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2021 (6) TMI 543 - AT - Income TaxUndisclosed investment in construction of factory building on the basis of report of DVO - Adoption of PWD rates as against CPWD rates - HELD THAT:- We agree with the contention advanced by the ld AR that where the factory building is situated within the jurisdiction of state PWD, State PWD rates should be applied for estimation of cost of construction of the factory building and not CPWD rates. The same is the consistent position taken by this Bench and other Jaipur Benches following the decision of Hon'ble Supreme Court in the case of CIT Vs. Sunita Mansingha [2017 (4) TMI 303 - SUPREME COURT]. The assessee during the course of assessment proceedings has raised similar objections regarding adoption of CPWD rates and submitted a report of registered valuer M/s V.G. Architects and Engineers dated 28.11.2015 who have estimated the cost of construction by applying PWD rates at ₹ 1,10,53,509/- as against ₹ 2,09,16,010/- determined by the DVO.Therefore, we direct the AO to adopt the value of ₹ 1,10,53,509/- as determined by the registered valuer as relevant for the year under consideration. We are not inclined to interfere with the report of the registered valuer as regard various adjustments made by him to the plinth area rate where the ld AR has contended that the adjustments should be made as per report of the DVO for the reason that firstly, no such contentions have been raised before the lower authorities and the same have been raised for the first time before us, no reason has been specified as to why such contentions should be accepted at this stage and more importantly, as to how the adjustments so made is not in accordance with accepted valuation methodology as relevant in the facts of the present case. We find that registered valuer is an expert in the field of valuation as is the case with DVO and unless, there is some fundamental flaw in their valuation methodology adopted by them as we have noted above in terms of PWD rates vis-à-vis CPWD rates, we need to be cautious enough in disturbing such valuation and that too, without confronting and providing an opportunity to them to rebut such alternate basis for adjustment. Thirdly, the assessee has itself appointed the registered valuer who has given an independent opinion on the valuation of the property and therefore, the assessee cannot plead now that he will follow the report of registered valuer in part and like to follow the report of the DVO in part and thus, seek to have best of both worlds which suits its interest. The report of the registered valuer has to be considered in its entirety and therefore, we direct the AO to follow the report of the registered valuer who has estimated the cost of construction by applying PWD rates at ₹ 1,10,53,509/-, and determine proportionate value of investment as relevant for the year under consideration as the construction has been spread over two years and to this limited extent, the matter is remanded to the file of AO. In the result, the ground of appeal is partly allowed. Disallowance u/s 14A read with Rule 8B - HELD THAT:- We find that it is a case of mixed funds where the assessee’s own funds by way of cash profits are sufficient to make the investment. Besides, the assessee holds shares in SBBJ and the investment in SBBJ shares have been made in earlier years and not in the year under consideration. During the year under consideration, the assessee has earned dividend income of ₹ 13,775/- which has been claimed exempt and at the same time, it has been contended that no expenditure has been incurred in relation to earning of such dividend income and thus, no disallowance is called for. Where there is no actual expenditure incurred by the assessee by way of interest and other expenses during the year under consideration, no disallowance could be made under section 14A - even the findings of the ld CIT(A) restricting the disallowance to the extent of dividend income is not justified and in any case, disallowance cannot swallow the entire dividend income even as per the decisions cited by the ld CIT(A) in his order. In view of the same, addition so sustained is hereby directed to be deleted and the ground of appeal is allowed.
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