IN INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI Before Shri A. Mohan Alankamony, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I T.A. No. 1338/Mds/2016 Assessment Year :2012-13 Dr. A.S. Abdus Samad, Income Tax Officer, C/o Shri S. Sridhar, Advocate, Vs. Ward I(2), Erode. 112/1, Periyar Street, Erode. [PAN:AGHPA3362L] ( Appellant) (Respondent) Appellant by : Shri S. Sridhar, Advocate Respondent by : Shri Supriyo Pal, JCIT Date of hearing : 14.07.2016 Date of Pronounce ment : 28.09.2016 O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by assessee is directed against order of ld. Commissioner of Income Tax (Appeals) 3, Coimbatore, dated 30.03.2016 relevant to assessment year 2012-13. only effective ground raised in appeal of assessee is that ld. CIT(A) has erred in confirming addition made on account of difference in cost of construction. 2. Brief facts of case are that assessee is individual and Allopathic Doctor by profession. survey under section 133A of Income 2 I.T.A. No.1338/M/16 Tax Act, 1961 [ Act in short] was conducted in business premises of assessee on 12.09.2012. assessee filed his return of income for assessment on 30.03.2013 admitting total income of .41,24,760/-. same was processed under section 143(1) of Act. As case was surveyed under section 133A of Act, same was selected for scrutiny under compulsory scrutiny norms and notice under section 143(2) of Act dated 12.08.2013 was issued to assessee and served on 13.08.2013. 2.1 assessee is proprietor of M/s. Bharat Hospital and is specialist in Neurology. assessee holds M.B.B.S. degree and Post graduate degree in M.D. (Neuro). assessee is partner in M/s. Sri Krishna Scans, No. 63, Mosuvanna Street, Near L.K.M. Hospital, Erode along with Dr. Selvaperumal and Dr. Ganesan. This firm is started in September, 2007 and assessee has declared that sum of .5,00,000/- was invested in firm as partnership capital. assessee is also partner in M/s. Sangu Medicals-B along with Shri Jiyavudeen who is his brother-in-law. assessee is having profit sharing ratio of 50% in this firm. This firm was srated during month of February, 2012. Moreover, assessee is also one of directors in M/s. Krish Care Remedy s Pharma Limited. This company was started in last quarter of 2010 and share investment [two shares one share is .1,00,000/-] of .2,00,000/- was held by assessee. assessee was issued notice under section 142(1) of Act 3 I.T.A. No.1338/M/16 on 06.12.2013 for furnishing various details as called for. Despite service of various letters/repeated notices, assessee has not offered any explanation to queries raised by Assessing Officer. Therefore, based on materials available on record and sworn statement recorded during course of survey under section 133A of Act, Assessing Officer has completed assessment under section 143(3) r.w.s. 144(1)(b) of Act by assessing total income of assessee at .2,41,64,770/- after making various additions. 3. assessee carried matter in appeal before ld. CIT(A) and raised various grounds. After considering explanations offered by assessee, ld. CIT(A) partly allowed appeal of assessee. 4. On being aggrieved, assessee is in appeal before Tribunal and challenged confirmation of addition on account of difference in cost of construction. ld. Counsel for assessee has mainly argued that ld. CIT(A) has erred in rejecting workings filed by assessee with regard to construction based on decision of Hon ble Madras High Court without any valid reason or basis or material. On other hand, ld. DR strongly supported order passed by ld. CIT(A) on this issue. 5. We have heard both sides, perused materials on record and gone through orders of authorities below. From initiation of assessment 4 I.T.A. No.1338/M/16 proceedings to completion of assessment proceedings, assessee has not produced any material evidence to consider that assessee has supervised construction of building, Assessing Officer has observed that assessee being Doctor, by profession and partner in various firms, it was impossible to devote any time to supervise building construction work which was entirely too different from his nature of profession. Admittedly, assessee has constructed hospital building and not any commercial complex or so. Therefore, Doctor, by profession can only better supervise as to whether construction of hospital is carried out as per plan and requirement of Doctor. Therefore, above observation of Assessing Officer in denial of self supervision carried out by assessee is ruled out. 6. difference between cost of building arrived by assessee and valuation report is reproduced as under: S.No. Particulars of investment Cost as per Cost as per assessee (in valuation report (in .) .) 1. Building 1,42,92,362 2,18,04,468 2. Furniture & electrical 4,46,686 4,46,686 [reported fittings by assessee 3. Plant & Machinery, motor 26,62,214 26,62,214 [reported cars by assessee 4 Computers software books 55,344 Nil Assessing Officer worked out difference in valuation of cost of building as per valuation given by DVO and arrived difference at 5 I.T.A. No.1338/M/16 .1,06,21,006/- and added to total income of assessee. On perusal of valuation report by ld. CIT(A), cost estimated by Valuation Officer was found to .2,09,23,000/- and thus figure is substituted in place of .2,18,04,468/-. Hence, difference between cost estimated by valuation officer and assessee appears to be only . 66,30,638/-. Before ld. CIT(A), by relying on decision of Hon ble Madras High Court in case of A. Abdul Rahim v. ITO 258 ITR 714, AR of assessee has contended that there should not any difference if State PWD rates are adopted and suitable reduction from CPWD rate is given. He also raised objection with regard to taking higher cost for floors other than ground floor. ld. CIT(A) has observed that it is common knowledge and belief that cost of consideration of higher floors in building will be less than that of ground floor unless some superior quality construction is established. Considering fact that assessee was not heard on logical point of higher floors should be estimated at reduced rate, addition to undisclosed investment was restricted to .50 lakhs instead of entire difference of .66,30,638/-, which was difference between assessee s estimate and valuation report. With regard to reliance placed by AR of assessee, ld. CIT(A) has observed that ad- hoc deduction by Hon ble High Court of Madras, is not squarely applicable in each and every case as it is based on specific facts of that case . 6 I.T.A. No.1338/M/16 7. Against above findings of ld. CIT(A), ld. Counsel for assessee has strongly contended before us that above decision of Hon ble Jurisdictional High Court is squarely applies to facts of assessee s case and submitted that hospital building was constructed in Erode and therefore, for purpose of valuation Department should have referred case to State PWD or otherwise, suitable reduction should be given in cost of service provided in building. We find force in argument advanced by ld. Counsel for assessee. We have also perused decision of Hon ble Jurisdictional High Court, wherein, it was held as under: Tribunal in arriving at cost of construction took into account nature of building, location of building and also that deduction, was already granted on account of self-supervision and then it held that deduction of 15 per cent. on CPWD rates should be granted. As far as cost of services was concerned, Tribunal held that estimate should be reduced to 11 per cent. On appeal: Held, that Tribunal had arrived at cost of construction of building on reasonable basis and it could not be stated that valuation of building as whole determined by Tribunal was in any way arbitrary, unreasonable or perverse. No question of law much less substantial question of law arose out of order of Appellate Tribunal, calling for interference. 8. However, assessee has not furnished any details with regard to area of building constructed by assessee, location whether hospital building is constructed within municipal limit or in any remote village, other facilities available, etc. Thus, in view of ratio laid down by 7 I.T.A. No.1338/M/16 Hon ble Jurisdictional High Court in case of A. Abdul Rahim (supra), we direct Assessing Officer to allow suitable reduction on CPWD rates and also for self supervision as we have declined to accept findings of Assessing Officer that self supervision is not possible. Accordingly, we set aside order of ld. CIT(A) on this issue and partly allowed grounds raised by assessee. It is needless to mention here that grant of reduction on CPWD rates and cost of services are depends on nature of building, location, existing facilities, etc. 9. In result, appeal filed by assessee is allowed for statistical purposes. Order pronounced on 28th September, 2016 at Chennai. Sd/- Sd/- (A. MOHAN ALANKAMONY) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 28.09.2016 Vm/- Copy to: 1. Appellant, 2. Respondent, 3. CIT(A), 4. CIT, 5. DR & 6.GF. A.S. Abdus Samad v. Income Tax Officer, Ward I(2), Erode