2013 (12) TMI 836 - HC - Income Tax

Whether the appellant had incurred an additional expenditure for additional construction of one room and renovation - valuation report - Held that - the assessing officer will have the other materials supplied by the assessee to know what exactly was the material used and what was the prevailing rate of such material apart from ascertaining the rates from PWD department which rate varies from time to time. Ultimately the assessing officer would take into consideration what was the prevailing rates of PWD in the State of Kerala adopted for the particular assessment year in order to arrive at the cost of renovation and construction claimed by the assessee for the assessment year 2006-07. The orders of the three authorities based on the Central PWD rates is set aside by remanding back the matter to the assessing officer who shall rely upon the report of the District Valuation Officer at Thiruvananthapuram so far as value of the renovation and cost of construction for the assessment year 2006-07 and then proceed in accordance with the procedure contemplated. - Decided partly in favor of assessee.

Summary

Issues:
1. Valuation of additional construction and renovation expenses for assessment year 2006-07.
2. Discrepancy between Chennai rates and State OWD rates for valuation.
3. Allegation of exaggerated estimation of household expenses.

Issue 1: Valuation of additional construction and renovation expenses for assessment year 2006-07:
The appellant claimed an expenditure of Rs. 20 lakhs for extension and renovation, but the Department valued it at Rs. 42,10,000 after a search on the premises. The dispute centered around the valuation based on a report by the District Valuation Officer, Chennai. The assessing officer, Commissioner of Income Tax(Appeals), and Tribunal upheld the Department's valuation, leading to the appeal. The appellant argued that the valuation report was flawed and should have been based on State OWD rates rather than CPWD rates.

Issue 2: Discrepancy between Chennai rates and State OWD rates for valuation:
The appellant contended that the District Valuation Officer in Thiruvananthapuram should have been consulted instead of relying on CPWD rates from Chennai for valuation. The appellant emphasized that State PWD rates should govern the valuation, not CPWD rates. The revenue's stance was that the appellant did not raise this issue earlier in the proceedings, questioning the timing of the objection.

Issue 3: Allegation of exaggerated estimation of household expenses:
The appellant challenged the estimation of household expenses as highly exaggerated. The Court reviewed the valuation report at Annexure B, noting that it was based on CPWD rates. The Court highlighted the importance of using local PWD rates for valuation due to variations in material costs and labor across states. Citing a previous decision, the Court emphasized the significance of relying on Kerala PWD rates for valuation in this case. Consequently, the Court set aside the orders based on CPWD rates and remanded the matter to the assessing officer to consider the report of the District Valuation Officer in Thiruvananthapuram for determining the cost of renovation and construction for the assessment year 2006-07.