Smt Rakurthi Jahnavi, Visakhapatnam V. THE ITO, WARD -3(1), VISAKHAPATNAM., Visakhapatnam

ITA 7/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2161 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Unexplained investment; Value adopted by valuation officer; Gift; Depreciation; Valuation report; Assessment record
• Section: 32; 147; 69; 148

Judgement Text

ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.7/VIZAG/2013 ( / ASSESSMENT YEAR : 2006-07) RAKURTHI JAHNAVI VISAKHAPATNAM VS. ITO WARD-3(1) VISAKHAPATNAM [ PAN: AHMPK 6932C ] ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR #$ / RESPONDENT BY : SMT. D. KOMALI KRISHNA, DR ( / DATE OF HEARING : 07.12.2015 ( / DATE OF PRONOUNCEMENT : 22.01.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 30-11-2012 AND IT PERTAINS TO T HE A.Y. 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 2 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM, IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPA TNAM, IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE INIT IATION OF PROCEEDINGS U/S.147 OF THE I.T. ACT, IS IN ACCORDANCE WITH LAW, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. AS THE VERY INI TIATION OF THE PROCEEDINGS U/S.147 OF THE I.T. ACT, ARE NOT IN ACC ORDANCE WITH LAW THE ASSESSMENT COMPLETED BY THE ASSESSING AUTHORITY IS OH INITIO VOID HENCE, THE APPELLANT PRAYS FOR RELIEF. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), V ISAKHAPATNAM, IS ALSO NOT JUSTIFIED IN COMING TO HIS CONCLUSION THAT THE VALUATION MADE BY THE DISTRICT VALUATION OFFICER, WAS QUITE REASONABL E, WITHOUT PROPERLY APPRECIATING THE OBJECTIONS RAISED BY THE APPELLANT AND ALSO THE SUBMISSIONS MADE AGAINST THE EXCESS AREA TAKEN BY T HE DISTRICT VALUATION OFFICER THAN THE AREA CONSTRUCTED BY THE APPELLANT AND ALSO THE OTHER DEFECTS POINTED OUT BY THE APPELLANT IN THE R EPORT OF THE DISTRICT VALUATION OFFICER. AS THE ESTIMATED COST OF CONSTRU CTION MADE BY THE DISTRICT VALUATION OFFICER WAS ABNORMALLY HIGH, THE OBJECTIONS RAISED BY THE APPELLANT IN THIS REGARD MAY KINDLY BE CONSIDER ED FAVOURABLY AND RELIEF MAY KINDLY BE GRANTED ACCORDINGLY. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS), VISAK HAPATNAM, IS ALSO NOT JUSTIFIED IN ALLOWING DISCOUNTS ONLY UP TO 10% EVEN THOUGH THE APPELLANT HAD SPECIFICALLY SOUGHT DISCOUNT OF 15% F OR HIGHER RATE ADOPTED BY THE DISTRICT VALUATION OFFICER AND FOR S ELF SUPERVISION TO THE EXTENT OF 10% TOTALLING TO 25% AND ALSO THE DISCOUN T FOR THE COST FOR THE EXCESS AREA TAKEN BY THE DISTRICT VALUATION OFFICER . HENCE, THE APPELLANT PRAYS FOR RELIEF ACCORDINGLY. 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS), VISAK HAPATNAM, SIMPLY STATED IN HIS ORDER THAT THE DECISIONS RELIED UPON BY THE APPELLANT ARE NOT SUPPORTING THE APPELLANT'S CASE, WITHOUT DISTINGUIS HING THE FACTS OF THE APPELLANT'S CASE WITH THAT OF THE FACTS OF THOSE CA SE RELIED UPON BY THE APPELLANT. HENCE, THE DECISION TAKEN BY THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE WAS NOT IN AC CORDANCE WITH LAW. THE APPELLANT, THEREFORE, PRAYS THE HONOURABLE LT.A .T., VISAKHAPATNAM BENCH, FOR RELIEF. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF APPEAL HEARING, THE APPELLANT PRAYS FOR RELIEF. ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 3 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESSEE IS AN INDIVIDUAL, DID NOT FILED THE RETURN FOR THE ASSESSMENT YEAR 20 06-07. THE ASSESSING OFFICER, BASED ON THE INFORMATION AVAILABLE ON RECO RD, AFTER DULY RECORDING THE REASONS, RE-OPENED THE ASSESSMENT U/S 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE AC T) BY ISSUING NOTICE U/S 148 OF THE ACT. IN RESPONSE TO NOTICE U/S 148 OF THE ACT, THE ASSESSEE HAS FILED HER RETURN OF INCOME ON 9.4.2010 DECLARING A TOTAL INCOME OF RS.93,690/-, BESIDES AGRICULTURAL INCOME OF RS.2,45,000/-, SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AS SESSMENT AND ACCORDINGLY NOTICE U/S 143 (2) OF THE ACT DATED 13. 4.2010 WAS ISSUED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. NOTICED THAT THE ASSESSEE HAS CONSTRUCTED A RESIDENTIAL HOUSE PROPER TY AT VISAKHAPATNAM AND ALSO PURCHASED 7 ACRES OF AGRICULTURAL LAND FOR A CONSIDERATION OF RS.7,28,800/-. THEREFORE, ISSUED A SHOW CAUSE NOTI CE AND ASKED HER TO EXPLAIN THE SOURCE FOR THE PURCHASE OF AGRICULTURAL LAND AS WELL AS INVESTMENT IN CONSTRUCTION OF HOUSE PROPERTY. 3. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEES AUTHORIZED REPRESENTATIVE APPEARED AND FILED WRITTEN SUBMISSIO N, WHEREIN THE ASSESSEE HAS STATED THAT SHE HAS INHERITED AGRICULT URAL LAND MEASURING 6.45 ACRES AT POLAVARAM VILLAGE, WEST GODAVARI DIST RICT AND 11 ACRES AT ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 4 GANGOULU VILLAGE OF W.G. DIST. SHE HAS ALSO STATED THAT THE RESIDENTIAL SITE AT VISAKHAPATNAM WAS GIFTED BY HER MOTHER. SH E FURTHER EXPLAINED THAT THE SOURCE FOR THE INVESTMENT FOR PURCHASE OF AGRICULTURAL LAND WAS MADE OUT OF AGRICULTURAL INCOME OF RS.2,45,000/- AN D THE BALANCE AMOUNT WAS BORROWED FROM FRIENDS AND RELATIVES. AS REGARDS THE CONSTRUCTION OF HOUSE PROPERTY, SHE CLAIMED THAT TH E RESIDENTIAL SITE WAS GIFTED BY HER MOTHER AND THE SOURCE FOR THE CONSTRU CTION WAS OUT OF THE AGRICULTURAL INCOME OF THE EARLIER YEARS, HOWEVER, FAILED TO PRODUCE ANY BILLS & VOUCHERS FOR THE AMOUNT INCURRED FOR CONSTR UCTION OF HOUSE PROPERTY. THE A.O., DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, REFERRED THE VALUATION OF BUILDING TO THE DEPARTMEN TAL VALUATION OFFICER (DVO) TO ASCERTAIN THE CORRECT AMOUNT INVESTED IN C ONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY. THE DVO HAS SUBMITTED HIS VALUATION REPORT, WHEREIN QUANTIFIED THE INVESTMENTS IN RESIDENTIAL H OUSE AT RS.68,30,949/- WHICH WAS SPREAD FROM APRIL, 2005 TO MARCH, 2008. THE D.V.O., BASED ON THE AMOUNT OF INVESTMENT MADE BY T HE ASSESSEE FOR VARIOUS YEARS, ESTIMATED THE COST OF CONSTRUCTION F OR THE ASSESSMENT YEAR UNDER CONSIDERATION AT RS.51,17,042/-. THE AS SESSING OFFICER, CONSIDERING THE DVOS REPORT, AN OPPORTUNITY HAS BE EN ACCORDED TO THE ASSESSEE VIDE HIS OFFICE LETTER DATED 15.10.2010 AL ONG WITH COPY OF THE VALUATION REPORT, IN ORDER TO ADOPT THE VALUE OF IN VESTMENT MADE BY THE ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 5 ASSESSEE AS ESTIMATED BY THE VALUATION OFFICER. IN RESPONSE TO THE NOTICE, THE ASSESSEE HAS SUBMITTED THAT SHE HAS INC URRED AN AMOUNT OF RS.21,12,437/- AND CONTENDED THAT THE DVO HAS ARRIV ED AT THE COST OF CONSTRUCTION ON THE ROUTINE MANNER AND THE VALUES A DOPTED WERE EXORBITANTLY HIGH. HOWEVER, THE AO, AFTER CONSIDE RING THE EXPLANATIONS OFFERED BY THE ASSESSEE, DETERMINED THE VALUE OF IN VESTMENT IN CONSTRUCTION OF HOUSE PROPERTY AT RS.51,17,042/- AN D THE DIFFERENCE OF RS.30,04,605/- BETWEEN THE VALUE ARRIVED AT BY THE DVO OF RS.51,17,042/- AND THE AMOUNT DISCLOSED BY THE ASSE SSEE OF RS.21,12,437/- HAS BEEN TREATED AS UNEXPLAINED INVE STMENT AND BROUGHT TO TAX U/S 69 OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CONTENDED THAT THE A.O. WAS ERRED IN CONSIDERING THE DVOS RE PORT, AS THE DVO HAS ARRIVED AT THE COST OF CONSTRUCTION BY APPLYING THE PLINTH AREA AND COST INDEX METHOD, WHEREAS THE ASSESSEE HAS OBTAINED A V ALUATION REPORT FROM THE REGISTERED VALUER, APPROVED BY THE CBDT, H AS VALUED THE BUILDING BY APPLYING DETAILED ESTIMATE METHOD. THE ASSESSEE FURTHER CONTENDED THAT THE DVO HAS VALUED THE BUILDING AT R S.68.31 LAKHS, WHEREAS THE REGISTERED VALUER HAS ARRIVED AT A VALU ATION OF ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 6 RS.29,80,582/-. THE ASSESSEE FURTHER SUBMITTED THAT THERE IS A BIG DIFFERENCE BETWEEN PLINTH AREA ESTIMATED BY THE DVO AND REGISTERED VALUER. THE ASSESSEE HAS CONSTRUCTED 432.52 SQ.MTRS . ONLY, WHICH WAS FURTHER SUPPORTED BY REVENUE RECORDS OF MUNICIPAL A UTHORITIES, WHEREIN THE MUNICIPAL AUTHORITIES HAVE MEASURED THE BUILDIN G AND AS PER THE MUNICIPAL AUTHORITIES, THE TOTAL BUILT UP AREA WAS 429.6 SQ.MTRS., AS AGAINST THIS, THE DVO HAS TAKEN 597.33 SQ.MTRS., WH ICH IS TOTALLY INCORRECT. THE DVO HAS ARRIVED AT THE PLINTH AREA PURELY ON ESTIMATION BASIS WITHOUT ANY BASIS, WHEREAS THE REGISTERED VAL UER HAS VALUED THE BUILDING ON ITEMWISE BASIS WHICH IS MORE SCIENTIFIC AND AUTHENTICATED. THEREFORE, THE A.O. WAS NOT CORRECT IN COMPLETELY I GNORING THE REGISTERED VALUER REPORT WHILE DETERMINING THE COST OF CONSTRU CTION. THE ASSESSEE FURTHER SUBMITTED THAT THE DVO HAS NOT GIVEN THE DE DUCTION TOWARDS RATE DIFFERENCE BETWEEN THE CPWD RATES AND LOCAL RA TES, AS THE LOCAL RATES ARE ALWAYS LESSER THAN THE CPWD RATES FIXED BY THE CENTRAL GOVERNMENT. IN SUPPORT OF HER CONTENTION, SHE HAS R ELIED UPON THE JUDGEMENT OF HONBLE ITAT HYDERABAD BENCH IN THE CA SE OF VINOD KUMAR AGARWAL VS. ACIT REPORTED IN 107 ITR 477. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT THE DVO HAS ADOPTED MORE CONSTRUCTED AREA, THAN WHAT ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 7 WAS ACTUALLY CONSTRUCTED AND THEREFORE, THE DVOS M EASUREMENTS WERE INCORRECT. THEREFORE, THE CIT(A) DIRECTED THE A.O. TO OBTAIN THE COMMENTS OF THE DVO ON THE ISSUES POINTED OUT BY TH E ASSESSEE. THE EXECUTIVE ENGINEER, VALUATION CELL, I.T. DEPARTMENT IN HIS LETTER FURNISHED HIS COMMENTS, WHEREIN HE HAS DENIED ALL T HE CLAIMS MADE BY THE ASSESSEE. IN VIEW OF THE ABOVE COMMENTS OF THE DVO, THE A.R. WAS CALLED UPON TO FURNISH THE COMMENTS OF THE ASSESSEE REGARDING THE CONTENTION OF THE DVO. IN REPLY, THE ASSESSEE SUBM ITTED THAT SHE HAS UTILIZED THE MATERIALS FROM DISMANTLED HOUSE PROPER TY FOR CONSTRUCTION OF NEW HOUSE PROPERTY AND ALSO SHE HAS SELF-SUPERVISED THE CONSTRUCTION, THEREFORE, THE COST OF CONSTRUCTION IS QUITE LESS, WHEN COMPARED TO THE VALUE ADOPTED BY THE DVO. THEREFORE, REQUESTED TO CONSIDER THE REGISTERED VALUER REPORT FOR ASCERTAINING THE COST OF CONSTRUCTION. HOWEVER, THE CIT(A) AFTER CONSIDERING THE ASSESSEE EXPLANATIONS, REMAND REPORT OF THE AO, DVO REPORT AND REGISTERED VALUER REPORT, DISMISSED THE CLAIM OF THE ASSESSEE AND HELD THAT T HE VALUATION REPORT OF THE DVO IS FAIR AND REASONABLE AND THEREFORE THE AO HAS RIGHTLY ADOPTED THE SAME. HOWEVER, CONSIDERING THE APPELLANTS CLA IM REGARDING SELF- SUPERVISION AND USE OF MATERIALS FROM DISMANTLED PR OPERTY, DIRECTED THE A.O. TO ALLOW 10% DEDUCTION TOWARDS COST OF CONSTRU CTION ARRIVED AT BY THE DVO AND RE-COMPUTE THE UNEXPLAINED INVESTMENTS FOR THE ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 8 CONSTRUCTION OF THE PROPERTY. AGGRIEVED BY THE CIT (A)S ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. A.R. OF THE ASSESSEE, SUBMITTED THAT THE CIT(A) WAS ERRED IN NOT CONSIDERING THE REGISTERED VALUERS REPORT F OR ASCERTAINING THE COST OF CONSTRUCTION OF THE BUILDING. THE A.R. FURTHER SUBMITTED THAT THE DVO MEASURED THE CONSTRUCTED AREA AT 597.33 SQ.MTRS., A S AGAINST THE ACTUAL CONSTRUCTED AREA OF 432.33 SQ.MTRS WHICH IS TOTALLY INCORRECT. THE HOUSE WAS MEASURED BY THE MUNICIPAL AUTHORITIES, FOR MUNI CIPAL TAX ASSESSMENTS AND AS PER THEIR RECORDS THE CONSTRUCTE D AREA WAS AT 429.6 SQ.MTRS. THEREFORE, THERE IS A DIFFERENCE BETWEEN PLINTH AREA ADOPTED BY DVO AND THE REGISTERED VALUER. THE A.R. SUBMITTE D THAT THE REGISTERED VALUER REPORT IS MORE SCIENTIFIC, AS HE HAS ADOPTED THE DETAILED VALUATION METHOD INSTEAD OF PLINTH AREA RA TES AND COST INDEX METHOD, THEREFORE THE REGISTERED VALUER REPORT SHOU LD BE ACCEPTED. THE A.R. FURTHER SUBMITTED THAT WHEN THE REGISTERED VAL UER IS ABLE TO ARRIVE AT THE COST OF CONSTRUCTION BY APPLYING THE DETAILE D ESTIMATE METHOD, THEN WHY THE DVO HAS NOT CONSIDERED THE DETAILED VA LUATION METHOD WHICH IS MORE BENEFICIAL TO THE ASSESSEE. THE DVO, WHILE ADOPTING THE RATES FOR ARRIVING THE COST OF CONSTRUCTION OF THE PROPERTY DID NOT MENTION AS TO HOW THESE RATES WERE ARRIVED AT. IN THE ABSENCE OF ANY ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 9 BASIS, THE ASSESSEE WILL BE IN DISADVANTAGEOUS POSI TION TO UNDERSTAND THE VALUES OF THE DVO. 7. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS RELEVANT FOR VALUATION OF BUILDING INCLUDIN G DETAILED PLANS AND ESTIMATES WHICH WERE AVAILABLE BEFORE THE DVO AT TH E TIME OF VALUATION OF BUILDING. HOWEVER, IN SPITE OF FURNISHING THE R EQUIRED DETAILS, THE DVO HAS CHOSEN TO ADOPT THE PLINTH AREA RATES AND C OST INDEX METHOD TO ASCERTAIN THE COST OF CONSTRUCTION WHICH IS NOT ACC EPTABLE. WHILE DOING SO, THE DVO HAS GIVEN HIS OWN REASONS AND AS PER TH E DVO, THE DETAILED ESTIMATE METHOD IS HAVING MANY PITFALLS, THEREFORE, THE PLINTH AREA RATES AND COST INDEX METHOD IS MORE APPROPRIATE METHOD RA THER THAN DETAILED ESTIMATE METHOD. AS REGARDS THE CPWD RATES AND LOC AL RATES ADOPTED BY THE DVO, THE A.R. SUBMITTED THAT THE DVO HAS TAK EN THE CPWD RATES FIXED BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF VALUATION OF BUILDING, WHEREAS THE REGISTERED VALUER HAS ADOPTED THE PREVA ILING MARKET RATES AT THE TIME OF CONSTRUCTION OF BUILDING. THEREFORE , THE DVO SHOULD HAVE ALLOWED THE REQUIRED MARGIN TOWARDS DIFFERENCE BETW EEN CPWD RATE AND ALSO TOWARDS SELF-SUPERVISION CHARGES. HOWEVER, TH E DVO HAS NOT ALLOWED THE REQUIRED MARGIN TOWARDS SELF-SUPERVISIO N CHARGES AND TOWARDS RATE DIFFERENCE BETWEEN CPWD AND LOCAL RATES . IN SUPPORT OF ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 10 HIS CONTENTION, THE A.R. OF THE ASSESSEE RELIED UPO N THE DECISION OF COORDINATE BENCH OF ITAT, HYDERABAD BENCH IN THE CA SE OF SALMA A. MEHDI AND VINOD KUMAR AGARWAL. ON THE OTHER HAND, T HE LD. D.R. STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE A.O. MADE ADDITIONS TOWAR DS DIFFERENCE BETWEEN THE COST OF CONSTRUCTION ESTIMATED BY THE D VO AND COST OF CONSTRUCTION DECLARED BY THE ASSESSEE. THE ASSESSE ES CONTENTION IS THAT THE DVO VALUATION CANNOT BE ACCEPTED, AS THE DVO HA S ARRIVED AT THE COST OF CONSTRUCTION BY APPLYING THE PLINTH AREA RA TES AND COST INDEX METHOD. THE DVO, IN THE PROCESS HAS ADOPTED HIGHER PLINTH AREA OF 597.33 SQ.MTRS, AS AGAINST THE ACTUAL CONSTRUCTED A REA OF 432.6 SQ.MTRS., WHICH IS TOTALLY INCORRECT. THE ASSESSEE FURTHER CONTENDED THAT, SHE HAD OBTAINED REGISTERED VALUER REPORT AND AS PE R REGISTERED VALUER REPORT THE PLINTH AREA OF THE BUILDING WAS ESTIMATE D AT 432.6 SQ. MTRS AND TO SUPPORT HER ARGUMENTS FILED VALUATION REPORT ISSUED BY THE REGISTERED VALUER. THE ASSESSEE FURTHER CONTENDED T HAT THE PLINTH AREA TAKEN BY THE REGISTERED VALUER WAS FURTHER SUPPORTE D BY PROPERTY ASSESSMENT RECORDS OF MUNICIPAL AUTHORITIES, WHEREI N THE PLINTH AREA WAS ESTIMATED AT 429.6 SQ.MTRS. ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 11 9. THE A.O. MADE THE ADDITIONS SOLELY ON THE BASIS OF DVO REPORT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS F AILED TO PRODUCE BILLS & VOUCHERS IN SUPPORT OF CONSTRUCTION OF BUILDING, THEREFORE, RELIED UPON THE DVOS REPORT. WE HAVE EXAMINED THE DVOS REPORT AND REGISTERED VALUER REPORT SUBMITTED BY THE ASSESSEE WHICH IS AV AILABLE IN PAPER BOOK. ON EXAMINATION OF THE RECORDS, WE FIND THAT THE DVO HAS ADOPTED PLINTH AREA RATES AND COST INDEX METHOD TO ARRIVE A T THE COST OF CONSTRUCTION. THE DVO HAS GIVEN BRIEF REASONS FOR CHOOSING A PARTICULAR METHOD OF VALUATION AND ALSO GIVEN REASONS FOR NOT CHOOSING THE DETAILED ESTIMATE METHOD. ACCORDING TO THE DVO, TH E PLINTH AREA RATES AND COST INDEX METHOD IS MORE SCIENTIFIC METHOD OF VALUATION WHICH IS ACCEPTED BY THE CBDT. THOUGH THE METHOD ADOPTED B Y THE DVO IS ONE OF THE ACCEPTED METHODS OF VALUATION, THE REASO NS GIVEN FOR NOT CHOOSING THE DETAILED ESTIMATE METHOD CANNOT BE ACC EPTED. THE DVO HAS GIVEN HIS OWN REASONS FOR NOT CHOOSING THE DETA ILED ESTIMATE METHOD AND AS PER THE DVO THIS METHOD INVOLVES MORE ASSUMPTIONS AND PRESUMPTIONS. THE DVO FURTHER SAID THAT UNLESS THE DETAILED STRUCTURAL AND ARCHITECTURAL DRAWINGS ARE PRODUCED, THE VALUER CANNOT HAVE ANY ACCURATE IDEA OF FOUNDATION AND RE-ENFORCEMENT USED IN THE STRUCTURE. WE DO NOT FIND ANY MERITS IN THE REASONS GIVEN BY TH E DVO FOR THE REASON THAT THE ASSESSEE HAS GOT VALUED THE BUILDIN G FROM THE REGISTERED ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 12 VALUER APPROVED BY THE CBDT. ON PERUSAL OF THE REG ISTERED VALUER REPORT, WE FIND THAT IT IS DETAILED ONE AND VALUED BY APPLYING THE DETAILED ESTIMATE METHOD. THEREFORE, WE FAIL TO UNDERSTAND AS TO WHY THE DVO IS UNABLE TO ESTIMATE THE COST OF CONSTRUCTION ON THE BASIS OF DETAILED ESTIMATE METHOD, WHEN THE REGISTERED VALUER APPROVE D BY CBDT WITH SAME INFORMATION COULD ESTIMATE THE COST OF CONSTRU CTION BY APPLYING DETAILED ESTIMATE METHOD. THEREFORE, WE ARE OF THE OPINION THAT THE AO WAS NOT CORRECT IN FULLY RELIED UPON THE DVO REPORT , WHEN THERE ARE TWO REPORTS AVAILABLE BEFORE HIM. 10. THE AO SUMMARILY REJECTED THE REGISTERED VALUER S REPORT WITHOUT GIVING ANY REASONS AND WITHOUT MAKING FURTHER INVES TIGATION. WE DO NOT APPRECIATE THE ACTION OF A.O. FOR NOT CONSIDERING T HE REGISTERED VALUER REPORT, WHEN THE REGISTERED VALUER REPORT IS BEING MADE WITH ITEMWISE ESTIMATE OF BUILDING. HOWEVER, WE ARE OF THE OPINI ON THAT THERE IS A BIG DIFFERENCE BETWEEN PLINTH AREA ARRIVED AT BY BOTH T HE VALUERS. THOUGH BOTH THE VALUATION REPORTS ARE FROM COMPETENT AUTHO RITY AND BOTH METHODS CHOSEN BY BOTH THE VALUERS ARE ACCEPTED MET HOD OF VALUATION, EITHER SIDE HAS FAILED TO SUBSTANTIATE THE RESPECTI VE REPORTS WITH ANY VALID REASONS. THEREFORE, WE ARE OF THE OPINION TH AT TO MEET THE ENDS OF JUSTICE, WE DEEM IT APPROPRIATE TO TAKE THE AVERAGE OF TWO PLINTH AREAS ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 13 ARRIVED BY THE VALUERS. ACCORDINGLY, WE DIRECT THE A.O. TO TAKE AVERAGE OF THE TWO PLINTH AREAS ARRIVED BY THE TWO VALUERS FOR THE PURPOSE OF VALUATION OF BUILDING. 11. COMING TO THE NEXT ISSUE I.E. DEDUCTION TOWARDS RATE DIFFERENCE AND SELF SUPERVISION CHARGES. THE DVO DID NOT ALLOW ED ANY DEDUCTION TOWARDS SELF SUPERVISION CHARGES AND DIFFERENCE TOW ARDS MATERIAL COST. THE A.O. MADE THE ADDITIONS AS PER THE DVO REPORT. THE CIT(A) HAVING CONSIDERED THE FACTS ALLOWED 10% DEDUCTION TOWARDS COST OF MATERIALS AND SELF SUPERVISION CHARGES. THE ASSESSEES CONTE NTION IS THAT SHE HAS USED MATERIALS FROM DISMANTLED BUILDING AND ALSO SU PERVISED CONSTRUCTION ON HER OWN, THEREFORE, THE COST OF CON STRUCTION WOULD BE ALWAYS LESS. THE ASSESSEE FURTHER CONTENDED THAT T HE PLINTH AREA RATES FIXED BY CENTRAL GOVERNMENT ARE MEANT FOR DELHI AND NOT FOR OTHER PLACES. THEREFORE, THE RATES CANNOT BE APPLIED FOR THE BUILDINGS CONSTRUCTED AT VISAKHAPATNAM. IN SUPPORT OF HER CO NTENTION RELIED UPON TWO JUDGMENTS OF THE COORDINATE BENCH OF HYDERABAD IN SALMA A. MEHDI (SUPRA) & VINOD KUMAR AGARWAL (SUPRA). WE FIND FOR CE IN THE ARGUMENTS OF THE ASSESSEE, FOR THE REASON THAT THE CPWD RATES ARE PRESCRIBED FOR CENTRAL GOVERNMENT PROJECTS BY TAKING INTO ACCOUNT VARIOUS PARAMETERS SUCH AS PLACE OF CONSTRUCTION, AVAILABILITY OF MATE RIALS AND QUALITY OF ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 14 CONSTRUCTION. THOUGH THESE RATES ARE THE BASIS FOR VALUATION OF COST OF CONSTRUCTION, SUITABLE MARGIN SHOULD BE ALLOWED TOW ARDS COST OF MATERIALS AND SELF SUPERVISION CHARGES. IN THE PRE SENT CASE ON HAND, THE ASSESSEE CLAIMED THAT SHE HAS USED MATERIALS FROM D ISMANTLED BUILDING AND ALSO CONSTRUCTED THE BUILDING ON HER SELF SUPER VISION. IT IS AN UNDISPUTED FACT THAT THE DVO HAS APPLIED THE PLINTH AREA RATE AND COST INDEX METHOD, WHEREAS THE REGISTERED VALUER HAS ADO PTED DETAILED ESTIMATION METHOD WITH PLINTH AREA RATE PREVAILING IN THE MARKET AT THAT POINT OF TIME. THE DVO DID NOT APPEAR TO HAVE TAKE N INTO CONSIDERATION THE LOCAL RATES THAT ACTUALLY EXISTED DURING THE PE RIOD OF CONSTRUCTION. IT IS A COMMON KNOWLEDGE THAT CPWD RATES ARE FAR HIGHE R THAN THE LOCAL RATES. KEEPING IN VIEW OF THE FACT THAT CPWD RATES ARE ALWAYS HIGHER THAN THE LOCAL RATES, THE CIT(A) WOULD APPEAR TO HA VE ALLOWED 10% DEDUCTION TOWARDS COST OF MATERIALS AND SUPERVISION CHARGES. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT THE ASSESSEE IS ELIGIBLE FOR 15% DEDUC TION TOWARDS RATE DIFFERENCE AND A FURTHER 10% DEDUCTION TOWARDS SELF SUPERVISION CHARGES. 12. NOW, IT IS PERTINENT TO MENTION THE CASE LAW RE LIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON ITAT, HYDERABAD BENCH DECISION IN ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 15 THE CASE OF SALMA A. MEHDI (SUPRA). THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THE ISSU E AS UNDER: THE DVO ESTIMATED THE COST OF CONSTRUCTION FOLLOWING THE PLINTH AREA METHOD OF VALUATION. HE APPLIED THE BASIC PLINTH AREA RATES APPROVED BY THE CEDT. . HE APPLIED THE PLINTH AREA OF NEW DELHI AS FIXED IN 19 76 AND APPROVED BY THE GOVERNMENT OF INDIA BY DULY ENHANCI NG THE BASIC RATE OF SIMILAR STRUCTURES WITH APPROPRIATE C OST INDEX AS APPLICABLE TO THE LOCALITY DURING THE PERIOD OF CON STRUCTION. THE VALUATION DID NOT APPEAR TO HAVE TAKEN INTO CONSIDE RATION THE LOCAL RATES THAT ACTUALLY EXISTED DURING THE PERIOD FOR C ONSTRUCTION. IT IS COMMON KNOWLEDGE CPWD RATES OF NEW DELHI ARE FAR HI GHER THAN LOCAL RATES. KEEPING THAT FACTOR IN VIEW THE FIRST APPELLATE AUTHORITY WOULD APPEAR TO HAVE ALLOWED SOME AD HOC DEDUCTION IN THE COST OF BASIC CONSTRUCTION. TAKING INTO CONSIDERATION THE F ACT THAT THE CPWD RATES OF NEW DELHI ARE ALWAYS HIGHER THAN THE LOCAL RATES, WE FELL THAT IT WOULD BE JUST AND REASONABLE TO GIVE AN OVE RALL REDUCTION OF 15% ON THE COST OF CONSTRUCTION ESTIMATED BY THE DVO IN ORDER TO COMPENSATE THE HIGHER ESTIMATE ON ACCOUNT OF THE ADOPTION OF H IGHER RATE OF CPWD OF NEW DELHI. FURTHER, THE VALUATION OFFICER D ID NOT ALLOW ANY DEDUCTION TOWARDS PERSONAL SUPERVISION. THE FIRST A PPELLATE AUTHORITY ALLOWED 10% REDUCTION ON ACCOUNT OF SAVINGS BY PERSONAL SUPERVI SION APPEARS TO BE QUITE REASONABLE. IF WE DEDUCT 10% TO WARDS PERSONAL SUPERVISION AND 15% ON ACCOUNT OF THE HIGHER RATE A DOPTED BY THE VALUATION OFFICER, THE ESTIMATE OF COST OF CONSTRUC TION DETERMINED BY THE VALUATION OFFICER COMES DOWN TO RS.5,16,7501/-. EVE N IF WE TAKE AVERAGE OF COST OF CONSTRUCTION OF RS.68900 DETERMI NED BY THE DVO ON THE BASIS OF PLINTH AREA METHOD WORKS OUT TO RS.5,22,000/-. IN THAT VIEW OF THE MATTER, THE COST OF CONSTRUCTIO N OF RS.5,16,750/- ARRIVED AT BY US AFTER GIVING 15% REDUCTION FOR HIG HER CPWD RATES AND 10% DEDUCTION FOR PERSONAL SUPERVISION, APPEARS TO BE QUITE REASONABLE. IT CAN BE ROUNDED TO RS.5,16,000/-. 13. THE ASSESSEE RELIED UPON ITAT, HYDERABAD BENCH DECISION IN THE CASE OF ACIT VS. VINOD KUMAR AGARWAL REPORTED IN 10 7 ITR 477, WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILA R CIRCUMSTANCES HELD AS UNDER: ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 16 10. AS TO THE ARGUMENT OF LEARNED COUNSEL FOR THE A SSESSEE THAT IT IS MORE SCIENTIFIC TO ADOPT THE DETAI1 ESTIMATE METHOD OR D ETAILED QUANTITIES METHOD WHILE DETERMINING THE COST OF CONSTRUCTION, WE ARE OF THE OPINION THAT WHERE TWO OR MORE METHODS OF VALUATION ARE AVAILABLE FOR DETERMINING THE COST OF CONSTRUCTION AND THE STATUTE DOES NOT PROVIDE FOR A NY PARTICULAR METHOD TO BE ADOPTED, THE OPTION OF THE METHOD OF VALUATION SHOU LD BE GIVEN TO THE ASSESSEE, AS OTHERWISE IT WOULD CAUSE GRAVE PREJUDI CE TO THE ASSESSEE. IF IT IS THE OPINION OF THE ASSESSEE THAT A PARTICULAR METHOD IS MORE SCIENTIFIC THEN ONLY THAT METHOD SHOULD BE ADOPTED IT IS FOR THE AS SESSEE TO CHOOSE ONE OF THE METHODS. OUR VIEW FINDS SUPPORT FROM A NUMBER O F CASES OF SUPREME COURT AND THE HIGH COURTS, WHICH THOUGH NOT DIRECTL Y ON THE POINT, LAY DOWN THE PROPOSITIONS THAT THE BENEFIT OF DOUBT AND CHOI CE SHOULD BE GIVEN TO THE ASSESSEE AND THAT IN SUCH SITUATIONS THE MORE BENEF ICIAL OPTION, SHOULD B& MADE AVAILABLE TO THE ASSESSEE. IN THIS REGARD WE R EFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V. MAHENDRA MI LLS (20001 243 ITR 56. AT PAGE 62, THE SUPREME COURT HAS OBSERVED AS UNDER : WHEN THERE ARE TWO PROVISIONS UNDER WHICH AN ASSESS EE COULD CLAIM SOME BENEFIT, IT IS FOR THE ASSESSEE TO CHOOSE ONE. A RE FERENCE WAS MADE TO A CLAIM FOR MEDICAL REIMBURSEMENT FOR THE CURRENT YEA R WHICH IS DIFFERENT FROM A CLAIM FOR DEPRECIATION. THIS IS SO BECAUSE D EPRECIATION IS A CLAIM ON THE WRITTEN DOWN VALUE AND IF DEPRECIATION IS NOT C LAIMED IN THE CURRENT YEAR, THE WRITTEN DOWN VALUE WOULD REMAIN THE SAME FOR TH E FOLLOWING YEAR. PRIOR TO THE AMENDMENT OF SECTION 32 BUSINESS LOSS COULD BE CARRIED FORWARD FOR EIGHT YEARS? THERE WAS NO TIME LIMIT FOR THE CLAIMI NG OF DEPRECIATION. THIS IS NOT SO NOW. EARLIER, THEREFORE, IT WAS ALWAYS FOR T HE ASSESSEE TO CLAIM BUSINESS LOSS FIRST AND CURRENT DEPRECIATION THEREA FTER IF HE SO DESIRED.' 16. BY THE SAME PRINCIPLES, WE HOLD THAT THE METHOD OF VALUATION TO BE ADOPTED FOR EVALUATING THE COST OF CONSTRUCTION SHO ULD BE THE METHOD THAT IS MOST BENEFICIAL TO THE ASSESSEE AND WHICH IS OPTED BY HIM. WE FAIL TO UNDERSTAND AS TO WHY THE DEPARTMENTAL VALUATION OFF ICER IS UNABLE TO ESTIMATE THE COST OF CONSTRUCTION ON THE BASIS OF D ETAILED QUANTITIES METHOD, WHEN WITH THE SAME INFORMATION THE EMPANELLED VALUE R OF THE INCOME-TAX DEPARTMENT, I.E., THE REGISTERED VALUER, COULD ESTI MATE THE COST OF CONSTRUCTION ON DETAILED QUANTITIES METHOD. IT IS AL SO FOUND FROM THE RECORD THAT THE REGISTERED VALUERS REPORT CONTAINING THE E STIMATION OF COST OF CONSTRUCTION BY ADOPTING DETAILED QUANTITIES METHOD WAS AVAILABLE TO THE DVO. THE JAIPUR BENCH OF THE TRIBUNAL IN SMT. REKHA DEVI V. ACIT [1994] 49 TTJ 530, HAD HELD THAT IT IS NOT RIGHT FOR THE D ISTRICT VALUATION OFFICER TO REJECT THE REGISTERED VALUERS REPORT WITHOUT GIV ING ANY REASON AND WITHOUT MAKING FURTHER INVESTIGATIONS AND WHEN THE REGISTER ED VALUERS REPORT BEING MADE WITH ITEMWISE ANALYSIS, IS AGAINST LAW. IN THI S CASE ALSO, THE VALUATION OFFICER HAS SUMMARILY REJECTED THE REPORT OF THE RE GISTERED VALUER WITHOUT ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 17 GIVING ITEMWISE COMMENTS/ANALYSIS AND ITEMWISE REAS ONS OR DEMONSTRATING IN ANY MANNER, WHATSOEVER THAT THE VALUATION REPORT OF THE REGISTERED VALUER IS CLEARLY UNDISPUTABLY UNTENABLE. 23.3 WHEN THERE ARE MORE THAN ONE METHOD TO ESTIMAT E THE COST OF CONSTRUCTION, THE METHOD MOST FAVOURABLE TO THE ASS ESSEE SHOULD BE FOLLOWED BY THE VALUATION CELL. THE MATERIAL THAT IS SUFFICI ENT FOR ARRIVING AT THE COST OF CONSTRUCTION BY A REGISTERED VALUER BY FOLLOWING A PARTICULAR METHOD, SHOULD BE THE MATERIAL SUFFICIENT FOR ARRIVING AT THE COST FOR THE SAME METHOD IF ADOPTED BY THE VALUATION CELL. PRIVATE INDIVIDUALS CONSTRUCTING RESIDENTIAL HOUSES CANNOT BE EXPECTED TO HAVE ALL THE TYPES OF DRAWINGS, DESIGNS, ETC., MAINTAINED BY THE GOVERNMENT CONTRACTORS NOR CAN TH EY BE EXPECTED TO HAVE STOCK BOOK, LOG BOOKS, ETC, NON-AVAILABILITY OF THE SE RECORDS SHOULD BE NO REASON TO APPLY PLINTH AREA METHOD OF ESTIMATION. E MPANELLED VALUERS' REPORT ITSELF SHOULD BE SUFFICIENT MATERIAL TO THE VALUATION OFFICER TO EVALUATE THE COST OF CONSTRUCTION ON THAT PARTICULAR METHOD (REFER JASWANT RAI V. CWT [1977) 107 ITR 477 (P&H)). 14. TAKING INTO CONSIDERATION OF THE FACTS THAT THE CPWD RATES OF NEW DELHI ARE ALWAYS HIGHER THAN THE LOCAL RATES AND AL SO FOLLOWING THE COORDINATE BENCH DECISION OF THIS TRIBUNAL, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR 15% DEDUCTION TOWARDS DIFFERENCE BETWEEN CPWD RATES AND LOCAL RATES AND FURTHER 10% DEDUCTIO N TOWARDS SELF SUPERVISION CHARGES. THEREFORE, WE DIRECT THE A.O. TO DETERMINE THE COST OF CONSTRUCTION OF BUILDING BY TAKING AVERAGE OF THE TWO PLINTH AREAS ARRIVED BY THE DVO AND CLAIMED BY THE ASSESSEE AND ALLOW 15% & 10% RESPECTIVELY TOWARDS RATE DIFFERENCE AND SELF SUPER VISION CHARGES. ITA NO.7/VIZAG/2013 RAKURTHI JAHNAVI, VISAKHAPATNAM 18 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JAN16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER , /VISAKHAPATNAM: 0 / DATED : 22.01.2016 VG/SPS # 2, 3,/ COPY OF THE ORDER FORWARDED TO :- 1. / THE APPELLANT RAKURTHI JAHNAVI, D.NO.8-4-12, PLOT NO.3, DOCTORS COLONY, PEDA WALTAIR, VISAKHAPATNAM-530 017. 2. #$ / THE RESPONDENT THE ITO, WARD-3(1), VISAKHAPATNAM 3. 5 / THE CIT, VISAKHAPATNAM 4. 5 () / THE CIT(A), VISAKHAPATNAM 5. , # :, ( : , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // >? : ( SR.PRIVATE SECRETARY ) ( : , , / ITAT, VISAKHAPATNAM