Construction account evidence prevails over departmental valuation absent specific defects in books, defeating unexplained investment addition.

A regularly maintained construction account supported by vouchers and reflected in books of account could not be disregarded for alleged unexplained investment in hotel construction absent specific defects. The ITAT noted that the Assessing Officer did not point out any concrete defect in the records, so the Departmental Valuation Officer's estimate could not override the recorded expenditure. The assessee's registered valuer's estimate, based on State PWD rates and supported by the construction record, was accepted as more appropriate than the DVO's general CPWD-based estimate. On that basis, the addition under section 69 for unexplained construction investment was held unsustainable.

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Issues: (i) Whether the addition made under section 69 of the Income-tax Act, 1961 on account of alleged unexplained investment in construction of the hotel building was justified; (ii) Whether the assessee's construction account and the registered valuer's estimate could be rejected in favour of the Departmental Valuation Officer's estimate without pointing out specific defects.

Issue (i): Whether the addition made under section 69 of the Income-tax Act, 1961 on account of alleged unexplained investment in construction of the hotel building was justified.

Analysis: The assessee maintained a detailed day-to-day record of construction and renovation expenditure, supported by vouchers and reflected in regularly kept books of account. No specific defect in the construction account was pointed out by the Assessing Officer. In the absence of such defects, the estimated figure adopted on the basis of the DVO's report could not displace the recorded expenditure.

Conclusion: The addition under section 69 was not justified and was rightly deleted.

Issue (ii): Whether the assessee's construction account and the registered valuer's estimate could be rejected in favour of the Departmental Valuation Officer's estimate without pointing out specific defects.

Analysis: Entries in regularly kept books of account are relevant under section 34 of the Indian Evidence Act, 1872 and cannot be lightly ignored. The assessee's construction record was consistent with the books and was supported by a registered valuer's estimate based on State PWD rates, which was accepted as more appropriate for construction in Rajasthan than the general CPWD rates used by the DVO. The departmental estimate therefore did not warrant preference over the assessee's evidence.

Conclusion: The construction account and the registered valuer's estimate were correctly accepted, and the DVO's estimate was not entitled to override them.

Final Conclusion: The addition for alleged unexplained construction investment was unsustainable, and the Revenue's challenge failed.

Ratio Decidendi: A regularly maintained construction account supported by vouchers and corroborative valuation evidence cannot be rejected or displaced by a departmental estimate in the absence of specific defects in the books.

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