By K. B. Bhujle
Advocate
(2018) 401 ITR 285 (Mad)
CIT vs. A. L. Homes
A.Y.: 2009-10, Date of Order: 20th Sept., 2017
The assessee was in
construction business. In the course of the assessment for the relevant year,
the Assessing Officer made a reference to the District Valuation Officer (DVO)
for estimation of the cost of construction. The estimated cost of construction
by the DVO was higher than that found according to the books of account of the
assessee. The valuation report was objected to by the assessee, on the ground
that it had been maintaining regular books of account and that reference could
not have been made to the DVO without rejecting the books of account. However,
the Assessing Officer added the difference in the cost of construction, as
unaccounted investment to the income of the assessee.
The Commissioner (Appeals)
deleted the addition and held that the Assessing Officer could not have made a
reference to the DVO for estimation, when the books of account of the assessee
had not been rejected. He further held that the difference between the cost
shown in the books of account and the estimation by the DVO was only 6.85%,
whereas, statutorily a reference for valuation could be made only if, in the
opinion of the Assessing Officer, the difference would have exceeded 15%. The
Tribunal found that the assessee had sold the flats and that most of the
purchasers had occupied the flats and that the cost improvements made had to be
considered as income of the purchasers. It upheld the deletion made by the
Commissioner (Appeals).
On appeal by the Revenue,
the Madras High Court upheld the decision of the Tribunal and held as under:
“i) The appellate authorities had concurrently
found that the books of account of the assessee had not been rejected by the
Assessing Officer and therefore, the matter ought not to have been referred to
the DVO for estimation of the cost of construction.
ii) The reliance placed on the report of the DVO
for making the addition was misconceived. No question of law arose.”
