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Issues: Appeal by Revenue against deletion of additions to assessee's income for unexplained investment in construction, cross-objection by assessee against AAC's order upholding cost of construction.
Analysis: 1. The assessee constructed 9 rooms over different accounting periods, reporting varying costs compared to ITO's estimates. The ITO based additions on assumed savings by the assessee, leading to discrepancies in the cost of construction. The AAC upheld the construction costs but deleted the additions, stating that as the assessee had no income sources other than agricultural, the difference in cost couldn't be taxed under specific sections. 2. The Revenue appealed against the deletion of additions, while the assessee filed cross-objections challenging the AAC's decision on construction costs. During the hearing, the departmental representative and the assessee's counsel presented their arguments, emphasizing the valuation discrepancies and the poor quality of construction. The approved valuer's report highlighted the substandard nature of the buildings, with minimal amenities and low-quality materials used. 3. The ITAT found that the ITO's estimate lacked supporting material, whereas the valuer's report detailed the inferior quality of the constructions. The ITO did not consider this poor quality or consult a Valuation Officer, failing to justify the discrepancy in cost estimation. The tribunal concluded that the construction costs reported by the assessee and the valuer were plausible, especially considering they could have been financed from agricultural and rental income savings. 4. Consequently, the ITAT ruled that no unexplained investment in the construction costs was proven, invalidating the Revenue's appeals. The cross-objections by the assessee were allowed, affirming the AAC's decision on construction costs. The Revenue's appeals were dismissed, and the cross-objections were upheld, providing a comprehensive resolution to the dispute.
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