1997 (10) TMI 85 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of cost of construction.
2. Acceptance of returns under Voluntary Disclosure Scheme (VDIS).

Summary:

Issue 1: Addition on Account of Cost of Construction
The Revenue challenged the deletion of the addition made by the AO on account of the cost of construction of 'Jaynath Hall'. The AO had initially estimated the cost of construction at Rs. 7,57,700 based on the DVO's report, which was significantly higher than the Rs. 2,79,025 shown by the assessee. The CIT(A) set aside the assessment, directing the AO to provide the DVO report to the assessee and afford a reasonable opportunity of being heard. Upon reassessment, the AO estimated the cost at Rs. 4,50,000 and treated Rs. 1,70,975 as unexplained investment, allocating it proportionately over three years. The CIT(A) found the AO's estimation arbitrary and without basis, noting that the AO did not reject the books of accounts or provide any reason for not accepting the registered valuer's report estimating the cost at Rs. 3,28,000. The CIT(A) concluded that the AO's estimate lacked supporting evidence and the assessee had provided complete details of expenses. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's estimate was not sustainable in the absence of defects in the books of accounts.

Issue 2: Acceptance of Returns under VDIS
The AO refused to accept the revised returns filed under VDIS, citing the DVO's report as evidence of concealed income. The CIT(A) disagreed, noting that the AO did not provide a justified reason for rejecting the returns and that the DVO himself admitted that his earlier estimate required reduction. The CIT(A) observed that the returns were filed to buy peace of mind and there was no material to conclude that the assessee had concealed investment. The Tribunal supported this view, highlighting that the returns were filed after the original assessment was set aside and that the AO's reliance on the DVO's report was misplaced. The Tribunal concluded that the Revenue had not detected any concealment and the returns under VDIS should be accepted, dismissing the Revenue's appeals.

Conclusion:
The Tribunal dismissed all the appeals of the Revenue, upholding the CIT(A)'s decisions to delete the additions on account of cost of construction and to accept the returns filed under VDIS.