Unexplained construction investment cannot rest on valuation alone when regular books are produced and not rejected.

An addition for unexplained investment in construction cannot be sustained merely on a departmental valuation report where the assessee has produced regular books of account and those books have not been rejected. The assessment record showed that the cash book and ledger were maintained and test-checked, and the estimated valuation could not override the actual cost recorded in the books. The appellate finding that bills and vouchers were not maintained was held perverse on the record. The addition was therefore deleted.

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Issues: Whether the addition made towards unexplained investment in construction could be sustained solely on the basis of a departmental valuation report when the assessee's books of account were not rejected.

Analysis: The assessee had maintained regular books of account, including cash book and ledger, which were produced before the assessing authority and test-checked. The assessing authority did not reject those books, but made the addition by relying on the valuation report, which only estimated the cost of construction. In the absence of rejection of the books of account, the estimated valuation could not displace the actual cost recorded by the assessee. The finding of the first appellate authority that bills and vouchers were not maintained was held to be perverse in view of the assessment record.

Conclusion: The addition based on the departmental valuation report was deleted and the assessee succeeded on the issue.

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