1978 (8) TMI 111 - AT - Income Tax

Summary

Issues Involved:

1. Compliance with Section 144B of the Income Tax Act, 1961.
2. Estimation of the cost of construction.
3. Explanation of the investment in the construction of the house.
4. Completion date of the construction.

Issue-wise Detailed Analysis:

1. Compliance with Section 144B of the Income Tax Act, 1961:

The assessee contended that the assessment order was invalid due to non-compliance with Section 144B of the IT Act, 1961. The learned AAC agreed and annulled the assessment order. However, upon appeal, it was conceded that Section 144B was not applicable as it came into force on April 1, 1976, and the assessment year in question was 1973-74. Therefore, the Tribunal held that the AAC was incorrect in annulling the assessment order based on Section 144B.

2. Estimation of the Cost of Construction:

The assessee declared the cost of construction at Rs. 1,28,179, while the ITO estimated it at Rs. 1,88,725 based on the Inspector's report. The AAC, after inspecting the property and considering all evidence, concluded that the cost of construction was Rs. 1,34,210 up to June 30, 1973, and Rs. 1,39,180 up to March 31, 1974. The Tribunal upheld the AAC's finding, noting that the Inspector's report was not sufficiently supported by evidence and that the AAC's estimation was reasonable and based on substantial material, including the report of three valuers who estimated the cost at Rs. 1,62,901.

3. Explanation of the Investment in the Construction of the House:

The ITO held that the assessee could explain the investment only up to Rs. 57,737 and treated Rs. 1,20,000 as unexplained investment. The AAC, however, found that the entire investment was fully explained, considering loans from M/s. Kewal Chand Bhanwarlal and other sources. The Tribunal agreed with the AAC, noting that the assessee provided detailed explanations and evidence, including balance sheets and loan details, which supported the claim that the investment was fully explained.

4. Completion Date of the Construction:

The ITO contended that the construction was completed by June 30, 1972, while the AAC concluded that construction continued up to June 30, 1973, with some work extending to March 31, 1974. The Tribunal supported the AAC's finding, citing consistent statements from various witnesses and evidence, including affidavits and certificates from individuals involved in the construction, which indicated that the construction and finishing touches continued until June 1973.

Conclusion:

The Tribunal dismissed the Department's appeal and the assessee's cross-objection, upholding the AAC's findings on all issues. The cost of construction was reasonably estimated at Rs. 1,39,180, the entire investment was explained, and the construction was completed by June 30, 1973. The assessment order was not annulled based on Section 144B, as it was not applicable for the assessment year in question.