TMI Blog2021 (6) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant for the year under consideration. We are not inclined to interfere with the report of the registered valuer as regard various adjustments made by him to the plinth area rate where the ld AR has contended that the adjustments should be made as per report of the DVO for the reason that firstly, no such contentions have been raised before the lower authorities and the same have been raised for the first time before us, no reason has been specified as to why such contentions should be accepted at this stage and more importantly, as to how the adjustments so made is not in accordance with accepted valuation methodology as relevant in the facts of the present case. We find that registered valuer is an expert in the field of valuation as is the case with DVO and unless, there is some fundamental flaw in their valuation methodology adopted by them as we have noted above in terms of PWD rates vis- -vis CPWD rates, we need to be cautious enough in disturbing such valuation and that too, without confronting and providing an opportunity to them to rebut such alternate basis for adjustment. Thirdly, the assessee has itself appointed the registered valuer who has given an indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken the following grounds of appeal:- 1. The Ld. CIT(A) has erred on fact and in law in upholding the action of AO in making reference to DVO u/s 142A of the Act even when the assessee has filed complete details of the expenditure incurred on construction in which no defect was found nor the books of accounts were rejected. 2. The Ld. CIT(A) has erred on fact and in law in confirming the addition of ₹ 52,12,917/- on account of alleged undisclosed investment in construction of factory building on the basis of report of DVO without dealing with the various contentions of the assessee. 3. The Ld. CIT(A) has erred on fact and in law confirming the disallowance of ₹ 13,775/- u/s 14A read with Rule 8B. 2. During the course of hearing, the ld AR submitted that the assessee-company is engaged in manufacture of readymade garments and madeups. It started construction of 2nd 3rd floor of its factory building situated at SPL -115, Opp. RIICO Water Works Office, Bindayaka Industrial Area, Jaipur in AY 2012-13 which was completed in AY 2013-14. The construction costs incurred is tabulated as under:- 3. It was submitted that during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction by applying PWD rates at ₹ 1,10,53,509/-. However, it is explained that since assessee has maintained complete record of construction along with bills vouchers, the actual cost recorded in the books is correct and therefore, reference made u/s 142A is not valid. 6. It was further submitted that the AO held that U/s 142A(2) AO may make reference to DVO whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. Even there is a difference of ₹ 28,83,645/- in the cost of construction determined by the registered valuer and that recorded in the books of accounts. There is no provision in the Income Tax Act that cost of construction should be determined by applying Rajasthan PWD rates. No discrepancy in report and rates adopted by the DVO is brought on record. He therefore, made an addition u/s 69B for difference between the cost of construction determined by DVO and that recorded in books of ₹ 52,12,917 in AY 2013-14 and of ₹ 75,33,218/- in AY 2012-13 by passing an order u/s 154 of the Act against which appeal is pending before the Ld. CIT(A). 7. It was submitted that the before the Ld. CIT(A), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luer is also higher than the actual cost of construction incurred by the assessee as he has added higher percentage on account of water, sanitary and electrical installation and not allowed deduction on account of the joinery work vis- -vis the percentage added/allowed by DVO. If the additions/deductions as considered by the DVO is applied to the cost estimated by the Registered Valuer, the adjusted cost as per the Registered Valuer would be ₹ 89,39,855/- as against actual cost of ₹ 81,69,864/- incurred by the assessee and the same would be almost same as recorded in the books of accounts. This difference is less than 10% which is on account of estimation. The Hon ble Patna High Court in case of Bimla Singh vs. CIT 308 ITR 71 has held that the difference between the cost of construction declared by the assessee and that estimated by the valuer being less than 15%, the same is to be ignored. In any case, when the assessee has maintained day to day complete records of construction expenses and no discrepancy therein is pointed out by the DVO or the AO and no evidence of any payment outside books of accounts is found by the AO, addition solely on the basis of the repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 52,12,917/- arising out of the valuation as determined by the valuation officer should not be assessed as additional income of the assessee. In response, the A/R of the assessee stated. The contentions of the assessee are not acceptable. The assessee, relying upon the judgment of ITAT Ahmedabad (IT(SS)A No. 65/Ahd/2009 AY 2004005 ACIT vs Shri Jayantilal T. Jariwala, order dtd 28.10.2015) argued that addition on the basis of DVO cannot be made as no incriminating material was found. As per the provisions of section 142A(2) the AO may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. Therefore it is clear that even if AO is completely satisfied with the correctness of the accounts of the assessee he can refer the case to Valuation Officer for determining value of the property constructed. Without prejudice to the above, the claim of the assessee that the no incrementing material was found by AO is also not correct. In his reply, the assessee stated to have obtained valuation report from approved valuer M/s V.G. Architects 86 Engineers, who determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 52,12,917/-. Further assessee challenged the valuation report only on the ground of method of valuation which is not tenable as the method was followed as recommended by the Board Instruction. Assessee did not challenge the valuation on grounds of area, constructed area, rates applicable etc. Therefore explanation offered by the assessee is not satisfactory and the amount of ₹ 52,12,917/- is added to the total income of the assessee under section 69B. 13. Further, our reference was drawn to the findings of the ld. CIT(A) which read as under:- (ii) During the appellate proceedings, it was contended by the appellant that the AO has not recorded the findings that the investment shown in the books of accounts is under reported. This issue has been dealt by the AO in the assessment order itself. The AO has clearly mentioned that the appellant has declared value of investment at ₹ 81,69,864/- spread over two years, while the valuation report submitted by the appellant shows cost of construction at ₹ 1,10,53,509/-, thus, there is basis to doubt that the appellant has shown actual investment in factory building. The appellant is relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with accepted valuation methodology as relevant in the facts of the present case. Secondly, we find that registered valuer is an expert in the field of valuation as is the case with DVO and unless, there is some fundamental flaw in their valuation methodology adopted by them as we have noted above in terms of PWD rates vis- -vis CPWD rates, we need to be cautious enough in disturbing such valuation and that too, without confronting and providing an opportunity to them to rebut such alternate basis for adjustment. Thirdly, the assessee has itself appointed the registered valuer who has given an independent opinion on the valuation of the property and therefore, the assessee cannot plead now that he will follow the report of registered valuer in part and like to follow the report of the DVO in part and thus, seek to have best of both worlds which suits its interest. The report of the registered valuer has to be considered in its entirety and therefore, we direct the AO to follow the report of the registered valuer who has estimated the cost of construction by applying PWD rates at ₹ 1,10,53,509/-, and determine proportionate value of investment as relevant for the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies at ₹ 1,81,36,020/- is for business use and not an investment yielding exempt income. Thus, the investment which may yield exempt income is only of ₹ 93,51,300/- and not ₹ 2,15,15,941/- (correct amount is ₹ 2,74,87,320/-) as taken by the AO. Further, no nexus is established by the AO that borrowed funds has been utilised for making the investment. Hence, no disallowance u/s 14A r.w.r. 8D is required. 19. It was further submitted that the assessee holds only two investments. One is investment in equity shares of SBBJ for ₹ 51,300/- and second is investment in HDFC Tax Saver Mutual Fund. The dividend of ₹ 13,775/- is received on shares of SBBJ. The assessee has not incurred any expenditure for earning the exempt income as the dividend is directly credited to the bank account of the assessee. Hence, the disallowance of ₹ 13,775/- confirmed by Ld. CIT(A) is unjustified. In support, reliance was placed on the following cases:- Godrej Boyce Manufacturing Company Ltd. Vs. DCIT Anr. (2017) 394 ITR 449 (SC) Vijay Solvex Ltd. Vs. ACIT (DBITA No.325/2017 326/2017 order dt.09.01.2018) (Raj.) (HC)- CIT Vs. Taikisha Engi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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