TMI Blog2001 (11) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... -10-1987. During the search operations under section 132 the ADI (Inv.) referred the residential building of the assessees at D.No. 3-6-396, Avantinagar, Hyderabad, to the valuation cell for estimating the cost of construction. 4. Shri Ashok Kumar Agarwal and Shri Vinod Kumar Agarwal are both brothers and have jointly purchased a site measuring 458 sq. yds. on 28-5-1983 for Rs.1,60,300 at Avantinagar, Hyderabad. They constructed a residential building jointly the cost of which was met equally between them. A major portion of the construction work was completed by October 1987. The two co-owners state that they have met the cost of construction by withdrawing the amounts from their accounts. As on 31-3-1989, both these assessees have shown the certain amounts as withdrawn by them from their business and invested in construction of the residential house. S/Shri Ashok Kumar contributed Rs.6,53,540 and Vinod Kumar, an amount of Rs.6,81,334, the total of which worked out to Rs.13,34,874. The Executive Engineer (hereinafter EE for short), Valuation Cell along with his team visited the appellant's building on the date of search itself i.e. 6-10-1987. Admittedly, the EE could not take me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E adopted plinth area rates by CPWD for Delhi constructions, after making suitable adjustments taking the cost index factor at 2.73 as the basis of the valuation and he added the value of additional items of fittings separately. He alleged that the valuation officer refused to furnish his working of the cost index and the rates adopted by him for various materials considered in working out the cost index. He submitted that the assessee was denied opportunity to rebut the cost index of 2.73 adopted by the valuation officer. (3) He argued that the Valuation Officer had not taken adequate measurements and has not inspected some portions of the building, which were locked during the conduct of search operations, as Shri Vinod Kumar Agarwal occupying these rooms on the second floor was out of station. He submitted that the value arrived at without inspecting these rooms were inaccurate and incomplete. He drew the attention of the Bench to the order of the Assessing Officer, at page 6 and argued that the comments therein demonstrate that the report of the Valuation Officer is incomplete and lacks authenticity. (4) He further argued that the method of valuation i.e. the plinth area ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... careful selection and hard bargain, was not considered. He submitted that the Assessing Officer should have independently applied his mind in view of the facts and circumstances of the case instead of just adopting the cost of construction as reported by the Valuation Officer. 6. On legal aspects, he argued that as the cost of construction declared by the assessee exceeded Rs.10 lakhs, the competent authority to value the building was the District Valuation Officer and not the EE, Valuation Cell. He argued that as the Valuation Officer was not the competent authority, the valuation report given, is not good evidence that can be relied upon by the revenue. For this proposition, he relied on the reported case of the jurisdictional High Court in Daulatram v. ITO [1990] 181 ITR 119, at page 135 (AP). 7. He further submitted that unaccounted investment in construction, if any, was assessable only under section 69B wherein in any financial year, the assessee makes investment and amount expended in making such investment exceeds the amount recorded in this behalf in the books of account and assessee offers no Explanation, or the Explanation offered is not in the opinion of the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1988-89, the personal drawings reflected in the books was Rs.1,97,000 as compared to lesser amounts of drawings in the books of account in the earlier years for the construction. He submitted that superior quality material was used for the construction and the Valuation Officer has rightly arrived at the value of Rs.26 lakhs. He relied heavily on the order of the Assessing Officer and submitted that the same should be sustained. On the appeals of the revenue, he vehemently argued that the ld. Commissioner (Appeals) was wrong in allowing 10 per cent deduction from the total cost of construction estimated by the Valuation Officer towards personal supervision and further direction of 15 per cent from the total value so assessed by the Valuation Officer towards difference in rates etc. 9. In reply to the arguments of the ld. DR and ld. counsel for the assessee submitted that at the time of inspection, the building was under occupation, which goes to prove that it is full and complete. He further drew the attention of the Bench to the valuer's report wherein it was mentioned that the material was available at site as on the date of inspection. As regards the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. This brings us to the argument of the assessee that the EEVC Unit II, Income-tax Department, Hyderabad is not competent to value the property in question as the value of the same exceeds Rs.10 lakhs and was required to be referred to the DVO, Hyderabad. In the last para, page 4 of the valuer's report, it is stated as follows: "It was pointed out at the time of inspection of the property on 6-10-1987 that the cost of construction will exceed Rs.10.00 lakhs and requires to be referred to the District Valuation Officer, Hyderabad. Now the cost has exceeded the powers vested with Valuation Officer. Accordingly, it may please be considered to refer the case to the competent authority." Admittedly, the Valuation Officer is not competent to value this property. In a case of the jurisdictional High Court in Daulatram's case at page 135, it is held as follows: "It is in the light of the aforesaid fresh material that the second point raised herein has to be answered. From the aforesaid rule, it is quite evident that the first "Valuation Officer" was not at all competent to value the capital asset, as the value of the capital asset admittedly was more than Rs.10 lakhs, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee to claim business loss first and current depreciation thereafter, if he so desired." Again at page 80, the Hon'ble Supreme Court has observed as under:-- "It is rightly said that privilege cannot be to a disadvantage and an option cannot become an obligation." It may also be imperative to refer one more judgment of the Hon'ble Supreme Court, in the case of CIT v. Indian Engg. Commercial Corpn. (P.) Ltd. [1993] 201 ITR 723, in which it was held as under, at page 782:-- "The employees concerned herein also happen to be directors. The provision in clause (c) of section 40 applies to directors among others. Of course, section 40(c) is applicable only to companies whereas section 40A(5) is applicable to employees, whether of companies or others. In the case of directors who are also employees, both the provisions will be attracted--the higher of the two ceilings has to be applied." The aforesaid judgment of the Hon'ble Apex Court clarifies that when there are two provisions under which an assessee could claim some benefit, it is for the assessee to choose one, which is more beneficial. The Hon'ble Bombay High Court in the case of Siemens India Ltd. v. K. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected the report of the registered valuer without giving itemwise comments/analysis and itemwise reasons or demonstrating in any manner, whatsoever that the valuation report of the Registered Valuer is clearly undisputably untenable. 11. We find that the Deptl. Valuation Officer has acted in a cavalier manner while inspecting the premises of the building in an hour, that too on the date of reference itself, which happened to be the date of search operations, during the course of search operations, without notice, transcending all principles of natural justice. Further, he declined to adopt the detailed quantities method of valuation, on the pretext that some material drawings were not furnished to him. The short-cut methods of evaluating cost of construction i.e. plinth area method is resorted to on the pretext of non-availability of some material, when a registered valuer could do the same valuation of the same building on the basis of the same material/drawings on a detailed valuation method. Private parties cannot be expected to maintain all the detailed drawings sought by the DVO. Law does not require the impossible to be done. The Deptl. Valuation Officer has also not stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be sustained and the balance is directed to be deleted." As seen from the DVO's report at page 1, it is observed as follows: "The building is mostly complete and is being used. A few doors, windows etc. have yet to be fixed. The material for these are also available at site." It is further observed that the period of construction, as stated by the DVO himself is July 1985 to October 1987. 13. Respectfully following the judgment of the Jaipur Bench of the Tribunal supra, we hold that the assessment of unaccounted investment is to be done with reference to the financial year and not the accounting year of the assessee. As no construction was done during the financial year 1989-90, there is no unaccounted investment under section 69B of the Income-tax Act in that year. 14. Coming to the Deptl. appeals, we find that the ld. CIT(A) has followed the judgment of the Tribunal in the case of Salma A. Mehdi [IT Appeal Nos. 697 and 698 (Hyd.) of 1995, 806 and 807 (Hyd.) of 1993 dated 20-6-1994] of this Bench in allowing 15 per cent deduction on account of variation of rates from place to place. There is no infirmity in the same. Similarly, there is no infirmity in the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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