SHRI HARI & CO OWNERS, C/O SAWAN TRADERS, INDIA SHOP NO. 42, NEW GRAIN MARKET, KAITHAL,KAITHAL vs. INCOME TAX OFFICER, WARD 1, KAITHAL

आदेश / O R D E R MANOJ KUMAR AGGARWAL (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC[CIT(A)] dated 22.11.2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 263 of the Act on 24.03.2023. The sole grievance of the assessee is confirmation of valuation addition of Rs.212.09 Lacs. Having heard rival

submissions and upon perusal of case records, the appeal is disposed- off as under. 2. It emerges that the assessee did not file its Income Tax Return. During regular proceedings u/s 143(3), Ld. AO had made reference on 21.03.2016 to Departmental Valuation Officer (DVO) to determine the cost of investment as made by the assessee in construction of building / structure. The Ld. DVO valued the same at Rs.12.78 Crores as against investment of Rs.10.66 Crores as reflected by the assessee. To tax the differential amount, the case was reopened and an assessment was framed u/s 143(3) r.w.s. 147 on 31.12.2019. However, the assessment was framed without making any addition by accepting the valuation report as submitted by the assessee. The Ld. AO apparently failed to take cognizance of the DVO report. Consequently, the order was revised in exercise of powers u/s 263 by revisionary authority on 08.03.2022. The assessee’s challenge to validity of these proceedings stood dismissed by Tribunal vide ITA Nos. 402 & 403/Chd/2022 common order dated 31.07.2024. 3. In the fresh proceedings, the assessee furnished valuation report of Shri Harjinder Singh Bhatia and stated that the valuer has adopted Haryana PWD rates applicable to Haryana for estimating the cost of construction. However, the said rates were discarded by DVO on the ground that the rate of godown for Rs.315/- per sq. feet and office / labour room at Rs.600/- per sq. feet was without any basis. Similar was the position for compound wall. The height of the godown was taken as 18’ whereas the height was more as per actual measurements. The

CBDT also approved adoption of PWD rates. Therefore, the valuation of the assessee was not accepted. The assessee challenged report of DVO on many counts and particularly that the DVO had used PWD rates. The same stood rejected by Ld. AO and an addition of Rs.212.09 Lacs was made in the hands of the assessee as ‘investment from unexplained sources’. 4. During first appeal, the assessee, on merits, referred to the decision of Hon’ble Punjab & Haryana High Court in the case of Shri Rajesh Mahajan (50 Taxmann.com 206) to contend that CPWD rates were higher than 30% and the benefit of personal supervision was to be allowed to the extent of 15% as against 7.5% as granted by Ld. DVO. The differential in valuation was merely 19.89%. If the benefit of 25% for CPWD rates and additional benefit of personal supervision for 7.5% was granted, there would remain no difference. However, Ld. CIT(A) endorsed the findings of Ld. AO against which the assessee is in further appeal before us. Our findings and Adjudication 5. Upon careful consideration of material facts, we find that the short issue that fall for our consideration is with regard to the addition of Rs.212.09 Lacs as made by the Assessing Officer on account of alleged unexplained investment in the construction of the building / structure. The addition has primarily been made on the basis of the valuation report furnished by the Ld. DVO who has estimated the cost of construction at Rs.12.78 crores as against the cost of Rs.10.66 crores as declared by the assessee. We find that the assessee had

furnished its own valuation report, wherein the cost of construction was estimated by adopting the Haryana PWD rates applicable to the area. The building / structure under consideration is in the shape of Godowns which is situated at France Wala Road, Kaithal. Before lower authorities, the assessee has specifically pointed out that the rates prevailing in Haryana were lower than the CPWD rates and that appropriate deductions towards personal supervision were also required to be allowed. However, the DVO did not accept the rates adopted by the assessee and proceeded to determine the cost of construction by adopting his own rates. 6. It is well settled that a valuation report of the DVO is an important piece of evidence, but the same cannot, by itself, be treated as conclusive proof of actual unexplained investment. The valuation is essentially an estimate and necessarily involves an element of approximation. Therefore, unless there is cogent material on record to establish that the assessee had actually incurred expenditure over and above the amount disclosed by it, an addition merely on the basis of an estimated difference in valuation cannot automatically be sustained. 7. In the present case, the assessee had specifically relied upon the judgment of the Hon'ble Punjab & Haryana High Court in the case of Shri Rajesh Mahajan (50 Taxmann.com 206), wherein the issue regarding the difference between CPWD and PWD rates and the allowance towards personal supervision was considered. The assessee had also contended that the CPWD rates adopted by the DVO were substantially higher than the Haryana PWD rates and that a deduction

of 15% towards personal supervision was justified, whereas the DVO had allowed only 7.5%. We find that in the cited case law, jurisdictional High Court, deleted similar addition as made by the revenue by allowing 15% supervision charges and by observing that CPWD rates were higher than 30% as valued by assessee’s valuer. In the present case, the valuation has been done at approx.19.89% higher than the cost as reflected by the assessee. The Ld. DVO has only allowed 7.5% for self-supervision as against 15%. Further, no cogent justification has been given to reject the assessee’s valuer estimates. Respectfully following this decision, we find considerable force in the contention of the assessee. The valuation adopted by the DVO has to be suitably adjusted having regard to the local PWD rates and the benefit attributable to the assessee's personal supervision. It is also relevant that the assessee had challenged the valuation report on several specific grounds, including the rates adopted for the godown, office / labour room and compound wall. The Ld. AO, however, has not brought any independent evidence on record to establish that the assessee had actually incurred the additional expenditure corresponding to the difference between the declared cost and the DVO's estimate. Further, the difference in valuation is merely 19.89%. After adjusting self- supervision benefits of 7.5%, the net differential is 12.39% only which could be attributed to higher CPWD rates. Such difference, particularly in a matter involving estimation of construction cost, cannot by itself be regarded as sufficient evidence of unexplained investment. The Hon'ble jurisdictional High Court has also recognized the necessity of making

appropriate adjustments while comparing CPWD / PWD rates and allowing a reasonable deduction towards personal supervision. Under these circumstances, we are of the considered view that the DVO's estimate, being an estimate based upon rates and assumptions which have been disputed by the assessee, could not be made the sole basis for sustaining the addition of unexplained investment u/s 69 of the Act in the absence of any corroborative material demonstrating actual unexplained expenditure. 8. Finally, considering the totality of the facts and circumstances of the case, the valuation adopted by the DVO could not be treated as conclusive evidence of unexplained investment. The addition as made by Ld. AO merely on the basis of such estimated difference is, therefore, not sustainable. We order so. The assessee’s grounds of appeal stand allowed. No other ground has been urged in the appeal. 9. The appeal of the assessee is allowed. Order pronounced on 02nd September, 2026

-Sd- -Sd- (RAJESH DAMODARLAL SHARMA) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AS Dated: 02-09-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR – 9A CHANDIGARH