TMI Blog2004 (1) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... and the cost of construction adopted by the Assessing Officer on the basis of DVO s report. The assessee had contended that the addition made by the Assessing Officer is not sustainable in the eyes of law and in support thereof the assessee has taken various pleas as raised in the grounds of appeal. 4. Briefly stated the material facts as borne out from the orders of the authorities below are as under:- For assessment year 1991-92 the original assessment was completed under section 143(3) on 13-1-1993, for assessment year 1992-93 the return was processed under section 143(1)(a ) on 12-7-1993 determining nil income. For assessment year 1993-94 the return was processed under section 143(1)(a) on 21-3-1994 determining at nil income. For assessment year 1994-95 the return was also processed under section 143(1)(a) on 29-8-1996 determining at nil income and for assessment year 1995-96 the assessment was originally completed under section 143(3) on 17-3-1998 determining at a loss figure of ₹ 6,67,080, as returned by the assessee. Subsequently the proceedings under section 147 were initiated by the Assessing Officer and accordingly notices under section 148 were served on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined by the DVO could not be taken and the difference could not be added as undisclosed income within the meaning of section 69 of the Act. The assessee submitted the explanation along with details and raised several objections in relation to the report sent by the DVO. The issues raised by the assessee before the Assessing Officer can be summarised as under:- (1) that the assessee has been maintaining accounts for the construction; (2) that the DVO did not consider the details submitted by the assessee in his report; (3) that the difference to the Valuation Officer was made during the course of proceedings and prior to receipt the valuation report the assessment was originally completed and as such the reference had become invalid. Several decisions were also cited by the assessee in support of its contentions. The Assessing Officer after considering the explanation of the assessee added the difference between the cost shown by the assessee and determined by the DVO by observing that entire details and evidences including the vouchers etc. were duly considered in the report and it is only after considering them the valuation was made and the valuation also has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) Modern Construction Development Project Promotion v. Asstt. CIT [1997] 63 ITD 235(ITAT, Kol.) Besides the ld. counsel for the assessee has also relied on some other dcisions rendered in the same line and holding the same principles as laid down in the aforesaid decisions. 8. On this aspect as to whether any addition can be made on account of difference in the cost of construction unless and until the books of account regularly maintained by the assessee are found defective, we have also heard the ld. D.R., who supported the orders of the authorities below to contend that all the details submitted by the assessee were verified by the Valuation Officer before determining the cost of construction by him. 9. We have heard both the parties and have gone through the orders of the authorities below. We have carefully perused the materials on record. We have deliberated upon the judicial decisions cited at the Bar. It is an admitted position that no addition on account of difference in the cost of construction shown by the assessee and the cost determined by the DVO were made in the course of original assessment proceedings. The assessee is engaged in the business of construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option but to rely on the valuation report which is a document prepared by an expert and is admissible, but there must be a finding by the ITO that the books of account maintained by the assessee are defective or are not reliable. 9.2 In the case of Hotel Joshi (supra) it was held by the Hon ble Rajasthan High Court that in a case where the value of the asset was claimed by the assessee on the basis of regular books of account maintained for the purpose of construction of the asset and not on the basis of the valuation of the registered valuer, it was not open to the Assessing Officer to make a reference to the District Valuation Officer unless the Assessing Officer formed an opinion that having regard to the nature of the asset and other relevant circumstances it was necessary to do so. If an account of the expenses of the construction of the asset are maintained regularly and supported by vouchers there should be no reason not to accept the same for determining the cost of construction of the asset. The Assessing Officer was required to assess the valuation of the asset on appreciation of material before him. 9.3 The jurisdictional High Court in the case of Smt. Uma Devi Jh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout pointing out any defect in the books of account maintained by the assessee. The observation of the Assessing Officer that the vouchers were not produced by the assessee before the Valuation Cell could not support the case of the revenue to suggest reference to the Valuation Officer, inasmuch as, invalid reference could not be validated by subsequent observation of the Assessing Officer that the books maintained by the assessee could not be relied upon for want of proper vouchers. It was, therefore, held therein that the Assessing Officer was not justified in making addition merely on the basis of the valuation report of DVO. 9.5 Further the Hon ble Madras High Court in the case of K.K. Seshaiyer v. CIT [2000] 246 ITR 351, has held that when the actual cost of construction is duly recorded in the books of account the creditability of which is not doubted, the opinion of the DVO cannot straightway be substituted for the actual cost recorded in the assessee s books. 9.6 Similar proposition has also been laid down by the Agra Bench of ITAT in the case of Hind Lamps Ltd. v. Dy. CIT [2001] 119 Taxman 107, ITAT, Bench of Delhi in the case of Naresh Behal v. ITO [1992] 41 ITD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment shown by the assessee and the report of the DVO for a number of reasons as the valuation report is prepared on the basis of norms prescribed by CPWD for the construction of building and the difference may be with regard to the quality and nature of the materials, etc. The Assessing Officer could have examined the matter in detail with regard to the books of account in order to say that the books are not reliable. It is the Assessing Officer who is required to determine the cost of construction on appreciation of material before him and to examine the matter in detail with regard to the books of account produced by the assessee. It is apparent from the facts already stated hereinabove that the assessee had maintained regular books of account and that no defects were found by the Assessing Officer either in the books of account maintained by the assessee and/or the vouchers, documents produced by it in support of the construction cost incurred, and as such, the addition on account of construction cost cannot be made on the basis of the report of the DVO without pointing out any defects or irregularities in the books. In this view of the matter, the Assessing Officer was not jus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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