V.K. Singhal, J. - (1.) THE Income-tax Appellate Tribunal has referred the following question for decision by this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 55,780?"
(2.) THE brief facts of the case are that the assessee is an association of persons. THE assessment was originally completed on an income of Rs. 44,670 on March 25, 1974. During the relevant assessment year 1971-72, for which the previous year ended on March 31, 1971, the assessee made certain additions and alterations to its Minerva Cinema building and the total expenditure incurred according to the books of account maintained by the assessee was Rs. 3,83,320. THE Income-tax Officer, 'C' Ward, Jodhpur, referred the matter to the Valuation Cell and the Valuation Officer has estimated the cost of additions and alterations at Rs. 4,48,400. THE assessment was reopened by issuing notice under Section 148 and the assessee was confronted with a copy of the valuation report. According to the Income-tax Officer, the assessee's version that its books of account are true and correct has to stand the test of valuation made by the Valuation Cell, and it was observed that the assessee-association of persons has not recorded the investment truly in its books of account. According to the Income-tax Officer, the actual investment was higher while the books have shown a lower figure and, therefore, a sum of Rs. 65,080 was considered as unexplained investment and was bifurcated in the ratio of 6 : 1 between the assessment years 1971 72 and 1972-73, during which the additions and alterations were made and a sum of Rs. 55,780 was added as unexplained expenditure. The Appellate Assistant Commissioner allowed a margin of ten per cent. instead of five per cent. for personal supervision and has also directed that the rate of construction prevalent in January, 1971, should have been adopted and not that of May, 1971. The Tribunal have held that there is no dispute that the assessee had maintained proper books of account and the same have been accepted in the past and no defects were pointed out in the books. The expenses were fully supported by vouchers. Full details were also mentioned in respect of each item in the books and on this basis, the Tribunal came to the conclusion that a reference to the valuation cell cannot be made without showing that the expenditure recorded in the books did not represent the true expenditure or that the assessee had failed to record fully and completely the expenditure actually incurred. The Tribunal observed that "in our view, the reference to the valuation cell was not justified. The expenditure recorded in the books of account should have been accepted. We may add that, where the books of account are properly maintained and the expenditure is recorded therein with full details and is supported by vouchers, the total expenditure so reflected in the books has to be accepted in preference to any estimate even if it is by an expert. We direct that the addition be deleted." From a perusal of the order of the Tribunal, it would be evident that even the reference to the valuation cell by the Income-tax Officer was held not justified on the ground that the books of account are maintained and the expenditure is recorded therein with full details and is supported by vouchers. The Tribunal has proceeded that, if the books of account are reliable, then the opinion of the expert would be considered to be an estimate only. We have considered the matter. In respect of the investment which is made in the property, there can be only two methods to find out the correct position (i) when proper books of account are maintained, and (ii) valuation report. If the assessee has maintained proper books of account and all details are mentioned in such books of account, which are duly supported by vouchers and no defects are pointed out and the books are not rejected, the figures shown therein have to be followed. The valuation report can be taken into consideration only when the books of account are not reliable or are not supported by proper vouchers or the Income-tax Officer is of the opinion that no reliance can be placed on such books of account. It is true that the Income-tax Officer has no option but to rely on the valuation report, which is a document prepared by an expert and is admissible, but there must be a finding by the Income-tax Officer that the books of account maintained by the assessee are defective or are not reliable. There may be a marginal difference in the actual investment and the report of the Valuation Officer for a number of reasons as the valuation report is prepared on the basis of norms prescribed by the C. P. W. D. for the construction of buildings and the difference may be with regard to quality of the materials, etc. The Income-tax Officer could have examined the matter in detail with regard to the books of account in order to say that the books are not reliable. Simply because the valuation report is of a higher amount, the books cannot be said to be unreliable unless, by a deeper probe, any defect is found in the maintenance of the books of account. The Tribunal was, therefore, justified in deleting the addition of Rs. 55,780.
(3.) CONSEQUENTLY, the reference is answered in favour of the assessee and against the Revenue and it is held that in the absence of any finding by the Income-tax Officer that the books of account are not properly maintained and that the expenditure is not fully recorded or is not supported by vouchers or the books of account are defective, the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 55,780. Reference is answered accordingly. No order as to costs. ;