DCIT, CENTRAL CIRCLE , DEHRADUN vs. GRAPHIC ERA EDUCATIONAL SOCIETY, DEHRADUN
Facts
During a search, the AO found a difference of INR 10,03,361/- between the assessee's declared construction cost and the DVO's valuation, making an addition under Section 69. Additionally, based on a seized document, the AO added INR 9,53,40,698/- as unexplained expenditure, including INR 4.56 crores for miscellaneous expenses without bills. The Ld. CIT(A) deleted both additions.
Held
The Tribunal upheld the deletion of the INR 10,03,361/- addition, finding the difference within the 10% tolerance limit. However, it partly allowed the revenue's appeal regarding the INR 9,53,40,698/- addition, confirming an addition of INR 4,97,40,698/- as unexplained expenditure for which no bills were obtained, while deleting the remaining amount.
Key Issues
The key legal issues were the addition for unexplained investment based on DVO valuation and the addition for unexplained expenditure based on seized documents, particularly regarding cash payments and expenses without bills.
Sections Cited
Section 69, Section 153A, Section 143(3), Section 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH: DEHRADUN
Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 1848/DEL/2018 [Assessment Year : 2011 -12] DCIT v M/s. Graphic Era Central Circle s Educational Society, Dehradun 566/6 Bell Road, Clement Uttarakhand Town, Dehradun Uttarakhand PAN-AAAAG0566E APPELLANT RESPONDENT Revenue by Ms. Poonam Sharma, CIT DR Assessee by Ms. Ruchika Rana, CA [Adjournment application rejected] Date of Hearing 09.03.2026 Date of Pronouncement 10.03.2026 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by Revenue against the order dated 21.12.2017 passed by Ld. Commissioner of Income Tax (A)-IV, Kanpur [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 29.07.2016 passed u/s 153A(1)(b) r.w.s. 143(3) of the Act pertaining to Assessment Year 2011-12.
Brief facts of the case are that the assessee is an individual, filed its return of income on 30.09.2011, declaring NIL income. Thereafter, a search action was carried out at the business premises
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of the assessee on 21.11.2013 and notice u/s 153A was issued on 09.09.2014. In response, the assessee filed return of income on 16.02.2015, declaring NIL income. The AO alleged that the assessee has constructed a property and as per the books of accounts of the assessee, total cost of construction was shown at INR 21,36,08,571/- whereas DVO has valued the cost of construction of the said property at INR 21,46,11,932/- thus, there is a difference of INR 10,03,361/- for which an addition was made u/s 69 of the Act as unexplained investment. Besides this, based on the seized document, titled as “A- 4 at page 9”, the AO alleged that assessee has made cash payment of INR 9,53,40,698/- on the construction of the property to the contractor [Gupta & Co.] proprietor, Shri Naveen Agarwal. In the said paper, total cost of construction as on 14.11.2010 is stated at INR 25,61,13,398/- out of which INR 15,15,54,956/- was reduced and balance of INR 10,45,58,442/- is mentioned as outstanding. The AO observed that this paper is written in the hand writing of Shri Naveen Agarwal. The AO further observed that out of this amount of INR 25,61,13,398/-, assessee’s society had made payment of INR 16,07,72,700/- upto AY 2011-12 therefore, the difference amount of INR 9,53,40,698/- was held as unexplained expenditure by the assessee which includes INR 4.56 crores noted as miscellaneous expenditure for which no bills were raised.
In first appeal, Ld. CIT(A) deleted both the additions therefore the Revenue is in appeal before the Tribunal.
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In Ground of appeal Nos. 1 & 2, the Revenue challenged the deletion of addition of INR 10,03,361/-.
In support, Ld. CIT DR for the Revenue submits that DVO has valued the property after considering all the facts and therefore, Ld. CIT(A) has wrongly deleted the addition made. She prayed for the restoration of the addition so made by the AO.
Heard the contention of Ld. CIT DR and perused the material available on record. It is observed from the record that Ld. CIT(A) has deleted the addition by observing that the difference between the valuation done by DVO and cost of construction declared by the assessee is of INR 10,03,361/- which is 2.87% and thus is within the tolerance limit of 10%. The relevant observations of Ld. CIT(A) as contained in para 5.5 to 5.8 are as under:- 5.5 “It is also seen that if we consider the totality of the facts and the circumstances of the case then as per DVO, valuation of various properties of the appellant form F.V. 2007-08 to 2013- 14 is at Rs. 2,18,99,93,746/-whereas the valuation disclosed by the appellant for the same property is at Rs. 2,12,89,92,365/-, thus there is a variation of 2.87% which is quite meager and negligible and within the permissible tolerance limit of 10%. 5.6 Hypothetically even if addition is made then by virtue of 12AA & 10(23C), appellant society would be entitled to claim application of funds. Thus, the addition would/revenue neutral. 5.7 Appellant has relied upon the following case laws which reproduced below: i. Supreme Court of India in C.B. Gautam Vs. Union of India (65 taxmann 440)
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ii. High Court of Delhi in the case of CIT Vs Ambience Developers & Infrastructure (P) Ltd. (25 taxmann.co, 210) iii. High Court of Karnataka in the case of CIT Vs Vasudev Construction (ITA No. 369/2007) iv. High Court of Delhi CIT Vs Abhinav Kumar Mittal (213 taxmann 54) v. High Court of Delhi Pr.CIT Vs. Anita Rani (ITA 174/2017) The case laws mentioned herein above are squarely applicable to the present facts and circumstance of the present case. 5.8 In view of the above detailed discussion the addition made by the AO on the basis of valuation of the DVO is hereby deleted and the ground of appeal is allowed.”
Since the Revenue has failed to controvert such findings and further, the difference is well within the tolerance limit therefore, we find no error in the order of Ld. CIT(A) which is hereby, upheld. The grounds of appeal Nos. 1 & 2 of the revenue are thus dismissed.
In Ground of appeal No.3 raised by the Revenue, deletion of addition of INR 9,53,40,698/- made by the AO is challenged.
Before us, Ld. CIT DR submits that documents were found and seized during the course of search wherein it is clearly mentioned that total cost of construction was incurred at INR 21,05,13,398/- and a sum of INR 4.56 crores were added as expenditure incurred without bill. Admittedly the said document was prepared by the contractor. Ld. CIT DR submits that AO after reducing the amount of cost of construction recorded in the books of accounts at INR
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16,07,72,700/- made the addition for differential amount as unexplained cash payment. Ld. CIT DR further submits that Ld. CIT(A) has wrongly deleted the addition by observing that this amount was never paid to the contractor during the year and thus, there is no application of undisclosed fund. Ld. CIT DR submits that this addition includes cost of INR 4.56 crores incurred on Miscellaneous items which was clearly admitted as incurred without raising any bill thus is expenditure incurred out of undisclosed sources. It is thus, submitted that the addition made by AO, deserves to be restored.
Heard the contention of Ld. CIT DR and perused the material available on record. From the perusal of the seized paper No. “Page 9 of Annexure “A-4” as reproduced at page 5 of the assessment order, it is observed that this page has two parts wherein at the lower part of the paper, under the title “total bill” at a sum of INR 21,05,13,398/- is mentioned which is increased by a sum of INR 4.56 crores with the title “without bill” and accordingly, total cost mentioned at INR 25,61,13,398/-. The AO made the addition of INR 9,53,40,698/- being the difference between the total cost as per the said paper and the total payment recorded in the books of accounts upto 31.03.2011 i.e. the end of the previous year. Ld. CIT(A) has deleted the addition by observing that no amount is paid for the balance amount mentioned and all the payments made have duly been recorded in the books of account. Ld. CIT(A) further observed that no evidence was brought on record to support the allegation of cash payment. It is further observed that in the case of the
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contractor, Shri Naveen Agarwal, the Co-ordinate Bench of Tribunal in ITA No.1840/Del/2017 and 3136/Del/2017 [Assessment Year 2011-12] vide order dated 13.04.2018 has deleted the addition made as income on estimated basis by treating the same as part of contract receipts, by observing that no funds were employed by the contractor. However, the fact remained that cost of INR 4.56 crores was incurred on the Miscellaneous items for which no bill was raised by the contractor and it is an admitted position that this paper was written in the handwriting of contractor himself. It is also observed that Department has referred the matter for valuation where DVO has valued the total cost of construction at INR 21,46,11,932/- as against the cost declared at INR 21,36,08,571/-. Since Miscellaneous items are of part of the cost of construction thus it was considered by the DVO in its valuation report. Therefore, the source of expenditure incurred of INR 4.56 crores by the assessee society for which no bill is obtained from the contractor, has been found noted in the seized documents remained unverified. In view of the above facts and by considering the judgment of Co-ordinate Bench in the case of the assessee, contractor, Shri Naveen Agarwal, we hold that that the addition to the extent of INR 4,97,40,698/- [INR 9,53,40,698 – INR 4,56,00,000] being the cost incurred by the assessee without obtaining the bills is clearly unexplained expenditure which is hereby upheld and remaining addition has rightly been deleted by ld. CIT(A). Accordingly, we confirmed the addition to this extent. Ground of appeal No. 3 of the revenue is partly allowed.
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In the result, the appeal of the Revenue is partly allowed. Order pronounced in the open Court on 10.03.2026.
Sd/- Sd/- (MAHAVIR SINGH) (MANISH AGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Date- 10.03.2026 *Amit Kumar, Sr.P.S*
