THE DCIT, (CENTRAL)-1, Indore V. Shri Anil Kataria, Ratlam

ITSSA 178/IND/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3758 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 23-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: P D NAGAR
• Keywords: Unexplained investment; Value adopted by valuation officer; Search and seizure; Loose papers; Fair market value; Valuation report; Validity of assessment; Block assessment
• Section: 143(3); 153A; 132

Judgement Text

ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NOS. 177, 178,179/IND/2016 & 9 84/IND/2016 AYS: 2007-08, 2010-11, 2011-12 & 2012- 13 CO NO. 49/IND/2016 ARISING OUT OF IT(SS)A NO. 177/IND/2016 A.Y. 2007-08 IT(SS)A NOS. 163, 164 & 165/IN D/2016 ASSESSMENT YEARS: 2010-11, 2011-12 & 2012-13 DY. COMMISSIONER OF INCOME TAX (CENTRAL)-1 INDORE VS. SHRI ANIL KATARIA RATLAM (APPELLANT) (RESPONDENT ) PAN NO.AC MPK - 3614Q SHRI ANIL KATARIA RATLAM VS. DY. COMMISSIONER OF INCOMETAX (CENTRAL)-1 INDORE (APPELLANT) (RESPONDENT ) PAN NO.ACMPK - 3614Q SHRI ANIL KATARIA RATLAM VS. DY. COMMISSIONER OF INCOME TAX (CENTRAL)-1 INDORE (APPELLANT) (RESPONDENT ) PAN NO.ACMPK - 3614Q ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 2 REVENUE BY SHRI LALCHAND RESPONDENT BY SHRI P.D. NAGAR DATE OF HEARING 2.5.. 2018 DATE OF PRONOUNCEMENT 31 .5 .2018 O R D E R PER BENCH THESE SEVEN APPEALS (FOUR BY REVENUE AND THREE BY ASSESSEE) AND CROSS OBJECTION BY THE ASSESSEE PERTAINING TO A SSESSMENT YEARS 2007-08, 2010-11, 2011-12 AND 2012-13 ARE DIRECTED AGAINST DIFFERENT ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III, INDORE, DATED 18.10.2016 WHICH ARE ARISING OUT OF T HE ORDERS U/S 153A R.W.S. 143(3) OF THE INCOME TAX ACT DATED 4.2. 2014 FRAMED BY THE DCIT, CENTRAL, INDORE. 2. AS THE ISSUES RAISED IN THESE APPEALS AND CROSS OBJECTION ARE COMMON, THESE WERE HEARD TOGETHER AND ARE BEING DEC IDED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. BRIEFLY STATED, THE FACTS, AS CULLED OUT FROM RE CORD, ARE THAT SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF KAT ARIA GROUP OF ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 3 RATLAM, INCLUDING THE ASSESSEE ALONG WITH OTHER CON CERNS/BUSINESS ASSOCIATES ON 7.9.2011. NOTICES U/S 153A WERE ISSUE D ON 30.5.2013 FOR THE BLOCK ASSESSMENT YEARS 2006-07 TO 2012-13. THE ASSESSEE FILED THE RETURNS FOR THESE ASSESSMENT YEARS DECLAR ING FOLLOWING INCOME :- A.Y. DATE OF FILING RETURN 139(1) RETURNED INCOME (RS.) DATE OF FILING RETURN IN RESPONSE TO NOTICE U/S 153A INCOME DECLARED IN RETURN U/S 153A (IN RS.) ADDITIONAL INCOME OFFERED IF ANY (IN RS.) 2006 - 07 27.10.2006 5,87,260 4.7.2013 5,87,260 0 2007 - 08 29.10.2007 4.7.2013 4.7.2013 1,88,150 0 2008 - 09 27.9.2009 1,21,46,936 4.7.2013 1,21,46,940 0 2009 - 10 24.9.2009 8,00,042 4.7.2013 8,00,000 0 2010 - 11 24.9.2010 3,05,619 4.7.2013 3,05,620 0 2011 - 12 31.3.2012 3,05,463 4.7.2013 3,45,645 0 2012 - 13 29.9.2012 37,41,190 4.9.2013 7,41,190 30,00,000 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS W ELL AS ON EXAMINATION OF SEIZED RECORDS IT WAS REVEALED THAT THE ASSESSEE PURCHASED A HOUSE PROPERTY AT 71, BAJAJ KHANA CHOWK , RATLAM, VIDE REGISTERED SALE DEED DATED 5.2.2007. INCRIMIN ATING MATERIAL WAS FOUND SHOWING THAT UNACCOUNTED CONSTRUCTION ACT IVITIES WERE CARRIED OUT DURING F.Y. 2011-12. ON BEING CONFRONT ED, THE ASSESSEE ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 4 SURRENDERED AN ADDITIONAL INCOME OF RS. 30 LACS AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOUSE DURING ASSESSME NT YEAR 2012- 13. A SUM OF RS.28,61,054/- AND RS.33,00,963/- WAS ALREADY SHOWN BY THE ASSESSEE AS COST OF CONSTRUCTION DURIN G ASSESSMENT YEARS 2010-11 AND 2011-12, RESPECTIVELY. THE ASSESS ING OFFICER IN ORDER TO INVESTIGATE THE PURCHASE TRANSACTION OF TH E ALLEGED PROPERTY PURCHASED IN F.Y. 2006-07 MADE REFERENCE TO THE DIS TRICT VALUATION OFFICER TO ESTIMATE THE FAIR MARKET VALUE OF THE LA ND AS WELL AS COST OF BUILDING. THE DEPARTMENTAL VALUATION OFFICER EST IMATED THE COST OF PURCHASE OF LAND AND BUILDING AT RS. 70,05,000/- AS AGAINST RS. 63 LACS DECLARED BY THE ASSESSEE. AS FAR AS THE CO ST OF CONSTRUCTION IS CONCERNED, THERE WERE THREE ROUNDS OF VALUATION WHEREIN A GOVERNMENT APPROVED VALUER VIDE REPORT DATED 29.6.2 011 VALUED IT AT RS. 84.43 LACS, THEREAFTER THE DEPARTMENTAL VALU ATION OFFICER VIDE ITS REPORT DATED 21.1.2014 ESTIMATED THE COST OF CO NSTRUCTION AT RS.228.44 LACS AND AGAIN AFTER THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE DEPARTMEN TAL VALUATION OFFICER VIDE REPORT DATED 17.5.2016 REVALUED IT AT RS. 214.73 LACS. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 5 5. AGAINST THE ALLEGED ADDITIONS, THE ASSESSEE PREF ERRED APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS). THIS BUNCH OF SEVEN APPEAL AND ONE CROSS OBJECTION RELAT ES TO ASSESSMENT YEARS 2007-08, 2010-11, 2011-12 AND 2012 -13. 6. THE ASSESSEES GROUNDS BEFORE THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) PERTAINING TO ASSESSMENT YEAR 2007-08 WERE TWO FOLD; FIRSTLY CHALLENGING THE VALIDITY OF ASSES SMENT U/S 153A READ WITH SECTION 143(3) OF THE ACT AS THERE WAS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND SECO NDLY AGAINST THE ALLEGED ADDITION OF RS.7.05 LACS TOWARDS UNACCO UNTED INVESTMENT IN COST OF PURCHASE. THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) ALLOWED THE ASSESSEES PLEA ON LEGAL GROUND HOLDING THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 WAS NOT VALID IN VIEW OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF KALANI BROTHERS; ITA(SS) A NO. 71/IND/2014. AS REGARDS THE GROUND FOR QUANTUM ADDITION, THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THE GROUND AS INFRUCTUOUS. AGGRIEVED, THE REVENUE IS IN APPEAL F OR THE ASSESSMENT YEAR 2007-08 AGAINST THE FINDING OF THE LEARNED COM MISSIONER OF ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 6 INCOME TAX (APPEALS) SETTING ASIDE THE ASSESSMENT P ROCEEDINGS WHEREAS THE ASSESSEE HAS RAISED CROSS OBJECTION. 7. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN INVALID THE PROCEEDINGS U/S 153 A IN ABSENCE OF INCRIMINATING DOCUMENTS WHEREAS, AS PER THE INCOME TAX ACT AND IN THE LIGHT OF VARIOUS CASE LA WS THE ASSESSMENT PROCEEDINGS CANNOT BE INVALID WHEN A SEA RCH WARRANT WAS ISSUED IN THE NAME OF THE ASSESSEE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT ADDITIONS BASED ON INCRIMINATING MATERIAL ONLY CAN BE MADE IN ABATED/C OMPLETED ASSESSMENT. (III) WHETHER RETURNS PROCESSED U/S 143(1) CAN BE T REATED AS COMPLETED ASSESSMENT DESPITE THE FACT THAT HON'BLE APEX COURT HAS CATEGORICALLY HELD THAT PROCESSING OF RET URN U/S 143(1) DOES NOT AMOUNT TO ASSESSMENT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKER PVT. LTD. CASE NO. 2830 OF 2007. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 7 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE OBSERVATIONS OF THE ASSESSING OFFICER AND FURTHER R EFERRING TO GROUND NO. 3 OF THE APPEAL, SUBMITTED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 IN THE CASE OF THE ASSESSEE WAS PROCESSED U/S 143(1)(A) OF THE ACT. FURTHER, IN VIEW OF THE HON'BLE APEX COURT JUDGMENT IN THE CASE OF ACIT VS. RAJESH JHAVERI STO CK BROKERS LIMITED CASE NO. 2830/2007 WHEREIN THE HON'BLE APE X COURT HAS HELD THAT PROCESSING OF RETURN U/S 1434(1)(A) OF TH E ACT DOES NOT AMOUNT TO ASSESSMENT. IT WAS FURTHER CONTENDED THAT DURING THE COURSE OF SEARCH, DOCUMENTS FOR PURCHASE OF LAND AN D BUILDING WERE ALSO IMPOUNDED ALONG WITH INCRIMINATING MATERIAL FO R COST OF CONSTRUCTION. ON THE BASIS OF THESE DOCUMENTS, THE ASSESSING OFFICER RIGHTLY CARRIED OUT THE ASSESSMENTS FOR SEV EN ASSESSMENT YEARS UNDER CONSIDERATION INCLUDING THAT FOR THE AS SESSMENT YEAR 2007-08 WHICH WAS THE YEAR IN WHICH THE PROPERTY IN QUESTION WAS PURCHASED BY THE ASSESSEE. 9. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE APART FROM MAKING SUBMISSIONS, ALSO MADE THE FOLLOWING SU BMISSIONS ON RECORD :- ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 8 ISSUE INVOLVED DEPTT.S APPEAL :- VALIDITY OF PROCEEDINGS U/S 153 A OF THE ACT IN THE ABSENCE OF INCRIMINATING DOCUMENTS. (I) THE APPELLANT & HIS BROTHER SHRI SANJAY KATARIA HAD PURCHASED A HOUSE PROPERTY UNDER CONSTRUCTION LOCATED AT 71, BA JAJ KHAN CHOWK, RATLAM, IN TWO PARTS AS PER REGISTERED SALE DEEDS DATED 05.02.2007 AND 12.02.2007 WHEREIN CONSTRUCTED PORTI ONS WERE SPECIFICALLY MENTIONED AS UNDER :- ANIL KATARIA (APPELLANT) (BACK PORTION) SANJAY KATARIA (FRONT PORTION) TOTAL BASEMENT NIL 380 SQ.FT. 380 SQ.FT. GROUND FLOOR 3637.59 SQ.FT. 531.93 SQ.FT 4179.52 SQ.FT. FIRST FLOOR 3637.59 SQ.FT. 531.93 SQ.FT. 4179.52 SQ .FT. APPARENT PURCHASE CONSIDERATION RS.41 LACS RS.22 LACS RS.63 LACS FAIR MARKET VALUE AS PER REGISTERED SALE DEEDS INCLUDING LAND VALUE RS.41.00 LACS RS.23,21,500/- RS.64,21,500/- CONSTRUCTION DETAILS OF EXISTING PROPERTY AS PER SALE DEED ONE HALL, TWO SHOPS ON G.F & HALL ON 1 ST FLOOR TWO SHOPS PASSAGE ON G.F. & ONE HALL ON FIRST FLOOR = ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 9 (II) IT IS UNDISPUTED FACT THAT NO ADDITION, A LTERATION OR RENOVATION OF AFORESAID STRUCTURE OF THE BUILDING WAS COMMENCE D IN NEXT TWO YEARS I.E. A.Y. 2008-09 AND A.Y. 2009-10. THE APPELLANT HAD SUBMITTED RETURN OF INCOME U/S 13 9(1) OF THE ACT ON 29.10.2007 DECLARING THE SAME AT RS.1,88,153/- W HICH WAS PROCESSED U/S 143(1) OF THE ACT. SEARCH PROCEEDINGS WERE INITIATED ON 07.09.2011 IN CASE OF APPELLANT AND HIS FAMILY M EMBERS. IN RESPONSE TO NOTICE U/S 153A OF THE ACT RETURN OF IN COME WAS SUBMITTED DECLARING THE SAME INCOME ON 04.07.2013. DURING SEARCH PROCEEDINGS, CERTAIN LOOSE PAPERS WERE FOUND RELATI NG TO PURCHASE OF CONSTRUCTION MATERIAL AND LABOUR PAYMENTS ETC. PERT AINING TO A.Y. 2012-13. THE ASSESSEE HAD SURRENDERED AN ADDITIONAL INCOME OF RS.30 LACS AS UNEXPLAINED INVESTMENT IN CONSTRUCTIO N OF HOUSE DURING A.Y. 2012-13. (PAGE 68 TO 80 OF P.B). (III) THE AO MADE REFERENCE TO THE DISTRICT VALUATI ON OFFICER TO ESTIMATE THE COST OF CONSTRUCTION BUT HE ESTIMATED THE FAIR MARKET VALUE OF LAND AS WELL COST OF BUILDING UNDER CONSTR UCTION PURCHASED COPIES OF SALE DEEDS AT PAPER BOOK PAGE NO. 1 TO 12 13 TO 25 = ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 10 BY THE APPELLANT AT RS.142.34 LACS AS AGAINST RS.69 .76 LACS AS PER REGISTERED SALE DEEDS INCLUDING COST OF STAMPS RE LEVANT FOR A.Y. 2007-08. SAID VALUATION REPORT WAS OBJECTED BY THE APPELLANT DUE TO VARIOUS DISCREPANCIES THEREIN. THE AO DID NOT ALLOW PROPER OPPORTUNITY AND VIDE PARA 11.4 OF THE ASSESSMENT OR DER FOLLOWED THE VALUATION REPORT DATED 21.01.2014 AND MADE ADDITION S OF RS.72,57,600/-. ON APPEAL, THE LEARNED CIT(A) DIREC TED THE AO TO REFER THE MATTER AGAIN TO DVO AND TO GIVE AN OPPORT UNITY TO THE APPELLANT TO JUSTIFY COST OF CONSTRUCTION DECLARED BY HIM. THEREAFTER, DVO REVISED THE ESTIMATES OF COST OF CONSTRUCTION V IDE REPORT DATED 17.05.2016. (PAGE 42 TO 51 OF PAPER BOOK) AND ALSO REVISED THE COST OF LAND AND BUILDING PURCHASED BY THE APPELLANT AT RS.70,05,000/-. (IV) BEFORE LEARNED CIT(A) VALIDITY OF PROCEEDINGS U/S 153A OF THE ACT THE ASSESSMENT ORDER WERE CHALLENGED BECAUSE NO INCRIMINATING DOCUMENTS WERE FOUND DURING SEARCH REGARDING PURCHA SE OF HOUSE PROPERTY UNDER CONSTRUCTION DURING A.Y. 2007-08. ON MERITS ALSO IT WAS CLAIMED THAT THERE WAS NO JUSTIFICATION ON THE PART OF DVO TO VALUE LAND AND BUILDING UNDER CONSTRUCTION PURCHASE D BY THE APPELLANT VIDE TWO REGISTERED SALE DEEDS. LEARNED CIT(A) ACCEPTED ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 11 THE PLEA THAT NO INCRIMINATING DOCUMENT WAS FOUND D URING THE SEARCH PERTAINING TO THE PURCHASE OF PROPERTY AND F OLLOWING VARIOUS JUDGMENTS OF HIGH COURTS AND DECISIONS OF THE JURIS DICTIONAL ITAT, SHE CONCLUDED THAT PROCEEDINGS INITIATED U/S 153A O F THE ACT FOR A.Y. 2007-08 WERE NOT VALID HENCE ADDITION TOWARDS UNEXPLAINED INVESTMENT ON THE BASIS OF DVOS REPORT WAS NOT CAL LED FOR. (V) THE RETURN FILED BY THE APPELLANT WAS ACCEPTED BY THE DEPARTMENT AND NO NOTICE UNDER SECTION 143(2), OR 1 42(1) HAD BEEN ISSUED IN REGARD TO THE ASSESSMENT YEAR 2007-08 AND NO PROCEEDINGS WERE PENDING ON THE DATE OF SEARCH I.E. ON 07.09.2011. PLAIN READING OF THE ASSESSMENT ORDER REVEALS THAT THE ASSESSMENT IS NOT AT ALL REFERRING TO OR RELYING ON ANY INCRIM INATING DOCUMENT OR PAPER FOUND DURING THE SEARCH RELEVANT TO A.Y. 2007 -08. IN FACT THERE IS NOT EVEN A WHISPER IN THE ASSESSMENT ORDER ABOUT ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF T HE SEARCH REGARDING PURCHASE OF BUILDING UNDER CONSTRUCTION B Y THE APPELLANT DURING A.Y. 2007-08. (VI) IN RELATION TO PURCHASE OF AFORESAID BUILDING UNDER CONSTRUCTION BY THE APPELLANT AND HIS BROTHER, TWO REGISTERED SA LE DEEDS DATED ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 12 05.02.2007 AND 10.04.2007 WERE FOUND DURING SEARCH. HOWEVER, CERTAIN LOOSE PAPERS WERE FOUND RELATING TO CONSTRU CTION MATERIAL AND LABOUR PAYMENTS ETC. PERTAINING TO A.Y. 2012-13 HENCE THE ASSESSEE HAD SURRENDERED AN ADDITIONAL INCOME OF RS .30 LACS INVESTED IN CONSTRUCTION OF HOUSE DURING A.Y. 2012- 13. NONE OF THE LOOSE PAPER FOUND DURING SEARCH RELATED TO A.Y. 200 7-08 TO A.Y. 2011-12. THERE BEING NO INCRIMINATING MATERIAL RELE VANT TO A.Y. 2007-08, THE ASSESSMENT FRAMED WAS WITHOUT JURISDIC TION HENCE THE SAME WAS STRUCK DOWN ON THAT GROUND BY LEARNED CIT( A) BEING SETTLED LAW BY REFERRING TO FOLLOWING JUDGMENTS, WH ICH DESERVES TO BE UPHELD :- ALL CARGO GLOBAL LOGISTICS LTD VS DCIT 137 ITD 287 (SPECIAL BENCH) CIT VS ANIL KUMAR BHATIA 211 TAXMAN 453 (DELHI) CIT VS CONTINENTAL WAREHOUSING CORPORATION 120 DTR 089 (BOM) KABUL CHAWLA VS ACIT 151 ITD (DEL) GURINDER SINGH BAWA VS DCIT 150 ITD 040 (MUM) ATUL BAROT VS DCIT 44 TAAXMAN.COM 167 (MUM) DCIT VS. KALANI BROTHERS PVT. LTD (2016) 27 ITJ 28 6 (INDORE ITAT) ANANT STEELS PVT LTD VS. ACIT (2016) 28 ITJ 47 (IN DORE ITAT) ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 13 (VII) KIND ATTENTION IS INVITED TO SUBSEQUENT JUDGM ENTS WHEREIN SAME VIEW HAS BEEN TAKEN BY SUPREME COURT AND HIGH COURTS AS UNDER :- A. CIT VS. SINGHGAD TECHNICAL EDUCATION SOCIETY (2017) 397 ITR 344 (SC) B. COM. INCOME TAX VS. SKS ISPAT & POWER LIMITED (2017 ) 398 ITR 584 (BOM) C. PR. CIT VS. VIKAS GUTGUTIA (2017) 396 ITR 691 (DEL) 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL PLACED BEFORE US. FOR THE ASSESSMENT YEAR 2007-08 THE REVENUE IS AGGRIEVED WITH THE FINDING OF THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSMENT PROCEED INGS U/S 143(3) R.W.S. 153A OF THE ACT WERE VOID AS THERE WA S NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALLOWE D THE GROUND RELATING TO VALIDITY OF ASSESSMENT PROCEEDINGS BY F OLLOWING THE DECISION OF THE COORDINATE BENCH IN THE CASE OF KAL ANI BROTHERS. IN THIS DECISION, THE COORDINATE BENCH FOLLOWED THE JU DGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWL A; 380 ITR 573 AS WELL AS OTHER JUDGMENTS. HON'BLE DELHI HIGH IN T HE CASE OF KABUL CHAWLA (SUPRA) CATEGORICALLY OBSERVED AS UNDER :- ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 14 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, REA D WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UN DER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATE LY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES P LACE. II. ASSESSMENTS AND REASSESSMENTS PEND ING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEA RCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AY S 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST- SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE R ELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSES SMENT 'CAN BE ARBITRARY ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 15 OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEI ZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTI ON ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPL ETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABAT ED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSE SS' TO COMPLETED ASSESSMENT PROCEEDINGS CEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE J URISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECT ION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY F OR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR R EQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURS E OF ORIGINAL ASSESSMENT. WE FIND THAT IN THE ABOVE JUDGMENT, THE HON'BLE DEL HI COURT HELD THAT COMPLETED ASSESSMENT CAN BE INTERFERED WITH BY THE ASSESSING ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 16 OFFICER WHILE MAKING THE ASSESSMENT U/S 153A OF THE ACT ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UND ISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHIC H WAS NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. TWO IMPORTANT ASPECTS COME OUT OF THIS JUDGMENT FIRSTLY THE ASSESSMENT SHOULD HAVE BEEN CO MPLETED EARLIER AND SECONDLY SOME INCRIMINATING MATERIAL IS FOUND D URING THE COURSE OF SEARCH RELATING TO THAT ASSESSMENT YEAR. IN THE INSTANT CASE, WE FIND THAT THERE IS NO DISPUTE TO THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND PERTAINING TO ASSE SSMENT YEAR 2007-08 AND ONLY THE PURCHASE DOCUMENTS IN THE SHAP E OF REGISTERED SALE DEED WERE FOUND WHICH WERE DULY DIS CLOSED IN THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSING OFFICER C OULD NOT HAVE REOPENED THE ASSESSMENT IF IN CASE THE ASSESSMENT H AS BEEN COMPLETED EARLIER U/S 143(3) OF THE ACT FOR THE ASS ESSMENT YEAR 2007-08 BUT THIS IS NOT SO IN THE CASE OF THE ASSES SEE BECAUSE FOR THE ASSESSMENT YEAR 2007-08 THE RETURN OF THE ASSES SEE WAS MERELY PROCESSED U/S 143(1)(A) OF THE ACT WHICH BY NO CANO N CAN BE ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 17 ACCEPTED AS REGULAR ASSESSMENT AND, THEREFORE, THE ASSESSING OFFICER HAD NO OCCASION TO EXAMINE THE RELATED TRAN SACTIONS FOR THE ASSESSMENT YEAR 2007-08. DURING THE COURSE OF SEARC H, DOCUMENTS WERE FOUND RELATING TO PURCHASE OF PROPERTY AS WELL AS INCRIMINATING MATERIAL FOR UNDISCLOSED INVESTMENT IN CONSTRUCTION OF PROPERTY WHICH WAS SUFFICIENT ENOUGH FOR THE ASSESSING OFFIC ER TO INITIATE THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007 -08 TO ASSESS THE CORRECT INCOME OF THE ASSESSEE. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND HOLD THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 20 07-08 U/S 153A R.W.S. 143(3) OF THE ACT WAS VALID. THE RELEVA NT GROUNDS OF THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 ARE ALLOWED . 11. NOW WE SHALL TAKE UP THE CROSS OBJECTION OF THE ASSESSEE WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S :- THAT THE LEARNED CIT(A) ERRED IN LAW IN SUSTAININ G THE ADDITIONS OF RS. 7,05,000/- TO THE TOTAL INCOME BAS ED ON VALUATION REPORT OF THE DEPARTMENTAL VALUATION OFFI CER IGNORING THE FACT THAT THE PROPERTY WAS PURCHASED BY REGISTE RED SALE DEEDS AND NO EXPENDITURE WAS FOUND TO HAVE BEEN INC URRED ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 18 TOWARDS ADDITION/ALTERATION EXPENSES AT ALL FOR NEX T TWO YEARS. ADDITION CONFIRMED TO THE EXTENT OF RS.7,05,000/- I S, THEREFORE, UNJUSTIFIED, IMPROPER, BAD IN LAW AND DESERVES TO B E QUASHED. 12. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ON THE STRENGTH OF THE VALUATION REPORT MADE AN ADDITION OF RS. 72,57, 600/- TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF LAND AND BUIL DING. DURING THE APPELLATE PROCEEDINGS BEFORE THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS), THE ASSESSEES OBJECTION FOR THE EXORBITANT VALUATION OF LAND AND BUILDING WAS FORWARDED TO THE DEPARTMENTAL VALUATION OFFICER THROUGH THE ASSESSING OFFICER AND FRESH VALUATION REPORT DATED 17.5.2016 WAS ISSUED AND THE IMPUGNED ADDITION WAS RESTRICTED TO RS. 7,05,000/- ONLY AS AGAINST RS. 72 ,56,600/- MADE EARLIER. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) DID NOT DEAL WITH THIS GROUND TREATING IT AS INFRUCTUOUS AS SHE ALREADY GAVE A FINDING HOLDING THAT THE ASSESSMENT PROCEEDINGS W ERE NOT VALID. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 19 B) NOW THE ASSESSEE HAS RAISED CROSS OBJECTION BEFO RE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT AS PER REVISED VALUATION REPORT OF DVO, THE DIFFERENCE IN VALUATION HAD ARISEN BECAUSE THE DVO, ESTIMATED FAIR MARKET VALUE OF LAND SEPARATELY RELATING TO A.Y. 2007-08. AS THE BUILDIN G UNDER CONSTRUCTION WAS PURCHASED AFTER PAYMENT OF STAMP D UTY, WHICH WAS DULY REGISTERED, SEPARATE VALUATION OF LAND BY THE DVO WAS UNCALLED FOR. HE FURTHER SUBMITTED THAT HAD THERE BEEN ANY UNDER VALUATION, AS PRESUMED BY DVO, THE SAME WOULD HAVE BEEN OBJECTED BY THE REGISTRAR AND ADDITIONAL STAMP DUTY WOULD HAVE BEEN DIRECTED TO BE PAID. THIS WAS DONE IN CASE OF SALE DEED EXECUTED ON 10.04.2007 RELATING TO FRONT PORTION OF THE BUILDING AT RS.23,21,500/- AS AGAINST APPARENT CONSIDERATION OF RS.22.00 LACS. WE SUBMIT THAT THE PROVISIONS OF SECTION 50-C WERE ALSO NOT APPLICABLE DURING RELEVANT ASSESSMENT YEAR SO AS TO ASSESS THE DIFFERENCE OF RS.1.21 LACS ONLY IN THE HANDS OF BUY ER. HE FURTHER SUBMITTED THAT THERE WAS NO JURISDICTION TO ESTIMATE FAIR MARKET VALUE OF PLOT OF LAND OR BUILDING WHEN REGIS TERED SALE DEEDS WERE EXECUTED AND ACCEPTED BY LAND REVENUE AUTHORIT Y AS PER ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 20 GUIDELINE RATES OF EACH AREA APPROVED BY THE STATE GOVT. IN THE CASE OF APPELLANT MARKET VALUE OF PLOT OF LAND HAVING B UILT-UP STRUCTURE SHOULD NOT HAVE BEEN SEPARATELY DONE BY THE DVO WHI CH RESULTED INTO DIFFERENCE OF RS. 7.05 LACS ONLY I.E. HARDLY 10%, HENCE IT DESERVES TO BE QUASHED ON MERITS ALSO. 13. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RELATES TO ALLEGED ADD ITION OF RS. 7,05,000/- FOR THE UNDISCLOSED INVESTMENT IN LAND A ND BUILDING. WE FIND THAT THE ASSESSEE DECLARED COST OF LAND AND BUILDING AT RS.63,00,000/-. DURING THE ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER ON THE STRENGTH OF VALUATION REPORT OF DEPA RTMENTAL VALUATION OFFICER MADE AN ADDITION OF RS.72,57,600/ -. ON THE OBJECTIONS RAISED BY THE ASSESSEE, LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) AGAIN DIRECTED FOR A FRESH VALUATION. VIDE DEPARTMENTAL VALUATION OFFICERS VALUATION REPORT D ATED 17.5.2016 THE FAIR MARKET VALUE OF THE PROPERTY WAS VALUED AS SESSMENT RS.70,05,000/-. AS A RESULT, THE ADDITION WAS SUSTA INED AT ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 21 RS.7,05,000/-. THESE FACTS CLEARLY SHOW THAT THERE WAS VARIATION IN THE VALUATION REPORT OF THE DEPARTMENTAL VALUATION OFFICER. THIS IS NOT THE REVENUES CASE THAT THERE WAS ANY OBJECTION BY THE REGISTRAR FOR PAYMENT OF STAMP DUTY AND THE PURCHASE CONSIDER ATION WAS ALSO NOT QUESTIONED. THE ALLEGED ADDITION IS ALSO WITHI N THE RANGE OF 10% OF THE COST OF LAND AND BUILDING SHOWN BY THE A SSESSEE. WE, THEREFORE, ARE OF THE CONSIDERED OPINION THAT NO AD DITION WAS CALLED FOR TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF P ROPERTY AND WE ACCORDINGLY DELETE ADDITION OF RS. 7,05,000/- AND A LLOW THE CROSS OBJECTION OF THE ASSESSEE. 15. NOW WE SHALL TAKE UP CROSS APPEALS FOR THE ASSE SSMENT YEARS 2010-11 TO 2012-13. IN IT(SS) A NO. 178/IND/2016 FOR THE ASSESSMENT YEA R 2010-11 THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEAL :- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS PARTLY O N ACCOUNT OF UNACCOUNTED INVESTMENT IN HOUSE PROPERTY. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 22 (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FINDINGS OF THE ASSESSING OFFICER PLACED ON THE RECORD BY THE A.O. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE CPWD/PWD RATES CANNOT BE APPLIED TO RESIDENTIAL HOUSE CONSTRUCTED AT RATL AM ON THE GROUND THAT RATLAM IS A SMALL TOWN. IN IT ( SS) A NO. 179/IND/2016 FOR ASSESSMENT YEAR 2011-12 THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEAL :- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS PARTLY O N ACCOUNT OF UNACCOUNTED INVESTMENT IN HOUSE PROPERTY. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FINDINGS OF THE ASSESSING OFFICER PLACED ON THE RECORD BY THE A.O. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE CPWD/PWD RATES CANNOT BE APPLIED TO RESIDENTIAL HOUSE CONSTRUCTED AT RATL AM ON THE GROUND THAT RATLAM IS A SMALL TOWN. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 23 IN IT(SS) A NO. 984/IND/2016 FOR ASSESSMENT YEAR 20 12-13 THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : - (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS PARTLY O N ACCOUNT OF UNACCOUNTED INVESTMENT IN HOUSE PROPERTY. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FINDINGS OF THE ASSESSING OFFICER PLACED ON THE RECORD BY THE A.O. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE CPWD/PWD RATES CANNOT BE APPLIED TO RESIDENTIAL HOUSE CONSTRUCTED AT RATL AM ON THE GROUND THAT RATLAM IS A SMALL TOWN. IN IT(SS) A NO.163/IND/2016 FOR ASSESSMENT YEAR 201 0-11 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL : - 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) ERR ED IN LAW IN CONFIRMING THE ADDITION OF RS. 28,38,693/- TO THE TOTAL INCO ME IGNORING DETAILED REPLY ALONG WITH APPROVED VALUERS REPORT SUBMITTED BEFOR E HIM. SHE ERRED IN LAW IN NOT APPRECIATING DISCREPANCIES IN THE SUBSEQUENT VALUATION REPORT DATED ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 24 17.05.2016 REGARDING CONSTRUCTED AREA OF THE BASEME NT, EXCESSIVE ESTIMATION OF CONSTRUCTION COST EVEN AFTER ALLOWING 15% REDUCTION, CONSTRUCTION COST OF TERRANCE FLOOR, COST INCURRED DURING OCTOBER/NOVEMBER 2015 I.E. MUCH AFTER SEARCH ETC. S UCH DISCREPANCIES PROVE BEYOND DOUBT THAT THE DVO HAD ESTIMATED THE C OST IN AN EXORBITANT MANNER. 2. IN SUBSTANCE, THE LEARNED COMMISSIONER OF INCOME T AX (A) ERRED IN LAW IN ALLOWING REDUCTION IN THE COST OF CONSTRUCTION ESTI MATED BY THE DVO TO THE EXTENT OF 15% ONLY IGNORING THE DETAILED WRITTEN SU BMISSIONS AND LOCATION OF THE PROPERTY. SUCH ESTIMATION OF COST MADE BY DV O WAS NOT ONLY ARBITRARY BUT IT IS BEYOND IMAGINATION. ADDITION SO CONFIRMED AT RS. 28,38,693/- IS UNJUSTIFIED, IMPROPER, BAD IN LAW AN D DESERVES TO BE QUASHED. 3. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSIONE R OF INCOME TAX (A) ERRED IN LAW IN CONFIRMING THE ADDITION OF RS.28,38 ,693/- BASED ON DVOS REPORT DATED 17.05.2016 FOR THE YEAR UNDER APPEAL I .E. A.Y. 2010-11. SHE OUGHT TO HAVE CONSIDERED THAT THERE WAS NO BASIS OR ANY INCRIMINATING MATERIAL TO ESTIMATE AND ALLOCATE ADDITIONAL COST O F CONSTRUCTION IN A.Y. 2010-11. THE APPELLANT MAINTAINED BOOKS OF ACCOUNTS WHEREIN COST OF ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 25 CONSTRUCTION WAS REGULARLY ACCOUNTED FOR HENCE DIFF ERENCE, IF ANY, DUE TO ESTIMATION OF COST AS PER DVO REPORT SHOULD HAVE BE EN CONSIDERED IN A.Y. 2012-13 ONLY I.E. THE YEAR IN WHICH THE CONSTRUCTIO N WAS COMPLETED AND THE APPELLANT MADE ADDITIONAL SURRENDER OF INCOME. IN IT(SS) A NO.164/IND/2016 FOR ASSESSMENT YEAR 201 1-12 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL : - 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) ER RED IN LAW IN CONFIRMING THE ADDITION OF RS. 32,75,163/- TO THE TOTAL INCO ME IGNORING DETAILED REPLY ALONG WITH APPROVED VALUERS REPORT SUBMITTED BEFOR E HIM. SHE ERRED IN LAW IN NOT APPRECIATING DISCREPANCIES IN THE SUBSEQUENT VALUATION REPORT DATED 17.05.2016 REGARDING CONSTRUCTED AREA OF THE BASEME NT, EXCESSIVE ESTIMATION OF CONSTRUCTION COST (EVEN AFTER ALLOWIN G 15% REDUCTION), CONSTRUCTION COST OF TERRANCE FLOOR, COST INCURRED DURING OCTOBER/NOVEMBER 2015 I.E. MUCH AFTER SEARCH ETC. S UCH DISCREPANCIES PROVE BEYOND DOUBT THAT THE DVO HAD ESTIMATED THE C OST IN AN EXORBITANT MANNER. 2. IN SUBSTANCE, THE LEARNED COMMISSIONER OF INCOME T AX (A) ERRED IN LAW IN ALLOWING REDUCTION IN THE COST OF CONSTRUCTION ESTI MATED BY THE DVO TO THE ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 26 EXTENT OF 15% ONLY IGNORING THE DETAILED WRITTEN SU BMISSIONS AND LOCATION OF THE PROPERTY. SUCH ESTIMATION OF COST MADE BY DV O WAS NOT ONLY ARBITRARY BUT IT IS BEYOND IMAGINATION. ADDITION SO CONFIRMED AT RS. 32,75,163/- IS UNJUSTIFIED, IMPROPER, BAD IN LAW AN D DESERVES TO BE QUASHED. 3. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSIONE R OF INCOME TAX (A) ERRED IN LAW IN CONFIRMING THE ADDITION OF RS.32,75 ,163/- BASED ON DVOS REPORT DATED 17.05.2016 FOR THE YEAR UNDER APPEAL I .E. A.Y. 2011-12. SHE OUGHT TO HAVE CONSIDERED THAT THERE WAS NO BASIS OR ANY INCRIMINATING MATERIAL TO ESTIMATE AND ALLOCATE ADDITIONAL COST O F CONSTRUCTION IN A.Y. 2011-12. THE APPELLANT MAINTAINED BOOKS OF ACCOUNTS WHEREIN COST OF CONSTRUCTION WAS REGULARLY ACCOUNTED FOR HENCE DIFF ERENCE, IF ANY, DUE TO ESTIMATION OF COST AS PER DVO REPORT SHOULD HAVE BE EN CONSIDERED IN A.Y. 2012-13 ONLY I.E. THE YEAR IN WHICH THE CONSTRUCTIO N WAS COMPLETED AND THE APPELLANT MADE ADDITIONAL SURRENDER OF INCOME. IN IT(SS) A NO.165/IND/2016 FOR ASSESSMENT YEAR 201 2-13 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL : - ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 27 1. . THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) ERR ED IN LAW IN CONFIRMING THE ADDITION OF RS. 29,52,752/- TO THE TOTAL INCOME IGNORING DETAILED REPLY ALONG WITH APPROVED VALUERS REPORT SUBMITTED BEFORE HIM. SHE ERRED IN LAW IN NOT APPRECIATING DISCREPANCIES IN THE SUBSEQUENT VALUATION REPORT DATED 17.05.2016 REGARDING CONSTRU CTED AREA OF THE BASEMENT, EXCESSIVE ESTIMATION OF CONSTRUCTION COST (EVEN AFTER ALLOWING 15% REDUCTION), CONSTRUCTION COST OF TERRANCE FLOOR , COST INCURRED DURING OCTOBER/NOVEMBER 2015 I.E. MUCH AFTER SEARCH ETC. S UCH DISCREPANCIES PROVE BEYOND DOUBT THAT THE DVO HAD ESTIMATED THE C OST IN AN EXORBITANT MANNER. 2. IN SUBSTANCE, THE LEARNED COMMISSIONER OF INCOME TA X (A) ERRED IN LAW IN ALLOWING REDUCTION IN THE COST OF CONSTRUCTION ESTI MATED BY THE DVO TO THE EXTENT OF 15% ONLY IGNORING THE DETAILED WRITTEN SU BMISSIONS AND LOCATION OF THE PROPERTY. SUCH ESTIMATION OF COST MADE BY DV O WAS NOT ONLY ARBITRARY BUT IT IS BEYOND IMAGINATION. ADDITION SO CONFIRMED AT RS. 29,52,752/- IS UNJUSTIFIED, IMPROPER, BAD IN LAW AN D DESERVES TO BE QUASHED. 16. FROM THE PERUSAL OF THE ABOVE GROUNDS WE FIND THAT THE ISSUES RAISED IN THESE APPEALS REVOLVES AROUND THE ADDITIO NS SUSTAINED BY ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 28 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FO R THE THREE ASSESSMENT YEARS FOR ALLEGED UNEXPLAINED INVESTMENT IN CONSTRUCTION OF BUILDING. FOR BETTER UNDERSTANDING , WE REPRODUCE BELOW THE CHART SHOWING THE ADDITIONS MADE BY THE A SSESSING OFFICER AND THE RELIEF GIVEN BY THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) :- ASSESSMENT YEAR AS DECLARED BY APPELLANT REVISED ESTIMATE BY DVO II AS PER REPORT DTD. 17.05.2016 DIFFERENCE CONSIDERED BY CIT(A) FOR ADJUDICATION DEDUCTIONS ALLOWED BY CIT(A) @ 15% TOWARDS CPWD/ PWD RATES 2010 - 2011 RS.28,61,054 RS.67,05,584 RS.38,44,530 RS.10,05,837 2011 - 2012 RS.33,00,963 RS.77,36,619 RS.44,35,656 RS.11,60,493 2012 - 2013 RS.30,00,000(* ) RS.70,31,238 RS. 40,31,238 RS.10,50,486 TOTAL RS.91,62,017/ - RS.2,14,73,441 RS.1,23,11,424 RS.32,16,816 17. SO THE FIRST ISSUE IS FOR THE ALLEGED UNEXPLA INED INVESTMENT IN HOUSE CONSTRUCTION. THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THE FOLLOWING WRITTEN SUBMISSIONS :- ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 29 DEPTT.APPEAL FOR 2010-11 TO 2012-13 THE APPELLANT & HIS BROTHER SHRI SANJAY KATARIA HAS PURCHASED A HOUSE PROPERTY UNDER CONSTRUCTION LOCATED AT 71, BA JAJ KHAN CHOWK, RATLAM, IN TWO PARTS AS PER REGISTERED SALE DEEDS DATED 05.02.2007 AND 12.02.2007. CONSTRUCTED PORTIONS AS SPECIFICALLY MENTIONED IN THE SALE DEEDS WERE AS UN DER :- ANIL KATARIA(APPELLANT) SANJAY KATARIA TOTAL (BACK PORTION) (FRONT PORTION) BASEMENT NIL 380 SQ.FT. 380 SQ.FT. GROUND FLOOR 3637.59 SQ.FT. 531.93 SQ.FT 4179.52 SQ.FT. FIRST FLOOR 3637.59 SQ.FT. 531.93 SQ.FT. 4179.52 SQ.FT. APPARENT PURCHASE CONSIDERATION RS.41 LACS RS.22 LACS RS.63 LACS FAIR MARKET VALUE AS PER REGISTERED SALE DEEDS INCLUDING LAND VALUE RS.41.00 LACS RS.23.21 LACS RS.64.21 LACS CONSTRUCTION DETAILS OF EXISTING PROPERTY AS PER SALE DEED ONE HALL, TWO SHOPS ON G.F & HALL BUILT BY RCC STRUCTURE ON 1 ST FLOOR TWO SHOPS PASSAGE ON G.F. & ONE HALL ON FIRST FLOOR = ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 30 02) SEARCH PROCEEDINGS WERE INITIATED ON 07.09.2011 IN CASE OF APPELLANT AND HIS FAMILY MEMBERS. CERTAIN LOOSE PAPERS WERE F OUND RELATING TO PURCHASE OF CONSTRUCTION MATERIAL AND LABOUR PAYMEN TS ETC. PERTAINING TO A.Y. 2012-13. THE ASSESSEE HAD SURRENDERED AN ADDIT IONAL INCOME OF RS.30 LACS AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF H OUSE DURING A.Y. 2012- 13. (PAGE 68 TO 80 OF P.B). THE AO MADE REFERENCE TO THE DISTRICT VALUATION OFFICER TO ESTIMATE THE COST OF CONSTRUCTION OF RES IDENTIAL HOUSE. THE VALUATION REPORT GIVEN BY THE DISTRICT VALUATION OF FICER WAS OBJECTED BY THE APPELLANT VIDE LETTER DATED 27.01.2014 BECAUSE IT C ONTAINED VARIOUS DISCREPANCIES AND PROPER OPPORTUNITY WAS NOT GIVEN BY DVO. THE AO DID NOT CONSIDER THE OBJECTION AND VIDE PARA 11.4 OF THE ASSESSMENT ORDER HE ACCEPTED THE VALUATION REPORT EVEN WITHOUT CONSIDER ING THE MISTAKES POINTED OUT BY THE APPELLANT. BASED ON VALUATION RE PORT DATED 21.01.2014 AO MADE ADDITIONS OF RS.136.82 LACS TO THE TOTAL IN COME OF THE APPELLANT FOR ASSESSMENT YEARS 2010-11 TO 2012-13 AS UNEXPLA INED INVESTMENT IN THE HOUSE PROPERTY. COPIES OF SALE DEEDS IN PAPER BOOK AT PAGE NO. 1 TO 12 13 TO 25 = ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 31 03) ON APPEAL, THE LEARNED CIT(A) DIRECTED THE AO TO REFER THE MATTER AGAIN TO DVO AND TO GIVE AN OPPORTUNITY TO THE APPE LLANT TO JUSTIFY COST OF CONSTRUCTION DECLARED BY HIM. THEREAFTER, DVO REVIS ED THE ESTIMATES OF COST OF CONSTRUCTION VIDE REPORT DATED 17.05.2016. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GRANTED PART R ELIEF. 18. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT AS PER PRELIMINARY ESTIMATE, COST OF CONSTRUCTION AND RENOVATION INCLUDING INTERIOR WORK WAS ESTIMATED BY AN ARCHITE CT ENGINEER AT RS. 96.88 LACS WHICH WAS FOUND AND SEIZED DURING SE ARCH PROCEEDINGS VIDE ANNEXURE A -1/95 PAGE 30-35. (PAGE 26 TO 28 OF PAPER BOOK). DURING SEARCH PROCEEDINGS, THE APPELLA NT WAS INSTRUCTED BY THE INVESTIGATION WING TO SUBMIT THE VALUATION REPORT OF ESTIMATED COST OF CONSTRUCTION, RENOVATION AND I NTERIOR WORK. A GOVT. APPROVED VALUER, MR. KUMAWAT, VIDE HIS REPORT DATED 26.09.2011 ESTIMATED COST OF CONSTRUCTION, ADDITION , RENOVATION, ALTERATION ETC. OF ENTIRE BUILDING AT RS.84.43 LACS WHICH WAS SUBMITTED TO THE DY. DIRECTOR OF INCOME TAX (INVEST IGATION), INDORE. (PAGE 29 TO 41 OF PAPER BOOK). ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 32 19. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT DIFFERENCE IN COST OF CONSTRUCTION ESTIMATED BY THE DVO AT RS.214.73 LACS IN HIS REPORT DATED 17.05.2016 AND A S DECLARED BY THE APPELLANT AT RS.91.62 LACS IS DUE TO FOLLOWING REASONS WHICH WERE NOT PROPERLY APPRECIATED BY LEARNED CIT(A) :- 1.1) THE DVO HAD VISITED THE PREMISES IN MAY 2016 I .E. MUCH AFTER COMPLETION OF ASSESSMENT U/S 153A OF THE ACT. MEANW HILE, THE APPELLANT HAD INCURRED FURTHER EXPENDITURE OF RS.17 ,68,263/- BY ACCOUNT PAYEE CHEQUES DURING OCTOBER/NOVEMBER 2015. SUCH DETAILS WERE ALSO FURNISHED BEFORE LEARNED CIT(A) A S WELL DVO BUT THEY DID NOT CONSIDER THE SAME. DVO SIMPLY STATED I N HIS REPORT THAT SUBSEQUENT EXPENDITURE HAS NOT BEEN INCLUDED I N THE COST (REFER PAGE 56 OF P.B) WHICH IS NOT POSSIBLE AS TH E WORK RELATED TO POP, INTERIOR, TILES AND SANITARY WARES AND FITTING S WAS CARRIED OUT BEFORE 17.05.2016. IT IS EVIDENT THAT FOLLOWING EXT RA ITEMS WERE CONSIDERED BY THE DVO IN HIS REPORT DT. 17.05.2016 AT PAGE 66 OF PAPER BOOK WHICH DID NOT FIND PALACE IN DVOS REPOR T DATED 21.01.2014 ARE :- (A) WOODEN FLOORING RS. 3,90,64 1/-, (B) VITRIFIED ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 33 TILE FLOORING RS. 2,74,816/-; (C) FALSE CEILING RS. 5,43,522/- I.E. RS.12,08,979/- IN AGGREGATE. SUCH CONSTRUCTION WORK WAS CARRIED OUT AFTER SEARCH PROCEEDINGS. NON-CONSIDERATION OF SUCH INVESTMENT OF RS.12.09 L ACS OUT OF RS.17.68 LACS INCURRED AS PER BOOKS OF ACCOUNT IN OCTOBER/NOVEMBER 2015 RESULTED INTO TREATMENT OF RE CORDED EXPLAINED EXPENDITURE AS ALLEGED UNEXPLAINED EXPEN DITURE. 1.2 THE DVO NOT ONLY MEASURED CONSTRUCTED AREA OF THE BUILDING IN EXCESS AS COMPARED TO REGISTERED VALUER BUT EVEN CPWD RATES APPLIED BY HIM WERE ALSO EXORBITANT AS COMPARED TO APPLIED BY REGISTERED VALUER AS DETAILED BELOW :- DESCRIPTION CONSTRUCTED AREA RATES APPLIED AS PER DVO AS PER REGD. VALUER BY DVO BY REGD. VALUER IN SQ.METER SQ.FT. SQ. METER PER SQ.METER PER SQ.FT. PER SQ. METER BASEMENT 383 1750 127.28 RS.9,337/- RS.475/- RS.5 ,113/- GROUND FLOOR 320 4169.52 387.36 RS.11,898/- RS.475/- RS.5,113/- 1 ST & 2 ND FLOOR 690.37 4169.52 & 2737.59 641.69 RS.13,755/- RS.725/- RS.7,804/- DOUBLE HEIGHT AREA 23.61 RS.9,198/- TERRACE 41.75 - RS.12,287/- TOTAL 1458.73 12446.63 1156.33 ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 34 THE DVO JUST PRESUMED THAT ENTIRE BUILDING WAS NEWL Y CONSTRUCTED BY DISMANTLING AN EXISTING BUILDING. IN FACT, THE A PPELLANT EXTENDED THE BASEMENT. NO PRUDENT PERSON WILL DEMOLISH BASEM ENT OF FRONT PORTION OF THE BUILDING HAVING CONSTRUCTED PORTION THEREON AT UPPER FLOORS (PAGE 10-11 OF P.B). BASED ON SUCH PRESUMPT ION, DVO ESTIMATED THE COST OF CONSTRUCTION OF 383 SQ. METER OF BASEMENT AREA @ RS.9,337/- PER SQ. METER I.E. RS.35,76,071/- WHEREAS THE APPELLANT CONSTRUCTED BACK PORTION OF BASEMENT OF 1 27 SQ. METER ONLY WHICH WAS ESTIMATED BY REGISTERED VALUER AT RS . 7,67,125/- (RENOVATION OF FRONT PORTION OF BASEMENT @ RS.300/- PER SQ. FT AND NEW CONSTRUCTION @ RS.475/- PER SQ. FT). THUS, EXC ESSIVE ESTIMATE OF COST TOWARDS CONSTRUCTION OF BASEMENT ONLY WAS R S.28.08 LACS. (PAGE 39/40 & 65 OF P.B). 1.3) THE DVO ADOPTED CPWD RATES TO ESTIMATE THE COS T OF CONSTRUCTION AND IT IS COMMON KNOWLEDGE THAT SUCH R ATES ARE MUCH HIGHER AS COMPARED TO CONSTRUCTION COST INCURRED BY AN INDIVIDUAL IN A SMALL TOWN. IN FACT, LABOUR AND MATERIAL COST DURING FINANCIAL YEARS 2009-10 TO 2011-12 WAS MUCH LESS IN SMALLER T OWN I.E. RATLAM AS COMPARED TO METROPOLITAN CITIES AS WELL O THER CITIES LIKE ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 35 BHOPAL/INDORE. SUCH DIFFERENCE BETWEEN THE CPWD RAT ES VIS--VIS INDIVIDUAL PROCUREMENT RATES IS BEING CONSIDERED BY THIS HONBLE TRIBUNAL AS WELL HIGH COURT TO THE EXTENT OF 25% TO 40%. SIMILARLY, DEDUCTION TOWARDS SELF SUPERVISION WAS G IVEN BY THE DVO ON OVERALL COST @2.5% ONLY I.E. RS. 5.39 LACS (PAGE 65 OF P.B. ) WHEREAS NORMALLY SUCH DEDUCTION IS BEING ALLOWED BY THE HONBLE TRIBUNALS CONSIDERING THE CONTRACTORS PROFIT TO TH E EXTENT OF 15% TO 20%. THE LEARNED CIT(A) ALLOWED THE REDUCTION TO THE EX TENT OF 15% ONLY WHICH WAS NOT JUSTIFIED AT ALL CONSIDERING THE LOCA TION OF THE PROPERTY AND PERSONAL SUPERVISION AT ALL LEVELS. RE LIANCE IS PLACED ON FOLLOWING JUDGMENTS :- S.NO. PARTICULARS TOWARDS CPWD RATES TOWARDS SELF SUPERVISION TOTAL 01) A. ABDUL RAHIM V. ITO, (2002) 258 ITR 714 (MAD.) 15% 11% 26% 02) SHRI JAGMOHAN JAISWAL, (2008) 10 ITJ 187 (TRIB.- INDORE) 30% 10% 40% ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 36 03) KALPANA SURANA V. ITO (2016) 28 ITJ 277 (TRIB.-INDORE) 25% - 25% 04) NANDU ATMARAM RAJPUT VS. DCIT, PUNE, ITA NO.1036 TO 1041/PN/2014 DATED 05.08.2016 20% 12.5% 32.5% 05) BISWA MITRA SINGH VS DY. CIT (2014) 23 ITJ 413, (INDORE BENCH) 25% 06) RAJEEV MEWARA V. ITO, ITAT, (2010) 35 SOT 01 INDORE BENCH 30% 07) C. SHANKAR REDDY VS. DCIT (2017) 49 CCH 0080 (BANGALORE). - 10% 10% 1.4) THE DVO ESTIMATED THE COST OF EXTRA ITEMS IN T HE BUILDING AT RS.39.47 LACS VIDE PAGE NO. 66 OF PAPER BOOK WHICH INCLUDES VITRIFIED TILES FLOORING ON TERRACE IN 247.28 SQ.MT . AREA AT RS. 2,34,916/-. HE SEPARATELY ESTIMATED COST OF TERRACE FLOOR AT RS.5,12,982/- I.E. ON 41.75 SQ.MTR. @ RS.12,287/- P ER SQ.MTR. (AT PAGE 65 OF P.B.) WHEN ROOFING OF SECOND FLOOR HAS A LREADY BEEN ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 37 CONSIDERED WHILE ESTIMATING COST OF SECOND FLOOR AN D COST OF TILES ON TERRACE FLOOR IS SEPARATELY CONSIDERED AS EXTRA ITE MS, THERE WAS NO VALID REASON AT ALL TO ESTIMATE THE COST OF CONSTRU CTION OF TERRACE FLOOR AT RS.5.13 LACS SEPARATELY AS ADDITIONAL EXP ENDITURE. 1.5) THE DVO FURTHER ADDED CONSULTANCY CHARGES AND EXTERNAL SERVICES CONNECTION CHARGES AT RS. 3.23 LACS & RS. 1.32 LACS RESPECTIVELY I.E. RS. 5.55 LACS WAS ON VERY HIGHER SIDE (PAGE 65 OF P.B. ) IN A PLACE LIKE RATLAM CONSULTANCY CHARGES I S BEING PAID TO THE ENGINEER IN LUMP-SUM. EVEN THE ARCHITECT ENGINE ER OF BARODA HAD STATED HIS PROFESSIONAL CHARGES AT RS. 2 LACS I N HIS ORIGINAL ESTIMATE (PAGE 28 OF P.B) SEIZED DURING SEARCH. DUE TO AFORESAID REASONS, COST OF CONSTRUCTION ESTI MATED BY DVO EVEN IN HIS REVISED REPORT WAS EXORBITANT I.E. 235% HIGHER THAN THE COST DECLARED BY THE APPELLANT. COST OF CONSTRUCTIO N ESTIMATED BY DVO AT RS.2,14,73,441/- WORKS OUT TO RS.14,721/- PE R SQUARE METER I.E. AROUND RS.1350/- PER SQUARE FEET DURING ASSESSMENT YEARS 2010-11 TO 2012-13. EVEN AFTER PARTIAL RELIEF BY LEARNED CIT(A) IT WORKS OUT TO RS. 12,515/- PER SQ. METER I.E. RS. 1,148/- PER SQ.FT. WHICH IS BEYOND IMAGINATION IN A SMALL TOWN I.E. RA TLAM. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 38 IN SUBSTANCE, LEARNED CIT(A) ALLOWED THE DEDUCTION ONLY TOWARDS ADOPTION OF CPWD RATES TO THE EXTENT OF 15% BUT SHE DID NOT CONSIDER OTHER FACTORS AS STATED ABOVE DUE TO WHICH ADDITIONS HAVE BEEN SUSTAINED BY HER OVER RS.90 LACS IN AGGREGATE. SUCH ESTIMATE OF COST OF CONSTRUCTION MADE BY DVO IS UNREALISTIC IGNORING THE LOCALITY AS WELL ACTUAL CONSTRUCTED AREA. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER WITH R EGARD TO PRO-RATA ALLOCATION OF UNEXPLAINED COST OF CONSTRUCTION IN A .Y. 2010-11 & 2011-12 STATED THAT CERTAIN LOOSE PAPERS WERE FOUND RELATING TO PURCHASE OF CONSTRUCTION MATERIAL AND LABOUR PAYMEN TS ETC. DURING SEARCH PERTAINING TO A.Y. 2012-13 ONLY AGAINST WHIC H AN ADDITIONAL INCOME OF RS.30 LACS WAS SURRENDERED. NO INCRIMINATING MATERIAL WAS FOUND DURING SEARCH WHICH RELATE TO EARLIER YEA RS HENCE IN CASE ANY AMOUNT IS CONSIDERED AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOUSE, IT HAS TO BE ASSESSED FOR A. Y. 2012-13 ONLY. RELIANCE IS PLACED ON RECENT JUDGMENT OF DELHI HIGH COURT IN THE CASE OF PR. COMMISSIONER OF INCOME TAX VS. MEETA GU TGUTIA (2017) 395 ITR 526 WHEREIN IT HAS BEEN HELD AS UNDER :- ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 39 ANY AND EVERY DOCUMENT CANNOT BE AND IS NOT AN INCRIMINATING DOCUMENT. NO ADDITION CAN BE MADE FOR A PARTICULAR ASSESSMENT YEAR WITHOUT THERE BEING AN INCRIMINATING MATERIAL QUA THAT ASSESSMENT YEAR WHI CH WOULD JUSTIFY SUCH AN ADDITION. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SI NGHGAD TECHNICAL EDUCATION SOCIETY (2017) 397 ITR 344 (SC) ALSO HELD THAT INCRIMINATING MATERIAL ON WHICH SATISFACTION W AS BASED PERTAINED TO A.Y. 2004-05 OR THEREAFTER HENCE NOTI CE FOR A.Y. 2000-01 TO 2003-04 WAS NOT SUSTAINABLE. IT IS, THEREFORE, PRAYED THAT ADDITIONS MADE IN A.Y . 2010-11 & 2011-12 ON PROPORTIONATE BASIS MAY PLEASE BE QUASHE D. 19. ON THE OTHER HAND, THE LEARNED DR REFERRED TO T HE PAPER BOOK RUNNING FROM PAGE 1 TO 82, SUPPORTED THE FINDINGS O F THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND FURTHER AD DED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS AL READY GIVEN SUBSTANTIAL RELIEF TO THE ASSESSEE BY WAY OF GIVING DEDUCTION OF 15% TOWARDS CPWD/PWD RATES. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 40 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US AS ALSO GONE THROUGH THE JUDGMENTS AND DECISIONS REFERRED TO AND RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE FIND THAT THE ASSESSEE PURCHASED A HOUSE PROPERT Y UNDER CONSTRUCTION LOCATED AT 71, BAJAJ KHAN CHOWK, RATLA M, VIDE REGISTERED SALE DEED DATED 5.2.2007. THERE WAS NO CONSTRUCTION CARRIED OUT DURING F.Y. 2006-07 TO F.Y. 2008-09. TH E INCRIMINATING MATERIALS DURING THE COURSE OF SEARCH CONDUCTED ON 7.9.2011 WERE FOUND IN THE SHAPE OF LOOSE PAPERS RELATING TO PURC HASE OF CONSTRUCTION MATERIAL AND LABOUR PAYMENTS PERTAININ G TO THE ASSESSMENT YEAR 2012-13. THE ASSESSEE SURRENDERED AN ADDITIONAL INCOME OF RS. 30 LACS AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOUSE. THE ASSESSEE HAS DULY DECLARED CONSTRUCTION COST OF RS.28,61,054/- AND RS. 33,00,963/- FOR THE ASSESSME NT YEARS 2010-11 AND 2011-12. IN THE COURSE OF SEARCH PROCEE DINGS ITSELF A PRELIMINARY ESTIMATE MADE BY AN ARCHITECT/ENGINEER FOR COST OF CONSTRUCTION AND RENOVATION INCLUDING INTERIOR WORK CALCULATING COST AT RS. 96.88 LACS WERE FOUND WHICH IS PLACED AT ANN EXURE A-1/05. DURING SEARCH PROCEEDINGS, ON THE INSTRUCTION OF IN VESTIGATION ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 41 WING, THE ASSESSEE SUBMITTED VALUATION REPORT OF GO VERNMENT VALUER MR. KUMAWAT AND VIDE REPORT DATED 26.9.2011 THE COST OF CONSTRUCTION WITH ADDITION, RENOVATION AND ALTERATI ON WAS VALUED AT RS.83.43 LACS. 21. THEREAFTER, DURING THE ASSESSMENT PROCEEDIN GS THE ASSESSING OFFICER AGAIN REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER WHO VIDE HIS REPORT DATED 21.1.20 144 VALUED THE COST OF CONSTRUCTION AT RS.228.44 LACS. THE ASSESS ING OFFICER TAKING THIS REPORT AS A BASIS MADE THE ADDITION OF RS.136. 82 LACS. THE ASSESSEE CHALLENGED THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER AND AT THE REQUEST OF THE ASSESSEE, THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED FOR A FRESH VALUATION REPORT. THE DEPARTMENTAL VALUATION OFFICER VIDE REP ORT DATED 17.5.2016 ESTIMATED THE COST OF CONSTRUCTION AT RS. 214.73 LACS. ACCORDINGLY, THE ADDITION WAS REDUCED TO RS.123.11 LACS. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE RAISED VARIOUS OBJECTIONS FOR THE ALLEGED MISTAKES COMMITTED BY THE DEPARTMENTAL VALU ATION OFFICER MAKING EXCESSIVE VALUATION. HOWEVER, THE ASSESSEE PARTLY SUCCEEDED AS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 42 ALLOWED 15% FOR CPWD RATES DEDUCTION CALCULATING AT RS. 32.16 LACS, THEREBY SUSTAINING THE ADDITION TO RS.90.95 L ACS. 22. WE FURTHER FIND THAT DURING THE COURSE OF HEARI NG, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO SOME GLARING MISTAKES COMMITTED BY THE DEPARTMENTAL VALUATION OF FICER WHICH, IN OUR VIEW, ARE CORRECT TO THE EXTENT AS MENTIONED BELOW :- (I) THE ADDITION TO COST OF CONSTRUCTION OF RS. 12, 08,979/- WHICH THE ASSESSEE HAS ACTUALLY PAID BY ACCOUNT PAYEE CHE QUE DURING THE MONTHS OF OCTOBER AND NOVEMBER, 2015 BUT THEY HAVE WRONGLY BEEN INCLUDED IN THE COST FOR THE F.Y. 2011-12. NECESSARY PROOF IS PLACED IN THE PAPER BOOK AND THE EXPENSES RELATE TO WOODEN FLOOR, VITRIFIED TILES, FLOOR AND FALSE CEILING. (II) DEPARTMENTAL VALUATION OFFICERS ESTIMATION OF COST OF CONSTRUCTION OF 383 SQ. MTRS OF BASEMENT AREA WHICH WE FIND TO BE INCORRECT BECAUSE THE PROPERTY PURCHASED BY T HE ASSESSEE IN THE ASSESSMENT YEAR 2007-08 WAS ALREADY HAVING A BASEMENT AND CONSTRUCTION THEREON AND THE ASSESSEE ONLY CONSTRUCTED THE BACK PORTION OF THE BASEMENT ADMEAS URING ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 43 127 SQ. MTR. THIS PLEA OF THE ASSESSEE, IN OUR VIEW , SEEMS TO BE CORRECT AS NO PRUDENT PERSON WOULD DEMOLISH BASEMEN T OF FRONT-PORTION OF THE BUILDING HAVING CONSTRUCTION P ORTION THERE ON UPPER FLOORS. THEREFORE, IT SEEMS THAT THE DEPAR TMENTAL VALUATION OFFICER HAD ESCALATED THE COST BY RS.23,9 0,272/- BEING THE COST OF 256 SQ. MTR (383 SQ. MTR. (-) 127 SQ. MTR.) APPLYING THE RATE OF RS.9,337/- PER SQ. MTR. (III) THE DEPARTMENTAL VALUATION OFFICER HAS SEPARA TELY ESTIMATED THE COST OF TERRACE FLOOR AT RS.5,18,982/- ALONG WI TH ESTIMATING COST OF VITRIFIED TILES AND FLOOR OF 247.28 SQ. MTR AT RS. 2,34,916/-. THE ASSESSEES PLEA HAS SUBSTANCE THAT WHEN ROOFING OF SECOND FLOOR HAS ALREADY BEEN CONSIDERED WHILE ESTIMATING THE COST OF SECOND FLOOR AND COST OF TIL ES AT TERRACE FLOOR, THERE WAS NO REASON TO AGAIN ESTIMATE THE CO ST OF CONSTRUCTION OF TERRACE FLOOR AT RS. 5,12,982/- SEP ARATELY. (IV) THE DEPARTMENTAL VALUATION OFFICER FURTHER ADD ED THE CONSULTANCY CHARGES AND EXTERNAL SERVICE CONNECTION CHARGES AT RS.4.55 LACS WHICH SEEMS TO BE ON HIGHER SIDE LO OKING TO THE ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 44 PLACE LIKE RATLAM. EVEN THE ARCHITECT ENGINEER OF BARODA HAS GIVEN AN ESTIMATE OF PROFESSIONAL CHARGES OF RS.2 L ACS. APART FROM THE ABOVE FOUR MISTAKES POINTED OUT BY T HE LEARNED COUNSEL FOR THE ASSESSEE, OUR ATTENTION WAS ALSO DR AWN TO THE DEDUCTION GIVEN BY THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) TOWARDS CPWD/PWD RATES ADOPTED FOR VALUAT ION. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO VARIO US JUDGMENTS OF THE TRIBUNAL SUBMITTED THAT DEDUCTION UP TO 30% HAS BEEN PROVIDED IN SIMILAR TYPE OF CASES WHEREAS THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN ONLY 15% DEDUCTIO N. SIMILARLY, AS REGARDS SUPERVISION CHARGES IN THE DECISIONS OF THE TRIBUNAL DEDUCTION UPTO 12.5% OF SELF SUPERVISION CHARGES WA S HELD TO BE JUSTIFIED WHEREAS THE DEPARTMENTAL VALUATION OFFICE R HAS GIVEN DEDUCTION OF 2.5% ONLY. 23. AS OBSERVED BY US IN THE PRECEDING PARAGRAPHS W HEREIN FACTS EMANATING OUT OF THE SUBMISSIONS MADE BY THE LEARNE D COUNSEL FOR THE ASSESSEE, MULTIPLE VALUATION REPORTS PREPARED B Y THE REGISTERED VALUER AS WELL AS DEPARTMENTAL VALUATION OFFICER CL EARLY DEPICT THAT THE VALUATION OF INVESTMENT IN CONSTRUCTION OF THE BUILDING HAS BEEN ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 45 OVERSTATED AND LOOKING TO THE FACT THAT THE IMPUGNE D BUILDING IS SITUATED IN RATLAM, RATES TAKEN FOR THE PURPOSE OF VALUATION ARE EXCESSIVE. WE, THEREFORE, IN THE GIVEN FACTS AND CI RCUMSTANCES OF THE CASE, FIND IT JUSTIFIED TO CALCULATE THE VALUATION OF THE BUILDING AFTER GIVING RELIEF/DEDUCTION/RELAXATION, AS DISCUSSED AB OVE, AGAINST THE TOTAL VALUATION MADE BY THE DEPARTMENTAL VALUATION OFFICER VIDE HIS REPORT DATED 17.5.2006 IN FOLLOWING MANNER :- PARTICULARS AMOUNT RS. 1. VALUATION TAKEN BY D.V.O. BEFORE GIVING REBATE FOR SELF SUPERVISION AND THE ADDITION FOR CONSULTANCY AND EXTERNAL SERVICE CHARGES (APPEARING AT PAGE 65 OF THE PAPER BOOK) 2,15,56,938 2. DEDUCTION (I) DOUBLE ADDITION TOWARDS COST OF BASEMENT AND CONSTRUCTION WHICH THE ASSESSEE HAD NOT INCURRED AS THE BUILDING PURCHASED IN F.Y.2006-07 ALREADY CONSISTED OF BASEMENT AND CONSTRUCTION THEREON ON TOTAL AREA 256 SQ. MTR. 23,90,272 ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 46 (II) DOUBLE ADDITION FOR COST OF TERRACE FLOOR 5,12,982 (III) CONSTRUCTION COST INCURRED BY CHEQUE IN F.Y. 2015-16 WRONGLY INCLUDED IN F.Y.2011-12 12,08,979 1,74,41,705 LESS : DEDUCTION FOR SELF SUPERVISION @ 10% (AVERAGE OF PER CENTAGE HELD TO BE JUSTIFIED BY THE COORDINATE BENCH) 17,44,171 1,56,97,534 ADD : (I) CONSULTANCY AND INTERIOR WORK CHARGES 1,75,000 (II) EXTERNAL SERVICE CONNECTION CHARGES @ 5% 74,488 1,59,51,022 LESS : DEDUCTION FOR CPWD/PWD RATES @ 25% LOOKING TO THE PLACE OF CONSTRUCTION AS WELL AS PER CENTAGE OF DEDUCTION HELD TO BE JUSTIFIED BY VARIOUS COORDINATE BENCHES CONSISTENTLY 39,87,756 TOTAL COST OF THE BUILDING AT 71, BAJAJ KHANA ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 47 CHOWK, RATLAM 1,19,63,266 WE ACCORDINGLY HOLD THAT AS AGAINST TOTAL COST OF CONSTRUCTION OF THE IMPUGNED PROPERTY AT RS. 91,62,0 17/- DECLARED BY THE ASSESSEE (INCLUDING THE AMOUNT OF RS.3 0 LACS SURRENDERED DURING ASSESSMENT YEAR 2012-13), WE VALUE THE PROPERTY AT RS. 1,19,63,266/- THEREBY SUSTAI NING THE ADDITION OF RS.28,01,249/-. THE ASSESSEE GETS RE LIEF IN VARIOUS ASSESSMENT YEARS AS THE ADDITIONS WERE MADE IN SEPARATE YEARS. HOWEVER, OUR THIS DECISION IS TO BE MERGED WITH THE ADJUDICATION OF NEXT COMMON GROUND TAKEN UP B Y THE ASSESSEE. 24 APROPOS GROUND NO. 3 COMMONLY TAKEN BY THE ASSESSE E WHEREIN THE ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) OF CONFIRMING THE ADDITION IN VARIOUS YE ARS EVEN THROUGH THE INCRIMINATING MATERIAL RELATING TO TH E ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 48 ALLEGED UNDISCLOSED INVESTMENT IN CONSTRUCTION OF TH E BUILDING WAS ONLY FOUND FOR F.Y. 2011-12 I.E. ASSESS MENT YEAR 2012-13. 25. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED QUOTING THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS.DHARAMPAL LIMITED; ITA NO. 512/2016 DATED 21.8.2017 SUBMITTED THAT BOTH THE LOWER AUTHORIT IES ERRED IN SUSTAINING THE ADDITION IN THOSE ASSESSMENT Y EARS FOR WHICH NO INCRIMINATING MATERIAL WAS FOUND DURING TH E COURSE OF SEARCH AND, THEREFORE, THE ADDITION, IF ANY, TO BE SUSTAINED TOWARDS THE ALLEGED UNACCOUNTED INVESTMENT I N CONSTRUCTION OF BUILDING SHOULD BE MADE ONLY FOR ASSESSMENT YEAR 2012-13. 26. PER CONTRA, THE LEARNED DR VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES. ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 49 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AS ALSO GONE THROUGH THE JUDGMENT REFERRED TO AND RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. THIS FACT IS NOT DISPUTED AT ANY STAGE DURING THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) THAT APART FROM THE DOCUMENTS RELATING TO PURCHASE OF PROPERTY, INCRIMINATING MATERIAL RELATING TO CONSTRUCTION OF BUILDING WAS FOUND RELATING TO F.Y. 2 011-12 I.E. ASSESSMENT YEAR 2011-12. THE SEARCH PARTY AS WELL AS LEARNED ASSESSING OFFICER COULD NOT BRING ON RECORD ANY IOTA OF EVIDENCE IN THE SHAPE OF ANY BILLS FOR PURCHAS E OF BUILDING MATERIAL OR OTHER CONSTRUCTION COST WHICH WE RE OF ANY DATE BEFORE THE START OF F.Y. 2011-12. WE OBSERVE THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF DHARAMPAL PREMCHAND (SUPRA) ADJUDICATING THE SIMILAR ISSUE HELD TH AT THERE HAS TO BE INCRIMINATING MATERIAL TO JUSTIFY THE ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 50 ASSUMPTION TO JURISDICTION U/S 153A OF THE ACT QUA EACH OF THE ASSESSMENT YEARS FOR WHICH ASSESSMENT IS SOUGHT TO BE REOPENED. 28. SIMILAR VIEW WAS ALSO TAKEN BY HON'BLE HIGH COURT OF DELHI IN THE CASE OF MEETA GUTGUTIA (SUPRA). 29. SIMILARLY, THE HON'BLE HIGH COURT OF GUJARAT IN T HE CASE OF DEEPAK J. PANCHAL (2017) 98 CCH 0074 GUJHC HELD THAT THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMEN T U/S 153A OF THE ACT FOR BLOCK PERIOD MAY MAKE ADDITIO N CONSIDERING THE INCRIMINATING MATERIAL FOUND FOR THE YEAR UNDER CONSIDERATION ONLY WHICH WAS COLLECTED DURING SEARCH. 30. APPLYING THE FACTS TO THE ABOVE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT (SUPRA), WE ARE OF THE VIEW THAT THE ADDITION TOWARDS UNACCOUNTED INVESTMENT IN CONSTRUCTION OF BUILDING SHOULD BE RESTRICTED ONLY TO ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 51 ASSESSMENT YEAR 2012-13 BECAUSE THERE IS NO BASIS TO APPORTION THE CONSTRUCTION COST FOR EARLIER TWO ASSESS MENT YEARS MORE SO THERE IS NO INCRIMINATING MATERIAL IN POSSESSION OF THE REVENUE. WE ACCORDINGLY SUMMARISE THE ISSUE OF UNACCOUNTED INVESTMENT IN CONSTRUCTION OF BUILDING BY HOLDING THAT THE ADDITION TO BE SUSTAINED AT RS.28,01,249/- WITH THE DIRECTION TO THE ASSESSING OFFICER TO TAX THE SAME AS THE INCOME FOR THE ASSESSMENT YEAR 2012-13. THIS ADDITION SUSTAINED BY US IS OVER AND AB OVE THE SURRENDER OF RS. 30 LACS MADE BY THE ASSESSEE AS W ELL AS THE COST OF CONSTRUCTION DISCLOSED IN THE REGULAR BOOKS OF ACCOUNTS. 31. ACCORDINGLY, CROSS APPEALS FOR THE ASSESSMENT YEA RS 2010-11, 2011-12 AND 2012-13 ARE PARTLY ALLOWED. 32. IN THE RESULT, FOR THE ASSESSMENT YEAR 2007-08 T HE REVENUES APPEAL AND ASSESSEES CROSS OBJECTION ARE ALLOW ED ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 52 AND CROSS APPEAL FOR A.Y. 2010-11 TO A.Y. 2012-13 ARE PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 31 MAY, 2018. SD/- SD/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER 31 MAY, 2018 DN/- COPY TO APPELLANT/RESPODENT/PR.CIT/CIT(A)/DR/GUAR D FILE BY ORDER PRIVATE SECRETARY ANIL KATARIA IT(SS)A NOS.177 TO 179,984, CO 49 & 163 TO 165/2017 53