TMI Blog1978 (8) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... of J.K. Industries Ltd. 6. The assessee has declared the cost of construction as per balance sheet is as under:- Asstt. Year: Amount. 1972-73 59,359 1973-74 55,113 1974-75 24,707 . 1,39,179 The cost of the land was Rs. 11,000. Thus the declared cost of construction was Rs. 1, 28,179. 7. The assessee obtained report of approved Valuer. The approved Valuer estimated the cost of construction according to the PWD schedule of 1968. He has added 50per cent on account of price rise. The copy of the report of the valuer is on the paper book. According, to the report, the cost of construction was to the extent of Rs. 1,17,000. The learned ITO also recorded the statement of Shri Vijay Gupta, Approved Valuer. In his statement also, he stated that the report filed by him is correct. The copy of the statement of the valuer is on the paper book. The assessee also filed a copy of order of the assessing authority under s. 10 of the Rajasthan Lands and Buildings Act, 1964. It is at pages 52, 53 and 54 of the paper book. The said order was passed on 15th June, 1976. According to this order, the market val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of construction at Rs. 1,88,727. According to the assessee, the evidence on record showed that cost of construction showed by the assessee at Rs. 1,29.000 was quite reasonable. This cost did not include the cost of the land. The learned ITO mainly relied on the report of the Inspector. Against the report of the Inspector, the assessee filed detailed objections and the same were not properly considered by the learned AAC. The assessee produced overwhelming evidence showing that cost of construction of the property was not more than Rs. 1,39,000. From the Valuer's report and his statement, it was clear that cost of construction was not more than Rs.1,70,000. The statement of Shri Bhanwarlal, the father of the assessee also goes to show that cost of the construction of the building was not more than Rs. 1,29,000. The learned ITO obtained report of 3 Inspectors. According to their report, the cost of construction of the building including the value of the land was Rs. 1.76,901. It means the cost of the construction of the building was taken by them at Rs. 1,62,901. Later on the learned ITO deputed another Inspector for preparing a second report. The Inspector proposed to take th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as through M/s. Kewal Chand Bhanwar Lal. On 17th Oct. 1971, money was received and was deposited with M/s. Kewal Chand Bhanwarlal. Thus the ITO was wrong in holding that investment to the extent of Rs. 57,737 was only explained. The learned ITO was also wrong to come to the conclusion that construction was completed upto June 1972. 16. The learned AAC after considering the evidence on record and contentions of the assessee came to the conclusion that construction of the property would fall in the asst. yr. 1972-73, 1973-74 and 1974-75. According to the learned AAC the cost of construction of the property up to 30th June, 1973 was about Rs. 1,34,210. After it, some more construction and finishing work continued upto 31st day of March, 1974. Thus total expenditure came to Rs. 1,39,180. According to the learned AAC upto 30th June, 1973, the total investment was shown by the assessee at Rs. 1,35,974. According to the learned AAC, the assessee was able to explain the entire investment. Thus the learned AAC deleted the addition of Rs. 1,20,000. 17. Against the order of the learned AAC, the Department is in appeal before the Tribunal. The assessee filed the Cross Objection. 18. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of construction at Rs. 1,39,180 upto 31st day of March, 1974. The cost of construction was not less than Rs. 1,88,725. The report of the Inspector relied by the learned ITO was quite detailed. The Inspector gave reasons in support of his estimate. From the report of the Inspector, it is clear that value of the land and cost of construction of the property were to the extent of Rs. 1,99,225. It includes the value of land at Rs. 11,000. The statement of Shri Bhanwarlal under whose supervision. The construction was made goes to show that construction was completed upto June, 1972 and according to his statement, it is not proved that by that time, the cost of construction was Rs. 1,40,000. According to the learned Departmental Representative, the statement of Shri. Bhanwarlal is contradictory and as such does not aspire any confidence. Even the report of the valuer shows that cost of construction was Rs. 1,17,000. The assessee had shown cost construction of the property at Rs. 1,40,000. So the valuer's report is not reliable. The other evidence produced by the assessee was also not reliable. Thus it was contended that finding of the learned AAC is incorrect. 24. The learned Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 of the paper book. The assessee filed other objections before the learned ITO against the Inspector's report. They are available at page 60 to 64 of the paper book. Inter alia, it was stated in the objection that the construction was carried on under the supervision of Shri Bhanwarlal, father of the assessee. It is common ground that Bhanwarlal was the main person under whose supervision, the construction was done. It is general practice in the IT Department that a deduction of about 10 per cent for supervision is given in estimating the cost of construction. This point was specially raised before the learned ITO, but he did not consider the aspect of the case. In our opinion, the learned ITO was wrong in not considering this contention of the assessee. The learned ITO worked out cost of construction at Rs. 1,38,000. If deduction of 10 per cent of the total cost is allowed, the cost of construction would be reduced by about Rs. 18,000. So the cost of construction would come to Rs. 1,70,000. The Inspector added a sum of Rs. 22,000 on adhoc basic. The PWD Rules do not provide for such additions. So this adhoc addition also should not be considered. If this addition is excluded, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of the valuer and his statements carefully. From his statement and the report, it is clear that his report is based on proper material. This report mainly agrees that the cost of construction was worked out by the assessing authority under s. 10 of the Rajasthan Lands and Buildings Act, 1964. The learned ACC after considering all the evidence came to the conclusion that the cost of construction upto 30th June, 1973 was Rs. 1,34,210 and upto 31st day of March, 1974 was Rs. 1,39,180. The said estimate is quite reasonable and is in accordance with the material on record. 29. Looking to the aforesaid facts, entire evidence on record and the order of the learned AAC, we are of the view that finding of the learned AAC on this point is quite correct. 30. Other contention of the learned Departments Representative was that the learned AAC was wrong in holding that construction continued upto 31st day of March, 1974. According to the learned Departmental Representative, the construction was completed by 30th June, 1972. This is also clear from the statement of Shri Bhanwarlal. The learned AAC was wrong in interpreting the evidence which is on record. Thus it was contended that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er work continued upto June, 1973. The learned ITO rejected the evidence of these persons on the ground that these persons were tuitored. The learned ITO gave no reasons whatsoever for rejecting their evidence. We have gone through their evidence carefully. Their statements are quite consistent. They are also independent persons. Thus we are of the view that the learned ITO was not correct, in rejecting their testimony. Apart from it, there are statements of Shri Bal Kishan, Koona Ram and Shambhulal. There is also aa certificate of Shri Randhir Singh of 11th April, 1976. In the statement Shri Bal Krishan stated that he worked in the said house from 11th Jan., 1972 to June, 1973. From his statement, it is clear that he made electric fitting in the said house for which payment was made to him. Similarly, the statement of Shri Koona Ram shows that he did finishing work in the said house from Dec. 1972 to March, 1973. The certificate of Shri Shambhu Lal dated 5th April, 1976 is also material. He was posted as Supdt. Circuit House at Jodhpur. His family remained there till June, 1973. According to this certificate the construction of the said house was completed in June, 1973. Similarly ..... 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