TaxTMI 
TaxTMI 
1988 (9) TMI 96
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.... the aforesaid four years as under: Accounting year Cots of Construction as per books 1979-80 Rs. 2,18,7738 1980-81 Rs. 4,51,268 1981-82 Rs. 7,94,612 1982-83 Rs. 2,80,342 4. In the assessment proceedings for asst. yr. 1984-85, the assessee submitted a valuation report from a registered valuer Shri S.B. Gupta, who reported the cost of construction of the entire building at Rs. 17,21,754 calculated as below: Items Plinth Area Rates in Amount . sq. m. Rs. /sqm. Rs. Renovation of shops 135.7 450 61,065 G.F. Main Hall 588.3 600 3,52,980 Reception 85.9 450 38,655 F.F. Main block 465.7 625 2,94,062 Passage 122.6 450 55,170 Reception 85.9 450 38,655 S.F. Main block 588.3 650 3,82,395 Reception 85.9 475 40,802 Th. F. Main block 376.4 675 2,54,070 Passage 211.9 500 1,05,900 Reception 85.9 500 42,950 Terrace floor 30.0 600 18,000 Lift lump sum . 30,000 Sundry items lump sum . 10,000 . . Total 17,21,754 The IAC(A) referred the matter to the valuation officer....
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....e an addition of Rs. 17,65,719. The assessee appealed to the CIT(A)and relied upon his books of accounts as well as the reports of two registered valuers filed by it. The learned CIT(A) upheld the determination of the cost of construction by the IAC(A)but finding that the building has been constructed in a period of 4 years, he held that the unexplained investment cannot be subjected to tax in a single assessment year. He therefore, distributed the unexplained investment as follows: 1981-82 2,20,000 1982-83 4,00,000 1983-84 8,00,000 1984-85 3,45,000 Thus the learned CIT(A) reduced the addition for the year under consideration to Rs. 3,45,000 and directed the ITO to take appropriate action for the other relevant years. Like the ITO the learned CIT(A) also did not deal with the assessee's plea that the correctness of the investment should be verified with reference to the books of accounts regularly kept by the assessee. The learned CIT(A) while dealing with the valuation report of Mrs. Shama Mehra observed that it was not sufficient to ascertain the actual facts on the basis of the cost of materials purchased in a particular year unless the assessee specif....
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....d accommodation. In respect of reception for the hotel and the nursing home being run in the building it was stated that they were situate in verandahs and therefore, for them a rate of Rs. 450 per sq. mt. was applied for the ground floor and the first floor, of Rs. 475 for the second floor and of Rs. 500 per sq. mt. for the third floor. He determined the value of the cost of construction at Rs. 7,21,754. He mentioned the following facts while considering the valuation: (i)The building work has been carried out directly whereby saving at least 10% by way of contractor's profits and supervision expenses. (ii)The height of floors is only 10 feet while the ground floor consists only of a single hall. (iii)Substantial quantities of bricks obtained from demolishing of the old existing structure at the site have been re-utilised in the brick masonry of the ground and the first floor laid in mud mortar. 7. The Valuation Officer Shri P.K. Kohli in his report has mentioned the year wise investments claimed by the assessee. According to him, the total covered area built was as under: Ground floor 848-55 sq., mts. First floor 806-15 sq, mts. Second floor 806-15 s....
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....calculations on the rate Schedule as on16th Oct., 1980of the PWD,Meerutand has upgraded the rates as under on account of cost increase: 1980-81 100 1981-82 115 1982-83 131 1983-84 143 and has added 18% separately for the cost of electrification, water supply and sanitation. She has also relied on the building cost index for Western Zone index which includesMeerut, for 1983-84 prepared by the Yojana Monitoring and Cost Management Division, State Planning Institute, UPLucknow. She has calculated the various quantities of work and determined the cost thereof by applying the rates as approved by the PWD,Meerut. A copy of the report alongwith all the calculations made by her and the booklet of the Yojana Monitoring and Cost Management Division and the Schedule of rates prescribed by the Superintending Engineer, PWD, Meerut are placed in the paper book from pages 23 to 90. The authorities below found no fault with the correctness of her calculations or of the rates applied by her which according to her were the rates specified by the PWD,Meerutand had been suitably upgraded according to cost index as stated above. The learned IAC(A) brushed aside this report by....
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....s as specified in the aforesaid documents of the local authorities, the cost of construction shown by the assessee appears to be quite reasonable. 9. The learned counsel for the assessee had also pointed out that the building has been subjected to house-tax for which the municipal authorities themselves estimated the cost of construction and according to them, it was Rs. 13,32,800. This was stated in the written submissions before the CIT(A) and has not been disputed. 10. For the above reasons we are of the opinion that the valuation as reported by Mrs. Shama Mehra and Shri S.B. Gupta, the registered valuers was nearer to the true cost of construction and the cost of construction as determined by the Dist. Valuation Officer was highly excessive and unacceptable. 11. As already stated the assessee had been contending before the authorities below that it has been maintaining regular books of accounts in which the investment has been duly recorded and, therefore, the correctness of the investment should be tested with reference to the books of accounts. In a letter dt, 23rd March, 1987 addressed to the IAC(A), the assessee specifically stated so in paragraph 3 and cited some ....
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....ng material as well as reasons for rejecting the report of a registered valuer. It is important to bear in mind that registered valuers are appointed by the Department and are equally qualified. Therefore, when there is a registered valuer's report the valuation officer's job is not merely to report the value as assessed by him but also to clarify where the registered valuer has erred. We have already stated that in this case the registered valuer's report had been made available to the valuation Officer and yet he chose not to comment on its accuracy. We, therefore, find no justification for the plea that the case should be sent back to the IAC(A) for examination of the accounts. If he chose not to do so he must have his own reasons for the same and a second innings would be thoroughly unjustified. We may mention that the learned counsel for the assessee had placed relianced on a Third Member order dt, 7th May, 1988 of this Tribunal in M/s. Harswarup Cold Storage & General Mills vs. ITO (ITA Nos. 2447 and 2448/Del/85) in which in a similar situation regarding investment in the construction of a cold storage building it was observed that if the account books have not been shown to ....