Case Number: ITA 1127/DEL/2021
Appellant: Ecstasy Buildcon Private Limited, Ghaziabad
Respondent: DCIT, CC, Ghaziabad
Assessment Year: 2016-17
Order Type: Final Tribunal Order
Date of Order: 2022-10-10
Pronounced On: 2022-10-10
Ecstasy Buildcon Private Limited (hereinafter referred to as ‘the Assessee’) is a company engaged in the business of construction of buildings and sale and purchase of land. The case involves the validity of assessment under Section 153C, additions under Section 69B for unexplained investments, and unexplained cash credits under Section 68 of the Income Tax Act, 1961 (‘the Act’).
A search and seizure operation under Section 132 of the Act was conducted on 10.11.2017 at the premises of Shri Rajeshwar Singh Yadav and other associated persons. During the search, certain incriminating documents/material belonging to the Assessee company were found and seized. Consequently, a notice under Section 153C of the Act was issued on 26.09.2019, and the Assessee was asked to file the return of income.
The Assessee filed the return of income electronically on 12.10.2019, declaring income at Nil. The case was taken up for scrutiny assessment, and an assessment order was framed under Section 143(3) read with Section 153C on 22.12.2019, determining the total income of the Assessee at Rs.3,68,83,990/-. Additions were made on various accounts, including unexplained investment in construction, unexplained cash credits, and disallowance of commission on share capital.
The Assessee raised multiple grounds of appeal, challenging the assessment order on the following bases:
1. Validity of Assessment under Section 153C: The Tribunal noted that the requirement for invoking jurisdiction under Section 153C is the discovery of incriminating material during the search that pertains to the Assessee. In this case, the AO had stated that certain bills and vouchers were found and seized during the search. These documents indicated investments and transactions that were not fully explained by the Assessee. The Tribunal found that there was sufficient material for the AO to initiate proceedings under Section 153C. Hence, the assessment was valid.
2. Approval under Section 153D: The Assessee contended that the approval by Addl.CIT was mechanical. However, the Tribunal found that the entire case file was placed before the Addl.CIT, who granted approval after perusing the documents and applying his mind. The Tribunal held that the approval was valid and not mechanical.
3. Addition under Section 69B: The Tribunal observed that the AO had adopted the valuation of the property based on the report of the District Valuation Officer (DVO). The Tribunal, referring to various judicial precedents, held that state PWD rates should be applied for estimating the fair market value of the property instead of CPWD rates. The Tribunal also directed that a deduction of 10% be allowed for self-supervision charges. Accordingly, the AO was directed to re-compute the addition under Section 69B based on these guidelines.
4. Addition under Section 68: The Assessee had received share application money from two companies. The AO made the addition on the basis of statements from directors of the companies without allowing the Assessee an opportunity to cross-examine them. The Tribunal held that such additions based on statements recorded at the back of the Assessee and without cross-examination were not sustainable. The Tribunal directed the AO to delete the addition under Section 68.
5. Addition under Section 69C: Since the addition under Section 68 was deleted, the related addition under Section 69C for unexplained commission expenditure was also deleted.
In conclusion, the Tribunal allowed the appeal of the Assessee partly. The assessment under Section 153C was upheld, but the additions under Sections 68 and 69C were deleted. The addition under Section 69B was directed to be re-computed based on state PWD rates and self-supervision charges.
This order reaffirms the principles that jurisdiction under Section 153C requires incriminating material, approvals under Section 153D must be given with application of mind, and additions should not be based on statements recorded without allowing cross-examination. It also underscores the importance of using appropriate valuation rates and allowing reasonable deductions for self-supervision.
Ecstasy Buildcon Private Limited vs. DCIT, Ghaziabad – ITAT Order
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