TaxTMI 
TaxTMI 
2021 (6) TMI 543
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....aw confirming the disallowance of Rs. 13,775/- u/s 14A read with Rule 8B." 2. During the course of hearing, the ld AR submitted that the assessee-company is engaged in manufacture of readymade garments and madeups. It started construction of 2nd& 3rd floor of its factory building situated at SPL -115, Opp. RIICO Water Works Office, Bindayaka Industrial Area, Jaipur in AY 2012-13 which was completed in AY 2013-14. The construction costs incurred is tabulated as under:- 3. It was submitted that during the course of assessment proceedings for AY 2012-13, assessee vide letter dt. 02.12.2014 and 21.01.2015 filed detailed account with full particulars of expenses incurred on expenses and copy of bills & vouchers in respect of the construction. However, the AO made reference u/s 142A to the DVO vide letter dated 09.02.2015 on the ground that assessee has not furnished the valuation report and complete bills and vouchers for verification of investment made in the construction. The report from DVO was not received before 31.03.2015 and therefore, AO completed the assessment for AY 2012-13 with the observation that as and when the valuation report is received, effect shall be given u/s 155....
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....f Rs. 52,12,917 in AY 2013-14 and of Rs. 75,33,218/- in AY 2012-13 by passing an order u/s 154 of the Act against which appeal is pending before the Ld. CIT(A). 7. It was submitted that the before the Ld. CIT(A), assessee filed written submission as reproduced at Pg 4-12 of the appellate order challenging the reference made U/s 142A to the DVO as also the various discrepancies in the valuation report prepared by him. The Ld. CIT(A), however, after quoting the assessment order at Pg 13-19 of the order, without controverting the various objections raised by the assessee held that when the valuation report submitted by the assessee shows the cost of construction at Rs. 1,10,53,509/- as against Rs. 81,69,864/- declared by the assessee in the two years there is basis to doubt that assessee has shown actual investment in the factory building. The DVO is an expert and his report cannot be doubted in the absence of any specific defects. Hence, reference made to DVO u/s 142A and the addition made is as per law. Accordingly, addition made by the AO is sustained and against the said findings, the assessee is in appeal before us. 8. Now, coming to grounds of appeal, the ld AR submitted that ....
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....and no discrepancy therein is pointed out by the DVO or the AO and no evidence of any payment outside books of accounts is found by the AO, addition solely on the basis of the report of the valuers' u/s 69B is unwarranted, unjustified and not as per law. 11. It was further submitted that the Ld. CIT(A) has not controverted any of the contentions raised by the assessee before him also. He is swayed by the report of registered valuer determining the cost of construction at Rs. 1,10,53,508/- as against Rs. 81,69,864/- declared by the assessee ignoring the reasons given by the assessee for such variation. The Ld. CIT(A) has not denied the fact that assessee has maintained correct and complete record of the construction expenses incurred by it. The various other objections as submitted before him as to the variation between the actual cost and the cost determined by DVO vis-à-vis the cost determined by registered valuer is not at all considered by him. Hence, the order of Ld. CIT(A) confirming the addition made by AO is wholly unjustified. In view of above, addition made by AO and confirmed by Ld. CIT(A) be directed to be deleted. 12. Per contra, the ld. DR/CIT relied on the fi....
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....eply, the assessee stated to have obtained valuation report from approved valuer M/s V.G. Architects 86 Engineers, who determined that construction cost for the period from 2011 to 2013 comes to Rs. 1,10,53,509. The above valuer was appointed by assessee itself. It is interesting to note the that valuer appointed by assessee determined the value of construction cost at Rs. 1,10,53,509 whereas assessee has shown it at Rs. 81,69,864/(48,28,551 in F.Y 2011-12 and 33,41,313 in F.Y 2012-13). Thus the report of the valuer appointed by assessee also proved that the investment was under-valued at least by Rs. 28,83,645/-. Therefore it cannot be accepted that there is no basis to make addition except the report of the DVO. Another contention of the assessee is that valuation officer has wrongly adopted the CPWD plinth area rates instead of the Rajasthan PWD Building and roads rates to determine the value of the construction. The argument of the assessee does not hold water as the valuation was done in conformity with CBDT instruction no. 1671 dated 06.12.1985 and 319/6/92-WT dated 13.12.1998. The claim of the assessee that Rajasthan PWD Building and roads are applicable to assessee is sim....
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....factory building. The appellant is relying on number of judgments but they are differentiated on facts as none of them is dealing with the difference in cost of investment recorded in books of accounts and valuation report submitted by the appellant. Had there been complete disclosure of investment in the books of accounts then the valuer appointed by the appellant would not have reached to different figure. The DVO is an expert person who knows his subject well and his report cannot be doubted in absence of any specific defects. Thus it is seen that the AO has made reference to DVO under correct provisions of the Act and has also made addition as per law. Therefore, no interference is called and the addition made by the AO is sustained." 14. We have heard the rival contentions and perused the material available on record. Regarding adoption of PWD rates as against CPWD rates, we agree with the contention advanced by the ld AR that where the factory building is situated within the jurisdiction of state PWD, State PWD rates should be applied for estimation of cost of construction of the factory building and not CPWD rates. The same is the consistent position taken by this Bench and....
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....vant for the year under consideration as the construction has been spread over two years and to this limited extent, the matter is remanded to the file of AO. In the result, the ground of appeal is partly allowed. 16. In ground no. 3, the assessee has challenged the disallowance of Rs. 13,775/- U/s 14A read with Rule 8D. 17. In this regard, the ld AR submitted that the AO on perusal of the balance sheet observed that the assessee has shown investments in shares of SBBJ of Rs. 51,000/-, in HDFC Mutual Fund of Rs. 81 lakhs and in property of Rs. 1,33,64,641/- aggregating to Rs. 2,15,15,941/- (correct amount of investment in HDFC Mutual Fund is Rs. 93 lakhs and that in property of Rs. 1,81,36,020/- aggregating to Rs. 2,74,87,320/-). During the year under consideration, the assessee invested Rs. 12 lakhs in HDFC Mutual Fund while the rest of the investments were made in earlier years. He further noted that the assessee has not shown any income from the investments and has claimed interest expense of Rs. 49,79,395/-. The assessee vide letter dated 16.03.2016 submitted that the investment made in HDFC Mutual Fund was made out of the proprietors' fund i.e., share capital and reserves & ....