IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH , CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA No.897/CHD/2016 Assessment Year : 2008-09 Shri Nirat Ram, Vs ITO, Prop. M/s Ocean Blue Hotel, Kullu (HP). V & PO Aloe, Tehsil Manali, Distt. Kullu (HP). PAN: AETPR9482C (Appellant) (Respondent) Appellant by : Shri R.R.Thakur Respondent by : Shri Yogendra Mittal,DR Date of Hearing : 22.09.2016 Date of Pronouncement : 26.09.2016 ORDER This appeal by assessee has been directed against order of ld. CIT(Appeals)-I, Amritsar camp at Palampur dated 20.05.2016 for assessment year 2008-09 challenging rejection of books of account on basis of valuation of building and addition of Rs. 1,78,679/- on account of estimate made by Departmental Valuation Officer. 2. Briefly facts of case are that assessee is engaged in business of running hotel under name and style of Ocean Blue Hotel. assessee 2 produced books of account and supporting vouchers before Assessing Officer. Assessing Officer noted that assessee has shown investment in building which was under construction. During assessment year under appeal, investment was shown at Rs. 4,01,044/-. During year under consideration, assessee has also made investment in furniture and fixtures and plant and machinery. Therefore, in order to ascertain correct amount of investment made in hotel building, case was referred to Departmental Valuation Officer (DVO) under section 142A of Act who has given his report. Assessing Officer, on going through report of DVO found that assessee has declared less cost of construction by Rs. 1,78,679/- and rejected books of account of assessee under section 145(3) and made addition of Rs. 1,78,679/-. 3. assessee challenged rejection of books of account and above addition before ld. CIT(Appeals). written submission of assessee is reproduced in impugned order in which assessee briefly explained that father of assessee constructed building of third floor in earlier year and assessee completed remaining work of building starting from 2005 to 2007. assessee got valuation from approved Valuer which was filed before authorities below but was ignored without any reasons. Valuation Officer has applied All India rates of construction applicable to metro 3 cities. In Himachal Pradesh, PWD has fixed low rate of construction, keeping in view material available at lower rate. In Himachal Pradesh, rates of sand, bajri and water used and construction are available at lower rates as compared to metro cities. So price index of construction is lower in Himachal Pradesh and rate of metro cities is high. Therefore, DVO has increased valuation of cost of construction without any reasons. DVO has also considered old construction as new construction. ld. CIT(Appeals), considering difference in valuation reported by assessee and DVO exceeding 20% of cost debited to building account, confirmed addition and dismissed appeal of assessee. 4. After considering rival submissions, I am of view that matter requires re-consideration at level of Assessing Officer. ld. counsel for assessee submitted that PWD rates of Himachal Pradesh may be applied as was argued before authorities below. On other hand, ld. DR relied upon orders of authorities below. assessee specifically pleaded before ld. CIT(Appeals) that he has got valuation of constructed portion from approved Valuer which has not been adversely commented by authorities below. assessee also pleaded before ld. CIT(Appeals) that DVO has applied All India rate of construction applicable to metro cities. He has also pleaded that in 4 Himachal Pradesh, PWD has fixed lower rate of construction because of building material available at lower rates as compared to metro cities. These submissions of assessee have not been rebutted by ld. CIT(Appeals) in any manner. ld. counsel for assessee also submitted that valuation report submitted by assessee was based on PWD rates. In case of CIT Vs Raj Kumar, Hon'ble Allahabad High Court in 182 ITR 436 considering order passed by Tribunal found that Tribunal while fixing cost of construction has taken into consideration rates to be applied for estimate of cost of construction should be UP, PWD rates and not Central PWD rates. Therefore, reference was rejected. 5. In present case, assessee pleaded that in Himachal Pradesh, PWD has fixed lower rates of construction, therefore, these were relevant to be considered by authorities below. I, therefore, set aside orders of authorities below and restore matter in issue i.e. estimate of cost of construction, to file of Assessing Officer with direction to re-decide this issue estimating cost of construction as per PWD rates fixed in Himachal Pradesh. Assessing Officer shall give reasonable sufficient opportunity of being heard to assessee. No other point is argued by ld. counsel for assessee. appeal of 5 assessee is, therefore, partly allowed for statistical purposes. 6. In result, appeal of assessee is partly allowed for statistical purposes. Order pronounced in Open Court . Sd/- (BHAVNESH SAINI) JUDICIAL MEMBER Dated 26th September, 2016. Poonam Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT,DR Assistant Registrar, ITAT/CHD Nirat Ram v. ITO, Kullu (HP)