2021 (7) TMI 941 - AT - Income Tax

Difference between the department's valuation cell as against the books of accounts maintained at the taxpayer's behest - HELD THAT - Case file prima facie suggests that neither the valuation cell nor the learned lower authorities have taken into consideration the alleged difference between the state and CPWDs rates as well as assessee's self-supervision and cost of raw material at the relevant point of time. And also it has come on record from a perusal of the municipal construction permissions as well as house tax assessment proceedings that the impugned construction had not been completed in the impugned AY. 2003-04 prima facie. Therefore deem it appropriate in these peculiar facts and circumstances that a lumpsum addition of ₹ 3.5 lakhs only than that in issue amounting to ₹ 16,09,048/- would meet the ends of justice with a rider that the same shall not be taken as a precedent. The assessee gets relief of ₹ 12,59,048/- in other terms.

Summary

Issues involved:
Appeal against CIT(A)'s order for AY 2003-04 under IT Act, 1961 - Addition on household expenses - Addition on cost of construction - Relief towards rate difference - Deduction on self supervision - Depreciation on building - Lumpsum addition for cost of construction.

Analysis:

1. Addition on Household Expenses:
The appellant withdrew the appeal regarding the addition on household expenses of ?38,000, considering it insignificant. The Tribunal rejected the withdrawal and proceeded with the appeal.

2. Addition on Cost of Construction:
The main issue revolved around the addition of ?16,09,048 on the cost of construction due to differences between the valuation cell's estimation and the taxpayer's books. The appellant argued that the construction was completed by 31.03.2002, and the expenses were incurred by then. The appellant presented various documents supporting the construction's approval and completion, challenging the lower authorities' assessment for AY 2003-04. The department supported the lower authorities' decision on the addition.

3. Relief Towards Rate Difference and Self Supervision:
The appellant contended that the valuation cell and lower authorities did not consider differences in rates or the appellant's self-supervision while making the addition. The Tribunal observed that the authorities had not factored in these aspects and found discrepancies in the consideration of CPWD rates, state PWD rates, and self-supervision costs. In light of these findings, the Tribunal allowed a lumpsum addition of ?3.5 lakhs, providing relief of ?12,59,048 to the appellant.

4. Depreciation on Building:
The Tribunal addressed the issue of depreciation on the building raised by the appellant. However, no specific details were provided in the judgment regarding the Tribunal's decision on this matter.

5. Conclusion:
The Tribunal partially allowed the appeal, providing relief to the appellant by reducing the cost of construction addition. The decision was based on the discrepancies found in the valuation process and the completion status of the construction project. The Tribunal's order was pronounced on 16th July 2021, with detailed reasoning provided for the decision on the various issues raised in the appeal.