Cit v. Ambience Developers & Infrastructure Pvt Ltd

S. RAVINDRA BHAT, J

R.V.EASWAR, J JULY 27, 2012

Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI Decided on : 27.07.2012 + ITA 195/2012, C.M. APPL.5434/2012 + ITA 196/2012, C.M. APPL. 5436/2012 + ITA 197/2012, C.M. APPL.5437/2012 + ITA 198/2012, C.M. APPL.5439/2012 + ITA 199/2012, C.M. APPL.5441/2012 + ITA 203/2012, C.M. APPL.5444/2012 CIT …..Appellant Through: Sh. N.P. Sahni, Sr. Standing Counsel and Sh. Ruchesh Sinha, Advocate, for Revenue. Versus M/S. AMBIENCE DEVELOPERS AND INFRASTRUCTURE PVT. LTD. …..Respondent Through: Dr. Rakesh Gupta, Sh. Ashwani Taneja, Ms. Rani Kiyala and Sh. Piyush Singh, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.V. EASWAR MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) % 1. The revenue has preferred these batch of appeals, claiming to be aggrieved by a common decision of the Income Tax Appellate Tribunal in ITA Nos.2376/Del/2011 to 2381/Del/2011 dated 5-8-2011. Page 2 2. The facts necessary to decide these appeals are that there was a search and seizure action under Section 132 on the Ambience Group of Companies, on 10.10.2007. The assessee belongs to the group which was covered in the search. In that year the assessee was in the property construction business i.e. building a mall in the National Capital Region of Delhi. The AO noted that the company was constructing the "Ambience Mall Projects", at NH-8, Gurgaon. Major construction work for the Mall was by M/s Ambience Projects and Infrastructure Ltd. and expenses were accounted for on the basis of bills drawn by the construction company. Certain costs and expenses were incurred directly by the assessee in its project. 3. During the assessment proceedings, the AO, based on certain seized documents mentioned in the assessment order concluded that the expenses incurred on the construction of Ambience Mall project, NH-8, Gurgaon were not completely reflected in the books of account. He therefore, made a reference to the Valuation Officer under Section 142A of the Income Tax Act. The Valuation Officer in his report, stated that the total investment incurred in the said property should have been `437,88,53,104/- over various years. As against that the assessee had shown the investment at `421,60,56,594/- for the relative period, in its books of account. The comparative year wise details of the expenses shown by the assessee company and as estimated by the Valuation Officer are as under: Period of Construction Cost of construction as per returns Cost of construction as per Valuation Officer Difference 2002-03 19000000/- 19733655/- 7,33,655/- Page 3 2003-04 282586069/- 293497693/- 1,09,11,624/- 2004-05 637415316/- 662028123/- 2,46,12,807/- 2005-06 1074083566/- 1115557644/- 4,14,77,078/- 2006-07 1212635421/- 1259459464/- 4,68,24,043/- 2007-08 990336222/- 1028576525/- 3,82,40,303/- TOTAL 421,60,56,594/- 437,88,53,104/- 16,27,96,510/- 4. The Assessing Officer made additions to the returned income as a result of the difference between the cost of construction as disclosed in the returns and cost of construction estimated by the District Valuation Officer for each year. Aggrieved, the assessee preferred a first appeal where detailed explanations and documents were filed by it. The CIT(A) called for AO's remand report and after consideration of the material available struck of the additions. It was held by the Commissioner (A) that the reference under Section 142-A (to the valuation officer) was not valid, since the AO did not advert to any specific defects in the books of accounts maintained and audited and his presumption that some expenses mentioned in seized documents on account of construction were not completely recorded in the books of accounts was not found correct when they were explained by the appellant and verified by the Assessing Officer with the supporting evidence corroborating the books of accounts. Since Assessing Officer had also not rejected the books of accounts under Section 145(3), by pointing out any defect, the reference to the DVO was not valid and ther