A K Kupparaju and Brothers Charitable Foundation Trust Vs ACIT (ITAT Bangalore)
DVO Estimate Alone Can’t Create ‘Unexplained Investment’ – ITAT Deletes Additions on Hostel Construction
In a significant ruling, the Bangalore ITAT deleted additions made against a charitable trust solely on the basis of a DVO valuation report, holding that a mere difference in estimated construction cost cannot justify addition u/s 69B unless the department proves actual unaccounted investment with cogent evidence.
The assessee trust had constructed Boys’ and Girls’ Hostels over several years and disclosed total construction cost of about ₹28.83 crore in its books. The DVO estimated the cost at ₹29.15 crore, resulting in a difference of approximately ₹32 lakh spread across six assessment years. Based solely on this valuation difference, the AO treated the amount as unexplained investment u/s 69B.
The Tribunal noted that the DVO himself had adopted the Plinth Area Rate and Cost Index Method because day-to-day construction accounts, structural drawings and certain details were not fully available. However, the ITAT emphasized that the valuation report itself was only an estimate and could not automatically replace the actual books of account maintained by the assessee.
Importantly, the Bench observed that the Revenue failed to point out any “latent, patent and glaring defect” in the books or actual construction expenditure recorded by the trust. The Tribunal also highlighted that during search proceedings against trustees, no incriminating material or evidence of unaccounted expenditure relating to hostel construction was found.
