1992 (2) TMI 143 - AT - Income Tax

Factory Building Power To Call For Information Tax Authorities Valuation Officer Words And Phrases

Summary

Issues:
1. Addition of unexplained investment in the construction of a factory building.
2. Acceptance of cost of construction as declared by the assessee versus the estimate by the official valuer.
3. Evaluation of evidence from account books in determining the cost of construction.
4. Probative value of information obtained under section 133(6) in comparison to valuation reports under other sections.

Detailed Analysis:
1. The appeal concerned the addition of Rs. 1,03,980 as unexplained investment in the construction of a factory building by the assessee. The CIT(A) had set aside the assessment for reframing due to lack of opportunity for the assessee to rebut the official valuer's report. Subsequently, in reassessment, the ITO made a higher addition of Rs. 1,86,165 based on a revised report by the official valuer. The CIT(A) then determined the unexplained investment at Rs. 1,03,980, which the assessee challenged in the appeal.

2. The dispute centered around the acceptance of the cost of construction as declared by the assessee versus the estimate by the official valuer. The CIT(A) noted discrepancies in the valuation methods used by the official valuer and the registered valuer. The CIT(A) found the official valuer's addition of Rs. 31,000 without justification and adopted a middle ground in determining the unexplained investment at Rs. 1,03,980.

3. The Tribunal emphasized the relevance and admissibility of entries in account books as evidence, carrying a presumption of correctness until proven otherwise. The Tribunal highlighted the importance of direct evidence over estimation in determining the cost of construction. In this case, the ITO was criticized for not providing reasons for rejecting the account of expenditure maintained by the assessee, which had been partially accepted by the Department.

4. The Tribunal discussed the probative value of information obtained under section 133(6) compared to valuation reports under other sections. While information under section 133(6) is advisory and persuasive, valuation reports under other sections are binding. The Tribunal considered the acceptance of the cost of construction in the assessee's wealth-tax case for the same year, indicating that the declared cost should have been accepted, leading to the deletion of the addition made by the ITO.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of direct evidence from account books and critiquing the ITO's reliance on the official valuer's estimate without sufficient justification. The decision highlighted the need to evaluate evidence impartially and accept reliable direct evidence over indirect estimations in determining the cost of construction.