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Issues involved: Appeal by revenue challenging deletion of addition representing difference in cost of construction of a hotel building as per books of account and that estimated by the Assessing Officer (A.O.) based on the report of Departmental Valuation Officer (DVO).
Summary: The assessee owned a building in Suratgarh, deriving income from a hotel. Dispute arose regarding the cost of construction of the hotel building, with the assessee declaring it at Rs. 2,08,000 based on records. The A.O. called for a report from the DVO, who estimated the cost higher. The A.O. made an addition of Rs. 1,25,225 under section 69 of the Income Tax Act, 1961. The CIT (A) deleted the addition, citing unjustified rejection of the building construction account and preferred the Registered Valuer's estimate based on State PWD rates over the DVO's estimate based on CPWD rates. The Departmental Representative argued for the A.O.'s estimation based on expert opinion, while the assessee's counsel supported the CIT (A)'s decision, referencing Tribunal's consistent view on estimating construction costs in Rajasthan. The Tribunal upheld the CIT (A)'s decision, emphasizing the relevance and credibility of entries in regularly maintained business account books as per Section 34 of the Indian Evidence Act, 1872. The Tribunal found the rejection of the specific record of expenditure by the A.O. unjustified, especially when supported by independent evidence. It noted the difference in estimation basis between the DVO and Registered Valuer, highlighting the preference for State PWD rates in Rajasthan due to local factors affecting construction costs. The Tribunal dismissed both grounds of appeal, affirming the deletion of the addition. In conclusion, the Tribunal dismissed the appeal, upholding the CIT (A)'s decision regarding the cost of construction of the hotel building based on credible record keeping and estimation methods in Rajasthan.
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