TMI Blog2018 (12) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... not permissible as per the provisions of the Act, then the order of the AO could have been reversed by giving a concluding finding on the issue. Pr. Commissioner has set aside the impugned order only for the purpose of referring the same to the DVO. Therefore, the Pr. CIT was also not sure about the correctness of the cost of construction or cost of fixed assets either shown in the project report or recorded in the books of account. Accordingly, in the facts and circumstances of the case when it is not a case of lack of enquiry but the AO has taken a view by accepting the cost of fixed assets as recorded in the books of account which were also supported by the valuation report, then the order of the AO cannot be held to be erroneous on the ground of lack of enquiry. - Decided in favour of assessee. - ITA No. 416/JP/2018 - - - Dated:- 20-12-2018 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri P.C. Parwal (CA) For The Revenue : Shri B.K. Gupta (CIT) ORDER PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the revision order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the valuation report with the bank is not based on the actual cost of construction but it was a projected or estimated cost of construction at the time of applying the term loan for construction of the building, therefore, the same cannot be considered as the actual value of cost of construction of the hotel building. The assessee also furnished the valuation report of the Registered Valuer wherein the valuation of the hotel building was valued at ₹ 1,57,76,400/- as against the actual cost of construction recorded in the books of account at ₹ 1,81,49,072/-. The assessee also contended that the AO passed the order after conducting an enquiry and verification of the relevant record on the issue of cost of construction. Therefore, once the A.O. was satisfied with the cost of construction as recorded in the books of account, then the valuation report with the bank for taking loan cannot be a basis for revision of the assessment order. The ld. Principal CIT did not accept the contention of the assessee and held that the order passed by the AO is erroneous and prejudicial to the interest of the revenue as the AO failed to conduct the proper enquiry on the valuation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her contended that the ld. Principal CIT has invoked the provisions of section 263 only to meet the objection of the audit party and, therefore, the audit note cannot be a basis of invoking the provisions of section 263. In support of his contention, he has relied upon the following decisions :- CIT vs. Sohana Woollen Mills (2007) 296 ITR 238 (P H) Sarlaben Bhansali Charities Trust vs. CIT (E) (2017) 51 CCH 464 (Kol. Trib.) Surinder Kumar Jain vs. ITO (2016) 48 CCH 158 (Del. Trib.) Dashmesh Motors Muktsar vs. PCIT (2016) 47 CCH 506 (Asr. Trib.) 4. On the other hand, the ld. CIT D/R has submitted that since there is a huge difference in the valuation as shown in the Project Report at the time of applying the loan from the bank and the valuation recorded in the books of account, therefore, it was incumbent upon the AO to conduct a proper enquiry on the issue which was not done by the AO. The AO has accepted the claim of the assessee despite the fact that a huge variance in the cost of construction of the building shown in the different reports including the valuation report, project report and value shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted with the Baroda Rajasthan Gramin Bank including application form and other record in the shape of Project Report for availing the term loan for construction of the hotel building. All these records were supplied by the Bank to the AO along with the sanction letter dated 26th July, 2011 whereby a loan of ₹ 2.00 crores was sanctioned by the bank for construction of the hotel building. Thus it is clear that at the time of applying for term loan, the assessee furnished the estimated and projected cost of construction of the hotel building for a total cost of ₹ 3.52 crores whereas the assessee has shown the fixed assets in the Balance Sheet as on 31.03.2013 at ₹ 2,69,26,206/-. This project report submitted with the bank was an estimated cost of the hotel building to be incurred in future and was not based on the valuation of any existing assets of the assessee. Therefore, the said project report cannot constitute actual cost of construction once the assessee has recorded the actual cost of construction in the books of accounts which was duly verified by the AO along with the report of the registered valuer. The AO has also examined all these documents includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e point that if the order passed by the AO is without any investigation or enquiry on an issue, then it would be erroneous so far as it is prejudicial to the interest of the revenue on the ground of lack of enquiry. In the case in hand, admittedly, it is not a complete lack of enquiry on the part of the AO rather the AO has conducted a detailed enquiry on this issue and called for all the relevant records from the bank for the purpose of examining the cost of construction of the hotel building. It may be a case of inadequate enquiry so far as not referring the matter to the DVO. However, it is not mandatory for the AO to refer the valuation to the DVO once the AO was satisfied with the cost of construction and cost of fixed assets as recorded in the books of account. Further, even if the Pr. Commissioner found that the decision of the AO accepting the cost of construction/cost of fixed assets is contrary to the facts or otherwise not permissible as per the provisions of the Act, then the order of the AO could have been reversed by giving a concluding finding on the issue. The Pr. Commissioner has set aside the impugned order only for the purpose of referring the same to the DVO. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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