1982 (7) TMI 148 - AT - Income Tax

Summary

Issues:
1. Whether there was an escapement of income justifying the reopening of assessment under section 147(a).
2. Whether the addition of Rs. 29,400 as unexplained investment in the construction of the property is justified.

Analysis:

Issue 1:
The case involved the question of whether there was an escapement of income warranting the reopening of assessment under section 147(a). The Assessing Officer (AO) initiated proceedings under section 147(a) based on the belief that income had escaped assessment due to the assessee's failure to disclose the construction of a property and related income in the original return. The assessee contended that there was no escapement of income as he had provided details of the property and construction costs, supported by valuation certificates. However, the AO argued that the non-disclosure of the completion date of the property led to income escaping assessment. The tribunal upheld the AO's action, stating that the AO had reason to believe that income from the self-occupied property had escaped assessment, despite the disclosures made by the assessee.

Issue 2:
Regarding the addition of Rs. 29,400 as unexplained investment in the property construction, the tribunal considered conflicting valuation reports. The assessee claimed the cost of construction was Rs. 63,775, supported by a valuation report from a Registered Valuer. The AO, relying on a Government Valuer's report, added Rs. 29,400 as undisclosed income. The tribunal noted a procedural lapse by the revenue authorities for not examining the assessee's valuer. It decided in favor of the assessee, accepting the second valuation report from the assessee's valuer at Rs. 64,275, which was closer to the completion date of construction. Consequently, the addition of Rs. 29,400 was deleted, and any excess tax paid by the assessee was to be refunded.

In conclusion, the tribunal partially allowed the appeal, ruling in favor of the assessee on the issue of the addition of unexplained investment based on the valuation reports.