S. Grover, Judicial Member - (1.) THE contentions in these two second appeals are that the Commissioner of Income-tax (Appeals) Bareilly vide his common order dated 23-2-1985 erred in: (a) retaining additions of Rs. 78,695 and Rs, 43,385 out of additions of Rs. 1,32,861 and Rs. 79,385 made respectively in the assessment years 1980-81 and 1981-82 as understated and unexplained investment; and (b) upholding disallowance of Investment Allowance on cold storage machineries. In respect of assessment year 1980-81 for which the accounting period ended on 31-3-1980, the assessee filed loss return of Rs. 1,68,420 which consisted of the following; JUDGEMENT_2218_TLIT0_19880.htm
(2.) In respect of the assessment year 1981-82 the return projected loss of Rs. 4,07,927 including carry forward loss of Rs. 90,915. The assessee-firm started construction of cold storage in July, 1979 and completed the same in July, 1981. The expenditure incurred as per account books maintained amounted to Rs. 11,44,554 as follows: JUDGEMENT_2218_TLIT0_19881.htm In the course of assessment proceedings for 1980-81 the assessee filed a valuation report dated 23rd October, 1982 from one Shri Y.P. Gupta, Government registered valuer showing expenditure in the construction of two chambers of the cold storage up to 31-3-1980 at Rs. 7,62,063. The ITO, however, referred the valuation to the Departmental Valuation Officer, Lucknow, who vide his report dated 15-3-1984 reported the estimated cost of construction up to 1981 consisting of three chambers and varandah at Rs. 13,46,800, There being variations between the cost of construction projecting from the account books, of the Government registered valuer, whose report was filed by the assessee and the Departmental Valuation Officer, the assessee was given a notice under Section 143(3) of the Act on 19th March, 1984 to show cause why the proportionate addition of the difference in the cost of construction, as for the books and the one estimated by the DVO, which he worked out at Rs. 1,32,861 in respect of assessment year 1980-81 and Rs. 79,385 for the next year, should not be added as unexplained investment. The assessee submitted a written explanation on 20th March, 1984 itself stating that its version of expenditure was correct and that the DVO had estimated the cost of construction of various items at very high figure which were not prevalent in those years. The assessee also submitted complete details of construction cost from the books and submitted that since no understated expenditure was pointed out by the DVO, there was no justification in rejecting the assessee's book version. The ITO, however, accepted the DVO's estimate and by further observing that there was difference in the assessee's registered valuer's report as compared to the books, made aforesaid additions as understated cost in the two years.
(3.) BEFORE the learned CIT(A) it was contended that whereas the assessee's books gave complete details of expenditure in relation to quantity and area constructed, the DVO had adopted valuation by taking high estimate on several items. For the assessee's list of items, where higher rates were taken, were filed. It was submitted that if higher valuation factor was taken into account and necessary adjustments made the difference between the assessee's book version and the DVO's estimate worked out to less than 20 per cent and in view of the contemporary books evidence no addition was called for. The learned OIT(A) though accepted the assessee's primary averment and objection against the additions still only partly modified the additions and it is considered expedient to notice para 3.a of the CIT(A) order, because to a great extent it has the effect of resolving the controversy as it was in terms stated that there was no allegation that the assessee had not correctly stated the extent of the construction or the quality in any significant respect: 3.a I have gone through the assessment order and have examined the matter. It is clear that the difference in the two estimates arises mainly on account of application of different rates of estimate to different items of work. There is no observation that the appella,nt had not correctly stated the extent of the construction or the quality of the construction in any significant respect. The appellant has given a list of six items out of which on consideration, I find that following items really represent a difference of opinion for which no addition should have been made. JUDGEMENT_2218_TLIT0_19882.htm The remaining three points mentioned by the learned authorised representative represent an examination of technical details and specification which are difficult for a laymen to evaluate. It is, however, clear that the appellant is entitled to a reduction of at least Rs. 90,166 as worked out above and bifurcation of this amount will be, in the two years in the proportion: Rs. 54,166 in asst. year 1980-81 and Rs. 36,000 in assessment year 1981-82. The Income-tax Officer will modify the computation of income in the above two years by reducing the amounts accordingly.;