Construction cost claim for second floor cannot be rejected without proper enquiry or valuation evidence.

A claim for proportionate cost of acquisition and construction for a second-floor property could not be rejected merely because direct purchase vouchers were unavailable. The property deed, site plan and photographs showed that only the ground floor and part of the first floor existed at purchase, while the second floor was constructed later and before sale. Supporting valuation evidence from a registered valuer and civil engineer was produced. As no independent enquiry was made and no reference was sent to the Valuation Officer, the disallowance lacked verification of the actual construction cost and attributable land cost. The addition was therefore deleted.

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Issues: Whether the addition made by disallowing the assessee's claim of proportionate cost of acquisition and cost of construction for the second floor property was justified.

Analysis: The property deed, site plan and photographs showed that only the ground floor and part of the first floor existed at the time of purchase and that the second floor came into existence after the purchase and before the sale. The assessee produced a registered valuer's report and civil engineer's certificate to support the construction cost. The Assessing Officer rejected the claim without making any independent enquiry and without referring the matter to the Valuation Officer. In the absence of verification of the actual cost of construction and proportionate land cost attributable to the second floor, the claim could not be disbelieved merely for want of direct purchase vouchers, especially when the existence of the newly constructed second floor was evidenced in the registered documents.

Conclusion: The rejection of the assessee's claim was unsustainable and the addition was deleted in favour of the assessee.

Ratio Decidendi: Where documentary records show that a constructed portion came into existence after purchase and the assessee supports the cost claim with valuation evidence, the revenue must make a proper enquiry or seek valuation assistance before rejecting the claim; a mere absence of purchase bills does not justify disallowance.

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