Facts of the Case

The assessee, Corner Point Infrastructure Private Limited, a builder and developer, filed its return of income for Assessment Year 2017-18 on 07.11.2017 declaring total income of ₹39,81,884. The case was selected for complete scrutiny to examine unsecured loans, real estate income and sales turnover.

During assessment proceedings, the Assessing Officer referred the matter to the District Valuation Officer for determining investment in construction projects. The DVO estimated total project cost at ₹103,20,80,956, whereas the assessee had disclosed investment of ₹66,27,72,894, resulting in a difference of ₹36,93,08,062. Treating the difference as unexplained investment, the Assessing Officer made an addition under Section 69.

The Assessing Officer further noted that the assessee had deposited cash of ₹66,29,500 in various bank accounts during the demonetisation period. Holding that the assessee failed to explain the source of such deposits, the Assessing Officer made an addition under Section 68. Similar additions were made for Assessment Year 2018-19. The CIT(A), NFAC confirmed the additions by a non-speaking order. Aggrieved, the assessee filed appeals before the Tribunal.

Issues Involved

Whether additions under Section 69 could be sustained solely on the basis of a DVO valuation report without rejection of books of account under Section 145, whether the assessee was denied opportunity to confront the DVO report, whether cash deposits during demonetisation could be added under Section 68 without proper verification of evidence, and whether the matter required remand for fresh adjudication.

Petitioner’s Arguments

The assessee contended that the DVO adopted incorrect parameters and valuation rates without considering the assessee’s actual cost of construction and sale prices of units. It was argued that the Assessing Officer neither rejected the books of account nor confronted the DVO report to the assessee before making the addition.

Regarding cash deposits during demonetisation, the assessee submitted that it maintained multiple bank accounts and had made deposits out of cash receipts supported by bills and transactions through cheques. It was argued that due to insufficiency of evidence at the assessment stage, complete details could not be correlated, but the assessee was now in a position to furnish builder-wise and transaction-wise details for verification.

Respondent’s Arguments

The Revenue relied upon the assessment order and the order of the CIT(A), contending that the additions were rightly made based on the DVO report and unexplained cash deposits.

Court Order / Findings

The ITAT Ahmedabad observed that the Assessing Officer had not rejected the books of account under Section 145 and had relied solely on the DVO report for making the addition under Section 69. The Tribunal noted that the DVO valuation and the figures adopted were not confronted to the assessee, and therefore the difference in valuation required proper examination after giving opportunity to the assessee.

The Tribunal further observed that with respect to cash deposits during demonetisation, neither the Assessing Officer nor the CIT(A) had properly verified the evidence, as the assessee had expressed inability to fully correlate deposits at the assessment stage due to insufficient documentation.

In the interest of justice, the Tribunal held that both issues required fresh examination. Accordingly, the matters relating to additions under Sections 69 and 68 for both assessment years were set aside and remanded to the file of the Assessing Officer for proper verification and adjudication after granting due opportunity of hearing to the assessee.

Important Clarification

The Tribunal clarified that additions based solely on a DVO report without rejection of books of account and without confronting the assessee are not sustainable. It was also clarified that cash deposit additions during demonetisation require proper verification of supporting evidence before being confirmed.

Final Outcome

Both appeals filed by the assessee for Assessment Years 2017-18 and 2018-19 were partly allowed for statistical purposes. The additions made under Sections 69 and 68 were set aside and remanded to the file of the Assessing Officer for fresh adjudication in accordance with law after providing adequate opportunity of hearing to the assessee.

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