments and the ld. AO has proposed the addition at Rs. 92,39,209/- 20 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 being the difference in the cost of construction as per books and as derived by the DVO the cost of construction of the site C T Center. The assessee filed the detailed contention of the proposed addition but the ld. AO observed that the contentions of the assessee’s counsel is not acceptable as the valuation of the property was done by the technical person and that too in the presence of the representative of the assessee. He further stated that the assessee has not come up with any concrete evidence to prove that the valuation done by the DVO is not proper and the contention raised by the assessee found be general in nature by the ld. AO and ultimately, he added a sum of Rs. 92,39,209 as unexplained investment of the assessee. Aggrieved, the matter was carried before the ld. CIT(A). Based on the arguments and contentions raised by the assessee the ld. CIT(A) has given the substantial relief on the issue where in the ld. CIT(A) has stated that the assessee had disclosed in his books of accounts the cost of investment of Rs. 3.38 crores as also found in report of DVO and cost of investment as estimated by the DVO as further reduced by 8% for self supervision the value shown by the DVO is reduced to Rs. 3,59,49,000/-. The average of cost of investment shown by the assessee of Rs. 3,38,61,000/- and estimated after adjustment of Rs. 3,59,49,000/- average comes to Rs. 3,49,05,000/-. Thus, the addition 21 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 to the extent of Rs. 10,44,000/- made by the AO can be sustained in view of decisions of Hon'ble Kerala High Court and ITAT Bench Cuttak in case of Meera Panigrahi as mentioned hereinabove and the same is confirmed. Aggrieved for the said sustained addition of Rs. 10,44,000/- the assessee is in appeal before us. As regards the C.T. Centre construction work commenced in the year under consideration and were continued. The assessee company is a private limited company. Their books of accounts are audited under the provision of the companies Act as well as under the provisions of Income Tax Act. Both the auditors have not pointed out any single defect in the books of accounts. In fact the books of the assessee company continuously accepted in scrutiny assessment for the Assessment Years 2008-09 and 2010-11 without any adverse effect on the books of the assessee company and the method of accounting adopted by the assessee company. As regards, the contentions of the maintenance of quantitative details of the project, the ld. AR of the assessee submitted that the construction of Rajiv Plaza has already completed in the year 2007-08. In respect of C.T. Centre, the site is started in the year under consideration and for this site all the purchases are duly accounted with bills and vouchers and the same are directly sent and kept at C. T. Center site. The ld. AR of the assessee filed all the expenses ledger 22 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 accounts which were also filed before the lower authorities where in the details of the all the expenses incurred are accounted (Assessee paper book page no. 65-191). The said accounts shows the details such as date of transaction, name of the party with whom the transaction done, bill number, voucher number nature of expenditure and details in terms of the quantity purchased is clearly made available and are supported by bills and vouchers. The ld. AO has not pointed out any single defects in records placed before him. Thus, the allegation made by the AO are general in nature. The ld. AR of the assessee also submitted that the site is under direct supervision and monitored by the security person. Therefore, quantitative details separately maintained or not, will not make any much difference, so far as the purchases of construction material is concerned. As regards the contentions of the Assessing Officer that there is no bifurcation of the material is available, is in fact in correct in the light of above fact. As only one site is operative there is no need to have the bifurcation of the material purchased so the ld. AO has not understood the facts already placed on record. The Assessing Officer has made general observations for rejection of books of accounts. He has not pin pointed particular vouchers or the purchase bills wherein the quantitative details are missing the observations of the AO are vague and are general in 23 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 nature. Books of accounts have already been produced before the Assessing Officer and the same were verified. All the major accounts expenses have been placed on record from Page Nos. 65 to 191 of the assessee paper book wherein the ledger accounts have been furnished with all possible details with rate of purchase and quantitative details along with invoice details and there is not a single observation pointed out any defect on maintenance of these records by the assessee company. In the book of accounts of the assessee in respect of C.T. Centre site, as this was the first year of construction all cost incurred by the assessee is considered as work in progress. The site is under control of management of the company supported by security personal. Not only that this project is constructed with help of the loan obtained from the Karnataka Bank, as reimbursement of the expenditure incurred by the assessee, this process is made only after the verification of the purchases and the progress of the expenditure at site is verified by the bank officials. Based on these set of facts, there is no probability of showing the cost undervalued or not maintained proper records by the assessee. 20. The ld. AR of the assessee further submitted that the bank has also got property valued which comes to Rs. 11 crores whereas as per 24 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 the books of accounts, this value is around 14.45 crores. Therefore, the contentions raised by the DVO that the same is undervalued for the first year is incorrect purely on this set of fact. The ld. AR of the assessee further submitted that the valuation made by the DVO purely an estimate whereas the assessee has derived the cost based on the actual expenditure incurred, duly supported by the bills and vouchers. Even these records were verified at the time of reimbursement availed from the bank officials too. The relief given by the ld. CIT(A) giving the average between the book results and DVO’s valuation adjusting it to the contentions raised is also not correct. Looking to that adjustment the difference is of only 10,44,000/- and considering the valuation being technical and estimate only and considering the project size needs, the difference sustained is to be ignored and the books results be accepted. The ld. AO has not pointed out any particular pinpointed defects and in the absence of specific finding the book results is required to be accepted. The reference made by the DVO invoking provision of section 145(3) is not only incorrect but bad in law in the light of following case laws as under:- • Sargam Cinema vs. CIT (2010) 328 ITR 0513 SC • CIT vs. Indus Technical Education Society (2015) 55 Taxmann.com 188 (Allahabad) • Nirpal Singh vs. CIT-2, Jalandhr (2013) 359 ITR 398 (Punjab & Haryana). 25 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 21. Per contra, the ld. DR appearing on behalf of the assessee supported the orders of the lower authorities and submitted that considering the various contentions of the assessee the ld. CIT(A) has given the substantial relief to the assessee. The ld. DR further submitted that recently this bench has in ITA No. 24/BIL/2017 in the case of Shri Brijmohan Narang taken a view that the CIT(A) has no power to enter into the adjustment to valuation report and the bench in that case set-a-side the issue and decided the matter to be revisited after consulting to the DVO on the points raised by the assessee. 22. In the rejoinder the ld. AR of the assessee stated that the facts in that case and this case are different as there was survey in that case and in assessee case there is no such action. Even the figure after the considerable technical adjustment is substantial. Whereas the book results of the assessee were consistently maintained and accepted in the past assessment year on the similar line of activity. Thus, the facts were differentiated by the ld. AR. 23. We have heard the rival contentions and perused the facts of the case and relied upon the judgment. We find that the main plank of rejection of books of account by the Assessing Officer is general and 26 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 no specific defects in the accounts were observed. The assessing officer cannot reject the books of accounts based on conjectures and surmises. He has not pinpointed any specific defects or non-availability of any particular expenditure head voucher/bills from the records produced before him. The relief that the CIT(A) granted is the deduction which the DVO has not considered based on the formula he adopted while granting the relief is again an estimate and that cannot be compared with the true results supported by the books of accounts, bills and vouchers. Not only that these records are duly audited by an independent chartered accountant and revenue has not found any single faults in the accounts. The final difference that the ld. CIT(A) has sustained after giving the legitimate claim of the assessee is only Rs. 10,44,000/- which will again be an estimate only. The site is under self- supervision and looking to the nature and volume of expenditure incurred by the assessee the difference is very nominal and that estimate cannot form part of undisclosed income in absence of any specific defects in the accounts. Thus, based on these arguments the addition of Rs. 10,44,000/- sustained by the ld. CIT(A) has no merits and required to be deleted. Thus, the ground no. 3 & 4 raised by the assessee is allowed. 27 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 24. Since, we have considered the grounds on merits the technical ground no1 taken by the assessee becomes educative in nature and is not required to be adjudicated in terms of our above observations. 25. Thus, the appeal of the assessee in ITA No. 302/RPR/2016 is allowed. 26. The fact of the case in CO No. 01/RPR/2022 marched by the assessee is similar to the case in ITA No. 302/RPR/2016 and we have heard both the parties and pursued the material available on record. The bench noticed that the issue raised by the assessee in this CO No. 01/RPR/2022 is equally similar on facts and the grounds in ITA No 302/RPR/2016. Hence, the bench feels that the decision taken by us in ITA No. 302/RPR/2016 for the Assessment Year 2012-13 shall apply mutatis mutandis in the case of CO No. 01/RPR/2022 for Assessment Year 2013-14 and in terms of these observations, CO No. 01/RPR/2022 raised by the assessee is allowed. 27. In the result, the appeal filed by the assessee in ITA No 302/RPR/2016 and CO No. 01/RPR/2022 are allowed. 28 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- RAVISH SOOD RATHOD KAMLESH JAYANTBHAI JUDICIAL MEMBER ACCOUNTANT MEMBER / RAIPUR ; +( ं / Dated : 19 th July, 2022 Ganesh Kumar (े* # $, - .े- $ / Copy of the Order forwarded to : 1. / The Appellant. 2. ! / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. - / 0 $ , , 1, / DR, ITAT, Raipur Bench, Raipur. 6. 0 2 3 4 / Guard File. (े* / BY ORDER, 5 1 / Private Secretary , / ITAT, Raipur. 29 ITA No. 302/RPR/2016 & CO No. 01/RPR/2022 A.Y.2012-13 & 2013-14 Date 1 Draft dictated on Sr.PS/PS 2 Draft placed before author Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order