TMI Blog2010 (7) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... ng at Khurram Nagar, Lucknow at ₹ 3,66,07,977 covering the asst. yrs. 1995-96, 1996-97 and 1997-98. The AO made reference to the DVO and the DVO vide his report dt. 28th Oct., 1997, estimated the value at ₹ 4,70,40,000. The DVO has given the estimate from December, 1994 to March, 1997. As for the year-wise break-up, the assessee had declared investment of ₹ 5,02,144 in the assessment year under consideration and whereas the DVO estimated the value at ₹ 6,45,238. The AO considered the difference in the cost as declared by the assessee and the cost as estimated by the DVO, which comes to ₹ 1,43,094 as unexplained investment and added the same to the total income of the assessee. 4. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT(A). 5. The learned CIT(A), after considering the submissions of the assessee, held as under : 4. I have given careful consideration to the matter. On the point of law Hon ble Rajasthan High Court in the case of CIT v. Pratapsingh Amrosingh Rajendra Singh [1993] 200 ITR 788 (Raj.) ruled as under : We have considered the matter. In respect of the investment which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 82 (Delhi)(Mag.). 5. In view of the above I fully agree with Shri S.K. Garg, FCA that the learned AO was not justified in seeking assistance of the DVO even when no defects were pointed out in the audited books of account of the appellant. Entire addition deserves to be struck off on this point of law alone. 6. Coming to the facts of the case I find that the appellant disclosed total cost of construction of the commercial building at Khurram Nagar, Lucknow at ₹ 3,71,58,385 (including cost of lift ₹ 5,50,408) covering the asst. yrs. 1995-96, 1996-97 and 1997-98 and the appellant s registered valuer determined total cost of construction at ₹ 3,69,15,900 but the DVO, Kanpur estimated the value of ₹ 4,70,40,000. It has been argued before me that if the objections of the appellant are accepted, there will be practically no addition. 7. It has been stated that the DVO has added 2 per cent for builder s efforts. In fact, the same should have been deducted because builder s endeavour is to keep the cost as low as possible. The DVO has also allowed 6.25 per cent for carrying out the work under self-supervision and self-procurement instead of 10 per cent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (48,00,000) ( iii )Deduction for self-supervision @ 10% (49,19,303) 3,73,84,049 10. Thus the cost of construction of the commercial building in several years works out to ₹ 3,73,84,049 as against value of ₹ 3,71,58,385 shown by the assessee as per audited books of account. The difference is within 10 per cent and hence can be ignored. 11. In view of the facts and circumstances of case and position of law as stated by me above, I am unable to sustain the addition of ₹ 1,43,094 made by the AO as unexplained investment in the building under s. 69 of the IT Act, 1961. The addition of ₹ 1,43,094 is, therefore, deleted. 6. We have heard the rival submissions and have also perused the materials available on record. Shri Vivek Mishra, learned CIT-Departmental Representative heavily relied on the order of the AO. On the other hand, Shri Amit Shukla, advocate, learned counsel for the assessee submitted that the assessee is a limited company which had come into existence with the main object of carrying on the business as builders. In pursuance of and for attainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any discrepancy on any count whatsoever either in the matter of recording various transactions/entries in the said books of account or otherwise were found or noted by the AO even after extensive scrutiny and enquiry under s. 142 (1) r/w s. 143(2) and the said books of account, details submitted by the assessee from time to time as also the audited balance sheet and P L a/c referred to above, were taken as the basis for completion of assessment also as may be clear from the computation of income appearing at the end of the assessment order dt. 27th March, 1998. Shri Amit Shukla, learned counsel for the assessee submitted that the statements giving list of purchases and supporting bills etc. were filed before the authorities below. Shri Amit Shukla, learned counsel for the assessee also relied on the following decisions : (1) CIT v. Meerut Cement Co. (P.) Ltd. [2006] 202 CTR (All.) 506; (2) K.K. Seshaiyer v. CIT [2001] 166 CTR (Mad.) 527 : (2000) 246 ITR 351 (Mad.); (3) CIT v. Hotel Joshi [1999] 157 CTR (Raj.) 369 : [2000] 242 ITR 478 (Raj.); (4) Order dt. 11th Nov., 2009 passed by the Tribunal, Lucknow Bench in the case of ITO vs. Syed Builders (P) Ltd. in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to ignore the report of the DVO and proceed with the assessment of actual amount spent duly supported by vouchers/bills as per audited books of account. It seems that the AO had not acceded to the request of the assessee. This letter is available at pp. 97 and 98 of the assessee s paper book. 6.5 In the instant case, the AO has made the addition merely on the basis of the valuation report by the DVO. The AO did not care to look into the books of account regularly maintained by the assessee, which were duly supported by bills and vouchers. There is no dispute that the books of account maintained by the assessee were duly audited. In fact, the AO has not pointed out any specific defect/discrepancy in the books of account regularly maintained by the assessee relating to the cost of construction of the building in question. In our considered view, the valuation report of DVO is only information and estimate of cost of construction carried on by the assessee and this report also suffers from material defects as pointed out by the learned CIT(A) in para 9 of the impugned order. The Revenue has also not pointed out a single instance to show that the assessee has actually incurred ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de these additions on the basis of report of the DVO, Kanpur, who estimated the cost of construction at ₹ 4,70,40,000, whereas the assessee has disclosed the investment at ₹ 3,66,07,977. 10. On appeal, the learned CIT(A) deleted the additions made for the asst. yrs. 1996-97 and 1997- 98 following his order dt. 15th Oct., 1999 passed in assessee s case for asst. yr. 1995-96. The relevant observations of the learned CIT(A) are as under : 3. I have given careful consideration to the matter. In the above written submissions Mr. Garg, Authorised Representative has quoted the observation made by me in my appellate order dt. 15th Oct., 1999 in Appeal No. l5/Circle-2(3)/LKO/1998-99 for asst. yr. 1995-96. On going through the appellate order I find that though I have decided the appeal for asst. yr. 1995-96, the observation made covers the entire valuation which spreads over to asst. yrs. 1996-97 and 1997-98. Therefore, I agree to the submission made by Mr. Garg, learned Authorised Representative. For the reasons given by me in the aforesaid appellate order for the asst. yr. 1995-96, the additions of ₹ 44,25,800 for asst. yr. 1996-97 and ₹ 58,63,126 for asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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