1998 (7) TMI 6 - HC - Income Tax

Recorded construction cost in assessee's books vs higher departmental valuer estimate; declared cost accepted, tribunal's higher valuation set aside.

Whether the Tribunal could disregard the assessee's recorded cost of construction and substitute a higher estimate based solely on the Departmental ... Income From Other Sources - Cost Of Construction - Whether, the Tribunal was right to ignore the valuation of the house property submitted by the assessee at Rs. 2,16,586 and instead adopt a sum of Rs. 2,48,000 as the valuation of the property ? - HELD THAT:- Even while holding that the rates as set out in the agreement between the applicant and the contractor were acceptable and without recording any finding that the entries in the books of account maintained by the assessee were not genuine, the Tribunal has found that the Departmental valuer had claimed that he had visited the building and had looked into the vouchers. When the actual cost of construction was duly recorded by the assessee and that cost also was set out in the agreement with the contractor, specifying the rates, and which rates had been accepted by the Tribunal, and there was no finding that the building is larger than what the assessee has claimed it to be or had better quality of construction or fixtures than that which the assessee has recorded in his books, the opinion of the valuer cannot be straightaway substituted for the actual cost that was recorded in the assessee's books. The Tribunal has not found that the books maintained by the assessee are not credible. In fact the Tribunal has not expressed opinion on the correctness of the entries in the assessee's books. Though in the order initially made, the Tribunal found fault with the assessee for not having produced the agreement with the contractor, after the assessee pointed out that the agreement that had been entered into with the contractor had been produced before the Assessing Officer, the Tribunal made a further order refusing to reconsider its earlier order but at the same time asserting that the rates as set out in the agreement had been adopted by the Tribunal in determining the value of the building. In the circumstances, we must hold that the Tribunal was not right in not accepting the value of Rs. 2,16,586. The question is, therefore, answered in favour of the assessee and against the Revenue. The assessee will be entitled to Rs. 1,000 as costs. Issues involved: Assessment of house property valuation u/s Income-tax Act, 1961 for the assessment year 1978-79.Summary: The High Court of Madras delivered a judgment regarding the assessment of a two-storeyed bungalow's valuation for the assessment year 1978-79 under the Income-tax Act, 1961. The Tribunal had to decide whether to accept the valuation submitted by the assessee at Rs. 2,16,586 or adopt a different valuation of Rs. 2,48,000 for the property.The assessee, engaged in handloom sarees business in Madurai, constructed the bungalow at a cost of Rs. 2,16,586 excluding the land cost. The assessee's valuer estimated the construction cost at Rs. 1,88,095, while the contractor reported it as Rs. 1,84,000, the amount payable as per the agreement. The District Valuation Officer valued the structure at Rs. 2,63,000. The Appellate Assistant Commissioner reduced this valuation by Rs. 15,000 due to overestimation in some items. The Tribunal upheld this decision despite accepting the rates in the agreement between the assessee and the contractor.The Tribunal's decision was challenged, and the High Court held that the Tribunal erred in not accepting the assessee's recorded cost of Rs. 2,16,586. Consequently, the judgment favored the assessee, who was awarded costs of Rs. 1,000.In conclusion, the High Court ruled in favor of the assessee, emphasizing the importance of accepting the actual cost recorded in the books unless there are substantial reasons to deviate from it.