1979 (2) TMI 134 - AT - Income Tax

Summary

Issues:
1. Valuation of property for assessment of income from house property.
2. Treatment of balance amount as income from other sources.
3. Dismissal of appeals by the AAC.
4. Consideration of objections raised against valuation by departmental valuer.
5. Discrepancy in the year of construction as per approved valuer and departmental valuer.
6. Failure to verify defects in departmental valuer's report by the ITO.
7. Refund of tax if already realized on enhanced assessment.

Detailed Analysis:
1. The deceased constructed a house property during her lifetime, and the Income Tax Officer (ITO) questioned the source of investment for construction. The approved valuer's report indicated a total cost of Rs. 80,357, funded by withdrawals from a trading company, a loan, and rental income. The ITO estimated construction cost at Rs. 1,07,738, treating the balance as income from other sources.

2. The Appellate Authority Commissioner (AAC) sought a remand report for valuation discrepancies. The ITO's reassessment valued the property at Rs. 1,41,150, adding the difference as income. The ITO separately demanded payment from the deceased's legal heirs, leading to their appeals being dismissed by the AAC.

3. The legal heirs contended that the withdrawals were used for construction, supported by evidence from the trading company's account. The ITO credited Rs. 85,880 for construction but disputed the starting year of construction, leading to discrepancies in valuation reports.

4. The legal counsel argued that objections against the departmental valuer's report were not considered, presenting evidence of objections raised. The departmental valuer's report conflicted with the approved valuer's report on the year of construction, raising doubts about the valuation process.

5. The departmental counsel claimed that objections were addressed promptly, but the legal heirs disputed this, providing correspondence evidence. The approved valuer's report on construction costs was favored over the departmental valuer's due to discrepancies and lack of verification by the ITO.

6. The Tribunal directed the ITO to value construction costs as per the approved valuer's report, deleting the addition as income from undisclosed sources. The decision allowed all three appeals, with a directive for tax refund if already paid on the enhanced assessment.