1979 (3) TMI 111 - AT - Income Tax

Summary

Issues:
Cost of construction estimation dispute

Analysis:
The case involved a dispute regarding the cost of construction of a lodging house by an individual for the assessment years 1973-74 and 1974-75. The assessee claimed the construction cost at Rs. 1,41,033, supported by books of accounts and an approved valuer's report. However, the ITO did not accept this claim and referred the matter to the departmental valuation cell, which estimated the cost at Rs. 2,49,000. The ITO treated the difference as undisclosed income and added Rs. 50,216 to the assessment. On appeal, the AAC modified the cost to Rs. 1,84,953, spreading the difference over the two assessment years. The assessee contended that the approved valuer's report and the cost admitted were in line with PWD rates and government notifications, urging for acceptance of the claimed cost.

The Tribunal noted that the assessee had maintained proper books of accounts and supporting vouchers for the construction cost, which the Revenue did not challenge. The ITO did not find any flaws in the accounts or valuation report submitted by the assessee. The AAC agreed that the building was not first-class and the departmental valuation was excessive but did not find any issues with the assessee's records. The assessee provided an analysis based on PWD rates and government notifications, showing consistency with the claimed cost. The Tribunal found no reason to estimate the cost of construction when the assessee's records were reliable and supported by various sources. Consequently, the Tribunal allowed the appeal, directing the deletion of the amount added by the AAC towards the deficiency in the cost of construction.

In conclusion, the Tribunal ruled in favor of the assessee, accepting the cost of construction as admitted by him and directing the deletion of the additional amount added by the AAC. The decision emphasized the importance of maintaining proper records and supporting documents in determining construction costs and highlighted the need for Revenue to provide substantial evidence to challenge such claims.