THATHAIYENGARPET VENKATESAN GOPALAKRISHNAN BADRINARAYANAN,KARUR vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIR 2 COIMBATORE, COIMBATORE

Since identical facts and issues are involved in both these appeals, these appeals were heard together and disposed of by this common order. For the sake of clarity and convenience the facts relevant in the ITA No.3748/CHNY/2025 for the Assessment Year 2013-14 are stated herein:

The Assessee in ITA No.3748/CHNY/2025 raised the following grounds of appeal : “1) Reopening under section 153A is invalid as there were no incriminating material documents. The Original Order dated 23-06-2021 itself is invalid. Consequently. rectification order under section 154 for the original order is also invalid as decided in the case of 2023(4) TMI 1056-SC/ (2023) 454 ITR 212 (SC) PCIT, Central Circle 3 Vs Abhishar Buildwell Pvt Ltd.

Briefly, the facts of the case are that the appellant is an Individual deriving income under head “business”. The appellant is partner in the partnership firm i.e.1) M/s. Krishna Plywoods, 2) M/s.Krishna Mobiles and 3) Krishna Laminates. The appellant filed the original Return of Income for the Assessment Year 2013- 14 on 31.03.2014 disclosing income at Rs.36,92,910/-.

Subsequently, the search and seizure operations u/s.132 of the Act were conducted in the premises of the appellant on 21.09.2017. During the course of search and seizure operations, certain incriminating material was stated to have found. The notices u/s.153A were issued 25.09.2019 for A.Y. 2013-14. In response to notice u/s.153A of the Act, the appellant filed the Return of Income on 10.12.2019 disclosing a total income at Rs.36,92,910/- same as shown in the original Return of Income filed u/s.139(1) of the Act. Against the said Return of Income, the assessment was completed accepting the returned income vide order dated 23.06.2021. During the course of assessment proceedings, the Assessing Officer found that the appellant made investment on construction of building at No.17, Ramakrishnapuram, 4th Cross Road, Sengunthapuram, Karur – 639001 during the Financial Year 2012-13 to 2017-18 and the cost of construction disclosed by the appellant for each assessment year was as under : F.Y. Investment amount (in Rs.) 2012-13 23,17,992 2013-14 33,67,837 2014-15 48,09,240 2015-16 8,06,659 2017-18 8,99,514 6. However, in order to find out the actual cost of construction incurred by the by the appellant, the Assessing Officer referred the matter to the valuation officer under the provisions of section 142A of the Income Tax Act. The said valuation report was not received by the Assessing Officer till the completion of the assessment on 23.06.2021 from the DVO estimating the total cost of construction of building at Rs.2,51,59,000/- as against the cost of construction show by the appellant at Rs.1,22,01,242/-. Accordingly, the Assessing Officer had arrived difference in the cost of construction of building as under : A.Y House construction Cost of construction Difference expenditure Reported by Valuation (unexplained disclosed/Declared report (distributed investment U/s 69B) value by the assessee proportionately based – enhancement of on the assessee’s income declared value 2013-14 Rs.23,17,992 Rs.47,80,210 Rs.24,62,218 2014-15 Rs.33,67,837 Rs.69,43,884 Rs.35,76,047 2015-16 Rs.48,09,240 Rs.99,15,162 Rs.51,05,922 2016-17 Rs.8,06,659 Rs.16,63,010 Rs.8,56,351 2017-18 - - - 2018-19 Rs.8,99,514 Rs.18,56,734 Rs.9,57,220 Total Rs.1,22,01,242 Rs.2,51,59,000 Rs.1,29,57,758

Based on the above information, the Assessing Office reached conclusion that there is under statement of cost of construction of Rs.24,62,218/- for the A.Y.2013-14. Accordingly, a notice issued u/s.154 of the Act, dated 29.12.2021 proposing to make the addition of differential amount of Rs.24,62,218/- for the A.Y.2013-14 was issued. However, the appellant had not responded to the notice u/s.154 of the Act. In the circumstances, the Assessing Officer had proceeded with passing of the order u/s.154 vide order dated 23.06.2021 rectifying the original assessment order dated 23.06.2021, made addition of Rs.35,76,047/- to the assessed income.

Being aggrieved by the above order passed u/s.154 of the Act, an appeal was filed before the ld.CIT(A) challenging the jurisdiction of Assessing Officer u/s.154 of the Act to make addition based on the valuation report and also that Assessing Officer cannot make addition based on the valuation report without rejecting the books of accounts. However, the ld.CIT(A) rejected the above contentions of the appellant, however, directed the Assessing Officer to restrict the addition to Rs.24,62,218/- as against the addition of Rs.35,76,047/- made by the Assessing Officer.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal.

It is submitted that the Assessing Officer ought not have exercised the jurisdiction u/s.154 of the Act to rectify the assessment based on the valuation report received subsequent to the completion of the assessment proceedings. It is further submitted that the valuation report contains several mistakes, such as repeating of item twice, estimating the excess quantities, not showing details of calculation and the underlying assumptions made. Thus, the addition based on the incorrect valuation report cannot be sustained.

At the outset, we find that there is a delay of 235 days in presenting appeal before this Tribunal. The appellant filed an Affidavit seeking the condonation of delay on the ground that the delay had occurred on account of the fact that Accountant, who was working with him for more than 10 years left suddenly and the new Accountant took time to understand the case, as a result, the appellant was not able to file the appeal within the stipulated time.

We have perused the Affidavit and the averments made in the Affidavit. The averments made in the affidavit remain uncontroverted by Learned CIT-DR. The Hon’ble Supreme Court in the case of M.Kalappa Sethi Vs. M.V.Laxmi Narain Rao AIR 1973 SC 627, held that an uncontroverted affidavit shall be taken as an affidavit on fact. In the light of this legal position, we are of the considered opinion that the delay had occurred in filing the appeal on account of Bonafide reasons and the explanation cannot be brushed aside. Therefore, we are of considered opinion that there is a reasonable and sufficient cause for the delay, hence, the delay is condoned. Accordingly, we admit the appeal for adjudication on merits.

On the other hand, learned CIT-DR submits that in response to show cause notice issued u/s.154 of the Act, the appellant had not responded to the notice u/s.154 of the Act, addition was made by the Assessing Officer based on the DVO’s estimation the actual cost of construction. And the DVO Report is binding on the Assessing Officer. Further, he submitted that the Assessing Officer can very well rectify the assessment order based on the DVO’s Report received subsequent to the completion of the assessment proceedings by virtue of provisions of sub section 5 of section 155 of the Act. Thus, it is submitted that the order passed by the ld.CIT(A) is a reasoned one does not require interference by this Tribunal.

We heard rival submissions and perused the material available on record. The first ground of appeal challenges the very validity of assessment u/s.153A of the Act in the absence of any incriminating material found as a result of search and seizure action. During the course of hearing of appeal, ld.Counsel fairly conceded that the assessment proceedings for A.Y.2013-14 and A.Y.2014-15 are abated assessment, therefore, even in the absence of any incriminating material. The Assessing Officer can complete the assessment based on the information which had come to the knowledge of Assessing Officer during the course of assessment proceedings. Therefore, these Grounds of Appeal stands dismissed.

The second Ground of Appeal challenges the validity of exercise of jurisdiction by the Assessing Officer u/s.154 of the Income Tax Act to rectify the assessment order based on the DVO’s Report.

Admittedly, the undisputed facts of the case are that during the course of assessment proceedings, pursuant to the Return of Income filed by the appellant in response to notice u/s.153A of the Act, the Assessing Officer had referred the matter to the valuation cell for the purpose of determination of the cost of building of the property situated house at No.17, Ramakrishnapuram, 4th Cross Road, Sengunthapuram, Karur – 639001. The Assessing Officer had not referred to any material found as a result of Search and Seizure operations, indicating under statement of cost of construction that the appellant had suppressed the cost of construction of the building. Therefore, it can be safely concluded there was not material found as a result of search and seizure operations. Further, the DVO’s report was not received before the conclusion of the assessment proceedings. The Assessing Officer had invoked the provisions of section 154 of the Act to rectify the assessment made u/s.143(3) r.w.s 153A of the Act. The DVO’s Report received subsequent to completion.

The question that is required to be determined by us is whether the DVO’s Report received subsequent to the completion of the assessment proceedings would constitute “record” as contemplated under the provisions of section 154 of the Act. No doubt, the Assessing Officer is entitled for the purpose of exercising the power of rectification of jurisdiction to look into not only order of the assessment, but whole evidence and the law applicable for ascertaining whether there was error apparent from the record. However, he cannot go beyond the record and look into fresh evidence or material, which had not been on record at the time the order sought to be rectified was passed. Reliance in this regard is placed on the decision of Gammon India Ltd. Vs. CIT 214 ITR 50. There is no provision under the Income Tax enabling the Assessing Officer to rectify the assessment order based on the DVO’s Report received subsequent to the completion of the assessment. The provisions of section 155(15) cannot be invoked to rectify the assessment based on the DVO’s Report received subsequent to the completion of the assessment proceedings. It is also settled position of law that the valuation report received subsequent to the original assessment proceedings cannot form the basis for initiation of reassessment proceedings. In support, the ld.Counsel relied on Hon’ble Calcutta High Court in the decision of Reliance Jute and Industries Ltd. v. Income-Tax Officer 150 ITR 643. Reliance can placed on the judgement of Hon’ble Supreme Court on the decision of ACIT vs. Dhariya Construction Co. 328 ITR 550.

In the light of the above legal position, we are of the considered opinion that the Assessing Officer cannot exercise the jurisdiction to rectify or amend the assessment order based on the report of DVO rectified subsequent to completion of the assessment. Therefore, we direct the Assessing Officer to delete the addition to Rs.24,62,218/-.

In the result, appeal filed by the assessee stands partly allowed.

Since the facts and issues involved in the above captioned appeal is identical, therefore, our decision in ITA No.3748/CHNY/2025 shall apply mutatis mutandis to this appeal of the assessee i.e. ITA No.3749/CHNY/2025 also. Accordingly, grounds of appeal filed by the assessee are partly allowed.

To sum up, both appeals filed by the Assessee are partly allowed. Order pronounced in the open Court on 22nd July, 2026.