1998 (7) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 4,99,300 on account of alleged unexplained investments in the cost of construction.
2. Reopening of cases for other assessment years based on alleged suppression of construction cost.
3. Charging of interest u/s 234A, 234B, and 234C.
4. Initiation of penalty proceedings u/s 271(1)(c).

Summary:

Issue 1: Addition of Rs. 4,99,300 on account of alleged unexplained investments in the cost of construction
The assessee appealed against the addition of Rs. 4,99,300 made by the AO, which was upheld by the CIT(A). The AO had referred the cost of construction of the shopping center 'Abhishek' to the Departmental Valuation Officer (DVO), who determined the cost at Rs. 68,98,300 against the assessee's declared Rs. 52,62,108. The AO concluded a difference of Rs. 16,36,192 and made a proportionate addition of Rs. 4,99,300 for the assessment year 1992-93. The assessee contended that the construction was carried out by Esvee Builders, and the cost was debited based on their bills, including a 15% supervision charge. The assessee also provided a report from an approved valuer estimating the cost at Rs. 54,90,409, which was rejected by the AO in favor of the DVO's report. The Tribunal found that the AO had not identified specific defects in the assessee's books and that the discrepancies cited by the AO were non-existent. The Tribunal concluded that the addition based on the DVO's report was unjustified.

Issue 2: Reopening of cases for other assessment years based on alleged suppression of construction cost
The AO reopened the cases for assessment years 1991-92, 1993-94, and 1994-95, making additions based on the DVO's report. For the assessment year 1991-92, an addition of Rs. 6,25,342 was made u/s 69C, Rs. 1,15,482 for 1993-94, and Rs. 35,862 for 1994-95. The Tribunal noted that the AO had not found specific defects in the books for these years either and that the additions were similarly unjustified.

Issue 3: Charging of interest u/s 234A, 234B, and 234C
The assessee objected to the AO's action of charging interest under sections 234A, 234B, and 234C. The Tribunal did not specifically address this issue in detail, focusing instead on the primary issue of the addition based on the DVO's report.

Issue 4: Initiation of penalty proceedings u/s 271(1)(c)
The assessee also objected to the initiation of penalty proceedings u/s 271(1)(c). The Tribunal's decision to allow the appeal and reject the addition of Rs. 4,99,300 implicitly negated the basis for penalty proceedings.

Conclusion:
The Tribunal allowed the appeal, concluding that the addition of Rs. 4,99,300 was unjustified as the AO had not identified specific defects in the assessee's books, and the discrepancies cited were non-existent. The Tribunal also noted that any additional expenditure incurred would be offset by an equivalent deduction u/s 37(1), resulting in no net addition. The appeal was allowed, and the addition was deleted.