2007 (9) TMI 264 - HC - Income Tax

Tribunal accepted the contention of assessee that a reference to a Departmental Valuation Officer could be made only for the purpose of section 55A and section 269 and, therefore, the reference was invalid - Revenue has drawn our attention to section 142A which came on the statute with retrospective effect only after the order was passed by the Tribunal- held that incorporation of section 142A is an issue that ought to be considered by the Tribunal matter remitted however, income disclosed by assessee in return for assessment years, should not be included in block assessment

Issues Involved:
1. Deletion of addition on account of investment in property.
2. Estimation of total turnover.
3. Estimation of net profit rate.
4. Estimation of investments in benami entities.
5. Estimation of income from a lucky draw.
6. Deletion of addition of disclosed income for specific years.

Detailed Analysis:

1. Deletion of Addition on Account of Investment in Property:
The primary issue was whether the Tribunal was correct in law in deleting the addition of Rs. 19,45,000 made by the assessee on account of investment in property bearing number B-222, Okhla, New Delhi. The Tribunal had relied on a Supreme Court decision in Smt. Amiya Bala Paul v. CIT, which held that a reference to a Departmental Valuation Officer could only be made for specific sections of the Income-tax Act. However, the Revenue pointed out that section 142A of the Act, inserted with retrospective effect from November 15, 1972, allowed such references. The Tribunal did not consider this provision as it was enacted after the Tribunal's order. The High Court remanded the matter back to the Tribunal to reconsider the issue in light of section 142A.

2. Estimation of Total Turnover:
The Tribunal estimated the total turnover of the assessee's three undisclosed business entities at Rs. 11.50 crores, despite the Assessing Officer's calculation of Rs. 14.81 crores and the assessee's contention of Rs. 10.24 crores. The Tribunal's estimation was not clearly explained, and it was noted that the Tribunal should have discussed all relevant material in its order. The High Court found this approach unsatisfactory and remanded the matter back to the Tribunal for a clearer determination of the turnover.

3. Estimation of Net Profit Rate:
The Tribunal estimated the net profit rate at 0.6% on the turnover of Rs. 11.50 crores. This estimation was based on an average of the net profit rates ranging between 0.30% to 0.80% for the disclosed concerns of the assessee. The High Court found that the basis for this estimation was not clear and noted that the total addition would change with any change in the total turnover. The matter was remanded back to the Tribunal for reconsideration.

4. Estimation of Investments in Benami Entities:
The Tribunal estimated the investments in the three benami entities at Rs. 6 lakhs on an estimated basis, without providing a clear explanation. The High Court found this approach unsatisfactory and noted that the Tribunal should have provided a basis for its estimation. The matter was remanded back to the Tribunal for reconsideration.

5. Estimation of Income from a Lucky Draw:
The Tribunal estimated the income from a lucky draw at Rs. 1 lakh and confirmed an addition of Rs. 50,000 in the hands of the assessee as undisclosed income. The High Court found that there was no clear basis for this estimation and remanded the matter back to the Tribunal for reconsideration.

6. Deletion of Addition of Disclosed Income for Specific Years:
The High Court decided in favor of the assessee regarding the deletion of Rs. 1.10 lakhs, which was already disclosed in the returns for the assessment years 1990-91 to 1992-93. The High Court found no error in the Tribunal's decision to delete this amount from the income of the assessee in the block assessment.

Conclusion:
The High Court remanded the matter back to the Tribunal for reconsideration of issues (a) to (f) with clear directions to provide the basis for its conclusions. The Tribunal was directed to reconsider the issues based on the records available and provide a detailed explanation for its findings. The appeal was disposed of accordingly, with the parties directed to appear before the Tribunal on October 22, 2007, for further directions.

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