2002 (9) TMI 415 - AT - Income Tax

Summary

Issues Involved:
1. Justification of the addition of Rs. 2,72,454 on account of the difference in the cost of construction.
2. Reliability of the Valuation Officer's report.
3. Examination and rejection of the assessee's books of account.

Issue-Wise Detailed Analysis:

1. Justification of the addition of Rs. 2,72,454 on account of the difference in the cost of construction:
The assessee constructed a marriage palace and declared the building account at Rs. 14,32,104. The Assessing Officer (AO) referred the case to the Valuation Officer (VO), who valued the property at Rs. 42,55,600. After considering objections and revaluations, the AO determined the cost of construction at Rs. 33,09,558, leading to an addition of Rs. 12,91,668 under section 69 of the Income-tax Act, 1961. The CIT(A) reduced this addition by Rs. 10,19,214, sustaining an addition of Rs. 2,72,454. The Tribunal found that the AO and CIT(A) did not properly examine the books of account, which were maintained by the assessee and supported by vouchers. The Tribunal concluded that the CIT(A) should have deleted the entire addition, as the book results were not rejected by the lower authorities.

2. Reliability of the Valuation Officer's report:
The Valuation Officer's report was challenged by the assessee, who provided valuation reports from other approved valuers showing lower construction costs. The CIT(A) noted that the property was a simple structure, and the VO's rates were higher than those applicable to such buildings. The CIT(A) allowed a rebate of 12% for self-supervision and reduced the addition based on the valuation differences. However, the Tribunal found that the CIT(A) and AO relied heavily on the VO's report without properly examining the assessee's books of account or giving the assessee an opportunity to rebut the findings.

3. Examination and rejection of the assessee's books of account:
The Tribunal emphasized that the AO and CIT(A) did not reject the assessee's books of account, which were maintained regularly and supported by vouchers. The Tribunal cited precedents, including the Hon'ble Rajasthan High Court in CIT v. Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar, which held that if proper books are maintained and no defects are pointed out, the figures shown therein must be followed. The Tribunal concluded that the AO and CIT(A) erred in relying on the VO's report without examining the books, and thus, the addition of Rs. 2,72,454 was unjustified.

Conclusion:
The Tribunal allowed the appeal, deleting the addition of Rs. 2,72,454 sustained by the CIT(A), as the lower authorities did not properly examine or reject the assessee's books of account before relying on the VO's report.