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TMI Blog2010 (7) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of the commercial building at Khurram Nagar, Lucknow at ₹ 3,66,07,977 covering the asst. yrs. 1995-96, 1996-97 and 1997-98. The AO made reference to the DVO and the DVO vide his report dt. 28th Oct., 1997, estimated the value at ₹ 4,70,40,000. The DVO has given the estimate from December, 1994 to March, 1997. As for the year-wise break-up, the assessee had declared investment of ₹ 5,02,144 in the assessment year under consideration and whereas the DVO estimated the value at ₹ 6,45,238. The AO considered the difference in the cost as declared by the assessee and the cost as estimated by the DVO, which comes to ₹ 1,43,094 as unexplained investment and added the same to the total income of the assessee. 4. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT(A). 5. The learned CIT(A), after considering the submissions of the assessee, held as under : "4. I have given careful consideration to the matter. On the point of law Hon'ble Rajasthan High Court in the case of CIT v. Pratapsingh Amrosingh Rajendra Singh [1993] 200 ITR 788 (Raj.) ruled as under : 'We have considered the matter. In re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Taxman 82 (Delhi)(Mag.). 5. In view of the above I fully agree with Shri S.K. Garg, FCA that the learned AO was not justified in seeking assistance of the DVO even when no defects were pointed out in the audited books of account of the appellant. Entire addition deserves to be struck off on this point of law alone. 6. Coming to the facts of the case I find that the appellant disclosed total cost of construction of the commercial building at Khurram Nagar, Lucknow at ₹ 3,71,58,385 (including cost of lift ₹ 5,50,408) covering the asst. yrs. 1995-96, 1996-97 and 1997-98 and the appellant's registered valuer determined total cost of construction at ₹ 3,69,15,900 but the DVO, Kanpur estimated the value of ₹ 4,70,40,000. It has been argued before me that if the objections of the appellant are accepted, there will be practically no addition. 7. It has been stated that the DVO has added 2 per cent for builder's efforts. In fact, the same should have been deducted because builder's endeavour is to keep the cost as low as possible. The DVO has also allowed 6.25 per cent for carrying out the work under self-supervision and self-procurement instead of 10 per cent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks out to ₹ 3,73,84,049 as against value of ₹ 3,71,58,385 shown by the assessee as per audited books of account. The difference is within 10 per cent and hence can be ignored. 11. In view of the facts and circumstances of case and position of law as stated by me above, I am unable to sustain the addition of ₹ 1,43,094 made by the AO as unexplained investment in the building under s. 69 of the IT Act, 1961. The addition of ₹ 1,43,094 is, therefore, deleted." 6. We have heard the rival submissions and have also perused the materials available on record. Shri Vivek Mishra, learned CIT-Departmental Representative heavily relied on the order of the AO. On the other hand, Shri Amit Shukla, advocate, learned counsel for the assessee submitted that the assessee is a limited company which had come into existence with the main object of carrying on the business as builders. In pursuance of and for attaining its main object, the assessee company had started the construction of a complex during the year under appeal and the direct cost as had been incurred on the said project, is made up of the following : Opening stock-in-hand Purchases 3,86,839 (-) Closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee submitted that the statements giving list of purchases and supporting bills etc. were filed before the authorities below. Shri Amit Shukla, learned counsel for the assessee also relied on the following decisions : (1) CIT v. Meerut Cement Co. (P.) Ltd. [2006] 202 CTR (All.) 506; (2) K.K. Seshaiyer v. CIT [2001] 166 CTR (Mad.) 527 : (2000) 246 ITR 351 (Mad.); (3) CIT v. Hotel Joshi [1999] 157 CTR (Raj.) 369 : [2000] 242 ITR 478 (Raj.); (4) Order dt. 11th Nov., 2009 passed by the Tribunal, Lucknow Bench in the case of ITO vs. Syed Builders (P) Ltd. in ITA Nos. 303, 399 and 400/Luck/2009. 6.2 It is true that for the purpose of making addition towards unexplained investment, the AO was under legal obligation to verify the books and vouchers maintained by the assessee in support of the cost of construction shown by the assessee and at the same time, the AO should have pointed out specific defects in the books of account regularly maintained by the assessee. In the case of K.K. Seshaiyer (supra), the Hon'ble Madras High Court held that when the actual cost of construction is duly recorded in the books of account, the credibility of which is not doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee were duly audited. In fact, the AO has not pointed out any specific defect/discrepancy in the books of account regularly maintained by the assessee relating to the cost of construction of the building in question. In our considered view, the valuation report of DVO is only information and estimate of cost of construction carried on by the assessee and this report also suffers from material defects as pointed out by the learned CIT(A) in para 9 of the impugned order. The Revenue has also not pointed out a single instance to show that the assessee has actually incurred expenditure more than that recorded in the books of account. In the case of Meerut Cement Co. (P) Ltd. (supra), the Hon'ble Allahabad High Court held that the report of the DVO suffered from material defects and the Revenue has not pointed out a single instance of unrecorded expenditure, addition under s. 69B made only on the basis of DVO's report could not be sustained. The Hon'ble jurisdictional High Court in the aforesaid case also held that if the assessee maintained books of account in the regular course of business and necessary entries relating to the expenditure towards cost of construction are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my appellate order dt. 15th Oct., 1999 in Appeal No. l5/Circle-2(3)/LKO/1998-99 for asst. yr. 1995-96. On going through the appellate order I find that though I have decided the appeal for asst. yr. 1995-96, the observation made covers the entire valuation which spreads over to asst. yrs. 1996-97 and 1997-98. Therefore, I agree to the submission made by Mr. Garg, learned Authorised Representative. For the reasons given by me in the aforesaid appellate order for the asst. yr. 1995-96, the additions of ₹ 44,25,800 for asst. yr. 1996-97 and ₹ 58,63,126 for asst. yr. 1997-98 are deleted. Relief Asst. yr. 1996-97 ₹ 44,25,800 Asst. yr. 1997-98 ₹ 58,63,126" 11. We have heard the rival submissions. In the assessment order dt. 26th March, 2002 relating to the asst. yr. 1996-97, the AO has observed that as per the assessee's books of account, the total investment in the property at Khurram Nagar is at ₹ 1,55,30,993, whereas the investment has been estimated by the DVO at ₹ 1,99,56,769. Thus, there was a difference of ₹ 44,25,800 between the report of the AO and the books of account regularly maintained by the assessee. The AO has categ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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