The Income Tax Appellate Tribunal (ITAT), deleted income tax addition as there was absence to take note of judicial pronouncements in District Valuation Officer (DVO) Report.
During the year under consideration, the Assessing Officer (AO) noted that assessee, Ecstasy Buildcon Pvt Ltd has disclosed the investment of Rupees nine crores in the construction on a plot on which the school namely LPS Global School was running. He noted that as per valuation report received from DVO, Delhi, the total construction value that was determined by him at Rs.13,08,36,369/- meaning thereby that there was difference of Rupees four crores.
The Assessee was asked to explain the difference of the aforesaid amount with necessary documentary evidences. Before AO, Assessee stated that the DVO has made estimation of fair market value of the property but the value declared by the assessee was actual cost incurred. It was further submitted that DVO had stated that the property was underconstruction but on the contrary the valuation was done by DVO by assuming the construction as completed.
The submissions of the assessee were not found acceptable to AO. The AO concluded the differential value between the valuation made by DVO and that declared by the assessee amounting to Rupees four crores as unexplained investment and made its addition under Section 69B of the Income Tax Act.
The Commissioner of Income Tax (Appeals) (CIT(A)) noted that if the actual expenses incurred by the assessee is considered, then the difference to the valuation of structure under construction would be to the extent of Rupees sixty-three lakhs which was confirmed by the CIT(A) and balance addition was deleted. Aggrieved the present appeal has been preferred.
A Bench consisting of Anil Chaturvedi, Accountant Member and Kul Bharat, Judicial Member observed that “We hold that the action of AO for making addition partly on the basis of a report by DVO who has failed to take note of the judicial pronouncements, adopted CPWD rate for the purpose of estimation of cost of construction cannot be sustained. We, therefore, direct the AO to delete the impugned addition.”
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