Tarun Rastogi, Dehradun vs Department Of Income Tax

2. The only grievance is against treating cost of investment in

building at `1,12,87,469/- as against `1,37,39,677/- determined by

the DVO.

ITA No.28/Del/2012

3. Briefly stated, the facts of the case are that a Survey was

conducted u/s 133A on 24.6.2004, in which the assessee

surrendered a sum of `2 lac for the AY 2004-05 and `19 lac for the

AY 2005-06. The return of income was filed declaring, inter alia,

'Income from other sources' at `12,08,835/-, including surrender of

`12,00,000. The AO observed that the assessee failed to offer the

entire surrendered amount in the course of survey in the return of

income, as only a sum of `12 lac was shown as miscellaneous

income. Valuation of building of commercial complex at C-1/101,

Indira Nagar, Opposite State Bank of India, Dehradun (Uttarakhand)

of the assessee was referred to the Departmental Valuation Officer

(DVO). The DVO determined investment in the property at `1.37

crore. On being called upon to explain the reasons for difference in

the cost of building as shown by the assessee and as determined by

the DVO, the assessee stated that the total expenditure incurred by

him in the construction of this building amounted to `1.05 crore.

Apart from that, it was submitted that there were several objections

against the DVO's report, including the DVO adopting CPWD rates

for valuation of the property and not allowing self-supervision

deduction @ 10%. Rejecting the books of account of the assessee,

2 ITA No.28/Del/2012

the AO adopted the value determined by the DVO and made

addition of `31.52 lac (`1.37 crore as estimated by the DVO minus

`1.05 crore as shown by the assessee in its books of account). The

ld. CIT(A) restricted the addition to `7 lac. The Revenue is

aggrieved against the relief of `24.52 lac allowed by the ld. first

appellate authority.

4. We have heard the ld. DR and perused the relevant material

on record. There is no appearance from the side of the assessee

despite notice. As such, we are proceeding to dispose of this matter

ex parte qua the assessee. It is noticed that pursuant to the Survey

conducted u/s 133A, the assessee surrendered a sum of `19 lac for

the assessment year under consideration. Out of that, a sum of `12

lac was offered for taxation and the CIT(A) enhanced the income

with the remaining amount of `7 lac, thereby attributing the total

surrendered income to the construction cost. It can be seen that the

DVO determined the value of the property at `1.37 crore, as

against `1.05 crore shown by the assessee in its books of account.

If the surrendered income of `19 lac is further taken into

consideration, then, the assessee's investment in the building would

3 ITA No.28/Del/2012

come to `1.24 crore, thereby leaving a gap of `13 lac in the DVO's

report as well as the assessee's valuation.

5. There is no dispute on the fact that the DVO adopted CPWD

rates for the estimation of the value of construction. It is settled

legal position that only the State PWD rates are to be adopted and

not the CPWD rates. The Hon'ble Allahabad High Court in CIT vs.

Raj Kumar (1990) 182 ITR 436 (All) has upheld the application of

State PWD rates instead of CPWD rates. The Hon'ble Punjab &

Haryana High Court in CIT vs. Harchand Palace (2004) 269 ITR 251

(P&H), has also upheld the view of the tribunal in holding that PWD

rates should be applied. Once it is held that the State PWD rates

are to be applied instead of CPWD rates, then, the question arises

about the adjustment to be allowed for converting the valuation of

property done by the DVO from CPWD to State PWD rates. In this

regard, it is observed that the Hon'ble Rajasthan High Court in CIT

vs. Smt. Prem Kumari Murdia (2006) 296 ITR 508 (Raj), upheld the

Tribunal's view in allowing deduction of 20% in converting the

valuation from CPWD to PWD rates first. Apart from that, there are

several decisions in which it has been held that the difference upto

4 ITA No.28/Del/2012

20% in DVO's report and that shown by the assessee should be

ignored due to this reason.

6. Moreover, there is always bound to be some difference in the

actual cost of construction and as estimated by a Valuer or a DVO.

The Hon'ble J&K High Court in Honest Group of Hotels Pvt. Ltd. Vs.

CIT (2002) 177 CTR (J&K) 232, has held that 10% deduction should

be allowed on this score.

7. Leaving aside all other adjustments claimed by the assessee, if

we concentrate only on these two aspects, the addition should not

have been made up to a difference of 30% between the value

adopted by the DVO and that recorded by the assessee in its books

of account. As against that, we find that the actual difference

between the value disclosed by the assessee at `1.05 crore and that

determined by the DVO at `1.37 crore is less than 23% of the DVO's

valuation. If we allow the effect of surrender of `19 lac towards the

investment in property, then, the difference would be around 10%

of the DVO's report. Viewed from any angle, this difference is less

than 30% as considered above warranting no addition on

accounting of unexplained investment in the property. We,

therefore, uphold the impugned order deleting such addition. 5 ITA No.28/Del/2012

8. In the result, the appeal is dismissed.

The order pronounced in the open court on 14.01.2015.

Sd/- Sd/-

[A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated, 14th January, 2015. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.

6