SUBRAMANYAM THANNIRU,NELLORE vs. ACIT,CENTRAL CIRCLE, TIRUPATI

Assessee is an individual deriving income from business of purchase and sale of seeds on retail basis. There was survey operation under section 133A of the Income Tax Act, 1961 (‘the Act’) on 20/02/2020 wherein it was found from a building construction costs note book that during the period from April, 2018 to August, 2019, the assessee constructed a function hall. According to such note book, the cost of construction was Rs. 2,53,98,515/- including the cost of AC machines, generator and furniture and fittings whereas according to the books of accounts of the assessee, it was recorded as Rs. 1.7 crores. The assessee admitted to offer the difference of Rs. 84 lakhs as additional business income for the assessment years 2019-20 and 2020-21 at Rs. 14 lakhs Rs. 70.15 lakhs respectively, filed his return of income admitting the same. Assessee also produced the registered valuer report, AP State Government plinth area rates Podalakur Government SRO valuation alongwith all the requisite details. The cost of building is Rs. 2,20,83,806/- According to his books, whereas the SRO valuation of building is only Rs. 1,39,39, 933/-, and the registered valuer certified value is Rs. 1,98,29,600/-. Assessee, therefore, submitted that the valuation according to his books is higher than the valuation of the SRO and registered valuer.

Learned Assessing Officer did not, however, agree with the assessee and referred the matter to the estimation of DVO. DVO estimated the same at Rs. 2,81,68,771/- resulting in a difference of Rs. 60,84,971/- which the learned Assessing Officer added to the income of the assessee under section 69B of the Act and taxed the same under section 115BBE of the Act.

Aggrieved by such an action of the learned Assessing Officer, assessee preferred appeal before the learned CIT(A) and argued that when all the material was available before the learned Assessing Officer to determine the actual cost of building, in the shape of the building construction costs note book, which was found during the course of survey and which forms the basis for the learned Assessing Officer to verify the cost of the building and binding on the learned Assessing Officer, there is no need for the learned Assessing Officer to refer the matter to the DVO. Assessee submits that all the material including the SRO valuation reflecting the AP State Government value and also the value determined by the registered valuer is available before the learned Assessing Officer, without recording any reasons for not accepting the AP State Government plinth area rates, it is not open for the learned Assessing Officer to resort to the reference of the matter to DVO or to go by the rates of the CPWD.

Learned AR submitted that the assessee preferred detailed quantities method whereas the learned Assessing Officer adopted plinth rate method, that too preferring CPWD rates to AP State PWD rates, and it is impermissible. Learned AR placed reliance on the decisions of the Co- ordinate Benches of this Tribunal in the case of Ahmed Shareeff vs. DCIT [2021] 189 ITD 522 and ACIT vs. Vinodkumar Agarwal, [2002] 82 ITD 1 (HYD.), apart from the decision of the Hon’ble Allahabad High Court in the case of CIT Vs. Raj Kumar [1990] 182 ITR 436 in support of his contention. 6. Learned DR to the contrary submitted that the law permits the learned Assessing Officer to take resort to the report of the DVO to determine the correct value of construction and there is nothing illegal or irregular in the course adopted by the learned Assessing Officer. 7. We have gone through the record in the light of the submissions made on either side. There is no dispute that the function hall was constructed during the period from April, 2018 to August, 2019. Its area is 12,228 sft. According to the assessee, the cost of construction per sft. is Rs.1200/- whereas According to the learned Assessing Officer, by applying the plinth area method it would Rs. 1975/- with a difference of Rs. 700/- per sft. This resulted in the difference of cost of construction to the tune of Rs. 60,84,971/-.

It is a fact that the note book that was found during the survey containing the details as to the cost of construction, the Government SRO valuation, AP State Government plinth area rates and also the report of the registered valuer were available before the learned Assessing Officer to determine the value of the cost of construction. Cost of construction According to the books of the assessee is Rs. 2,20,83,806/- which is higher than the Government SRO valuation at Rs. 1,39,39,933/- and registered valuer value at Rs. 1,98,29,600/-. According to the note book that was found during the course of survey all the details of construction were available. Such a note book was prepared much prior to the date of survey and it is at variance with the books of accounts of the assessee. The contents of such note book are detrimental to the interest of the assessee and, therefore, it cannot be said that the assessee manipulated any entry only to defeat the process of law in determination of the cost of construction. For this reason, we are of the considered opinion that the entries in the note book cannot be said to have been tainted with any wrong information.

Along with the reports of the Government SRO and the registered valuer, the assessee also submitted all the requisite details before the learned Assessing Officer. For that matter, learned CIT(A) in his order observed that all the bills and vouchers for the basic material were available and it is only after perusing the same the Government SRO valued the market value of the cost of construction. In these circumstances, the question that falls for our consideration is whether the DVO valuation is binding when a note book containing all the details of construction is available apart from the valuation reports of the Government SRO following the State PWD rates and also the registered valuer are available. 10. Fortunately, this issue is no longer res integra and has been dealt with by the Co-ordinate Benches of this Tribunal in the cases of Ahmed Shareeff (supra), wherein it was held that when the SRO value is available and the assessee adopts the same, no addition could be made solely on the basis of the DVO value; and Vinod Kumar Agarwal (supra) wherein it was held that when two methods of valuation are available, the method favourable to the assessee shall be adopted for assessment. In the case of Raj Kumar (supra) Hon’ble Allahabad High Court upheld the findings of the Tribunal that if both the State PWD rates the CPWD rates are available only State PWD rates are to be adopted.

For the sake of completeness we deem necessary to refer to the observations in the case of Vinod Kumar Agarwal (supra). which read as under: “….where two or more methods of valuation are available for determining the cost of construction and the statute does not provide for any particular method to be adopted, the option of the method of valuation should be given to the assessee, as otherwise it would cause grave prejudice to the assessee. If it is the opinion of the assessee that a particular method is more scientific than only that method should be adopted. It is for the assessee to choose one of the methods. Our view finds support from a number of cases of the Hon’ble Supreme Court and the High Courts, which though not directly on the point, lay down the propositions that the benefit of doubt and choice should be given to the assessee and that in such situations the more beneficial option should be made available to the assessee. In this regard we refer to the judgment of the Hon’ble Supreme Court in the case of CIT v. Mahindra Mills [2000] 243 ITR 56. At page 62, the Hon’ble Supreme Court has observed as under :— "When there are two provisions under which an assessee could claim some benefit, it is for the assessee to choose one. A reference was made to a claim for medical reimbursement for the current year which is different from a claim for depreciation. This is so because depreciation is a claim on the written down value and if depreciation is not claimed in the current year, the written down value would remain the same for the following year. Prior to the amendment of section 32 business loss could be carried forward for eight years. There was no time limit for the claiming of depreciation. This is no so now. Earlier, therefore, it was always for the assessee to claim business loss first and current depreciation thereafter, if he so desired." [Emphasis supplied]

Again at page 80, the Hon’ble Supreme Court has observed as under:— "It is rightly said that privilege cannot be to a disadvantage and an option cannot become an obligation." It may also be imperative to refer one more judgment of the Hon’ble Supreme Court, in the case of CIT v. Indian Engg. & Commercial Corpn. (P.) Ltd. [1993] 201 ITR 723, in which it was held as under, at page 782:— "The employees concerned herein also happen to be directors. The provision in clause (c) of section 40 applies to directors among others. Of course, section 40(c) is applicable only to companies whereas section 40A(5) is applicable to employees, whether of companies or others. In the case of directors who are also employees, both the provisions will be attracted-the higher of the two ceilings has to be applied."[Emphasis supplied] The aforesaid judgment of the Hon’ble Apex Court clarifies that when there are two provisions under which an assessee could claim some benefit, it is for the assessee to choose one, which is more beneficial. The Hon’ble Bombay High Court in the case of Siemens India Ltd. v. K. Subrahmanian, ITO [1983] 143 ITR 120 held as follows : "Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is (functioning) but if the conflict is between the decisions of other High Courts, he must take the view which is in favour of the assessee and not against him." [Emphasis supplied]. The P&H High Court’s decision on the matter of valuation under the Wealth-tax Act, in the case of Jaswant Rai v. CWT [1977] 107 ITR 477, at p. 478 as under :— "The determination of the value of property in accordance with either of the aforementioned three methods at best gives an estimate of its value. The estimate made by adopting one method may vary with the estimate made by adopting another method. The principle that if the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee, applies with full vigour to a case in which different values of the same property are arrived at by adopting different methods. In such a situation, it is far and proper that the benefit of the method which is most favourable to the assessee should be allowed to him and the choice of the method to be adopted for determining the value of property should be left to the assessee." [Emphasis supplied] By the same principles we hold that the method of valuation to be adopted for evaluating the cost of construction should be the method that is most beneficial to the assessee and which is opted by him. We fail to understand as to why the Deptl. Valuation Officer is unable to estimate the cost of construction on the basis of detailed quantities method, when with the same information the empanelled valuer of the Income-tax Department i.e. the registered valuer could estimate the cost of construction on detailed quantities method. It is also found from record that the Registered Valuer’s report containing the estimation of cost of construction by adopting detailed quantities method was available to the DVO. The Jaipur Bench of the Tribunal in Smt. Rekhadevi’s case (supra), had held that it is not right for the DVO to reject the Registered Valuer’s report without giving any reason and without making further investigations and when the Registered Valuer’s report being made with itemwise analysis, is against law. In this case also, the Valuation Officer has summarily rejected the report of the registered valuer without giving itemwise comments/analysis and itemwise reasons or demonstrating in any manner, whatsoever that the valuation report of the Registered Valuer is clearly undisputably untenable”.

In the case of Ahmed Shareeff (supra), it was held that when two methods of valuation are available, the method that is favourble to assessee shall be taken into account for assessment. In Raj Kumar (supra), the Hon’ble Allahabad High Court upheld the direction of the Tribunal that if both the State PWD and CPWD rates are available, the State PWD rates have to be adopted. In these cases, the material was available and, therefore, the estimation was not favoured. On the same analogy, the estimation made by the DVO in this case has to yield to the detail quantities method preferred by the assessee and, therefore, the decisions referred by the learned CIT(A) give way to the former.

With this view of the matter, we are of the considered opinion that any addition basing on the estimation of the DVO by adopting plinth area method will not prevail over the detail quantities method basing on the material available. We accordingly hold that the addition cannot be sustained and the same is liable to be deleted. We direct the learned Assessing Officer accordingly.

In the result, appeal of the assessee is allowed.