ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -I, RAIPUR vs. LORD BUDDHA EDUCATIONAL SOCIETY, RAIPUR

2 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 आदेश / O R D E R

Per Arun Khodpia, AM :

2. The assessee has also filed cross objections being CO Nos.05- 08/RPR/2022 arising out of the appeals of revenue in ITA Nos.188- 191/RPR/2019 for the assessment years 2012-2013, 2013-2014, 2014- 2015 & 2015-2016, respectively. The assessee has also filed appeals in IT(SS)A Nos.16&17/RPR/2019 for AY 2016-17 and 2017-18. 3. First, we are taking the appeals of revenue for our consideration. On the basis of issues involved in the aforesaid appeals filed by the revenue, these appeals can be separated in two parts, Part one for unabated years i.e. ITA Nos.188-191/RPR/2019 for the assessment years 2012-2013, 2013-2014, 2014-2015 & 2015-2016 and Part two for abated years i.e. ITA Nos.192-193/RPR/2019 for the assessment years 2016-17 & 2017-18. 4. Part one : Since similar and identical issues have been raised by the revenue in, ITA Nos.188-191/RPR/2019 for the assessment years 2012-2013, 2013-2014, 2014-2015 & 2015-2016, except difference in quantum, therefore, for the sake of convenience and brevity, we shall first take into consideration, the appeal of the revenue in ITA No.188/RPR/2019 for the A.Y.2012-2013 as a lead case and the result of 3 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 the same will apply mutatis mutandis to the other appeals for the unabated assessment years also. The sole ground raised

by the revenue in ITA No.188/RPR/2019 is read as under: - 1. “On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the additions made by the Assessing Officer of Rs. 2,28,39,650/- on account of undisclosed investment without appreciating fact that the additions made by the Assessing Officer were based on an incriminating material marked as LP-l, page no. 18 duly scanned in the assessment order.”

5. Part Two : For AY 2016-17 and 2017-18, the one and only ground of appeal of the department is different than that of for AY 2012-13 to 2015-16, though the same is similar and identical for these two abated years, therefore, the issue raised by the revenue in, ITA Nos.192- 193/RPR/2019 for the assessment years 2016-2017 and 2017-18 which is identical, except difference in quantum, for the sake of convenience and brevity, we shall take into consideration the appeal of the revenue in ITA No. 192/RPR/2019 for the A.Y. 2016-17 and the result of the same will apply mutatis mutandis to the appeal for AY 2017-18 also. The sole ground raised by the revenue in ITA No.192/RPR/2019 is read as under: - 1. “On the facts and in the circumstances of the case the Ld CIT(A) erred in deleting the additions of Rs. 2,68,47,635/- out of the total addition of 3,59,80,960/- made by the Assessing Officer on the basis of DVO report.”

6. Brief Facts:- All these appeals have arisen out of common order of the LD CIT(A)-3, Bhopal on a common assessment order passed u/s 143(3) r.w.s. 153A of the IT Act., the brief facts culled out, for all these appeals / cases are that the assessee is a trust registered u/s 12A of the 4 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 Act. A survey was conducted at the office premises of assessee on 29.09.2016. During the course of survey cash amounting to Rs. 35,27,030/- was found. To verify the genuineness of the cash found a survey was carried out at Noida Office of the assessee by JDIT (Inv), Noida and it was observed that the cash balance in regular books of account was only Rs. 29,502/- therefore, the survey was converted into search u/s 132 of the Act. The search was conducted on 01.10.2016. During the course of search statement of Shri Dalip Kumar, president of the society was recorded. In his statement he admitted that he is unable to explain the source as he is looking after the administrative matters only and the financial matters are being looked after by Shri Anil Kumar Sharma, treasurer of the society. Therefore, the statement of Shri Anil Kumar Sharma, treasurer, was recorded. In his statement Shri Anil Sharma admitted that he is unable to explain the source of cash found at the premise and surrendered the amount of Rs. 31,47,030/- for taxation in the hand of society for the A.Y. 2017-18. After being given proper opportunity of being heard, the case was centralized to the central circle- 1, Raipur (CG) under section 127 of the income tax Act 1961, vide order dated 20.02.2017 of the Commissioner of Income Tax (Exemption) Lucknow. Consequently, notice u/s 153A of the Act was issued on 08.05.2017 for AY 2011-12 to 2016-17. The assessee in reply, filed returns of income for AYs 2011-12 to 2016-17 on 08.05.2017 declaring the returns of income for the relevant assessment years as under:-

5 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 Income Additional income Date of Notice Date of filing of Returned declared in offered by the u/s 153A A.Y. return u/s income (In return u/s assessee (In Rs.) issued to the 139(1) Rs.) 153A (Rs.) assessee 2011-12 27/09/2011 Nil 08/05/2017 Nil Nil 2012-13 28/09/2012 Nil 08/05/2017 Nil Nil 2013-14 27/09/2013 Nil 08/05/2017 Nil Nil 2014-15 30/09/2014 Nil 08/05/2017 Nil Nil 2015-16 30/09/2015 Nil 08/05/2017 Nil Nil 2016-17 04/10/2016 Nil 08/05/2017 Nil Nil 2017-18 30/10/2017 31,47,030/- — -- —

7. During the course of assessment proceedings, copy of seized materials and accounts were provided to the assessee. The seized materials and documents were examined. Explanation submitted by the assessee to the queries and transactions depicted on seized materials was considered. On examination of corroboratory material in possession, the AO noticed that common issues are involved in the entire block period, therefore, the AO take up the issue commonly for A.Ys. 2011-12 to 2017-18. During the course of assessment proceedings, the AO verified soft copy of books of accounts produced by the assessee. After verifying all the documents available during the course of assessment proceedings, the AO made following additions for the assessment years 2012-2013 to 2017-2018:-

AY Addition made Returned Assessed income (Rs.) income (Rs.) (Rs.) 2012-13 Nil 2,28,39,649/- 2,28,39,649/- 2013-14 Nil 10,08,31,901/- 10,08,31,901/- 2014-15 Nil 3,86,18,432/- 3,86,18,432/- 2015-16 Nil 2,51,46,659/- 2,51,46,659/- 2016-17 Nil 3,59,80,962/- 3,59,80,962/- 2017-18 31,47,030/- 6,63,17,874/- 6,94,64,904/- Total 31,47,030/- 28,97,35,477/- 29,28,82,507/- 6 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 8. Against the above additions made by the AO, the assessee approached before the ld. CIT(A) and the ld. CIT(A) deleted the additions made by the AO for the A.Ys.2012-2013 to 2015-2016, however, the additions made for the assessment years 2016-2017 & 2017-2018 were partly deleted.

9. Now, the revenue is in further appeals before the Tribunal against the order of the ld. CIT(A).

with respect to validity of reference made to DVO by Ld AO without rejecting books of accounts of the assessee was not adjudicated by the LD CIT(A) the matter is suitable to be restored back to the files of AO for fresh consideration.

13. To counter the arguments of the department, for unabated AY’s 2012-13 to 2015-16, Ld Authorised Representative (AR) of the assessee submitted that Ld CIT(A) has very considerately understood the issue relating to incriminating material for the unabated AY‟s 2012-13, 2013-14, 10 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 2014-15 & 2015-16, deliberated upon the same and decide the same very judiciously. He took us through to the page no. 24 to 35 of the order Ld CIT(A) and read through the submissions/ contentions of the assessee submitted before the Ld CIT(A) and the decision of Ld CIT(A) in para 4.1.5. Extract of the submission of the assessee and observation of the Ld CIT(A) are reproduced here under: As regards ground no. 3 1. This ground of appeal is relating 10 the objection taken by the appellant that the addition made by AO is not covered within the ambit of assessment u/s I53A.

2. A perusal of relevant findings of AO as given in page no. 5, para 7(i) of the assessment order shows that on the basis of audited balance sheet of appellant, the AO observed that the appellant has made huge investment in construct ion of building was this observation of AO which triggered reference to DVO which ultimately culminated to additions made in different years. Therefore, the material on the basis of which addition has been made was not something which was discovered during search as incriminating material but was already on the record of AO. The balance sheet of appellant is certainly not an incriminating material.

3. On page 7 of the assessment order, the AO has referred-to a loose paper found during search, being page no. 18 of the LP-I, which is a certificate dated 07.04.2015 issued by a Chartered Accountant certifying investment in building at Rs. 4,913.24 lacs. The AO has observed (hat this figure is different from the investment shown in the audited balance sheet of AY 20] 5116 and therefore, the case was referred to DVO. In this regard, it is submitted that :- i) We are enclosing herewith the schedule of fixed assets and of loans & advances as on 31.03.2015 (page no.75 & 76) wherein the investment in buildings is reflected at Rs.2740.41 lacs while in the schedule of loans & advances, WIP is reflected at 2298.30 lacs. The amount of Rs.2298.30 represents payments made against which capitalization was pending and so it was included in fixed assets while the figure of Rs. 2740.41 is the capitalized amount. While certifying the investment, the CA has considered both the 11 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 capitalized and un-capitalized amount 017 account of building as he was required to certify the total investment made by appellant. Considering both the figures disclosed in books, the amount certified by CA is more than the figure disclosed in regular books and so there is no case that any evidence was found to the effect that actual investment is more than that disclosed in books. It may kindly be noted that the AO refereed the matter of valuation to DVO stating that the certificate of CA certified a higher amount of investment in buildings. The above explanation shows that such conclusion of AO is actually incorrect and the reference made to DVO is on wrong premise, ii) Assuming without admitting that there is difference in figures, it is submitted that the certificate issued by a Chartered Accountant is not an evidence of investment and the same cannot be considered to be an incriminating material.

4. The search look place on 01.10.2016. The details of dale of filing return u/s 139 are mentioned in the fable given 077 page 3 of assessment order. As per these dates, the assessments upto AY 2015/16 remained un-abated while AY 2016/17 and 2017/18 are abated assessments.

5. No incriminating material found during search It is submitted that neither during search nor during assessment, any incriminating material or evidence was found to the effect that there was any undisclosed investment in building This is also supported by the fact that in the assessment order, there is no reference of any such material/evidence. In search, assessments, for un-abated years, addition can be made only on the basis of incriminating material found during search and any other addition not emanating from incriminating material cannot be made for the reason that for such year/s, completed assessments cannot be disturbed As such, the issue of addition account of valuation of buildings, which is not arising out of any incriminating material, is not covered by and is outside the ambit of assessment u/s 153A and no addition could have been made as held in the following cases. - CIT Vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) In Mohd. Shoib vs DCIT(20JO) 127 TTJ 459 (Luck.) it was held vide para 20 that where statute has used the word "shall" then whether conditions are fulfilled or not, obligation is met by the assessee or not, the statutory authority is required to take action as mentioned in the statute. ii) In Chapter-9 of guidelines of 2009 referred to above - "co- ordination with assessing officer ", it is mentioned in para (ii) as under. - "In most of the cases referred to Valuation Unit by the Assessing Officers under various sections are referred to in the month of October and November of the year and most of these cases get time barred by December of the year. This puts pressure on the Valuation Officers to carry out valuation of the properties in a time bound manner. As a result, the cases are decided in a hurry due to acute shortage of time and thus quality gets adversely affected In view oj this, it would be better if the cases aye referred. to Valuation Cell round the year so that Valuation Officers ore able 10 prepare high quality estimates." iii) A perusal of above guidelines shows that CBDT was concerned about references made by AOs to DVO belatedly and proper time being not available with the DVO for carrying out estimation of cost of construction and this is why provisions of sec. 142A(6) were incorporated in the Statute la provide time limit of 6 months so that quality reports ore prepared The above guidelines clearly demonstrate the intention of legislature in providing time-limit of 6 months in sub-section (6) of sec. 142A. 11 is also submitted that in absence of any time-limit, lot of inconvenience would be caused to assessees which will ultimately result into injustice to the assessees, which, as per the above decision of Hon'ble Supreme Court, is a consideration to be kepi in mind to decide as to whether a particular condition is mandatory or not. Therefore, considering all the above facts, it comes out that provisions of sec. 142A(6) are mandatory in nature and non-compliance of such mandatory provision will result into the report of DVO not capable of being considered for the purpose of assessment 4 On page 7, para 7(ii) of assessment order, it is mentioned that reference to DVO was made on 04.01.2018. Therefore, as per mandatory condition of sec. 142A(6), the DVO was required to prepare his valuation report by 31.07.2018 and also to forward a copy of the same to the assessee and the AO by 31.07.2018. As against this, the valuation report submitted by DVO is dated 15.12.2018, which was made available to the assessee on 18.12.2018. Therefore, clearly the valuation report was not submitted by DVO within the time prescribed u/s.142A(6).

the appellant has challenged that during search no incriminating material was found which would establish nexus and suggest any unexplained investment in medical college and hospital building. It has been contended that during search no 'incriminating material' was found during the course of search and therefore, the assessment made U/S 153A for A. Y 2012-13 to 2015-16 and additions made in these years are illegal, void and without jurisdiction of A.O. Ld AR has strongly relied on the decision of CIT v/s Kabul Chawala (2016) 38G.ITR 573 (Del) to argue that where no incriminating material was found, no assessment u/s 153A can be made for that particular year. 4.1.1 Ld AR of the appellant has strongly contended that provision of sec 153A of the Act provides that the assessment or re- assessment relating to any assessment year falling within the period of six assessment years, if pending on the dale of initiation of search shall abate whereas with regard to scope of provision of sec 153A that where no incriminating material was found indicating any undisclosed income, no additions or disallowance can be made for that particular year. Reliance has been place on the decision of Hon’ble Delhi High Court in the case of CIT v/s Kabul Chawla of Delhi High Court in ITA No. 707/2014 dated 28.08.2015.- 380 ITR 573 (Del): "Summary of the legal position"

37. In a conspectus of Section 153A(J) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under.: I) Once a search takes place under section 132 of the Act, notice U/S 153A(J) will have to be mandatorily issued to the persons searched requiring him to file returns for six AYs immediately preceding the previous year relevant 10 the AY in which the search lakes place.

14 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 II) Assessments and reassessments pending on the date of the search shall abate. The total income for such ATs will have 10 be computed by the AOs as a fresh exercise. III) The A0 will exercise normal assessment powers ill respect of the six years previous 10 the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax.·" IV) Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of search, or other post-search material or information available with the A0 which can be related to the evidence found, if does not mean that the assessment " can be arbitrary or made without any relevance or nexus with the seized material. Obviously all assessment has to be made under this Section only on the basis of seized material. " v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e those pending on the dale of search) and the word 'reassess' to completed assessment proceedings Vl) In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment Under Section 153A merges into one. Only one assessment shall be made separately for each A.Y. on the basis of findings of the search and any other material existing or brought on the record of the AO. VII) Completed assessments can be interfered with by the AO while making the assessment Under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered ill the course of search which were not produced or not already disclosed or made known in the course of original assessment. 4.1.2 There are numerous case laws which supports this proposition that in absence of any incriminating material found/seized during search operation, no addition can be made on the basis of examination of return/books of accounts because having "incriminating material" is sine qua non for making addition in assessment order passed u/s 153CI153A of the Act. The relevant case laws are as under:-

15 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 i) Jai Steel (India), Jodhpur V/s. ACIT reported in (2013) 36 taxmann. cam 523 (Raj) ii) CIT (Central) V/s. M/s.Murli Agro Products reported in (2014) 49 taxmann.com 172 (Bom.) iii) CIT V/s. Continental Warehousing Corporation reported in (2015) 374lTR 645 (Born) iv) CIT V/s, Kabul Chawla reported in (2015) 3801TR 573 (Del) v) PCIT V/s. Kurele Paper Mitts Ltd. reported in (2015) 3801TR 571 (Del) vi) PCIT V/s. Saumya Construction (P.) Ltd. (2016) 387 ITR 529 (Guj.) vii) CIT V/s. Lancy Constructions (2016) 66 ta.xm"'aJ777.com 264 (Kar.) viii) CIT V/s. IBC Knowledge Park (P) Ltd. (2016) 3851TR 346 (Kar.) ix) PCIT V/s.Ms. Lata Jain (2016) 384lTR 543 (Del.) x)ClT Vis. Gurinder Singh Bawa (2017)79 taxmann.com 398 (Bom.) xi) PClT V/s. Meeta Gutgutia (2017) 395 lTR 526 (Del) xii) ClT V/S. SKS lspat & Power Ltd. (20l7) 398 1TR 584 (Bom.HC) xiii) CIT V/s. Deepak Kumar Agrawol &Ors. (.2017) 299 .CTR 62 (Bom.HC) (xiv) CIT Vs. Jaya Ben Ratila Sorathia Dated 02.07.2013 Tax Appeal No. 914 of212 (Guj -HC) (xv) ACIT Vis. Budhia Marketing Pvt. Ltd -173 TTJ 649. (xvz) MukeshSangla Vis. DClT - 21 IT] 172 (Ind) (xvii) Amandeep Singh Bhatia Vis. ACIT - 29 IT] ] (Ind) (xviii)Sanjay Agarwal Vis. DCIT -169 TT] 2821291 (Hyd) (xix) Himanshu B Kanakiya - 46ITR (Trib) 756 (Mum) (xx) Anant Steel Pvt Ltd t//s. ACIT - 28 IT] 47 (Ind) (xxi) DeIT Vis. Kalani Brothers (Indore) Pvt Ltd - (2016) 27 ITJ 286 (Ind-Trib) (xxii) Chandrabhan lalchandani V/so ACIT-1 (1), 'Bhopal - ITA No.lT(SS)A Nos. 121 to 126/lnd/2015 order dated 28.10.2016 (xxiiij Rawal Das Jaswani V/so ACIT (2015) 43 CCH 606 (Raipur- Tnb) (xxiv) In- the case of Pr. CIT ·vs Lata Jain (Delhi HC dated 29.04.2016) (2016) 384 ITR 0543 it was held that " There had to be incriminating material recovered during the search quo the Assessee in each of the years for the purposes of framing an assessment under Section 153A of the Act. " (xxv) In the case of CIT vs Kabul Chawala (20] 6) 380 ITR 573 (Del) it was held that "Assessment U/S 153A can be carried out only on the basis of seized material. 'Where no incriminating material was unearthed during the search, no additions could be made to the income already assessed" (xxvi) In the case of Best Infrastructure lndia (P) Ltd & 01'5. Vrs. ACIT & Ors. (2016) 47 CCH 0159 it was held that "When issue of 16 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 share capital was out of purview of assessment u/s 153A as assessment for assessment year 2005-06 was not pending on date of search and no incriminating material relating to share capital was found during course of search hence addition made not justified". (xxvii) the case of ACIT Vs Ram Mehar Garg & Anr. (2016) 47 CCH 0404 it was held that "Provisions of section} 53.11 and 153C are search related provisions and these provisions were applicable only, relating la any undisclosed income on basis of seized documents found in search. (xxviii) In the case of Rawal Das Jaswani Vs. ACIT , (2015) 43 CCH 0606, jurisdictional tribunal bench of Raipur have held that "Where A 0 had not referred to any incriminating material found during the course of search based on which addition was made, then the AO had no jurisdiction to make addition in the assessment framed under s. 153A of the Act". (xxix) In the case of Sainath Colonisers V/s ACIT(CenlTa1)-Il, Bhopal ITA(SS) Nos. 289 to 291/Ind/2017; The jurisdictional tribunal bench of Indore have held that "We therefore in the given facts and circumstances of the case and respectfully following the judgments referred and relied by the Id. Counsel for the assessee are of the considered view that no addition/ disallowance was called for assessment year 2008-09 to 2010- 11 as no incriminating material was found during the course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act. Accordingly all the three appeals of the assessee are allowed. " (xxx) In the case of Omprakash Gupta vis ACIT (Centrall-ll, Bhopal IT(SS) Nos. 277 to 281/Ind/2017; the jurisdictional tribunal bench of Indore have held that "these appeals for assessment years 2009-10 to 2012-13 are concluded and no abate assessments. The AO has not time to issue notice u/s 143(2) of the Act and until and unless there is an incriminating material found during the course of search no addition can be made. Nowhere in the assessment order shows that additions are based on the incriminating material even in the order of the Ld. CIT(A). Additions are only made during the course of assessment proceedings by calling the assessee for various details such as books of accounts various documents and assessment was completed. Therefore once the assessments are concluded/non- abated, addition cannot be made unless there is on incriminating material found during the course of scorch. This legal aspect has already been considered by us in the above appeals in 1T(SS) A No 277 to 281/Ind/2017. In view of our decision above the same is to apply in to in all the other present appeals also. We therefore in view of our decision in those appeals, the orders of the 17 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 Ld. CIT(A) are reversed and the appeals filed by the assessee are allowed. ". (xxxi) In the case of DCIT(Central)-1 Indore v/s M/s. MCS Trading Company Pvt. Ltd. IT(SS) No. 141, co. No. 38/Ind/2016 & 1TA NO 35311nd/2017; The jurisdictional tribunal bench of Indore have held that "We therefore respectfully allowing the above decision and examining the facts of the instant appeal, find that the assessee e- filed its regular return of income u/s J39(1) on 27.08.2009 declaring income of Rs. 29, 39,060/-. The case of the assessee could have been picked up for scrutiny assessment by issuance of notice u/s 143(2) of the Act latest by 30.09.2010. No such notices u/s 143(2) of the Act MCS Trading Company Pvt Ltd IT(SS) No. 141, C.

in the appeals of the department in ITA 188-191/RPR/2019 for AY 2012-13 to 2015-16 is dismissed.

17. With regard to reliance of the Ld CIT(A) of the case of Prince Rai Vs. ITO (supra), there has been a finding on this issue also by the CIT(A) for the later assessment years i.e. 2016-17 and 2017-18, which is mutatis mutandis applicable for the unabated AY‟s 2012-13 to 2015-16, also, in para 4.4.5 (page 45 of 61) of his order, wherein provisions of section 142A, pre amendment and post amendment w.e.f 01.10.2014 were discussed and categorically concluded as under: - “I agree with the views expressed by A.O. in assessment order that reference made to DVO on 04.01.2018 (which falls after 01.10.2014) without rejection of books of accounts was in accordance to the prevailing provision of law and nothing was illegal about such reference and ratio of the judgment pronounce by Hon'ble Supreme Court in the case of Sargam Cinema v/s CIT (2010) 328 ITR 513 (SC) and other case laws is not applicable to the facts of this case in view of changed legal scenario.”

21 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 18. As the issue, whether rejection of books of account is mandatory or not for making a reference to DVO u/s 142A? has been discussed, deliberated and decided by the Ld CIT(A) without leaving room for any ambiguity, we therefor of the view that, ratio of law emanated by the order of ITAT Jabalpur in the case of Price Rai (supra) could not be applied in the present case, so the contentions of the revenue to restore the matter back to AO for fresh adjudication is not acceptable on this ground.

1. Ld. CIT(A) erred in not adjudicating upon ground no. 1 of appeal taken before him relating to addition of Rs. 2,28,30,649/- made by AO on account of difference between cost of construction debited in books and as estimated by DVO. The addition of Rs. 2,28,30,649/- made by AO is illegal, baseless and not sustainable on merits also.

2. In the facts of the case, Ld. CIT(A) erred in not adjudicating upon ground no. 2 of appeal taken before him relating to validity of reference made by AO to DVO u/s 142A. The reference made to Valuation Officer is illegal and consequent addition made in assessment is also illegal and not sustainable.

3. Ld. CIT(A) erred in not adjudicating upon ground no. 4 of appeal taken before him relating to validity of assessment order based on report of DVO which was submitted beyond stipulated statutory time period. The valuation report submitted by DVO beyond time prescribed u/s 142A(6) is inadmissible and consequently the assessment order is also illegal.

22 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 4. The appellant reserves the right to add, amend or alter any of the ground/s of appeal.

, the appellant has challenged the addition of Rs. 3,59,80,962/- in AY 2016-17 and Rs. 6,63,17,874/- in AY 2017-18 on account of investment J10t fully disclosed in books of account. During the course of assessment proceedings, the AO observed of immovable property for medical college and Hospital. In order to ascertain the fair value of purchase and cost of construction a reference was made to the Departmental Valuation Officer (D.V.O.) u/s 142A of the Act on 04.01.2018 to estimate the value of investment in construction of Medical college and Hospital of the assessee. In compliance, the D.V.O. submitted year-wise valuation report dated 15.12.2018 estimating the year- wise cost of investment and vis-a-vis value of investment declared by the assessee in books of accounts. On comparison of these two i.e. valuation by D.V.O. vis-a-vis cost of investment declared by the assessee in its books of accounts, The A.O. noticed substantial difference in the amount. On comparison made with valuation report following picture emerges:- • Raipur Institute of Medical Science, Gram Godhi Bhansoj road, Raipur A.Y. Declared by As per Difference Assessee (Rs.) Valuation (Rs.) Report 2016-17 53511154 89492116 35980962 2017-18 98628433 164946307 66317874 Total 152139587 254438423 102298836 4.4.1 Copy of valuation report was provided to the appellant and confronted to the assessee and was required to explain the difference between the value of investment shown in the books of 25. ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 account vis-a-vis cost of investment estimated by D.V.O. Assessee was also required to show cause as to why the difference in investment should not be' treated as deemed income of assessee of the respective year. In reply, the assessee submitted that the time available for study of DVOs report is too short, especially when a technical matter is involved. The appellant further submitted that the valuer of the assessee on perusal of report of the DVO has pointed out various discrepancy including adoption of CSR rates in place of local rates and the rates which should have been applied are PWD SOR rates and not CSR rates. However, The AO did not find the explanation acceptable and submitted that no technical discrepancy is pointed out in the report of DVO and therefore, the same is appropriate and can be relied upon. Discussion and appellate decision: 4.4.2 1 have considered the facts of the case, contention raised by the appellant and findings of the AO. The appellant has taken a plea that reference made for valuation of investment made in Medical college and Hospital building of appellant to DVO uls 142A of the Act was bad in law as well as use of such valuation report as an evidence in assessment proceedings was also bad in law for making addition of Rs. 3,59,80,960/- in AY 2016-17 and Rs. 6,94,64,900/- in AY 2017-18 on account of alleged excess cost of investment by the assessee from undisclosed sources and argument that impugned addition was not proper, justified and' was totally unwarranted. 4.4.3 The Key relevant facts emerging from the issue of making reference for valuation report to DVO and the valuation report used by AO for assessment are as follows :- Before AO as well as before me, the appellant has vehemently challenged the legality of making reference to DVO u/s 142A 'of the Act and using the same as solitary evidence for making impugned addition towards unexplained investment in construction of Medical college and Hospital building. The appellant has challenged various aspects of the valuation exercise e.g. from making reference for valuation, to the methodology of valuation, to the mechanical adoption of the valuation report by the A.O. for making addition while passing assessment order etc. Key facts relevant to resolve this controversy as emerging from the records are as below' i) During assessment proceedings u/s 153A of this assessee, a reference to DVO was made u/s 142A of the Act by the AO vide letter dated 04.01.2018 for estimation of the value of investment in construction of Medical college and Hospital building of appellant; ii) It is apparent that the AO has referred the matter for determination of cost of investment of various projects as 26. ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 mentioned in para 7(j) of assessment order to the DVO, Jabalpur during assessment proceedings u/s 153A of the Act for the period starting from F. Y 2011-12 till 31.08.2018; iii) DVO has submitted the valuation report on 15.12.2018, against which various objections have been raised by appellant. Main objections being that valuation done by DVO cannot be used as an evidence because it has laced with discrepancies and based on subjective judgment of DVO; iv) There was search & seizure operation conducted at the business premises of present assessee resulting into seizure/impounding of loose papers/documents/incriminating material. The AO has made reference of a certificate dated 07.04.20]5 of M/s Abhishek Raja & Associates showing investment in land and building of Rs. 4913 .24 lacs which is the only basis for making reference to the DVO. v) The period for which the valuation is required to be done as mentioned by the DVO in his report is from F.Y 2007-08 till 31.08.2018; vi) In the assessment order, the A.O. has not given any reason for making addition on account of differences in valuation of the building except relying solely on DVO's report and A.O. has not referred to any incriminating/seized materia1 except value estimated by the DVO in the valuation report. In other words, the AO has worked out the amount of undisclosed investment-in the property by comparing value of investment estimated by DVO vis- a-vis declared by the assessee in his books of accounts, which shows a total lack of any application of mind of his own; vii) There is no denying of the fact that, appellant has maintained its books of accounts regularly which were subjected to Audit as well. On perusal of relevant audit reports it is apparent that auditors have not made any adverse remarks about any discrepancy or under valuation noted by them about investment in the said project. Further, the books of accounts of the appellant have not been rejected before making reference to DVO and not even after receipt of valuation report despite this AO has made huge addition based on difference in value of investment estimated by DVO vis-a-vis value/investment shown by the assessee. Although requirement of rejection of book results before making reference to DVO has been done away with by) making amendment in the stature book by Finance Act 2014 w.e.f 01.10.2014, still before making addition, the A.O. need to bring some cogent material to prove unaccounted investment in building and reject the books of accounts may be after receipt of valuation report from DVO. Without prejudice, this goes without saying that for invoking the provision of sec 145(3) of the Act i.e. rejection of book results, AO is required to demonstrate defects/discrepancies noticed by him in maintenance of regular 27 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 books of accounts. Obviously, nothing of this sort was done in this case. viii) The A.O. has not specifically addressed/replied to the legal objections raised about the valuation report by the appellant in spite of the fact that such huge additions have been made based only on he DVO's report and no sufficient time was granted to the appellant; ix) In para 7(iii) of assessment order, the AO has acknowledged certain objections raised by the appellant about applying cost index on DPAR by saying that methodology adopting by the "Valuation officer was as per the prescribed norms and procedure and the scientific methodology adopted in accordance with the accepted standard. x) It is trite law that the report of DVO is not binding on the AO but in action A.O. has accepted the valuation ipso facto as gospel truth without any adjustments or modification or without giving any credence to the genuine objections raised by appellant which are acceptable ex-facie. Facts on record do not demonstrate any application of mind on the part of AO who has simply rested his decision on DVO’s valuation report. The AO has placed total reliance on valuation report of the DVO as if that was gospel truth and binding on him. xi) Last but not the least, the AO has totally failed to bring any positive and tangible evidence to corroborate the allegation of excessive unexplained investment made in the building over and above the cost disclosed in the books of accounts. It has been held in the case of Smt. Amar Kumari Surana v/s CIT (1996) 89 taxman 544(Raj) that the burden is on the revenue to prove that real investment exceeded the investment shown in books of accounts of assessee. In the instant case, the AO has failed to discharge his onus of brining the necessary 'evidence on record. 4.4.4 The position of law with respect to reference for valu:1tion and whether it is binding on the A.O. and whether addition can be made solely on the basis of valuation report; The main legal contention of the appellant remained to be that reference to DVO U/S 142A of the Act to determine cost of investment in projects of appellant and the addition made thereafter was bad-in-law because same was done without rejecting books of accounts. Further the DVO while submitting valuation report exceeded his jurisdiction and submitted the valuation report for the period which was not even included in the reference. With this factual back-drop, legal aspect of the issue are discussed in forthcoming paras. The law with respect to the reference for valuation has gone through huge litigation before and after introduction of section J42A of the Act. Before section 131(1)(d)

28 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 were held to be non maintainable by the Supreme Court in the Amiya Bala Paul [2003] 130 TAXMAN 511 (Se) case: Section 55A of the income-tax Act, 1961 - Capital gains - Reference to Valuation Officer - Assessment Years 1982-83 and 1983-84 - Whether a Valuation Officer appointed under Wealth-tax Act can neither be called upon nor he would have jurisdiction 10 give a report either to Assessing Officer under Income-tax Act except when a reference is made under and ill terms of section 55A, or to a competent authority except under section 269L - Held, yes - In income-tax returns, assessee disclosed certain amounts which she had invested in construction of the house - These were 110t accepted by Assessing Officer, who referred question of construction cost of house to Valuation Officer under section 55A - on basis of report submitted by Valuation Officer Assessing Officer reopened assessment and made addition of excess amount as undisclosed income - Whether Assessing Officer could refer matter to Valuation Officer for estimating cost of construction - Held, no Section ]31, read with sec/ions 133 & 142, the Income-tax Act, ]96] - Income-tax Authorities - Powers regarding discovery, production of evidence, etc. - Whether power of Assessing Officer under sections 131 (1) and 133(6) is distinct from and does 1I0t include the power to refer a matter to the Valuation Officer under section 55A, nor does section 142(2) allow him to do so - Held, yes - Whether report by Valuation Officer under section 55A cannot be the result of an inquiry by the Assessing Officer under provisions of section 133(6) or section 142(2) - Held, yes - Whether power oj inquiry granted to an Assessing Officer under sections 133(6) and 142(2) does 110t include power to refer mutter to Valuation Officer for all enquiry by him - Held.ses." 4.4.5 It is most appropriate to refer to the relevant provision of sec 142A of the Act as existed before amendment and after amendment w.e.f 01.10.2014: Pre-amended: (1) For the purpose of making on assessment or reassessment under this Act, where the estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 698 [or fair market value of any property referred to in sub- section (2) of section 56] is required to be made, the assessing officer may require the valuation officer to make on estimate of such value and report the some to him. (2) The valuation officer to whom a reference is made under sub- section (1) shall, for the purpose of dealing with such reference, hove 011 the powers that be has under section 38 of the wealth tax Act 1957 (27 of 1957)

29 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 (3) On receipt of the report from the valuation officer, the assessing officer may after giving the assessee an opportunity of being heard, take into account such report in making such assessee or reassessment 69A or section 69. Provided that nothing contained J this section shall apply in respect of on assessment mode on or before the 30th day of September 2004, and where such assessment has become final and conclusive on or before that date} except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. Explanation: in this section “valuation Officer" has the same meaning as in clause (r) of section (2) of the of the Wealth Tax Act 1957 (27 of 1957) Amended w.e.f 01.10.2014 For section 142A of the Income-tax Act} the following section shall be substituted with effect from the 1st day of October, 2014, namely;.,- '142A. Estimation of value of assets by Valuation Officer. - (1) The Assessing Officer may, or the purposes of assessment or reassessment, make 0 reference to Valuation Officer to estimate the value, including fair market value, of any asset property or investment and submit a copy of report to him. (2) The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. (3) The Valuation Officer, on reference mode under sub-section (1), shale for the purpose of estimating the value of the asset, property or investment, hove all the powers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957). (4) The Valuation Officer shall, estimate the value oj the asset, property or investment after taking into account such evidence as the assessee may produce and any other evidence in his possession gathered} after giving on opportunity of being heard to the assessee. (5) The Valuation Officer may estimate the value of the asset} property or investment to the best of his judgment, if the assessee does not co-operate or comply with his directions. (6) The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or sub-section (5), as the case may be, to the Assessing Officer and the assessee} within a period 30 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 of six months from the end of the month in which a reference is made under sub-section (1). (7) The Assessing Officer may, on receipt oj the report from the valuation Officer, and after giving the assessee on opportunity of being heard, take into account such report in making the assessment or reassessment Explanation.-In this section, "Valuation Officer" has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957) On careful reading of amended provision, it is abundantly clear that before 01.10.2014, AO was not empowered to make reference to DVO u/s 142A(1) of the Act without expressing his dissatisfaction about correctness and completion of books of accounts and thus AO could make reference to DVO only after rejecting books of accounts. In the present case, reference to DVO was made u/s 142A LW.S 131(1)(d) of the Act vide letter dated 04.01.2018 to ascertain the cost of investment made in different projects of appellant. Since, the relevant provision of sec 142A of the Act has been amended w.e.f 01.10.2014 (as discussed herein before) which does not require the rejection of books of accounts as pre- condition 'for making "reference 10 valuation officer.. Thus, in view' of amended legal provision, it is absolutely clear that the Assessing Officer can make a reference to Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. In view of this, I agree with the views expressed by A.O. in assessment order that reference made by DVO on 04.01.2018 (which falls after 01.10.2014) without rejection of books of accounts was in accordance to the prevailing provision of law and nothing was illegal about such reference and ratio of the judgment pronounce by Hon'ble Supreme Court in the case of Sargam Cinema vis CIT (2010) 328 ITR 513 (SC) and other case laws is not applicable to the facts of this case in view of changed legal scenario. 4.4.6 The position of law with respect to methodology adopted for preparing valuation report; The two method which are adopted by the DVO"s for valuation are (i) Detailed or item wise method' and (ii) Plinth area rate ad Cost Index method, as prescribed in “Guidelines for Valuation of Immovable Properties 2009" duly notified by CBDT. The Detailed or Itemwise method is adopted when the detailed construction drawings or completion drawings are available with DVO and as per Guidelines for Valuation of Immovable Properties 2009 this method should be given preference over all the other methods. However, the Plinth area rate and Cost Index method is a commonly used method for determining the cost of a building by comparing with the 31 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 known cost of building. The cost. of building depends on various major factors (i) the area and specification of the building (covered under plinth area rate) (ii) the cost of materials and labour (covered under cost index). In the case of appellant, the DVO has adopted Plinth area rate and cost index method of valuation, however, as per Guidelines for Valuation of Immovable Properties 2009 the 'Detailed or Hem wise method' should be given preference over all other methods. Hon'ble Rajasthan High Court in the case of ClT vs Hotel Joshi (2000) 242 ITR 478 (Raj) has held that item wise detailed method of valuation is most accurate, authentic, reliable and desirable. The most important and major condition to adopt detailed or item wise method is that when all the detailed construction drawings or completion drawings are available with DVO. On perusal of valuation report of the DVO dated 15.12.2018, the DVO. in para 3.1 has clearly mentioned that the following documents have been submitted by the assessee. • Location plan, layout and service plan of medical college "Raipur Institute of Medical Science" duly approved by Nagar and Gram • Architectural drawings of project "Raipur Institute of Medical Science" showing plans and front elevations of Hospital building, Architectural drawings of medical college "Raipur Institute of Medical Science" showing roads and building proposed location etc, Architectural .drawings of quarter "Raipur Institute of Medical Science" showing ground floor up to third floor plan, valuation 'method which is authentic and accurate as held by Hon'ble Rajasthan High Court in the case of CIT vs Hotel Joshi (supra), On the contrary the DVO adopted plinth area rate and cost index method which involves three major factors (i) Plinth area of the property, (ii) Plinth area rate and (iii) Cost index, 0) Plinth area of property:- The appellant has strongly contended that there are differences in plinth area as worked out by DVO vis-a-vis worked out by valuer of the appellant. For instance, appellant has pointed that the area of security cabin and panel room (item no 1.8 of DVO’s report has been computed by DVO at 95,77 sqm whereas such area is nil as per report of valuer of the appellant. Similarly, the total area of shed computed by DVO is at 1822.80 sqm, however, the same is ]284.60 sqm as per report of valuer of the appellant. (ii) Plinth area rate :- The appellant has also strongly contended that the 'Plinth area rate' 32 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 adopted by the DVO is 'Standard DPAR 2007 approved by DG, CPWD, New Delhi (have been adopted) in conformity with CBDT instruction no 1671, with due adjustments'. Thus the plinth area rates adopted by the DVO are for New Delhi to the year 2007. Further the DVO has not given the details of adjustments made in the standard plinth area rate on account of superior/inferior specifications. The cost of water and sanitary fittings have been considered at 15% as per CPWD rates, however, as per the local PWD rates the same should have been taken @ 7% to 8%. (iii) Cost index:- This is the most crucial and multi-dimensional factor affecting the valuation of irremovable property. The DVO has adopted two cost index i.e. (i) For all buildings (other than auditorium and shed) at 176.36% and (ii) For auditorium and shed at 894.15%. The DVO as adopted at par rates, applicable in New Delhi, in the case of appellant. The valuer of the appellant has collected data from the open market and obtained quotations for various building materials for construction of buildings and it was found that the cost index for FY 2018-19 came approx. 140-150%, which is way more than that adopted by the DVO at 176.36%. The construction of the hospital building started in FY 2011-12 and continued till FY 2018-19. Therefore, rates of all items included in building material may have gone upwards or downwards and the then prevailing rates in Delhi would have been on a higher side as compared to Raipur 4.4.7 As far as merit of this issue is concerned AO made addition of Rs. 3,59,80,960/- in AY 2016-17 and Rs. 6,94,64,9001- in AY 2017- 18 towards difference in cost of investment in the building of medical college and hospital of appellant shown in the books vis-a- vis estimated by DVO. This is an undisputed fact that the impunged addition was made solely on the basis of valuation report and A.O. did not bring any positive material or cogent evidence to establish that actually assessee made investment out of books i.e. over and above the amount of investment shown in the books. This is settled law that addition made solely on the basis of valuation report is not sustainable in law. This proposition finds support from the following case laws:- . (1) ClT Vs. Chouhan Resorts 359 ITR 394 (P&H)- Section 698 of the income-tax Act, 1961 - Undisclosed investments - Assessment year 2007--08 - No addition could be made on account of undisclosed investment in construction of building on basis of report of DVO without books of account being rejected, wherein every expenditure relating to construction was recorded (2) Family of S.S.S. P- Subramanium Chetiar Vs. /TO 372 ITR 203(Mad) - 33 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 Section 69B of the Income-tax Act, 1961 - Undisclosed investments (Valuation by DVO) - Assessment year 1996-97 - Whether primary burden to prove under statement or concealment of income is on revenue and it is only when such burden is discharged that it would be permissible to rely upon valuation given by District Valuation Officer (DVO) - Held, yes - Whether opinion of DVO, per se, is not an information and cannot be relied upon without books of account being rejected - Held, yes - Whether in instant case, since matter was referred to DVO without rejecting books of account of assessee, Assessing Officer was not entitled to resort to section 69B - Held, yes [Paras 8 and 9][In favour of assessee] 4. Even though this appeal was admitted on the questions of law referred to supra, the learned counsel on either side fairly concede that the core issue to be determined in this appeal is "Whether the Assessing Officer is entitled to resort to section 69B of the Act and, consequently, refer the matter to the Departmental Valuation Officer, when the books of account were not rejected ?"

5. The main plea taken by the learned counsel for the assessee is that the onus probandi lies on the Assessing Officer to establish that the assessee has understated or concealed the actual cost of construction and without discharging the onus, the Assessing Officer is not empowered to rely upon the valuation given by the Departmental Valuation Officer, when the books of account were never rejected.

3. Being aggrieved by the said addition the respondent assessee preferred an appeal before the CIT (Appeals) who deleted the said addition after referring to the decision K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (SC). The Commissioner of Income Tax (Appeals) held that the addition had been made on the basis of the valuation report without there being any other material to indicate that any extra consideration had passed in respect of the said purchase of property. Thereafter, the revenue, being aggrieved by the order passed by the CIT (Appeals), preferred an appeal before the Tribunal which has been dismissed by the Tribunal by confirming the deletion made by the CIT (Appeals). The revenue is in appeal before us.

5. The law seems to be well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of the DVO cannot form the basis of any addition on the part of the revenue. In the present case there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition. In these circumstances, the question which has been framed is decided in favour of the assessee and against the revenue. The appeal is dismissed. (6) ClT VS. Lahsa Construction Pvt. Ltd 357 ITR 671 (Delhi) -, Section 142A of the Income-tax Act, 1961 - Estimate made by Valuation Officer - Assessment year 1999-2000 - Whether addition can be made solely relying upon report of Departmental Valuation Officer - Held, no [Para 5] [In favour of assessee] 1. Revenue in this appeal under Section 260A of the Income Tax Act, 1961 ("Act" for short) impugns order dated 25.06.2010, passed by the Income Tax Appellate Tribunal in the case 'M/s. Lahsa Construction Pvt. Ltd.' on the ground of perversity. The appeal pertains to the Assessment Year 1999-2000. (incorrectly mentioned in the impugned order as assessment year 2006-07).

2. Property in question bearing No.C-20, NDSF, South Ex., Part-II, New Delhi had two sellers. The respondent/assessee -Lahsa Construction Pvt. Ltd. had sold 50% share of-the property in favour of Mrs. Madhu Arora, whereas the second group of owners consisting of four individuals had sold 50% of the property in favour of Mrs. Madhu Arora and her husband Mr. Om Prakash Arora.

38 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 4. The Departmental Valuation Officer had opined that the value of the property at the time of purchase was Rs.2,84,72,600/- and this became the basis of the addition made by the assessing officer. The respondent/assessee had disclosed sale consideration of as Rs.39,00,000/- for sale of their 50% share, in the property to Mrs. Madhu Arora. Mrs. Madhu Arora and Mr. Om Prakash Arora paid an amount of Rs.44.00.000/- to the four individual co-.owners for purchase of the balance 50% share. Thus, in all they had shown sale consideration of Rs.83,00,000/-, instead of Rs.2,84,72,600/-, as opined by the Departmental Valuation Officer. This property was sold in the period relating to the Assessment Year 2004-05 for Rs. 1,00,00,000/-. No addition was made by the Assessing Officer on this sale consideration.

5. Whether an addition can be made solely and on the basis of the report of the Departmental Valuation Officer, is no longer res integra and is covered by the decision of this court in CIT v. S.K. Construction Co. [2008] 167 Taxman 171, CIT v. Navin Gera [2010] 328 ITR 516/[2011] 198 Taxman 93 (Delhi), CIT v. Smt. Suraj Devi [2010] 328 ITR 604/[2011] 197 Taxman 173 (Delhi) (Mag.), and CIT v. Bajrang Lal Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 taxmann.com 88 (Delhi). It has been repeatedly held that addition cannot be justified solely relying upon the valuation report. Decision of the Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 has been followed.

6. In view of the aforesaid position order of the Tribunal does not require Interference. No substantial question of law arises. The appeal is accordingly dismissed. (7) CIT Pratap Singh Amrosingh Rajendra Singh 200 ITR 788 Held, that there was no dispute that the assessee maintained proper books of account and the same have been accepted in the past and no defects were pointed out in the books. The expenses were fully supported by the vouchers. Full details were also mentioned in respect of each item in the books. Simply because the valuation report was of a higher amount, the books could not be said to be unreliable. The Tribunal, was, therefore, justified in deleting the addition of Rs.55,780/- (8) CIT v/s Vijay Kumar D Gupta (2014) 3651TR 470 (Guj) " ..... Moreover, it is apparent that the only reason for making the addition under section 69 of the Act is that there is a difference in the cost of construction as determined by the Valuation Officer and as shown by the assessee. At no stage of the assessment proceedings does the Assessing Officer appear to have mentioned that the books of account are defective or that the cost of 39 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 construction as shown in the books of account is not the true cost of construction. Thus, while making the reference to the Valuation Officer, the Assessing Officer has not recorded any defect in the books of account nor has he rejected the same. Except for the difference in the estimated cost determined by the Valuation Officer and the actual cost as shown by the assessee, the Assessing Officer has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that the books of account do not reflect the correct cost of construction. Under the circumstances, there was no occasion for the Assessing Officer to make a reference to the Valuation Officer. As held by the Supreme Court in the case of Sargam Cinema (supra), unless the books of account are rejected, the Assessing Officer cannot make a reference to the Valuation Officer. The reference made to the Valuation Officer, not being in consonance with the provisions of law, was, therefore, invalid. Accordingly, the report made by the Valuation Officer pursuant to such an invalid reference could not have been made the basis for addition under section 69 of the Act." (9) Whether an addition can be made solely and simply on the basis of the valuation report submitted by DVO is no longer 'res integra' and is covered by the various decision of Hon'bIe Courts mentioned below:- • CIT v. S.K. Construction Co. [2008] 167 Taxman 171, • ClT v. Navin Gera [2010] 328 ITR 516/[2011] 198 Taxman 93 (Delhi), • CIT v. Smt. Suroj Devi[2010] 328 ITR 516/[2011] 197 Taxman 173 (Delhi)(Mag) • CIT v. Bojrong Lal Bansal [20111 335 ITR 572/200 Taxman 188 (Mag)/12 taxmann.com 88 (De/hi) • It has been repeatedly held that addition cannot be justified solely relying upon the valuation report. Decision of the Supreme Court in the case oj K.P. Varghese v. ITO {19811131 ITR 597/7 Toxmon 13. • Nirpo/singh vis ClT (2013) 359 ITR 398 (P & H) • Roghuroj Agro Industries (P}Ltd (2013) 38 Toxmonn.com 318(AII). (10) ClT V/I,' Vridnaban Real estate (P) Ltd. (2012) 254 CTR (All) 10. Although above cited case pertains to re-opening of the case based on DVO's report but ratio laid down is equally applicable to the instant case. Hon'ble court has deleted the re-opening of assessment u/s 147 by holding that OVO's report per se is not an information for the purpose of reopening of assessment uls147-AO has to apply his mind on the information, if any, collected and must form a belief thereon for re-opening of assessment-there has to be 40 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 something more than the report of DVO for the belief of AO. By observing so, hon'ble court dismissed the appeal of revenue. 4.4.8 Considering the aforesaid fact and circumstances of the matter and the law as interpreted by several High Courts and the Hon’ble Supreme Court – the findings on this issue in respect of peculiar facts of this case are as below; i) Admittedly, the assessee company maintained its regular books of accounts supported by bills/vouchers and other records which were subjected to Audit. The AO has neither pointed out any defect in books nor brought any positive material all record to establish alleged unaccounted investment in different projects of appellant. Most importantly, AO has not even rejected the books of accounts even after receipt of valuation report. In view of these facts, valuation report obtained from DVO cannot form a foundation ipso facto for making addition towards alleged suppression or cost of investment. Neither DVO nor AO has pointed out that certain expenditure on certain items/construction was incurred which was not recorded in the books maintained by the assessee. Hence, additions made by AO is not sustainable in law being based merely on valuation report received from DVO. ii) The AO has scanned a loose paper No.8 of LP-1 on page no 7 of the assessment order and has pointed that the said loose paper contain details of investment of Rs. 4913.24 lacs in building by the appellant however, the same is not fully reflected in books of accounts. The appellant, however, has brought some different facts to light and stated that the investment in building has been reflected at Rs. 2740.41 lacs in the schedule of loans and advances and Rs. 2298.30 lacs in \VIP (Work In Progress) which on totaling amounts to Rs.5038.71 which is more than the figure of Rs. 4913.241acs as mentioned on the said loose paper. The appellant has also explained that the amount of Rs. 2298.30 represents payments made against which capitalization was pending and so it was not included in fixed assets while the figure of Rs. 2740.41 is the capitalized amount. While certifying the investment, the CA has considered both the capitalized and un-capitalized amount on account of building as he 'was required to certify the total investment made by appellant. On perusal of copy of balance sheet as on 31.03.2015 it was observed that fixed asset shown by the appellant was at Rs. 35,83,79,872/- and WIP Building at Rs. 22,33,77,614/- which clearly shows that the investment shown by the appellant is more than that shown in loose paper found during the course of search. iii) The A.O. has not mentioned any reason in the assessment order or in the reference to the valuation, that he had any incriminating material which led to form his belief that the appellant had under stated the cost of construction referred for valuation. 11 is very 41 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 relevant to understand that the appellant was subjected to search and seizure action u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment ill the different projects of appellant. Lack of any incriminating material /evidence regarding under reporting of cost or construction being pointed out by the A.O., in spite of search and seizure action addition simply made on the basis of DVO's report is even more unjustified and unwarranted. iv) During assessment proceedings, appellant raised several objections with regards to methodology adopted by DVO as well as valuation aspect, but AO has totally failed to consider the same. He has mechanically adopted the estimate of value of construction provided b:y DVO. One should not lose sight of the fact that at the end of the day, cost derived by DVO in his report is nothing but an 'estimate' which is bound of have some amount of estimation, guess work & opinion involved and estimate cannot be 'exact'. After all it is an estimate done by an expert and it is a popular maxim 'to err is human'. It is evident from the very fact that; appellant has raised various discrepancies in the DVO's report. However, A.O. did not find it appropriate to invite counter comments of DVO on objections raised by the assessee. Although, it is a settled legal position that valuation report submitted by DVO is not binding upon AO, but in the present case AO has adopted and used the valuation report as if it is binding on him. Appellant has pointed out several glaring mistakes and omissions in valuation report, on which AO has maintained a conspicuous silence which is unbecoming of a quasi-judicial authority. vi) It is important to note that DVO has prepared his report based on DP AR- 2007 after applying cost index on above DPAR as base 100. Interestingly, DVO has applied same rate for cost of construction of the project even though the investment is spread over many years. As per appellant, DVO should have adopted state PWD rates after making certain adjustment for the construction done by the assessee in different assessment years. Hon'ble Allahabad High Court in the case of CIT v/s Raj Kumar 182 ITR 436 (All) has held that value of property under PWD rates is much lower than the cost of value of property as per CPWD rates. Similarly, in the case of Cl'T vis Prem kumara Murdiya 296 ITR 508 (Raj) wherein hon 'ble court refused to interfere in the order of ITAT holding that appropriate to be taken into consideration would be PWD rates and holding difference between CPWD rates and PWD rates at 20-25%. Similar views have been expressed in the case of ITO vis Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur). In view of this, a difference of 20-25% between cost shown in books and estimated by DVO falls within 'tolerance band' as held by various courts. Further, appellant purchased material on wholesale basis which brings 'economy of scale' into construction cost which as per appellant would result into savings upto 25-30%. AO has 42 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 acknowledged this aspect but did not provide any relief while making addition. Appellant has also argued about savings in cost of construction for other reasons as well i.e. self-supervision, consultancy charges etc. however, AO failed to allow any benefit to the assessee on any of the count which is not justified. vii) I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts of the assessee. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 5.8 of this order, it is pertinent to refer to the decision of I TO Vs. Dreamland enterprises 80 Tax man 143 (ITAT Ahd) wherein it was held that when the cost of construction declared by the assessee was supported by regular books of accounts and vouchers, correctness of which was not disturbed by the AO or DVO by bringing any specific material on record, the CIT(A) was fully justified in holding that no addition could be validly made on account of any understatement, of cost of construction merely because of difference as estimated by the DVO. Hence, on this count, 1 am of the view that addition made merely on the basis of DVO's report is not sustainable. viii) The valuation report of DVO is not binding on the AO because it is merely an opinion of an expert. 1n the context of the controversy in issue, it may also be germane to notice the expression used by. legislature i.e. "estimate". Thus, resort can be made to the said provision by the AO for the purpose of "estimating" the value of any investment, bullion, jewellery or any valuable article etc. However, this is settled legal position that addition cannot be made solely on the basis of valuation report which is only give an estimate as held by various High Courts, discussed earlier. ix) It is apparent from record that assessing officer has not brought any material on record to establish that the assessee had made any unaccounted investment in construction of the buildings in question and that books of accounts do not reflect the correct cost of construction. It is evident that only reason for making the addition is that there is a difference in the cost of construction as estimated by the valuation officer and as shown by the assessee in its books of accounts. 4.4.911 is interesting 10 note that valuation of the property under consideration was done by the DVO after applying cost index on the basis of DPAR -2007 (as base). It is settled law that DPAR rates adopted by DVO are higher than PWD rates. Honble High Court of Rajasthan in the case of CIT vls Prern Kumari Murdiya 296 ITR 344 (Raj) refused to interfere in the order of ITAT holding that appropriate rate to be taken into consideration would be PWD rates and holding difference between CPWD rates and FWD rates at 20- 43 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 25%. Similarly, in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (JTAT Jaipur) held after relying. on the decision of Tek Chand vIs ITO 51 TTJ (JPR) 607 that there is variation in local PWD rates and CP\VD rate by margin of20-25%.lt has been held in the case of CIT vis lahsa Construction (P) Ltd (2013) 357 ITR 671 (Delhi) that no addition .can be made solely on the basis of valuation report of DVO. Ld AR also placed reliance on the decision of CIT v/s VS Prata p Singh Amro Singh (1993) 200 ITR 788 (Raj) that addition to income could not be made on the basis of the report of the Valuation Officer. 4..4.10 In view of the above discussion, the comparative picture of investment shown by the assessee and that estimated by the DVO after allowing margin of 30% (25% for difference in CPWD and PWD rates and 5% for self supervision) comes out as under:- A.Y. Declared by 70% of estimate Different Assessee (Rs.) made 2016-17 53511154 62644484 9133327 2017-18 98628433 115462415 16833982 Thus, the addition made by the AO amounting 10 Rs. 91,33,327/- in AY 2016-17 and Rs. 1,68,33,982/- in AY 20177-18 me Confirmed and the appellant gets relief of Rs.1,60,13,333/- in AY 2016-17 and Rs.1,91,46,978/- in AY 2017-18. Therefore, appeal on these grounds is Partly Allowed.

45 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 has held that item wise detailed method of valuation is most accurate, authentic, reliable and desirable. This is submission of Ld AR that in view of this finding that the DVO has not adopted a method duly notified by CBDT it self held the report of DVO unreliable and no assessment or addition can be made relying on the same. Further the DVO has committed several other errors while preparing its report under (i) Plinth Area Rate Method and (ii) Cost Index Method, such mistakes were pointed out in para 4.4.6 of the order of Ld CIT(A). According to the Ld AR the area of the security cabin and shed were wrongly taken by DVO in its report at higher quantities. With regard to the plinth area rate also it was submitted by the AR that DVO has adopted „Standard DPAR 2007 approved by DG, CPWD, New Delhi‟ as per CBDT instruction no 1671, with due adjustments but no details of such adjustment were provided, also no adjustment on account of superior/inferior specifications have been made. Cost of water and sanitary fittings were also taken at 15% of the CPWD rates as against the standard of 7% to 8%. Ld AR further argued that the cost index which is very vital in estimating the valuation of immovable property, adopted by DVO in two segments (i) For all buildings (other than auditorium and shed) at 176.36% and (ii) For auditorium and shed at 894.15%. The DVO has very unreasonably adopted the rates applicable in New Delhi, whereas the property for which the valuation was done is situated at Raipur, such adoption of rates applicable for a place entirely dissimilar in all respect from the place where actual property is 46 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 located and investment was made, cannot be accepted. As per valuer of the assessee after collecting data from open market, the cost index for various building material for construction is worked out at 140%-150% as against 176.36% by the DVO, thus estimation of the DVO was on higher side. It is the submission that, since the additions made by the Ld AO were entirely based on the valuation report of the DVO without bringing any material or cogent evidence to establish that any investment, as alleged, was made out of the books. This is submitted that, as per settled law the additions made solely on the basis of valuation report is not sustainable in law, moreover, reliance on a valuation report with errors / mistakes and defects was a miscarriage of the justice. On this aspect, Ld AR relied upon various of judgments referred to supra. It was the prayer of the Ld AR, that the order passed by the Ld AO is void-ab-initio being based on a valuation report prepared on inapplicable, unjustified and unreasonable factors which cannot be suitable for the facts and in the circumstances, apart from unjustified and inaccurate workings the report of the DVO has several other technical mistakes and errors as pointed out by the Assessee but the same were not considered by the Ld AO. Therefore, the order of the Ld AO has no legal standing and thus the additions made deserves to be deleted in its entirety. Even the relief granted by Ld CIT(A) for margin of 30% on account of excessive rates adopted by the DVO was not a substantial justice to the assessee. In 47 ITA Nos.188-193/RPR/2019 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 such circumstances the entire additions made by the Ld AO are not sustainable and are liable to be deleted.

1. 1. Ld. CIT(A) erred in confirming addition of Rs. 91,33,327/- out of the addition of Rs. 3,59,80,962/- made by the AO on account of difference between cost of construction as per books and that estimated by Valuation Officer. The addition confirmed by Id. CIT(A) Rs. 91,33,327/- is arbitrary and is not justified and he ought to have deleted entire addition.

2. Without prejudice to ground no. 1, Ld. CIT(A) erred in confirming addition of Rs. 91,33,327/- out of the addition of Rs. 3,59,80,962/- without providing due and proper opportunity of hearing. Ld. CIT(A) was not justified in passing the appellate order ignoring request of appellant to provide time for submitting report of registered valuer & his comments on report of DVO.

3. Ld. CIT(A) erred in holding that the reference made by AO to DVO U/S 142A without rejecting books of account of appellant is justified. The order of Ld. CIT(A) on this ground is erroneous and not justified.

4. Ld. CIT(A) erred in not adjudicating upon ground no. 4 of appeal taken before him relating to validity of assessment order based on report of DVO which was submitted beyond stipulated 49 IT(SS)A No.16&17/RPR/19 & CO Nos.5-8/RPR/2022 statutory time period. The valuation report submitted by DVO beyond time prescribed u/s 142A(6) is inadmissible and consequently the assessment order is also illegal. 5. The appellant reserves the right to add, amend or alter any of the grounds of appeal

28. The departmental appeal in IT(SS)A Nos.192-193/RPR/2019 for AY 2016-17 and 2017-18 on its sole common ground (except difference in quantum) has been decided, in terms of our observations above.

29. Since, the Order of Ld CIT(A) has been sustained and the departmental appeals are dismissed, the grounds raised by the assessee in its cross appeals are also incidentally decided, become infructuous and for academic interest only, thus, no separate adjudication of the same is called for. Consequently, IT(SS)A No. 16-17/RPR/2019 of the assessee, stand dismissed.

30. In the result, the appeals of the revenue ITA Nos.188 to 193/RPR/2019 and cross objections of the assessee CO Nos.05 to 08/RPR/2022and also the appeals of the assessee IT(SS)A No. 16- 17/RPR/2019 are dismissed. Order pronounced in pursuance to the Rule 34(4) of ITAT Rules,1963 on 27/03/2023. (RAVISH SOOD) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER रायऩुर/Raipur; ददनाांक Dated 27/03/2023 Prakash Kumar Mishra, Sr.P.S.