TMI Blog2012 (7) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... irdudh Rai, C.I.T. D.R. K.E.B.Rengarajan, Jr.Standing Counsel Assessee by : Shri G.Baskar, Advocate O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER: These are the appeals filed by the Assessee against the consolidated order of the Commissioner of Income Tax(Appeals)-II(i/c), Madurai dated 12.09.2011. 2. The Revenue has taken the following common grounds of appeal. 1. The order of the learned Commissioner of Income Tax(A) is contrary to law and facts of the case. 2. The learned Commissioner of Income Tax(A) has erred in holding that regular accounts is certainly more reliable than an estimate by an expert though the assessee has failed to produce supportive vouchers before the Assessing Officer for verification. 3. The Commissioner of Income Tax(Appeals) ought to have seen the reasons stated by the Assessing Officer that the assessee does not have proper accounts for construction, many items of expenses are not supported by bills or vouchers and no proper bills for purchase of materials. Further, the assessee has not adduced any credible evidence to prove that the cost of construction accounted for in the books of accounts is the real cost of construction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be taken into consideration for valuation of the building. Assessee questioned the rate of rebate at 6% allowed toward self supervision and direct purchase of building materials. The Commissioner of Income Tax(A) deleted the additions by observing as under:- 6. Only issue to be decided in all the appeals is the addition made towards proportionate difference in cost of construction between the value of Departmental Valuation Officer and Assessee s cost of construction during the relevant Assessment Years. As per books of accounts of assessee, total cost of construction of Hospital was Rs.1,06,70,600/- as on 31.03.2008. Assessing Officer had not pointed out any material defects in the accounts maintained by the appellant. 6.1. Departmental Valuation Officer (DVO) in his report dated 30.6.09 arrived at estimated cost of construction of Hospital at Rs.1,09,88,000/-. However, the estimated cost was revised to Rs.1,18,08,700/- vide modified report dated 18.08.09. The upward revision of estimated cost of construction in the modified report was said to be on account of typing error in the original report. 6.2. Assessee objected to the estimated cost of construction as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only 6% rebate towards self supervision and direct purchase of materials. Maximum rebate @ 7.5% on total cost of Rs.1,16,89,433/- (as per DVO s figure) works out to Rs.8,76,707/- as against DVO s rebate @ 6% of Rs.7,01,366/-. The difference worked out to Rs.1,75,341/- (Rs.8,76,707 Rs.7,01,366). The claim of assessee regarding cost of vetrified tiles seems to be correct. 6.6. DVO in his report in assessee s case had estimated charges for preparation of plans, structural drawings, approval from local bodies etc. @ 3% of total cost at Rs.2,33,780/- and considered architect fee at Rs.1,55,964/-. Valuation authorities themselves had added payment towards plans, structural drawings, approval from local bodies etc. @ 1% of total cost in certain other cases. Similarly, architect fee payment was added @ 1% of total cost in such cases. If 1% of total cost is considered for payment towards plans, structural drawings, approval from local bodies etc. and for architect fee each, then there would be substantial reduction in the estimate of DVO. If State PWD rates are adopted instead of Central PWD rates, then there would be further substantial reduction in the estimate of DVO. Ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property in question by applying CPWD rates instead of local PWD rates, which rates should have been applied, cost estimated being excessive, relief at 15% of the cost estimated by the valuation officer was to be given and since after that difference in cost worked out to just about 10%, no addition on account of unexplained investment was to be made. 7. Construction cost recorded in the books of accounts need not be disbelieved merely because the value of the constructed property was estimated at higher amount by the DVO. Evidence in the form of regular accounts is certainly more reliable then an estimate by an expert. Where books are maintained for cost of construction, the question of resort to expert valuation should also arise only when the books were found to be unreliable. In assessee s case, cost of construction is duly supported by proper vouchers/bills etc. In such circumstances, I am not inclined to agree with Assessing Officer s stand to make additions only on the basis of estimate obtained from DVO. Consequently additions made for various Assessment Years towards difference in cost of construction as unexplained investments, are directed to be deleted. 5. Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R (Trib) 193 (Chennai) where it was held that the PWD rates are applicable in the case of value of the property situated in a mofussil area. 15 per cent deduction apart from the deduction towards self-supervision should be given for matching the cost of construction estimated on the basis of CPWD rates with the PWD rates. He submitted that if 15% reduction is given in the cost of construction, then the cost of construction shown by its books of accounts compares favorably with that of the DVO s. 7. After considering the rival submissions and perusing the orders of the lower authorities and materials available on record, we find that in the instant case Assessing Officer observed that the books of accounts of the assessee for cost of construction of the building is not reliable on the grounds that many items of expenses are not supported by bills or vouchers and there are also no proper bills for purchase of materials. On the above facts, we agree with the Departmental Representative that books of accounts of the assessee in respect of cost of construction of building were rejected by the Assessing Officer. However, we find that such a rejection was not made after pointing out a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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