Tribunal Upheld CIT(A)'s Decision on Construction Cost, Rejects Revenue Appeals

The Tribunal upheld the CIT(A)'s decision to reduce the estimated construction cost, dismissing the Revenue's appeals and the assessee's cross objections. The Assessing Officer's blind adoption of the DVO's valuation without rejecting the impounded books of accounts was deemed impermissible. The Tribunal emphasized the use of local PWD rates over CPWD rates for valuation in the specific location of Karur. The decision was in line with the principle that no addition can be made if books of accounts are not rejected, as established in the Sargam Cinema case.

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Issues involved: Appeal by Revenue against CIT(Appeals) order, cross objections by assessee, addition of unaccounted investment in building construction.

Appeal by Revenue:
The Revenue challenged the CIT(A)'s decision to delete the addition of unaccounted investment in building construction for the assessment years 2002-03, 2003-04, and 2004-05. The Assessing Officer had added the difference between the cost of construction admitted by the assessee and estimated by the DVO. The CIT(A) accepted the assessee's claim regarding cost index, deduction for conversion of rates, and self-supervision. The Revenue argued that CPWD rates should apply, even for a building in Karur. The DVO's report mentioned a specific construction period and cost index, but the books of accounts impounded during survey were not submitted to the DVO. The CIT(A) granted relief by using State PWD rates and providing deductions, which the Revenue contested.

Cross objections by assessee:
The authorized representative of the assessee withdrew the cross objections filed, leading to their dismissal.

Decision and Analysis:
The Tribunal noted discrepancies in the DVO's valuation due to the construction period and cost index used. It was observed that CPWD rates were not applicable to Karur, and local PWD rates should have been used. The CIT(A) correctly granted deductions and applied PWD rates. The Assessing Officer blindly adopted the DVO's valuation without rejecting the impounded books of accounts, which is impermissible. The Tribunal cited the Sargam Cinema case to support the position that no addition can be made if books of accounts are not rejected. As the assessee did not appeal for further reduction in estimated construction cost, the CIT(A)'s decision was upheld. Consequently, the Revenue's appeals were dismissed, and the cross objections were withdrawn.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to reduce the estimated construction cost, dismissing the Revenue's appeals and the assessee's cross objections.

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