2014 (3) TMI 262 - AT - Income Tax

Cost of construction adopted by the CIT (A) Held that - The assessee has not maintained any accounts with regard to cost of construction of the property - He has not been able to establish by bringing evidence on record the cost of construction at Rs.250 adopted by him - the Assessing Officer cannot rely upon some media advertisement to determine the cost of construction - neither the assessee nor revenue could demonstrate that the cost of construction adopted by the assessee and Assessing Officer was on the basis of any substantive evidence - the claim of the assessee and conclusion of the Assessing Officer cannot be accepted - when there is no material on record to determine the cost of construction then it has to be arrived at on a reasonable basis - As can be seen from the observation made by the CIT (A), she has adopted the cost of construction on the basis of SRO s estimate which at least has some basis - the conclusion arrived at by the CIT (A) is fair and reasonable and needs no interference the order of the CIT(A) upheld Decided against Assessee.

Summary

Issues:
1. Discrepancy in cost of construction adopted by CIT (A), assessee, and Assessing Officer for a property in Hyderabad.

Analysis:
The judgment revolves around cross appeals filed by the assessee and the department concerning the cost of construction for a property in Hyderabad for the assessment year 2007-08. The CIT (A) adopted a cost of Rs.400 per sft, whereas the assessee argued for Rs.250 per sft, and the revenue sought Rs.800 per sft as determined by the Assessing Officer. The Assessing Officer added the differential amount of Rs.1,24,41,200 as unexplained investment to the assessee's income due to the discrepancy in cost. The CIT (A) based her decision on the SRO's estimate of Rs.400 per sft, as neither party could substantiate their claims with concrete evidence.

The assessee failed to provide sufficient evidence to support their claim of Rs.250 per sft, while the Assessing Officer's determination of Rs.800 per sft lacked substantial backing. The judgment highlighted the importance of substantiating claims with evidence and criticized the reliance on media advertisements and hearsay. The CIT (A) rejected both the assessee's and the Assessing Officer's estimates, opting for the SRO's estimate of Rs.400 per sft due to its basis on contemporaneous evidence. The judgment emphasized the need for a reasonable basis for determining costs in the absence of concrete evidence.

Ultimately, the tribunal found no fault with the CIT (A)'s decision, considering it fair and reasonable based on the available evidence. The appeals from both the assessee and the department were dismissed, confirming the adoption of Rs.400 per sft as the cost of construction for the property in question. The judgment highlighted the importance of substantiated claims and reasonable bases for determining costs in such cases.