Income Tax Appellate Tribunal - Jaipur
Income-Tax Officer vs Tek Chand on 22 November, 1994
Equivalent citations: [1995]52ITD197(JP)
ORDER
M.A.A. Khan, Judicial Member
1. This is an appeal by revenue from the order dated 27-3-1991 whereby the CIT (A), Jodhpur deleted an addition of Rs. 1,25,225 representing the difference between the cost of construction of a hotel building as per books of account of the assessee and that estimated by the Assessing Officer (A.O.) on the basis of the report of Departmental Valuation Officer (DVO).
2. The assessee owns a building at Suratgarh, Distt. Sri Ganganagar and derives business income from running a hotel called Ashoka Hotel therein. According to the assessee after demolition of the old structure the constuction and renovation of the building in question was started in March 1986 and completed in all respects in the month of July 1987. He had allegedly maintained a complete record, on day-to-day basis, of all the expenditure incurred on the demolition, construction and renovation of the hotel building. On the basis of such record the position of expenditure incurred came to the following :-
Old cost up to 31-3-1986 Rs. 47,000.00
Exp. during 1986-87 Rs. 1,83,000.00
Exp. during 1987-88 Rs. 25,000.00
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Rs. 2.55.000.00
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3. As per item wise details of the expenditure incurred on the constuction of the hotel building, the cost of construction came to Rs. 2,08,000 which was reflected in the regularly maintained books of account of the assessee.
4. The assessee declared the cost of construction of the hotel building at Rs. 2,08,000 as per his books of account. This declaration was also supported with the report of Sri R.N. Goyal, a registered valuer, dated 3-2-1987. Sri Goyal had estimated the cost of constuction at Rs. 2,07,803. The Assessing Officer did not accept the cost of construction as declared by the assessee and called for the advisory report from the DVO. The DVO in his first report dated 23-6-1988 estimated the cost of construction at Rs. 4,11,000 but on second reference, necessitated on assessee's objection, he estimated such cost at Rs. 3,80,225 vide his report dated 2-3-1990. The AO accepted the second report of the DVO and therefore considered the difference between the cost of construction as shown by the assessee in his books at Rs. 2,55,000 and that estimated by the DVO at Rs. 3,80,225 as representing the unexplained investment by the assessee in the construction of the hotel building. He accordingly made an addition of Rs. 1,25,225 under Section 69 of the Income tax Act, 1961 (The Act') to the total income of the assessee.
5. In appeal, however, the learned CIT (A) examined the issue in sufficient detail and held that rejection by the A.O. of the building constuction account in the books of the assessee without pointing out any specific defect was unjustified and that since the estimate made by the Registered Valuer was based on the standing order of the Public Works Department (PWD) of the State of Rajasthan, the same was acceptable in preference to that made by the DVO on the basis of Central Public Works Department (CPWD) rates. The learned CIT (A), therefore, deleted the addition in question giving thereby rise to the present appeal before the Tribunal.
6. The learned Departmental Representative urged that since the estimation made by the AO of the cost of construction was based on the report of an expert of the subject, the same should not have been disturbed by the learned CIT (A), particularly when the expert opinion was based on more scientific method approved by the CPWD than that adopted by the Registered Valuer in his report. It was also submitted by the learned Departmental Representative that the AO had rightly rejected the cost of construction account as maintained by the assessee.
7. On the other hand Sri O.P. Agarwal, CA, the learned counsel appearing for the assessee, supporting the order under appeal submitted that since the AO had found no particular and specific defects in the building account in the books of the assessee, he was not at all justified in rejecting the same. The learned counsel further submitted that the Tribunal has all along approved of the method of estimating the cost of construction of immovable properties in Rajasthan as per guidelines in X-3 standing orders of the PWD of the State. In this behalf the learned counsel referred to the several decisions of Jaipur Bench referred to by the learned CIT (A) in his order.
8. We have given thoughtful consideration to the arguments advanced on behalf of the parties and after taking into account the material on our record we entertain no doubt that the issue involed in this appeal has been decided by the leatned CIT(A) on correct lines and in confirmity with the consistent view of the Tribunal.
9. Section 34 of the Indian Evidence Act, 1872 makes entries in the books of account relevant in judicial proceedings. The said section says that entries in the books of account, regularly kept in the course of business, are relevant when they refer to a matter into which the Court has to enquire but such statements shall not alone be sufficient evidence to charge any person with liability. The necessary requirements for availing the benefit of this provision are that the entries should have been made in the books of account, that such books of account have been regularly kept in the regular course of business and that such entries refer to a matter being enquired into by the Court. But such entries would not by themselves fasten a liability on the other. The statements made through such entries are in the nature of admission of certain facts by a person which no doubt are not conclusive proof of the matters admitted but may operate as estoppel against the maker and may be proved against him. The possible use of such statement against the maker thereof attaches the degree of credibility to them and enhances their probative value. Therefore, wherever such statements are relied upon to prove the existence of a fact they are required to be considered in right perspective and should not be lightly ignored or rejected. It is in confirmity with this fundamental principle of law of evidence that it is by now well established that the account of construction of a building maintained by a person in the regular course of business should be given due weight and not be rejected without finding specific defects therein. Such account becomes all the more credible and reliable if the same is reflected in the regularly kept books of account pertaining to the business being carried on by him and also gets some corroboration from other independent evidence.
10. Judged in the light of the principles highlighted above the position in the instant case comes to this. The assessee had admittedly kept a record of the expenditure incurred on the construction of the hotel building over the years. Such record was duly supported with relevant vouchers and contained the detailed particulars of the itemwise expenditure on day-today basis. The expenditure had duly been reflected in the account books regularly maintained by the assessee in the course of his business. On scrutiny the AO might have found some defect in the account relating to sales but no specific defects in the account maintained for expenditure incurred on the construction/renovation of hotel building was pointed out by him. Under such circumstances the AO was certainly not justified in rejecting such specific record of expenditure and relying upon estimation of such cost by an expert person, particularly when the account of construction submitted by the assessee got good corroboration from the opinion of other similar expert. In our opinion the issue in the point has rightly been decided by the learned CIT (A) and, therefore, ground No. 1 is dismissed.
11. Now coming to the subject-matter of the other ground it may be stated at the very outset that whereas the DVO had made the CPWD rates as basis of his estimation of the cost of construction, the Registered Valuer had made the standing order of the PWD Rajasthan as basis of his estaimation. The PWD rates might be having a more scientific approach as their basis than that adopted by the State PWD. But it needs to be appreciated that whereas the CPWD rates are general in their nature and purpose in view of the wide area of their applicability, the State PWD rates take into account the special conditions in a particular area in the territories of Rajasthan State. The availability and cost of construction material, the availability of labour and wages to be paid to them and other like factors do affect the cost of construction and, therefore, it is quite logical for the person concerned to follow the State PWD rates while estimating the cost of construction of buildings in different areas in the territories of Rajasthan State. Such an approach has consistently been adopted by the Jaipur Bench of the Tribunal in similar other cases, which have been referred to by the learned CIT (A) in his order viz.-
1. ITA No. 370/JP/77-78 in the case of Shashu Pd. Heda v. ITO, Ajmer.
2. ITA No. 164/JP/77-78 in the case of ITO v. Prakash Chand Surana.
3. ITA Nos. 462/464/JP/1981 in the case of Digvijay Textile Mills.
There is thus no force in ground No. 2 either.
12. In the result, the appeal is dismissed.