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TMI Blog1999 (11) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated by the DVO at Rs. 19,89,000 which was based on the scientific CPWD rates as against the PWD rates of the State based on order X-3 which is meant for determining the rent of the building ? " The respondent-assessee constructed a hotel building during the period between 1st Oct., 1981, to 15th Oct., 1984. As per his say, he maintained regular books of account for construction of the hotel building. The expenses of the construction were completely vouched except the expenses to the extent of Rs. 71,000. They were not supported by vouchers because the nature of the expenses was such that the maintenance of the vouchers was not practicable. The respondent-assessee filed an yearwise break-up of the day-to-day expenses incurred as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated the cost of the building at Rs. 19,89,000 as estimated by the Department Valuation Officer based on the CPWD rates. Thus, the AO made an addition of Rs. 6,30,807 as unexplained investment in the hotel. The assessee preferred an appeal against the said addition before the CIT(A). The CIT(A) accepted the cost as worked by the registered valuer on the itemwise basis at the rate of each item issued by the State PWD. In the opinion of the CIT(A) as the construction account maintained is subject to full verification both with regard to the material and labour used and the construction made, the AO was justified in rejecting the cost of construction shown as per the books of account. On scrutiny of the record, the CIT(A) also found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted the rates of Rajasthan PWD. The Department filed an application under s. 256(1) of the IT Act to the Tribunal requesting that the question of law arises out of the order of the Tribunal dt. 29th Nov., 1994, and the same may be referred to this Court. The Tribunal by order dt. 20th March, 1996, rejected the application on the ground that no question of law arises out of the order of the Tribunal. 3. It is contended by Mr. Sundeep Bhandawat, learned counsel for the Revenue, that the Tribunal has committed an error in not considering that it had already referred a similar question of law under s. 256(1) of the IT Act before this Court in the case of D.B. IT Ref. No. 115/1995. Learned counsel has placed before us a copy of the order in D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also submitted that the finding of the Tribunal is based on appreciation of material on record and, as such, no question of law arises from the order of Tribunal. 4. We have considered the rival contentions. At the first instance, we are in agreement with the view of the CIT(A) that in the facts of the case, the AO was in error in making reference to the Valuation Officer under s. 55A of the Act to ascertain the fair market value of the hotel building. Sec. 55A of the Act reads as follows : "55A. Reference to Valuation Officer.---With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the AO may refer the valuation or capital asset to a Valuation Officer : (a) in a case where the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where value of the asset is claimed by the assessee on the basis of regular books of account maintained for the purpose of construction of the asset and not on the basis of the valuation of the registered valuer, it win not be open for the AO to make a reference to the District Valuation Officer unless the AO forms an opinion that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so. Thus, the powers under s. 55A cannot be exercised in a routine manner. For invoking sub-cl. (ii) of cl. (b) of s. 55A, the AO is required to form an opinion on the basis of material on record that reference to the District Valuation Officer for ascertaining the fair market value of the asset is necessary having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of broad guidelines and in its applications to individual case, may vary on the facts of a particular case. Thus, it is ultimately for the AO to appreciate the material on record and satisfy, as to the correct valuation of the asset. A reference to the District Valuation Officer would arise only in a case where the AO is not satisfied with the account of construction produced by the assessee or where such account is kept and the assessee relies on the valuation report of the registered valuer. In a case where the AO does not agree with the account submitted by the assessee with respect to the cost of construction, there must exist some strong reasons to disagree. 7. In view of the aforesaid, the question, whether the valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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