TMI Blog2016 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... s rate difference and a further 10% deduction towards self supervision charges. Taking into consideration of the facts that the CPWD rates of New Delhi are always higher than the local rates we are of the opinion that the assessee is entitled for 15% deduction towards difference between CPWD rates and local rates and further 10% deduction towards self supervision charges. Therefore, we direct the A.O. to determine the cost of construction of building by taking average of the two plinth areas arrived by the DVO and claimed by the assessee and allow 15% & 10% respectively towards rate difference and self supervision charges. - Decided partly in favour of assessee - I.T.A.No.7/Vizag/2013 - - - Dated:- 22-1-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri C. Subrahmanyam, AR For The Respondent : Smt. D. Komali Krishna, DR ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the assessee is directed against the order of CIT(A), Visakhapatnam dated 30-11-2012 and it pertains to the A.Y. 2006-07. The assessee has raised the following grounds. 1. The order of the learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal hearing, the appellant prays for relief. 2. The Brief facts of the case, are that the assessee is an individual, did not filed the return for the assessment year 2006-07. The assessing officer, based on the information available on record, after duly recording the reasons, re-opened the assessment u/s 147 of the Income-Tax Act, 1961 (hereinafter called as the Act ) by issuing notice u/s 148 of the Act. In response to notice u/s 148 of the Act, the assessee has filed her return of income on 9.4.2010 declaring a total income of ₹ 93,690/-, besides agricultural income of ₹ 2,45,000/-, subsequently, the case was selected for scrutiny assessment and accordingly notice u/s 143 (2) of the Act dated 13.4.2010 was issued. During the course of assessment proceedings, the A.O. noticed that the assessee has constructed a residential house property at Visakhapatnam and also purchased 7 acres of agricultural land for a consideration of ₹ 7,28,800/-. Therefore, issued a show cause notice and asked her to explain the source for the purchase of agricultural land as well as investment in construction of house property. 3. In response to show cause notice, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that the A.O. was erred in considering the DVO s report, as the DVO has arrived at the cost of construction by applying the plinth area and cost index method, whereas the assessee has obtained a valuation report from the registered valuer, approved by the CBDT, has valued the building by applying detailed estimate method. The assessee further contended that the DVO has valued the building at ₹ 68.31 lakhs, whereas the registered valuer has arrived at a valuation of ₹ 29,80,582/-. The assessee further submitted that there is a big difference between plinth area estimated by the DVO and registered valuer. The assessee has constructed 432.52 sq.mtrs. only, which was further supported by revenue records of Municipal authorities, wherein the Municipal authorities have measured the building and as per the municipal authorities, the total built up area was 429.6 sq.mtrs., as against this, the DVO has taken 597.33 sq.mtrs., which is totally incorrect. The DVO has arrived at the plinth area purely on estimation basis without any basis, whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uer s report for ascertaining the cost of construction of the building. The A.R. further submitted that the DVO measured the constructed area at 597.33 sq.mtrs., as against the actual constructed area of 432.33 sq.mtrs which is totally incorrect. The house was measured by the municipal authorities, for municipal tax assessments and as per their records the constructed area was at 429.6 sq.mtrs. Therefore, there is a difference between plinth area adopted by DVO and the registered valuer. The A.R. submitted that the registered valuer report is more scientific, as he has adopted the detailed valuation method instead of plinth area rates and cost index method, therefore the registered valuer report should be accepted. The A.R. further submitted that when the registered valuer is able to arrive at the cost of construction by applying the detailed estimate method, then why the DVO has not considered the detailed valuation method which is more beneficial to the assessee. The DVO, while adopting the rates for arriving the cost of construction of the property did not mention as to how these rates were arrived at. In the absence of any basis, the assessee will be in disadvantageous position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the plinth area taken by the registered valuer was further supported by property assessment records of municipal authorities, wherein the plinth area was estimated at 429.6 sq.mtrs. 9. The A.O. made the additions solely on the basis of DVO report. The A.O. was of the opinion that the assessee has failed to produce bills vouchers in support of construction of building, therefore, relied upon the DVO s report. We have examined the DVO s report and registered valuer report submitted by the assessee which is available in paper book. On examination of the records, we find that the DVO has adopted plinth area rates and cost index method to arrive at the cost of construction. The DVO has given brief reasons for choosing a particular method of valuation and also given reasons for not choosing the detailed estimate method. According to the DVO, the plinth area rates and cost index method is more scientific method of valuation which is accepted by the CBDT. Though the method adopted by the DVO is one of the accepted methods of valuation, the reasons given for not choosing the detailed estimate method cannot be accepted. The DVO has given his own reasons for not choosing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als from dismantled building and also supervised construction on her own, therefore, the cost of construction would be always less. The assessee further contended that the plinth area rates fixed by Central Government are meant for Delhi and not for other places. Therefore, the rates cannot be applied for the buildings constructed at Visakhapatnam. In support of her contention relied upon two judgments of the coordinate bench of Hyderabad in Salma A. Mehdi (supra) Vinod Kumar Agarwal (supra). We find force in the arguments of the assessee, for the reason that the CPWD rates are prescribed for Central Government projects by taking into account various parameters such as place of construction, availability of materials and quality of construction. Though these rates are the basis for valuation of cost of construction, suitable margin should be allowed towards cost of materials and self supervision charges. In the present case on hand, the assessee claimed that she has used materials from dismantled building and also constructed the building on her self supervision. It is an undisputed fact that the DVO has applied the plinth area rate and cost index method, whereas the registered v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/-. 13. The assessee relied upon ITAT, Hyderabad bench decision in the case of ACIT Vs. Vinod Kumar Agarwal reported in 107 ITR 477, wherein the coordinate bench of this Tribunal, under similar circumstances held as under: 10. As to the argument of learned counsel for the assessee that it is more scientific to adopt the detai1 estimate method or detailed quantities method while determining the cost of construction, we are of the opinion that where two or more methods of valuation are available for determining the cost of construction and the statute does not provide for any particular method to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the District Valuation Officer to reject the registered valuers report without giving any reason and without making further investigations and when the registered valuers report being made with itemwise analysis, is against law. In this case also, the Valuation Officer has summarily rejected 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. 23.3 When there are more than one method to estimate the cost of construction, the method most favourable to the assessee should be followed by the Valuation Cell. The material that is sufficient for arriving at the cost of construction by a registered valuer by following a particular method, should be the material sufficient for arriving at the cost for the same method if adopted by the Valuation Cell. Private individuals constructing residential houses cannot be expected to have all the types of drawings, designs, etc., maintained by the Government contractors nor can they be expected to have stock book, log books, etc, Non-availability of these records shou ..... 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