TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 259
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....ey. Hence, the assessment is reopened u/s 147 of the Act by issue of notice u/s 148 of the Act. The A.O. has asked the assessee to produce the books of accounts, bills, vouchers relating to construction of residential apartment building and the firm failed to produce the same. Therefore, the A.O. referred the cost of construction to the Departmental valuation cell (DVO) and the Executive Engineer, valuation cell, Visakhapatnam vide his report dated 28.12.2013 valued the cost of construction of the said property at Rs. 172.10 lakhs and submitted his report. The DVO has adopted the plinth area rate method for valuing the property. The A.O. during the assessment proceedings observed that 93.25% of the construction was completed by the end of financial year 2011-12, relevant to the assessment year 2012-13, hence, proportionate cost of construction amounting to Rs. 1,00,48,325/- was taken as cost of construction for the assessment year 2012-13 and accordingly, treated the difference amount of Rs. 50,06,106/- as unexplained investment and added back to the returned income. 3. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and disputed the cost of const....
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....in this line of activity. The ld. A.R argued that with his experience and knowledge they bought the materials at lowest cost and reduced the wastages to the maximum level ,thus reduced the cost of construction, hence requested for rebate for selfsupervision. The Ld. AR submitted that both the Ld. DVO and the Ld. CIT(A) have not allowed any rebate for self supervision. The rates of CPWD are abnormal and the cost of construction cannot be compared with the assessee's cost of construction or for that matter very high compared to market rate of construction. The Ld A.R further submitted that the there are hidden costs in CPWD construction since the contractor executes the work. The CPWD type construction is entirely different with that of assessee's construction, hence requested for allowing credit for self supervision @ 10% and rate difference 15%. The Ld. A.R. further argued that the DVO has adopted the cost of construction adopting the plinth area rate of CPWD. Adoption of plinth area rate is not correct and it is purely a guess work since the contracts of CPWD involve the profit of contractor's margin, hence, argued that there is a vast difference in cost of construction of CPWD bu....
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.... have allowed some ad hoc deduction in the cost of basic construction. Taking into consideration the fact that the CPWD rates of New Delhi are always higher than the local rates, we feel that it would be just and reasonable to give an overall reduction of 15% on the cost of construction estimated by the DVO in order to compensate the higher estimate on account of the adoption of higher rate of CPWD of New Delhi. Further, the valuation officer did not allow any deduction towards personal supervision. The first appellate authority allowed 10% reduction on account of savings by personal supervision appears to be quite reasonable. If we deduct 10% towards personal supervision and 15% on account of the higher rate adopted by the valuation officer, the estimate of cost of construction determined by the valuation officer comes down to Rs. 5,16,7501/-. Even if we take average of cost of construction of Rs. 68900 determined by the DVO on the basis of plinth area method works out to Rs. 5,22,000/-. In that view of the matter, the cost of construction of Rs. 5,16,750/- arrived at by us after giving 15% reduction for higher CPWD rates and 10% deduction for personal supervision, appears to be q....
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....ex as applicable to the locality during the period of construction. The Valuation did not appear to have taken into consideration the local rates that actually existed during the period for construction. It is common knowledge CPWD rates of New Delhi are far higher than local rates. Keeping that factor in view the first appellate authority would appear to have allowed some ad hoc deduction in the cost of basic construction. Taking into consideration the fact that the CPWD rates of New Delhi are always higher than the local rates, we feel that it would be just and reasonable to give an overall reduction of 15% on the cost of construction estimated by the DVO in order to compensate the higher estimate on account of the adoption of higher rate of CPWD of New Delhi. Further, the valuation officer did not allow any deduction towards personal supervision. The first appellate authority allowed 10% reduction on account of savings by personal supervision appears to be quite reasonable. If we deduct 10% towards personal supervision and 15% on account of the higher rate adopted by the valuation officer, the estimate of cost of construction determined by the valuation officer comes down to Rs.....