TaxTMI 
TaxTMI 
2012 (7) TMI 687
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....es not have proper accounts for construction, many items of expenses are not supported by bills or vouchers and no proper bills for purchase of materials. Further, the assessee has not adduced any credible evidence to prove that the cost of construction accounted for in the books of accounts is the real cost of construction. 4. For these and such other grounds that may be adduced at the time of hearing, it is prayed that the order of the Commissioner of Income Tax(Appeals) may be set aside to that extent and that the order of Assessing Officer may be restored. 3. The only issue involved in the appeal is that the learned Commissioner of Income Tax(A) erred in deleting the addition made towards proportionate difference in cost of construction between the value of Departmental Valuation Officer and Assessee's cost of construction during the relevant Assessment Years. 3.1. The brief acts of the case are that the assessee is a Doctor by profession. The assessee constructed a nursing home namely 'Peace Health Centre" and a medical store at Tirunelveli . The cost of construction of the building was during the period 2001-02 to 2007-08. The cost of construction as at 31.03.2007 as....
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....of estimated cost of construction in the modified report was said to be on account of typing error in the original report. 6.2. Assessee objected to the estimated cost of construction as per the valuation report during the course of assessment proceedings for the following reasons: a) Application of CPWD plinth area rates instead of State PWD rates. b) Rebate of self supervision and direct purchase was allowed only at 6% at total cost. c) The cost of vetrified flooring tiles was actually Rs.825/- per sq. mt (supported by purchase bills) instead of Rs.1,140/- per.sq.mt. adopted by DVO. d) DVO estimated charges for preparation of plans/drawings/plan approval etc at 3% of total cost whereas amount actually incurred was much less. 6.3. Overruling these objections, Assessing Officer considered the difference in the construction of hospital on pro-rata basis to arrive at assessable income for relevant Assessment Years. In respect of income tax valuation, the valuer is a mere expert to guide Assessing Officer. When the objections were raised by assessee, Assessing Officer should have referred the matter to DVO for his comments. Assessing Officer had not done so. ....
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....e each, then there would be substantial reduction in the estimate of DVO. If State PWD rates are adopted instead of Central PWD rates, then there would be further substantial reduction in the estimate of DVO. Ultimately, the difference between the cost of construction accounted for in the books of accounts of assessee and the estimate of DVO after taking into account the above factors would be very negligible. 6.7 During the course of appellate proceedings, assessee produced books of accounts pertaining to cost of construction of hospital a well as original vouchers/bills/invoices in this regard. I have perused them. In my view, assessee had maintained proper original bills/vouchers in respect of most of the expenses recorded in the construction account for relevant Assessment Years. Assessing Officer had not found out any controvertible materials to show that the cost was definitely higher than declared. Assessing Officer did not point out any deficiency in the accounts of assessee. She did not reject the books of accounts of assessee. 6.8 In ITO V.J K K Textile Processing Mills (1990) 38 ITD 178 (Special Bench) it was held that where the Assessing Officer has not establi....
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....tions only on the basis of estimate obtained from DVO. Consequently additions made for various Assessment Years towards difference in cost of construction as unexplained investments, are directed to be deleted." 5. Departmental Representative submitted that the Assessing Officer in Assessment Year 2007-08 has mentioned that the assessee has not maintained proper accounts for cost of construction. Many items of expenses are not supported by bills or vouchers. There are also no proper bills for purchase of materials. The assessee has not adduced any credible evidence of materials to prove that the cost of construction accounted for in the books of accounts is the real cost of construction. He ,therefore, referred the matter to the DVO for estimating the cost of construction. He submitted that from the above quoted reasons it can be inferred that the Assessing Officer has rejected the books of accounts of the assessee before referring the matter to the DVO. He further referred to the DVO's report wherein the DVO at para No.4.1.1. of his report dated 30.06.09 has observed that the accounts method of valuation can be adopted only if proper books of accounts are maintained by the owne....
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....th the Departmental Representative that books of accounts of the assessee in respect of cost of construction of building were rejected by the Assessing Officer. However, we find that such a rejection was not made after pointing out any specific defect in the books of accounts of the assessee and was rejected merely on the basis of generalized statement. We find that the Commissioner of Income Tax(Appeals) has categorically recorded finding that on perusing of books of accounts and original bills and vouchers, he found that assessee had maintained proper original bills/vouchers in respect of most of the expenses recorded in the construction account for relevant Assessment Years. The Departmental Representative could not bring any material before us to controvert the above finding of the Commissioner of Income Tax(Appeals). In absence of any specific defect brought by the Assessing Officer in respect of cost of construction of building in the books of account of the assessee and in view of the above finding of the Commissioner of Income Tax(Appeals), in our considered opinion the rejection of books of account by the Assessing Officer is untenable and cannot be sustained. Consequently....