ACIT, Ghaziabad V. M/s. Friends Land Developers, Ghaziabad

ITA 4770/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69540 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Assessee Lawyers: C S AGARWWAL SR SHRI RAVIMAL
• Keywords: Rejection of books of accounts; Unexplained investment; Sale consideration of property below Jantri Value; Search and seizure; Loose papers; Valuation report
• Section: 69; 132; 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI T.S. KAPOOR , ACCOUNTANT MEMBER AND SHRI A . T. V A RKEY , JUDICIAL MEMBER ITA NO. 4770 /DEL/ 2012 ASSESSMENT YEAR: 2009 - 10 ACIT, CENTRAL CIRCLE, CGO COMPLEX - I, HAPUR CHUNGI ROAD, GAXIABAD , VS. FRIENDS LAND DEVELOPERS 17, KIRAN ENCL AVE, G. T . ROAD GAZIABAD PAN AABFF1343A (APPELLANT) (RESPONDENT) APPELLANT BY : DR. SUDHA KUMARI, CIT RESPONDENT BY : SHRI C. S. AGARWWAL, SR. ADVOCATE, SHRI RAVIMAL , ADVOCATE SHRI R. K. AGGGARWAL, ADVOCATE O R D E R PER A . T. V A RKEY , J M THIS APPEAL HAS BEEN FILED BY THE R EVENUE AGAINST THE ORDER OF CIT(A) , GAZIABAD DATED 28/6 /2012 FOR THE ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF THE APPEAL ARE AS FOLLOWS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,0 0 , 00 , 000/ - MADE BY THE A.O. AS THE ASSESSEE DID NOT PRODUCE FULL DETAILS AND VOUCHERS IN RESPECT OF INVESTMENT IN THE BUILDING DURING THE ASSESSMENT PROCEEDINGS, IN VIEW OF THE FACT THAT ADDITION WAS ALSO FORTIFIED BY THE REPORT OF THE DVO RECEIVED ON 09.03.2011 IN WHICH THE 2 ITA NO. 4770 /DEL/ 2012 DIFFERENCE OF RS. 1,11,87,237/ - WAS ESTIMATED BY THE DVO. 2. THAT LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE CONTENTION OF THE ASSESSEE ON ADDITION OF RS. 5,00,000/ - AND RESTRICTING THE SAME TO RS. 3,00,000/ - IN VIEW OF THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT GIVE FULL DETAILS OF EXPENSE S WITH VOUCHERS. 3. THAT THE ORDER OF THE LD CIT(A) DESERVES TO BE VACATED AND THE ASSESSMENT ORDER PASSED BY THE AO BE RESTORE. 4. THAT THE APPELLANT CRAVES LEAVE TO AMEND ANY OR MORE OF THE GROUNDS OF THE APPEAL AS STATED ABOVE AND WHEN NEED FOR DOING SO MAY ARISE. 2. BRIEF FACT S OF THE CASE IS AS FOLLOWS . THE ASSESSEE IS A FIRM AND IS ENGAGED IN CONSTRUCTION OF BUILDINGS. DURING SEARCH AND SEIZURE OPERATION CONDUCTED ON 14/10/2008 UNDER SECTION 132 OF THE INCOME TAX ACT 1961 (HEREIN AFTER , THE ACT ) IN THE PREMISES OF S V. P BUILDERS INDIA LIMITED AND ASSOCIATED COMPANIES, CERTAIN LOOSE PAPERS WERE FOUND AND IS REFERRED IN THE ASSESSMENT ORDER AS ( A - 8 PAGES, PAGES 45 AND 46, DOCUMENTS A - 12 PAGES 1 TO 3, 7 TO 12 AND 13 TO 18 AND DOCUMENTS A - 76 PAGES 1 & 2 ) , THAT WHICH WERE RELATED TO THE ASSESSEE FIRM. ON THE BASIS OF THE SAID SEIZED MA TERIALS , THE ASSESSEE FIRM ALSO WAS COVERED UNDER SECTION 153C OF THE ACT . IN COMPLIANCE TO THE NOTICE OF THE AO, THE ASSESSEE FILED THE ACKNOWLEDGMENT OF THE E - FILED RETURN FILED EARLIER ON 29/09/2009 , IN WHICH THE DECLARED INCOME WAS RS.4,95,065/ - FROM BUSINESS. THE ASSESSEE FIRM HAS SHOWN THE FOLLOWING YEAR WISE EXPENDITURES ON GULMOHUR GREEN (NAME OF THE RESIDENTIAL BUILDING COMPLEX BEING BUILD BY THE ASSESSEE ) YEAR WISE EXPENDITURE F.Y. EXPENDITURE 2006 - 07 RS. 4.02.65.543 2007 - 08 22,35,02,233/ - 2008 - 09 22,62,16,479/ - THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS STATED THAT , THOUGH , THE DETAILS OF INVESTMENT IN THE CONSTRUCTION WAS ASKED VIDE NOTICE UNDER SECTION 142 [1] OF THE ACT ON 25/10/2010, AND THE ASSESSEE DID NOT GIVE FULL DETAILS SUPPORTED 3 ITA NO. 4770 /DEL/ 2012 BY VOUCHERS , THEREFORE, AN ESTIMATED ADDITION WAS MADE AT RS.1, 00, 00,000/ - AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. 3. THE ASSESSEE AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER PREFERRED A N APPEAL BEFORE THE LEARNED CIT(A) WHO BY ORDER DATED 04.11.2011 , ASKED FOR A REPORT FROM THE AO , WHO VIDE LETTER DATED 11/11/ 2011 SEN T HIS REMAND REPORT ALONG WITH A COPY OF THE DEPARTMENTAL VALUATION REPORT. IN THE SAID DVOS REPORT A DIFFERENCE OF RS. 1,11, 87, 237/ - BETWEEN THE COST OF CONSTRUCTION ESTIMATED BY THE DVO AND DECLARED BY THE ASSESSEE WAS BROUGHT OUT BY THE AO AND T HUS THE AO JUSTIFIED THE ADDITION OF RS. 1 CRORE MADE B Y HIM IN RESPECT OF THE COST OF CONSTRUCTION. A COPY OF THE SAID REMAND REPORT WAS GIVEN BY LD CIT(A) , TO THE ASSESSEE , WHO WAS GIVEN AN OPPORTUNITY TO FILE HIS OBJECTION S . THEREAFTER, TAKING NOTE OF THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE , THE LD CIT (A) BY A REASONED ORDER DATED 28.06.2012 WAS PLEASED TO DELETE THE ADDITION OF RS.1 CRORE. AGGRIEVED BY THE SAID DELETION OF THE ADDITION OF RS.1 CRORE BY THE CIT (A) , THE REVENUE HAS PREFERRED THIS A PPEAL AND IS NOW BEFORE US. 4. THE LD DR CONTENDED THAT THOUGH THE ASSESSEE WAS GIVEN SEVERAL OPPORTUNITIES, THE ASSESSEE FAILED TO FILE FULL DETAILS SUPPORTED BY VOUCHERS. THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED IN ESTIMATING AN ADDITION OF RS.1 CRO RE AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT . ON THE OTHER HAND THE LD SENIOR COUNSEL REPRESENTING THE ASSESSEE , SHRI C. S. AGGARWAL CONTENDED THAT THE ASSESSING OFFICER HAD MADE THE ADDITION OF RS. 1 CRORE , MERELY ON SURMISES, CONJECTURES AND SUSPICION AND THEREFORE THE IMPUGNED ADDITION WAS NOTHING BUT A FIGMENT OF IMAGINATION AND AS SUCH , THE ADDITION SO MADE WAS PALPABLY INCORRECT, AND BASED ON HYPOTHETICAL CONSIDERATIONS AND WAS DONE IN A WHIMSICAL MANNER AND HENCE IT WAS AN UNSUSTAINABLE AND ILLEGAL ADDITION . ACCORDING TO THE LEARNED SR. COUNSEL , THE AO HAD FAILED TO APPRECIATE THAT THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE WAS DULY DEBITED IN THE BOOKS OF ACCOUNTS AND THAT COULD NOT BY ANY STRETCH OF IMAGINATION COULD BE HELD TO BE UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT . THE LD SR. COUNSEL 4 ITA NO. 4770 /DEL/ 2012 CONTENDED THAT SINCE THE SOURCE OF INVESTMENT STANDS FULLY EXPLAINED FROM THE BOOKS OF ACCOUNT, WHICH HAVE BEEN ACCEPTED AS SUCH BY THE AO , THE ADDITION MADE WAS ILLEGAL . THE LEARNED COUNSEL ALSO SUBMITTED THAT THE AO DID NOT REJECT THE BOOKS OF ACCOUNTS AND DID NOT HAD IN HIS POSSESSION AT THE TIME OF ASSESSMENT ORDER , THE COPY OF THE VALUATION REPORT OF THE DVO AND WONDERED HOW THE AO COULD ESTIMATE RS.1 CRORE AS ADDITIONAL INVESTMENT . ACCORDING TO HIM, TO ARRIVE AT THIS MAGICAL FIGURE THE AO SHOULD HAVE SOME EVIDENCES TO SUBSTANTIATE OR LD AO SHOULD HAVE FOUND OUT SOME IRREGULARITIES TO REJECT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSE E . HOWEVER , ACCORDING TO THE LD COUNSEL, ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNTS WHICH WAS MAINTAINED AS PER THE LAW BY THE ASSESSEE AND DID NOT HAD ANY EVIDENCE IN FRONT OF HIM, WHICH COULD JUSTIFY THE ADDITION OF RS. 1 CRORE AS UNEXPLAINED INVESTMENT AND IS THEREFORE ILLEGAL AND UNSUSTAINABLE AND THE ADDITION SO MADE HAS TO BE SET ASIDE AND THE LD CIT(A) HAS RIGHTLY DONE SO AND THEREFORE, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF LD CIT(A). 5. THE LD CIT DR CONTENDED THAT EVEN IF THE BOOKS OF ACCOUNTS HAS NOT BEEN REJECTED BY THE AO , THE VALU ATION REPORT SUBMITTED BY THE DV O CAN BE TAKE N INTO CONSIDERATION BY THE CIT(A) WHILE CONSIDERING THE STATUTORY APPEAL AND TH E RE WAS NOTHING ILLEGAL ABOUT IT AND THERE ARE PRECEDENT S TO SUPPORT TH IS CONTENTION. ACCORDING TO THE LD CIT DR, THE ADDITION OF RS.1 CRORE MADE BY THE LD AO, COULD BE JUSTIFIED AFTER TAKING NOTE OF THE DVOS REPORT. THE LD CIT DR ALSO SUBMITTED THAT THERE HAS BEEN SEVERAL CASES IN WHICH THOUGH THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS, STILL THE DVOS REPORT HAD BEEN ADMITTED. THE FOLLOWING CASES CITATION HAS BEEN GIVEN BY THE LD DR TO SUBSTANTIATE HER CLAIM : - 1. SHAGUN BUILDWELL LTD. VS. DCIT (2011) 011 ITR 0273 (TRIB)(ITAT)(DEL) 2. CIT VS. DR. INDRA SWAROOP BHATNAGAR (2010) 349 ITR 0210 - (ALL) 3. CIT VS. KARAN KHANDELWA (2010) 348 ITR 0126 ( DEL) 6(A) THE LD SR COUNSEL C.S. AGARWAL ALSO POINTED OUT THAT THE ASSESSEE IS A BUILDER, AND NORMALLY THE BUILDERS IF THEY HAVE ANY INTENTION TO AVOID OR 5 ITA NO. 4770 /DEL/ 2012 MINIMIZE THE TAX, WILL SHOW INFLATED EXPENDITURE, SO THAT WHEN THEY SELL THE BUILDING, PROFIT CAN BE MINIMIZED. AND HERE IT IS JUST THE OTHER WAY A ROUND. THEREFORE, ACCORDING TO THE SR. COUNSEL, THE IMPUGNED ADDITION OF RS. 1 CRORE MADE WITHOUT REJECTING THE BOOKS OF ACCOUNTS MERELY ON SURMISES AND CONJECTURES IS AN ARBITRARY EXERCISE OF POWER, WHICH IS ANTITHESIS TO ARTICLE 14 OF THE CONSTITUTION OF INDIA. 6(B) THE LD SENIOR COUNSEL FOR THE ASSESSEE SHRI C. S. AGARWWAL ALSO CITED THE FOLLOWING CASES TO SUPPORT HIS CONTENTION THAT THE ASSESSING OFFICER CANNOT MAKE ANY ADDITIONS BASED ON GUESS WORK : - CIT VS. KAMESWAR SINGH 01ITR 94 (P.C.), (1954) 25 ITR 216 HC (NAGPUR) 7. THE LD SENIOR COUNSEL ALSO POINTED OUT THAT WITHOUT PREJUDICE TO HIS ARGUMENT AGAINST THE VALUATION REPORT BEING TAKEN INTO CONSIDERATION AFTER THE ASSESSMENT WAS OVER , HE STATES THAT EVEN IF THE VALUATION REPORT MADE BY THE DVO I S TAKEN INTO CONSIDERATION , THEN ALSO IT CAN BE NOTICE D THAT THE DIFFERENCE BETWEEN THE VALUATION REPORT AND THE EXPENDITURE SHOWN BY THE ASSESSEE IS A MEAGER 2.7% , WHICH IS QUI TE SMALL AND NEED TO BE IGNORED AND ON THIS ACCOUNT ALSO THE APPEAL OF THE REVENUE SHOULD FAIL. THE LD CIT DR ALSO GRACIOUSLY AGREES THAT THE DIFFERENCE WORKED OUT AND SHOWN BY THE CIT(A) IN THE IMPUGNED ORDER BETWEEN THE VALUATION REPORT AND THE ASSESSEES EXPENDITURE IS TOO MEAGER AND ON THAT ACCOUNT SHE CONC EDES THAT DIFFERENCE IS TOO MEAGER TO BE TAKEN NOTE OF . 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE PRECEDENTS CITED BY THEM . FIRST OF ALL, WE HAVE TO EXAMINE WHETHER THERE WAS ANY MATERIAL ON RECORD TO FASTEN THE ADDITION OF RS.1 CRORE UNDER SECTION 69 OF THE ACT. ON A PERUSAL OF THE RECORDS WE FIND THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAS FURNISHED THE FULL DETAILS OF ALL EXPENSES , PURCHASES , AND REMAINING CLOSING STOCK, PURCHASES ITEM WISE , 6 ITA NO. 4770 /DEL/ 2012 DETAILS OF THE PURCHASES , AND GIVING INVENTORY OF THE SAME , AND THE RATES WHICH PURCHASES ARE DONE. NO DEFECT WAS FOUND BY THE ASSESSING OFFICER , EITHER IN THE BOOKS OF ACCOUNT , OR IN THE DETAIL S FURNISHED BY THE ASSESSEE. AFTER THE BOOKS OF ACCOUNT REGULARLY MAINTAINED IN THE COURSE OF BUSINESS ARE FURNISHED BEFORE THE AO FOR VERIFICATION, THE AO MAY ACCEPT THE SAME OR AFTER POINTING OUT SPECIFIC DEFECT MAY REJECT THE BOOKS OF ACCOUNT AND DETERM INE THE ASSESSEES INCOME AS PER THE PROVISIONS OF THE ACT. UNDISPUTEDLY, IN THE INSTANT CASE, THE AO HAS NOT INDICATED ANY DEFECT EITHER IN THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE OR IN THE BOOKS OF ACCOUNT AND THERE WAS ANY ISSUE REGARDING CHAN GE IN THE METHOD OF ACCOUNTING DURING THE YEAR UNDER CONSIDERATION AS COMPARED TO THE EARLIER YEAR. WHEN THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED THERE IS NO RATIONALE IN MAKING THE ADDITION OF RS.1 CRORE, AS INVESTMENT UNDER SECTION 69 OF THE ACT. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS NOT STATED ANY VALID REASON FOR MAKING THE SAID ADDITION . THE REASON STATED BY THE AO FOR MAKING THE SAID ADDITION WAS SIMPLY BY MAKING A BALD ALLEGATION THAT , THE ASSESSEE DID NOT TO FURNISH FULL DETAILS SUPP ORTED BY VOUCHERS , WHEN THE DETAILS OF INVESTMENT IN THE CONSTRUCTION WAS SOUGHT BY HIM. FOR THE SAID REASON THE AO WENT AHEAD AND ESTIMATED ADDITION OF RS.1CRORE AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. FROM A PERUSAL OF THE SAID ASSESSMENT ORDER , WE CAN FIND THAT THE AO HAD NO MATERIAL OR A SHRED OF EVIDENCE TO ADD THE IMPUGNED ADDITION OF RS.1 CRORE. THE LD CIT(A) IN THE IMPUGNED ORDER HAS MADE AN OBSERVATION ABOUT THE AFORESAID REASON OF THE AO; AS TO HAVE BEEN MADE BY THE AO IN A CURSORY MANNER WITHOUT CARRYING OUT ANY REQUISITE VERIFICATION AND THAT IS WHY NOT EVEN A SINGLE INSTANCE OF DEFECT HAS BEEN POINTED OUT IN THE ASSESSMENT ORDER. THE LD CIT(A) HAS ALSO MADE A FINDING THAT THE AO HAS NOT REJECTED THE BOOKS OF 7 ITA NO. 4770 /DEL/ 2012 ACCOUNTS OF THE ASSE SSE E WHICH WAS KEPT IN THE REGULAR COURSE OF BUSINESS. 9. THE PRIVY COUNCIL IN CIT V. KAMESWAR SINGH 01 ITR 94 (P.C.) HAS OBSERVED THAT THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE A GUESS , WITHOUT EVIDENCE. IN [1954] 25 ITR 216 HC [NAGPUR] WHERE HONBLE DIVISION BENCH OBSERVED THA T: IT IS CERTAINLY NOT A LEAP IN THE DARK AND THE ITO IS NOT ENTITLED TO MAKE A GUESS WITHOUT EVIDENCE. 10. A PERUSAL OF THE RECOR DS REVEALS THAT THE AO ON 11.11.2010 HAS SOUGHT THE OPINION OF DVO. HOWEVER THE ASSESSING OFFICER DIDNT WAIT FOR THE SAID REPORT OF DVO TO COME BEFORE HIM AND HE PROCEEDED TO PASS THE ASSESSING ORDER ON 31.12.2010 . WE WONDER HOW THE AO HAS DETERMINED RS.1 CRORE AS ADDITION IN INVESTMENT . WHAT LE D HIM TO BELIEVE THAT RS. 1 CRORE IS THE MAGICAL FIGURE . WE ARE UNABLE TO FIND ANYTHING THAT WAS ON RECORD BEFORE THE AO TO MAKE SUCH AN ADDITION. ONLY WHEN THE REMAND REPORT WAS SOUGHT FOR BY CIT(A) , THEN ONLY AO ARMED WITH THE DVOS REPORT WHICH WAS SUBMITTED TO HIM ON 09.03.2011 , WAS FO RWARD TO LD CIT(A) AND THEN ONLY THE ASSESSING OFFICER COULD GIVE A PLAUSIBLE JUSTIFICATION AND THAT TOO , IT MUST BE NOTED THAT , THE DIFFERENCE OF RS. 1,11,87,237/ - BETWEEN THE COST AS DECLARED BY THE ASSESSEE AND THAT ESTIMATED BY THE DVO, IS COMBINED FO R THREE FINANCIAL YEAR 2006 - 07, 2007 - 08 AND 2008 - 09. SO IT BECOMES CLEAR THAT ASSESSING OFFICER DID NOT HAD ANY MATERIAL BEFORE HIM TO SUGGEST THE SAID IMPUGNED ADDITION. ONLY WHEN THE ASSESSING OFFICER WAS CALLED UPON TO JUSTIFY HIS ADDITION, THE ASSESSIN G OFFICER ARMED WITH THE POST ASSESSMENT ORDER, MADE A FEEBLE ATTEMPT TO JUSTIFY THE IMPUGNED ADDITION ON THE STRENGTH OF DVOS REPORT WHICH OBVIOUSLY WAS NOT IN HIS POSSESSION , WHEN HE PASS ED THE ADDITION OF RS. 1 CRORE. AOS SAID JUSTIFICATION ITSELF IS TESTAMENT TO THE FACT THAT HE DID NOT HAD ANYTHING IN FRONT OF HIM WHEN HE MADE THE IMPUGNED ADDITION IN THE ASSESSMENT ORDER. 8 ITA NO. 4770 /DEL/ 2012 11 (A) . IN THE SAID CIRCUMSTANCES, WE FIND CONSIDERABLE FORCE IN THE CONTENTION OF THE LD SR. COUNSEL FOR THE ASSESSEE, THAT TH E AO WITHOUT REJECTING THE BOOKS OF ACCOUNT SHOULD NOT HAVE RESORTED TO BRING DVOS REPORT ALONG WITH THE REMAND REPORT. IN FACT, HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT REPORTED IN 328 ITR 513 HAS HELD AS UNDER: IN THE PRESENT CASE, WE FIND THAT THE TRIBUNAL DECIDED THE MATTER RIGHTLY IN FAVOUR OF THE ASSESSEE INASMUCH AS THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSING AUTHORITY COULD NOT HAVE REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER (DVO) WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. IN THE PRESENT CASE, A CATEGORICAL FINDING IS RECORDED BY THE TRIBUNAL THAT THE BOOKS WERE NEVER REJECTED. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE HIGH COURT. IN THE CIRCUMSTANCES, RELIANCE PLACED ON THE REP ORT OF THE DVO WAS MISCONCEIVED. FOR T HE ABOVE REASONS, THE IMPUGNED JUDGMENT OF THE HIGH COURT IS SET ASIDE AND THE ORDER PASSED BY THE TRIBUNAL STANDS RESTORED TO THE FILE. ACCORDINGLY, THE ASSESSEE SUCCEEDS. CIVIL APPEAL IS ALLOWED. NO ORDER AS TO COSTS. 11(B) LET US TAKE A LOOK AT THE CASES CITED BY THE LD CIT DR, TO BUTTRESS THE POINT THAT EVEN IF THE BOOKS OF ACCOUNTS ARE NOT REJECTED, STILL HIGH COURT AND TRIBUNAL S HAVE UPHELD THE DV O S REPORT. NO DOUBT, IN THE CASES CITED BY THE LD CIT D R, DVOS REPORT WERE ACCEPTED BUT IT WAS IN DIFFERENT SCENARIO AND FACTS AND CIRCUMSTANCES WERE DIFFERENT AND IT IS CLEARLY, DISTINGUISHABLE AND IS NOT SUPPORTING THE CASE OF THE REVENUE. THE CASES CITED ARE AS FOLLOWS: 11(C) IN DR. INDRA SWAROOP BHATNA GAR CASE THE QUESTION WAS OF INVOKING SECTION 50C, FOR SUBSTITUTION OF THE RECORDED SALE CONSIDERATION, SINCE THE VALUATION DONE BY THE STAMP VALUATION AUTHORITIES WAS MORE THAN DOUBLE. WHEN THE ASSESSEE CONTESTED, THE AO REFERRED THE MATTER TO DVO, WHOSE VALUATION WAS LITTLE MORE THAN THE RECORDED SALE CONSIDERATION OF THE ASSESSEE. THE AO REJECTED THE DVOS 9 ITA NO. 4770 /DEL/ 2012 VALUATION, THEN THE HONBLE ALLAHABAD HIGH COURT HELD THAT WHEN THE AO HAD OBTAINED DVOS REPORT THEN THE SAME IS BINDING AND DISMISSED THE REVENUES APPEAL AND ANSWERED IN FAVOUR OF ASSESSEE. HERE IT MAY BE NOTED THAT THERE WAS NO REJECTION OF BOOKS OF ACCOUNTS AND IS DISTINGUISHABLE. 11(D) SIMILARLY , IN SHAGUN BUILDWELL LTD. CASE THE ASSESSEE HAD REFLECTED A PURCHASE PRICE OF A FLAT WHICH WAS LOW. THE AO REFERRED TO DVO FOR ESTIMATION OF INVESTMENT IN THE PROPERTY. BEFORE THE DVO COULD SUBMIT THE REPORT, ASSESSMENT PROCEEDINGS WERE COMPLETED. LATER WHEN THE AO RECEIVED THE DV OS REPORT IT WAS MORE THAN DOUBLE THE AMOUNT REFLECTED BY THE ASSESSEE. THE AO INITIATED REASSESSMENT PROCEEDING BASED ON DVOS REPORT AND MADE AN ADDITION OF THE DIFFERENCE. WHEN THE SAME WAS BEFORE THE LD CIT(A) HE REDUCED THE VALUE OF THE LAND AND BUIL DING. THE REVENUE FILED AN APPEAL AGAINST THE CIT(A)S ORDER, ON WHICH, DELHI TRIBUNAL RESTORED THE ORDER OF AO, WHO HAD MADE THE ADDITION BASED ON DVOS REPORT. HERE ALSO THERE IS NO REJECTION OF BOOKS OF ACCOUNT ISSUE ARISING AND DISTINGUISHABLE. 11(E) IN KARAN KHANDELWA L CASE, REJECTION OF BOOKS OF ACCOUNTS OR DVOS REPORT DID NOT SURFACE AT ALL. IN THAT CASE THE ASSESSEE HAD EARLIER MADE AN M.O.U WITH A SELLER ON A HIGHER RATE AND LATER BROUGHT IT DOWN IN THAT FACTGS THE HONBLE HIGH COURT HELD AS F OLLOWS: (III) THAT THE BURDEN PLACED ON THE DEPARTMENT STOOD DULY DISCHARGED FROM THE CONSIDERATION DISCLOSED IN THE MEMORANDA OF UNDERSTANDING DATED MARCH 2, 2000 AND DECEMBER 19, 2000, WHICH WERE THE DOCUMENTS FILED BY NONE OTHER THAN THE ASSESSEE. FROM THE CONSIDERATION DISCLOSED IN THESE DOCUMENTS, COUPLED WITH OTHER FACTS AND CIRCUMSTANCES OF THE CASE, IT COULD B SAFELY INFERRED THAT THE ACTUAL VALUE OF SHAREHOLDING TRANSFERRED TO SB WAS NOT LESS THAN WHAT IS ASSESSED BY THE ASSESSING OFFICER AND THE ASSESSEES HAD NOT DISCLOSED THE ACTUAL CONSIDERATION IN THEIR RETURNS AND HAD UNDERSTATED THE ACTUAL CONSIDERATION PAID BY SB TO THE K FAMILY. (IV) THAT THE FINDING OF THE TRIBUNAL THAT NO SUM OVER AND ABOVE THE STATED CONSIDERATION WAS RECEIVED BY SB WAS CLEARLY PERVERSE. THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION OF RS. 75 LAKHS, 10 ITA NO. 4770 /DEL/ 2012 BEING THE DIFFERENCE BETWEEN THE APPARENT CONSIDERATION AND REAL V ALUE OF THE ASSETS OF ASSESSEE. 11 (F) FROM THE AFORESAID CASES CITED BY THE LD CIT DR , IS NO WAY SUPPORT THE CONTENTION THAT EVEN IF THE BOOKS OF ACCOUNT ARE NOT REJECTED STILL DVOS REPORT CAN BE ADMITTED AND RELIED UPON. 12(A) IT IS A WELL SETTLED PRINCIPLE OF LAW THAT WHEN A JUDICIAL OR QUASI - JUDICIAL AUTHORITY ARE DECIDING A QUEST ION OF FACT, THAT HAS TO BE DECIDED ON THE BASIS OF MATERIALS AND EVIDENCES TO SUPPORT THE SAME AND NOT ON THE BASIS OF SURMISES AND CONJECTURES AS LAID DOWN IN UMA CHARAN SHAW & BROS 37 ITR 271 (SC), AND THAT SUSPICION , HOWSOEVER STRONG CANNOT TAKE THE PL ACE OF PROOF . HERE WE FIND THERE WAS NO MATERIAL OR EVIDENCE BEFORE THE AO, TO SUPPORT THE IMPUGNED ADDITION OF RS. 1 CRORE U/S 69 OF THE ACT AND THE ATTEMPT TO BRING IN DVOS REPORT TO SUPPORT HIS DECISION CANNOT BE APPROVED UNLESS THE CIT(A) HAD PASSED O RDERS U/S 250(4) OF THE ACT. 12(B) THEREFORE, WE HAVE TO EXAMINE, WHETHER THE DVOS REPO R T SHOULD HAVE BEEN CONSIDERED BY THE LD CIT(A) IN THE ABSENCE OF THE AO HAVING NOT REJECTED THE BOOKS OF ACCOUNT. WE FIND THAT F ROM THE RECORD S, WE COULD NOT ASCER TAIN WHETHER AN Y ORDER TO FORWARD DVOS REPORT WAS PASSED BY THE LD CIT(A) UNDER SECTION 250 (4)OF THE ACT, TO AO WHILE ASKING FOR THE REPORT. HOWEVER, WE HAVE TAKEN NOTE THAT THE CIT(A) FURNISHED THE COPY OF THE REMAND REPORT ALONG WITH THE VALUATION REPORT OF THE D.V.O, TO THE ASSESSEE , WHO WAS GIVEN A FAIR CHANCE TO FILE THEIR OBJECTIONS AND THE ASSESSEE HAVE DULY FILED ITS SUBMISSION AFTER PERUSAL OF THE DVOS REPORT. THEREFORE, WE FIND THAT NO PREJUDICE HAS BEEN CAUSED ON ACCOUNT OF THE VALUATION R EPORT BEING CONSIDERED BY THE CIT(A) IN THE APPELLATE PROCEEDINGS . THEREFORE, WE DO NOT WANT TO FURTHER ENTER INTO THE MERITS OF 11 ITA NO. 4770 /DEL/ 2012 WHETHER THE DVOS REPORT SHOULD HAVE BEEN TAKEN INTO CONSIDERATION BY THE CIT(A). 12(C) NOW COMING TO THE NEXT CONTENTION OF THE SR. COUNSEL OF THE ASSESSEE THAT EVEN IF THE DVOS REPORT IS TAKEN INTO CONSIDERATION, STILL THE DIFFERENCE WILL BE A MEAGER AMOUNT OF 2.7% AND LD CIT(A) IS RIGHT IN DELETING THE SAID IMPUGNED ADDITION. AND WE FIND FORCE IN THIS CONTENTION OF THE SR. C OUNSEL. THE LD CIT(A) HAVE DEALT THE SAID CONTENTION IN THE FOLLOWING WORDS: - 8.3 FURTHER FROM THE SAID VALUATION REPORT, NOW FORWARDED BY THE AO TO THIS OFFICE, IT IS OBSERVED THAT DVO HAS MADE FOLLOWING ESTIMATION: - S. NO. FINANCIAL YEAR COST OF CONSTRUCTION DECLARED BY ASSESSEE (RS.) ESTIMATED BY THIS OFFICE (RS.) 1. 2006 - 07 14420909.00 14537934.00 2. 2007 - 08 206449665.00 211235085.00 3. 2008 - 09 226216479.00 232501271.00 TOTAL 447087053.00 458274290.00 FROM THE ABOVE IT IS CLEAR THAT THE TOTAL DIFFERENCE OF RS. 1,11,87,237/ - BETWEEN THE COST AS DECLARED BY THE ASSESSEE AND THAT ESTIMATED BY THE DVO IS COMBINED FOR THREE FINANCIAL YEARS, FY 2006 - 07, 2007 - 08 AND 2008 - 09. THIS MEANS THAT FOR THE YEAR UNDER CONSIDERATION THE DIFFERENCE IS OF RS. 62,84,792/ - WHICH IS THE DIFFERENCE BETWEEN THE COST DECLARED BY THE ASSESSEE AT RS. 22,62,16,479/ - AS AGAINST THE COST ESTIMATED BY THE DVO AT RS. 23,25,01,271/ - . THIS DIFFERENCE AMOUNTS TO ONLY ABOUT 2.7% OF THE VAL UE DECLARED BY THE ASSESSEE AND THUS IS TOO MEAGER A DIFFERENCE TO BE GIVEN SERIOUS CONSIDERATION. THIS IS SPECIALLY WHEN DVO HAS HIMSELF MADE A REMARK THAT VARIOUS KEY INPUTS WERE NOT KNOWN TO THE DVO AND HENCE DVO HAS RESTORED TO BACK - WARD CALCULATION, ON THE BASIS OF DETAILS OF STAGES OF CONSTRUCTION, BY MAKING APPROXIMATE ADJUSTMENTS IN PERCENTAGES FOR VARIOUS 12 ITA NO. 4770 /DEL/ 2012 ITEMS NOT FURNISHED SO AS TO ARRIVE APPROPRIATE PLINTH ARE RATE. THE DVO HAS HIMSELF ADMITTED THAT THE ESTIMATION HAD BEEN MADE ON THE BASIS OF REASONABLE DEDUCTIONS IN CALCULATION. THIS HIGHLIGHTS THE HUMAN FACTOR PRESENT IN THE ESTIMATION. HENCE IN SUCH BACK GROUND, THE DIFFERENCE OF AROUND 2.7% IS QUITE SMALL SHOWN AS TO BE WORTH IGNORING. 7.4 THE OPINION OF THE REGISTERED VALUER AND OF THE A PPELLANT THAT THIS IS A CASE OF A BUILDER OBTAINING MATERIALS ON WHOLESALE BASIS AS COMPARED TO THE PETTY CONTRACTORS OF CPWD AND PWD AND THEREFORE THE MARGIN OF 3 TO 5% IN PURCHASE/ COLLECTION OF MATERIALS SHOULD BE GIVEN; IS ALSO WORTH CONSIDERATION . FURTHER MORE CONTRACTORS MARGIN NEEDS TO BE REDUCED IN THE PRESENT CASE. 7.5 OVER - ALL, THE MOOT POINT IS THAT THERE IS AN IGNORABLE EXTENT OF DIFFERENCE BETWEEN THE VALUE OF CONSTRUCTION AS DECLARED BY THE ASSESSEE AND VALUE AS ESTIMATED BY THE DVO. THE UMPTEEN NUMBER OF COURT JUDGMENTS ON THIS ASPECT LAY DOWN A PRINCIPLE THAT IF THE EXTENT OF SUCH VARIATION IN VALUE IS BETWEEN 10% TO 15%; SUCH VALUATION CANNOT BE MADE A BASIS OF ADDITION. THE APPELLANT AS ALSO CITED VARIOUS COURT CASES IN ITS SUBMISSION RE - PRODUCED ABOVE. I FIND THAT ALL THESE COURT DECISIONS ARE IN FAVOUR OF THE APPELLANTS CONTENTION. 7.6 OVER ALL, I HOLD THAT NO ADDITION IS TENABLE ON THE BASIS OF SUCH REFERENCE TO THE DVO AND ON THE BASIS OF MINOR ENHANCEMENT IN THE COST, SO ESTIMATED BY THE DVO. THUS, THE ESTIMATED ADDITION OF RS. 1 CRORES IS FOUND UN - SUSTAINABLE AND THE SAME IS DELETED. 13. THE LD SR. DR COULD NOT POINT OUT ANY DEFECT ON THE LD CIT(A) ORDER IN WHICH A CHART SHOWING FINANCIAL YEAR AND COST OF CONSTRUCTION IS SHOWN IN WHICH THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE AND ESTIMATED BY DVO WHICH HAS BEEN REPRODUCED ABOVE. THE LD SR. DR COULD NOT FIND ANY DEFECT IN THE FINDING OF THE CIT(A) THAT THE DIFFERENCE BETWEEN THE COST DECLARED BY THE ASSESSEE AT RS .22,62,16,497/ - AS AGAINST THE COST ESTIMATED 13 ITA NO. 4770 /DEL/ 2012 BY THE DVO AT RS. 23,25,01,275/ - , WHICH AMOUNTS TO ONLY ABOUT 2.7% OF THE VALUE DECLARED BY THE ASSESSEE. THE LD SR. DR GRACIOUSLY HAS CONCEDED BEFORE US THAT THE SAID DIFFERENCE OF 2.7% IS NEGLIGIBLE AND MEAGER, WHICH CAN BE IGNORED. THE REASONS GIVEN BY THE CIT(A) TO DELETE THE SAID IMPUGNED ADDITION OF RS. 1 CRORE DOES NOT SUFFER FROM ANY INFIRMITY AND THEREFORE WE CONFIRM THE SAID DELETION OR DER BY THE LD CIT(A). 14 . FOR THE AFORESAID REASONS WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE CIT(A) AND HENCE THE APPEAL PREFERRED BY THE REVENUE FAILS AND IS THEREFORE DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON 2 8 .11 .2013. S D / - S D / - ( T.S. KAPOOR ) ( A . T. V A RKEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 2 8 / 11 /2013 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI