O/TAXAP/917/2017 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 917 of 2017 PRINCIPAL COMMISSIONER OF INCOME TAX, RAJKOT 1, RAJKOT....Appellant(s) Versus M/S RAJNI DEVELOPERS PVT LTD....Opponent(s) Appearance: MRS MAUNA M BHATT, ADVOCATE for Appellant(s) No. 1 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.S. SUPEHIA Date : 23/11/2017 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. appellant revenue in this appeal under section 260A of Income Tax Act, 1961 (hereinafter referred to as Act ) has called in question order dated 6.6.2017 passed by Income Tax Appellate Tribunal, Rajkot Bench, Rajkot (hereinafter referred to as Tribunal ) in IT(SS)A No.21/ RJT/ 1988 for block period 1987-88 to 24.12.1996, by proposing following questions, stated to be substantial questions of law: (A) Whether in facts and in law ITAT is justified in deleting addition made by AO under section 69C of Act? Page 1 of 6 HC-NIC Page 1 of 6 Created On Sat Dec 16 10:08:41 IST 2017 O/TAXAP/917/2017 ORDER (B) Whether in facts and in law ITAT is justified in deleting addition by holding that there is no evidence, whereas ITAT had confirmed addition on account of cash on money receipt? 2. respondent assessee was carrying on business of construction and had constructed building known as Dhanranjni Commercial Complex. search came to be carried out in case of M/s. Rajni Developers Private Limited, associate firm of assessee company during course of which books of account, incriminating documents, etc. of assessee were seized. Pursuant to search, notice dated 20.8.1997 came to be issued to respondent assessee, initiating proceedings under section 158BC of Act. During course of assessment proceedings Assessing Officer found that books of account which were seized during search proceedings were not written up to date of search and no cash balance was drawn. He further found that in respect of building Dhanranjni constructed by assessee, no day to day stock register was maintained and therefore, there was no check over consumption of raw material. assessing officer found that books of account of assessee had not been written on day to day basis and in regular manner and were incorrect and incomplete and, therefore, case was covered by sub-section (2) of section 145 of Act. Accordingly, he rejected books of account. 3. To verify cost of construction of building Dhanranjni Assessing Officer, referred case to Valuation Cell of Department to work out fair market value of land and building. Valuation Officer worked Page 2 of 6 HC-NIC Page 2 of 6 Created On Sat Dec 16 10:08:41 IST 2017 O/TAXAP/917/2017 ORDER out value of land and building Dhanranjni as under: Cost/ value determined by DVO Cost/ value shown Difference by assessee Land Rs.63,15,568/- Rs.61,00,000/- Rs.2,15,568/- Building Rs.1,87,18,104/- Rs.1,36,68,956/- Rs.50,49,148/- Rs.52,64,716/- 4. stand of assessee before Assessing Officer was that it was regularly maintaining books of account and that during survey under section 133A of Act at its business premises, books of account for financial years 1995-96 and 1996-97 had been found. It was contended that it is settled legal position that when assessee maintains account regularly, addition cannot be made on basis of report of Valuation Officer without pointing out any defects in books. Assessing Officer took note of fact that Valuation Officer had determined value of building at Rs.1,87,18,104/-, whereas assessee had shown cost of building at Rs.1,36,68,956/- and held that difference between valuation of cost of construction determined by Valuation Officer and cost of construction shown by assessee amounting to Rs.50,49,138/- was undisclosed income of assessee under section 69C of Act and added same to income of assessee. 5. assessee carried matter in appeal before Tribunal, which found that addition on account of cost of construction was made only on basis of valuation report without reference to any seized material/ document found at time of search. Moreover, there was also no Page 3 of 6 HC-NIC Page 3 of 6 Created On Sat Dec 16 10:08:41 IST 2017 O/TAXAP/917/2017 ORDER evidence found at time of search which would suggest that cost shown by assessee in books of account was lesser than actual cost of construction incurred by assessee and that entire assessment was devoid of incriminating material. Tribunal was of opinion that Chapter XIV-B of Act is complete code in itself and if assessment has to be made for undisclosed income, such undisclosed income should be out of result of search. Tribunal held that there was no undisclosed income to this extent which could be said to have been detected as result of search and set aside addition of Rs.50,49,138/- made on account of cost of construction. 6. Being aggrieved, revenue is in appeal before this court. 7. Mrs. Mauna M. Bhatt, learned senior standing counsel for appellant, assailed impugned order passed by Tribunal by submitting that material on record establishes that books of account seized during search were not written up to date of search and no cash balance was drawn. It is also established that non day to day stock register has been maintained in respect of building Dhanranjni and hence there was no check on raw material. It was argued that Assessing Officer was therefore, wholly justified in rejecting books of account of assessee and referring matter to Valuation Cell for estimating cost of construction of building. 8. From facts as emerging from record it is evident that insofar as cost of construction of building Page 4 of 6 HC-NIC Page 4 of 6 Created On Sat Dec 16 10:08:41 IST 2017 O/TAXAP/917/2017 ORDER Dhanranjni is concerned, no incriminating material had been recovered during course of search. Assessing Officer, on perusal of books of account, was of opinion that they were not maintained in accordance with law and rejected them and referred case to Valuation Cell for valuation, and based upon such valuation, made such addition. In this regard settled legal position as held by this court in case of N.R. Paper and Board Limited and others Vs. Deputy Commissioner of Income Tax, (1998) 234 ITR 733, is that essence of special procedure of Chapter XIV-B of Act is to provide for assessment of undisclosed income detected as result of search without affecting regular assessments made or to be made. special provisions are devised to operate in separate field of undisclosed income and are clearly in addition to regular assessments covering previous years falling in block period. In Deputy Commissioner of Income Tax Vs. Radhe Developers India Limited and another, (2010) 329 ITR 1 (Guj), it was contended on behalf of assessee that two additions of Rs.99,00,000/- and Rs.4,00,000/- were found to be based on entries recorded in regular books of account and were thus, outside scope of special provisions for assessment of block period and had to be considered only in regular assessment as held by this court in N.R. Paper and Board Limited (supra). court held that admittedly such amounts were found having been entered in regular books of account. Therefore, inquiry, if any, was permissible in course of regular assessment proceedings. 9. In facts of present case also, amounts in question have been found to be entered in regular books of Page 5 of 6 HC-NIC Page 5 of 6 Created On Sat Dec 16 10:08:41 IST 2017 O/TAXAP/917/2017 ORDER account of assessee. Therefore, inquiry, if any, in respect of valuation of building Dhanranjni was permissible in course of regular assessment proceedings. findings recorded by Tribunal, therefore, are in consonance with principles propounded in above referred decisions of this court. Consequently, it cannot be said that impugned order of Tribunal suffers from any legal infirmity giving rise to question of law, much less substantial question of law, warranting interference. appeal, therefore, fails and is accordingly, summarily dismissed. (HARSHA DEVANI, J.) (A. S. SUPEHIA, J.) karim Page 6 of 6 HC-NIC Page 6 of 6 Created On Sat Dec 16 10:08:41 IST 2017 Principal Commissioner of Income-tax, Rajkot-1 v. Rajni Developers Pvt. Ltd