ITAT Ahmedabad Sets Aside Additions Made Without Confronting DVO Report and Proper Evidence Verification

The Income Tax Appellate Tribunal, Ahmedabad Bench "D" has delivered a significant ruling in the matter of Corner Point Infrastructure Pvt. Ltd. Vs ACIT, remanding back to the Assessing Officer the issues concerning additions made under Section 69 and Section 68 of the Income Tax Act, 1961. The decision emphasizes the fundamental principles of natural justice and proper adjudication procedures in tax assessment proceedings.

Background of the Appeals

The company under consideration operates in the real estate development sector. For the assessment year 2017-18, the company filed its return of income on 07-11-2017, declaring a total income of Rs. 39,81,884/-. The case underwent complete scrutiny assessment, with notices issued under Section 143(2) of the Act on 08-09-2018. Subsequently, the Assessing Officer issued questionnaires under Section 142(1) on multiple occasions, to which the company duly responded with requisite details and submissions.

The appeals before the ITAT pertained to two consecutive assessment years - 2017-18 and 2018-19 - challenging the order dated 30-07-2025 passed by the National Faceless Appeal Centre (NFAC), Delhi.

Financial Particulars Reported by the Assessee

According to the records submitted by the company, the gross receipts from revenue operations amounted to Rs. 10,18,48,290/-, with additional income of Rs. 1,94,20,460/- shown under other income heads. After claiming business expenses totaling Rs. 11,92,38,122/-, the company reported a profit of Rs. 20,30,628/-, which after necessary adjustments resulted in the declared total income of Rs. 39,81,884/-.

Grounds of Appeal Raised

For Assessment Year 2017-18

The company raised multiple contentions challenging the NFAC's confirmation of additions:

• The appellate authority passed a non-speaking order without adequately considering the detailed submissions made by the company
• The addition of Rs. 36,93,08,062/- was made under Section 69 regarding alleged unexplained investment solely based on the District Valuation Officer's report, without rejecting the books of account under Section 145 of the Act
• The addition of Rs. 66,29,500/- was confirmed under Section 68 concerning cash deposits made in bank accounts
• Both additions warranted deletion based on the facts and evidence on record

For Assessment Year 2018-19

Similar grounds were raised for this year, primarily focusing on:

• The NFAC's erroneous holding that the appeal was infructuous
• The confirmation of addition of Rs. 36,93,08,062/- under Section 69 without proper legal basis
• Non-rejection of books of account under Section 145 before making additions based on DVO's report

DVO Reference and Valuation Discrepancy

To determine the actual investment in the real estate projects undertaken by the company, the Assessing Officer made a reference to the District Valuation Officer (DVO) vide communication dated 14-11-2019. The DVO submitted a comprehensive valuation report after examining various aspects of construction activities, associated expenses, and total investment made.

The critical observation emerging from the DVO's report revealed a substantial discrepancy. The total project valuation as per the DVO's assessment stood at Rs. 103,20,80,956/-, whereas the company's books reflected a total investment of only Rs. 66,27,72,894/- in the projects. This resulted in a difference of Rs. 36,93,08,062/-.

The Assessing Officer concluded that this variance represented unexplained investment not properly recorded in the regular books of account. Since the company allegedly failed to provide satisfactory explanation regarding this discrepancy, the entire amount of Rs. 36,93,08,062/- was added to the income under Section 69 of the Income Tax Act, 1961, treating it as unexplained investment.

Cash Deposits During Demonetisation Period

The second major addition stemmed from cash deposits made during the demonetisation period. The Assessing Officer observed that the company deposited cash aggregating to Rs. 66,29,500/- across various bank accounts during the period from 09-11-2016 to 30-11-2016 (the demonetisation window).

Upon examining the details furnished by the company, the Assessing Officer held that the source of these substantial cash deposits lacked proper evidentiary support. Since the company purportedly could not satisfactorily explain the origin of these deposits, the entire sum of Rs. 66,29,500/- was added back to the income as unexplained cash deposits under Section 68 of the Act.