TMI Blog2016 (1) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... s not correct in considering the CPWD rates, when the state PWD rate is available for ascertaining the value of building. As the assessee is entitled for 15% deduction towards rate variation between CPWD and State PWD and a further 10% deduction towards self-supervision charges from the value arrived by the DVO applying the CPWD rates. The CIT(A), after considering the facts that the assesse has maintained books of accounts and bills for construction, scaled down the addition to ₹ 7,25,000/-. We do not find any error or infirmity in the order of the CIT(A). Therefore, we inclined to upheld the order of the CIT(A) and reject the ground raised by the revenue. - Decided in favour of assessee. - ITA No. 49/Vizag/2013 - - - Dated:- 4-12-2015 - V. Durga Rao, JM And G. Manjunatha, AM For the Appellant : Shri M Narayana Rao, DR For the Respondent : Shri D L Narasimha Rao, AR ORDER Per G. Manjunatha, Accountant Member This appeal filed by the revenue is directed against the order of the CIT(A), Vijayawada dated 15.11.2012 for the assessment year 2006- 07. The revenue has raised the following grounds: 1. The Id. CIT(A) erred both in law and in facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2006-07, declaring a total income of ₹ 52,210/- besides agricultural income of ₹ 1,30,000/-. The Assessing Officer, completed the assessment u/s 143(3) of the Income-tax Act, 1961 (hereinafter called as 'the Act') on 31.12.2008, by making an addition of ₹ 29,78,850/- towards unexplained investment in cost of construction of commercial complex at Mudinepalle village of Krishna district. On appeal, the Ld. CIT(A), allowed the appeal by directing the A.O. to recalculate the difference in cost of construction by following the ratio of decision of jurisdictional ITAT in the case of Salma A. Mehdi, wherein the Tribunal ordered deduction of 15% towards difference between CPWD and State PWD rates and also 10% deduction towards self-supervision charges. On further appeal by the department, the Hon'ble ITAT, set aside the order of the CIT(A) and restored the matter back to the file of the A.O., with a direction to re-examine the cost of construction with the books of accounts maintained by the assessee and to frame the assessment in accordance with law. 3. Consequent to the order of the ITAT, The Assessing Officer, issued a letter requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also not allowed any margin for self supervision charges. The assessee submitted that the assessee has constructed the building on its own with due care, therefore, the cost of the construction is naturally very less, when compared to the CPWD rates fixed for the purpose of construction of buildings and other works spread across the country. Therefore, requested to delete the additions made by the A.O.; 5. The D.R. submitted that the A.O. has considered the valuation report given by the DVO and made the additions. Therefore, the CIT(A) was not correct in directing the A.O. to make an adhoc addition of ₹ 7.25 lakhs without any basis. The D.R. further submitted that the DVO has allowed 6% discount towards self-supervision charges, while valuing the property for the difference in rates between CPWD State PWD rates. The D.R. further submitted that since, the DVO was already allowed 6% rebate towards self supervision and other charges, the A.O. has rightly taken the DVO value for the purpose of determining the difference between cost of construction reported by the assessee and the cost of construction valued by the DVO, therefore, requested to uphold the order of the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by taking into account the CPWD rates. The assessee further contended that he himself constructed the building and the quality of materials used for construction is also very low, whereby he had saved good amount of money, therefore, the value adopted by the assessee should be taken into account, instead of DVO report. As stated by the AO, there is a discrepancy in the books of accounts maintained by the assessee. Therefore, the A.O. referred the matter to the valuation officer for ascertaining the correct value of the cost of construction. The DVO has valued the building by taking into account CPWD rates and determined the value at ₹ 72.99 lakhs. We have examined the DVO report and find that the DVO has allowed 6% towards self supervision charges. The assessee's contention is that at least 15% towards rate difference and 10% towards self supervision charges should have been allowed by the A.O. while determining the value of the building. We find force in the arguments of the assesse that, CPWD rates are prescribed for construction of buildings for the Central Government projects by taking in to account the standard quality of construction with high quality materials. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of savings by personal supervision appears to be quite reasonable. If we deduct 10% towards personal supervision and 15% on account of the higher rate adopted by the valuation officer, the estimate of cost of construction determined by the valuation officer comes down to ₹ 5,16,7501/-. Even if we take average of cost of construction of ₹ 68900 determined by the DVO on the basis of plinth area method works out to ₹ 5,22,000/-. In that view of the matter, the cost of construction of ₹ 5,16,750/- arrived at by us after giving 15% reduction for higher CPWD rates and 10% deduction for personal supervision, appears to be quite reasonable. It can be rounded to ₹ 5,16,000/-. 10. In yet another case, the ITAT Hyderabad bench in the case of G. Pulla Reddy Vs. JCIT, while considering the similar issue of applicability of State PWD rates and deduction for self supervision charges, has observed as under: Plinth area rate as prescribed by CBDT of curse contain provisions for cost indexing and adjustment of location variation to arrive at cost of construction of a particular location. But the facts remains that such valuation rests CPWD rates fixed on uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be just and reasonable to give an overall reduction of 15% on the cost of construction estimated by the DVO in order to compensate the higher estimate on account of the adoption of higher rate of CPWD of New Delhi. Further, the valuation officer did not allow any deduction towards personal supervision. The first appellate authority allowed 10% reduction on account of savings by personal supervision appears to be quite reasonable. If we deduct 10% towards personal supervision and 15% on account of the higher rate adopted by the valuation officer, the estimate of cost of construction determined by the valuation officer comes down to ₹ 5,16,7501/-. Even if we take average of cost of construction of ₹ 68900 determined by the DVO on the basis of plinth area method works out to ₹ 5,22,000/-. In that view of the matter, the cost of construction of ₹ 5,16,750/- arrived at by us after giving 15% reduction for higher CPWD rates and 10% deduction for personal supervision, appears to be quite reasonable. It can be rounded to ₹ 5,16,000/-. 24. We are in respectful agreement with the aforesaid order of the Tribunal and hold that CIT(A) was justified in uph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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