Income Tax Appellate Tribunal - Hyderabad
Assistant Commissioner Of Income-Tax vs Vinodkumar Agarwal And Ashokkumar ... on 29 November, 2001
ORDER
J. Sudhakar Reddy, Accountant Member
1. These are cross appeals filed against the order of the Commissioner of Income-tax (Appeals), dated February 9, 1996, for the assessment year 1989-90 in the case of Sri Ashok Kumar Agarwal and the Commissioner of Income-tax (Appeals) separate order dated February 9, 1996, for the assessment year 1989-90, in the case of Sri Vinod Kumar Agarwal.
2. As the issues involved in all these four appeals are common they are taken up together for the purpose of convenience and disposed of by way of this common order.
3. The brief facts as gathered from the record are as follows. The assessee carried on wholesale business in cut-pieces of cloth under the name and style of Ashok Textiles at Patel Market, Hyderabad. For the assessment year 1989-90, the assessee filed his return of income on April 30, 1990, declaring a total income of Rs. 39,830. Search and seizure operations were conducted on the business and residential premises of the assessee on October 6, 1987. During the search operations under section 132, the Additional Director of Income-tax (Investigation), referred the residential building of the assessees at D. No. 3-6-396, Avantinagar, Hyderabad, to the Valuation Cell for estimating the cost of construction.
4. Shri Ashokkumar Agarwal and Sri Vinodkumar Agarwal are both brothers and have jointly purchased a site measuring 458 sq. yds. on May 28, 1983 for Rs. 1,60,300 at Avantinagar, Hyderabad. They constructed a residential building jointly the cost of which was met equally between them. A major portion of the construction work was completed by October, 1987. The two co-owners state that they have met the cost of construction by withdrawing the amounts from their accounts. As on March 31, 1989, both these assessees have shown the certain amounts as withdrawn by them from their business and invested in construction of the residential house. Sri Ashokkumar contributed Rs. 6,53,540 and Vinodkumar, an amount of Rs. 6,81,334 to the total of which worked out to Rs. 13,34,874. The Executive Engineer (hereinafter EE for short), Valuation Cell, along with his team visited the appellant's building on the date of search itself, i.e., October 6, 1987. Admittedly, the Executive Engineer could not take measurement of some of the rooms on the second floor, as the keys were not readily available. The building was in occupation as on the date of search, which was also the date of inspection by the search party. No documents or details were obtained from the appellant. On November 24, 1987, the cost of construction was estimated at Rs. 28,68,000 by the Executive Engineer, Valuation Cell. On the basis of this valuation report, the Assessing Officer arrived at a figure of Rs. 15,33,127 as unaccounted investment in the hands of both the assessees and Rs. 7,66,563 was added as share of unexplained investment under Section 69B of the Income-tax Act, 1961, to each of the assessees. The assessee had also obtained a valuation report from a registered valuer empanelled with the Income-tax Department who estimated the cost of construction at Rs. 10,35,000. The registered valuer evaluated the cost on detailed valuation method whereas the Executive Engineer of Valuation Cell adopted plinth area method of calculation. The assessees carried the matter in appeal before the Commissioner of Income-tax (Appeals) on various grounds. The learned Commissioner of Income-tax (Appeals) while upholding the valuation made by the Executive Engineer, Valuation Cell allowed deduction of 10 per cent, towards personal supervision from Rs. 28,68,000. He further allowed 15 per cent, of the total cost as deduction towards variation in the cost of construction from place to place and also the economies effected by the individuals while constructing the property. The Revenue is in appeal against these two deductions made by the learned Commissioner of Income-tax (Appeals). Further the Commissioner of Income-tax (Appeals) directed the Assessing Officer to verify the actual cost incurred by the appellant towards items like borewell with pump-set, 3 AC units, 6 bath-tubs and six geysers from the bills and invoices available with the appellant. Both the assessee are in appeal against the addition sustained by the Commissioner of Income-tax (Appeals).
5. Learned counsel for the assessee vehemently argued that-
(1) The inspection of the building was carried out hurriedly by the Valuation Officer during the course of search operations and no details or documents whatsoever were obtained from the appellant. He alleged that it was an ad hoc valuation made, at the instance of the Additional Director of Income-tax, who was in control of the search team. He argued that the valuation was done in a haphazard manner within one hour, based on scanty material like drawing obtained from the Additional Director of Income-tax.
(2) The Executive Engineer adopted plinth area rates by the CPWD for Delhi constructions, after making suitable adjustments taking the cost index factor at 2.73 as the basis of valuation and he added the value of additional items of fittings separately. He alleged that the Valuation Officer refused to furnish his working of the cost index and the rates adopted by him for various materials considered in working out the cost index. He submitted that the assessee was denied opportunity to rebut the cost index of 2.73 adopted by the Valuation Officer.
(3) He argued that the Valuation Officer had not taken adequate measurements and has not inspected some portions of the building, which were locked during the conduct of search operations, as Shri Vinodkumar Agarwal occupying these rooms on the second floor was out of station. He submitted that the value arrived at without inspecting these rooms were inaccurate and incomplete. He drew the attention of the Bench to the order of the Assessing Officer, at page 6 and argued that the comments therein demonstrate that the report of the Valuation Officer is incomplete and lacks authenticity.
(4) He further argued that the method of valuation, i.e., the plinth area rate, adopted by the Valuation Officer, is not the appropriate method to arrive at the cost of construction, as the basic rates for material and labour was fixed 25 years back, based on Delhi rates. He submitted that private buildings do not conform to these specifications and unless the deviations are noticed with diligence, cost of construction will give distorted results. He argued that the detailed estimation method is more scientific and gives a more realistic result, as it takes into account, the actual work done and on the basts of the cost at which the material is procured.
(5) He vehemently argued that the empanelled valuer of the Income-tax Department itself, to whom the assessee has referred this building for valuation, could work out the cost on the basis of detailed valuation method or quantity method, whereas the Valuation Officer states, that in the absence of detailed drawings, no comments could be offered on the detailed valuation method. He submitted that in private construction the nature of drawings referred to by the Valuation Officer are seldom got done and it is very unrealistic on the part of the Valuation Officer to expect that all these documents and drawings should be maintained by private individuals constructing residential houses for their own stay and in the absence of any one of these materials, plinth area method, which is a thumb rule method would be applied, which is detrimental to the interests of the assessee. He further argued that the Valuation Officer has dismissed the report of the empanelled registered valuer as unrealistic without giving any specific comments on the items/quantities of work and his rates for material. For the proposition that the Valuation Officer is not entitled to dismiss the report in such a manner, he relied on the decision of the Income-tax Appellate Tribunal, Jaipur Bench, in the case of Smt. Rekha Devi v. ACIT [1994] 49 TTJ 530 (Jaipur).
He further argued that the Assessing Officer has not given any opportunity to the assessee to rebut the rejoinder of the Valuation officer, which is against the principles of natural justice. He further submitted that the Valuation Officer after adopting the higher plinth area rates, made further addition on almost every item, on the ground that very superior material has been used. The fact that the assessee has purchased medium quality material by personally making the purchases after careful selection and hard bargain was not considered. He submitted that the Assessing Officer should have independently applied his mind in view of the facts and circumstances of the case instead of just adopting the cost of construction as reported by the Valuation Officer.
(6) On legal aspects, he argued that as the cost of construction declared by the assessee exceeded Rs. 10 lakhs, the competent authority to value the building was the District Valuation Officer and not the Executive Engineer, Valuation Cell. He argued that as the Valuation Officer was not the competent authority, the valuation report given, is not good evidence that can be relied upon by the Revenue. For this proposition, he relied on the reported case of the jurisdictional High Court in Daulatram v. ITO (1990) 181 ITR 119 (AP), at page 135.
(7) He further submitted that unaccounted investment in construction, if any, was assessable only under Section 69B wherein in any financial year, the assessee makes investment and amount expended in making such investment exceeds the amount recorded in this behalf in the books of account and the assessee offers no explanation, or the explanation offered is not in the opinion of the Assessing Officer satisfactory, the amount may be deemed to be the income of the assessee for such financial year. In other words, he argued that the assessment of unaccounted investment is with reference to the financial year and not to the accounting year of the assessee. He further submitted that as no construction was done during the financial year 1988-89 relevant to the assessment year 1989-90, there was no unaccounted investment, which could have been made by the Assessing Officer in the said financial year. Thus, he submitted that the alleged unaccounted investment in construction for the assessment year 1989-90, which is under appeal was against the provisions of law and was grossly misconceived. He concluded his submissions by pleading that in view of the legal and factual aspects, this Tribunal should set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to accept the cost of construction as declared by the assessee, which conforms to the cost of construction determined by the registered valuer.
(8) Learned Departmental Representative on the other hand, vehemently refuted all the arguments of the assessee's counsel and submitted that the facts of the case are distinguishable from the facts of the case of the jurisdictional High Court's judgment reported in Daulatram v. ITO [1990] 181 ITR 119 (AP). He drew the attention of the Bench to page 6 of the assessment order and submitted the Assessing Officer had given various reasons for adopting the valuation of the Valuation Officer's report. He submitted that there was substantial variation in actual execution and the architectural drawings and hence the building was actually measured at site for working out the cost of construction. Comparative comments were also offered by the Assessing Officer vide pages Nos. 6 and 7 of the Assessing order, which shows that there was total application of mind by the Assessing Officer. He drew the attention of this Bench to page 8 of the registered valuer's report submitted by the assessee and argued that at page 8 of the paper book, para. 2, which consists of the registered valuer's report, the period of construction up to January 22, 1988, was taken into account. He further relied on page 20 of the paper book to demonstrate that the withdrawals for construction made by the assessee for the assessment year 1988-89 was Rs. 2,00,600 in the case of Ashokkumar and Rs. 55,000 in the case Vinodkumar. Similarly, for the assessment year 1988-89 the personal drawings reflected in the books was Rs. 1,97,000 as compared to lesser amounts of drawings in the books of account in the earlier years for the construction. He submitted that superior quality material was used for the construction and the Valuation Officer has rightly arrived at the value of Rs. 26 lakhs. He relied heavily on the order of the Assessing Officer and submitted that the same should be sustained. On the appeals of the Revenue, he vehemently argued that the learned Commissioner of Income-tax (Appeals) was wrong in allowing 10 per cent, deduction from the total cost of construction estimated by the Valuation Officer towards personal supervision and further direction of 15 per cent, from the total value so assessed by the Valuation Officer towards difference in rates, etc. (9) In reply to the arguments of the learned Departmental Representative, [earned counsel for the assessee submitted that at the time of inspection, the building was under occupation, which goes to prove that it is full and complete. He further drew the attention of the Bench to the valuer's report wherein it was mentioned that the material was available at site as on the date of inspection. As regards the entries in these books for the assessment years 1988-89 and 1989-90, he submitted that these reflected clearing of old bills repurchases made on credit, etc., and this cannot go to prove that the construction of the building was undertaken only in the years 1988-89 and 1989-90.
(10) Heard both sides. Read all the papers on record, the orders of the authorities below and the case law cited. On a careful examination of the issues involved, we are convinced with the arguments of learned counsel for the assessee that the Valuation Officer of the Department has carried out the inspection of the premises in a hurried and haphazard manner. We do not see any logic or reason for the Valuation officer to inspect the building on the date of search itself as if the immovable property would vanish, be removed or destroyed. Valuation of immovable properties cannot be done in such a hurried manner, i.e., as soon as the search operations are commenced, as the occupants of the premises would be in no position whatsoever to co-operate with the Valuation Officer by giving all the necessary information and putting forward the facts and their points of view. The action of the Assessing Officer is highly unwarranted and is against the principles of natural justice and that, which could result in erroneous estimation of cost, which could cause irreparable prejudice to the assessee. The Additional Director of Income-tax should have refrained from getting the building valued in such a hurried manner. The assessee should have been given adequate opportunity. Coming to the valuation report by the Valuation Officer, it is pertinent to note the following observations of the Assessing Officer, at page 6 of the assessment order :
"After going through the assessee's objections in adopting the cost of construction of the building, I am convinced that certain lapses took place in the valuation and this office inspector also reported in his report dated March 25, 1991, that there are certain variations of measurements of each floor."
6. The Valuation Officer himself, in his report admitted that he has not taken measurements of all the rooms in the building, as some of them were locked. We are convinced with the arguments of learned counsel for the assessee that the inspection of the building carried out on October 6, 1987, on the date of search was irregular and was done in a haphazard and hurried manner, without giving adequate opportunity to the assessee.
7. This brings us to the argument of the assessee that the Executive Engineer, Valuation Cell, Unit II, Income-tax Department, Hyderabad, is not competent to value the property in question as the value of the same exceeds Rs. 10 lakhs and was required to be referred to the DVO, Hyderabad. In the last para, page 4 of the valuer's report, it is stated as follows :
"It was pointed out at the time of inspection of the property on October 6,1987, that the cost of construction will exceed Rs. 10 lakhs and requires to be referred to the District Valuation Officer, Hyderabad. Now the cost has exceeded the powers vested with the Valuation Officer. Accordingly, it may please be considered to refer the case to the competent authority."
8. Admittedly, the Valuation Officer is not competent to value this property. In a case reported in Daulatram v. ITO [1990] 181 ITR 119 (AP) of the jurisdictional High Court it is held as follows (at page 135):
"It is in the light of the aforesaid fresh material that the second point raised herein has to be answered. From the aforesaid rule, it is quite evident that the first 'Valuation Officer' was not at all competent to value the capital asset, as the value of the capital asset admittedly was more than Rs. 10 lakhs, in which case it will be competent only for the 'District Valuation Officer' to value the said capital asset. Therefore, the valuation arrived at earlier by the 'Valuation Officer' could not have been taken into the reckoning at all, as it was contrary to the statutory provisions. Secondly, there was material which came to light admittedly subsequent to the finalisation of the valuation by the first Valuation Officer which was not only germane but crucial in determining the correct valuation of the building, viz., the raid conducted on October 29, 1983, revealed that a higher investment than the one arrived at earlier came to the knowledge of the authorities concerned. Further, the reports of the Valuation Cell (sic) which were brought to the notice of the Income-tax Officer subsequent to the first valuation report showed a lot of variation in respect of plinth area, quality of construction and defects in measurements and so forth. It is the second Valuation Officer who, after due reference from the Income-tax Officer, has given a notice explicitly bringing all these materials to the notice of the assessees, which go to show that adequate opportunity and notice has been given before finalising the valuation afresh, in compliance with the principles of natural justice. Therefore, there is no good reason as to why such second reference should not be allowed to be made as otherwise, obviously fresh material, which was highly relevant, would have gone unnoticed rendering the entire exercise and the purpose of valuation futile."
9. In view of the jurisdictional High Court's judgment supra, we hold that the valuation arrived at by the Valuation Officer could not be taken into account at all, as it is contrary to the statutory provisions and as he is not competent to value this property.
10. As to the argument of learned counsel for the assessee that it is more scientific to adopt the detailed estimate method or detailed quantities method while determining the cost of construction, we are of the opinion that 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 then 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 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 Supreme Court in the case of CIT v. Mahendra Mills [2000] 243 ITR 56. At page 62, the 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 not 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)
11. Again page 80, the Supreme Court has observed as under :
"It is rightly said that a privilege cannot be to a disadvantage and an option cannot become an obligation."
12. It may also be imperative to refer one more judgment of the Supreme Court in the case of CIT v. Indian Engineering and Commercial Corporation P. Ltd. [1993] 201 ITR 723, in which it was held as under at page 728 :
"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."
13. The aforesaid judgment of the apex court clarifies that when there are two provisions under which an assessee could claim some benefit, it is for the assesses to choose one, which is more beneficial.
14. The Bombay High Court in the case of Siemens India Ltd. v. K. Subramanian, ITO [1983] 143 ITR 120 held as follows (page 141) :
"Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is, but if the conflict is between decisions of other high courts, he must take the view which is in favour of the assessee and not against him."
15. The Punjab and Haryana 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 page 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 fair 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."
16. 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 Departmental 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 the 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. Rekha Devi v. ACIT [1994] 49 TTJ 530, had held that it is not right for the District Valuation Officer 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.
17. We find that the Departmental Valuation Officer has acted in a cavalier manner while inspecting the premises of the building in an hour that too on the date of reference itself, which happened to be the date of search operations, during the course of search operations, without notice, transcending all principles of natural justice. Further, he declined to adopt the detailed quantities method of valuation, on the pretext that some material drawings were not furnished to him. The short-cut methods of evaluation of cost of construction, i.e., plinth area method, is resorted to on the pretext of non-availability of some material, when a registered valuer could do the same valuation of the same building on the basis of the same material/drawings on a detailed valuation method. Private parties cannot be expected to maintain all the detailed drawings sought by the Departmental Valuation Officer. Law does not require the impossible to be done. The DVO has also not stated as to why he was unable to accept the quantities and rates arrived at by the registered valuer. He gave no reason why they have to be disbelieved or are inaccurate. The Assessing Officer should have insisted that the DVO investigate the matter properly adhering to the principles of natural justice. We are convinced with the argument of learned counsel for the assessee that when as late as in the year 1991, apartments and commercial spaces were being sold in the city at Rs. 225 to 275 per sq. yd. inclusive of land cost and development and profit the DVO valued the cost of construction at Rs. 368 per sq. yd. during the year 1985-87. To our mind, this is highly irrational and far from reality. For all these reasons we uphold the contentions of the assessee's counsel and reject the report of the DVO as not good evidence.
18. As regards the arguments of the assessee on the application of Section 69B of the Act the Jaipur Bench of the Tribunal in Smt. Rckha Devi v. ACIT [1994] 49 TTJ 530, held as follows (headnote) :
"It is difficult to believe that the lady had the savings of Rs. 70,000 in cash which she is stated to have invested in the construction of this house property and hence this explanation of the assessee is rejected. However, the arguments of the assessee that the assessee had started construction of the house in January, 1981, and it was completed in October, 1982. This would mean that financial years 1980-81, 1981-82 and 1982-83 were involved during which those investments were made. If those additions have to be made under Section 69 or Section 69C, the addition have got to be made on financial year basis. None of the lower authorities has made out a case to the effect that the entire amount of Rs. 70,000 was invested by the lady in any one financial year. The total period works out to approximately two months in the financial year 1980-81, 12 months in financial year 1981-82 and 7 months in financial year 1982-83, which only would be relevant for the assessment year under consideration. Since seven months' period works out to one-third of the total period of 21 months on a proportionate basis, only Rs. 23,350 may be estimated as unexplained investment of the assessee in the relevant financial year which may be deemed to be the income of the assessee for this assessment year and may be added to her income. Thus, instead of an addition of Rs. 70,000, an income of only Rs. 23,350 may be sustained and the balance is directed to be deleted."
19. As seen from the DVO's report at page 1, it is observed as follows :
"The building is mostly complete and is being used. A few doors, windows, etc., have yet to be fixed. The material for these are also available at site."
20. It is further observed that the period of construction as stated by the DVO himself is July, 1985 to October, 1987.
21. Respectfully, following the judgment of the Jaipur Bench of the Tribunal supra, we hold that the assessment of unaccounted investment is to be done with reference to the financial year and not the accounting year of the assessee. As no construction was done during the financial year 1989-90, there is no unaccounted investment under Section 69B of the Income-tax Act in that year.
22. Coming to the Departmental appeals, we find that the learned Commissioner of Income-tax (Appeals) has followed the judgment of the Tribunal in the case of Salma A Mehdi, Visakhapatnam, dated June 20, 1994, of this Bench in I. T. A. Nos. 697 and 698/H of 1995 and I. T. A. Nos. 806 and 807/Hyd of 1993 in allowing 15 per cent, deduction on account of variation of rates from place to place. There is no infirmity in the same. Similarly, there is no infirmity in the order of the Commissioner of Income-tax (Appeals) allowing a deduction of 10 per cent, towards personal supervision. Anyhow, as we have held that the valuation report of the DVO cannot constitute a good evidence in view of the reasons stated by us above, we see no merit in the appeals of the Department and accordingly, the appeals of the Revenue are hereby dismissed.
23. As far as the appeals of the assessee are concerned we allow both the appeals and direct the Assessing Officer to accept the cost of construction as determined by the registered valuer and not to apply Section 69B for the assessment year 1989-90.
24. Before parting with this order, we note with concern that the Departmental Valuation Officers are not following the judgments of this Tribunal. If so, he would have himself given 15 per cent, overall rebate on account of difference in cost of construction due to rate variations among different places, as held by this Tribunal in the case of Salma A. Mehdi (supra). This attitude is enormously increasing the infructuous work of the Department and the Tribunal and also causing unnecessary harassment and anxiety to the taxpayers. We should seriously consider awarding costs on the officers of the Valuation Cell in all such cases in future wherein the propositions laid down by the various courts and tribunals of this country are not followed. In all such cases, where properties have been referred to valuation, the following propositions of law can be stated to have been laid down by various High Courts and Tribunals.
(1) Reference should be made to the Valuation Cell only after proper application of mind by the officer concerned. Courts have held that reference cannot be made without rejecting books of account maintained by the asses-see, which gives details of the construction expenditure. It is a settled proposition that evidence in the form of regular books is certainly more reliable than an estimate by an expert. This necessarily means that reference made on the arrival of the search party to the assessee's premises without even going into the books of account or other details available and filed with the Department, is obviously a reference made without application of mind. (Dr. P. Subramanian v. ITO [2001] 118 Taxman-Mag 187 (Mad) ; CIT v. Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar [1993] 200 ITR 788 (Raj) and K. K. Seshaiyer v. CIT [2000] 246 ITR 351 (Mad)).
(2) Inspection of the properties should not be done during the course of search and seizure operations as during that period the assessee would be more under psychological pressure and no proper defence can be advanced by the assessee during that period of time. Inspection of the property should be done by giving adequate notice and opportunity to the assessee and preferably in his presence.
(3) When there are more than one method to estimate the cost of construction, the method most favourable to the assessee should be followed by the Valuation Cell. The material that is sufficient for arriving at the cost of construction by a registered valuer by following a particular method, should be the material sufficient for arriving at the cost for the same method if adopted by the Valuation Cell. Private individuals constructing residential houses cannot be expected to have all the types of drawings, designs, etc., maintained by the Government contractors nor can they be expected to have stock book, log books, etc. Non-availability of these records should be no reason to apply plinth area method of estimation. Empanelled valuers' report itself should be sufficient material to the valuation officer to evaluate the cost of construction on that particular method (refer Jaswant Rai v. CWT [1977] 107 ITR 477 (P&H)).
(4) When two sets of rates are prescribed, one by the CPWD and the other by the State PWD and as none of these can be considered unrealistic and wrong, the rates that are more favourable to the assessee have to be applied by the Valuation Cell. Only local rates are to be adopted (refer I. T. A. Nos. 697 and 698/Hyd of 1995 and I. T. A. Nos. 806 and 807/Hyd of 1993 in the case of Salma A. Mehdi, Visakhapatnam, order of this Bench dated June 20, 1994.) (5) The Valuation Cell is confronted with the report of the empanelled registered valuer and if the Valuation Officer is not in agreement with the report of the registered valuer, he should give itemwise reasons for such disagreement. The quantities and rates should be necessarily controverted itemwise with evidence and reasons, after detailed investigation in Smt. Rekha Devi v. ACIT [1994] 49 TTJ 530 (Jaipur).
(6) It is obligatory on the part of the Valuation Officer to furnish to the assessee, in the interest of natural justice, his working of the cost of index and the rates adopted by him for various material considered in working out the cost index.
25. In the result, the appeals filed by the assessee are allowed and that of the Revenue are dismissed.