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TMI Blog2019 (10) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, it is an admitted fact that the books of account of the assessee are not rejected and the assessee has maintained all bills and vouchers which are not found to be false or untrue, therefore, without rejecting the books of account of the assessee, the Assessing Officer could not have referred the matter to the DVO for determination of the cost of construction and thereby making addition on the basis of such difference. Even otherwise also, it is an admitted fact that the difference between the cost of construction declared by the assessee at ₹ 85.22 crores as against the value determined by the DVO of ₹ 82.68 crores is only 2.54 crores which is less than 3% of the total cost of construction declared by the assessee. Thus, the difference being less than 3% is very insignificant. We find the Hon'ble Delhi High Court in the case of CIT vs. Ambience Developers and Infrastructure (P) Ltd., [ 2012 (8) TMI 157 - DELHI HIGH COURT] has held that for insignificant difference between cost of construction as per books of account and that estimated by the DVO, addition on the basis of DVO s report is not justified. Since, in the instant case, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 477.84 lac and ₹ 28.85 lac respectively has not been reduced from the cost of the project. (ii) In terms of built up area the ratio of Mall and Hotel is approximately 65.35 whereas 83% of construction cost has been allocated to the Mall only. In case of indirect cost 90% of the entire cost has been allocated to the Mall. Such allocation has no basis except one certificate dated 16.11.2008 issued by one M L Mutneja Co., which is a chartered accountant firm (the same is enclosed with the order as Annexure B). How can a chartered accountant allocate cost in a project, is best known to the assessee. Moreover, no working/document was furnished evidencing the basis on which the allocation was made. (iii) As a result of the above allocation what has happened is that cost per square feet of built up area of Mall works out to be ₹ 2316 whereas for Hotel same works out at ₹ 1013 per sq. ft. of built up area. In other words, the cost of per sq. ft of built up area of Mall is 2.3 times that of the Hotel for which there is absolutely no basis. 4. He, therefore, allocated the cost of the mall and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal:- Assessees appeal (ITA No.1087/Del/2013) Ground No. 1: The Ld. Commissioner of Income Tax (Appeals) - 1, New Delhi (hereinafter referred to as 'CIT(A)') has erred in law and in the fact circumstances of the case by passing the order dated 16.01.2013 under section 250 of the Income Tax Act, 1961 (hereinafter referred to as 'The Act'). The order passed by the CIT(A) is illegal being against the principles of natural justice and against the provisions of the Act. Ground No. 2: a) The CIT(A) has erred on facts and circumstances of the case in confirming the addition amounting to ₹ 90,50,894 on the basis of the valuation report of the District Valuation Officer, Jaipur ( DVO ). b) The CIT(A) has erred on facts and circumstances of the case in relying on the valuation report of DVO. c) The CIT(A) has erred on facts and circumstances in not appreciating the fact that DVO has determined the cost of Mall and Hotel on the basis of Plinth Area Rates and Cost Index Method for the basic structural work of the building and accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e over stated that cost to the extent of ₹ 2,54,44,286/-, which has been claimed in the income Tax Return as cost/expenditure but not supported with the tangible accretion in the assets. Therefore, this excess cost of Rs,2,54,44,286/- claimed by the assessee are to be disallowed. The part of this amount has already been taxed In the F.Y. 2007-08, relevant to A.Y. 2008-09 and the balance amount of ₹ 1,63,93,392/- is pertain to total project which has culminated/completed during the current financial year and liable to be taxed during the year, excess claim of cost and to be disallowed. Therefore, the amount of ₹ 1,63,93,392/- is added to the income of the assessee on account of Excess claim of Cost of Integrated Project. 8. He submitted that the report of the DVO was not available at the time of assessment although the Assessing Officer had referred the matter to the DVO. The report of the DVO was obtained before the appeal was heard by the CIT(A) and the copy of the same was forwarded to the Assessing Officer for his comments. After considering the report of the DVO, the ld.CIT(A) gave relief to the assessee to the extent of ₹ 9,67,27,979/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. We have also considered the various decisions cited before us. We find the Assessing Officer, in the instant case, made addition of ₹ 10,57,78,873/- to the total income on the ground that the assessee has over stated the cost of construction. We find the ld.CIT(A), after considering the report of the DVO and the remand report of the Assessing Officer to such DVO s report sustained the addition of ₹ 90,50,894/- and deleted an addition of ₹ 9,67,27,979/-. The reasons for such part relief granted by the CIT(A) have already been reproduced in the preceding paragraphs. It is the submission of the ld. counsel that when the books of account of the assessee are not rejected and the difference between the value determined by the DVO and the value declared by the assessee is insignificant, no addition on account of such difference in cost of construction can be made. 12. We find some force in the above argument of the ld. counsel. As mentioned in the earlier paragraph, the Assessing Officer while passing the order for assessment year 2010-11 has himself accepted the value determined by the DVO and has made proportionate addition for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We find the Hon'ble Delhi High Court in the case of CIT vs. Ambience Developers and Infrastructure (P) Ltd., (supra) has held that for insignificant difference between cost of construction as per books of account and that estimated by the DVO, addition on the basis of DVO s report is not justified. The relevant observation of the Hon'ble High Court reads as under:- 16. In view of the above, it is evident that the valuation in this case was uncritically accepted by the AO. As can be seen from a comparison of the valuation by the assessee, with that of the DVO, the variation is 3.86 %. This is a very minor variation, having regard to the large amounts involved. Besides, the fact that the AO did not examine the variations, with specific reference to any items of expenditure that were unreasonable, or showed wide variation, these differences can also be put down to differing perceptions, and the practice adopted by the concerned business activity. 17. In view of the above discussion, and having regard to the fact that the variation in valuation, in this case between what was disclosed by the assessee and what was indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding and accounts method for finishing items in the building, however the determination of cost by the appellant is based on actual cost which has actually been incurred and claimed by the appellant in its audited financial statements. h) The CIT(A) has erred on facts and circumstances in not appreciating the fact that the difference between the cost of construction as per the books of accounts and the estimated cost of construction (according to the DVO's report) is only a marginal, and an acceptable one, therefore, the cost determined by the appellant should be considered in view of the decision of Hon'ble Delhi High Court i.e., Commissioner of Income-tax vs. Ambience Developers and Infrastructure (P.) Ltd. (IT Appeal Nos. 195 to 199 203 of 2012) July 27, 2012. Hence, the appellant prays that the total addition confirmed at ₹ 90,50,894 is only on surmises conjectures and should be deleted. Ground No.3: The appellant prays that he may be allowed to add, amend, alter or forego any of the above grounds of appeal as the circumstances may warrant. Ground No.4: The abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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