MAHESHWARI DYING WORKS v. INCOME TAX OFFICER
[Citation -1986-LL-1125-1]

Citation 1986-LL-1125-1
Appellant Name MAHESHWARI DYING WORKS
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 25/11/1986
Judgment View Judgment
Keyword Tags cost of construction • departmental valuer • electricity board • valuation officer • approved valuer • cpwd rates • cash book
Bot Summary: A. KALYANASUNDARAM, A.M. These are two cross appeals one by the assessee and the another by the Department on the same issue regarding the addition to the income that is made on account of cost of construction. The plea of the assessee was that the assessee had constructed a factory building within a period of over three years at a cost of Rs. 3,30,831. The Department has treated the difference between a cost as per books of the assessee and the value arrived at by the departmental valuer as un-explained income. The assessee filed a detailed paper book containing approved valuer's report, summary of cost, details of suppliers of materials, objection to the valuation made by the departmental as well as comparative statement of difference in the values as per assessee and the departmental valuer. The primary objection of the assessee was that the departmental valuer knowing fully well that the property is in Jodhpur had applied the CPWD rates while he should have applied the PWD rates. A t the out set, we must observe that in para 3 of the ITO has observed that between the dates of 12th Sept., 1981 to 1st Oct., 1981 the cash book was not written up properly and the debits being more than the credits and ultimately the assessee had conceded that the excess debits be treated as income from undisclosed sources. The ITO is directed to treat the difference between the cost as shown by the assessee in his books and Rs. 3,75,000 and distribute the same unexplained over the period of construction of three years in the proportion of the cost shown to have been incurred by the assessee.


A. KALYANASUNDARAM, A.M. These are two cross appeals one by assessee and another by Department on same issue regarding addition to income that is made on account of cost of construction. plea of assessee was that assessee had constructed factory building within period of over three years at cost of Rs. 3,30,831. matter was referred to Valuation Officer who had valued it originally at over 6 lacs and after repeated objections raised had ultimately determined value at Rs. 4,26,682. Department has treated difference between cost as per books of assessee and value arrived at by departmental valuer as un-explained income. assessee filed detailed paper book containing approved valuer's report, summary of cost, details of suppliers of materials, objection to valuation made by departmental as well as comparative statement of difference in values as per assessee and departmental valuer. primary objection of assessee was that departmental valuer knowing fully well that property is in Jodhpur had applied CPWD rates while he should have applied PWD rates. second objection was that because of this particular difference in rate schedule increased percentage on account of cost index is also wrong. Further, he has taken certain items like, extra electrical connection which in fact was borne by Electricity Board, this resulting in un-necessary counting it i n hands of assessee. He also submitted that in quantity of steel though departmental valuer had taken figure to be 17,925 Kgs. while actual quantity used by assessee was 14,746 Kgs. approved valuer of assessee was satisfied that quantity as per books of assessee was sufficient for factory building. Apart from this even rate adopted was different in view of schedule of rates adopted by Valuation Officer of Department taking CPWD rates. Several other infirmities were also brought to our attention to effect that entire addition has been made on basis of departmental valuer's report without any evidence whatsoever and also by disbelieving assessee's version while accepting that books of accounts of assessee are properly maintained. For Department argument was that authorities below are not at all satisfied and after examination they have made addition and, therefore, order is reasonable and rather they have objected that CIT (A) should not have allowed any reduction in view of departmental valuer's report. We have given very careful consideration to arguments of parties. t out set, we must observe that in para 3 of ITO has observed that between dates of 12th Sept., 1981 to 1st Oct., 1981 cash book was not written up properly and debits being more than credits and ultimately assessee had conceded that excess debits be treated as income from undisclosed sources. Further, it has also been observed by ITO at p. 3 of his order on construction issue, that expenses on transports, chuna, bajri, cement wages paid to labourers and other building materials were not supported by bills. Also considering fact of difference in quantity of steel, pointed out by Valuation Officer of Department, it appears that books of assessee cannot be said to be acceptable in toto specially when there is no bill i n support of cement, wages etc. Therefore, in these circumstances books not being reliable and there appears to be merit in Valuation Officer's report, some addition is definitely called for. We, therefore, keeping over all circumstances of case as well as rate of difference on account of schedule of rates of PWD and CPWD, we estimate cost of construction at Rs. 3,75,000. ITO is directed to treat difference between cost as shown by assessee in his books and Rs. 3,75,000 and distribute same unexplained over period of construction of three years in proportion of cost shown to have been incurred by assessee. appeal of assessee is partly allowed while that of Department is dismissed. *** MAHESHWARI DYING WORKS v. INCOME TAX OFFICER
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