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2016 (3) TMI 86 - ITAT VISAKHAPATNAM

2016 (3) TMI 86 - ITAT VISAKHAPATNAM - TMI - Reference to DVO - Additions towards difference between the cost of construction estimated by the DVO and cost of construction declared by the assessee - Held that:- 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 valuer has .....

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. Therefore, considering the facts and circumstances of the case, we are of the opinion that the assessee is eligible for 15% deduction towards 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 toward .....

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espondent : 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 of Income Tax (Appeals) , Visakhapatnam, is contrary to Law and facts of the case. 2. The Commissioner of Income Tax (Appeals), Visakhapatnam, is not justified in coming to the conclusio .....

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de by the District Valuation Officer, was quite reasonable, without properly apprec iat ing the objec t ions rai sed by the appel lant and al so the s ubmi s s ions made agains t the ex c es s area t aken by the Di s t r i c t Valuation Officer than the area constructed by the appellant and also the other defects pointed out by the appellant in the report of the District Valuation Officer. As the estimated cost of construction made by the District Valuation Officer was abnormally high, the objec .....

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aken by the District Valuation Officer. Hence, the appellant prays for relief accordingly. 5. The Ld. Commissioner of Income Tax (Appeals), Visakhapatnam, simply stated in his order that the decisions relied upon by the appellant are not supporting the appellant's case, without distinguishing the facts of the appellant's case with that of the facts of those case relied upon by the appellant. Hence, the decision taken by the learned Commissioner of Income Tax (Appeals) on this issue was n .....

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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 assesse .....

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cultural land measuring 6.45 acres at Polavaram village, West Godavari District and 11 acres at Gangoulu village of W.G. Dist. She has also stated that the residential site at Visakhapatnam was gifted by her mother. She further explained that the source for the investment for purchase of agricultural land was made out of agricultural income of ₹ 2,45,000/- and the balance amount was borrowed from friends and relatives. As regards the construction of house property, she claimed that the res .....

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n report, wherein quantified the investments in residential house at ₹ 68,30,949/- which was spread from April, 2005 to March, 2008. The D.V.O., based on the amount of investment made by the assessee for various years, estimated the cost of construction for the assessment year under consideration at ₹ 51,17,042/-. The Assessing Officer, considering the DVO s report, an opportunity has been accorded to the assessee vide his office letter dated 15.10.2010 along with copy of the valuati .....

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rty at ₹ 51,17,042/- and the difference of ₹ 30,04,605/- between the value arrived at by the DVO of ₹ 51,17,042/- and the amount disclosed by the assessee of ₹ 21,12,437/- has been treated as unexplained investment and brought to tax u/s 69 of the Act. 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 .....

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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 registered valuer has va .....

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t of Hon ble ITAT Hyderabad Bench in the case of Vinod Kumar Agarwal Vs. ACIT reported in 107 ITR 477. 5. During the course of appellate proceedings, the assessee contended that the DVO has adopted more constructed area, than what was actually constructed and therefore, the DVO s measurements were incorrect. Therefore, the CIT(A) directed the A.O. to obtain the comments of the DVO on the issues pointed out by the assessee. The Executive Engineer, Valuation Cell, I.T. Department in his letter fur .....

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by the DVO. Therefore, requested to consider the registered valuer report for ascertaining the cost of construction. However, the CIT(A) after considering the assessee explanations, remand report of the AO, DVO report and registered valuer report, dismissed the claim of the assessee and held that the valuation report of the DVO is fair and reasonable and therefore the AO has rightly adopted the same. However, considering the appellant s claim regarding selfsupervision and use of materials from d .....

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ucted 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 .....

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bsence of any basis, the assessee will be in disadvantageous position to understand the values of the DVO. 7. The A.R. further submitted that the assessee has furnished all the details relevant for valuation of building including detailed plans and estimates which were available before the DVO at the time of valuation of building. However, in spite of furnishing the required details, the DVO has chosen to adopt the plinth area rates and cost index method to ascertain the cost of construction whi .....

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the prevailing market rates at the time of construction of building. Therefore, the DVO should have allowed the required margin towards difference between CPWD rate and also towards self-supervision charges. However, the DVO has not allowed the required margin towards self-supervision charges and towards rate difference between CPWD and local rates. In support of his contention, the A.R. of the assessee relied upon the decision of coordinate bench of ITAT, Hyderabad bench in the case of Salma A .....

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ost index method. The DVO, in the process has adopted higher plinth area of 597.33 sq.mtrs, as against the actual constructed area of 432.6 sq.mtrs., which is totally incorrect. The assessee further contended that, she had obtained registered valuer report and as per registered valuer report the plinth area of the building was estimated at 432.6 Sq. Mtrs and to support her arguments filed valuation report issued by the registered valuer. The assessee further contended that the plinth area taken .....

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ble 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 acc .....

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ns given by the DVO for the reason that the assessee has got valued the building from the registered valuer approved by the CBDT. On perusal of the registered valuer report, we find that it is detailed one and valued by applying the detailed estimate method. Therefore, we fail to understand as to why the DVO is unable to estimate the cost of construction on the basis of detailed estimate method, when the registered valuer approved by CBDT with same information could estimate the cost of construc .....

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r, we are of the opinion that there is a big difference between plinth area arrived at by both the valuers. Though both the valuation reports are from competent authority and both methods chosen by both the valuers are accepted method of valuation, either side has failed to substantiate the respective reports with any valid reasons. Therefore, we are of the opinion that to meet the ends of justice, we deem it appropriate to take the average of two plinth areas arrived by the valuers. Accordingly .....

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ges. The assessee s contention is that she has used materials 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 .....

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e 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 valuer has adopted detailed estimation method with plinth area rate prevailing in the market at that point of time. The DVO did not appear to have taken into consideration the local rates that actually existed during the period of construc .....

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, it is pertinent to mention the case law relied upon by the assessee. The assessee relied upon ITAT, Hyderabad bench decision in the case of Salma A. Mehdi (supra). The coordinate bench of this Tribunal, under similar circumstances held the issue as under: T he DVO e s t ima t ed the c o s t o f c ons t ru c t i o n fol lowing the pl inth area method of valuation. He applied the basic plinth area rates approved by the CEDT. . He appl ied the pl inth area of New Delhi as f ixed in 1976 and appro .....

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ion in the cost of basic construction. Taking into consideration the fact that the CPWD rates of New Delhi are always higher than the local rates, we fell that it would 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 authori .....

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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 couns .....

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nion of the assessee that a particular method is more scientific then only that method should be adopted It is for the assessee to choose one of the methods. Our view finds support from a number of cases of Supreme Court and the High Courts, which though not directly on the point, lay down the propositions that the benefit of doubt and choice should be given to the assessee and that in such situations the more beneficial option, should b& made available to the assessee. in this regard we ref .....

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in the current year, the written down value would remain the same for the following year. Prior to the amendment of section 32 business loss could be carried forward for eight years? There was no time limit for the claiming of depreciation. This is not so now. Earlier, therefore, it was always for the assessee to claim business loss first and current depreciation thereafter if he so desired." 16. By the same principles, we hold that the method of valuation to be adopted for evaluating the c .....

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d valuers report containing the estimation of cost of construction by adopting detailed quantities method was available to the DVO. The Jaipur Bench of the Tribunal in Smt. Rekha Devi v. ACIT [1994] 49 TTJ 530, had held that it is not right 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 Val .....

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