TaxTMI 
TaxTMI 
2016 (12) TMI 1783
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.... 3. The learned CIT (A) ought to have appreciated the fact that the cost of construction has been arrived at by the Departmental Valuation Officer, after following due process and the prescribed standards and rates and after allowing all eligible deductions". 3. Subsequently, it was noticed that the authorization of the CIT for the above grounds was not filed. Therefore, the DR was directed to file the authorization of the CIT for filing of the grounds of appeal. Subsequently, the revised form-36 along with the authorization has been filed before us raising only one ground of appeal which has been reproduced as above. Though notice has been served on the assessee, none appeared on behalf of the assessee. The DR has filed the proof of service of notice before us vide letter dated 20.12.2016. Therefore, the appeal is taken up for hearing. 4. Brief facts of the case are that the assessee, an individual, filed his return of income for the A.Y 2009-10 on 30.06.2010 admitting total income of Rs. 8,22,300 and agricultural income of Rs. 1,50,000. During the course of search, a document vide Annexure A/MLR/01 containing details of construction of building at Surv....
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....standard rate as against the rates prescribed by the State PWD for valuation of the cost of construction and taking into consideration various decisions relied upon by the assessee, he allowed the rebate of 15%. We have also gone through the decision of the Coordinate Bench of the Tribunal in the case of Sri Krishna Ventures P Ltd vs. Income Tax Officer in ITA Nos.781 to 785/Hyd/2009 and find that the Tribunal has analyzed the difference between the CPWD rate and the State PWD rate and has given justification for allowing 15% rebate on account of rate variation between the CPWD and State PWD rate. For the sake of ready reference, the relevant paragraphs are reproduced hereunder: "11. Ground Nos. 6 and 7 are with regard to claim for allowance for deduction on account of self supervision and the benefit towards rate variance between the CPWD rates and State PWD rates for construction of the project building at Hyderabad. 12. The learned AR submitted before us that the DVO while estimating the cost of construction has adopted the CPWD rates based on coefficient of CBRI, Roorkie which cannot be taken as a yardstick to determine the cost of construction at Hyderabad. T....
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....f 10 lakhs sft as a builder and the present property has also been developed under the direct supervision of the assessee but while considering the deductions towards self supervision the DVO has not allowed such deduction by observing that deduction towards self supervision is not required since accounts method has been followed. Such prevarications stand by the DVO is not acceptable. If the FVO has found the books of account to be correctly maintained and has followed the accounts method by relying upon them, then he should not have deviated from books of accounts and resorted to estimation by applying coefficient in case of certain specific items like steel, sand, bricks etc. 15. The DVO cannot accept and reject the book results according to his will and convenience. While estimating the quantum and cost of certain materials consumed he has applied coefficients as per the hand book of the CBIR without accepting the entries in the books of accounts, whereas when it comes to allowing benefit for self supervision, the DVO has not allowed such deduction by observing that deduction towards self supervision cannot be allowed as the accounts method is followed. The DVO c....
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....roject and, hence, it is not correct to say that the State PWD rates are the proper basis to arrive at the cost of construction. The applicability of CPWD rate with local indexing came up before the Tribunal in the case of Smt. Salma A. Mehdi, in ITA Nos. 697 & 698/Hyd/93 for asst. years 1985-86 and 1986-87 wherein the Tribunal vide paras 10 of this order held that in arriving at proper cost of construction, it would be justified if a discount of 15% is given for higher CPWD rate and further rate of 10% for personal supervision is allowed. The said paragraph-10 reads as under:- "The DVO estimated the cost of construction following the plinth area method of valuation. He applied the basic plinth area rates approved by the CEDT. .He applied the plinth area of New Delhi as fixed in 1976 and approved by the Government of India by duly enhancing the basic rate of similar structures with appropriate cost index 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....