Local PWD rates and self-supervision deduction govern construction cost valuation; marginal differences may not justify addition.

For estimating construction cost in income-tax valuation, local State PWD rates should be preferred over CPWD rates where they better reflect local market conditions, and a reasonable deduction must be allowed for self-supervision. Applying those adjustments may bring the declared and estimated cost within the accepted tolerance range, in which case no addition survives for alleged unexplained investment in house construction.

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Issues: Whether, for estimating the cost of construction of the house property, the valuation should be based on State PWD rates instead of CPWD rates, what deduction should be allowed for self-supervision, and whether any addition survived when the revised estimate fell within the tolerance range.

Analysis: The Tribunal noted that the lower authorities had adopted CPWD rates and allowed only 7.5% deduction for self-supervision. It held that local State PWD rates better reflect market conditions for valuation and that, in the facts of the case, a 15% deduction for self-supervision was justified. By applying the higher local-rate adjustment together with the enhanced self-supervision deduction, the difference between the declared cost and the estimated cost became marginal and fell within the accepted tolerance band.

Conclusion: No addition was sustainable on account of cost of construction, and the assessee succeeded on the valuation issue while the Revenue's challenge failed.

Final Conclusion: The estimated investment in construction was brought within the permissible tolerance margin after adopting local valuation rates and proper deductions, so the addition was deleted in full.

Ratio Decidendi: For property valuation in income-tax proceedings, local State PWD rates should be preferred over CPWD rates where they better reflect local market conditions, and a reasonable deduction for self-supervision must be allowed before determining any unexplained investment.

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