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TMI Blog1984 (4) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... over the estimate of cost at Rs. 11,58,000 made by the Approved Valuer. Since an addition of more than 1,00,000 was involved, he made out draft assessment and sent to the IAC (Assessment) under s. 144 for obtaining his directions. The IAC (Assessment) went into the facts, but he was not satisfied that the ITO had correctly proceeded in the matter by proceeding on the basis of the estimate made by the Valuation Officer at Rs. 16,91,757. He, no doubt, found that there was some omission in the estimate, made by the Valuation Officer, but he could not find support for the estimate of Rs. 16,91,757, made by the Valuation Officer. According to him, the estimate made by the Approved Valuer had omitted to take into consideration the cost of construction, several items, like extra temporary structure, the platform, Electric Motor on hand pump etc. Therefore, according to the IAC, the cost of the structure had been omitted by the Approved Valuer to be included in the estimate made by him. According to him, the addition to the estimate made by the Approved Valuer, had to be placed at Rs. 43,000. This would raise the estimate of construction to nearly Rs. 12,00,000. He supported this by the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 19,671, thereby leaving the difference at Rs. 87,585 as against the cost of construction actually shown in the books amounting to Rs. 11,42,744 or the difference works out to about 7.50 per cent. Thus, in such circumstances, it is very difficult to, firstly, show that there was an under-statement and, secondly, to quantify the same in this manner." The CIT (A) quoted the instance of a decision by the Amritsar Bench in the case of Aanam Cinema vs. CIT, ITA No. 121 (ASR)/77-78 for the asst. yr. 1972-73 to find support for the plea that a small margin of error either way should be ignored because the estimate cannot represent the exact cost of the building which depicts so many factors including the efficiency of the owner himself in achieving the economy in the purchase of various types of materials and also in his bargaining power with the Contractor or even exact type of material used. Taking these things into account, the CIT (A) did not find that the addition of Rs. 2,02,802 was well-founded on facts and, therefore, he deleted the same. 4. Revenue felt aggrieved and has brought this issue before the Tribunal. According to the departmental representative, the CIT(A) was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that Revenue has not been able to make out a case to enable us to interfere with finding of the CIT (A), and reverse it to maintain the addition, made by the ITO. We find force in the finding of the CIT (A) that the two authorities have proceeded only on the basis of an estimate. There were three estimates, one made by the Approved Valuer, the other was by the Valuation Officer and the third was the estimate made by the IAC. The IAC rejected the estimate made by the Valuation Officer, which disregarded the fact that the rate of cost of construction applicable to the buildings, which required sophisticated construction, would be applied to work out the cost of construction of godowns, which did not require any specification at all. But, when he proceeded to make the estimate on the basis of the estimate made by the Approved Valuer, he caused an addition of Rs. 43,000 representing the cost of structures, ignored by the Approved Valuer, to be made in his estimate. The Approved Valuer had placed the value at Rs. 11,58,000, which, together with the addition, would go in the neighbourhood of Rs. 12,00,000 only. Where was the justification for the IAC to place the estimate at Rs. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that in the facts and circumstances of the case, as discussed in the aforesaid paragraphs, there would be no justification in making any addition." In our view, this aspect of the matter having been completely ignored by the ITO and the IAC in adopting the Approved Valuer's estimate, did not make their estimate bearing resemblance to the realities of the situation at all, which could be relied upon to discredit the actual expenditure contained in the books. If we after making the adjustment in the estimate look at the matter, we would not find any appreciable discrepancy between the estimate and the actual expenditure. There is another error noted by us in adopting the said estimate. It is not necessary after the above observation but as we are on the subject, we may allude to it. The ITO and later-on the CIT(A) made the mistake of excluding the entire sum of Rs. 1,00,796 representing interest payments. The ITO has observed as under: "Further, it is seen that the following amounts of interest paid to the bank on loan taken for the construction, are also included in the total cost debited in the books by the assessee: Rs. 12,082 Rs. 735 Rs. 33,438 Rs. 34,523 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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