Shri V.K. Sinha, A.M. - (1.) THIS is an appeal filed by the assessee and a cross appeal filed by the Department. Both are being disposed of by a common order for the sake of convenience.
(2.) The dispute relates to an addition of Rs. 1,37,400 made by the Assessing Officer for unexplained investment in construction of a building under section 69 of the Act. The assessee constructed a hotel complex called "M/s. Shanti Complex" and the investment shown during the year was Rs. 95,440. It is mentioned in the assessment order that the total cumulative investment up to the year was shown at Rs. 9,94,522, but this figure has been challenged by the ld. counsel for the assessee as incorrect and the correct figure is stated to be Rs. 5,02,656. The assessee admittedly did not maintain proper books of account for the construction and, therefore, the Assessing Officer referred the question of cost of construction to the Departmental Valuation Cell. According to the Valuer's Report, the estimated cost of construction was Rs. 12,08,000. On the other hand, the assessee filed a Report from a Registered Valuer, according to which, the cost of construction was Rs. 5,06,000 only. The assessee submitted various objections to the valuation by the Departmental Valuer but the Assessing Officer rejected them saying that they were the same which were made before the Valuation Cell. He, accordingly, estimated the investment up to the year at Rs. 12,08,000. The pro rata investment in this year was taken at 19.32% of Rs. 12,08,000 i.e., Rs. 2,33,144 as against Rs. 95,440 shown by the assessee. The difference of Rs. 1,37,404 was added to the assessee's income for the year as "Income from undisclosed sources". The CIT(A) went into the matter in a greater detail. He summarised the objections to the report of the Valuation Cell and made out a comparative chart of the valuation as per Departmental Valuer and as per Registered Valuer as under : "3. Before me, the A.R. has reiterated the objections taken before the ITO and has also assailed the valuation made by the Valuation Cell on other grounds which are summarised below : (i) The construction was conducted under the personal supervision of the Managing Partner Sri Jitendra Kumar Singh who had practical and personal knowledge of construction being a contractor earlier. (ii) Estimate of itemwise consumption of materials was not given by the Valuation Officer. (iii) The materials used in construction was available at cheaper rate at Gaya. Bricks and labour were also available at cheaper rates. (iv) No details of wood work was given in the valuation made by the Valuation Cell. (v) The partners had also agricultural lands and trees of Sal, Sisham, etc., owned by them, wood of which was used to a large extent. (vi) Construction in ground floor was on old foundation. Ground floor had only shops and there were no toilets. (vii) The second floor consisted of only some pillars and one unfinished room of 21' X 11' which had been valued by the Valuation Officer at Rs. 2,18,396 as against Rs. 22,421 estimated by the approved Valuer. (viii) Exorbitant rate for services have been taken, Electrical and sanitary fittings are of ordinary type.
(3.) THE valuations made by the registered valuer and the Departmental Valuer show the following comparative position : Shanti Complex. Ground Floor. As per Departmental Valuer As per Registered Valuer Rs. Rs. Construction Cost 5,87,361 Construction costs 2,63,786 (including services (Including services) @ 15%) Less : Self supervision @ 7.5% 44,052 @ 10% 25,000 ---------- ---------- 5,43,309 2,37,407 First Floor : As per Departmental Valuer As per Registered Valuer Cost 5,26,645 3,23,645 Less : Self supervision For personal 7.5% 39,498 supervision @ 10% 32,365 --------- --------- 4,87,147 2,91,280 Less : Old materials 25,000 20,315 ---------- ------------ 4,62,147 2,70,965 Second Floor Cost (including services) 2,46,915 24,801 Less : Less : Self supervision Self supervision @ 7.5% 18,519 @ 10% 2,480 ----------- ---------- 2,28,396 22,421" ----------- ---------- 4. THEreafter, the CIT(A) allowed relief on certain grounds. He observed that the rates adopted by the Valuation Cell were the same for the ground floor and the first floor, and allowed a reduction of 15% for the first floor. He also accepted the contention that the second floor consisted only of some pillars and an unfinished room and, therefore, could not be valued at Rs. 1,89,366. He reduced the same by 50%. Regarding services, since the ground floor consisted of shops with no sanitary facilities, he reduced the estimate to 7.5% against 15% adopted by the Valuation Officer. Regarding the first floor, for one block, he reduced the estimate for services to 22.5% from 32.5%. Similarly, for the first floor, another block and the second floor the estimate of services was reduced to 15% against 27.5% adopted by the Valuation Officer. According to the ld. counsel for the assessee, the total relief allowed by the CIT(A), for cumulative cost, up to that year, was about Rs. 2,50,000.;