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TMI Blog2002 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the assessment year 1987-88. The assessee had declared the cost of construction in the books of account maintained by the firm. While framing the assessment order for the assessment year 1986-87, the Assessing Officer noted that the assessee had understated the cost of construction and, therefore, the matter was referred for determination of the cost of construction to the Departmental Valuation Officer (DVO) under section 131(1)(d) of the Act. The Departmental Valuation Officer submitted his report dated March 28, 1988, after inspection of the property and after taking into consideration the relevant material and on that basis, the Assessing Officer reopened the assessment under section 147(b) of the Income-tax Act, 1961, for the assessment years 1985-86 and 198788. The Assessing Officer estimated the cost of construction at Rs. 1,531 per sq. mt. against the cost declared by the assessee at Rs. 1,117 per sq.mt. The Assessing Officer made addition of the difference of the cost and was of the view that the assessee must have earned profit on unexplained income and, therefore, he added 10 per cent. of the unexplained income as profit. Similarly Mahavir Builders also construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees before estimating the cost of construction. The Tribunal accordingly restored the matters back to the Assessing Officer for determining the actual cost of construction. It was further held by the Tribunal that the Assessing Officer would also give the assessee or his registered valuer an opportunity to cross-examine the Departmental Valuation Officer in respect of the various aspects for determining the cost of construction made in the valuation reports. The Tribunal was of the view that this exercise was also necessary to appreciate the contention of the assessees that the quantity of steel consumed by the assessees was in conformity with the standard prescribed as per IS code or any other authentic book. The Tribunal also set aside the order of the Commissioner of Income-tax (Appeals) enhancing the profit margin from 10 per cent. to 15 per cent. as declared by the assessee and the Assessing Officer was directed to make the de novo assessments. Pursuant to the aforesaid order of the Tribunal, the matters went back to the Assessing Officer. The Assessing Officer was directed to allow an opportunity to the assessees to cross-examine the Departmental Valuation Officer. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total cost of construction of Tirupati Builders works out to Rs. 15,53,929 and that of Mahavir Builders works out to Rs. 15,53,994." In short as against the cost of construction, disclosed by the assessees, namely, Tirupati Builders and Mahavir Builders at Rs. 1,170 per sq. mt. and at Rs. 1,058 per sq. mt. respectively (against which the Departmental Valuation Officer estimated the cost of construction at Rs. 1,531 per sq. mt. and at Rs. 1,530 per sq. mt. respectively), the Commissioner of Income-tax (Appeals) estimated the cost of construction at Rs. 1,300 per sq. mt. In this manner, the Commissioner of Income-tax (Appeals) upheld a part of the addition and deleted the rest of it. The above order dated January 21, 1999, the Commissioner of Income-tax (Appeals) gave rise to one set of appeals by Tirupati Builders and another set of appeals by Mahavir Builders and two sets of cross appeals by the Assessing Officer. Thus, in all twelve appeals came to be filed before the Appellate Tribunal at Rajkot. The Tribunal referred to the chequered history of the litigation and took a serious view of the conduct on the part of the Assessing Officer in not permitting the assessee to cross-ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat "a difference up to 15 per cent. may be attributable to bona fide error of estimation made by two different experts". The Tribunal further observed that the Assessing Officer had not dealt with the construction activities with a realistic approach. Against the aforesaid common judgment and order dated November 29, 2001, the Revenue has come in appeal by filing these twelve separate appeals. Mr. B.B. Naik, learned standing counsel appearing for the Revenue, has urged that the Tribunal had erred in passing the first order directing the Assessing Officer to permit the assessee to cross-examine the Departmental Valuation Officer who is a quasi-judicial authority exercising the power under section 131 of the Act. The Departmental Valuation Officer gives an opportunity to the assessee to lead evidence on the question of determination of cost of construction and, therefore, the assessee has opportunity before the Departmental Valuation Officer to meet the material which may ultimately be held against the assessee and it is therefore strenuously urged by Mr. Naik that the Tribunal had committed a grave error of law in issuing the previous direction to the Assessing Officer to permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer had also referred to the other aspects like cost of construction of the buildings in the same locality, and quality of construction. This would, however, warrant exercise of reappreciation of evidence in this regard. But a tax appeal under section 260A is to be entertained only on a substantial question of law. As regards the prayer made by Mr. Naik for remanding the matters to the Assessing Officer for reestimating the cost of construction after giving an opportunity of hearing to the assessees, we are not inclined to accept the said request for two reasons. In the first place the assessment years for our consideration are 1985-86, 1986-87 and 1987-88, and secondly the tax effect/penalties demanded from the respondent-assessees are as under: Year Mahavir Builders (Rs.) Tirupati Builders (Rs.) 1985-86 25,345 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d standing counsel appearing for the Revenue that ordinarily the Departmental Valuation Officer appointed under section 131 of the Act himself gives opportunity of hearing to the assessee in such matters and, therefore, the question of issuing any direction to the Assessing Officer to permit the assessee to cross-examine the Departmental Valuation Officer should not ordinarily arise. Mr. Naik has expressed the apprehension that such directions may again be issued by the Tribunal to the Assessing Officer to permit the assessees to cross-examine the Departmental Valuation Officer or any other quasi-judicial authority. We are sure that the Tribunal will keep in mind that when a quasi-judicial authority like the Departmental Valuation Officer gives an opportunity of hearing to the assessee, the Tribunal would not issue a direction for permitting the assessee to cross-examine the Departmental Valuation Officer or any other quasi-judicial authority but in the peculiar facts and circumstances of the case indicated hereinabove in para. 13 we are not inclined to interfere with the impugned judgment and order dated November 29, 2001, of the Tribunal. Subject to the aforesaid observations m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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