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TMI Blog2006 (8) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... rty at plot No. R-11/12, Raj Nagar,Ghaziabad. The assessee declared investment in the construction year-wise as under in asst. yr. 1990-91: Asst. yr. Amount 1988-89 Rs. 3,23,111 1989-90 Rs. 4,01,171 1990-91 Rs. 2,28,772 ------------ Rs. 9,53,254 ------------ The issue of investment in the house property was considered in asst. yr. 1990-91. The AO referred the matter regarding the cost of construction in the house property to the DVO whose report is dt.6th May, 1991, estimating the total cost of construction at Rs. 13,82,000 as under: Asst. yr. Amount 1988-89 Rs. 6,45,670 1989-90 Rs. 7,36,330 ------------- Rs. 13,82,000 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment by the assessee in these two assessment years. The learned CIT(A) computed the investment in the house property as under: ----------------------------------------------------------- Asst. yr. Investment shown Investment as per Difference by the assessee DVO as modified by CIT(A) ----------------------------------------------------------- 1988-89 3,23,111 5,28,644 2,05,533 ----------------------------------------------------------- 1989-90 4,01,171 6,03,356 2,01,985 ----------------------------------------------------------- 1990-91 2,28,772 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 TTJ (Jp) 530 : (1995) Taxman 30 (Jp)(Mag), the rates of UPPWD should be adopted. Further, the property was constructed under self-supervision, but the DVO has given no supervision discount. The AO considered these submissions but as not agreeable with the same. The AO observed that the cost of investment in the house property has to be looked into in asst. yrs. 1988-89 and 1989-90. The AO then referred to the valuation report of the registered valuer of the assessee dt.11th May, 1995working out the cost at Rs. 9,59,300 and also the report of the Valuation Officer estimating the cost at Rs. 13,82,000 and noticed that the registered valuer has applied a rate of 1,600 per sq. mtr. for ground floor while the DVO has applied a rate of Rs. 2,345 per sq. mtr. As per the registered valuer's report, the first floor consisted of 229 sq. mtr. whereas the Valuation Officer has taken the plinth area at 242 sq. mtr. This difference was not explained. The AO then noticed that the registered valuer did not include extra items likeKotastone, marble stone and Dholpur stone used at one or the other place. The AO, therefore, held that the valuation report of the Valuation Officer is reasonable. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in asst. yr. 1989-90. In view of the discussion made, the AO completed the two assessments. for asst. yrs. 1988-89 and 1989-90 and also directed to charge the interest as per rules." 7. The learned CIT(A) decided the issue by observing as under: "14. I have carefully considered the arguments of the learned counsel and the papers filed in the paper book. I have also considered the reasons given by the AO in the assessment orders as well as in the remand reports. I have also tried to consult the relevant assessment records but only part covers have been made available. The brief facts of the two cases have already been outlined hereinabove. The assessee started constructing a house property from asst. yr. 1988-89 and declared its completion in asst. yr. 1990-91. In asst. yr. 1990-91, the assessee declared an investment of Rs. 9,60,383 (wrongly taken at Rs. 9,53,254 by the AO in the assessment order) and its bifurcation in the three years was also given. The AO referred this issue to the Departmental Valuation Officer, but surprisingly, the Valuation Officer took the years of construction in asst. yrs. 1988-89 and 1989-90 and estimated the cost at Rs. 13,82,000. While co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asst. yr. 1990-91 because the addition for earlier years was made in asst. yr. 1990-91 and it was deleted on the same ground. The learned CIT(A) has not gone beyond the issue involved in asst. yr. 1990-91 and any directions given thereto are, no doubt, binding on the AO. It is, therefore, held that the AO was perfectly justified in reopening the assessments under s. 148 in view of the direction of the learned CIT(A). The merits of the arguments of the learned counsel challenging the validity of the notices are, therefore, not discussed further. 15. Coming to the second issue determining the cost of construction of the house property in asst. yrs. 1988-89 and 1989-90, there are only two main arguments of the learned counsel, firstly that the UPPWD rates should be applied and secondly that self-supervision rebate of 10 per cent should be allowed against 7.5 per cent allowed by the AO The decision of the Hon'ble Allahabad High Court in the case of Raj Kumar has been perused. In fact, this decision is the result of reference application filed by the Department under s. 256 (2). The Hon'ble Allahabad High Court has confirmed the decision of the Hon'ble Tribunal and observed that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 1989-90 though the construction period was three years. The Valuation Officer has given no self-supervision rebate though such rebate is always allowed by the Valuation Officer in other cases. The Departmental Valuation Officer is, no doubt, bound to give the report on the basis of the CPWD but he should also compute the cost on the basis of the UPPWD rates and should give reasons as to which cost should be taken as correct state of affairs. 18. It is a common experience that the cost varies from one construction to another construction depending on the quality of material and the standard of fittings used. It is a common fact that the cost of construction of kitchen or a bathroom varies enormously depending on the type of fittings, their quality and the standard. One bathroom may cost a thousand while another bathroom may cost lakhs of Rupees. The valuation reports using standard rates are bound to vary unless the cost is computed on the basis of the different material and the items used in the construction of the property. Considering all these facts and the fact that a part of the cost has already been confirmed by the learned CIT(A) in asst. yr. 1990-91, considering that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his argument. He submitted that the unamended provisions of s. 147(a) cannot be applied as there was no omission or failure on the part of the assessee to disclose all the material facts in the return of income. It was his submission that, at most, provisions of s. 147(b) can be applicable but after the expiry of four years no action under this sub-section can also be taken. The assessee had disclosed all necessary materials in the return of income filed and it was for the AO to draw inference from the same. If the inference drawn is erroneous no action can be taken as it would amount to change of opinion. For this reliance was placed on the decision reported in Dy. CIT vs. Naginimara Veneer & Saw Mills (P) Ltd. (2000) 163 CTR (Gau) 572 : (2000) 241 ITR 636 (Gau), 156 Taxation 260 (Pat), 155 Taxation 179 (J&K), Arvind Mills Ltd. vs. Dy. CIT (1999) 157 CTR (Gau) 156 : (2000) 242 ITR 173 (Gau). It was also the argument of the counsel for the assessee that where the assessee had disclosed all material facts and full disclosure was made in the return of income regarding construction of property and its investment was supported by report of registered valuer, it cannot be said that full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses completed in self-supervision. In the case of Raj Kumar the Hon'ble Tribunal allowed a rebate of 10 per cent for self-supervision which was followed in the case of Ganga Ram Ram Kishan also by the Tribunal. Although the Valuation Officer did not allow any self-supervision rebate but the AO has allowed self-supervision rebate of 7.5 per cent only against the rate of 10 per cent allowable on the basis of Tribunal decision. 13. The learned Authorised Representative of the assessee submitted that in the asst. yr. 1989-90 the assessee filed return on 26th Oct., 1989 declaring income of Rs. 20,030 and the assessment was completed under s. 143(3) on 27th March, 1992 at an income of Rs. 69,430. 14. In the assessment made, addition of Rs. 49,600 was made on account of investment in the construction of house property from undisclosed sources. The assessee disclosed all the necessary facts about the investment in the house property supported by the report of the registered valuer and also report of the Departmental Valuer and while completing the assessment for the asst. yr. 1989-90 both the reports were before the AO. The assessee filed appeal against the order of the AO, against addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake action as per law in asst. yrs. 1988-89 and 1989-90 for the amount invested in the construction of the house property in those years. It was, therefore, his submission that the addition made by the AO by making an assessment under s. 147/143(3) of the Act for the asst. yrs. 1988-89 and 1989-90 were fully justified and, therefore, the order of the CIT(A) should be confirmed. 16. After hearing the submission made by both the parties and accordingly perusing the orders of the lower authorities and examining the materials available on record, we find from the order of the learned CIT(A) at p. 11 para 14 where he has observed to quote as under: "The learned CIT(A) further deleted the addition relevant to asst. yrs. 1988-89 and 1989-90 holding that this addition cannot be made in asst. yr. 1990-91 but can only be made in the relevant assessment years under s. 69 and observed that it was for the AO to take necessary remedial action to tax the same in the relevant assessment years." 17. From a reading of the above observation, we find that the deletion of the addition made by the AO in the asst. yr. 1990-91 was not made by the learned CIT(A) on a finding that the said addition must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of an expert and it is not a conclusive evidence of the actual amount invested by the assessee. For the above, reliance is being placed on the decision of the Guwahati High Court in the case of Bhola Nath Majumdar vs. ITO (1997) 137 CTR (Gau) 198 : (1996) 221 ITR 608 (Gau). Where two valuers will make valuation of the same property there is bound to occur a slight difference. Just because there is a slight difference it cannot be inferred that the assessee has made any undisclosed investment. In view of the reasons stated above, we are of the considered opinion that even on merits no addition can be sustained in the asst. yrs. 1988-89 and 1989-90. Therefore, the addition sustained by the learned CIT(A) requires to be deleted. Hence, we set aside the order of the AO and the CIT(A) and delete the addition of Rs. 1,39,219 and Rs. 1,26,299 made in the asst. yrs. 1988-89 and 1989-90, respectively. The grounds of appeal in both the years under consideration are allowed. 19. Ground No. 2.6 in both the years relates to charging of interest under s. 217 and s. 234B of the IT Act, 1961. The learned counsel for the assessee argued that no interest under s. 217 and s. 234B of the IT Act co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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