2017 (7) TMI 856 - AT - Income Tax

Valuation of property - reference to DVO - proper determination of cost of construction of property - Held that - Admittedly, the Assessing Officer has adopted the cost of construction as per Stamp Valuation Ready Reckoner which cannot substitute the actual cost of construction provided assessee is able to substantiate his claim. However, if assessee is not able to substantiate its claim then valuation of property needs to be referred to a Registered Valuer/ DVO for determination of value of property. Whatever the discrepancies were pointed out by the Assessing Officer for rejecting the assessee s claim were explained before ld. CIT(A), however, ld. CIT(A) has not commented upon the same in detail. Considering the entirety of facts, we consider it in the interest of justice that the Architect s certificate being that of an expert should be admitted to advance the cause of substantial justice. The Assessing Officer would be free to refer the valuation of property to DVO for proper determination of cost of construction of property. After taking into consideration the opinion of two experts, he will frame the assessment de-novo. In the result, the assessee s application under Rule 29 of ITAT Rules, 1963 is allowed and the matter is restored back to the file of the Assessing Officer for de-novo assessment in terms of aforementioned observations. Appeal of the assessee allowed for statistical purposes.

Summary

Issues:
1. Admission of additional evidence under Rule 29 of ITAT Rules, 1963.
2. Rejection of the assessee's claim for cost of construction.
3. Determination of cost of construction by the Assessing Officer.
4. Confirmation of Assessing Officer's action by CIT(A).
5. Competency of Assessing Officer in property valuation.
6. Consideration of additional evidence in the form of Architect's certificate.
7. Referral of property valuation to a Registered Valuer/DVO.
8. Application of the principle of substantial justice in admitting additional evidence.

Issue 1: Admission of Additional Evidence under Rule 29 of ITAT Rules, 1963:
The appeal involved the assessee seeking permission to adduce additional evidence in the form of an Architect's certificate for valuation of construction. The decision of the Hon'ble Jurisdictional High Court in a similar case was cited, emphasizing the Tribunal's discretion to admit additional evidence in the interest of justice. The DR objected to the admission, questioning the sufficiency of cause for not submitting the certificate earlier.

Issue 2: Rejection of Assessee's Claim for Cost of Construction:
The Assessing Officer rejected the assessee's claim for the cost of construction due to various discrepancies in the bills provided. The discrepancies included inconsistencies in bills for materials like wooden doors, windows, electric fans, and iron bars. The AO also noted the absence of a completion certificate from the GDA and the lack of a valuation report from a Government-approved valuer to support the claim.

Issue 3: Determination of Cost of Construction by the Assessing Officer:
The AO adopted the cost of construction based on the Stamp Valuation Officer's rate, leading to a different valuation than claimed by the assessee. The AO justified this by comparing the declared sale price with the prevailing market rates and concluded that the cost of construction was inflated.

Issue 4: Confirmation of Assessing Officer's Action by CIT(A):
The CIT(A) upheld the AO's decision, emphasizing the assessee's failure to provide sufficient evidence to support the claim for cost of construction. The CIT(A) dismissed the appeal, citing the AO's reasonable adoption of the government-prescribed rate for construction costs.

Issue 5: Competency of Assessing Officer in Property Valuation:
The counsel argued that the AO lacked the expertise to determine property valuation and should have referred the matter to a Government-approved valuer or DVO. However, the DR contended that the onus was on the assessee to substantiate the claim, which was not fulfilled.

Issue 6: Consideration of Additional Evidence in the Form of Architect's Certificate:
The Tribunal considered the Architect's certificate as crucial evidence provided by an expert and admitted it in the interest of substantial justice. The AO was directed to refer the property valuation to a Registered Valuer/DVO for a proper assessment.

Issue 7: Referral of Property Valuation to a Registered Valuer/DVO:
The Tribunal instructed the AO to conduct a de-novo assessment after considering the opinions of the Architect and the Registered Valuer/DVO to determine the cost of construction accurately.

Issue 8: Application of the Principle of Substantial Justice in Admitting Additional Evidence:
The Tribunal relied on the principle of substantial justice to allow the admission of the Architect's certificate, emphasizing the importance of ensuring a just outcome by considering all relevant evidence.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, decisions made by the authorities involved, and the application of legal principles to ensure a fair and just resolution in the matter.