TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 396
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....e return was processed u/s 143(1) of the Income Tax Act, 1961 ("the Act" in short). Later on, the case was selected for scrutiny assessment. During the course of assessment proceedings, it was observed by the Assessing Officer (AO) that the work-in-progress (WIP) is suppressed by the assessee and the certificate issued by civil engineer is not reliable. 3.1. Therefore, the AO referred the case to the District Value Officer (DVO) to ascertain the fair market value of the work-in-progress. The District Valuation Officer, vide his order under section 142A of the Act, No.2(7)/DVO/2015-16/403 dated 7th of September-2016, estimated the fair market value of the WIP. The AO issued show-cause notice to the assessee. The AO not satisfied with the reply of the assessee, made an addition of Rs. 1,39,61,058/- being difference in the value of work-in-progress and passed an order under section 144 r.w.s. 142A of the Act. 3.2. The assessee preferred an appeal before CIT(A), who partly allowed the appeal of assessee by granting relief of Rs. 22,18,856/- and substituted the addition by Rs. 1,17,42,202/-. 4. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us with followin....
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....he Act is an operative provision and on the day of assessment the provision was applicable. He also brought to our attention that the Certificate issued by the Government Registered Valuer was not correct and the Valuer himself withdrew the Certificate. 6.1 The Ld.Counsel for the assessee stated that both the AO and the Ld.CIT(A) have not taken into consideration clarification in respect of statement of Valuer Shri A.Y. Chipa in which he stated that he has not withdrawn the Certificate, but has relied on the measurements given by the technical person of the assessee and he has not issued any wrong Certificate. The Ld.Counsel for the assessee also pointed out that there was negligible difference in the cost estimated by DVO and the cost as per "calculation sheet" submitted during the course of assessment in reply to the show-cause notice issued by the AO and this difference was due to the fact that administrative expenses were not included in valuation by the DVO. 6.2. After hearing the rival contentions and perusing the material on record, it is observed that the primary issue revolves around the applicability of section 142A of the Act to the valuation of WIP prior to its amendm....
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....indicate that the books are incomplete. 3. If the books of accounts are not maintained according to the prescribed accounting standards or principles, the AO may find them unreliable. This includes not following the generally accepted accounting principles (GAAP) or the standards set by the Institute of Chartered Accountants of India (ICAI). In the present case AO has not recorded any such his findings on the method of valuation followed by the assessee. 6.5. We also note that the addition is made on the estimated value, without substantial evidence to contradict the actual cost recorded by the assessee, which is not justifiable. 6.6. The Ld.CIT(A)'s partial relief indicates some merit in the assessee's arguments but does not fully address the core issue of rejection of books of accounts. The Ld.CIT(A) in his order for AY 2013-14 has recorded observations which are as follows: "5.5.3 Since the accounts of the appellant company were ready as on the date of inspection of the above-mentioned two projects i.e. 13.04.2016 and both the projects were also found to be completed in the books of accounts for A.Y. 2014-15, therefore, the valuation officer ought to have provided ....
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....the current year i.e. for A.Y. 2013-14 have to be estimated of its own and ignoring the valuation report." 6.8. Before granting partial relief, the Ld.CIT(A) also recorded the following observations: "The enhanced estimate by applying the rate of 20% over the declared direct cost of the project is further based on the following observations: - a) The A.O. has not mentioned the working of direct cost of the project for the year under consideration and not provided the working in the assessment order. b) The DVO has all the details of the two projects as on the date of inspection i.e. 13.04.2016 and the projects were completed by that date as the sales of flats and shops were declared by the appellant and therefore, he ought to have adopted the % age method of valuation as provided in the guidelines as reproduced above. c) The appellant has also not substantiated the figures of direct cost for the year under consideration during the course of appellate proceedings. Therefore, the proportionate cost over the years during which the project continued has been re-worked out without considering the indirect expenses so as to rebut the contention for making nominal variations if t....
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....essed. The AO must adhere to the provisions of sub-section (3) of the section 145 of the Act, before making an assessment in the manner provided in section 144 of the Act. The Ld.CIT(A) has not considered this before going ahead with his own estimation rejecting DVO's valuation. 6.10. We also note that the Valuer (Shri A.Y. Chipa) has submitted the letter clarifying that he has not withdrawn the Certificate and its correctness should not be doubted. Both the Assessing Officer and the Ld.CIT(A) have not taken into consideration this letter by Valuer which is a basis for referring the Valuation to DVO. 6.11. Based on the above analysis, we conclude that the addition based on the estimated cost, without discrediting the actual costs recorded, is not justifiable. 6.12. In the result, the addition of Rs. 1,17,42,202/- confirmed by the Ld.CIT(A) is directed to be deleted. Therefore, the appeal of the assessee for A.Y. 2013-14 is allowed. 7. In the next appeal of the assessee, i.e. ITA No.1720/Ahd/2019 for AY 2014-15, the following grounds have been raised: "1. In law and in the circumstances of the case, the impugned order passed by the Id Dy. Commissioner of Income Tax, Circle -3(....