ASSISTANT COMMISSIONER OF INCOME TAX, CHANDIGARH vs. SARAF THE JEWELLERS, PUNJAB

4. Notwithstanding the above ground of appeal, the adoption of CPWD rates by the DVO is contrary to the judgment of Punjab & Haryana High Court in the case of Sh. Rajesh Mahajan, in which, it has been held that CPWD rates are higher by 30% and the benefit of 15% is to be for self-supervision and thus, the addition has been made u/s 69C r.w. Section 115BBE of the difference of the alleged cost of construction is not sustainable.

3 5. That CIT(A) has erred in making the addition of Rs.1,03,81,120/- on account of cash as found during the course of search, disregarding the valid contention of the assessee with regard to availability of amount out of sale of ‘short stock’ as found and admitted by the Assessing Officer during the course of search in respect of Gold Jewellery and rejecting such valid explanation and applying the provisions of Section 115BBE on such addition is not justified.

6. That the finding of CIT(A) in conforming the above addition of cash is contrary, since already having accepted the contention of the assessee about the availability of amount of short stock as per books of account and, as such, the confirmation of addition is against the facts and circumstances of the case.

7. That the Ld. CIT(A) has erred in rejecting the ground of appeal with regard to approval as granted u/s 153D which is without any application of mind of the Addl. CIT and he has failed to consider the judgment of Hon’ble Apex Court in the case of ACIT vs. Serajuddin & CO. (2024) 168 Taxmann.com 118 and many other judgments of different high courts and benches of the ITAT. 8.That the confirmation of addition is against the facts and circumstances of the case.

1.3 The revenue’s grounds of appeal read as under: -

1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs.9,57,05,100/- sale suppression during AY 2021- 22 was to be considered as undisclosed income of the assessee.

2. Whether on the facts and circumstances of the case the Ld. CIT(A) failed to appreciate the fact that the assessee failed to declare the sale receipt of Rs.9,57,05,100/- in the books of account for the said year.

3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs.14,43,53,102/- income from explained sources during the AY 2021-22 was to be considered as unexplained cash credit u/s 68 of the IT Act, 1961.

4. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs.20,59,380/- & Rs.1,29,35,806/- income from unexplained investment in stock during the AY 2021-22 was to be considered as unrecorded business income u/s 69A of the Income Tax Act. 1.4 The Ld. AR advanced arguments on legal grounds as well as on merits by drawing our attention to various documents as placed on record. Reference has been made to various judicial decisions, the copies of which have been placed on record. The Ld. CIT-DR also advanced arguments supporting the assessment order of Ld. AO. These cross-appeals were heard along with cross-appeals for AYs 2019-20 & 2020-21. It was admitted position that the facts as well as issues are substantially the same and our 4 adjudication in the lead appeal would have an equal application to these cross-appeals also. The lead order has been passed by us in cross-appeals for AY 2019-20 (ITA Nos.1230 & 1592/Chandi/2025 dated 10-03-2026) which is followed by order for cross-appeals in AY 2020-21 (ITA Nos.1231 & 1593/Chandi/2025 dated 11-03-2026). In the said background, our adjudication would be as under. Assessment Proceedings 2.1 The assessee being resident-firm was subjected to search action u/s 132 on 21-01-2021 pursuant to which impugned assessment has been framed against the assessee. The assessee filed return of income u/s 139 on 18-01-2022 declaring income of Rs.649.82 Lacs. The case was subjected to scrutiny and a notice u/s 143(2) was issued on 04-02-2022 which was followed by notices u/s 142(1) from time to time which was duly responded to by the assessee. 2.2 The first issue that was identified by Ld. AO was alleged unaccounted sales on various units as sold by the assessee during AYs 2019-20 to 2021-22. The units were in the shape of Double Story Showrooms (DSSs) / Shop-cum-offices (SCOs).During survey u/s 133A at assessee’s site office viz. Mohali Citi Centre, GMADA, Aerocity, Mohali, certain digital loose papers were found and impounded as Annexure-1 (Pages 16,17 & 18). The seized papers, inter-alia, contained list of customer’s names, sale price, unit and address along with welcome letter cum receipt allegedly issued by the assessee against sale of Shop-cum-office (SCOs) / Double Story Shops (DSSs). The contents thereof have been extracted by Ld. AO in the assessment order. The Ld. AO, referring to certain whatsapp images as 5 recovered during above action coupled with loose sheets and welcome letters, made allegation of receipt of cash against sale of units by the assessee. 2.3 The complete details of 126 units as sold by the assessee during FYs 2018-19 to 2020-21 at Mohali Citi Center and the prices declared by the assessee in the regular books was tabulated and compared with prices mentioned in the seized documents and difference was computed. The statement of one Shri Santokh Singh, as recorded by investigation wing, was referred to support the allegation of receipt of on-money. In the above background, Ld. AO tabulated variation in 41 sale instances and the suppression of sales was quantified for AYs 2019-20 to 2021-22. The suppression for this year worked out to be Rs.1570.95 Lacs. Though the assessee raised various objections including the averment that the welcome letter was nothing but roughly drafted letters only showing higher values to make better negotiations with the customers and strike good bargains with the customers, all these objections stood rejected by Ld. AO. Finally, this amount was added as undisclosed income of the assessee. 2.4 The Ld. AO, thereafter, went on to extrapolate similar findings for the remaining units also. The addition of Rs.1570.95 Lacs covered 41 sale instances. The assessee had sold 126 units in the three years and similar estimation was to be made for remaining 85 sale instances also. The market price of the SCOs was searched in the public domain website i.e., 99acres.com and average price per square yards was worked out at Rs.1,35,000/- (approx.). The same was applied to remaining 85 unitsas well and sale suppression was worked out for all the three years for these units.

6 The sale suppression for this year worked out to be Rs.957.05 Lacs which was further added to assessee’s income. 2.5 The third addition as made by Ld. AO was for Rs.318.91 Lacs. The same was on the allegation that the assessee made unaccounted construction at Mohali Citi Centre. This addition stem from the fact that the assessee claimed to have sold the plots only whereas construction was outsourced to external entities namely M/s DS Construction Co. and M/s DCS Structure Company. In this regard, statement of Shri Roshan Singh (GM) was recorded who stated that he was coordinating all the overall monitoring and construction related work including coordination with engineers and Architects and he reported to Shri Anil Goyal. He stated that they were selling complete SCOs. At the time of selling, the buyer was asked to issue cheques in favor of these construction companies and an agreement was signed between the customers and these construction companies for construction. Shri Anil Goyal stated that no written agreement was signed between STJ and these construction companies. However, Ld. AO observed that all the design, approvals and plans of the projects were finalized and decided by the STJ group and there was no role of the customers in it. Secondly, no liberty was available to customer with regard to customization or exercise any user specific choices as the design of all the SCOs and showrooms was required to conform to larger plan of the project which had already been decided by the STJ group. Therefore, the agreement between the buyer and construction companies was clever arrangement by STJ group to bring 7 down the cost of the showrooms and SCOs to enable billing at reduced price to evade GST. To support the same, Ld. AO referred to the statement of Shri Santokh Singh who stated that he purchased fully constructed DSS from the assessee. The payment was made in two parts i.e., one in the name of the assessee and the other in the name of M/s DCS Structure Company. At the time of booking, construction was already completed which would show that the agreement between the construction companies and customers was a clever arrangement by the assessee group so as to evade stamp duty and GST. For external validation, reply of Jasmeen Kaur Varaich (in response to summons issued by the investigation wing) was also referred to by Ld. AO. As per her reply, an agreement was signed between her and the assessee in which it was agreed that the assessee would get the work completed from M/s DS Construction Co. The copy of the agreement has been extracted at para 2.4 of the assessment order. On the basis of these facts, Ld. AO alleged that constructed units were sold at much higher rates than the declared sale in the regular books and the difference was received in cash by the assessee. During assessment proceedings, the assessee stated that 29 units were constructed by it from two construction companies viz. M/s DS Construction and M/s DSC construction. The construction expenses were booked in the regular books of accounts. However, the case was referred by Ld. AO to DVO for valuation of the construction cost as declared by the assessee in the regular books of accounts. The report of DVO was received on 01-07-2022 8 who valued the construction cost at much higher figures than the recorded value. On the basis of the same, Ld. AO made allegation of unaccounted expenditure by the assessee. The assessee objected to valuation on the ground that CPWD rates were used instead of PWD rates. The Ld. AO rejected the same on the ground that valuation was done as per CBDT guidelines. The estimated difference was summarized as under: - Declared Cost Cost as per base DVO estimation Difference of 2012 Rs.1,38,59,554/- Rs.1,24,86,085/- Rs.4,09,97,200/- Rs.2,85,11,175/- After rejecting assessee’s objection to valuation, the amount of Rs.285.11 Lacs was added to the income of the assessee as unexplained expenditure u/s 69C. One unit had not been declared as constructed unit by the assessee to DVO. The construction of the same was estimated at Rs.33.80 Lacs which was further added to the income of the assessee. 2.6 The fourth addition as made by Ld. AO stem from the allegation that the assessee reflected higher Gross Profit (GP) in jewellery business during this year. Upon perusal of financials of Jewellery segment, Ld. AO observed that GP Rate as declared by the assessee in this year was 40.02% whereas GP rate in earlier year AY 2019-20 was 11.84%. The assessee attributed higher GP rate to wide fluctuation in gold prices during the year. It was stated that the assessee maintained complete books of accounts and supporting documents and therefore, no adverse view was to be taken on this account. The Ld. AO, finding minor discrepancies in the sales bills (i.e., some sales bills were unsigned, some bills were not having customer’s identification, most of the bills were less than Rs.1 Lacs etc.), Ld. AO alleged that the GP 9 rate as declared by the assessee was not verifiable. The assessee was having another sister concern M/s KLG Jewellers which was closely related to functioning of the group. Any enhancement of GP rate due to sharp jump in gold prices would have a similar impact on both the firms since the two firms were closely inter-related. The percentage increase in GP rate of M/s KLG Jewellers for AYs 2020-21 & 2021-22 was 2.77% & 31% respectively. Assuming / applying similar growth rates to the GP rate of the assessee, Ld. AO proceeded to compute excess profit as declared by the assessee in jewellery business. The same was quantified at Rs.1525.03 Lacs for AY 2020-21 and Rs.1443.53 Lacs for AY 2021-22. The assessee objected to the same on the ground that M/s KLG Jewellers was franchise of Tanishq which charges a profit before supplying the stock to the assessee. The assessee is able to make purchases at a lower cost from the market. The income declared in the regular books of account could not be treated as income from undisclosed sources. However, Ld. AO compared the GP rates of two other entities viz. Shyam Jewellers and Kalyan Jewellers who declared profits of 11.62% and 5.36% respectively in AY 2020-21 and profit of 11.19% and 4.93% respectively in AY 2021-22. Finally, the assessee’s submissions were rejected and alleged excess income as shown by the assessee was added as unexplained cash credit u/s 68 r.w.s. 115BBE of the Act. 2.7 The fifth addition was addition of difference in stock at jewellery showrooms. The assessee had two showrooms viz., 45, NAC Manimajra, Chandigarh and another showroom at Sector 17, Chandigarh. The stock was valued during search. The difference in net stock was computed at 10 5368.904 grams which was confronted to Shri Ayush Goyal who stated that it could be explained by Shri Anil Goyal. During assessment proceedings, the assessee sought reconciliation of the stock which is extracted at Para 4.2 of the assessment order. It was stated that the assessee maintained separate stocks for both the locations. There was excess stock at Sec.17 premises whereas there was shortage of stock at SCO 45, NAC, Manimajra. Overall, there was shortage of stock with the assessee. The assessee claimed setting-off of the two components. However, Ld. AO observed that the assessee adopted the practice of manual billing but could not produce documentary evidences with respect to regularization of these manual bills. The modus operandi as adopted by the assessee leaves ample scope to the assessee to manipulate its sales which would ultimately result in discrepancy of physical stock with the books. Even if the contention that stocks were maintained separately for both the units is considered, the assessee could not be allowed to club the two units while claiming the benefit of discrepancies in stocks. Maintenance of separate stock implies that the sales and purchases of the two units were being recorded separately. Thus, any discrepancy in stock would arise only when the unauthorized sales or undisclosed purchases would be carried out. The telescoping benefit of shortage in stock in one unit with excess stock in other units could not be granted in the absence of stock movement between the units. Finally, the shortage of stock at 4979 grams was to be added to the income of the assessee at gross profit rate. The assessee already offered to tax GP rate for 2421 grams of gold. On the remaining 2558 grams (valued at Rs.129.35 Lacs), Ld. AO applied GP rate of 15.92% and 11 made addition of Rs.20.59 Lacs. The excess stock at Sec.17 branch was valued at Rs.129.35 Lacs which was fully added to the income of the assessee. 2.8 The last of the addition was on account of excess cash found from the premises of the assessee. The cash found at SCO 45, NAC, Manimajra was Rs.103.81 Lacs which was added to assessee’s income u/s 69A for want of an acceptable explanation from the assessee. 2.9 Finally, the assessment was framed on 28-12-2022 which was subjected to assessee’s challenge in first appeal. Appellate Proceedings 3.1 The assessee, by way of detailed written submissions, assailed the assumption of jurisdiction on legal grounds and also challenged quantum additions on merits. The Ld. CIT(A), after due consideration thereof as well as material on record, upheld the addition of alleged on-money for Rs.1570.95 Lacs but deleted addition of Rs.957.05 Lacs which was made on the basis of extrapolation. The same form subject matter of cross- appeals before us. 3.2 On the issue of third addition of Rs.318.91 Lacs which represent difference in DVO valuation and recorded values and alleged sale of one unit, Ld. CIT(A) endorsed the view of Ld. AO that the assessee was not merely selling plots but delivering completed or semi-completed units. The submissions that the two construction companies were independent contractors as engaged by the buyers was not convincing. The prices were artificially split between the assessee and these so-called contractors. The assessee did not furnish any independent valuation to demonstrate that the 12 DVO’s valuation was erroneous. Finally, the addition was confirmed against which the assessee is in further appeal before us. 3.3 On the fourth issue of alleged higher GP in jewellery business, it was noted by Ld. CIT(A) that the assessee was running two retail showrooms selling gold and diamond jewellery. The assessee’s books of accounts were duly audited and quantitative stock records of all items were maintained. The purchases were through verifiable banking channels. No discrepancy was found in the purchase vouchers or stock records. Therefore, the book results could not be discarded unless there was clear evidence of suppression of sales which was not the case. M/s KLG Jewellers was exclusive franchisee of Tanishq and was bound to sell branded products at fixed prices as determined by franchisor. Its margin structure, cost profile and pricing policy is entirely different from that of an independent jewellery entity like the assessee who sells its own design and competes on prices in the open market. The department had verified the franchise status of M/s KLG Jewellers during the course of search itself. Therefore, M/s KLG Jewellers could not be said to be an independent retailer. Accordingly, the allegation of Ld. AO had no foundation. Further, there was no unexplained cash credit in terms of Sec.68. The provisions would be attracted only when a credit entry is found in the books of the assessee and the assessee is unable to explain its nature and source. The receipts under consideration were recorded sales proceeds. Their nature was known and their source was the trading activity of the assessee. Therefore, this addition was deleted against which the revenue is in further appeal before us.

13 3.4 On the issues of addition on account of discrepancy in stock, it was noted there was deficit in physical stock at SCO 45, Manimajra to the extent of 4979 grams. The assessee contended that the department did not consider the stock of Sec.17 showroom while computing the discrepancies. If assessee’s reconciliation is considered, then on overall basis, there would be net shortage of only 2421 grams of stock because Sec.17 branch had excess stock. The assessee contended that it already offered profit element in net shortage of stock in the return of income and therefore, no further addition was warranted. The Ld. AO denied the set-off of the two components. 3.5 On the issue of cash found for Rs.103.81 Lacs, it was contended that the cash was generated out of out-of-books sales corresponding to the shortage of stock. Since GP element in shortage of stock was already offered, the seized cash was part of the same stream of unaccounted turnover. Shri Anil Goyal, in recorded statement, stated that the cash belonged to STJ group as a whole which comprises multiple firms. However, during assessment proceedings, it was contended that the cash belonged to assessee-firm. 3.6 The assessee further contended that it was a single entity carrying on the jewellery business through two branches. In the normal course of business, the jewellery is frequently transferred from one unit to the other unit to meet customers’ demand. Since both showrooms belong to the same entity, such movements are not separately recorded in the stock register. Consequently, a shortage at one branch may correspond to an excess at another branch. The correct view would be to consider the two 14 branches together as part of one consolidated business. The assessee already offered additional income to account for GP element on net shortage of stock to the extent of Rs.30,36,002/- in the return of income. The shortage in stock to the extent of 4979 grams was equivalent to Rs.243.97 Lacs whereas the value of excess stock of 2558 grams worked out to be Rs.125 Lacs. In addition, cash of Rs.103 Lacs was found at the time of search. When these figures are telescoped together, nothing would remain to be further added. The shortage of stock would explain the investment in excess stock as well as seized cash. Therefore, separate addition was not warranted for stock and cash. 3.7 The findings of Ld. CIT(A) are contained in para 7.3.1 onwards. The Ld. CIT(A) concurred that when both the showrooms belonged to the same assessee under one PAN and the final accounts are consolidated, in such a situation, discrepancies at different branches have to be looked at together and nor separately. If shortage is found at one branch and excess stock is found at the other branch, the most reasonable inference would be that there had been inter-branch movement of stock that was not recorded at the time of search. In a jewellery business, such transfers are common since customers demand variety and stock is shifted quickly between different outlets. The AO’s reliance on manual bills may indicate that there were lapses in recording of sales but it does not disprove the possibility that shortage of stock at one branch and excess at the other are inter- connected. To tax the same 2558 grams twice, once by treating it as shortage at one showroom with addition of gross profit and again adding the full value of excess stock at another branch, would not be justified. The 15 assessee already offered additional income for profit element on net shortage of stock. The disclosure adequately covers the income element. The double taxation could not be permitted. The Hon’ble Madras High Court in the case of KSM Guruswami Nadar & Sons (19 Taxman 533) recognized that stock discrepancies at different locations belonging to the same assessee could be netted. The other decisions of Tribunal also support the grant of telescoping benefit to the assessee. Therefore, the estimated GP addition of Rs.20.59 Lacs as made by Ld. AO was deleted. Consequently, by applying similar logic, the addition of Rs.129.35 Lacs for excess stock was also deleted. Aggrieved, the revenue is in further appeal before us. 3.8 On the issue of cash found for Rs.103.81 Lacs which was treated as unexplained money u/s 69A, the assessee contended that this cash represent proceeds of unrecorded jewellery sales which had already led to shortage of stock and since gross profit on such shortage has been offered to tax, no separate addition is called for. However, Ld. CIT(A) noted that the statement given at the time of search that the cash belonged to the assessee group was abandoned and during assessment proceedings, it was claimed that the cash was generated out of unrecorded sales of the assessee. Such a shift in stand was without any evidence and raise serious doubts about the credibility of the explanation. When different versions are given at different stages, the burden would be on assessee to prove that the cash was indeed generated from sale of jewellery. No reconciliation statement, no customers’ records and no books were produced to establish any nexus. The presumption of Sec.132 (4A) and Sec. 292C would apply 16 and therefore the benefit of telescoping could not be granted to the assessee. Moreover, the assessee offered additional income of Rs.30.36 Lacs only which merely represent gross profit margin embedded insales and cannot explain the entire sale proceeds found in cash form. The seized cash represent total receipts of an unrecorded activity whether it was property dealing or jewellery business. In the absence of any clear and consistent explanation supported by records, the only conclusion would be that the assessee had failed to discharge the burden u/s 69A and therefore, the addition was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 4. The first two issues viz. receipt of alleged on-money on sale of units and addition on the basis of extrapolation has been adjudicated by us in cross-appeals for AY 2019-20 (supra) as under: - 4. We find that the assessee-firm came into existence on 10-03-2016. From the written submissions of Ld. AR, it emerges the assessee had entered into real estate business in February, 2018 and it enrolled for bid before statutory authority GMADA. The assessee was accorded permission by GMADA for construction of commercial site measuring 28348.87 Square meters in Block-F, Aero City, SAS Nagar, Mohali vide allotment letter dated 08-02- 2018. The assessee paid 15% of the initial amount and the remaining 85% of consideration was to be paid in 12 half- monthly installments with interest of 9%. Any delay in payment would attract higher interest rate of 14%. The delay could be condoned for maximum period of 3 years from due date and in case of breach of conditions of allotment letter, 10% of total price plus interest due till date would be forfeited and the site or building would be liable to be resumed. These facts are borne out of allotment letter as issued by GMADA to the assessee which has been placed in the paper-book. It could also be seen that this was the first real estate project for the assessee and there was huge burden on the assessee to make payment to GMADA within stipulated time. At the same time, the project had to be completed well within time and the assessee was to sell DSSs / SCOs within the shortest possible of time on the basis of negotiation keeping in mind that substantial amount of payment that was to be made to GMADA besides constructing the site. The assessee majorly gave the contract for construction of SCOs / DSS to third-parties to speedily construct major portion so as to attract the customers and sell the same. In order to arrange funds, the assessee adopted various marketing and sales strategies for the speedy sale of SCOs / DSSs and the assessee would negotiate with prospective buyers depending upon their willingness and financial capacity for 17 purchasing a particular size and location of SCOs / DSSs. In such circumstances, difference prices were quoted to different customers depending upon marketing conditions and urgency and margin for negotiation so as to maximize sales. The same explain variation of sale prices amongst customers for various units. To collect higher advances from customers, the assessee apparently prepared welcome letters for individual SCOs / DSSs which were displayed at business premises so that the visiting customers could see that substantial advanced had already been received from other buyers thereby enhancing the confidence in the project. As per assessee, these letters were roughly drafted letters indicating higher amount of booking to build up confidence amongst customers regarding the demand of the project and so as to facilitate negotiations. These letters were used only as a marketing tool to demonstrate demand for SCOs / DSSs and to support negotiations. A sample copies of these welcome letters have already been extracted in the assessment order. Upon perusal of the same, it could be seen that there is no signature either of the assessee or of the customer and only certain rate and amount received has been mentioned. Pertinently, there is no mention of any cash component in the deal. The letter merely states the customer’s name, unit number, rate and payment received. The same has not been acknowledged by any of the parties to the transaction. The same are not in the nature of any agreement, allotment letter, receipt or any legally enforceable document. No corroborative evidences such as cash receipt, bank trail, agreement to sale or confirmation from buyer has been brought on record to substantiate the allegation of receipts of on-money. The payment so received as per welcome letters matches with assessee’s regular books of accounts and the payments have been received through normal banking channels only. There is no mention of the fact in the welcome letter that the remaining consideration would be paid in cash and no such cash is shown to have exchanged between the parties. The findings of Ld. CIT(A) that post-search investigations, the buyers’ statements were recorded wherein the purchaser admitted to paying a portion of the consideration in cash over and above the registered value, is factually incorrect. Nothing of that sort could be borne out of assessment order. Even if presuming that such statement was ever recorded, the same was never confronted to the assessee and the same, at the most, would be third-parties’ statements. Unless the same are confronted to the assessee or the assessee is afforded opportunity of cross-examination of the so called buyers’ as alleged by Ld. CIT(A), the same, on standalone basis, could not be relied upon to make the impugned additions in the hands of the assessee since the same would be violative of principles of natural justice. It is another fact that no such statement has otherwise been referred to by Ld. AO in the assessment order nor such a fact of recording of statements have been demonstrated before us. Therefore, these findings of Ld. CIT(A) could not be accepted. The only statement as referred to by Ld. AO is the statement of Shri Santokh Singh which, in fact, favors the case of the assessee that the consideration was mentioned in the welcome letter do not representation actual sale consideration for the assessee.

6. It could further be seen that the digital loose excel sheets which have been considered by Ld. AO are undated, unsigned bearing no details of receipt of alleged on-money by the assessee.These loose excel sheets have no corroboration with any other material on record. Similar is the case with whatsapp chats as relied upon by Ld. AO to fortify its allegation. The same are bereft of any third-party corroboration. It is trite law that no addition could be made merely on the basis of presumption, assumptions, conjectures or surmises. Pertinently, no enquiries have been made by Ld. AO from any of these buyers (except recording of statement of Shri Santokh Singh) to corroborate the allegations neither any such incriminating statement is borne out of the orders of lower authorities. It is settled law that no addition could be made merely on the basis of loose papers unless the same is corroborated by cogent evidences. It could be seen that no evidence of excess cash or unexplained investment by the assessee has been found during search proceedings since the only addition made is addition of alleged unaccounted sales. Therefore, the addition made by Ld. AO merely on the basis of welcome letters and loose sheets is misconceived and unjustified. The allegation that the units were sold at much higher price do not have any foundation.

7. Considering the facts and circumstances of the case and in the light of our findings, it is to be concluded that the allegation of Ld. AO remains unsubstantiated. We find substantial merits in the argument of Ld. AR and therefore, we delete the impugned addition of Rs.810.75 Lacs as made by Ld. AO and confirmed by Ld. CIT(A). The assessee succeeds in corresponding grounds of appeal. This being so, the addition of Rs.350.16 Lacs would also not survive since no incriminating material, in that respect, has been found from the assessee. The addition is merely an extrapolation by Ld. AO on the basis of probable market prices as gathered from portal 99acres.com. As rightly observed by Ld. CIT(A), such an approach by Ld. AO is legally impermissible in the absence of any seized material or independent evidences. The Ld. AO has merely presumed that all the other sales suffered similar suppression and applied market rate to compute actual consideration. The rates have been applied mechanically whereas no buyer was examined. No incriminating document was available for these units. The presumption of Ld. AO was speculative and contrary to the principle that additions in search cases must be based on cogent material. The extrapolation was flawed in methodology. The Ld. AO effectively replaced the assessee’s declared turnover for 85 units with an artificial figure without rejecting the books u/s 145(3). The absence of any direct 19 evidence for the alleged suppression of sales in these sales instances render the addition unsustainable. The rates displayed on the property portal was not authenticated record of concluded transactions. These rates are posted by brokers, sellers or other users to advertise asking prices. There is no certainty that these rates correspond to actual deals and the rates are sensitive to range of variable including location, frontage, floor level, view, stage of construction, urgency of sale and buyer’s negotiation strength etc. The assessee’s books were not rejected u/s 145(3). No attempt was made to obtain comparable sale deeds for similar units sold during the year and no reference was made to Department’s valuation cell for technical opinion on market rates. There was no corroboration of such extrapolation. Therefore, the addition has rightly been deleted by Ld. CIT(A). In the result, the revenue’s appeal stands dismissed.

Facts being pari-materia the same, taking the same view, we delete impugned addition of Rs.1570.95 Lacs as made by Ld. AO and confirmed by Ld. CIT(A). The assessee succeeds in its corresponding grounds of appeal

. The action of Ld. CIT(A) in deleting the addition of Rs.957.05 Lacs stand confirmed. The corresponding grounds as raised by the revenue stand dismissed.

5. The next issue is addition of alleged unaccounted expenditure for Rs.318.91 Lacs. The same has been adjudicated by us in cross-appeals for AY 2020-21 (supra) as under: -

5. The next issue is addition of alleged unaccounted expenditure for Rs.259.49 Lacs. The same has been made by Ld. AO by making a reference to DVO who has estimated the expenditure at much higher figures than the construction cost as reflected by the assessee in its regular books of accounts. From the facts, it clearly emerges that no incriminating evidence has been found during search which would indicate incurrence of unaccounted expenditure by the assessee. In the absence of such incriminating material, the reference to DVO itself would be illegal, arbitrary and bad-in-law. The facts of the present case would show that Ld. AO do not have any cogent material with him to support the allegation of unaccounted expenditure by the assessee in this year. In such a case, the reference u/s 142A could not be held to be a valid one and such a reference could not be held to be justified on the facts of the case. This proposition find support from the decision of Chandigarh Tribunal in the case of Khanna Infrabuild Pvt. Ltd. [2024; 110 ITR (Trib.) 161 dated 12-10-2023]. The bench, while referring to the decision of Hon’ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. (149 Taxmann.com 399), observed that report of the DVO is purely based on estimation basis. The assessee raised various objections to the same including the objection that the rates of construction were taken as per CPWD rates as against PWD rates which have difference of at least 25%. Reference was made to the decision of Ahmedabad Tribunal in the case of CIT vs.

20 Jayantilal T. Jariwala (IT (SS) No.65/Ahd/2009 dated 28-10-2015). It was finally held by the bench that the reference to DVO was not valid and the consequential addition purely on the basis of estimated report of DVO could not be sustained. This case law duly supports the case of the assessee. The case of the assessee is further supported by the fact that DVO has applied CPWD rates as against PWD rates which have difference of at least 25%. Further, the benefit of self-supervision has also not been granted. This is against the settled position that local PWD rates are to be preferred over CPWD rates and CPWD rates are generally higher than local PWD rates (as per decision of Hon’ble Apex Court in Sunita Mansingha 393 ITR 121; the decision of Hon’ble Punjab & Haryana Court in the case of Rajesh Mahajan 50 Taxmann.com 206). In the case of Rajesh Mahajan (supra), it was observed by Hon’ble Court that 15% of valuation could be allowed for personal supervision. It is another fact that the assessee has engaged two contractors for construction of 29 units. The payment to the two contractors form part of assessee’s regular books of accounts which is evident from copies of ledger extract of these two entities as placed on Page No. 98 to 100 of the paper books for this year. All the payments are through banking channels after deduction of applicable TDS. No independent enquiry is shown to have been carried out from the two contractors and there is no cogent material on record to indicate incurrence of unaccounted expenditure by the assessee. The assessee has maintained regular books of accounts which are duly audited as required under law. The books have not been rejected and no defect has been pointed out in the same. There is no iota of evidence which would reflect that the assessee indulged in out-of-books expenditure. It is trite law that no addition could be made merely on the basis of estimations or presumptions particularly in search cases. Finally, considering the facts and circumstances of the case, we are of the considered opinion that the impugned addition, as sustained by Ld. CIT(A) in the impugned order, is unsustainable. By deleting the same, we allow corresponding grounds of assessee’s appeal.

Facts being pari-materia the same, taking the same view, we delete the impugned addition of Rs.318.91 Lacs and allow corresponding grounds of assessee’s appeal.

21 The Ld. CIT(A) has rightly appreciated the fact that the assessee’s books of accounts were duly audited and quantitative stock records of all the items were maintained. The purchases were through verifiable banking channels. No discrepancy was found in the purchase vouchers or stock records. Therefore, the book results could not be discarded unless there was clear evidence of suppression of sales which was not the case. M/s KLG Jewellers was exclusive franchisee of Tanishq and was bound to sell branded products at fixed prices as determined by franchisor. Its margin structure, cost profile and pricing policy would entirely be different from that of an independent jewellery entity like the assessee who sells its own design and competes on prices in the open market. Therefore, M/s KLG Jewellers could not be said to be an independent retailer. It has finally been concluded that the allegation of Ld.AO had no foundation. Further, the provisions of Sec.68 would be attracted only when a credit entry is found in the books of the assessee and the assessee is unable to explain its nature and source. The receipts under consideration were recorded sales proceeds. Their nature was known and their source was the trading activity of the assessee. Therefore, in our considered opinion, this addition has rightly been deleted by Ld. CIT(A). By endorsing the adjudication of Ld. CIT(A), we dismiss the corresponding grounds of revenue’s appeal. The revenue’s appeal stands dismissed.

Facts being pari-materia the same, taking the same view, we endorse the action of Ld. CIT(A) in deleting this addition. The corresponding grounds of revenue’s appeal stand dismissed.

8. The aforesaid factual matrix as brought on record could not be controverted before us. The issue of approval as taken by Ld. AO from Addl. CIT, in our considered opinion, has adequately been dealt with by Ld. CIT(A) in the impugned order and we concur with the same. This adjudication does not warrant any interference on our part. The correspond grounds of assessee’s appeal stand dismissed. No other grounds have been urged in assessee’s appeal.

Facts being pari-materia the same, taking the same view, we endorse the adjudication of Ld. CIT(A) and dismiss assessee’s corresponding grounds of appeal

. Conclusion