2005 (2) TMI 74 - HC - Income Tax

Difference between the cost of construction shown by the assessee and the one assessed by the Departmental Valuation Officer - Unexplained Investment - Whether Tribunal was justified in deleting the additions made by the Assessing Officer on account of difference between the cost of construction shown by the assessee and the one assessed by the Departmental Valuation Officer -we hold that no question of law, much less a substantial question of law, arises for determination in this appeal. Consequently, the appeal is dismissed.

Summary

Issues:
1. Whether the Income-tax Appellate Tribunal was justified in deleting the additions made by the Assessing Officer on account of the difference in the cost of construction.
2. Whether the addition made by the Assessing Officer based on the valuation report is sustainable.
3. Whether the report of the Valuation Officer can be relied on for making additions.

Issue 1 - Cost of Construction:
The respondent had constructed a building, and the Assessing Officer determined a difference in the cost of construction compared to the value projected by the respondent. The matter was referred to the Valuation Officer, who valued the construction higher. The Assessing Officer made an addition to the income of the respondent based on this difference. The Commissioner of Income-tax (Appeals) deleted the addition, but some other additions were maintained. The Tribunal, citing a Supreme Court judgment, held that the Assessing Officer did not have jurisdiction to make additions based on the Valuation Officer's report. The Tribunal thus deleted all additions based on the report, including the one in question for the assessment year 1993-94.

Issue 2 - Addition Based on Valuation Report:
The appellant argued that Section 142A of the Income-tax Act should sustain the addition made by the Assessing Officer based on the valuation report. However, the court found that Section 142A did not apply in this case. The assessment had become final before the relevant date for the application of Section 142A, and no revision or reassessment was required under Section 153A. Therefore, Section 142A could not be used to support the addition made by the Assessing Officer.

Issue 3 - Reliability of Valuation Officer's Report:
In analyzing the reliance on the Valuation Officer's report for making additions, the court referred to a Supreme Court judgment. The Supreme Court had held that the Assessing Officer cannot refer the cost of construction to the Valuation Officer for assessment purposes. The power of the Assessing Officer to inquire does not include the power to refer matters to the Valuation Officer. The Valuation Officer's report may be considered as evidence if relevant but cannot be the basis for additions. The court concluded that no substantial question of law arose, and the appeal was dismissed.

In summary, the High Court upheld the Tribunal's decision to delete the additions made by the Assessing Officer based on the Valuation Officer's report. The court found that the Assessing Officer did not have jurisdiction to rely on the report for making additions, as clarified by a Supreme Court judgment. Additionally, the court determined that Section 142A did not apply in this case to sustain the addition.