1993 (8) TMI 26 - HC - Income Tax

Income Tax Act Power To Allow Additional Ground Powers Of Tribunal Rental Income Taxing Statutes Total Income Wealth Tax Act

Summary

Issues Involved:
1. Admission of additional ground regarding the Departmental Valuation Officer's opportunity to be heard.
2. Deletion of additions made under section 69B of the Income-tax Act, 1961.
3. Assessment of the annual letting value of flats as income in the hands of the assessee.

Issue-Wise Detailed Analysis:

1. Admission of Additional Ground Regarding the Departmental Valuation Officer's Opportunity to be Heard:
The Tribunal was asked whether the Commissioner of Income-tax (Appeals) erred in not giving an opportunity of being heard to the Departmental Valuation Officer regarding the cost of construction of flats. The Tribunal noted that no such ground was raised by the Revenue before the Commissioner of Income-tax (Appeals). The Tribunal held that there is no statutory provision in the Income-tax Act, 1961, requiring the Commissioner of Income-tax (Appeals) or the Tribunal to give such an opportunity to the Departmental Valuation Officer. This is unlike the Wealth-tax Act, 1957, which mandates such a hearing under sections 23(3A) and 24(5). The Tribunal found no justification in admitting the additional ground raised by the Revenue. The court affirmed this view, stating that the absence of such a provision in the Income-tax Act justified the Tribunal's refusal to admit the additional ground. Thus, the first question was answered in the affirmative and in favor of the assessee.

2. Deletion of Additions Made Under Section 69B of the Income-tax Act, 1961:
The second issue was whether the Tribunal was correct in upholding the order of the Commissioner of Income-tax (Appeals) deleting the additions made under section 69B. The Commissioner of Income-tax (Appeals) had considered various submissions and evidence, noting that the assessee-firm maintained regular books of account audited by chartered accountants, and no defects were found by the tax authorities. The construction was carried out through contractors paid per square foot, and the cost of construction was a revenue expenditure for the assessee-firm. The Tribunal found no justification to take a different view and upheld the deletion of the additions. The court noted that the Revenue did not produce any material to challenge this finding and that there was no allegation of perversity. Therefore, the second question was answered in the affirmative and in favor of the assessee.

3. Assessment of the Annual Letting Value of Flats as Income in the Hands of the Assessee:
The third issue was whether the Tribunal was correct in upholding the order of the Commissioner of Income-tax (Appeals) that the Income-tax Officer erred in concluding that the annual letting value of the flats was assessable in the hands of the assessee. The court referred to the case of Madgul Udyog v. CIT [1990] 184 ITR 484 (Cal), where it was held that the income from the flats was not assessable in the hands of the assessee once possession was handed over to the purchasers. The Commissioner of Income-tax (Appeals) had accepted the assessee's contention that the Income-tax Officer erred in assessing the rental income from the flats. The court found that the Tribunal was correct in upholding this view, and the third question was answered in the affirmative and against the Revenue. The court also granted leave to appeal to the Supreme Court regarding this question, as it followed the decision in Madgul Udyog's case, for which leave had already been granted.

Conclusion:
The High Court of Calcutta answered all three questions in favor of the assessee, affirming the decisions of the Commissioner of Income-tax (Appeals) and the Tribunal. The court found no statutory requirement for the Departmental Valuation Officer to be heard, upheld the deletion of additions under section 69B, and confirmed that the annual letting value of the flats was not assessable in the hands of the assessee. The court granted leave to appeal to the Supreme Court on the third question.