ITA No. 49 of 2005 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 49 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar ....Appellant. Versus M/s Grover Nursing Home ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla, Advocate and Mr. Jaginder Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 49 to 51 of 2005 as common questions of law and facts are involved therein. For brevity, the facts are being extracted from ITA No. 49 of 2005. 2. ITA No. 49 of 2005 was admitted by this Court vide order dated 10.12.2007 for determination of the following substantial questions of law:- “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the case is squarely covered in favour of the assessee by the judgment of Hon'ble the Supreme Court in the ITA No. 49 of 2005 -2- case of Smt. Amiya Bala Paul Vs. CIT (2003) 262 ITR 407 (SC) especially when the reference with regard to the construction of house building was made to the Valuation Officer under Section 131(1) (d) and not under Section 55A of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in following the judgment of Hon'ble the Supreme Court in spite of provisions of Section 142A of the Income Tax Act, 1961 inserted by the Finance Act 2004 with retrospective effect from 15.11.1972 giving the power to the Assessing Officer to refer the question regarding determination of the cost of the construction to the Valuation Officer?” 3. Fact necessary for adjudication of the present appeal may be noticed. The assessee constructed a Nursing Home at Sirsa. Assessment proceedings were initiated and for valuation of the cost of construction of the Nursing Home, the matter was referred to the Departmental Valuation Officer (DVO). The DVO vide his report determined the cost of construction at Rs.5,38,011/- as against Rs.3,41,537/- shown by the assessee, the difference of which comes to Rs.1,96,474/-. The assessee raised objections against the valuation of the DVO and the Assessing Officer referred the matter to the DVO for his comments. Finally, the DVO revised his valuation report and finally the difference in valuation was worked out to be Rs.98,524/-. The ITA No. 49 of 2005 -3- Assessing Officer considered the said amount as investment made from undisclosed sources and accordingly made an addition of Rs.98,524/-. Feeling aggrieved, the assessee went in appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT (A)”] who vide his order dated 24.2.2003 deleted the addition made by the Assessing Officer. The department feeling dissatisfied approached the Tribunal, who vide order dated 17.5.2004 affirmed the view of the CIT(A) and dismissed the appeal. Hence, the present appeal by the revenue. 4. We have heard learned counsel for the parties and perused the record. 5. On appeal by the assessee, the CIT(A) while discussing the report of DVO noticed that the valuation as determined therein required to be reduced by Rs.4,00,203/- and cost of construction as estimated by DVO would stand reduced to Rs.22,66,936/- less Rs.4,00,203/- = Rs.18,66,733/- as against depicted in the books of account of the assessee at Rs.17,59,694/-. The amount of Rs.4,00,203/- was held to be deductible from the valuation of DVO on account of the following: (a) Weighted cost deduction Rs.30,430/- (b) Economy in bricks, steel & wood ] Rs.1,29,968/- ] Rs.67,319/- ] Rs.66,735/- (c) Unfinished walls on external surface Rs.45,719/- (d) Items relating to Kota Stone and Rs.60,032/- marble 6. The findings recorded by the CIT(A) read thus:- “13. In view of the discussion above, the assessee would become entitled to a further deduction to the ITA No. 49 of 2005 -4- extent of Rs.4,00,203/- (30430+264002+45719+ 60032 = 4,00,203/-). After giving effect to the different items considered above, the cost of construction as estimated by the Valuation Officer will stand reduced to Rs.22,66,936/- - 400203/- = 18,66,733/-. The cost as per assessee's books of account is Rs.17,59,694/-. Accordingly, this difference would now only be to the extent of Rs.1,07,039/-. In terms of percentage, this works out to little over 6%. 14. While considering the two reports i.e. of the Valuation Officer and the registered valuer, one has to bear in mind that after all both reports are only estimates as to the real cost of construction and are based on a laid down procedure. The report of the Government registered valuer too is a piece of good evidence, since this is also based on the same approved guidelines. There can be no dispute that the reports of the two experts i.e. DVO and the registered valuer, only act as opinions before a quasi judicial and statutory authority to whom they are submitted and who is entitled to prefer one over the other, though such appreciation has to be guided by scrupulous and sound reasons. It is always to be remembered that law does not admit any substantial different between the two experts from the same ITA No. 49 of 2005 -5- genus, namely DVO and a government registered valuer, both of whom are statutory creations. The registered valuer is also a qualified person vested with legal powers to make reasonable estimate of the cost of construction and in the matter of making estimates, exactitude and precision is virtually impossible, as held by the Chandigarh Tribunal in the case of ITO Vs. Kamboj Rice & General Mills reported in 138 Taxation 56. Similarly, the Amritsar Bench, if the ITAT have held in the reported decision 18 TLR 277 in the case of ITO Vs. JMP Enterprises that reasonable variation in the two estimates should be no reason to make an addition. In a case before the Amritsar Bench in the case of Smt. Veena Vs. ITO 2(1), Jalandhar reported in (1998) 5 I.T.REP 330, the difference in the two estimates was about 13.7%. The Tribunal concluded that such a difference is within reasonable limits and declared that “we feel, no addition is called for unless and until there is apparent and specific mistake in the valuation report and therefore directed that the addition was not warranted where the difference is within reasonable limit.” In view of the cited judicial judgments/decisions and the fact that difference in this case is a little over 6% and considering the fact that both estimates were made by responsible ITA No. 49 of 2005 -6- authorities, no addition on the basis of difference of about 6% was required to be made in the case and the same is, therefore, deleted.” 7. It would be relevant to notice the observations made by the Tribunal on merits regarding valuation in paras 5 and 6 which are as under:- “5. It is relevant to point out here that in the instant case, the assessee was maintaining proper books of account and no material defects have been pointed out in the books. It is also stated that the expenses were duly supported by the vouchers. The Ld. counsel for the assessee Shri P.C.Jain, also contended that the full details were also mentioned in respect of each item in the books. The Assessing Officer has no where stated that the books maintained by the assessee were unreliable. It is also relevant to point out that the Assessing Officer has not rejected the book result while accepting the cost of construction on the basis of revised valuation report of the DVO. In this connection, the Hon'ble Rajasthan High Court in the case of CIT v. Partap Singh Amrosingh Rajendra Singh and Deepak Kumar (1993) 200 ITR 788 held that “if the assessee has maintained proper books of account and all details are mentioned in such books of account, which are duly supported by vouchers and no defects were ITA No. 49 of 2005 -7- pointed out and the books are not rejected, the figures shown therein have to be followed.” The Hon'ble High Court further observed that the valuation report can be taken into consideration only when the books of account are not reliable or not supported by proper vouchers or the Income Tax Officer is of the opinion that no reliance can be placed on such books of account. 6. In the instant case, the Assessing Officer had not stated that the assessee was not maintaining proper books of account. In that view of the matter also the addition made by him was not justified and the Ld. CIT(A) rightly deleted the same. The net result of the above discussion is that the Assessing Officer was not justified in making the addition on the basis of DVO's report and therefore, Ld. CIT(A) rightly deleted the same.” 8. The Tribunal had concluded that the books of accounts of the assessee could not be doubted as the assessee was maintaining proper books of account and no material defect could be pointed out therein. The expenses were also supported by the vouchers and full details were also mentioned in respect of each item in the books. The accounts produced by the assessee were never rejected by the Assessing Officer. Moreover, the revised valuation report of the DVO and that of the government registered valuer produced by the assessee were opinions of two experts and in the present case, as noticed above, ITA No. 49 of 2005 -8- the difference was mere little over 6% as per assessee's books of account. The revised DVO report, thus, could not be held to be the basis for sustaining the addition. Learned counsel for the revenue could not point out any defect in the approach of the CIT(A) and the Tribunal which may warrant interference by this Court under Section 260A of the Act. 9. The appeal was admitted for determination of the substantial question s of law as the Tribunal had also adjudicated the matter on the basis of the judgment of the Apex Court in Smt. Amiya Bala Paul v. Commissioner of Income-Tax [2003] 262 ITR 407 (SC). 10. In the light of findings recorded by the CIT(A) and the Tribunal and also the conclusion arrived at, as noticed above, the substantial questions of law on which appeal had been admitted are rendered academic. 11. Finding no merit in these appeals, the same are accordingly dismissed. (AJAY KUMAR MITTAL) JUDGE October 13, 2010 (ADARSH KUMAR GOEL) gbs JUDGE ITA No. 49 of 2005 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 50 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar ....Appellant. Versus M/s Grover Nursing Home ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla, Advocate and Mr. Jaginder Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. This appeal is dismissed. For orders, see ITA No. 49 of 2005 (Commissioner of Income Tax, Hisar v. M/s Grover Nursing Home). (AJAY KUMAR MITTAL) JUDGE October 13, 2010 (ADARSH KUMAR GOEL) gbs JUDGE ITA No. 49 of 2005 -10- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 51 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar ....Appellant. Versus M/s Grover Nursing Home ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla, Advocate and Mr. Jaginder Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. This appeal is dismissed. For orders, see ITA No. 49 of 2005 (Commissioner of Income Tax, Hisar v. M/s Grover Nursing Home). (AJAY KUMAR MITTAL) JUDGE October 13, 2010 (ADARSH KUMAR GOEL) gbs JUDGE