2002 (9) TMI 794 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 43,200 on account of income declared in the return filed at Delhi for the assessment year 1996-97.
2. Jurisdictional issue regarding the filing of the return at Delhi instead of Amritsar.
3. Deletion of addition of Rs. 15,47,610 out of Rs. 26,85,600 on account of undisclosed investment in property construction at Delhi.
4. Directions for reassessment of the remaining Rs. 11,38,990.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 43,200:
The Department challenged the deletion of Rs. 43,200, which was declared in the return filed at Delhi for the assessment year 1996-97. The Assessing Officer (AO) had denied this credit, arguing that the return filed at Delhi was non est since the jurisdiction was with the Income-tax Officer, Ward 2(2), Amritsar, later transferred to Inv. Circle-II, Amritsar, under section 127 of the Income-tax Act, 1961.

The CIT(A) observed that the assessee was residing in Delhi during the assessment year under consideration and was employed by M/s Yogi Pharmacy Ltd., thus the correct jurisdiction was with the ITO, Delhi. Consequently, the return filed at Delhi was deemed valid. The CIT(A) directed the AO to delete the income of Rs. 43,200 disclosed by the assessee for the assessment year 1996-97.

The Tribunal upheld the CIT(A)'s decision, noting that the return was filed before the search and was accepted by the Department. The Tribunal emphasized that the income was not unearthed during the search proceedings and thus should be excluded from the block period under section 158BB(1)(b).

2. Jurisdictional Issue:
The Department argued that the assessee was not entitled to file the return at Delhi unless jurisdiction was transferred through an order under section 127(2). The CIT(A) concluded that jurisdiction was conferred by orders under section 120, and since the assessee was residing in Delhi and employed there, the ITO, Amritsar, had no jurisdiction. The Tribunal agreed with the CIT(A), confirming that the return filed at Delhi was valid and the jurisdictional issue was resolved in favor of the assessee.

3. Deletion of Addition of Rs. 15,47,610:
The Department contested the deletion of Rs. 15,47,610 out of the total addition of Rs. 26,85,600 related to undisclosed investment in property construction at Delhi. The AO had added Rs. 26,86,600 based on the valuation officer's report, which estimated the cost of construction/acquisition at Rs. 48,15,600.

The CIT(A) noted that the assessee had purchased the property for Rs. 15,60,000 and provided evidence of the previous owner's investment of Rs. 13,70,590 in the construction. The CIT(A) held that the total market value at the time of purchase could not substitute the disclosed consideration for determining actual investment. Thus, the addition of Rs. 15,47,610 was deleted.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the valuation by the D.V.O. was merely an opinion and the disclosed investment was based on documentary evidence found during the search. The Tribunal found no merit in the Department's ground and dismissed it.

4. Directions for Reassessment of Rs. 11,38,990:
The CIT(A) directed the AO to reassess the remaining Rs. 11,38,990, instructing the AO to verify the previous owner's investment through necessary evidence and inquiries. The Tribunal found the CIT(A)'s directions justified, as the AO had made the addition without appreciating the facts and based solely on the D.V.O.'s valuation.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the CIT(A)'s decisions on all contested issues. The deletion of Rs. 43,200 and Rs. 15,47,610 was justified, and the directions for reassessment of Rs. 11,38,990 were appropriate. The jurisdictional issue was resolved in favor of the assessee, validating the return filed at Delhi.