2001 (11) TMI 235 - AT - Income Tax

Summary

Issues Involved:
1. Competency of the Valuation Officer.
2. Method of Valuation.
3. Application of Section 69B of the Income-tax Act.
4. Deductions allowed by the Commissioner (Appeals).

Summary:

Competency of the Valuation Officer:
The Tribunal held that the Executive Engineer (EE) of the Valuation Cell was not competent to value the property as the cost of construction exceeded Rs.10 lakhs. According to the jurisdictional High Court in Daulatram v. ITO [1990] 181 ITR 119 (AP), the valuation should have been referred to the District Valuation Officer (DVO). Therefore, the valuation report by the EE was not considered good evidence.

Method of Valuation:
The Tribunal agreed with the assessee that the detailed quantities method is more scientific and realistic compared to the plinth area method adopted by the Valuation Officer. The Tribunal emphasized that the method of valuation should be chosen by the assessee, especially when multiple methods are available and the statute does not mandate a specific method. The Tribunal criticized the Valuation Officer for rejecting the Registered Valuer's report without providing item-wise comments or reasons.

Application of Section 69B of the Income-tax Act:
The Tribunal held that unaccounted investment in construction should be assessed with reference to the financial year, not the accounting year of the assessee. Since no construction was done during the financial year 1988-89 relevant to the assessment year 1989-90, there was no unaccounted investment u/s 69B for that year. This view was supported by the Jaipur Bench of the Tribunal in Smt. Rekhadevi v. Asstt. CIT [1994] 49 TTJ (Jp.) 530.

Deductions Allowed by the Commissioner (Appeals):
The Tribunal found no infirmity in the Commissioner (Appeals)'s decision to allow a 10% deduction towards personal supervision and a 15% deduction for variation in rates from place to place. These deductions were upheld based on the Tribunal's earlier decision in the case of Salma A. Mehdi.

Conclusion:
The Tribunal dismissed the appeals of the revenue and allowed the appeals of the assessee, directing the Assessing Officer to accept the cost of construction as determined by the Registered Valuer and not to apply section 69B for the assessment year 1989-90.