TaxTMI 
TaxTMI 
2014 (9) TMI 607
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.... Officer and as recorded in the books of account. 3. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 2. The Revenue in its appeal has raised following grounds : 1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,74,724/- on account of cost of earth filing on the basis of admitting the affidavit/statement of Shri Bikkar Singh, the seller of the land and admitting the valuation report of the registered valuer which was never provided during the assessment proceedings. Moreover, Sh. Bikker Singh could not produce any evidence in support of his affidavit/statement i.e. from where the earth was taken, bill of diesel, hiring of tractor and labour etc. The VO determined total cost of earth filling at Rs. 21,24,540/- and the AO had already allowed 40% of the rebate amounting to Rs. 8,49,816/- and made addition of Rs. 12,74,724/- u/s 69 of the I.T.Act, 1961. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 30,79,789/- on account of construction of the building by not admitting the....
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....he assessee firm was asked to produce books of account alongwith bills and vouchers. Vide para 2.2 of the AO, the assessee firm vide letter dated 28.01.2013 furnished objections on the DVO's report dated 31.10.2012, available at pages 2 & 3 of AO's order. Such objections filed by the assessee were forwarded to the DVO for his comments vide letter dated 20.01.2013, who vide letter dated 13.02.2013 offered his parawise comments on the objections, which were confronted to the assessee vide letter dated 20.02.2013 by providing a copy of the same and again the assessee was show caused as to why difference of Rs. 88,23,290/- may not be added back to the income of the assessee u/s 69 of the Act by rejecting the book version u/s 145(3) of the Act. The assessee made the submissions, which is reproduced in para 2.3 at page 3 of AO's order and the observations made by the Approved valuer of the assessee have also been reproduced by the A.O. in para 2.4 of his order. The relevant para 2.3 to 3.1 including the observations made by the AO are reproduced for the sake of convenience as under: "2.3. The objections filed by the assessee firm were forwarded to the Valuation Officer for his comments ....
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....for self supervision @ 7.5% but the same is allowed as per various appellate decision @ 10%. iv) The assessee had produced the complete purchase bills for the items used in construction of the building before the VO but the VO has taken the value of the items of his own without any justification. v) The VO has estimated the number of bricks, cement bags and other items used in the construction of the building without giving any working. In view of the above stated facts, the estimation of cost of construction prepared by the VO is based on presumptions and it is requested that the cost of construction as declared by the assessee may kindly be accepted without drawing any adverse inference. 2.4. The observations made by the approved value of the assessee as reproduced for the sake of convenience: ".... I am approved valuer of your department. M/s. Shree Gian Resort has appointed me as a valuer to assess the cost of construction of their property. The department valuer has done the valuation of this property on the basis of plinth area ametho with cost index. The Plinth area method is just to assess to make the rough cost estimate for approvals of higher authorities. The....
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....ng. Your valuer has taken the cost of earth filling as Rs. 21,24,450/-. In actual the owners has purchased this land from the sellers with the condition that earth filling will be provided free . So no cost of earth filling should be included in the valuation report. However, if we forget this aspect of free earth filling the actual cost of earth filling will come out to be Rs. 5,90,000/- as earth filling is available. 2.5. The written submissions furnished by the assessee alongwith observations of the approved valuer have been considered. The most of the observations made by the approved valuer are of technical in nature. Moreover, the objections of the assessee on the valuation report and parawise comments alongwith necessary details of the valuation officer on the said objections of the assessee firm were provided to the assessee but no valuation report of approved valuer has been submitted by the assessee during the course of assessment proceedings, which could be compared. However, the observations are being sent to the VO for his counter comments separately. But assessment being time barring, the same cannot be kept pending and is decided accordingly. Some of the observatio....
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....cost/value is worked out as under: Total value as estimated by the VO 1,70,89,026/- Less:earth filling as rebate is allowed separately 21,24,540/- Balance 1,49,64,486/- Less: 10% as mentioned in para 2.7 above 14,96,448/- 1,34,68,038/- Add:Earth filling as estimated in para 2.8 12,74,724/- Total 1,47,42,762/- Less: 10% for self supervision 14,74,276/- Total: 1,32,68,486/- After allowing rebate as mentioned above, year-wise cost of investment is determined as under:- S.No. Financial year Investment shown by the assessee Investment determined by the VO Investment determined after allowing rebate as mentioned in para Diff 1 2 3 4 5 (5-3) 1 2008-09 977639 33,54,082 2815364 18,37,725/- 2 2009-10 3629948 12453238 10453122 68,23,174/- Total 46,07,587/- 1,58,07,320/- 1,32,68,286/- 86,80,899/- 3.1. Keeping in view the foregoing facts in view as discussed in paras 2.1 to 2.7 above, by invoking the provisions of sec. 145(3) of the Act, the difference of Rs. 68,23,174/- on account of cost of unexplained investment as worked out above for the financial year 2009-10 relevant to the assessment year under consideration is added....
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....of the relevant area of the building. i) The DVO has compared main banquet hall with godown structure with steel trusses. There is a lot of difference between the specifications of main banquet hall and godown structure with steel truss. ii) In storage godown the flooring consist of 7"PCC over 9" sand filling with top cover of 2" CC flooring. In roofing tabular trusses of structural steel with AC sheet and rain water gutters are to be provided. But in the construction of this banquet hall ordinary MS pipe has been used with CG sheets. The cost of structural steel and AC sheet is quite high as compared to ordinary MS steel pipe and GI sheets. iii) As stated above, this a major part of the building and there is approx. 40% difference in the cost estimate. Since the major part of building which governs the major portion of construction has such a large difference so method of CPWD rates adopted is inappropriate for the estimate of cost of construction for the whole building as well." 2.9. The registered valuer has further pointed out that there is variation of as much as 55% in the cost estimated by VO for dry brick flooring by applying PAR CPWD approved and the cost estimated by ....
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....of these expenses. It has also been stated that the amount of Rs. 169198/- taken as builder efforts by the registered valuer be also deleted because the purchases were made from local market without any efforts. He has relied n the order of the ITAT,Amritsar Bench, in the case of Dr. Ramesh Kumar Anand vs. ITO, supra in which the AO himself allowed relief for builider's efforts ( para 12.2 of the order). According to the A/R of the appellant the AO has also failed to rebut the arguments of the registered valuer regarding the addition on account of earth filling expenses and he has only stated that "no authentication of the statement/fact has been provided/brought on file ground and the AO has already allowed relief of 40% (para 9 of the assessment order). 2.13. It has been further stated by the A/R of the appellant that the detailed analysis of the registered valuer could not be submitted during the course of assessment proceedings because the same was a lengthy process and the AO did not allow proper further opportunity to the appellant on this that the assessment being time barring, the same cannot be kept pending. The A/R of the appellant has made a request that the detailed ob....
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....d that whatever the valuation officer has stated is final and the detailed report should be preferred as compared to the estimate prepared on the basis of PAR approved by CPWD. The Ld. CIT(A) accordingly relying upon the decision in the case of ITO vs. Harchand Palace (supra), a relief of 40% on estimate of cost of construction made by the VO was allowed as against 10% allowed by the A.O. 13. As regards builder's efforts, the AO has estimated the amount of Rs. 169198/- being 1% of the estimated cost. The Ld. CIT(A) restricted the same at 0.50 of the estimated cost and the assessee had made purchases on FOR basis. 14. As regards expenses not related to PAR, the VO has taken the same on percentage basis and the DVO has taken the same at Rs. 11,93,468/-, as such 7.5% of the PAR and water supply/sanitary has been taken@ 4% of the PAR. But as per efforts of the registered valuer it comes to Rs. 3,97,574/- as worked out by the registered valuer on the basis of bills available on record. The separate calculation of the estimation of the cost of construction had been annexed by the Ld. CIT(A) as Annexure-1 at Rs. 77,41,316/- which has been divided for the assessment year 2009-10 at Rs. 1....
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....CIT vs. Smt. Salochana Bhatia 20 Taxman.com 298 (P&H) 3. CIT vs. Om Overseas (2009) 315 ITR 185 (P&H) 4. DCIT vs. Harpreet Singh Prop. M/s. Akash Enterprises, Ferozepur.ITA No.317(Asr)/2013 dated 28.02.2014 (Asr). 5. Kashmir Steel Rolling Mills. vs. ACIT 155 Taxman 121 (Asr) 6. CIT vs. Rajni Kant Davi (2006) 150 Taxman 387 (All.) 7. CIT v. Poonam Rani (2010) 5 Taxman .com 76 (Del) 15.1. The Ld. counsel for the assessee also relied upon the decisions of various courts of law when the assessee had maintained books of account regularly, no addition can be made on the basis of the report of the DVO without pointing out any defects in the books, as under: i) Sheikhar Chand & Sons 186 ITR 269 ii) Western Estates case 209 ITR 343 iii) Vindaban Chitra Mandir's case 209 ITR 520 iv) Shekhar Chand Jain & Sons 32 TTJ 570 (Del) v) Tek Chand's case 52 ITD 197 (Jp) vi) Nishant Housing Development (P) Ltd. 52 ITDE 103 (Pat) vii) Smt. Uma Devi Jhawars 126 Taxation 452 (Cal) 15.2 The Ld. counsel for the assessee further argued that the registered valuer Mr. Manikant Garg had submitted the objections to the DVO' report which is in itself is the valuation made by the registered valuer of....
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....d. CIT(A). Therefore, on this account, the books of account could not have been rejected. Secondly, the objection of the AO with regard to not debiting the expenses on account of fuel/diesel etc. it was submitted that all the expenses and details were submitted before the AO and no specific defect has been pointed out on this account as well. In the absence of any specific defect on this account, books of account cannot be rejected. Third objection is that the assessee has debited labour expenses which appears to be on the lower side as proportionate to the material purchased, in the opinion of the A.O. Such opinion of AO, without bringing any specific defect on record, cannot be a reason suffice to reject the books of account u/s 145(3) of the Act. 18. Lastly, as per letter dated 20.12.2012, the AO after having obtained DVO's report gave a show cause notice as to why difference between valuation report and the amount declared by the assessee should not be added to the income of the assessee and why the books of account should not be rejected. The DVO's report being just opinion and estimate in view of the decision of various courts of law, as referred to above, the ld. counsel fo....