2002 (1) TMI 1296 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment u/s 147/148.
2. Exemption u/s 54 for investment in more than one flat.
3. Enhancement of assessment u/s 251(2) regarding expenditure on new flat.
4. Enhancement of assessment u/s 251(2) rejecting the valuation report for fair market value as on 1-4-1981.

Summary:

1. Reopening of Assessment u/s 147/148:
The assessee challenged the reopening of the assessment, arguing that since the original return was accepted u/s 143(1)(a) and no order u/s 143(3) was made, the reopening was invalid. The Tribunal upheld the reopening, stating that the issuance of notice u/s 148 was justified as the income had escaped assessment, and the time limit for issuing notice u/s 143(2) had expired.

2. Exemption u/s 54 for Investment in More Than One Flat:
The assessee claimed exemption u/s 54 for two flats purchased in the same building. The Tribunal upheld the CIT(A)'s decision that exemption u/s 54 is available only for one residential house. The Tribunal noted that the language of the statute is clear, and "a residential house" means one residential unit. The Tribunal also considered the assessee's family size and concluded that the second flat was not required for residential purposes as it was let out.

3. Enhancement of Assessment u/s 251(2) Regarding Expenditure on New Flat:
The CIT(A) had enhanced the assessment by disallowing Rs. 14,94,357 out of the total expenditure of Rs. 17,26,908 incurred by the assessee to make the new flat habitable. The Tribunal held that the expenditure incurred to make the flat habitable should be included in the cost of the new asset. Therefore, the enhancement by the CIT(A) was deleted.

4. Enhancement of Assessment u/s 251(2) Rejecting the Valuation Report for Fair Market Value as on 1-4-1981:
The CIT(A) rejected the valuation report of the Government Approved Valuer and adopted a lower fair market value. The Tribunal set aside this issue and directed the CIT(A) to refer the matter to the Departmental Valuation Officer (DVO) for a proper valuation.

Conclusion:
The appeal was partly allowed, with the Tribunal upholding the reopening of assessment and the restriction of exemption u/s 54 to one residential house, while deleting the enhancement related to the expenditure on the new flat and remanding the valuation issue for reconsideration by the DVO.