DCIT, CHANDIGARH vs. SANJEEV AGGARWAL , CHANDIGARH

Order \nPer Bench:\nAll these captioned appeals have been directed against the\nseparate orders of the Ld. CIT(A) and pertained to the assessments\ncarried out under Section 153A of the Income Tax Act, 1961\n(hereinafter referred to as the “Act”) pursuant to the search action\ncarried out under Section 132 of the Act in Scott Edil Group of cases\non 15.11.2017. Since the facts involved in all these captioned appeals\nare identical and there are common issues, hence the same were heard\ntogether and the same are being disposed of by this common order.\n2. The grounds/issues raised in all the appeals are summarized as\nunder :\nITA No. 489/Chandi/2023 (Sanjeev Aggarwal, AY 2017-18) (Assessee’s\nAppeal)\n1. Ground No. 1 – General in nature.\n2. Ground no. 2 – Deemed dividend on account of credits exceeding remuneration /\npayments received from SEPL.\n3. Ground no. 3 - Deemed dividend on account of credits exceeding remuneration /\npayments received from SEARLE.\n4. Ground no. 4 – approval u/s 153D\n5. Ground no. 5 – transfer order u/s 127 dated. 30.03.2018 was without sanction of\nlaw, hence bad in law.\n6. Ground no. 6 – General in nature.\nITA No. 505/Chandi/2023 Sanjeev Aggarwal, AY 2017-18 (Appeal by Department)\n1. Ground No. 1 – Deemed dividend u/s 2(22)(e) on account of credit credits\nexceeding remuneration / payments.\n2. Ground no. 2 – General in nature.\nITA No. 480/Chandi/2023 Sanjeev Aggarwal, AY 2018-19 ( Assessee’s Appeal)\n1. Ground No. 1 – General in nature.\n2. Ground no. 2 – Transfer order u/s 127 dtd. 30.03.2018 was without sanction of\nlaw, hence bad in law.\n3. Ground no. 3 – Deemed dividend on account of credits exceeding remuneration /\npayments received from SEPL.\n4. Ground no. 4 – Payment made by SEPL for construction of H.NO 323, Sector-9,\nChandigarh\n5. Ground no. 5 – Payment made by SEPL for construction of H.NO 3100, Sector 21,\nChandigarh.\n6. Ground no. 6 – Addition u/s 69C r.w.s.115BBE on account of difference in\nvaluation of H.NO 3100, Sector-21, Chandigarh.\n7. Ground no. 7: Approval u/s 153D.\n8. Ground No. 8- General in nature.\n5\n9. Ground No. 9- General in nature.\n (Sanjeev Aggarwal, AY 2018-19 ) (Appeal by Department)\n1. Ground No. 1 – Deemed dividend on account of credits exceeding remuneration /\npayments received from SEPL.\n2. Ground No. 2: General in nature.\nITA No. 482/Chandi/2023 (Vaishali Aggarwal, AY 2017-18 ) (Appeal by Assessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 – Deemed dividend u/s 2(22)(e) on account of credit credits\nexceeding remuneration / payments.\n3. Ground No. 3 - Approval u/s 153D.\n4. Ground No. 4 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of\nlaw, hence bad in law.\n5. Ground No. 5 – General in nature.\nITA No. 483/Chandi/2023 (Vaishali Aggarwal, AY 2018-19) (Appeal by Assessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 – Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 - Deemed dividend u/s 2(22)(e) on account of credit credits exceeding\nremuneration / payments.\n4. Ground No. 4 - Payment made by SEPL for construction of H.NO 323, Sector-9,\nChandigarh.\n5. Ground No. 5 – Payment made by SEPL for construction of H.NO 3100, Sector-21,\nChandigarh.\n6. Ground no. 6 – Addition u/s 69C r.w.s.115BBE on account of difference in valuation\nof H.NO 3100, Sector-21, Chandigarh.\n7. Ground No. 7 – Unexplained investment in jewellery.\n8. Ground No. 8 - Approval u/s 153D.\n9. Ground No. 9 – Reasonable opportunity of being heard not provided.\n6\nITA No. 591/Chandi/2023 (Maxport India Pvt Ltd, AY 2018-19 ) (Appeal by\nAssessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 – Order deserves to be quashed in absence of incriminating material.\n4. Ground No. 4 – Deemed dividend on account of credits exceeding\nremuneration/payments received from SEPL\n5. Ground No. 5 - Approval u/s 153D.\n6. Ground No. 6 – General in nature.\nITA No. 579/Chandi/2023 (Maxport India Pvt Ltd, AY 2017-18 )(Appeal by Assessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 - Transfer order u/s 127 dated 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 – Order deserves to be quashed in absence of incriminating material.\n4. Ground No. 4 – Commission on sales and purchase transactions carries out allegedly\noutside books.\n5. Ground No. 5 - Approval u/s 153D.\n6. Ground No. 6 – General in nature.\nITA No. 584/Chandi/2023 (Maxport India Pvt Ltd, AY 2016-17 ) (Appeal by\nAssessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 – Order deserves to be quashed in absence of incriminating material.\n4. Ground No. 4 – Commission on sales and purchase transactions carries out allegedly\noutside books.\n5. Ground No. 5 - Approval u/s 153D.\n7\n6. Ground No. 6 – General in nature.\nITA No. 583/Chandi/2023 (Maxport India Pvt Ltd, AY 2015-16) (Appeal by Assessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 – Order deserves to be quashed in absence of incriminating material.\n4. Ground No. 4 – Commission on sales and purchase transactions carries out allegedly\noutside books.\n5. Ground No. 5 - Approval u/s 153D.\n6. Ground No. 6 – General in nature.\nITA No. 582/Chandi/2023 (Maxport India Pvt Ltd, AY 2014-15 )(Appeal by Assessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 – Order deserves to be quashed in absence of incriminating material.\n4. Ground No. 4 – Commission on sales and purchase transactions carries out allegedly\noutside books.\n5. Ground No. 5 - Approval u/s 153D.\n6. Ground No. 6 – General in nature.\nITA No. 732/Chandi/2023 (Balram Krishan Aggarwal, AY 2018-19) (Appeal by\nAssessee)\n1. Ground No. 1 – General in nature.\n2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law,\nhence bad in law.\n3. Ground No. 3 – Order deserves to be quashed in absence of incriminating material.\n8\n4. Ground No. 4 – Commission on sales and purchase transactions carries out allegedly\noutside books.\n5. Ground No. 5 - Payment of Rs.18,15,549/-by SEPL for construction of house and\nholding the same as deemed dividend.\n6. Ground No. 6 – Payment of Rs.7,77,384/- by SEPL for construction of house and\nholding the same as deemed dividend.\n7. Ground No. 7 – Difference in valuation as per DVO report and books of accounts.\n8. Ground No. 8- Shortage of stock found during search.\n9. Ground no. 9 – approval u/s 153D\n10.Ground no.

\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\n47\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.\n48\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\ngenuneness 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\n49\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\n50\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\n51\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\n52\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\n53\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.\n54\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\n55\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 AO 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.\n56\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)\n57\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.\n58\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\n59\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\n60\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\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\n62\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.\n63\nIssue No. 5: Directions by CIT(A) to AO to reopen assessment u/s 147/148 for AY 2010-11\nand 2012-13\n66. Following is the list of cases involving this issue :-\nSr.\nNo.\nName of the assessee\nAY\nAppeal by\nAppeal No.\nGround\nNo.\n1\nScott Edil Pharmacia\nLimited\n2013-\n14\nAssessee\n829/Chandi/20\n23\n8\n2\nScott Edil Advance\nResearch Laboratories\nand Education Limited\n2010-\n11\nAssessee\n842/Chandi/20\n23\n4\n3\nScott Edil Advance\nResearch Laboratories\nand Education Limited\n2010-\n11\nAssessee\n842/Chandi/20\n23\n4\n67. The issue raised by the assessee in the above appeals relates to the directions given\nby the ld. CIT(A) to ld. AO to initiate 147/148 taking shelter of s.150(1)(2) for AY 2010-\n11 and 2012-13\n68. In view of our findings given , above, the direction of the Ld. CIT(A) to reopen\nthe assessment on account of difference in valuation the basis of DVO’s report for AY.\nAY 2010-11 & 2012-13 is also set aside/quashed This issue is accordingly decided in\nfavour of the assessee.\nIssue 6: Shortage of stock found during search held as undisclosed sale.\n69. 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\n5\n2\nScott Edil Pharmacia Ltd.\n2018-19\nAssessee\n846/Chandi/2023\n4\n3\nBalram Krishan Aggarwal\n2018-19\nAssessee\n732/Chandi/2023\n8\n64\n70. The lead case taken up is Scott Edil Advance Research Laboratories and\nEducation Limited for AY 2018-19, having ITA No. 846/Chandi/2023. The assessee in\nthis appeal has taken the following grounds of appeal:\nGround no. 4: 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.30,26,235 where\nhe had erroneously held that the alleged shortage of stock found during the search\nof Rs.2,75,12,235/- is undisclosed sales of the appellant and on the same, GP rate\nof 11% is to be applied.”\n71. The brief facts relating to the issue under consideration are that during the search\naction u/s 132 of the Act, the department made inventory of the stock of the assessee.\nThe investigation team arrived at the value of stock at Rs.13,24,36,300/. At the same\ntime, the department also computed the stock as per books by applying GP Ratio method.\nBased on this, they computed the book stock at Rs.15,99,48,635/-. Therefore, it was\nobserved that there was shortage of stock of Rs.2,75,12,235. On above shortage of stock,\nthe Ld. AO assumed that the assessee might have sold the said stock outside the books.\nThe AO, therefore, applied past GP Rate of 11% and made addition of Rs.30,26,235/-\nas undisclosed profits of the assessee. Being aggrieved by the said addition made by the\nAO, the assessee raised this issue in appeal before the Ld. CIT(A).\n72. In appeal, it was contended by the assessee that the valuation of the stock done by\nthe department was not correct and that it was based on estimation in cost as well\nquantities. That even the stock taking was completed within 3 days even when the stock\nof the assessee was at more than one locations and it comprised of raw material, work in\nprogress (WIP), finished goods, packing material etc. and all the stock were technical\nproducts. It was, therefore, contended that the addition on account of shortage of stock\nwas based on incorrect valuation and pure estimation, therefore, the impugned addition\nwas not justified.\n73. The ld. CIT(A), however, observed that the aforesaid stock valuation was\nconfronted to the directors, Shri Sanjeev Aggarwal and Shri Balram Krishan Aggarwal,\nwho accepted its correctness in their statements recorded u/s 132(4). That the assessee\n65\nfailed to maintain a proper stock register, as reflected in Clause 35 of Form 3CD. That\nthe assessee had not properly maintained the quantitative and qualitative details of raw\nmaterials, finished goods, and work-in-progress. The Ld. CIT(A), therefore, held that the\nld. AO rightly determined the book stock by applying the average GP rate of the\npreceding three years, which was reasonable and accepted method. He held that the claim\nof the assessee that the physical inventory was incorrectly recorded was an afterthought.\nHe, therefore, upheld the addition, so made by the AO.\n74. We have heard the rival contentions and gone through the record. The ld. Counsel\nof the assessee contended that the assessee is a renowned pharmaceutical manufacturer,\nand like any other manufacturing company, it always has a substantial component of\nWork in Progress (WIP) at any given time. The nature of the pharmaceutical industry\nnecessitates continuous production cycles, meaning that raw materials undergo multiple\nstages of transformation before reaching the finished goods stage. However, during the\nsearch, the search team completely ignored WIP during the physical stock-taking process,\nwhich resulted in a flawed and incomplete inventory assessment. The Ld. Counsel has\nfurther contended that the physical inventory conducted by the department only included\nraw materials and finished goods while completely disregarded partially processed\ngoods, which are a significant part of the stock in any manufacturing company. He,\ntherefore, has contended that incorrect method of valuation by the search team led to an\nunderstatement of physical stock, whereas, there was no shortage of stock of the assessee\nas compared to the books of accounts of the assessee. The Ld. Counsel has submitted that\nthe assessee had maintained year-wise stock records, which clearly reflected the actual\ninventory including WIP at the end of each financial year during the block period. He in\nthis respect has referred to pages 142 to 158 of the paper book which is the copy of year wise\ndetail of stock as at close of every year in the block period, contents of which are\nreproduced below for the sake of ready reference:\n66\nSCOTT EDIL ADVANCE RESEARCH LABORATORIES & EDUCATION LIMITED\nDetail of Stock at Year End\nFY\n2011-12\n2012-13\n2013-14\n2014-15\n2015-16\n2016-17\n2017-18\nRM/PM\n9,08,05,000\n14,90,00,000\n15,27,84,000\n14,76,90,000\n15,78,20,000\n16,71,00,000\n14,72,50,000\nConsumables\n9,70,000\n32,54,000\n28,23,000\n20,40,000\n21,30,000\n22,40,000\nFG\n28,75,000\n1,41,54,000\n3,50,82,000\n3,06,79,000\n3,50,00,000\n3,06,74,000\n3,50,00,000\nRM/PM\n28,85,000\n2,85,50,000\n5,59,32,000\n6,23,21,000\n6,78,50,000\n6,95,60,000\n6,82,90,000\nTOTAL\n9,60,45,000\n19,73,60,000\n34,85,00,000\n24,62,59,000\n26,38,10,000\n32,06,90,000\n25,20,50,000\nSCOTT-EDIL ADVANCE RESEARCH LAB.& EDU.LTD.\nFY 2011-12\nParticulars\nQty.\nRate(Rs)\nAmount\nGroup\nRM/PM\n4\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\nCeftixime Trihydrate\n3,068.00\n9,400.00\n2,87,92,000.00 RM/PM\n5\n1,990.00\n12,700.00\n2,52,73,000.00 RM/PM\n6\nCefodizime Proxetile\n7\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n3\nCeftriaxone Sodium Sterlie\n4\nCefotaxime Sodium Sterlie\n2,549.00\n7,000.00\n1,78,43,000.00 RM/PM\n3\nCeftriaxone Sodium Sterlie\n2,549.00\n7,000.00\n1,78,43,000.00 RM/PM\n2\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\n4\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n3\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n5\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n1\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n7\nCarton\n77.00\n1,00,500.00 Consumables\n8\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n8\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n8\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n8\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n8\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n9\n10 ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n10\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n11\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n12\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n13\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n14\nPfd. Foil Alum\n925.00\n385.00\n3,56,125.00 RM/PM\n15\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n16\nCarton\n77.00\n1,00,500.00 Consumables\n17\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n18\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n19\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n20\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n21\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n22\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n23\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n24\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n25\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n26\nCefotaxime Sodium Sterlie\n2,549.00\n7,000.00\n1,78,43,000.00 RM/PM\n27\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n28\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n29\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n30\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n31\nCarton\n77.00\n1,00,500.00 Consumables\n32\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n33\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n34\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n35\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n36\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n37\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n38\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n39\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n40\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n41\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\n42\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n43\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n44\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n45\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n46\nCarton\n77.00\n1,00,500.00 Consumables\n47\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n48\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n49\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n50\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n51\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n52\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n53\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n54\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n55\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n56\nCeftotaxime Sodium Sterlie\n2,549.00\n7,000.00\n1,78,43,000.00 RM/PM\n57\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n58\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n59\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n60\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n61\nCarton\n77.00\n1,00,500.00 Consumables\n62\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n63\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n64\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n65\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n66\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n67\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n68\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n69\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n70\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n71\nDr House No 3100, Sec 21 Chd\n145\n5,50,000.00\n5,50,000.00 RM/PM\n72\nDr House No 323 Sec 9 Chd\n81\n6,50,000.00\n6,50,000.00 RM/PM\n73\nDr House No 3100, Sec 21 Chd (25% Share)\n100\n6,50,000.00\n6,50,000.00 RM/PM\n74\nDr House No 323 Sec 9 Chd (25% Share)\n87\n3,90,000.00\n3,90,000.00 RM/PM\n75\nDr House No 3100, Sec 21 Chd (25% Share)\n131\n5,50,000.00\n5,50,000.00 RM/PM\n76\nDr House No 323 Sec 9 Chd (25% Share)\n132\n5,50,000.00\n5,50,000.00 RM/PM\n77\nHDFC Bank-4399\n196\n16,250.00\n16,250.00 FG\n78\nDr House No 323 Sec 9 Chd\n106\n17,00,000.00\n17,00,000.00 FG\n79\nDr House No 3100 Sec 21 Chd\n137\n1,80,00,000.00\n1,80,00,000.00 FG\n80\nHDFC Bank-4399\n196\n1,80,00,000.00\n1,80,00,000.00 FG\n81\nDr House No 323 Sec 9 Chd\n106\n2,00,000.00\n2,00,000.00 FG\n82\nHDFC Bank-4399\n137\n1,80,00,000.00\n1,80,00,000.00 FG\n83\nDr House No 3100 Sec 21 Chd\n170\n4,00,00,000.00 FG\n84\nHDFC Bank-4399\n176\n4,00,00,000.00 FG\n85\nDr House No 323 Sec 9 Chd\n115\n13,023.00 FG\n86\nDr House No 3100 Sec 21 Chd\n120\n7,570.00 FG\n87\nHDFC Bank-4399\n117\n81,515.00 FG\n88\nDr House No 323 Sec 9 Chd\n192\n10,538.00 FG\n89\nDr House No 3100 Sec 21 Chd\n131\n5,50,000.00\n5,50,000.00 RM/PM\n90\nDr House No 323 Sec 9 Chd\n132\n5,50,000.00\n5,50,000.00 RM/PM\n91\nDr House No 3100 Sec 21 Chd\n145\n5,50,000.00\n5,50,000.00 RM/PM\n92\nDr House No 323 Sec 9 Chd\n81\n6,50,000.00\n6,50,000.00 RM/PM\n93\nDr House No 3100 Sec 21 Chd (25% Share)\n100\n6,50,000.00\n6,50,000.00 RM/PM\n94\nDr House No 323 Sec 9 Chd (25% Share)\n87\n3,90,000.00\n3,90,000.00 RM/PM\n95\nDr House No 3100 Sec 21 Chd (25% Share)\n131\n5,50,000.00\n5,50,000.00 RM/PM\n96\nDr House No 323 Sec 9 Chd (25% Share)\n132\n5,50,000.00\n5,50,000.00 RM/PM\n97\nHDFC Bank-4399\n196\n16,250.00\n16,250.00 FG\n98\nDr House No 323 Sec 9 Chd\n106\n17,00,000.00\n17,00,000.00 FG\n99\nDr House No 3100 Sec 21 Chd\n137\n1,80,00,000.00\n1,80,00,000.00 FG\n100\nHDFC Bank-4399\n196\n1,80,00,000.00\n1,80,00,000.00 FG\n101\nDr House No 323 Sec 9 Chd\n115\n13,023.00 FG\n102\nDr House No 3100 Sec 21 Chd\n120\n7,570.00 FG\n103\nHDFC Bank-4399\n117\n81,515.00 FG\n104\nDr House No 323 Sec 9 Chd\n192\n10,538.00 FG\nCarry Over\n8,03,23,547.00\n3,78,69,043.00\ncontinued ...\n67\nSCOTT-EDIL ADVANCE LAB & EDU.LTD.\nFY Year 2011-12\nParticulars\nQty.\nRate(Rs)\nAmount\nGroup\n1\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\n2\nCeftixime Trihydrate\n3,068.00\n9,400.00\n2,87,92,000.00 RM/PM\n3\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n4\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n5\nCeftriaxone Sodium Sterlie\n2,549.00\n7,000.00\n1,78,43,000.00 RM/PM\n6\nCefotaxime Sodium Sterlie\n2,549.00\n7,000.00\n1,78,43,000.00 RM/PM\n7\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n8\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n9\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n10\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n11\nCarton\n77.00\n1,00,500.00 Consumables\n12\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n13\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n14\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n15\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n16\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n17\n10 ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n18\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n19\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n20\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n21\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\n22\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n23\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n24\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n25\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n26\nCarton\n77.00\n1,00,500.00 Consumables\n27\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n28\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n29\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n30\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n31\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n32\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n33\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n34\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n35\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n36\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\n37\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n38\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n39\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n40\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n41\nCarton\n77.00\n1,00,500.00 Consumables\n42\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n43\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n44\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n45\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n46\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n47\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n48\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n49\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n50\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n51\nCeftriaxone Sodium Sterile\n3,417.00\n7,520.00\n2,56,95,840.00 RM/PM\n52\nCeftixime Trihydrate\n2,430.00\n8,750.00\n2,12,62,500.00 RM/PM\n53\nCeftotaxime Proxetile\n765.00\n12,300.00\n94,10,500.00 RM/PM\n54\nAmpax Vlav\n910.00\n12,640.00\n1,15,02,400.00 RM/PM\n55\nDSP. SYNG.\n1,000.00\n2,390.00\n23,90,000.00 RM/PM\n56\nCarton\n77.00\n1,00,500.00 Consumables\n57\nDr House No 323 Sec BD Chd\n128\n4,00,000.00 RM/PM\n58\nDr House No 323 Sec BD Chd\n129\n2,40,000.00 RM/PM\n59\nDr House No 323 Sec BD Chd\n130\n1,11,86,000.00 RM/PM\n60\nDr House No 323 Sec BD Chd\n131\n13,58,000.00 RM/PM\n61\nDr House No 323 Sec BD Chd\n132\n4,27,63,000.00 RM/PM\n62\n10ml WFI\n1,74,225.00\n1.00\n1,74,225.00 RM/PM\n63\n20mm Gray Butyl Rubber\n18,75,000.00\n4.08\n7,61,25,000.00 RM/PM\n64\n20mm Carton\n1,90,000.00\n0.18\n34,200.00 RM/PM\n65\n20mm Seals Blue\n4,27,63,000\n0.08\n34,210.40 RM/PM\n66\nDr House No 3100, Sec 21 Chd\n145\n5,50,000.00\n5,50,000.00 RM/PM\n67\nDr House No 323 Sec 9 Chd\n81\n6,50,000.00\n6,50,000.00 RM/PM\n68\nDr House No 3100, Sec 21 Chd (25% Share)\n100\n6,50,000.00\n6,50,000.00 RM/PM\n69\nDr House No 323 Sec 9 Chd (25% Share)\n87\n3,90,000.00\n3,90,000.00 RM/PM\n70\nDr House No 3100, Sec 21 Chd (25% Share)\n131\n5,50,000.00\n5,50,000.00 RM/PM\n71\nDr House No 323 Sec 9 Chd (25% Share)\n132\n5,50,000.00\n5,50,000.00 RM/PM\n72\nHDFC Bank-4399\n196\n16,250.00\n16,250.00 FG\n73\nDr House No 323 Sec 9 Chd\n106\n17,00,000.00\n17,00,000.00 FG\n74\nDr House No 3100 Sec 21 Chd\n137\n1,80,00,000.00\n1,80,00,000.00 FG\n75\nHDFC Bank-4399\n196\n1,80,00,000.00\n1,80,00,000.00 FG\n76\nDr House No 323 Sec 9 Chd\n115\n13,023.00 FG\n77\nDr House No 3100 Sec 21 Chd\n120\n7,570.00 FG\n78\nHDFC Bank-4399\n117\n81,515.00 FG\n79\nDr House No 323 Sec 9 Chd\n192\n10,538.00 FG\n80\nDr House No 3100 Sec 21 Chd\n131\n5,50,000.00\n5,50,000.00 RM/PM\n81\nDr House No 323 Sec 9 Chd\n132\n5,50,000.00\n5,50,000.00 RM/PM\n82\nDr House No 3100 Sec 21 Chd\n145\n5,50,000.00\n5,50,000.00 RM/PM\n83\nDr House No 323 Sec 9 Chd\n81\n6,50,000.00\n6,50,000.00 RM/PM\n84\nDr House No 3100 Sec 21 Chd (25% Share)\n100\n6,50,000.00\n6,50,000.00 RM/PM\n85\nDr House No 323 Sec 9 Chd (25% Share)\n87\n3,90,000.00\n3,90,000.00 RM/PM\n86\nDr House No 3100 Sec 21 Chd (25% Share)\n131\n5,50,000.00\n5,50,000.00 RM/PM\n87\nDr House No 323 Sec 9 Chd (25% Share)\n132\n5,50,000.00\n5,50,000.00 RM/PM\n88\nHDFC Bank-4399\n196\n16,250.00\n16,250.00 FG\n89\nDr House No 323 Sec 9 Chd\n106\n17,00,000.00\n17,00,000.00 FG\n90\nDr House No 3100 Sec 21 Chd\n137\n1,80,00,000.00\n1,80,00,000.00 FG\n91\nHDFC Bank-4399\n196\n1,80,00,000.00\n1,80,00,000.00 FG\n92\nDr House No 323 Sec 9 Chd\n115\n13,023.00 FG\n93\nDr House No 3100 Sec 21 Chd\n120\n7,570.00 FG\n94\nHDFC Bank-4399\n117\n81,515.00 FG\n95\nDr House No 323 Sec 9 Chd\n192\n10,538.00 FG\n30. The Ld. AR of the assessee placing reliance upon the above excerpts of the ledger\naccount has demonstrated that it was evident from the above ledger account of assessee\nin books of SEPL that the above account was a running current account, wherein,\npayments were being exchanged in the form of current & inter banking transactions very\nfrequently and contain both type of entries i.e. receipts and payments. The Ld. Counsel\nhas contended that this nature of current account transactions could not be said to be\n“loan” or “advance” as contemplated u/s 2(22)(e). The Ld. AR of the assessee has further\ncontended that these were not gratuitous advances, but a reflection of ongoing business\n38\ntransactions, thus falling outside the scope of deemed dividends as per the statutory\nprovision. Reliance has been placed on following case laws :\ni). DCIT vs Futurz Next Services Ltd. (Del Trib) (ITA No. 3556/Del/2016) dated\n04.01.2022\nii). Bombay Oil Industries Ltd. Vs. DCIT (2009) 28 SOT 383 (Bom)\niii). “Exotica Housing & Infrastructure Company Pvt. Ltd. vs. ITO., 82 ITR 0046,\n(Delhi ITAT),\n31. The Ld. Counsel for the assessee has further contended that the assessee provided\npersonal guarantees to SEPL in order to secure credit facilities from banks which included\na fund-based limit of Rs.42.85 crore and a non-fund-based limit of Rs.15 crores. Copy\nof record of sanction letters of loans raised by SEPL have been placed at page 96-106 of\nthe Paper Book, the relevant part of the same is reproduced below:\n39\n32. The ld. Counsel of the assessee has further demonstrated that the value of\nproperties and personal guarantees given by the assessee were more than the entire value\nof the loans. The guarantee given by the assessee to the SEPL was worth Rs.89.12 crores,\nwhereas, the amount in question received from the SEPL by the assessee during the year\n40\nwas less than Rs.4 crores. The Ld. Counsel for the assessee, thus, has contended that\nwhen the bank loan raised by the company on the basis of personal guarantee and\nmortgage of personal properties of assessee was far in excess of amount given to the\nassessee by the company, the said amount received by the assessee from SEPL cannot be\nsaid to amount to deemed dividend u/s 2(22)(e). The Ld. AR has contended that it has\nbeen held time and again that money transferred to give effect to commercial transactions\nshould be kept outside the ambit of s.2(22)(e). He in this respect has placed reliance upon\nthe following case laws:\na. Pradip Kumar Malhotra V. CIT [2001] 338 ITR 538 (Cal HC).\nb. DCIT vs. Lakra Brothers, 2007, 106 TTJ 0250, Chandigarh ITAT.\nc. Bagmane Constructions (P) Ltd. vs. CIT & Anr., 277 CTR 338, Karnataka ITAT.\nd. CIT vs. Ambassador Travels (P) Ltd., 318 ITR 376, Delhi HC\ne. Smt. Jamuna Vernekar Vs. DCIT (2021) 432 ITR 146 (Kar HC),\n33. The Ld. Counsel for the assessee, thus, has contended that it has been held in the\nabove referred to decisions that if the transactions between a shareholder and the\ncompany create mutual benefits and obligations, then the provision of treating any sum\nreceived by the shareholder out of accumulated profits as deemed dividend would not\napply.\n34. The Ld. Counsel, however, in his alternate contentions, has submitted that while\ncalculating the addition for deemed dividend, the ld. AO included all amounts received\nand ignored the payments that assessee had made to the company earlier. The amount\nreceived by assessee was not a new loan or deposit, but simply a return of the funds\npreviously given to the company. He , therefore, has submitted that that even if, the\nsaid transaction are taken in the ambit of s.2(22)(e), addition at maximum can be made\nof peak credit of these transactions. He, in this respect, has relied upon the following\njudicial precedents:\ni). CIT vs. Madhur Housing Development & Co., 93 laxmann.com 502, Supreme\nCourt.\nii). DCIT vs. Entrack Organic Haus Pvt. Ltd., ITA No. 182 of 2016, Rajasthan ITAT.\n41\n35. It was further contended alternatively, that a credit entry once added as\nincome in the hands of the assesse u/s 2(22)(e) should not be considered again while\ncalculating peak for subsequent periods otherwise the same would lead to double\naddition of the same entry in the hands of the assessee.\n36. The ld. DR, however, has placed reliance on the orders of the lower\nauthorities and submitted that all the conditions enumerated in Section 2(22)(e) of the\nAct have been fulfilled i.e. (a) The company is closely held, (b) The shareholder holds\na substantial interest in the company, (c) The payment is made out of accumulated\nprofits, and (d) The company is not engaged in the business of money lending. She,\ntherefore, has submitted that both the lower authorities were justified in treating the\namount received by the assessee as deemed dividend in the hands of the assessee. She\nhas further contended that the Ld. CIT(A) was not justified in directing the AO to add\nonly the peak credits of the year instead of the entire advances received by the\nassessee from the SEPL.\n37. We have heard the rival contentions and gone through the record. There is no\ndenial of fact that the transactions between the assessee group company SEPL were like\nthat of a current and running account. It is noticed that from time to time the assessee and\nSEPL had given and taken loan from each other as per the business needs. The\ntransactions were continuous and running as per business needs and expediency. The\ncase laws relied upon by the Ld. Counsel for the assessee in this respect, are squarely\napplicable to the facts and circumstances of the case in hand. In the case of “ Exotica\nHousing & Infrastructure Company Pvt. Ltd. vs. ITO., 82 ITR 0046, Delhi ITAT” on\nidentical issue, it has been held as under : –\nDividend—Reception of loans and advances—Deemed dividend—\nAssessee company is engaged in business of commission agent and\nproperty development—A.O. completed assessment under section 143(3)\nafter making impugned addition under section 2(22)(e) on account of\ndeemed dividend as Assessee company has received loans and advances\nfor a value of Rs.23,70,33,000/- from E, which was squared off during\n42\nyear—Assessee held 98% shares of E—CIT(A), dismissed appeal of\nassessee— Held, transactions carried out through current account for\nbusiness purposes would not fall within definition of \"Deemed\nDividend"—Initially assessee company has taken amount from\nsubsidiary company which was repaid and thereafter, it is assessee\ncompany which has given amount to subsidiary company on most of\noccasions and later on subsidiary company has returned amount to\nassessee—Therefore, provisions of Section 2(22)(e) would not be attracted\nin case of assessee company because on most of occasions assessee\ncompany has advanced amount to subsidiary company and ultimately\nbalance is squared-up at end of year—Assessee company has also filed\ncopy of ledger account of subsidiary company for preceding A.Y. 2012-\n2013 which revealed that there was a substantial opening balance and\nsubsidiary company has paid amount to assessee company and later on\namounts have been returned by assessee company to subsidiary\ncompany—It is assessee company who have given amount mostly to\nsubsidiary company which have been returned to subsidiary company by\nassessee company—Therefore, on such facts when Revenue did not\ndispute transactions in current account between assessee company and\nsubsidiary company in earlier as well as in subsequent year and\nassessee company on most of occasions have made payment to\nsubsidiary company, which have been returned by assessee company for\nbusiness purposes, there was no reason to apply provisions of Section\n2(22)(e)—When current account is maintained between parties, provisions\nof Section 2(22)(e) would not apply—Thus, issue is covered by aforesaid\ndecisions of Tribunal in favour of assessee as well as various decisions\nconsidered by jurisdictional Delhi High Court—Assessee’s appeal\nallowed.”\n38. Even the Ld. Counsel for the assessee has demonstrated that the assessee had\nmortgaged substantial personal properties and provided personal guarantees to enable\nSEPL to obtain credit facilities from banks which included a fund-based limit of Rs.\n12.85 crore and a non-fund-based limit of Rs.15 crore. The transactions between assessee\nand SEPL were mutually beneficial. The Ld. Counsel in this respect has referred to\n43\nsanction letters of loans raised by SEPL which are placed from page 96-106 of Additional\nPaper Book. It is proved on the file that the advances were not gratuitous. The Ld.\nCounsel has further demonstrated from the ledger of the assessee in the books of SEPL\nthat there were both type of transactions i.e. the assessee had not only taken the advances\nbut has also given the advances. Both the assessee and SEPL would give and take\nadvances as per their business needs. These were not gratuitous loans, rather it was a case\nof quid pro quo, where, both the parties mutually benefitted from each other. The issue\nis squarely covered by the various decisions of the Tribunal as well as that of the Hon’ble\nHigh Courts of the country as referred to above in the submissions of the assessee. The\nCoordinate Kolkata Bench of the Tribunal in the case of “Shree Krishna Gyanodya\nFlour Mills Pvt. Ltd. vs. PCIT” in ITA No.1008/Kol/2016 dated 14.02.2018, wherein,\nthe Tribunal further relying upon the decision of the Mumbai Bench of the Tribunal in\nthe case of “Bombay Oil Industries Ltd. vs. DCIT” reported in [2009] 28 SOT 383\n(Bom) and also on the decision of the Calcutta High Court in the case of “Pradip Kumar\nMalhotra vs. CIT” 338 ITR 538(Cal), has held that where the loan transactions are in\nthe normal course of business and out of business expediency and are representing current\naccount transaction, in such type of transactions, the provisions of section 2(22)(e) would\nnot be attracted. The relevant part of the order of the Coordinate Bench of the Tribunal\nin the case of “Shree Krishna Gyanodya Flour Mills Pvt. Ltd. vs. PCIT” (supra) is\nreproduced as under:\n“The purpose of Section 2(22)(e) of the Act is to tax the benefit extended by private\nlimited company to its shareholders holding shares not less than 10% as beneficial\nowner of shares (not being shares entitled to a fixed rate of dividend income).\nThere is no dispute with regard to shareholding of the assessee. Now coming to\nthe amount of advance taken by assessee, we note that assessee has not only taken\nloan / advance from SVPL, but also it has sometime given advance to SVPL. Thus,\nthere was change in the balance shown by assessee. Thus, it cannot be termed as\nadvance taken by assessee as it was fluctuating during the year. In holding so, we\nfind support and guidance from the order of co-ordinate Bench of this Tribunal in\nthe case of Bombay Oil Industries Ltd. vs. DCIT reported in [2009] 28 SOT 383\n(Bom), wherein it was held as under:-\n“From the above it is clear there is distinction between deposits viz-a-vis\nloans/advances. Section 2(22)(e) enacts a deeming fiction whereby the\nscope and ambit of the word dividend has been enlarged to bring within its\n44\nsweep certain payments made by a company as per the situations\nenumerated in the section. Such a deeming fiction would not be given a\nwider meaning than hat it purports to do. The provisions would necessarily\nbe accorded strict interpretation and the ambit of the fiction would not be\npressed beyond its true limits. The requisite condition for invoking Section\n2(22)(e) of the Act is that payment must be by way of loan or advances.\nSince there is a clear distinction between the inter-corporate deposits viz\na-vz loans/advances, according to us the authorities below were not right\nin treating the same as deemed dividend u/. 2(22)(e) of the Act” [emphasis\nsupplied]\nSimilarly, we also support and guidance from the judgment of Hon'ble\njurisdictional High Court in the case of Pradip Kumar Malhotra v. CIT 338 ITR\n538 (Cal) wherein the Hon'ble High Court held as under:-\n“The phrase “by way of advance or loan” appearing in sub-clause (e) of\nsection 2(22) of the Income-tax Act, 1961, must be construed to mean those\nadvances or loans which a shareholder enjoys simply on account of being\na person who is the beneficial owner of share (not being share entitled to\na fixed rate of dividend whether with or without a right to participate in\nprofits) holding not less than ten per cent of the voting power; but if such\nloan or advance is given to such shareholder as a consequence of any\nfurther consideration which is beneficial to the company received from\nsuch a share-holder, in such case, such advance or loan cannot be said to\nbe deemed dividend within the meaning of the Act. thus, gratuitous loan or\nadvance given by a company to those clauses of shareholders would come\nwithin the purview of section 2(22) but not cases where the loan or advance\nis given in return to an advantage conferred upon the company by such\nshareholder.” [emphasis supplied]\nFrom the foregoing discussion, there remains no doubt that the transactions\nbetween assessee and SVPL is representing current account transactions.\nTherefore, the provision of Section 2(22)(e) of the Act cannot be attracted to such\ntransactions. Keeping in view the above discussions, and also bearing in mind the\nentire facts of the case, we deem it fit and proper to uphold the grievance of the\nassessee and quash the impugned revision order as devoid of jurisdiction. The\nassessee gets the relief, accordingly.”\n39. Even, as demonstrated by the Ld. Counsel for the assessee, the issue of deemed\ndividend was raised in earlier regular assessment in assessee’s own case for AY 2011-12.\nIn the assessment order for that year, passed prior to the search action, the Ld. AO had\nmade addition in respect of the deemed dividend. However, in appeal, the ld. CIT(A)\ndeleted the addition by following the above reasoning of mortgage of properties and\n45\ngiving of personal guarantees by the assessee for loans raised by the company by\nfollowing the above decision of Hon’ble Calcutta High Court in “Pradip Kumar\nMalhotra vs CIT” (supra). Copy of the said order of CIT(A) dtd. 15.12.2015 is placed\nat page of the paper Book. The appeal of the revenue against the said order of the Ld.\nCIT(A) was dismissed by the this Tribunal in ITA No. 169/Chd/2016 dated 23.05.2016,\nhence the issue has attained finality. The issue is thus, even otherwise squarely covered\nin favour of the assessee in his own case for the earlier assessment year. Considering the\nabove facts and settled legal position, we hold that the additions made/confirmed by the\nlower authorities on this issue are not sustainable. Accordingly, the impugned additions\non this issue are ordered to be deleted.\n40. Since the facts and issue involved are identical in all the appeal given in the chart\nabove, hence, in view of the discussion made above, the addition on account of deemed\ndividend u/s 2(22)(e) in all the 11 appeals as mentioned in the chart above is ordered to\nbe deleted. These grounds taken by the assessee stand allowed, whereas the grounds taken\nby the Revenue on the issue of deemed dividend stand dismissed.\nIssue 3: Difference in valuation of building/Immovable Property situated at Village\nDasora, Majra Hiltop, Near Venus Remedies, Jharmajri, Baddi:\n41. Following is the list of cases involving this issue :\nSr.\nNo\n.\nName of the\nassessee\nAY\nAppeal by\nAppeal No.\nAO Order\nCIT Order\n1\nScott Edil\nAdvance\nResearch\nLaboratories and\nEducation\nLimited\n2017-\n18\nAssessee\n845/Chand\ni/2023\n4\nPage 2-7\nPara 7.4-7.5\nPage 105-\n111\nPara 12.7\n2\nScott Edil\nAdvance Research\nLaboratories and\nEducation Limited\n2018-\n19\nAssessee\n846/Chand\ni/2023\n4\nPage 2-7\nPara 7.4-7.5\nPage 85-91\nPara 10.6\n3\nSanjeev Kumar\nAggarwal\n2018-\n19\nAssessee\n480/Chand\ni/2023\n6\nPage 14-15\nPara 11.2\nPage 206-\n208\nPara 13.5\n4\nVaishali Aggarwal\n2018-\n19\nAssessee\n482/Chand\ni/2023\n6\nPage 14-15\nPara 11.2 &\n11.3\nPage 180-\n182\nPara 13.4\n46\n5\nBalram Krishan\nAggarwal\n2018-\n19\nAssessee\n732/Chand\ni/2023\n7\nPage 11-12\nPara11.2 &\n11.3\nPage 195-\n197\nPara 7.4\n6\nScott Edil\nAdvance Research\nLaboratories and\nEducation Limited\n2017-\n18\nDepartme\nnt\n94/Chandi\n/\n2024\n1-5\n-\n-\n7\nScott Edil\nAdvance Research\nLaboratories and\nEducation Limited\n2018-\n19\nDepartme\nnt\n93/Chandi\n/\n2024\n1-5\n-\n-\n42. The lead case taken up is Scott Edil Advance Research Laboratories and Education\nLimited( herein after referred to as “SEARL”” for AY 2017-18, having ITA No.\n845/Chandi/2023. The assessee, in this respect, has taken following ground:\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\n47\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.\n48\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\ngenuneness 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\n49\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\n50\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\n51\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\n52\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\n53\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.\n54\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\n55\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 AO 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.\n56\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)\n57\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.\n58\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\n59\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\n60\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:-", "summary": { "facts": "Search actions were conducted on \"Scott Edil Group\" of cases, resulting in various appeals related to assessments under Section 153A of the Income Tax Act, 1961. The core issues revolve around the absence of incriminating material during searches, deemed dividend, property valuation differences, alleged bogus transactions, and procedural approvals.", "held": "The Tribunal noted that in cases where assessments were completed and not abated at the time of search, additions under Section 153A are unsustainable without incriminating material. It also highlighted issues with the arbitrary application of DVO reports and the lack of due application of mind in granting statutory approvals, leading to quashing of assessments in several instances. The Tribunal considered various legal precedents and decided several issues in favour of the assessee, directing deletion of additions.", "result": "Partly Allowed", "sections": [ "153A", "132", "2(22)(e)", "69C", "115BBE", "153D", "147", "148", "150", "132(4)", "132(9D)", "142(2A)", "69B", "80IC", "153C", "139", "147", "148", "149", "151", "153", "132(9D)", "142A", "153B", "153C", "132", "145(3)", "37(1)", "36(1)(vii)", "36(2)" ], "issues": "The primary issues involve the sustainability of additions made under Section 153A in the absence of incriminating material, the validity of property valuation reports, the treatment of deemed dividends, the legality of transfer orders and approvals, and the handling of stock discrepancies." } }