TMI Blog2001 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... to the valuation cell of the Department. The DVO made inspection of the building on 14th Nov., 1992. According to the DVO the cost of construction upto 31st March, 1991, was Rs. 10,69,027. The AO wanted the assessee to show-cause why this figure of cost of construction over the different years should not be accepted in preference to the figures shown by the assessee and the difference between the two figures should, therefore, not be treated as the income of the assessee from undisclosed sources. The assessee submitted her explanation stating that the valuation adopted by the DVO was very high and that the rates considered by the DVO for the ground floor and the first floor were exorbitant. The AO states in the assessment order for asst. yr. 1990-91 completed on 24th March, 1993, that besides submitting a general explanation like that, the assessee was not in a position to adduce any evidences contradicting the DVO's report. The AO discussed in this connection that the DVO had mentioned clearly that the building under consideration was a well-furnished one and fitted with costly materials. The AO furthermore mentioned the discussions made by the DVO to the effects that the doors an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O clearly mentioned that the 3rd story (meaning the second floor) under construction, had not been considered. 4. The AO thereafter, makes certain observations about the rates accepted by the registered valuer and considers those rates to be too low. As regards the question of allowance on account of personal supervision, although the assessee claimed such allowed at 12.5 per cent of the total estimate, the AO has been of the view that the DVO has rightly allowed deduction of 10 per cent on this account, taking into consideration the fact that the assessee being a lady of a respectable family could not have undertaken the strenuous construction work by herself. The AO also mentioned certain other details of the construction work like the wood work having been done by using teak wood and the electrical and other installations etc. Ultimately, the AO held that the valuation report as submitted by the assessee, is not to be taken into consideration and on the other hand, the cost of construction as estimated by the DVO was required to be taken into account. The differences between the figures of cost of construction as per the DVO and as shown by the assessee for the different year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n why and on what basis the DVO came to the conclusion that the construction work upto the first floor had been completed by 31st March, 1991, and had proceeded to evaluate the cost of construction covering a period upto that date alone. In this connection, the learned counsel for the assessee has placed on our record, a copy of the remand report furnished by the AO to the CIT, dt. 21st Feb., 1997, in which he stated as below: "However, I am to further submit that the investment made in the aforesaid assessment years (upto asst. yr. 1991-92) is not conclusive. The assessee has carried on further construction of house property in the subsequent assessment years also. Further investment in the house construction has not been taken into account as there has been no scrutiny assessment in the case of the assessee relating to the asst. yr. 1992-93 onwards." The learned counsel for the assessee has also placed on our record certain papers evidencing carrying on of the construction work even during the financial year 1992-93, like copy of an agreement dt. 22nd May, 1992, between the assessee and Shri Prasanta Kumar Rana, a labour contractor and also copies of certain cash memos evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion work in respect of the ground and the first floor by considering the cost as on 1st Oct., 1976, at the figure of Rs. 2,48,496. In doing so, he had allowed deduction towards self-supervision at the rate of 10 per cent. Thereafter, the DVO considered the figures of year-wise investments declared by the assessee for the four years only, viz financial years 1987-88 upto 1990-91 corresponding to asst. yrs. 1988-89 upto 1991-92, respectively, at the aggregate amount of Rs. 3,59,436. The DVO also considered the average cost indexes for these four years and with the help of such indices reduced the year-wise figures of investment as declared by the assessee to 1976 base. The total amount as per 1976 base thus comes out to Rs. 83,563 as against Rs. 3,59,436 as declared by the assessee to be the cost of construction for the four years. The DVO also seems to have calculated the percentage progress of the construction work during the four years on the basis of the proportionate costs shown by the assessee. In this matter, he considered 100 per cent progress upto financial year 1990-91. By applying the weighted cost index at 430.035 arrived at by considering the gross year-wise investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation has been considered by him to be 31st March, 1991, and that he did not specify the quantum of works carried out after March, 1991. 10. We find that the DVO proceeded to consider the cost of construction for the building comprising of the ground and the first floor to be confined to the accounting years covered by 1988-89 upto 1991-92 only (in respect of which assessment years, reference had been made to him for valuation) without taking into consideration the fact that the construction work in respect of even this portion of the building was carried on much late thereafter, and that the assessee herself had declared as having spent the amounts of Rs. 2,60,000 and Rs. 1,50,000 during the financial years 1991-92 and 1992-93 respectively. We fail to understand on what basis the DVO inspecting the property on 14th Nov., 1992, was able to come to the conclusion that the construction work had been completed by 31st March, 1991, when he himself observed that the construction work was still in progress. The fact that the construction work was continued even after the period corresponding to a asst. yr. 1991-92 also stands acknowledged by the AO in his remand report submitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion the truncated figures of cost of construction as shown by the assessee herself over the four years and arriving at the percentage progress during the different years on that basis. Although in the reassessment order for asst. yr. 1988-89, the AO seems to have made some efforts to discredit the original valuation report of the registered valuer dt. 12th Oct., 1991, the DVO however, does not seem to have refuted that valuation report and has proceeded to make his own valuation in his own way. Ultimately, the AO has also stuck to the valuation as made by the DVO. Again, the final valuation/reconciliation statement of the registered valuer dt. 27th March, 1993, estimates the cost of construction at Rs. 7,14,769. On the other hand, the assessee herself has declared and also explained the total cost of construction upto March, 1993 (for the ground and the first floor) at Rs. 7,69,436, which is much higher than the abovementioned figure. We are, therefore, of the opinion that the additions made by considering the valuation report of the DVO to be having the ultimate sanctity, are not warranted. We, therefore, delete the additions for all the four years under consideration and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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