ORDER
1. The Tribunal, New Delhi, has referred the following question of law under Section 256(2) of the IT Act, 1961 (hereinafter referred to as ‘Act’), for opinion to this Court relating to asst. yr. 1985-86:
Whether, on the facts and in the circumstances of the case, the Hon’ble Tribunal was legally justified in deleting the addition of Rs. 3,10,719 on account of difference in the cost of construction as added by the AO under Section 69B of the IT Act?
2. The brief facts of the case giving rise to the present case are that during the relevant previous year, assessee/opposite party (hereinafter referred to as ‘assessee’) completed its factory building and disclosed the cost thereof at Rs. 5,38,350 in its books of account. Cost of construction shown by the assessee was also supported by the report of registered valuer. Assessing authority further made a reference to the Departmental Valuation Cell who worked out the cost of construction at Rs. 8,49,069. Assessee raised objections against the report, but the same did not find favour with the AO who treated the difference of cost of construction as per the Departmental Valuation Cell and as shown by the assessee as the assessee’s income. First appeal filed by the assessee failed. Assessee filed second appeal before the Tribunal which was allowed. Assessee contended that it was maintaining the books of account in the normal course of business and all the expenditure incurred on construction of factory building stood recorded on day-to-day basis. It was submitted that it had already undertaken construction of factory building prior to the relevant previous year when it had incurred an expenditure of Rs. 2,73,538 in the accounting period ending 31st March, 1984. He submitted that the expenditure so incurred was not disturbed by the AO when he framed the assessment for the asst. yr. 1984-85 on 22nd Feb., 1987. It was also submitted that the assessee also raised serious objections against the report of DVO which have altogether been ignored by the Revenue even though material defects, deficiencies and discrepancies were pointed out. In this connection, reference made to the pp. 72 to 75 containing the comments of another registered valuer, Sri S.P. Bansal on the report of the DVO as also pointing out the factual errors including measurement of area constructed was submitted that the assessee had purchased a property including a built-up structure covering 2400 sq. ft. of workshop-shed, boundary wall, two iron gates for Rs. 47,500 on 4th Feb., 1984 yet the DVO had ignored and worked out the cost of construction in respect of this portion of the property also even though it was already in existence. It was submitted that the addition on this account as worked out by the DVO, comes to Rs. 2,64,898. Reference was also made to the report of DVO in which it had been accepted that the construction is of poor specification and sheds are unplastered while the machine-sheds are even without flooring and the construction is below ordinary type, yet he had made no allowance on this account. It was submitted that when no defects, discrepancies or omissions were noted by the Revenue with regard to the expenditure booked towards construction in the assessee’s books of account, there was no justification for making the impugned addition. Tribunal allowed the appeal and deleted the addition. Tribunal held as follows:
On merit of the case, we are of the considered view that, on facts and in the circumstances of the case, the addition made is not justified. The assessee is admittedly maintaining the regular books of account where expenditure incurred in construction of factory has been faithfully recorded. Further a part of the expenditure incurred by the assessee prior to the relevant previous year stands accepted by the AO when such expenditure was also recorded in the same manner as was recorded during the relevant previous year. The only basis for making the impugned addition is the report of the DVO which on the face of it suffered from material defects, as pointed out by the assessee during the course of assessment as also appellate proceedings. The objections taken by the assessee against the accuracy of the report stand unrebutted. The report of the DVO called for under Section 133(6) is lonely advisory and not binding on the AO. The Revenue has not pointed out a single instance to show that the assessee has actually incurred expenditure more than recorded in the books of account. It is well settled that entries in the account books maintained in the regular course of the thing are relevant and carry with them a presumption of their correctness until the contrary is proved. We do not find any material on record to even suggest that the entries recorded by the assessee in its books of account are incorrect. Therefore, on a consideration of relevant facts and circumstances, we see no reason to sustain the impugned addition. It is deleted.
3. Heard Sri Govind Krishna, learned standing counsel. Learned standing counsel is not able to assail findings recorded by the Tribunal that “only basis for making the impugned addition was the report of the DVO which on the face of it suffers from material defects as pointed out by the assessee during the course of assessment as also appellate proceedings and the objections taken by the assessee against the accuracy of the report stand unrebutted”. Learned standing counsel is also not able to dispute the findings recorded by the Tribunal that “the Revenue has not pointed out a single instance to show that the assessee had actually incurred expenditure more than recorded in the books of account”. Learned standing counsel is not able to show that the findings recorded by the Tribunal are wrong and based on no material and are perverse. Thus, there is no reason to interfere with such findings.
4. If the assessee maintained books of account in the regular course of business and necessary entries relating to the expenditure towards cost of construction are entered in the books of account, which are open to verification, and its correctness is not doubted, it should be accepted. In case of doubt, the assessing authority can refer the matter to the Valuation Cell for determination of cost of construction and rely upon such report as an evidence, but it is open to the assessee to challenge the correctness of such valuation report and in case if it establishes that such report is not correct and reliable, expenditure shown in the construction as per the books of account is liable to be accepted.
5. In view of the aforesaid facts and circumstances, we do not find any error in the order of Tribunal. Question referred is accordingly answered in affirmative, in favour of the assessee and against the Revenue.