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TMI Blog2006 (11) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... business of construction of apartments and sale thereof. During the years under consideration as well as the intervening year relevant to asst. yr. 1997-98, shopping complex known as 'Shrishti Complex' was constructed by the assessee. During the course of assessment proceedings for asst. yr. 1997-98, the said complex constructed by the assessee was referred by the AO to the valuation cell for the purpose of valuation of cost of construction. The Valuation Officer vide his report dt.20th May, 2000determined the value of said construction at Rs. 32,52,000 as against Rs. 17,41,148 shown by the assessee. The yearwise break-up of the valuation so made by the DVO vis-a-vis the construction cost shown to have been incurred by the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for the relevant years, the AO initiated reassessment proceedings by issuing notices under s. 148 of the IT Act for the said years. In response to the said notices, a reply was filed by the assessee in writing stating therein that the returns filed by him originally might be treated as the returns filed in compliance to the notices issued under s. 148 of the Act. During the course of reassessment proceedings, the value of cost of construction determined by the Valuation Officer was strongly challenged by the assessee on the ground that the same was done by applying the CPWD rates, instead of State PWD rates. It was also pointed out by the assessee that the said valuation ought to have been done by applying itemwise rates, instead of pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is noteworthy that even this report was based on plinth area rates while the report submitted by the appellant before the AO was worked out on the basis of PWD rates. Reliance is placed on the judgment of Rajasthan High Court in the case of CIT vs. Hotel Joshi (1999) 157 CTR (Raj) 369 wherein it was held that item based PWD rates was a proper method of valuing the construction cost. Reliance is further placed on the appellate order of CIT(A)-I, Dehradun in the appellant's case for the asst. yr. 1997-98 wherein it was held that difference added towards the cost would be covered under s. 69C and since this construction was relating to business stock, appellant was entitled to get deduction under s. 37 and the net effect would be zero. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n higher side. Therefore, although the appellant is claiming deduction @ 31 per cent (6 per cent for self supervision, 10 per cent for bulk purchases and 15 per cent for UP PWD rates) I consider it just and fair to reduce the cumulative deductions to 28 per cent out of the valuation estimated by the DVO. The AO is directed to work out the difference after allowing deductions @ 28 per cent from the yearly investments as estimated by the DVO and compute the additions accordingly. Of course the appellant will be entitled to get consequential benefit in terms of enhancement of value of closing stock by equivalent amount upto asst. yr. 1998-99. Thus, the AO is directed to recompute the additions on account of unexplained expenditure in construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute that the assessee is in the business of construction and sale of flats. The investment said to have been made by the assessee was not recorded in the books of account as an investment made in construction of the flats were held as stock-in-trade of business by the assessee. Prior to the amendment to the provisions of s. 69C w.e.f. 1st April, 1999 by the Finance Act, 1998 such unexplained expenditure even if considered as income should be allowed to be claimed as a deduction as an expenditure by an assessee. It is only with effect from the asst. yr. 1999-2000 that a proviso was introduced to s. 69C whereby unexplained expenditure when deemed as an income cannot be allowed as an expenditure. The assessee had sold all the flats and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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