DCIT, CC 1, CHANDIGARH , CHANDIGARH vs. SANJEEV AGGARWAL , CHANDIGARH

Order \nPer Bench:\nAll th ese ca ptio ne d a ppe al s ha ve be e n dir ected a gainst the\nsepa rate order s o f th e Ld. CIT(A ) an d per taine d to the asse ssme nts\nca rried ou t under Sec tion 153A of t he Income Tax Ac t, 1961\n(he reina fte r re ferre d to as the “A ct”) p ursua nt to the searc h ac tion\nca rried out under Se ction 132 of the Act in Sc ott E dil G roup of cases\non 15.

\nGround No. 4: That on facts, circumstances and legal position of the case, Worthy CIT(A)\nhas erred in confirming the addition made by Ld. AO of Rs.28,41,258/- u/s 69C r.w.s.\n115BBE of the Act on account of difference in valuation of factory building situated at\nVillage Dasora, Majra Hiltop, Near Venus Remedies, Jharmajri, Baddi as per DVO’s\nreport and as per books of the appellant even when the valuation exercise carried out by\nDVO is absolutely incorrect.\n43. The brief facts relating to this issue are that the assessee was carrying on\nmanufacturing operations of pharmaceutical products. One of the manufacturing\nfacilities was at Village Dasora, Majra Hill Top, Near Venus, Remedies, Jharmajri, Baddi.\nThe construction on the said property was carried out primarily during FYs 2009-10 to\n2011-12, though, some activity was done almost every year thereafter also. A search\naction u/s 132 was carried out by the investigation wing on 15.11.2017 at the premises\nof the assessee. The Ld. DDIT referred the matter of valuation of construction of above\nreferred property to the DVO u/s 132(9D). The DVO, thereafter framed his report and\nforwarded it to the Ld. DDIT. The DDIT further forwarded the copy of the report of the\nDVO to the Assessing Officer. The DVO vide his valuation report valued the property at\nRs.58.67 crores as against Rs.44. 51 crores declared by the assessee in its books. The\ndifferential amount of the year in question was computed in the same ratio in which the\nconstruction expenses were recorded by assessee in different years in its books and based\non that, difference for the year was computed at Rs.1.98 cr. The AO issued notices to the\n48\nassessee show-causing it as to why the difference of the valuation may not be added to\nthe income of the assessee, to which the assessee responded disputing the DVO’s\nvaluation and submitted an independent valuation report from M/s Sharma & Associates,\na registered valuer, empanelled with the Income Tax Department, valuing the property at\nRs.46.07 crores. The assessee also provided an analysis highlighting computational\nerrors in the DVO’s valuation methodology. The ld. AO, however, rejected the\ncontentions raised by the assessee holding that DVO was an independent authority and\nthat there was no reason to consider valuation report of registered valuer over DVO’s\nreport. The AO, based on the DVO’s report, made addition of the differential amount\nunder Section 69C read with Section 115BBE of the Act. Assessing Officer made\nidentical addition in every year being the difference reported by the Ld. DVO. Being\naggrieved by the said order of the AO on this issue, the assessee preferred appeal before\nthe Ld. CIT(A).\n44. In appeal before the Ld. CIT(A), the assessee contended that the valuation report\nof the DVO was based on assumptions and estimations, ignoring actual records of\nexpenses incurred; That the assessee had maintained complete books of accounts, duly\naudited, and no defect was pointed out by the ld. AO before making reference to DVO.\nFurther that the DVO erroneously applied CPWD rates instead of local PWD rates, which\nwere more appropriate. It was also contended that the assessee had self-supervised the\nconstruction, leading to substantial savings that were not considered in the DVO’s\nvaluation. It was also contended that the DVO’s report was merely an estimate and should\nnot be the sole basis for making additions. A legal issue was also raised to the effect that\nthe Ld. AO did not make his own reference to DVO u/s 142(2A) and she only relied upon\nDVO’s report as was obtained by Ld. DDIT in a reference made u/s 132(9D). It was\ncontended that since no incriminating material was found during search action on the\nbasis of which it could be suspected that assessee invested unaccounted funds in\nconstruction and in absence of incriminating material having been found, the reference\nto DVO in itself was bad in law.\n49\n45. The Ld. CIT(A), after considering the above submissions of the assessee directed\nthe AO to get the valuation of the same property from the DVO again since the earlier\nDVO report had been obtained in violation of principles of natural justice. The DVO gave\nthe report valuing it at Rs.58,67,88,300/- as against Rs.44,51,28,408/- recorded in the\nbooks of the assessee. The Ld. CIT(A) applied the said report of the DVO. The Ld.\nCIT(A) though, observed that there was merit in the argument of the Ld. AR of the\nassessee regarding the application of State PWD rates, but noted that the assessee had\nfailed to provide evidence to show that the DVO's valuation was higher than the State\nPWD based valuation. He, however, further observed that on the basis of documents\nfurnished, it was evident that no contractor was engaged and therefore, benefit on account\nof self-supervision/Self-procurement was to be allowed. He, however, held that the said\nincome/addition was not eligible for deduction u/s 80IC as it was not derived from\neligible business. The Ld. CIT(A), thus gave part relief to the assessee. Accordingly, the\nremaining addition of Rs.28,41,258/- made by the AO was upheld. The relevant part of\nthe order of the Ld. CIT(A) on this issue is reproduced as under:\n“On going through the facts of the case, and submission of the Ld. AR on the above\nissue, it is found that there is merit in the argument that PWD rates\nshould have been adopted for the purpose of valuation by the DVO. However, the\nappellant has not provided any material to show that the revised valuation made\nby the DVO was higher than the valuation on the basis of PWD rates. Therefore no\nmerit is found in such submission of the appellant. Such income is not eligible for\ndeduction u/s 80IC of the Act as the same has not been derived from the eligible\nbusiness. Further the DVO has allowed rebate on account of self supervision/ self\nprocurement of the material after going through relevant record. The appellant has\nfurnished copy of construction account wherein various expenditure for labour,\nmaterial, steel, electrical items etc have been clearly demarcated. From the same it\nis evident that no contractor was engaged by the appellant for the purpose of\nconstruction of the said building. The AO has not brought on record any material to\nshow that construction was not done through self supervision/ self procurement of\nthe material. The DVO only after being satisfied on this account and as per the\nrelevant guidelines has allowed rebate for this purpose. The AO has accepted the\ngenuniness and particulars of cost of construction as declared in the books of\naccount for different assessment years. Such objections of the AO in the remand\n50\nreport have been found without any substance. It is relevant to mention here that\nthe DVO was engaged by th\"e Department itself.\n10.6 On the basis of above facts, discussion and report of the DVO it is evident that\ncost of construction has been under stated by the appellant. Reliance is hereby\nplaced upon the decision of Hon'ble Madras High Court in the case of Shri Krishna\nMahal vs ACIT ZSOITR 0333/169 CTR0228 (2001). Keeping in view above facts and\ndiscussion it is evident that the appellant has failed to explain source and nature of\ninvestments made to the extent of difference in cost of construction of factory\nbuilding as determined by the DVO and as d red by the appellant in its books of\naccount satisfactorily. Accordingly the addition made by the AO for AY 2018-19 is\npartly confirmed for Rs.56,21,339/- u/s 69B r.w.s.115BBE oi the Act and\ncorresponding ground of appeal is partly allowed.”\n46. Being aggrieved by the above order of the CIT(A) on this issue, the assessee has\ncome in appeal before us agitating against the confirmation of the addition made by the\nCIT(A), whereas the Revenue has come in appeal assailing the action of the CIT(A) to\nthe extent the addition on this issue stood deleted by him.\n47. Before us, the Ld. Counsel for the assessee has submitted that the DVO had\ncalculated the aggregate difference in construction cost and then bifurcated the same year\nwise in the same ratio in which construction value was declared by the assessee. No basis\nfor such adoption of ratio was mentioned in the report of DVO. That the DVO had\npresumed that the assessee was under-recording the construction cost in the same\nproportion in which he was recording the construction at every point of time throughout\nthe period of construction spanning more than 10 years. That these estimates were pure\nguess works without having any evidence in hand. It was further submitted by the Ld.\ncounsel that the valuation report filed by the Ld. DVO was full of errors. He has made a\nwrong computation of area as well as the rate. That the assessee has declared the expenses\non construction of relevant property in its books of accounts and that no discrepancy,\ndefect or incriminating material regarding the same was found during the course of search\naction. That even the said books have neither been doubted nor rejected by AO or the Ld.\nCIT(A). The ld. Counsel for the assessee contended that the construction on the said\nproperty was carried out primarily during FYs 2009-10 to 2011-12, though some activity\n51\nwas done almost every year. That the expenses incurred on the subject property were duly\nrecorded in the books. That the expenditure incurred on the construction in the books of\naccounts was at Rs.44. 51 cr. However, as per the valuation report from the independent\nregistered valuer namely M/s Sharma & Associates, was at Rs.46.07cr, which was only\n3.5% more than the value recorded in books. He, therefore has submitted that under the\ncircumstances, no addition was warranted in this case due to such a small difference.\nThe Ld. counsel for the assessee further contended that while making valuation of the\nproperty, DVO made certain mistakes which included calculation on CPWD rates rather\nthan State PWD rates, which were lesser than the CPWD rates. It has been contended\nthat thought the Ld. CIT(A) agreed with the view that State PWD rates should be used\nbut, the ld. CIT(A) did not give any relief on this count despite the fact that the assessee\nhad submitted a report wherein valuation was computed with State PWD rates and also\nprovided analysis of difference between the CPWD rates and State PWD rates. He\nsubmitted that the analysis of rates would show that the State PWD rates were more than\n20% lesser than the CPWD rates. The Ld. counsel submitted that State PWD rates would\nbe applicable for property valuation as the property is situated in a jurisdiction where\nsuch rates are applicable. The ld. Counsel of the assessee has relied upon following\nJudicial pronouncements on this issue: :\na) Smt. Kamini Sharma, Solan vs. ITO, ITA Nos.1365 to 1369 of 2010\n(Chandigarh ITAT),\nb) C.S. Daniel vs. DCIT, 220 TAXMAN 336 (Kerala HC),\nc) CIT vs. K. Jayakumar, 216 TAXMAN 166 (Madras HC), and\nd) CIT vs. D. Subramanian, 296 ITR 348 (Chennai HC)\n48. Further, the ld. Counsel for the assessee also contended that the difference in\nreport of DVO and as per books was less than 10% and therefore, the addition u/s 69B\nwas not sustainable as per the judicial precedents laid down by Hon’ble J&K HC in\nHonest Group Of Hotels (P) Ltd. Vs. Cit, 123 Taxman 0464.\n49. The Ld. Counsel for the assessee has further contended that reference made by the\nDDIT u/s 132(9D) was without rejecting the books of the accounts which was bad in law\n52\nand that the subsequent DVO report was also legally not sustainable as per the judicial\nprecedent laid down by the Hon'ble Apex Court in the case of Sargam Cinema vs. CIT,\n328 ITR 513.\n50. The ld. Counsel for the assessee further contended that the ld. AO did not have\nany incriminating evidence to prove that the assessee incurred out-of-book construction\nexpenses. Therefore, the addition made solely on the basis of the DVO report without\nany evidence was incorrect.\n51. The ld. Counsel for the assessee has further, alternately, contended that\nundisputedly, the assessee’s only source of income was profit from manufacturing\noperation which was eligible for deduction u/s 80IC. That when there was no other source\nof income of the assessee, even if there was any undisclosed investment in construction\nof property, the same would have come from the same profit from manufacturing\noperations. Therefore, the deduction u/s 80IC should have been allowed on that\ncomponent of income invested in alleged construction.\n52. The Ld. CIT (DR) , on the other hand, has contended that the ld. AO was justified\nin making the impugned addition on the basis of valuation report of the DVO on account\nof difference calculated proportionately, based on the expenses incurred by the assessee\nover different years. She has placed reliance on the orders of ld. AO and ld. CIT(A) and\nstated the assessee's reliance on an alternate valuation report by M/s Sharma and\nAssociates, was not tenable as the DVO was an independent authority, and the valuation\nwas conducted on a reference made by the Investigation Wing u/s 132(9D), ensuring\ncredibility and impartiality. She has further contended that assessee's claim that the\nestimates made by DVO were without any evidence was not correct. That the DVO used\navailable data and professional expertise to determine the construction cost. The ld. DR\nrebutting the contentions of the Ld. AR of the assessee regarding books being not rejected\nand even no defect pointed out by any of the authorities in the same, has submitted that\nthat the books of accounts alone cannot conclusively determine the correctness of\ndeclared expenses, especially when external valuation highlights significant\ndiscrepancies. She therefore, has contended that the ld. CIT(A)’s decision to uphold the\n53\nDVO’s valuation, with limited adjustments for self-supervision and procurement, was\nfair and reasonable.\n53. The ld. DR has also submitted that assessee’s claim for deduction u/s 80IC was\nuntenable as the addition pertains to unexplained construction costs, which were not\nderived from manufacturing activities eligible for the deduction. She has further\ncontended that the Ld. CIT(A) has rightly applied the CPWD rates for valuation of the\nproperty and that there was no discrepancy in the same. She, therefore, has relied upon\nthe findings of the lower authorities.\n54. We have heard the rival contentions and gone through the record. In this case,\nadmittedly, no incriminating material, whatsoever, was found during the course of search\naction. It has been held time and again that the report obtained of the DVO after the\nsearch action, would not fall in the definition of incriminating material. The Ld. Counsel\nfor the assessee has relied upon various case laws to stress the point that even in the\nabsence of any corroborating evidence, the addition solely on the basis of the report of\nthe DVO cannot be made even in the normal course or even in case of abated assessment\nyears on the date of search. He has further submitted that the report of the DVO was a\nmere estimation of investment and would not constitute as conclusive evidence of\ninvestment. The ld. Counsel has further relied upon the decision of the Hon’ble Supreme\nCourt in the case of PCIT vs. Abhisar Buildwell P. Ltd. Civil Appeal No.6580 of 2021\ndated 24.04.2023 reported in [2023] 149 taxmann.com 399 (SC) wherein the Hon’ble\nSupreme Court has held that in respect of completed/unabated assessments, no addition\ncan be made by the AO in an assessment carried out u/s 153A of the Income Tax Act in\nthe absence of any incriminating material found during the search action. He has further\nrelied upon various case laws to contend that the report of the DVO cannot be construed\nas an incriminating material found during the course of search action and further that\naddition cannot be made on account of unexplained investment in a property solely on\nthe basis of DVO report without any other corroborating evidence or incriminating\nevidence found in support of such addition. The Hon’ble Supreme Court in Sargam\n54\nCinema v. CIT (328 ITR 513) has held that a DVO’s report cannot be relied upon unless\nthe books of accounts are found to be incorrect. The Income Tax Act does not mandate\nblind reliance on a DVO’s report unless corroborated by substantive proof of undisclosed\ninvestment. Valuation reports are opinion-based and susceptible to variations due to\ndiffering methodologies, assumptions, and regional price fluctuations. The reliance in\nthis respect can be placed on the following decisions:\n“(i) [Assistant Commissioner of Income Tax, Central Circle-1(3), Kolkata v. Narula\nEducational Trust [2021] 126 taxmann.com 158 (Kolkata - Trib.)\n(ii) Champaklal S. Kasat v. Deputy Commissioner of Income-tax, Cent. Cir. 1(3),\nAhmedabad [2017] 82 taxmann.com 243 (Ahmedabad - Trib.)\n(iii) Kay Jay Projects Pvt. Ltd. Versus Dcit, Central Circle, Noida 2023 (8) Tmi 431:\nAssessment u/s 153A - Addition towards the cost of construction of the building -\nReference made to ld. DVO u/s 142A - HELD THAT:- Admittedly, no incriminating\nmaterial has been found during the course of search qua this addition towards cost of\nconstruction. This fact is evident from the perusal of the orders of the lower authorities.\n[Refer para 13]\nSole basis of the addition is only the valuation report furnished by the DVO which has\nbeen obtained by the ld. AO during the course of search assessment proceedings. Then,\nthe said report cannot constitute incriminating material found during the course of\nsearch. Hence, we have no hesitation to hold that no addition could be made by placing\nreliance on the said valuation report while framing the assessment u/s 153A of the Act\nin the hands of the assessee. This issue is now well settled by the recent decision of\nSargam Cinema vs. (2009 (10) TMI 569 – SC ORDER] and in the case of CIT Vs.\nNirmal Kumar Aggarwal (2018 (10) TMI 2002- SC ORDER] as referred to supra in the\ncontentions of the ld. AR.\n(iv) The Dcit, Central Circle-1 Ludhiana Versus M/S Rajan Enterprises And Vice\nVersa 2022 (5) Tmi 1376\nAddition on account of difference in cost of construction as per the books of account and\nas per the report of the DVO - As it is an undisputed fact on record that no incriminating\nmaterial or evidence was found during the course of search which could indicate that the\nassessee had made investment towards cost of construction outside the regular books of\naccount. We also note that the Ld. CIT(A) had deleted the addition in this year by\nfollowing the order of the Ld. CIT(A) for the immediately preceding assessment year.\nSince no material was found in the search and seizure operations which could justify the\nAssessing Officer's action in referring the matter to the DVO for his opinion on valuation\nof the said properties, then the valuation arrived at by the DVO would be of no\nconsequence. Accordingly, in view of the above cited judicial precedents as well as the\nfactual finding recorded by the Ld. CIT(A) in assessment year 2016-17, which, in our\nopinion, is both sound as well as logical, we have no hesitation in upholding the same.\n55\nAccordingly, the ground raised by the Department on this issue also stands\ndismissed.[Para 8.3]\n(v) Commissioner Of Income Tax Versus Abhinav Kumar Mittal 2013 (1) Tmi 629 –\n(Delhi High Court: (2013] 351 Itr 20\nAdditions u/s 69 - search conducted u/s 132 - notice u/s 153C - valuation of properties\nreferred to District Valuation Officer (DVO) - ITAT deleted the addition - Held that:- No\nreason to differ from the view taken by the Tribunal as no material was found in the\nsearch and seizure operations, which would justify the A0's action in referring the matter\nto the DVO for his opinion on valuation of the said properties. If that be the case, then\nthe valuation arrived at by the DVO would be of no consequence. In any event, the\nTribunal has also, on facts, held that the DVO's valuation was based on incomparable\nsales, which is not permissible in law - in favour of assessee. [Para 5]\n(vi) Smt. Jatinder Kaur, Smt. Harbhajan Kaur Versus The Dcit Cc-1, Ludhiana2021\n(10) Tmi 1150 - Itat Chandigarh\nAssessment u/s 153A - Undisclosed investment in the residential buildup house -\ndifference in values as declared by the assessee and as opined by the DVO, - Whether no\nincriminating evidence was found during the course of search relating to the part\nadditions as confirmed by the Worthy CIT(A)? - Tribunal in the second appeal reversed\nthe findings of the Ld. CIT(A) and deleted the addition holding that since no material\nwas found during the search to justify the reference to the DVO, the action was not in\naccordance with law - HELD THAT:- As in the present case, the authorities below have\nnot pointed out any corroborative evidence to show that the assessee had made\ninvestment in question more than the amount declared by the her during assessment\nproceedings. Hence respectfully following the judgment of Abhinav Kumar Mittal [2013\n(1) TMI 629 - DELHI HIGH COURT] we allow the appeal of the assessee and set aside\nthe impugned order passed by the Ld. CIT(A).[Para 6& 7]\n(vii) 2021 (7) TMI 671 - ASSISTANT COMMISSIONER OF INCOME-TAX,\nCENTRAL CIRCLE-1 (3), KOLKATA VERSUS M/S. JIS FOUNDATION AND\n(VICE-VERSA)\nAssessment u/s 153A - Unexplained investment u/s.69 - valuation report of the District\nValuation Officer (DVO) - Estimation of value of assets by Valuation Officer - HELD\nTHAT:- As relying on M/S. NARULA EDUCATIONAL TRUST AND M/S. NARULA\nEDUCATIONAL TRUST VERSUS DEPUTY COMMISSIONER OF INCOME-TAX,\nCENTRAL CIRCLE-1 (3), KOLKATA [2021 (2) TMI 459 - |TAT KOLKATA] From the\nperusal of panchnama and the assessment orders, it can be safely inferred that the\nreference made by DDIT (Inv.) for valuation of the properties was without any\nincriminating materials found during search [oral or documentary which could have\nsuggested that the assessee has shown less investment in its books for building\nconstruction] Therefore, no addition was permissible in the assessment order u/s 153A\nof the Act in the case of un-abated assessments unless it is based on relevant\n56\nincriminating material found during the course of search qua the assessee and qua the\nAY. - Decided in favour of assessee. [Para 15]\n(viii) 2013 (5) TMI 637 - ITAT DELHI ASSTT. COMMISSIONER OF INCOME TAX\nCENTRAL CIRCLE-11, NEVW DELHI VERSUS MS. ASHA KATARIA\nAddition made upon the valuation done by the DVO - value of the property in this case\nas reflected in the registered sale deed was Rs.33,00,000/-. Reference u/s.142A was\nmade to the DVO who determined the value of the property at Rs.63,74,700/- as against\nRs.33,00,000/- shown by the assessee. Hence, there was difference of Rs.30,74,700/-.\nThis was added to the income of the assessee. CIT(A) deleted the addition as there was\nno evidence of adverse material regarding payment of under hand consideration - Held\nthat:- As no other incriminating material was found during the course of search CIT(A)\nis correct in this regard. Addition in this case has been made pursuant to search on the\nbasis of Valuation Report of the DVO. It has been settled that in case of search in the\nabsence of any incriminating material found during search, no addition can be made on\nthe basis of Report of the DVO. See K.P. Varghese vs. ITO, Ernakulam&Anr. [1981 (9)\nTMI 1-SUPREME Court],C.I.T. vs. Abhinav Kumar Mittal [2013 (1) TMI 629 - DELHI\nHIGH COURT], C.I.T. Vs. Mahesh Kumar [2010 (8) TMI 64 - DELHI HIGH COURT].\nThus in the absence of any evidence that the assessee has invested more than value\ndeclared in the registered sale deed of property purchased, the addition in this regard\non the basis of Valuation Report by the DVO is not sustainable. [Para 50]\n(ix) 2015 (3) TMI 156 - DELHI HIGH COURTCOMMISSIONER OF INCOME TAX\nVERSUS NISHI MEHRA, ARUN MEHRA, SUSHIL MEHRA, SUBHASH MEHRA,\nSURBHI MEHRA, MANJU MEHRA\nScope, power and jurisdiction of AO in block assessment proceedings and the term\n\"undisclosed income - AO concluded a comparison between declared value and the value\ndetermined by the DVO disclosed serious discrepancy and added the difference and\nbrought them to tax in the block assessment orders – ITAT concluded that the A0 could\nnot have brought to tax the amounts that he ultimately did merely based upon the DVO's\nreport in the absence of any material pointing to under valuation - Held that:- As decided\non CIT Versus. Naveen Gera (2010 (8) TMI 194 - Delhi High Court] it is settled law that\nin the absence of any incriminating evidence that anything has been paid over and above\nthan the stated amount, the primary burden of proof is on the Revenue to show that there\nhas been an understatement or concealment of income. It is only when such burden has\nbeen discharged, would it be permissible to rely upon the valuation given by the DVO.\nAs apparent from the factual narrative, the materials collected in the search operations\nimpelled the A0 to complete the block assessment in this case. Conspicuously, however,\nthere was no material in the course of the search or collected during the proceedings\npost search, pointing to under valuation of the assessees' properties which were\nultimately held to have been the subject of under valuation. Again, significantly the\nassessees had at relevant time when the actual purchases were effected disclosed the\ntransactional value of those assets; the A0 has then unreservedly accepted them. Wealth\nTax authorities too had accepted the valuation. - Decided in favour of assessee.\n57\n(x) (2008] 166 Taxman 75 (Delhi) HIGH COURT OF DELHI Commissioner of\nIncome-tax, Delhi-VII, New Delhi v. Ashok Khetrapal*\nSection 158B of the Income-tax Act, 1961 - Block assessment in search cases Undisclosed\nincome - Assessment year 1999-2000- Whether where no incriminating material\nwhatsoever was found during search that might show that assessee had made more\ninvestment in properties than their declared value, addition could not be made by\ntreating investment as undisclosed on basis of any DVO's report - Held, yes\n(xi) Commissioner of Income-tax, Central Circle v. Vasudev Construction*2014] 44\ntaxmann.com 30 (Karnataka)\nSection 158BB of the income-tax Act, 1961 - Block assessment in search cases -\nUndisclosed income, computation of (DVO report) - Block period 1-4-1989 to 28-1-2000\n- Assessee-firm was engaged in business of construction of building and development of\nproperties - During search, certain documents like bills of materials purchased, labour\ncharges paid, cheques relating to assessee-firm were found and seized - Notice was\nissued under section 158BD calling upon assessee to file return of undisclosed income\nfor block period 1-4-1989 to 28-1-2000 - Thereafter, valuation of cost of construction of\nbuildings constructed by assessee-firm was referred to DVO, for valuation under section\n133(6) - Assessing Officer added difference in valuation of cost of construction adopted\nby assessee-firm and DVO as undisclosed income - Whether since no material was found\nduring search to indicate that assessee had not recorded expenses incurred on\nconstruction in books of account, in absence of any seized materials and solely on basis\nof DVO's report addition of undisclosed income under section 158BB could not be made\n- Held, yes [Para 10] [In favour of assessee]\n11.1 It has further been held by Hon'ble Delhi High Court and Hon'ble Gujarat High\nCourt that report of the DVO is not binding and no addition can be made in the basis of\nthe standalone valuation report.”\n55. As noted above, it has been held time and again by various courts of law that the\nDVO’s report on standalone basis without any corroborating material cannot be\nconstrued as incriminating material and hence the additions solely on the basis of the\nDVO’s report are not sustainable. The Ahmedabad Bench of the Tribunal in the\ncase of ACIT vs. Shri Jayantilal T. Jariwala in IT(SS) A\nNo.65/Ahd/2009 vide order dated 28.10.2015 has taken note of the\nfollowing decisions of the Hon’ble High Courts in this respect:\n“ i) Hon’ble Gujarat High Court in the case of CIT Vs. Jayendra N. Shah, (2014) 52\ntaxmann.com 54 (Gujarat).\nii) The Hon’ble High Court in the case of CIV Vs. Vasudev Construction (2014) 44\ntaxmann.com 30 (Kar.)\niii) CIT Vs. Berry Plastics P. Ltd., (2013) 35 taxmann.com 296 (Guj)\n58\niv) CIT Vs. Sadhna Gupta (IT Appeal No.434 of 2012) (Delhi HC);\nv) CIT Vs. Lahsa Construction P. Ltd., (2014) 42 taxmann.com 549 (Delhi);\nvi) GookluckAutomobils P. Ltd. Vs. ACIT (2012) 26 taxmann.com 254 (Guj)”\n56. The Coordinate Ahmedabad Bench of the Tribunal in the case of\nACIT vs. Shri Jayantilal T. Jariwala (supra) taking note of the aforesaid\ndecision of various High Courts, under similar circumstances, has\ndecided the issue in favour of the assessee, observing as under:\n“8. We have duly considered rival contentions and gone through the record carefully.\nBefore we embark upon an inquiry on the facts of the present case, we would like to take\nnote of the finding recorded by the Delhi High Court in the case of CIT Vs. Sadhna Gupta\n(supra) on the issue whether merely on the basis of the DVO’s report, an addition can be\nmade or not. The following finding is worth to note:\n“4. The only point to be considered is whether the valuation rendered by the DVO\nis to be taken into account or not. It has been argued by the learned counsel for\nthe revenue that the assessing officer was justified in referring the matter to the\nDVO for an opinion with regard to the fair market value of the property and once\nthat opinion has been rendered, the same has to be taken into account and if that\nwere to be so, the addition of Rs.2,81,83,0007- would be fully justified.\nConsequently, it was submitted by the learned counsel for the revenue that the\nTribunal had erred in deleting the addition. On the other hand the learned\ncounsel for the respondent referred to a Division Bench decision of this Court in\nthe case of CIT v. Puneet Sabharwal [2011] 338 ITR 485. In that decision a\nspecific question had been raised as to whether the Income Tax Appellate\nTribunal was right in holding that notwithstanding the report of the DVO the\nrevenue had to prove that the assessee had received extra consideration over and\nabove the declared value of the same. That question was answered by this Court\nin favour of the assessee and against the revenue. The Division Bench in the case\nof Puneet Sabharwal (supra) had also placed reliance on the decision of Supreme\nCourt in K. P. Varghese (supra) as also on another decision of a Division Bench\nof this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604 wherein this Court\nheld that the primary burden of proof with regard to concealment of income was\non the revenue and it was only when the said burden was discharged that reliance\ncould be placed on the valuation report of the DVO. There are several other\ndecisions of this Court in the same vein. One such case being the case of CIT v.\nVinodSinghal (IT Appeal No.482/2010 decided on 05.05.2010) where, again,\nreliance was placed on the very same decision of the Supreme Court in K.P.\nVarghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala\nDevi [2009] 316 ITR

46. It was observed that there must be a finding that the\nassessee had received an amount over and above the consideration stated in the\nsale deed and for this the primary burden was cast on the revenue. It is only when\nthis burden is discharged by the revenue that it would be permissible to rely upon\nthe value as given in the valuation report of the DVO.\n59\n5. The law seems to be well settled that unless and until there is some other\nevidence to indicate that extra consideration had flowed in the transaction of\npurchase of property, the report of the DVO cannot form the basis of any addition\non the part of the revenue. In the present case there is no evidence other than the\nreport of the DVO and, therefore, the same cannot be relied upon for making an\naddition. In these circumstances, the question which has been framed is decided\nin favour of the assessee and against the revenue. The appeal is dismissed.”\n9. Similarly, it is pertinent to note the observations of the Hon’ble Gujarat High Court\nin the case of CIT Vs. Jayendra N. Shah (supra). The observations in para-8 and 9 are\nworth to note. They read as under:\n“8. We have no reason to interfere with the concurrent reasonings of the two\nauthorities below. Firstly, taking the issue of cost of construction, it clearly\nemerges from the record that between the DVO's estimation of cost of\nconstruction without furniture and fixture and that of the assessee's valuer, there\nis a minor difference of Rs.1.22 lakhs. When we are considering the total figure\nin the vicinity of Rs.1.36 crores, this difference is insignificant. Even if, therefore,\nthe Assessing Officer had accepted the DVO's report in its entirety, the total\naddition under the head could not have exceeded Rs.1.22 lakhs. He instead made\nan addition of Rs.27.69 lakhs, for which we see no basis whatsoever. Learned\ncounsel, Shri K. M. Parikh, strenuously urged that the construction was carried\nout in three separate previous years relevant to different assessment years. The\nAssessing Officer had, therefore, divided the undisclosed investment in the cost\nof construction in these three years. Even if this be so, we fail to see how the total\nof these three years of expenditure could exceed Rs.1.22 lakhs which was the\ndifference between the DVO's valuation and that of the valuation of the assessee's\nvaluer, on the basis of which he filed the return.\n9. Coming to the question of addition towards purchase of land, the Commission\nof Income-Tax (Appeals) as well as the Tribunal both have examined the issue on\nthe basis of the material available on record. It is noted that the assessee had\nmade no disclosure towards the purchase of land in his statement during the\nsearch proceedings. The addition was made merely on the basis of the DVO’s\nreport without there being any other material. Moreover, the DVO had also\nsubstantially relied on jantri rates and had made other reference's for arriving at\nthe valuation.”\n10. Both the issues are based primarily on factual aspects. No question of law,\ntherefore, these appeals are dismissed.”\n10. Similarly, in the case of CIT Vs. Berry Plastics P. Ltd., (2013) 35 taxmann.com 296\n(Guj), the Hon’ble Gujarat High Court has made following observations:\n“9. We are of the opinion that CIT( Appeals) as well as the Tribunal committed\nno error in deleting the additions made by the Assessing Officer. It is undisputed\nthat the sole basis for making the addition was the DVO's report. DVO's report\nmay be a useful tool in the hands of the Assessing Officer, Nevertheless it is an\nestimation and without there being anything more, cannot form basis for\n60\nadditions under Section 69B of the Act. In absence of any other material on\nrecord, addition was correctly deleted. Tax Appeal is, therefore, dismissed.”\n11. A perusal of the above judgments would indicate that mere valuation report is not\nsufficient to conclude that the assessee has made unexplained investment. From perusal\nof the assessment, nowhere it reveals that inspite of search, Revenue was in a position to\nlay its hands on any material exhibiting the unexplained investment made by the assessee,\nover and above one stated in the books of accounts. Further, we find that the ld. First\nAppellate Authority has deleted the addition by following the order of the ITAT in the\ncase of Smt. Ilaben Bharat Shah in ITA No.839/Ahd/2007 dtd. 17-8-2007 for the Asstt.\nYear 2004-05. The ld. First Appellate Authority is of the opinion that the addition cannot\nbe made merely on the basis of DVO’s report, and there should be some other\nincriminating material to support the case of the Revenue. The issue is also covered by\nthe various decisions of the Hon’ble High Courts cited supra, and therefore, we do not\nfind any reason to interfere in the order of the CIT(A), which is confirmed and the ground\nof appeal of the Revenue is dismissed.”.\n57. Even the the ld. AO has not rejected the books of accounts of the assessee, which\nwere duly audited. It is a settled principle that unless books of accounts are rejected under\nSection 145(3), the declared cost cannot be ignored in favour of a mere estimate by the\nDVO. In “ITO v. Sanjeev Kumar”(ITA No. 1234/Chd/2020) and “CIT v.\nPratapsingh Amrosingh Rajendra Singh” (282 ITR 641), it has been held that DVO’s\nreport cannot override actual expenditure recorded in books unless books are proven\ndefective.\n58. Moreover, the value of investment estimated by the DVO was highly disputed and\nvarious discrepancies have been pointed out in the same by the Ld. Counsel for the\nassessee, hence the same cannot be formed the sole basis for making the impugned\nadditions. Even the DVO has adopted Central Public Works Department (CPWD) rates,\nwhereas, the property in question is situated in the State of Himachal Pradesh and the\nDVO, otherwise was supposed to take the State Public Works Department (PWD) rates\nand that the State PWD rates were about 20% lesser than the CPWD rates. The\nIndependent registered valuer M/s Sharma & Associates, has valued the property as per\nthe State PWD rates. He has also given the comparison between CPWD rates and State\nPWD rates. Therefore, the observations of the Ld. CIT(A) that the assessee has failed to\ndemonstrate the difference between the State PWD rates and CPWD rates is factually\nincorrect. Even, as pointed out by the Ld. Counsel for the assessee, there was no evidence\n61\nthat the assessee has ever given any contract of the construction of the property to any\nbuilder. That even as per the DVO, the properties in question were improved/renovated\nduring different assessment years. Under the circumstances, the A.O should have given\nthe deduction of 10% to 15% on the value estimated by the DVO on account of self\nsupervision and self-purchasing of material. The ld. Counsel has submitted that the\ndifference of amount of investment in the said property even as per the DVO’s report is\nless than 10% and is liable to be ignored. The ld. Counsel has further submitted that if\nthe difference of valuation on account of 20% less State PWD rates, 10% to 15% saving\non account of self-supervision/self-purchase of material is deducted, then the resultant\nfigure will be minus. . The Hon’ble J&K High Court in Honest Group of Hotels (123\nTaxman 464) held that minor variations in valuation should not trigger additions under\nSection 69C in the absence of corroborative evidence. The Revenue failed to establish\nthat the assessee incurred unrecorded expenses. Considering the above facts and settled\nlegal position, we hold that the addition made by the AO and sustained by the CIT(A)\nbased solely on the DVO’s valuation is not justified and the same is accordingly ordered\nto be deleted. The facts and issue involved in the appeals as given in chart above relating\nto the above issue/ground are identical, hence our findings given above will accordingly\napply to all the appeals /ITAs as given above in the chart and the identical additions made\nin all these appeals are accordingly ordered to be deleted.\n59. As regards the ground of the revenue on the component of relief allowed by\nCIT(A) to the assessee, since the entire addition on this score has been ordered to be\ndeleted by us, this ground of the revenue’s appeals does not survive anymore and hence\nthe same is rejected. This issue is accordingly directed in favour of the assessee.\nIssue 4: Enhancement u/s 251(1) regarding alleged understatement of investment in\nproperty at 28/6, Industrial Area, Phase-2, Chandigarh.\n60. Following are the cases involving this issue:-\nSr.\nNo.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Pharmacia\nLimited\n2017-18\nAssessee\n833/Chandi/2023\n7\n2\nScott Edil Pharmacia\nLimited\n2015-16\nAssessee\n831/Chandi/2023\n9\n3\nScott Edil Pharmacia\nLimited\n2016-17\nAssessee\n832/Chandi/2023\n5\n4\nScott Edil Advance\nResearch Laboratories\nand Education Limited\n2016-17\nAssessee\n857/Chandi/2023\n7\n62\n61. The lead case taken up is Scott Edil Pharmacia Limited for AY 2017-18, having\nITA No. 833/Chandi/2023.The assessee in this appeal has taken the following grounds\nof appeal:\nGround No. 7: That on facts, circumstances and legal position of the case, the\nWorthy CIT(A) has erred in directing the ld. AO to make further addition of Rs.\n15,23,214/- u/s 69B by erroneously making enhancement u/s 251(1) regarding\nalleged understatement of investment in property at 28/6, Industrial Area, Phase –\n2, Chandigarh.\n62. The issue raised by the assessee in the above appeals relates to enhancement u/s\n251(1) regarding alleged understatement of investment in property at 28/6, Industrial\nArea, Phase-2, Chandigarh. During assessment proceedings u/s 153A for AY 2012-13 to\n2018-19, the ld. AO noted that Sanjeev Aggarwal held a General Power of Attorney\n(GPA) for a property transferred to Vaishali Aggarwal in 2015. This property was leased\nto group concerns SEARLE and SEPL. The tenants had incurred expenditure for\nconstruction/improvement of the said property. The DDIT referred the valuation of the\nproperty to the DVO. The value of the construction cost as per DVO’s report was more\nthan that was shown in the books of accounts of tenants SEARLE & SEPL. The AO\nadded the difference of valuation in the hands of individuals/Landlords treating the said\ndifference in valuation as an expenditure incurred from undisclosed sources.\n69. The Ld. CIT(A), however, held that the addition on account of difference in\nDVO’s report and books of the company-tenant cannot be made in the hands of\nIndividual-Landlords but can only be made in the hands of tenants since the tenants have\n63\nthemselves admitted of having made accounted portion of expenditure. He deleted the\naddition made in the hands of Individual-Landlords but, proposed addition by way of\nenhancement in the income of company-tenants u/s 69B r.w.s.115BBE for AY 2013-14,\n2015-16 to 2017-18. Further, the cases of AY 2010-11 & 2012-13 were not before Ld.\nCIT(A) and for these years qua this issue of difference in DVO report and book value of\nconstruction, he directed the AO to take remedial measures by taking appropriate action\nu/s 148\n63. The Ld. Counsel for the assessee has taken identical grounds as discussed above\nviz. that the ld. AO relied solely on the DVO’s report without considering their objections,\nsuch as errors in area and rates used by the DVO; That the assessee also submitted\nvaluation report from M/s Sharma & Associates showing that construction costs were\naligned with what was recorded in their books, with differences less than 10%; That the\nreference to DVO was bad in law since no incriminating material qua outside books\nconstruction was found or even alleged before making reference; That books of accounts\nhave not been rejected; That the DVO applied CPWD rates instead of State PWD rates.\nThat the property was constructed under self-supervision and self-procurement of\nmaterial was done and no contractor was engaged hence the cost was less. That the Copy\nof ledger account categorizing expenses into labour, materials, and electrical fittings were\nplaced on record before the lower authorities and no defect or infirmity was found in the\nsame.\n64. The Ld. DR has also reiterated her submissions as discussed above regarding the\nissue of valuation of building/Immovable Property situated at Village Dasora.\n65. In view of the factual as well legal discussion made above on the identical issue\nof valuation of the property at village, Dasora, and in the light of various Judicial\npronouncements as discussed above, this issue is accordingly decided in favour of the\nassessee and against the revenue. The impugned additions are ordered to be deleted. The\ndirection of the Ld. CIT(A) to reopen the assessment on account of difference in valuation\nthe basis of DVO’s report for AY. AY 2010-11 & 2012-13 is also set aside and quashed.\n90\n(x) (2008] 166 Taxman 75 (Delhi) HIGH COURT OF DELHI Commissioner of\nIncome-tax, Delhi-VII, New Delhi v. Ashok Khetrapal*\nSection 158B of the Income-tax Act, 1961 - Block assessment in search cases Undisclosed\nincome - Assessment year 1999-2000- Whether where no incriminating material\nwhatsoever was found during search that might show that assessee had made more\ninvestment in properties than their declared value, addition could not be made by\ntreating investment as undisclosed on basis of any DVO's report - Held, yes\n(xi) Commissioner of Income-tax, Central Circle v. Vasudev Construction*2014] 44\ntaxmann.com 30 (Karnataka)\nSection 158BB of the income-tax Act, 1961 - Block assessment in search cases -\nUndisclosed income, computation of (DVO report) - Block period 1-4-1989 to 28-1-2000\n- Assessee-firm was engaged in business of construction of building and development of\nproperties - During search, certain documents like bills of materials purchased, labour\ncharges paid, cheques relating to assessee-firm were found and seized - Notice was\nissued under section 158BD calling upon assessee to file return of undisclosed income\nfor block period 1-4-1989 to 28-1-2000 - Thereafter, valuation of cost of construction of\nbuildings constructed by assessee-firm was referred to DVO, for valuation under section\n133(6) - Assessing Officer added difference in valuation of cost of construction adopted\nby assessee-firm and DVO as undisclosed income - Whether since no material was found\nduring search to indicate that assessee had not recorded expenses incurred on\nconstruction in books of account, in absence of any seized materials and solely on basis\nof DVO's report addition of undisclosed income under section 158BB could not be made\n- Held, yes [Para 10] [In favour of assessee]\n11.1 It has further been held by Hon'ble Delhi High Court and Hon'ble Gujarat High\nCourt that report of the DVO is not binding and no addition can be made in the basis of\nthe standalone valuation report.”\n57\n56. The Coordinate Ahmedabad Bench of the Tribunal in the case of\nACIT vs. Shri Jayantilal T. Jariwala (supra) taking note of the aforesaid\ndecision of various High Courts, under similar circumstances, has\ndecided the issue in favour of the assessee, observing as under:\n“8. We have duly considered rival contentions and gone through the record carefully.\nBefore we embark upon an inquiry on the facts of the present case, we would like to take\nnote of the finding recorded by the Delhi High Court in the case of CIT Vs. Sadhna Gupta\n(supra) on the issue whether merely on the basis of the DVO’s report, an addition can be\nmade or not. The following finding is worth to note:\n“4. The only point to be considered is whether the valuation rendered by the DVO\nis to be taken into account or not. It has been argued by the learned counsel for\nthe revenue that the assessing officer was justified in referring the matter to the\nDVO for an opinion with regard to the fair market value of the property and once\nthat opinion has been rendered, the same has to be taken into account and if that\nwere to be so, the addition of Rs.2,81,83,0007- would be fully justified.\nConsequently, it was submitted by the learned counsel for the revenue that the\nTribunal had erred in deleting the addition. On the other hand the learned\ncounsel for the respondent referred to a Division Bench decision of this Court in\nthe case of CIT v. Puneet Sabharwal [2011] 338 ITR 485. In that decision a\nspecific question had been raised as to whether the Income Tax Appellate\nTribunal was right in holding that notwithstanding the report of the DVO the\nrevenue had to prove that the assessee had received extra consideration over and\nabove the declared value of the same. That question was answered by this Court\nin favour of the assessee and against the revenue. The Division Bench in the case\nof Puneet Sabharwal (supra) had also placed reliance on the decision of Supreme\nCourt in K. P. Varghese (supra) as also on another decision of a Division Bench\nof this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604 wherein this Court\nheld that the primary burden of proof with regard to concealment of income was\non the revenue and it was only when the said burden was discharged that reliance\ncould be placed on the valuation report of the DVO. There are several other\ndecisions of this Court in the same vein. One such case being the case of CIT v.\nVinodSinghal (IT Appeal No.482/2010 decided on 05.05.2010) where, again,\nreliance was placed on the very same decision of the Supreme Court in K.P.\nVarghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala\nDevi [2009] 316 ITR

46. It was observed that there must be a finding that the\nassessee had received an amount over and above the consideration stated in the\nsale deed and for this the primary burden was cast on the revenue. It is only when\nthis burden is discharged by the revenue that it would be permissible to rely upon\nthe value as given in the valuation report of the DVO.\n90\n5. The law seems to be well settled that unless and until there is some other\nevidence to indicate that extra consideration had flowed in the transaction of\npurchase of property, the report of the DVO cannot form the basis of any addition\non the part of the revenue. In the present case there is no evidence other than the\nreport of the DVO and, therefore, the same cannot be relied upon for making an\naddition. In these circumstances, the question which has been framed is decided\nin favour of the assessee and against the revenue. The appeal is dismissed.”\n9. Similarly, it is pertinent to note the observations of the Hon’ble Gujarat High Court\nin the case of CIT Vs. Jayendra N. Shah (supra). The observations in para-8 and 9 are\nworth to note. They read as under:\n“8. We have no reason to interfere with the concurrent reasonings of the two\nauthorities below. Firstly, taking the issue of cost of construction, it clearly\nemerges from the record that between the DVO's estimation of cost of\nconstruction without furniture and fixture and that of the assessee's valuer, there\nis a minor difference of Rs.1.22 lakhs. When we are considering the total figure\nin the vicinity of Rs.1.36 crores, this difference is insignificant. Even if, therefore,\nthe Assessing Officer had accepted the DVO's report in its entirety, the total\naddition under the head could not have exceeded Rs.1.22 lakhs. He instead made\nan addition of Rs.27.69 lakhs, for which we see no basis whatsoever. Learned\ncounsel, Shri K. M. Parikh, strenuously urged that the construction was carried\nout in three separate previous years relevant to different assessment years. The\nAssessing Officer had, therefore, divided the undisclosed investment in the cost\nof construction in these three years. Even if this be so, we fail to see how the total\nof these three years of expenditure could exceed Rs.1.22 lakhs which was the\ndifference between the DVO's valuation and that of the valuation of the assessee's\nvaluer, on the basis of which he filed the return.\n9. Coming to the question of addition towards purchase of land, the Commission\nof Income-Tax (Appeals) as well as the Tribunal both have examined the issue on\nthe basis of the material available on record. It is noted that the assessee had\nmade no disclosure towards the purchase of land in his statement during the\nsearch proceedings. The addition was made merely on the basis of the DVO’s\nreport without there being any other material. Moreover, the DVO had also\nsubstantially relied on jantri rates and had made other reference's for arriving at\nthe valuation.”\n10. Both the issues are based primarily on factual aspects. No question of law,\ntherefore, these appeals are dismissed.”\n10. Similarly, in the case of CIT Vs. Berry Plastics P. Ltd., (2013) 35 taxmann.com 296\n(Guj), the Hon’ble Gujarat High Court has made following observations:\n“9. We are of the opinion that CIT( Appeals) as well as the Tribunal committed\nno error in deleting the additions made by the Assessing Officer. It is undisputed\nthat the sole basis for making the addition was the DVO's report. DVO's report\nmay be a useful tool in the hands of the Assessing Officer, Nevertheless it is an\nestimation and without there being anything more, cannot form basis for\n60\nadditions under Section 69B of the Act. In absence of any other material on\nrecord, addition was correctly deleted. Tax Appeal is, therefore, dismissed.”\n11. A perusal of the above judgments would indicate that mere valuation report is not\nsufficient to conclude that the assessee has made unexplained investment. From perusal\nof the assessment, nowhere it reveals that inspite of search, Revenue was in a position to\nlay its hands on any material exhibiting the unexplained investment made by the assessee,\nover and above one stated in the books of accounts. Further, we find that the ld. First\nAppellate Authority has deleted the addition by following the order of the ITAT in the\ncase of Smt. Ilaben Bharat Shah in ITA No.839/Ahd/2007 dtd. 17-8-2007 for the Asstt.\nYear 2004-05. The ld. First Appellate Authority is of the opinion that the addition cannot\nbe made merely on the basis of DVO’s report, and there should be some other\nincriminating material to support the case of the Revenue. The issue is also covered by\nthe various decisions of the Hon’ble High Courts cited supra, and therefore, we do not\nfind any reason to interfere in the order of the CIT(A), which is confirmed and the ground\nof appeal of the Revenue is dismissed.”.\n57. Even the the ld. AO has not rejected the books of accounts of the assessee, which\nwere duly audited. It is a settled principle that unless books of accounts are rejected under\nSection 145(3), the declared cost cannot be ignored in favour of a mere estimate by the\nDVO. In “ITO v. Sanjeev Kumar”(ITA No. 1234/Chd/2020) and “CIT v.\nPratapsingh Amrosingh Rajendra Singh” (282 ITR 641), it has been held that DVO’s\nreport cannot override actual expenditure recorded in books unless books are proven\ndefective.\n58. Moreover, the value of investment estimated by the DVO was highly disputed and\nvarious discrepancies have been pointed out in the same by the Ld. Counsel for the\nassessee, hence the same cannot be formed the sole basis for making the impugned\nadditions. Even the DVO has adopted Central Public Works Department (CPWD) rates,\nwhereas, the property in question is situated in the State of Himachal Pradesh and the\nDVO, otherwise was supposed to take the State Public Works Department (PWD) rates\nand that the State PWD rates were about 20% lesser than the CPWD rates. The\nIndependent registered valuer M/s Sharma & Associates, has valued the property as per\nthe State PWD rates. He has also given the comparison between CPWD rates and State\nPWD rates. Therefore, the observations of the Ld. CIT(A) that the assessee has failed to\ndemonstrate the difference between the State PWD rates and CPWD rates is factually\nincorrect. Even, as pointed out by the Ld. Counsel for the assessee, there was no evidence\n61\nthat the assessee has ever given any contract of the construction of the property to any\nbuilder. That even as per the DVO, the properties in question were improved/renovated\nduring different assessment years. Under the circumstances, the A.O should have given\nthe deduction of 10% to 15% on the value estimated by the DVO on account of self\nsupervision and self-purchasing of material. The ld. Counsel has submitted that the\ndifference of amount of investment in the said property even as per the DVO’s report is\nless than 10% and is liable to be ignored. The ld. Counsel has further submitted that if\nthe difference of valuation on account of 20% less State PWD rates, 10% to 15% saving\non account of self-supervision/self-purchase of material is deducted, then the resultant\nfigure will be minus. . The Hon’ble J&K High Court in Honest Group of Hotels (123\nTaxman 464) held that minor variations in valuation should not trigger additions under\nSection 69C in the absence of corroborative evidence. The Revenue failed to establish\nthat the assessee incurred unrecorded expenses. Considering the above facts and settled\nlegal position, we hold that the addition made by the AO and sustained by the CIT(A)\nbased solely on the DVO’s valuation is not justified and the same is accordingly ordered\nto be deleted. The facts and issue involved in the appeals as given in chart above relating\nto the above issue/ground are identical, hence our findings given above will accordingly\napply to all the appeals /ITAs as given above in the chart and the identical additions made\nin all these appeals are accordingly ordered to be deleted.\n59. As regards the ground of the revenue on the component of relief allowed by\nCIT(A) to the assessee, since the entire addition on this score has been ordered to be\ndeleted by us, this ground of the revenue’s appeals does not survive anymore and hence\nthe same is rejected. This issue is accordingly directed in favour of the assessee.\nIssue 4: Enhancement u/s 251(1) regarding alleged understatement of investment in\nproperty at 28/6, Industrial Area, Phase-2, Chandigarh.\n60. Following are the cases involving this issue:-\nSr.\nNo.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Pharmacia\nLimited\n2017-18\nAssessee\n833/Chandi/2023\n7\n2\nScott Edil Pharmacia\nLimited\n2015-16\nAssessee\n831/Chandi/2023\n9\n3\nScott Edil Pharmacia\nLimited\n2016-17\nAssessee\n832/Chandi/2023\n5\n4\nScott Edil Advance\nResearch Laboratories\nand Education Limited\n2016-17\nAssessee\n857/Chandi/2023\n7\n62\n61. The lead case taken up is Scott Edil Pharmacia Limited for AY 2017-18, having\nITA No. 833/Chandi/2023.The assessee in this appeal has taken the following grounds\nof appeal:\nGround No. 7: That on facts, circumstances and legal position of the case, the\nWorthy CIT(A) has erred in directing the ld. AO to make further addition of Rs.\n15,23,214/- u/s 69B by erroneously making enhancement u/s 251(1) regarding\nalleged understatement of investment in property at 28/6, Industrial Area, Phase –\n2, Chandigarh.\n62. The issue raised by the assessee in the above appeals relates to enhancement u/s\n251(1) regarding alleged understatement of investment in property at 28/6, Industrial\nArea, Phase-2, Chandigarh. During assessment proceedings u/s 153A for AY 2012-13 to\n2018-19, the ld. AO noted that Sanjeev Aggarwal held a General Power of Attorney\n(GPA) for a property transferred to Vaishali Aggarwal in 2015. This property was leased\nto group concerns SEARLE and SEPL. The tenants had incurred expenditure for\nconstruction/improvement of the said property. The DDIT referred the valuation of the\nproperty to the DVO. The value of the construction cost as per DVO’s report was more\nthan that was shown in the books of accounts of tenants SEARLE & SEPL. The AO\nadded the difference of valuation in the hands of individuals/Landlords treating the said\ndifference in valuation as an expenditure incurred from undisclosed sources.\n69. The Ld. CIT(A), however, held that the addition on account of difference in\nDVO’s report and books of the company-tenant cannot be made in the hands of\nIndividual-Landlords but can only be made in the hands of tenants since the tenants have\n63\nthemselves admitted of having made accounted portion of expenditure. He deleted the\naddition made in the hands of Individual-Landlords but, proposed addition by way of\nenhancement in the income of company-tenants u/s 69B r.w.s.115BBE for AY 2013-14,\n2015-16 to 2017-18. Further, the cases of AY 2010-11 & 2012-13 were not before Ld.\nCIT(A) and for these years qua this issue of difference in DVO report and book value of\nconstruction, he directed the AO to take remedial measures by taking appropriate action\nu/s 148\n63. The Ld. Counsel for the assessee has taken identical grounds as discussed above\nviz. that the ld. AO relied solely on the DVO’s report without considering their objections,\nsuch as errors in area and rates used by the DVO; That the assessee also submitted\nvaluation report from M/s Sharma & Associates showing that construction costs were\naligned with what was recorded in their books, with differences less than 10%; That the\nreference to DVO was bad in law since no incriminating material qua outside books\nconstruction was found or even alleged before making reference; That books of accounts\nhave not been rejected; That the DVO applied CPWD rates instead of State PWD rates.\nThat the property was constructed under self-supervision and self-procurement of\nmaterial was done and no contractor was engaged hence the cost was less. That the Copy\nof ledger account categorizing expenses into labour, materials, and electrical fittings were\nplaced on record before the lower authorities and no defect or infirmity was found in the\nsame.\n64. The Ld. DR has also reiterated her submissions as discussed above regarding the\nissue of valuation of building/Immovable Property situated at Village Dasora.\n65. In view of the factual as well legal discussion made above on the identical issue\nof valuation of the property at village, Dasora, and in the light of various Judicial\npronouncements as discussed above, this issue is accordingly decided in favour of the\nassessee and against the revenue. The impugned additions are ordered to be deleted. The\ndirection of the Ld. CIT(A) to reopen the assessment on account of difference in valuation\nthe basis of DVO’s report for AY. AY 2010-11 & 2012-13 is also set aside and quashed.\n93\nIssue 14: Extended period of Limitation\n120. Following is the list of cases involving this issue :-\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal\nby\nAppeal No.\nGround\nNo.\n1\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2010-11\nAssessee\n842/Chandi/2023\n2\n121. The assessee in this appeal has taken the following grounds of appeal:\nGround No. 2: That on facts, circumstances and legal position of the case, Worthy\nCIT(A) has erred in confirming the action of Ld. AO where the impugned\nassessment was re-opened u/s 153A by illegally using extended period of\nlimitation.\n122. This appeal already stood decided in favour of the assessee in view of our findings\ngiven above on issue No. 1, while holding that the assessments in the above cases stood\ncompleted and not abated, therefore the additions in the absence of any incriminating\nmaterial are not sustainable in the light of the decision of the Hon'ble Supreme Court in\nthe case of Abhisar Buildwell Pvt. Ltd. (supra). This issue is accordingly rendered\nacademic in nature and hence not adjudicated at this stage. The assessee will be at liberty\nto raise this issue at appropriate stage if need be.\nIssue 15: Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in\nlaw:\n123. Following is the list of cases involving this issue :-\n94\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2018-19\nAssessee\n846/Chandi/2023\n3\n2\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2017-18\nAssessee\n845/Chandi/2023\n3\n3\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2016-17\nAssessee\n857/Chandi/2023\n3\n4\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2015-16\nAssessee\n856/Chandi/2023\n3\n5\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2014-15\nAssessee\n855/Chandi/2023\n3\n6\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2013-14\nAssessee\n844/Chandi/2023\n3\n7\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2012-13\nAssessee\n543/Chandi/2023\n3\n8\nScott Edil Pharmacia Limited\n2013-14\nAssessee\n829/Chandi/2023\n3\n9\nScott Edil Pharmacia Limited\n2014-15\nAssessee\n830/Chandi/2023\n3\n10\nScott Edil Pharmacia Limited\n2015-16\nAssessee\n831/Chandi/2023\n3\n11\nScott Edil Pharmacia Limited\n2016-17\nAssessee\n832/Chandi/2023\n3\n12\nScott Edil Pharmacia Limited\n2017-18\nAssessee\n833/Chandi/2023\n3\n13\nScott Edil Pharmacia Limited\n2018-19\nAssessee\n834/Chandi/2023\n3\n14\nBalram Krishan Aggarwal\n2012-13\nAssessee\n726/Chandi/2023\n5\n15\nBalram Krishan Aggarwal\n2013-14\nAssessee\n727/Chandi/2023\n5\n16\nBalram Krishan Aggarwal\n2014-15\nAssessee\n728/Chandi/2023\n5\n17\nBalram Krishan Aggarwal\n2015-16\nAssessee\n729/Chandi/2023\n5\n18\nBalram Krishan Aggarwal\n2016-17\nAssessee\n730/Chandi/2023\n5\n19\nBalram Krishan Aggarwal\n2017-18\nAssessee\n731/Chandi/2023\n6\n20\nBalram Krishan Aggarwal\n2018-19\nAssessee\n732/Chandi/2023\n9\n21\nMaxport India Pvt Ltd\n2014-15\nAssessee\n582/Chandi/2023\n5\n22\nMaxport India Pvt Ltd\n2015-16\nAssessee\n583/Chandi/2023\n5\n23\nMaxport India Pvt Ltd\n2016-17\nAssessee\n584/Chandi/2023\n5\n24\nMaxport India Pvt Ltd\n2017-18\nAssessee\n579/Chandi/2023\n5\n25\nMaxport India Pvt Ltd\n2018-19\nAssessee\n591/Chandi/2023\n5\n26\nVaishali Aggarwal\n2018-19\nAssessee\n483/Chandi/2023\n3\n95\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n27\nVaishali Aggarwal\n2017-18\nAssessee\n482/Chandi/2023\n3\n28\nSanjeev Aggarwal\n2018-19\nAssessee\n480/Chandi/2023\n4\n29\nSanjeev Aggarwal\n2017-18\nAssessee\n489/Chandi/2023\n7\n124. The lead case taken up is Scott Edil Advance Research Laboratories and\nEducation Limited for AY 2010-11, 842/Chandi/2023.The assessee in this appeal\nhas taken the following ground of appeal:\nGround No. 5: That on facts, circumstances and legal position of the case, Worthy\nCIT(A) has erred in confirming the action of Ld. AO of passing assessment order\non the basis of transfer order u/s 127 dtd 30.03.2018 as such order is without\nsanction of law and once order u/s 127 is bad, therefore order u/s 153A r.w.s\n143(3) passed by Ld. AO is also bad.\n125. This issue/ground is not pressed by the Ld. Counsel for the assessee.\nHence this issue is accordingly decided against the assessee being not\npressed.\nIssue 16: Carry forward of MAT credit against the demand raised consequent to\nimpugned addition made in assessment\n126. Following is the list of cases involving this issue :-\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2018-19\nAssessee\n846/Chandi/2023\n6 & 7\n2\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2017-18\nAssessee\n845/Chandi/2023\n7 & 8\n96\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n3\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2016-17\nAssessee\n857/Chandi/2023\n9 & 10\n4\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2015-16\nAssessee\n856/Chandi/2023\n7 & 8\n5\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2014-15\nAssessee\n855/Chandi/2023\n8 & 9\n6\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2013-14\nAssessee\n844/Chandi/2023\n6 & 7\n7\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2012-13\nAssessee\n543/Chandi/2023\n7 & 8\n8\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2010-11\nAssessee\n842/Chandi/2023\n3\n9\nScott Edil Pharmacia Limited\n2013-14\nAssessee\n829/Chandi/2023\n9 & 10\n10\nScott Edil Pharmacia Limited\n2014-15\nAssessee\n830/Chandi/2023\n6 & 7\n11\nScott Edil Pharmacia Limited\n2015-16\nAssessee\n831/Chandi/2023\n10 & 11\n12\nScott Edil Pharmacia Limited\n2016-17\nAssessee\n832/Chandi/2023\n6 & 7\n13\nScott Edil Pharmacia Limited\n2017-18\nAssessee\n833/Chandi/2023\n8 & 9\n14\nScott Edil Pharmacia Limited\n2018-19\nAssessee\n834/Chandi/2023\n5\n127. The lead case taken up is Scott Edil Advance Research Laboratories and\nEducation Limited for AY 2010-11, 842/Chandi/2023.The assessee in this appeal\nhas taken the following ground of appeal:\nGround No. 5: That on facts, circumstances and legal position of the case, Worthy\nCIT(A) has erred in not the ground in right manner regarding wrong computation\nmade by the Ld. AO about carry forward/ set-off of available MAT credit against\ntax demand raised consequent to impugned addition made in the assessment.\n128. This issue is not pressed by the Ld. Counsel for the assessee. The same is\ntherefore, dismissed as not pressed.\n97\nIssue 17: Disallowance of 80IC on subsidy claimed in ITR\n129. Following is the list of cases involving this issue :- \nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Pharmacia Limited\n2015-16\nAssessee\n831/Chandi/2023\n7 & 8\n130. The assessee in this appeal has taken the following ground of appeal:\nGround No. 7: That on facts, circumstances and legal position of the case, Worthy\nCIT(A) has erred in confirming the addition made by Ld. AO of Rs.4,86,458/- by\ndisallowing the deduction u/s 80-IC even when the appellant had itself not claimed\ndeduction on such items in the ITR filed.\nGround No. 8: That on facts, circumstances and legal position of the case, Worthy\nCIT(A) has erred in confirming the action of Ld. AO by disallowing the deduction\nu/s 80-IC on the subsidy income of Rs.1,25,913/-.\n131. This appeal already stood decided in favour of the assessee in view of our findings\ngiven above on issue No. 1, while holding that the assessments in the above cases stood\ncompleted and not abated, therefore the additions in the absence of any incriminating\nmaterial are not sustainable in the light of the decision of the Hon'ble Supreme Court in\nthe case of Abhisar Buildwell Pvt. Ltd. (supra). This issue is accordingly rendered\nacademic in nature and hence not adjudicated at this stage. The assessee will be at liberty\nto raise this issue at appropriate stage if need be.\nIssue 18: Jewellery found at House no 2273, Sector 21C, Chandigarh & Locker no 64, Bank\nof India, Sector 35, Chandigarh during the search.\n132. Following is the list of cases involving this issue :- \nSr.\nNo.\nName of the\nassessee\nAY\nAppeal by\nAppeal No.\nGround No.\n1\nVaishali Aggarwal\n2018-19\nAssessee\n482/Chandi/2023\n7\n2\nSanjeev Aggarwal\n2018-19\nAssessee\n489/Chandi/2023\n98\n133. The lead case taken up is Vaishali Aggarwal for AY 2018-19, having ITA No.\n482/Chandi/2023. The assessee in this appeal has taken the following grounds of appeal:\nGround No. 7: That on facts, circumstances and legal position of the case, the\nWorthy CIT(A) has erred in confirming the addition of Rs.51,44,693/- on account\nof alleged unexplained investment in jewellery found from bank lockers during the\nsearch.\n134. The brief facts relating to the above issue are that during the course of search\naction conducted u/s 132 of the Act, certain jewellery was found at House No. 2273,\nSector 21C, Chandigarh, and Locker No. 64, Bank of India, Sector 35, Chandigarh. The\ndetails of which are as under:\nS.\nNo.\nAddress/ Location from where\nJewellery was found\nValue of the Jewellery (in\nRs.)\n1.\nH.No. 2273 Sector-21C Chandigarh\n88,75,224\n2\nLocker No. 64 Bank of India, Sector\n35C, Chandigarh\n51,44,693\nTotal\n1,40,19,917\n135. The assessee explained that the said jewellery was purchased from time to time\nout of past savings and gifts received from relatives and friends on occasions such as\nbirthday, marriage and birth of children etc. The ld. AO on the basis of guidelines issued\nin clause (ii) of the CBDT Instruction No. 1916 dated 11.05.1994, treated the jewellery\nto the extent of the value of Rs.64,19,900/- as explained and reasonably possessed by\nthe assessees and treated the remaining part of the jewellery of the value of Rs.\n76,00,017/- as acquired from undisclosed sources of income. The AO made addition of\nRs.24,55,324/- in the hands of Sanjeev Aggarwal and of Rs.5144693/- in the hands of\nVaishali Aggarwal. The ld. CIT(A) confirmed the additions so made by the AO.\n99\n136. Before us, the Ld. Counsel for the assessee has submitted that the jewellery found\nat the premises belonged to the assessee’s family members, spanning multiple\ngenerations. That the assessee’s family has consistently declared an annual income of\nmore than Rs.1.25 crore, and they have been in a thriving pharmaceutical industry for\nover 25 years. The group's yearly turnover has continuously exceeded Rs.150 crores,\nwith an average profit of Rs.15 crores per year over the relevant block period. That given\nthe family’s status and substantial earnings, maintaining jewellery worth Rs.\n1,40,19,917/- was reasonable, and no addition should be made on this account. The Ld.\nCounsel has relied upon details of past income details showing that it had sufficient\nowned funds wherefrom jewellery had been bought. The Ld. Counsel in this respect had\nreferred to the following chart of past assessed income of the assessees, which was also\nfurnished before the lower authorities:\n137. The ld. Counsel, therefore has contended that given the size, standing,\nand financial stature of the group, it was reasonable to maintain personal\njewellery as found during the course of search action. He has submitted that\n100\nthe guidelines given in the CBDT circular could not be yard stick in each and\nevery case, rather the same are applicable for a person/family of average\nresources. He, therefore, has contended that the assessee should be granted\nthe benefit of considering the family status and the past income of the assessee.\nThe Ld. Counsel in this respect has also relied upon the following case laws:\na. Smt. Neena Syal vs. ACIT , 70 ITD 0062, Chandigarh ITAT.\nb. Vibhu Aggarwal V.s DCIT, CC-6, New Delhi, 93 taxmann.com 275,\nDelhi ITAT.\nc. Nawaz Singhania vs. DCIT, 162 DTR 0137, Bombay ITAT.\nd. Ashok Chaddha, ITA 274 of 2011, Delhi HC.\n138. The ld. DR, however, has relied upon the findings of the lower authorities.\n139. We have heard the rival contentions of the Ld. Representatives of the parties\nand gone through the record. We agree with the submissions made by the Ld. Counsel\nfor the assessee. The CBDT guidelines are not fixed yardstick for determining the\nvalue of jewellery which a person can possess in each and every case These are general\nguidelines for a person of reasonable income and status. However, given the past\naverage income of the assessees, their rank and status, the aforesaid jewellery can not\nbe said to be on higher side, and hence, can not be treated as acquired from undisclosed\nsources. The case laws cited by the Ld. Counsel for the assessee are squarely\napplicable to the facts and circumstances of the present case wherein it has been time\nand again held that Keeping status of assessee’s family in mind as well as customs and\npractices of community to which family belonged, the value of the jewellery which\nthe family would reasonably and in the ordinary circumstance is to be taken . In view\nof the above discussion, the addition made under Section 69A is unsustainable and the\nsame is accordingly ordered to be deleted.\nIssue 19: Approval u/s 153D\n140. Following is the list of cases involving this issue :- \n101\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2018-19\nAssessee\n846/Chandi/2023\n3\n2\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2017-18\nAssessee\n845/Chandi/2023\n3\n3\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2016-17\nAssessee\n857/Chandi/2023\n3\n4\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2015-16\nAssessee\n856/Chandi/2023\n3\n5\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2014-15\nAssessee\n855/Chandi/2023\n3\n6\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2013-14\nAssessee\n844/Chandi/2023\n3\n7\nScott Edil Advance Research\nLaboratories and Education\nLimited\n2012-13\nAssessee\n543/Chandi/2023\n3\n8\nScott Edil Pharmacia Limited\n2013-14\nAssessee\n829/Chandi/2023\n3\n9\nScott Edil Pharmacia Limited\n2014-15\nAssessee\n830/Chandi/2023\n3\n10\nScott Edil Pharmacia Limited\n2015-16\nAssessee\n831/Chandi/2023\n3\n11\nScott Edil Pharmacia Limited\n2016-17\nAssessee\n832/Chandi/2023\n3\n12\nScott Edil Pharmacia Limited\n2017-18\nAssessee\n833/Chandi/2023\n3\n13\nScott Edil Pharmacia Limited\n2018-19\nAssessee\n834/Chandi/2023\n3\n14\nBalram Krishan Aggarwal\n2012-13\nAssessee\n726/Chandi/2023\n5\n15\nBalram Krishan Aggarwal\n2013-14\nAssessee\n727/Chandi/2023\n5\n16\nBalram Krishan Aggarwal\n2014-15\nAssessee\n728/Chandi/2023\n5\n17\nBalram Krishan Aggarwal\n2015-16\nAssessee\n729/Chandi/2023\n5\n18\nBalram Krishan Aggarwal\n2016-17\nAssessee\n730/Chandi/2023\n5\n19\nBalram Krishan Aggarwal\n2017-18\nAssessee\n731/Chandi/2023\n6\n20\nBalram Krishan Aggarwal\n2018-19\nAssessee\n732/Chandi/2023\n9\n21\nMaxport India Pvt Ltd\n2014-15\nAssessee\n582/Chandi/2023\n5\n22\nMaxport India Pvt Ltd\n2015-16\nAssessee\n583/Chandi/2023\n5\n23\nMaxport India Pvt Ltd\n2016-17\nAssessee\n584/Chandi/2023\n5\n24\nMaxport India Pvt Ltd\n2017-18\nAssessee\n579/Chandi/2023\n5\n25\nMaxport India Pvt Ltd\n2018-19\nAssessee\n591/Chandi/2023\n5\n26\nVaishali Aggarwal\n2018-19\nAssessee\n483/Chandi/2023\n3\n102\nSr.\nNo\n.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n27\nVaishali Aggarwal\n2017-18\nAssessee\n482/Chandi/2023\n8\n28\nSanjeev Aggarwal\n2018-19\nAssessee\n480/Chandi/2023\n4\n29\nSanjeev Aggarwal\n2017-18\nAssessee\n489/Chandi/2023\n7\n141. The lead case taken up is Scott Edil Advance Research Laboratories and\nEducation Limited for AY 2010-11, 842/Chandi/2023.The assessee in this appeal\nhas taken the following ground of appeal :\nGround No. 3: That on facts, circumstances and legal position of the case, Worthy\nCIT(A) has erred in confirming the action of Ld. AO in acquiring jurisdiction u/s\n153A as such order is invalid and unlawful as stated and purported approval u/s\n153D dated 30.12.2019 was without due application of mind and merely in\nritualistic manner stated approval is accorded which is disputed and challenged\nhere so as to invalidate the entire assessment.\n142. The contention of the Ld. Counsel for the assessee in respect of the above issue\nare that in all this Scott Edil group of cases, Ld. AO forwarded draft assessment order\nto the Addl. CIT on 29.12.2019 along with assessment records only, but without any\nseized record folders. The Addl. CIT had sent back the file with his cryptic approval\nnote on 30.12.2019. In the approval note, he has simply written “the approval u/s 153D\nof the Act, 1961, is accorded for the AY 2014-15.”\n150. The Ld. Counsel has contended that the said approval has been granted by the\nLd. Addl. CIT without application of mind. He in this respect has stressed on the\nfollowing points of arguments :\na) That there is no discussion on the file by the Ld. AO during assessment\nproceedings with the Addl. CIT. That the approval u/s 153D given in this\ncase is mechanical and ritualistic only and without any application of mind.\n103\nb) That the Ld. Addl. CIT even did not mention that he has looked into the\nrecords or the draft assessment order. That he has just signed the dotted\nlines.\nc) That the approval was sought by the AO on 29.12.2019. In this large search\ngroup containing more than 50 assessment orders and all these approvals\nwere given in less than 5 working hours. Based on this limited time used by\nAddl. CIT, it would not have been possible to go through this voluminous\nassessment record, draft assessment orders containing such minute issues.\nd) Seized record was never sent to the Addl. CIT as is evident from approval\nnote dated 30.12.2019 appended at Page 303 of Ld. CIT(A) order dated\n31.10.2023 in case of SEARLE.\ne) Even the assessment record also does not show that there was any noting on\nthe file when the assessment proceedings were ongoing.\nf) That when the above facts and contentions were raised before the Ld.\nCIT(A), he rejected this ground of the assessee by holding that approval u/s\n153D is only an administrative action and its validity or invalidity will not\nimpinge upon the validity of the assessment order.\ng) That the above action of Ld. CIT(A) is bad in law as now number of courts\nhave held that the approval u/s 153D is not merely administrative and that if it\nis demonstrated by the assessee that the approval was mechanical, without\napplication of mind, without giving reasonable time to the file and is ritualistic\nin nature, said approval u/s 153D and the consequential assessment order\ndeserves to be quashed.\nh) The Ld. Counsel, in this respect has relied upon the following case laws,\nwherein the approval u/s 153D is granted within a short span of time without\napplication of mind, such approval will not be a valid approval and the\nconsequent assessment order framed would be liable to be quashed:\n1. Inder International vs. ACIT, ITA No. 1573 of 2018, Chandigarh ITAT.\n2. Sanjay Duggal vs. ACIT, ITA No. 1813 of 2019, Delhi ITAT.\n3. PCIT vs. Shreelekha Damani, 307 CTR 218, Bombay High Court.\n104\n4. ACIT vs Serajjudin & Co., 454 ITR 312, Orissa High Court, which is affirmed\nby Hon’ble Supreme Court in SLP(C) Diary No(s). 44989/2023 dtd. 28.11.2023.\n5. PCIT vs Siddharth Gupta, 450 ITR 534, Allahabad High Court.\n6. CIT vs Shiv Kumar Nayyar, 8 NYPCTR 1064, Delhi High Court.\n7. PCIT vs Anuj Bansal, 7 NYPCTR 1020, Delhi High Court.\n143. The Ld. DR on the other hand has relied upon the findings of the Ld. CIT(A) and\nhas further submitted that the approval has been granted by the Addl. CIT after due\napplication of mind. That moreover it was an administrative function and that\nintervention can be made on this issue on judicial side.\n144. We have considered the rival contentions and gone through the record. It is a\nmatter of record that about 50 assessment orders have been passed by the AO u/s 153A\nof the Act in the group cases of the assessee. The AO was required to get approval of the\nAddl. CIT/CIT u/s 153D of the Act before passing the impugned assessment orders. It\nis also a matter of record that the AO had forwarded the draft assessment orders to the\nAddl. CIT 29.12.2019 . We take a sample copy of the letter forwarding the draft order in\nthe case of SEPL vide letter no 886 along with assessment record to seek the approval\nu/s 153D of the Act which was accorded on 30.12.2019. The copy of the letter sent by\nthe AO to the Addl. CIT is reproduced as under ( for reference only the letter for AY\n2018-19 has been reproduced as under. However the AO has sent separate letter for\ndifferent assessment years):-\n105\n145. A perusal of the above letter reveals that the AO had sent the draft Assessment\nOrder on 29.12.2019 to the Addl. CIT along with assessment records. However, the AO\ndid not send the seized material along with the assessment records. The Ld. Addl. CIT\nsent the approval in all the cases the next day i.e. on 30.12.2019. The contents of the\napproval in the said case are reproduced as under:\n106\n146. The identical approval letters have been sent by the Addl. CIT in respect of\nmore than 40 draft assessment orders involving multiple issues, some of which\nrequired due application of mind and also reference to the seized material. Even one\nof the major issue raised during the assessment proceedings in most of the cases was\nthat as to whether the seized material would constitute incriminating material or not.\nThe other major issue as discussed above was regarding the discrepancies pointed out\nby the assessee in the DVO’s reports. Further, whether the DVO was justified in\napplying CPWD rates or he was supposed to apply State PWD rates. There were many\nother disputed issues such as issue of deemed dividend, commission income estimated\nby the AO holding the transactions within the group entities as bogus. The issue of\naddition on account of jewellery found and seized during search action, addition on\naccount of bogus sales and bogus purchases etc. proposed by the AO in the draft\nassessment order. It is also a matter of record that in many of the cases, the original\nassessment had already stood completed and not abated. The Ld. CIT(A) has also\nquashed assessment in many cases for which the department had preferred appeals\nbefore this Tribunal along with the captioned appeals, however the same have been\ndecided by way of our separate common order dated 6.11.2024 passed in\n501/Chandi/2023 and others. It is apparent that the Ld. Addl. CIT had not made a\nsingle comment on any of the issues and about the additions proposed in the draft\nassessment order. Though, the Ld. Addl. CIT is not supposed to give his comments on\neach or every issue, however, considering that these were set of about 50 draft\nassessment orders involving multiple issues proposing additions in crores of rupees,\nthe lack of single comment on any of the issue with only a one line approval, “ the\napproval u/s 153D of the Act, 1961, is accorded for the AY 2014-15.”, without even a\nbare minimum discussion on any of the issues/additions proposed in any of the draft\nassessment orders, even without having perused the seized material and sending the\napproval letters in all the cases the very next day shows non application of mind by\nthe Ld. Addl. CIT and shows that such approvals have been given in a mechanical\nmanner. It is pertinent to mention here that these appeals along with other appeals\npertaining to the same search action were earlier heard by this Tribunal on 20.08.2024\n107\nand the hearing continued for the next day also and concluded on 21.08.2024. The\nmatter was again fixed for clarifications for 27.11.2024. This time the Ld. CIT (DR)\nMr. K. MehboobAli Khan was also joined in arguments by another CIT(DR) Smt.\nKusum Bansal. At their request, the matter was adjourned to 5.12.2024. On 5. 12.\n2024, the matter was again heard at length, and both the Ld. CITs (DRs ) and the\ncounsel for the assessee addressed the arguments and hearing was concluded to their\nsatisfaction. Thereafter, it took considerable time to us also to go through each of the\nissue and adjudicate upon the same. What we want to convey is that the above facts\nand circumstances show that the draft assessment orders were sent by the AO in\napproximately 50 cases, which required due application of mind , but the Ld. Addl\nCIT sent the approval on the very next working day in a casual and mechanical manner\nvide one line order saying that approval is accorded without even minimum\ndeliberations. Under the circumstances, the case laws cited by the Ld. Counsel for the\nassessee are squarely applicable. The Coordinate Chandigarh Bench of the Tribunal,\nin the case of “Inder International vs. ACIT” (supra), in some what similar\ncircumstances, has observed as under:\n“7. The Ld.Counsel for the assessee before us stated that this issue is squarely covered\nby the decision of the Hon'ble Bombay High Court in the case of PCIT Vs. Shreelekha\nDamani (2019) 307 CTR 218. He also stated that the Tribunal is consistently taking\nview and he cited the following case laws:\nS. No. Name of the case\nCitation\n1 . S a n j a y D u g g a l V s . A C I T I T A N o . 1 8 1 3 / D e l / 2 0 1 9\n2 . M 3 M I n d i a H o l d i n g s V s . D C I T 7 1 I T R ( T r i b . ) 4 5 1\n3 . D i l i p C o n s t r u c t i o n s P v t . L t d . V s . A C I T I T ( S S ) A N o . 6 6 t o 7 1 / C T K / 2 0 1 8\n4 . S a u r a b h A g a r w a l V s . D C I T I T A N o s.2 6 3 t o 2 6 7 / A g r / 2 0 1 7\n5 . R a j e s h L a d h a n i V s . D C I T I T A N o . 1 0 6 t o 1 0 8 / A g r a / 2 0 1 9\n6 . U t t a r a k h a n d U t h a n S a m i t i V s . I T O I T A N o . 4 8 t o 5 2 / D D N / 2 0 1 9\n7 . R i s h a b h B u i l d w e l l P v t . L t d . V s . D C I T I T A N o . 2 2 1 2 / D e l / 2 0 1 8\n8. AAA Paper M arket in g Lt d. Vs. ACI T ITA No. 167/L kw/ 2 016\n108\n9. M/s Rajat Min erals Pvt. Ltd. Vs.DCI T IT(SS)A N os.4 1 to 47 /R an/2 01 9\n10 . Ge etarani Pand a Vs. ACIT IT(SS)A Nos. l/CTK/ 2 017\n11 . ACIT Vs . C R Mitt al & So ns (H UF) IT(SS)A N o. 1 00 /JAB/20 14\n8. The Ld.Counsel for the assessee also relied upon the recent decision of the ITAT, Mumbai\nBench in the case of Arch Pharmalabs Ltd. Vs. ACIT, CC-32 in ITA No.6656/Mum/2017 &\nOthers dated 07.04.2021, wherein exactly on identical facts the Tribunal has held that the\napproving authority has not mentioned any process of deriving satisfaction so as to exhibit due\napplication of mind by the approving authority.\n9. On the other hand, the Ld.CIT DR took us through the Departmental Circular\nF.No.286/161/2006-IT (Inv.II) dated 22.12.2006 wherein entire process of search and seizure\nassessment is mentioned and according to her this is strictly followed and there is no deviation\nfrom the same. She also stated that the Addl.CIT is supervising authority of the AO in case of\nsearch assessment and there is no allegation by the assessee that there is any deviation in the\nprocess. She read out the relevant clauses of the above circular issued by the Board.\n10. We have gone through all the facts of the case first and also gone through the Paper\nBook filed by the assessee on 18.05.2021 wherein relevant two documents i.e. letter by the AO\nto the Addl.CIT which is enclosed in assessee’s Paper Book at page No.1 and which reads as\nunder:\nGov ernm ent of Ind ia\nOffice of the Asst . C om missioner of I ncom e T ax, C entr al C ir cl e-II,\n O pp.B.V .M . School Kit chlu Nagar ,\nL udhiana .\nNo.ACI T/C-II/Ldh/ 20 17-18/44 6 D at ed:29.0 6.2017\nTo\nThe Additi onal C omm issioner of Inc ome Tax ,\nCentral R ange, L udhiana .\nM adam ,\nSu b: Ap prova l und er sectio n 153 D of the In co me Ta x Ac t, 196 1 - in t h e ca se of M/s\nInd er Int ernat ion a l(PA N A ABFI7996J ) an d Sh .Ab hay J ain (P AN AHEPJ720 3M) –\nmatt er reg ar d ing - \n *********\n109\nKindly r efer to t he subje ct cit ed above. Keeping i n vi ew the or der s of H on'bl ePunj ab & Har ya na High C ourt Chandi gar h (whereb y\ndir ecting t he asse ssm en t or der t o com plete t he a ssessm ent pr oceedi ngs by 30 .0 6.20 17 ),\ndraft ass essm ent or der s of the foll owing cases have bee n pr epar ed:\nS. No.\nNam e & addr ess of t he assessee\nPA N\nAsse ssm ent Years\n1. M/ s Inder I nt er nati onal, 59 4,\nNir ankari M ohalla No.1,\nOver l ock Road, Ludhiana\nAABF 179 96J\n20 11 -12 t o 20 16 -17\n(six Y ears U/ s 153A )\n2. S.Abhay Jain Pr op.\nM/ s Shr ee Lak shmi St eels,\n46 7, I ndustria l Ar ea-B ,\nMiller ganj , L udjhiana\nAHEPJ 72 03 M\n20 12 -13 t o 20 16 -17\n(Fiv e Ye ars U /s 15 3C)\nSubmitt ed for kind perusal and st at ut ory appr o val U /s 1 53 D of t he I nco me T ax A ct, 1 96 1.\nYour s fait hfully\nEncls: A ssessm ent fol der s in\n11 cases alongwit h\nCorr espo nding dr aft\nassessm ent Or der s.\nSd/ -\n(Manke S hah K apoor )\nAsstt. C ommissione r of I ncom e T ax\nCentr al Cir cle-II, L udhiana\n12. On page 2, the relevant statutory approval accorded u/s 153D of the Act\nby the Addl.CIT is also enclosed and the same reads as under:\nGovernment of India\nMinistry of Finance\nOffice of the Addl. Commissioner of Income Tax, Central Range, Ludhiana.\nSCO 1-6, 2nd Floor, Opp.B.V.M. School Kitchlu Nagar, Ludhiana.\n________________________________________________________\nF.No.Addl.CIT(C), R/Ldh./16-17/560 Dated:29.06.2017\nTo\n110\nThe Asst. Commissioner of Income Tax,\nCentral Circle-II, Ludhiana.\nSub: Approval u/s 153D of the I.T. Act, 1961 in the case of M/s Inder\nInternational (PAN AABFI7996J) and Sh.Abhay Jain (PAN AHEPJ7203M)\n–regarding-\n**********\nKindly refer to the subject cited above. Please refer to your office letter\nNo.446 dated 29.06.2017, received in this office on 29.06.2017 thereby submitted\ndraft assessment order in the following cases:\nS.No. Name & address of the assessee PAN Assessment Years\n1. M/s Inder International, 594,\nNirankari Mohalla No.1,\nOverlock Road, Ludhiana\nAABF17996J\n2011-12 to 2016-17\n(six Years U/s 153A)\n2. Sh.Abhay Jain Prop.\nM/s Shree Lakshmi Steels,\n467, Industrial Area-B,\nMillerganj, Ludjhiana\nAHEPJ7203M\n2012-13 to 2016-17\n(Five Years U/s 153C)\nNecessary statutory approval u/s 153D is given to pass the above assessment order,\nas sub. Assessment record in this case is returned herewith.\nEncls: As above.\nSd/-\n(Dr.Rajinder Kaur)\nAddl.Commissioner of Income Tax\nCentral Range, Ludhiana\n111\n11. From these two documents it is clear that the AO has prepared a draft\nassessment order only either on 28.06.2017 or on 29.06.2017. This draft\nassessment order was sent to the Addl.CIT only on 29.06.2017 alongwith draft\n112\nassessment order of other group cases and the Addl.CIT, Central Range,\nLudhiana has accorded approval u/s 153D of the Act that very day i.e.\n29.06.2017 as is clear from the above approval reproduced. The Addl.CIT simply\nrecorded that:\n“N ecessa ry statut ory a p pro va l u/s 153 D is given to p ass th e abo v e a sses smen t\nord er as such . Ass essm ent record in th is cas e is r etu rn ed h erew ith.”\n12. We have gone through the decision of Hon'ble Bombay High Court cited by\nthe Ld.Counsel for the assessee in the case of Shreelekha Damani (supra)\nwherein almost identical approval was considered by the Hon'ble Bombay High\nCourt and the relevant findings are as under:\n“6. Having hear d the l ear ned C ounse l for the bot h si des and havi ng perused t he\ndocum ent s on r ecord, we have no hesit ation in upholdi ng the de cisi on of the Tribunal .\nThe Additiona l C IT while gr anting an appr oval for passi ng t he or der of assessm ent ,\nhad m ade followi ng r em ar ks :-\n\"To, The DCIT (OSD )-1 M umbai\nSubject : A pprov al u/s 1 53 D of dr aft ord er u/ s 143(3) r.w.s.15 3A in t he c ase of Smt.\nShr eele kha Nandan D ama ni for A. Y. 2 00 7-0 8 r eg.\nRef : No. DCI T (O SD )-1/CR-7 /A ppr/ 20 10 -11 dt. 31 .12.20 10\nAs per this office lett er dat ed 20.12.2010 , the Assessi ng O fficer s were aske d t o\nsubm it the draft or ders for approv al u/ s 153 D on or be fore 24.1 2.20

10. H owever , this\ndraft or der h as bee n subm itt ed on 31 .12.2 010. H ence the re is no m uch time left t o\nanalise t he issue of dr aft or der on mer it. T her efor e, t he dr aft or der is be ing appr ove d\nas it i s subm itt ed.\nAppr ov al t o t he above said dr aft ord er is gr ant ed u/s 1 5 3D of t he I.T. A ct, 1 96 1.\"\n7. I n pl ain t erms, t he Additional CI T r ec or ded t hat t he dr aft order for appr oval under\nSection 1 53 D of the Ac t was subm itt ed only on 3 1st 3 of 4 Uday S. J agt ap 66 8-16 -\nITXA1 5=.doc De cem ber , 2 010. H ence , t her e was not e nough tim e left t o anal yz e t he\nissues of draft or der on mer it. Ther efor e, t he or der was appr ov ed as it was submitt ed.\nClearly , t her efor e, t he Addit ional CI T for want of tim e could not ex amine t he issues\narisi ng out of the dr aft or der . H is action of gr ant i ng t he appr oval was thus, a m er e\nmec hanical exer c ise acc epting the dr aft or der as it is w ith out any in dependent\napplic ation of mind on his pa rt. The Tr ibunal is, th er efor e, perfectl y j ustified in\ncoming t o the concl usi on t hat t he appr oval was invalid in eye of law. We ar e\nconscious t hat the st atut e does not pr ovi de for any form at in which the approv al\nmust be gr ant ed or t he appr oval gr ant ed m ust be r ecorde d. Ne v ert hel ess, when t he\nAdditional CIT while gr ant ing t he appr oval r ec orde d that he did not hav e enough t im e\nto analyze the issues arising out of t he dr aft or der , cle arly this was a case in whi ch\nthe higher Aut horit y had gr ant ed t he appr ov al wit hout c onsider at ion of r elevant\n113\nissues. Question of val idity of t he appr oval goes to the r oot of t he m att er and could\nhave been r aised at any tim e. In t he r esult , no quest ion of l aw ar ises.”\n13. We have also gone through the recent case law of Mumbai Tribunal in\nthe case of Arch Pharmalabs Ltd. (supra) wherein the Tribunal held as under:\n“11.1 It may be pertin ent to obs erve at th is stage th at th e impu gn ed assessment\nord ers w er e p ass ed u/s.143(3) rws 15 3A of th e Act for th e AY 20 03 -04 to AY 20 08 -\n09 and for the A Y 2009-1 0 u/s.1 43(3 ) of the Act pursu ant to search c ar ried out und er\ns.1 32 o f the Act. For passing su ch asse ssme nt ord ers , th e Ass essing Officer is\ngo vern ed b y s.1 53 D of the Act whereb y t he Assessin g Officer shou ld comp let e th e\nass essment p ro ce ed ings and p rep ar e a draft assessmen t ord er wh ich need to b e\nplaced be fo re th e approving auth orit y i. e. Jo int / Add l. Co mmiss ion er (d esi gn ated\nau thorit y givin g appro val to sear ch assess ments u/s.153D of th e Act). Th e appro vin g\nau thorit y is n e cess aril y requ ired t o objectivel y eval u at e such d raft ass e ssment order\nwith du e appl ication o f min d on various issues cont ain ed in such ord er s o as t o d eri ve\nhis/ h er con clusive s atis facti on th at th e propose d action o f AO is in con formit y with\nsubsistin g law. Th e AO is obligat ed to p ass t he assessmen t or de r ex act ly, as p er\napp roval/ di re ct ions o f the des ign at ed autho rit y. In evit ab ly , th is evalu ation is to b e\nmad e on b asis o f material gath ered at ti me o f se arch as well as o bt aine d i n th e\ncourse of th e ass essme nt pro ce edin g. The req uire me nt o f law is t o gran t app ro val\nnot me rely as a fo rmality o r a s ymbolic act but a mand atory requi rement . 11 .2 In th e\nbackdrop of facts n arrated in th e preced ing p aras , it is t he co nt ention on b eh alf of\nthe asssess e e th at approval grant ed und er S . 1 53 D do es n ot meet the requ irement\nof law and h ence ass essment ord ers p assed in consequ en ce o f su ch non -est appro val\nis a n ullit y in law. Th e assessmen t ord ers thus passed is vitiated in law\nwhich ille galit y cannot be c ured. In suppo rt o f ch arge o f non est ap proval, sev eral\ncont entions h ave b e en rais ed viz (i) th e appro val ac co rd ed und er sec tion 153D is\nwithout an y occ as ion to re fer to th e assessment re cords and se iz ed mater ial , if any,\nincri min ating th e assessee and h en ce su ch appro val is in t he r ealm o f an abstract\napp roval o f draft ass essment o rders which was u nsubst ant iat ed and unsu pport ed and\ncons equ entl y suffered fro m tot al non -applic ation o f mind (ii) ap proval gr an ted\nhurri ed ly in a spu r in vo lvin g volu min ous ass ess ments sp anning o ver 7 assessment\nyears and thus on ly a sy mbo lic e xercise to meet th e requirement o f law (iii) Total\nlack o f o bjectivit y in drawin g satis faction o n obj ective mat erial while giving a\nc ombin ed appro val for 7 assessmen ts and also withou t e valu ating t he nu ances of\neach assessment year in vo lved (iv) th e mund an e act ion o f Ad dl. CIT und er S. 153 D in\na cosmeti c mann er giv es in fallible i mpression of approv al on do tt ed line and thus\n113\nde feats th e p urpos e o f sup er vision o f se arc h ass essments (iv) in i tial ed draft\nass essment orders no t availabl e in o ffice records.11.3 As obs erved , Section 1 53D\nbesto ws a sup erviso ry j urisdict ion on t he d es ignated authorit y in resp ec t o f search\nrelat ed assessment an d thus en joi ns a salu t ary du t y o f statu tory nature. Th e\ndesi gn at ed sup erio r authorit y is thus expecte d to con firm t o the st at utor y\nrequ irement in letter and spirit. It is e vident fro m th e co mmunicatio n of AO and\ncons equ ent appr o val t hereo n und er S. 1 53 D th at n o assessment re cord for an y\nass essment ye ar in q ue stion or an y seiz ed mate ri al h ad travel ed to th e autho rit y\ncon ce rn ed fo r his obj ecti ve consid eration o f the s ame qu a th e d raft assess ment\nord ers. No refe re nc e in this reg ard is made in the appro val not e eith e r which may\ndiscard such allegation as untru e. No oth er material or ord er sheet i n assessment\nproc eed ings etc . were p l aced be fore us eith er to est ablish oth erwis e. Except th es e\ntwo do cu ments namel y, a so li t ary co mmuni cati on fro m AO to th e Add l. C IT d ated\n29 /1 2/ 20 10 and an in tu rn approval b y Addl . C IT dat ed 31 /1 2/2 01 0, th ere is not hin g\nels e b efore us to gau ge th e facts differently . A b are\nglan c e at th e app ro val so ac cord ed makes it eviden t th at such appro val is gen eric\nand listless and accord ed in a b l an ket mann er without an y re feren ce to an y issu e in\nresp ect o f an y of th e 7 assessmen t ye ars. Ap p arent ly, th e appro val h as been grant ed\non a dott ed line wit hout an y availabi lit y o f reaso nab le t ime which firms u p th e b elief\ntowards no n appl icatio n of min d. Bes id es , th e app ro val h as b een grant ed in a\nconsolid at ed mann er for all assessment ye ars for which vo lu min ou s assessmen t\nord ers were prep ared. The who le sequ enc e of ac tion app arent ly appears t o b e\nillusory t o me rely meet the requirement of l aw as an e mp t y formalit y. It is also\nalle ged o n b eh alf of ass esse e th at th e d raft ass ess men t ord ers are no t availabl e on\nrecord whi ch all egation has not b een r ebu tt ed. Th e draft ass essmen t orders sh owin g\nsome marking / init ials etc. co uld h ave g iven a v alu able input on th e ap pli cabilit y of\nmin d and cou ld t hro w light on objecti vity app lied o wing to t ot al sile nce on an y\ndelin eat ion on t hes e asp ec ts in th e app ro val memo . Th e records be fo re us are t ot all y\nmut ed . 1 1.4 Based on solit ary co mmun icati on p laced befo re us, it is ost ensib le th at\ndraft assessmen t ord ers were pl aced b e fore t he Addl. CIT on 29.1 2.20 10 for th e first\nti me . It is axio mat ic fro m t he p lai n r eadin g of appro v al memo th at various\nass essment ord ers and t he issu es in co rporat ed in the assess me nt ord ers, were n ever\nsubje ct ed t o an y d iscuss ion wit h th e auth orit y gran tin g app ro val prior t o 29 .

12. 2010.\nIt is evi den t from t he CBD T C ircu l ar No. 3 of 20 08 d at ed 12.0 3.2008 th at th e\nlegisl atu re in i ts hi gh est wisdo m mad e it obligatory th at th e assessmen ts of s e arch\ncas es should be made with th e prior appro val of sup erior autho rity, so that th e\nsuperior aut horit y ap ply th e ir mind on th e materials and o th er atten din g\n114\ncircu mstance s on th e b asis of wh ich t he Assess ing o fficer is making the assess men t\nand after du e app li cat io n of min d and on the b asis of s eized mat erials, the sup erio r\nau thorit y is requ ired to accord appr o val th e re spec tive Assess ment order. Sole mn\nobject o f entrus tin g th e duty o f App ro val o f ass essmen t in search cas es is that the\nAddi tion al CIT , with h is exp erien ce and maturi ty of und erst andin g sh ould at least\nmin imall y scr utin iz e th e s eized do cu ments an d any oth er mat erial formin g th e\nfoundation of Assessme nt. It is e lemen t ary th at wh en eve r an y s t atut ory ob lig at ion\nis cast upon an y st atut ory au thorit y, such aut horit y is required to discharg e its\nobligat ion not mechanically, not e ven formally but aft er du e applic ation o f mind .\nThus, th e ob ligation o f granting Ap pro val acts as an inbui lt prot ect ion to the t axp ayer\nagainst arb itrary or unjust exercise of d iscr etion b y th e AO. The app roval grant ed\nunde r s ectio n 15 3D o f the Act sh ould n ecess aril y re flec t du e app lic at ion o f mind and\nif t he same is subj ected to judicial s crut in y, it should st and for its elf an d should b e\nself-d efen din g. There are lon g line o f judicial preced ents which pro vid es gu id an ce in\napp lyi ng th e law in this re gard. 11.5 At th e cos t o f r ep etition , it may b e reit erated\nth at in th e instan t c ase , ap pro ving auth orit y d id n ot mention an ythin g in th e\napp roval memo to ward s his/ h er p ro cess of d erivin g sat isfaction so as to exhibit\nhis/h er du e ap pli cation of mind . We may observe th at Para 2 o f th e abo ve appro v al\nlett er mere ly says th at "Ap pro val is he reb y acc ord ed u/s.15 3D of th e In co me-tax\nAct , 196 1 to co mp lete assess ments u/s.143(3 ) r.w.s.1 53A o f t he I.T . Ac t in t he\nfo llo wing case on th e basis o f dr aft assessmen t ord ers..."wh ich clearl y pro ves th at\nthe Addl . CIT had routi nely given ap pro val to the AO to p ass the ord er only on th e\nbasis of cont en ts ment ione d in th e dr aft ass essment or de r with out an y applicat ion\nof mind and seiz ed mat erials wer e no t l o o ked at and/or oth er enqu iry and\nexam in at ion was n ever carried ou t. Fro m th e s aid appro val , it can b e e asily in fer red\nth at th e said ord e r was approved , s olely rely ing upon th e imp lied undert aking\nobtained fro m the Ass e ssing Officer in\nthe form of draft assessment order that AO has taken due care while framing\nrespective draft assessment orders and that all the observations made in the\nappraisal report relating to examination / investigation of seized material\nand issues unearthed during search have been statedly considered by the AO\nseeking approval. Thus, the sanctioning authority has, in effect, abdicated his\nstatutory functions and delightfully relegated his statutory duty to the\nsubordinate AO, whose action the Additional CIT, was supposed to supervise.\nThe addl. CIT in short appears to have adopted a short cut in the matter and\nan undertaking from AO was considered adequate by him to accord approval\nin all assessments involved. Manifestly, the Additional CIT, without any\nconsideration of merits in proposed additions with reference to incriminating\nmaterial collected in search etc. has proceeded to grant a simplicitor\napproval. This approach of the Additional CIT, Central has rendered the\nApproval to be a mere formality and can not be considered as actual approval\nin law. Hence, we quash the assessment framed u/s 153A of the Act on this\nadditional ground alone.\n16. Needless to say that we need not to adjudicate the grounds raised on\nmerits by the assessee as we have already quashed the assessment on\njurisdictional issue that the statutory approval granted u/s 153D is without\napplication of mine by the Addl.CIT.”\n116\nand the relevant is noted in above paras. We noted that the relevant Para of\nthe above approval letter merely says that \"Necessary statutory approval u/s\n153D is given to pass the above assessment order as such. Assessment record\nin this case is returned herewith...\"which clearly proves that the Addl. CIT\nhad routinely given approval to the AO to pass the order only on the basis of\ncontents mentioned in the draft assessment order without any application of\nmind and seized materials were not looked at because that was not available\nbefore him at the time of granting of approval to the draft assessment order\nand other enquiry and examination was never carried out. From the said\napproval, it can be easily inferred that the said order was approved, solely\nrelying upon the implied undertaking obtained from the Assessing Officer in\nthe form of draft assessment order that AO has taken due care while framing\nrespective draft assessment orders and that all the observations made in the\nappraisal report relating to examination / investigation of seized material\nand issues unearthed during search have been statedly considered by the AO\nseeking approval. Thus, the sanctioning authority has, in effect, abdicated his\nstatutory functions and delightfully relegated his statutory duty to the\nsubordinate AO, whose action the Additional CIT, was supposed to supervise.\nThe addl. CIT in short appears to have adopted a short cut in the matter and\nan undertaking from AO was considered adequate by him to accord approval\nin all assessments involved. Manifestly, the Additional CIT, without any\nconsideration of merits in proposed additions with reference to incriminating\nmaterial collected in search etc. has proceeded to grant a simplicitor\napproval. This approach of the Additional CIT, Central has rendered the\nApproval to be a mere formality and can not be considered as actual approval\nin law. Hence, we quash the assessment framed u/s 153A of the Act on this\nadditional ground alone.\n16. Needless to say that we need not to adjudicate the grounds raised on\nmerits by the assessee as we have already quashed the assessment on\njurisdictional issue that the statutory approval granted u/s 153D is without\napplication of mine by the Addl.CIT.”\n117\n147. The aforesaid case laws are squarely applicable to the case in hand.\nThe approval/s 153D given in the above noted case being without\napplication of mind and in a mechanical and casual manner, the assessment\norders thereof are thus not sustainable, the same are hereby quashed.\n148. Though, we have given our findings both on legal as well as factual\nissues raised in the captioned appeals, however, in view of our findings\ngiven on legal issues No. 1 and 18, the since assessment in all the cases\nstand quashed, hence all the appeals of the assessees herein are treated as\nallowed, whereas all the appeals of the revenue are treated as dismissed.\nUnder the circumstances, at this stage, our findings given on the factual\naspects in all the appeals are rendered in academic in nature, which can be\ntaken note of at appropriate stage, if so required and legally permissible.\nOrder Pronounced on 03.03.2025.\nSd/-\nSd/-\n(KRINWANT SAHAY)\nAccountant Member\n(SANJAY GARG)\nJudicial Member\n“आर.के.”\nआदशे कितिलिपअेिषत/