HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR (1) D.B. Income Tax Appeal No. 33 / 2013 C I T Central Jaipur ----Appellant Versus M/S Unique Builders And Developers (Rama), Jaipur ----Respondent (2) D.B. Income Tax Appeal No. 34 / 2013 C I T Central Jaipur ----Appellant Versus M/S Unique Builders And Developers (Rama) Jaipur ----Respondent For Appellant(s) : Mr. Anil Mehta For Respondent(s) : Mr. Sanjay Jhanwar HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH JUDGMENT 19/05/2017 1. Since identical question of law and fact are involved in both these appeals, they are decided by this common judgment. 2. By way of these appeals, appellant has assailed judgment and order of Tribunal whereby Tribunal has party allowed appeal of assessee and dismissed appeal of department. (2 of 9) [ ITA-33/2013] 3. This court while admitting appeals (33/2013 & 34/2013) on 11.9.2014 framed following substantial questions of law:- (1) Whether Tribunal was justified in holding that Assessing Officer as well as CIT(A) have erred in rejecting books of accounts of assessee under Section 145(3) of Act and thereby reversing findings given by Assessing officer as well as CIT(A), ignoring undisputed facts that assessee has failed to maintain quantitative and qualitative stock registers and vouch expenses incurred by it and on money received by it has not been disclosed? (2) Whether Tribunal was justified in rejecting application of percentage completion method adopted by AO, when this rejection means acceptance of loss returns of assessee engaged in construction and sale of residential/commercial projects inh contravention of Accounting Standard- 7 and Accounting Standard-9 issued by ICAI? (3) Whether Tribunal was justified in ignoring fact that two brothers who are partners either themselves or through their families and actively engaged jointly in business of sister concerns of assessee firm and thus acceptance of on money and specific seized documents cannot be ignored for intervention? (4) Whether Tribunal was justified in not accepting DVO report which took stamp Duty Authority valuation of land? 4. Counsel for appellant has contended that view taken by tribunal is contrary to law. 5. Counsel for respondent has pointed out observations made by tribunal which reads as under:- We have carefully considered submissions of Ld. representatives of both parties. It is fact that said addition of Rs. 76,93,120/- has been made merely on basis of DVO s report and considering that assessee has not fully explained investment and/or there is unexplained expenditure. No document or evidence have been brought on record to establish that assessee has paid any amount over and above amount entered in books of account to purchase (3 of 9) [ ITA-33/2013] said land presently known as Unique Destination. It is fact that onus is on department for making any addition u/s 69, Section 69B or Section 69C of Act that there is understatement of investment or unexplained expenditure/investment. Only when such burden is discharged by revenue, onus shift on assessee to prove that there is no unexplained expenditure/investment. Hon ble Delhi High Court in cases of CIT Vs. Naveen Gera 328 ITR 516 and in case of CIT Vs. Smt. Suraj Devi 328 ITR 607 have held that in absence of any incriminating material, actual consideration asper agreement has to be accepted and no addition can be made in case of buyer because of difference between stamp duty valuation of property and actual consideration as per agreement. Primary burden of proof to prove understatement or concealment of income is on revenue and it is only when such burden is discharged, it would be permissible to rely upon valuation given by Valuation Officer. We are of considered view that above decisions of Hon ble Delhi High Court squarely apply to caseof assessee before us. 6. He has also relied upon following decisions:- In Sargam Cinema vs. CIT reported in (2010) 328 ITR 513 (SC) wherein Supreme Court held as under:- In present case, we find that Tribunal decided matter rightly in favour of Assessee inasmuch as Tribunal came to conclusion that assessing authority could not have referred matter to Departmental Valuation Officer (DVO) without books of account being rejected. In present case, categorical finding is recorded by Tribunal that books were never rejected. This aspect has not been considered by High Court. In circumstances, reliance placed on report of DVO was misconceived. (4 of 9) [ ITA-33/2013] 6.1 In Commissioner of Income Tax vs. Pratap Singh Amro Singh Rajendera Singh (1993) 200 ITR 788 (Raj. High Court) wherein it has been held as under:- We have considered matter. In respect of investment which is made in property, there can be only two methods to find out correct position (i) when proper books of account are maintained, and (ii) valuation report. If assessee has maintained proper books of account and all details are mentioned in such books of account, which are duly supported by vouchers and no defects are pointed out and books are not rejected, figures shown therein have to be followed. valuation report can be taken into consideration only when books of account are not reliable or are not supported by proper vouchers or Income Tax Officer is of opinion that no reliance can be placed on such books of account. It is true that Income Tax Officer has no option but to rely on valuation report, which is document prepared by expert and is admissible, but there must be finding by Income Tax Officer that books of account maintained by assessee are defective or are not reliable. There may be marginal difference in actual investment and report of Valuation Officer for number of reasons as valuation report is prepared on basis of norms prescribed by C. P. W. D. for construction of buildings and difference may be with regard to quality of materials, etc. Income Tax Officer could have examined matter in detail with regard to books of account in order to say that books are not reliable. Simply because valuation report is of higher amount, books cannot be said to be unreliable unless, by deeper probe, any defect is found in maintenance of books of account. Tribunal was, therefore, justified in deleting addition of Rs. 55,780. 6.2 In Deputy Commissioner of Income Tax vs. Ravi Builders (2015) 231 Taxman 62 (Gujarat) wherein Gujarat High Court held as under:- At outset it is required to be noted that AO directed to make addition of Rs.10,23,545/- being (5 of 9) [ ITA-33/2013] difference of value of land and cost of construction with respect to building 'Ravi Darshan' on basis of report of District Valuation Officer, which admittedly was obtained during course of block assessment proceedings. It is required to be noted that as such it is not case on behalf of Revenue that on basis of any material collected during course of search and/or during inquiry at time of search, aforesaid undervaluation was found. Therefore, short question which is posed for consideration of this Court is whether on basis of material collected subsequently and that too during course of block assessment proceedings u/s 158BC of Act, such addition could have been made? As such aforesaid question is squarely covered by decision of Division Bench of this Court in case of Kantilal B. Kansara (HUF) (supra). In aforesaid decision of Division Bench of this Court has specifically observed and held that addition u/s 158BD of Act can be made only in respect of material disclosed at time of search or pursuant to any inquiry made in relation to search. In aforesaid case also, addition was made by AO solely based upon report made by District Valuation Officer, which was referred during course of assessment proceedings. To aforesaid Division Bench has observed that report of District Valuation Officer cannot be stated to be material found during course of search and therefore, addition made on basis of District Valuation Officer's report was not permissible. Applying aforesaid decision of Division Bench of this Court in case Kantilal B. Kansara (HUF) (supra) to facts of present case, addition of Rs.10,23,454/- made by AO solely based upon report of District Valuation Officer, which was collected during course of block assessment proceedings, was not permissible u/s 158BC of Act. Under circumstances, no error has been committed by learned Tribunal in directing to delete aforesaid addition of Rs.10,23,545/-. 6.3 In Principal Commissioner of Income Tax vs. J. Upendra Construction (P.) Ltd. (2015) 377 ITR 383 (Guj.) wherein it has been held as under:- (6 of 9) [ ITA-33/2013] At outset, it is required to be noted that in present case, Assessing Officer made additions with respect to difference in cost of construction based upon and/or relying upon DVO's report in case of one M/s. Manjusha Estate Pvt. Ltd. from whom, assessee subsequently got project. It is true that in present case, copy of DVO's report was furnished to assessee during reassessment proceedings. However, it is required to be noted that except DVO's report, there was no further tangible material before Assessing Officer. Therefore, solely on basis of DVO's report which, as per catena of decisions of Hon'ble Supreme Court as well as this Court, can be said to be opinion of DVO only, no addition can be made with respect to difference between cost of construction determined by DVO and shown by assessee. Under circumstances and in facts and circumstances of case, it cannot be said that learned Tribunal has committed any error in deleting additions made by Assessing Officer on account of difference of cost of construction which was solely based upon DVO's report. 6.4 In CIT vs. Sadhna Gupta (2013) 352 ITR 595 (Guj.) wherein it has been held as under:- law seems to be well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in transaction of purchase of property, report of DVO cannot form basis of any addition on part of revenue. In present case there is no evidence other than report of DVO and, therefore, same cannot be relied upon for making addition. In these circumstances, question which has been framed is decided in favour of assessee and against revenue. appeal is dismissed. 6.5 In CIT vs. Agile Properties Pvt. Ltd. (2014) 107 DTR 201 (Del.) wherein Delhi High Court held as under:- In matter CIT v. Dinesh Jain (supra), this Court also relied upon ruling in Lalchand Bhagat Ambica Ram v. Commissioner of Income Tax, Bihar & (7 of 9) [ ITA-33/2013] Orissa, MANU/SC/0081/1959 : (1959) 37 ITR 288 (SC) which held that mere suspicion cannot take place of proof. Court was of opinion that mere reliance upon report of Valuation Officer expressing his opinion as to true value would be inadequate material for AO to constitute evidence in absence of positive evidence. In present case too, approach of Tribunal is in accord with what has been expressed in Dinesh Jain HUF's matter and other judgments of Supreme Court noticed earlier. As such no substantial question of law arises. 6.6 In CIT vs. Smt. Prem Kumari Murdia (2008) 296 ITR 508 (Raj.) wherein it has been held as under:- In case of respondent-assessee, AO had made additions as income from undisclosed sources for asst, yr. 1995-96, on basis of difference in cost declared by assessee and cost determined by DVO on CPWD rates. On appeal, CIT(A) has held that in facts of case, appropriate rate to be taken into consideration would have been PWD rates. Keeping in view aforesaid, deduction of 20 per cent was allowed from cost of construction estimated by Valuation Officer in order to arrive at reasonable estimate of cost of construction for relevant assessment year and sustained balance of addition on that basis. On further appeal, Tribunal by order under appeal has upheld order of CIT(A) by following Bench decision of this Court in CIT v. Dinesh Talwar MANU/RH/0743/2002, facts of which case were almost similar. We are also of opinion that what shall be taken to be cost of construction of property constructed is essentially question of fact and not question of law. Moreover, matter is squarely governed by Bench decision of this Court and does not give rise to any substantial question of law. 6.7 In CIT vs. Naveen Gera (2010) 328 ITR 516 (Del) wherein it has been held as under:- (8 of 9) [ ITA-33/2013] On appeal being filed by Respondent- Assessee, learned Commissioner of Income Tax (Appeals) (for short Commissioner (Appeals)) allowed same and deleted addition made by assessing officer. revenue challenged Commissioner (Appeals)s order, which was dismissed by Tribunal by observing as under:- Being aggrieved, Assessee carried matter in appeal before Ld. Commissioner (Appeals) who has deleted this addition on basis that Assessee in fact has purchased property from M/s. Sam Aviation (P) Ltd. where Assessee was also director. It is also noted by him that purchase was made by M/s. Sam Aviation (P) Ltd. and in case of company, there is no action taken for extra payment. It is also noted by him that there is no evidence that action has been taken in hands of seller for extra receipts. It is also submitted that there was no material found during search that any extra payment was made by Assessee to seller company or by seller company to original seller. On this basis, this addition and now, revenue is in further appeal before us. X x x We have heard rival submissions and have gone through material available on record and Tribunal decision cited by Ld. AR of Assessee. We find that this is undisputed factual position that no evidence whatsoever was found in course of search indicating any undisclosed investment in agricultural land. factum of purchase of land was disclosed by Assessee before department in VDIS, 1997 and in absence of any adverse material found in course of search, addition made by assessing officer in present case, on basis of valuation report of DVO cannot be sustained in absence of any adverse material found in course of search. We, therefore, decline to interfere in order of Ld. Commissioner (Appeals) on this issue. Ms. Suruchii Aggarwal, learned Counsel for revenue submitted that both Commissioner (Appeals) and Tribunal have erred in law in deleting addition of Rs. 2,24,08,820/- made by assessing officer on ground that addition based on DV Os report could not be sustained as no adverse material had been found during search. She also relied upon Supreme Courts decision in CIT v. Mukundray K. Shah MANU/SC/1717/2007 : (2007) 17 (I) ITCL 145 (SC) : (2007)290 ITR 433 to contend (9 of 9) [ ITA-33/2013] that block assessment of undisclosed income can be based on evidence found in search and/or material or information gathered in post search inquiries made on basis of evidence found in search. 7. In view of above, in our considered opinion observations made by Tribunal are just and proper. 8. issue is answered in favour of assessee and against department. appeals stand dismissed. copy of this judgment be placed in each file. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 35-36. CIT, Central Jaipur v. Unique Builders And Developer