TMI Blog1995 (1) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Singh in 1976 but ultimately purchased the same on 27th April, 1981, for Rs. 2,31,000. During the period between 1976 and 1982 the assessee incurred an expenditure of Rs. 1,07,725 on the alteration and modification of the said hotel building. In 1982 the assessee started new construction on the vacant land and completed the same in April, 1986. The investment made by the assessee in various years came to the following: Asst. yr. Amount . Rs. 1985-86 10,93,612 1986-87 8,56,772 1987-88 1,13,943 . 20,64,327 The previous year adopted by the assessee was April ending. 3. It appears that in the wealth-tax cases of the partners o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mean of the construction period as June, 1984, the DVO determined the cost of construction at Rs. 22,03,000 for the period relevant to asst. yrs. 1984-85 to 1987-88. The period of construction had been taken from 1st May, 1982 to 30th April, 1986. In conformity with the report of DVO dt. 23rd Feb., 1989, given for wealth-tax purposes, the Assessing Officer determined the cost of construction at Rs. 24,92,714 in the following manner: . Rs. Value of old building portion as on 1st Oct., 1976 2,87,094 Value of new building portion as on (sic) 22,05,620 . 24,92,714 The difference between the cost determined by the DVO at Rs. 24,92,714 and as declared by the assessee at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 1987-88 were not at all justified particularly when the assessee had maintained a complete record of the expenditure on investment made in the two years and the Assessing Officer had found no defects in such account. The learned CIT(A) accordingly deleted the additions in question for both the years. 7. The learned Departmental Representative vehemently urged that since the report of the DVO was based on scientific data as clarified in the CBDT instructions cited supra, the Assessing Officer was justified in determining the cost of construction of the hotel building in the two years under consideration. The learned counsel for the assessee, however, supported the order under appeal and further submitted that since the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction of the hotel building as maintained by the assessee. The Assessing Officer was, therefore, not justified in calling for a report in the matter from the DVO. 9. That apart, the DVO admittedly prepared the report for the purposes of wealth-tax proceedings. For imposing wealth-tax the "valuation" of the immovable property as on the relevant valuation date is relevant and material. In proceedings under the Act the valuation of the property is not relevant if liability for earning income is to be fastened. It is well known that the concepts of "cost", "value" and "price" are not akin in their meanings and widely differ from one another in their areas of operation and application. The cost of construction of a building is not the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Rs. 1986-87 4,108 1,500 1987-88 13,871 5,000 1988-89 30,091 10,000 12. The learned CIT(A) has thought it proper to restrict the above disallowances at 1/6th of the total expenses claimed. 13. At the hearing before us the learned counsel for the assessee was fair enough to concede that the disallowance may be revised to 1/5th instead of 1/6th as made by the learned CIT(A). We direct accordingly. (4) Subsidy (common to all the years): 14. The Assessing Officer reduced the cost of the assets by the amounts of subsidy received by the assessee for asst. yrs. 1987-88 and 1988-89 for the purpose of allowing depreciation. But in appeal, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged unexplained investment in the construction of the hotel building and since the said addition was deleted by him, the penalty levied did not survive. He, therefore, cancelled the penalty. 19. Heard the parties. 20. Since the deletion of the addition which had turned a case of negative income to that of positive income has been upheld by us, there is no ground to restore the penalty. This appeal has, therefore, to be dismissed. (2) Penalty under s. 273 (ITA No. 646/Jp/91; Asst. yr. 1986- 87): 21. The addition of Rs. 2,87,531 which made the basis for the Assessing Officer to levy the penalty of Rs. 16,120 under s. 273 in this case has finally disappeared in view of our order in assessment appeal for this year. The assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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