COMMISSIONER OF INCOME TAX Vs. HARCHAND PALACE

JUDGEMENT

(1.) THE Revenue has filed these two appeals under s. 260A of the Income -tax Act, 1961 (for short "the Act"), against the whereby its appeals against the order of the Commissioner of Income -tax (Appeals) [for short "the CIT(A)"], dt. 10th

(2.) DURING the course of proceedings relating to the asst. yrs. 1989 -90 and 1990 -91, the AO referred the matter of estimated the cost of construction at Rs. 42,26,000 as against the sum of Rs. 24,40,000 debited in the books of account was bifurcated year -wise as under : Assessment year Investment as per assessee Cost estimated by Difference DVO 1987 -88 7,05,000 12,21,016 5,16,016 1988 -89 4,02,000 6,96,418 2,94,418 1989 -90 8,12,000 14,06,248 5,94,248 1990 -91 5,11,000 8,85,033 3,74,033 1991 -92 10,000 17,267 7,267 The report of the DVO was confronted to the assessee during the course of assessment proceedings relating to the asst. yrs. 1989 -90 and 1990 -91. The assessee submitted its objections to this report and also filed the valuation report of an approved registered valuer in support of the investment as per books. The AO referred the objections of the assessee along with the report of its approved registered valuer to the DVO for his comments. The DVO did not respond to the objections of the assessee nor did he comment on the report of the approved registered valuer. The AO, however, allowed deductions for self -supervision at 10 per cent and builder's efforts at 1.5 per cent from the cost of construction estimated by the DVO and consequently made additions of Rs. 4,92,428 and Rs. 2,74,033 on account of unexplained investment in the construction in the asst. yrs. 1989 -90 and 1990 -91, respectively. The assessee preferred appeals for the asst. yrs. 1989 -90 and 1990 -91 before the CIT(A), who after considering the submissions of the assessee, deleted the additions. He observed that the report of the approved registered valuer furnished by the assessee was based on detailed calculations of each item and was more comprehensive and scientific as compared to the report of the DVO, who had neither appeared before him personally nor had offered any comments on the various objections raised by the assessee. The CIT(A) also held that even otherwise the AO could not make any addition under s. 69 of the Act on account of unexplained investment in the construction of cinema without first rejecting the books of account maintained by the assessee.

(3.) THE Revenue preferred appeals before the Tribunal for the two assessment years, viz., asst. yrs. 1989 -90 and 1990 - of the approved registered valuer, which was based on detailed measurements and in which the cost of construction was estimated at the scheduled rates of the PWD, was more scientific and reliable. Accordingly, it was held that without pointing out any discrepancy in the said report, no addition could be made. The Tribunal also upheld the additional reason for deleting the addition that unless and until the books of account were rejected, no addition on account of unexplained cost of construction could have been made.