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2013 (5) TMI 746 - AT - Income TaxReopening of assessment - Unaccounted purchases - survey u/s 133A - CIT (A) deleted the addition on account of construction adopted by the A.O. @ Rs.210/- per sq. ft. as against Rs.177/- per sq. ft. declared by the assessee - Held that - As from the assessment order it is seen that AO has worked out the average cost of construction on the basis of total area of construction and the total cost as per the books of accounts and came to the conclusion that the average rate of Rs.177/sq ft was very low. Nothing has been brought on record by AO to justify his conclusion that the average rate of Rs.177/- sq ft was very low. AO has estimated the cost of construction at Rs.210/ sq. ft. without justifying its basis. CIT(A) has given a finding that the inference drawn by the AO was based on suspicion, conjectures and surmises. Revenue has not placed any material in support of the findings of AO. Nothing is on record to justify the conclusion of CIT(A) that the rate adopted by Assessee was also not correct. It is a fact that Assessee has constructed the shops and incurred cost for its construction and without incurring the cost the Assessee could not have completed the shop for its sale. It is also a fact that the estimate made by the assessee of Rs. 133/ sq. ft. has been held to be two low by AO and at the same time the estimate of Rs. 220/sq. ft made by the AO is held to be without any books by CIT (A). Thus an estimate of addition of Rs.8 lacs would meet the ends of justice instead of Rs.11,10,552/- made by the AO - appeal of the Revenue partly allowed.
Issues:
Assessment of construction cost discrepancy. Analysis: The appeal was filed by the Revenue against the order of Ld. CIT (A)- VI, Baroda for the assessment year 2002-03. The case was reopened under section 147 based on a survey conducted where it was found that the Assessee had made purchases higher than declared. The Assessing Officer concluded that the investment in the construction of Hilton Plaza Complex was from an undisclosed source. The Assessee contested this, stating there was no discrepancy. The Assessing Officer calculated the cost of construction per sq. ft. at Rs. 177, considering it low, and estimated it to be Rs. 210 per sq. ft. The difference was added to the income, leading to an appeal before the Ld. CIT (A). Before the CIT (A), the Assessee argued that the Assessing Officer presumed the cost of construction to be low without substantial evidence. The Ld. CIT (A) reviewed the case and deleted the addition, emphasizing that the Assessing Officer's conclusions were based on suspicion, conjectures, and lacked material evidence. The Ld. CIT (A) highlighted the importance of the Assessing Officer acting fairly and not arbitrarily, citing legal precedents to support the decision to delete the addition. The Revenue appealed the CIT (A) decision, arguing that the cost of construction was undervalued by the Assessee, justifying the Assessing Officer's estimation. The Assessing Officer's lack of details led to estimation, supported by the Revenue. The Assessee countered, stating the Assessing Officer's decision lacked justification and tangible material. The Assessee provided a valuation report to support their stance, highlighting discrepancies in the Assessing Officer's estimation process. Upon hearing both sides, the Tribunal found that the Assessing Officer's estimation lacked justification and was based on suspicion. The Tribunal acknowledged that both parties' estimations were flawed and decided on a fair estimate of Rs. 8 lakh as an addition, instead of the initial Rs. 11,10,552. The appeal of the Revenue was partly allowed, concluding the case on 30-4-2013.
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