1990 (2) TMI 117 - AT - Income Tax

Summary

Issues Involved:
1. Proper opportunity of being heard.
2. Applicability of Valuation Officer's report under the Wealth-tax Act for Income-tax purposes.
3. Basis for estimating the cost of construction.

Detailed Analysis:

1. Proper Opportunity of Being Heard:
The assessee contended that the AAC erred in not giving a proper opportunity of being heard and failed to consider the directions given by the Appellate Tribunal earlier. The AAC dismissed the appeals due to non-compliance and lack of material to controvert the ITO's findings. The Tribunal observed that the matter had been pending for a long time and suggested that the issue should be reconsidered by the ITO without relying on the Valuation Officer's report, which was deemed inadmissible.

2. Applicability of Valuation Officer's Report under the Wealth-tax Act for Income-tax Purposes:
The ITO had relied on the Valuation Officer's report under the Wealth-tax Act to estimate the cost of construction, which the assessee argued was not applicable under the Income-tax Act. The Tribunal noted that the Valuation Officer's report was defective and not suitable for determining the cost of construction for Income-tax purposes. The Tribunal referenced conflicting judicial views, citing the Andhra Pradesh High Court's decision in *Daulatram v. ITO* and the Punjab & Haryana High Court's decision in *CIT v. Roshan Lal Seth*. The Tribunal concluded that the view favoring the assessee should be adopted, emphasizing that the Valuation Officer's report under the Wealth-tax Act cannot be used for Income-tax assessments.

3. Basis for Estimating the Cost of Construction:
The ITO had estimated the cost of construction based on the Valuation Officer's report, which the assessee argued was higher than the actual expenditure incurred. The Tribunal observed that the ITO did not provide a basis for concluding that the cost shown by the assessee was low. The Tribunal highlighted that the cost of construction should be based on rates prevailing during the construction period, not on rates at the time of assessment. The Tribunal found merit in the assessee's contention that the Valuation Officer's report was flawed and could not be legally accepted. Consequently, the Tribunal concluded that the additions made by the ITO were invalid and incorrectly sustained by the AAC.

Conclusion:
The Tribunal held that the ITO had considered irrelevant evidence by relying on the Valuation Officer's report under the Wealth-tax Act, which was not applicable for Income-tax purposes. The Tribunal deleted the additions made by the ITO for both assessment years and allowed the appeals.