1995 (6) TMI 42 - AT - Income Tax

Summary

Issues:
1. Valuation of construction cost of two cinema theatres.
2. Acceptance of valuation reports by the Assessing Officer.
3. Justification for addition as unexplained investment.
4. Failure to consider remand report by the CIT(A).
5. Comparison between DVO's report and approved valuer's report.
6. Reliability of books of account maintained by the assessee.
7. Rejection of accounts by the Assessing Officer.
8. Applicability of legal principles in similar cases.

Detailed Analysis:
The judgment by the Appellate Tribunal ITAT Bangalore dealt with the valuation of the construction cost of two cinema theatres in Gulbarga city for the assessment year 1983-84. The construction commenced in November 1977 and was completed by March 1982, with the declared cost of Rs. 21.31 lakhs. The Assessing Officer, disagreeing with this valuation, referred the matter to the Departmental Valuation Officer (DVO), who estimated the cost at Rs. 35.48 lakhs. The Assessing Officer accepted the DVO's valuation, leading to an addition of Rs. 22,000 as unexplained investment for that year.

The assessee objected to the DVO's report and provided an approved valuer's report valuing the construction at Rs. 21,36,110. The CIT(A) directed the Assessing Officer to reevaluate the cost of construction impartially, considering the objections raised by the assessee. Subsequently, the Assessing Officer revised the cost to Rs. 9 lakhs, rectifying an earlier error in valuation.

The CIT(A) dismissed the appeal based on the revised valuation by the DVO at Rs. 27.71 lakhs. The Tribunal found that the CIT(A) did not adequately consider the evidence presented, including the approved valuer's report. The Assessing Officer's remand report confirmed the reliability of the assessee's accounts, leading to the conclusion that no addition under section 69 was warranted.

The Tribunal cited legal precedents emphasizing that when properly maintained accounts are not rejected by the Assessing Officer, reference to a valuation cell for estimation is not justified. Therefore, the Tribunal ruled in favor of the assessee, deleting the entire addition made towards the cost of construction. The appeal was allowed in favor of the assessee.