2017 (9) TMI 819 - AT - Income Tax

Valuation determined by DVO - CIT(A) confirming the addition by not allowing the deduction of 15% from cost of construction by following the CPWD method and 10% on self-supervision - Held that - As gone through the DVO report and also the assessment order and found that the DVO by considering the time and place of construction and also rates approved by the CBDT, cost of construction is estimated. Find no infirmity in the order passed by the Ld. CIT(A). So far as self-supervision is concerned, the DVO has granted 7.5%. However, A.O. has not accepted the allowance given by the DVO. On appeal, Ld. CIT(A) allowed the rebate at 7.5% by observing that this rebate is allowed towards probable savings in engaging labour and procuring material directly rather to a contractor. A.O. is directed to allow 7.5% towards self-supervision for an amount of ₹ 15,88,392/-. As find that the Ld. CIT(A) has reasonably allowed self-supervision at 7.5% to the assessee and also find that no further allowance is required on account of self-supervision. By taking into consideration all find no infirmity in the order passed by the Ld. CIT(A). Thus, this appeal filed by the assessee is dismissed.

Summary

Issues:
1. Addition of ?36,63,299 sustained by CIT(A) based on DVO report.
2. Justification of not allowing deduction of 15% from cost of construction by following CPWD method and 10% on self-supervision.

Analysis:
1. The appeal challenged the addition of ?36,63,299 based on the DVO report. The DVO determined the cost of construction at ?2,56,24,000, while the assessee admitted ?2,19,60,712. The AO noted discrepancies in maintaining vouchers and adopted CPWD rates approved by CBDT. The AO added ?54,51,619 to the income. The CIT(A) partly allowed the appeal, directing the AO to allow 7.5% towards self-supervision.

2. The primary issue was the denial of a 15% deduction from the cost of construction by the CIT(A). The DVO adopted CPWD rates and allowed 7.5% for self-supervision. The CIT(A) rejected the plea for a rate difference and self-supervision rebate. The Tribunal upheld the CIT(A)'s decision, stating that the DVO's rates were reasonable, and self-supervision rebate at 7.5% was justified. The appeal was dismissed, affirming the CIT(A)'s order.

In conclusion, the Tribunal dismissed the appeal, upholding the CIT(A)'s decision regarding the addition based on the DVO report and the denial of the 15% deduction from the cost of construction. The Tribunal found the DVO's rates reasonable and the 7.5% self-supervision rebate appropriate, leading to the dismissal of the appeal.