1977 (4) TMI 74 - AT - Income Tax

Summary

Issues:
Cost of remodelling property, valuation discrepancies, justification of addition to income, borrowing for remodelling, apportioning costs over assessment years.

Analysis:
The appellant remodeled a property, claiming a cost of Rs. 40,000, but the Asstt. Valuation Officer estimated it at Rs. 59,000. The Income Tax Officer (ITO) assessed the difference as income from other sources. The Appellate Assistant Commissioner (AAC) upheld the addition, stating the appellant failed to explain the source of the additional cost. The appellant argued the Departmental valuer's estimate did not consider factors like contractor's profit, personal supervision, and old materials. The Departmental representative supported the AAC's decision. The appellant borrowed funds to cover the remodeling costs, indicating the work spanned two assessment years. The AAC acknowledged the remodeling occurred over two years but couldn't determine the cost split. The AAC's finding, along with the approved valuer's report, supported the appellant's claim of Rs. 40,000 cost. The Departmental valuer used PWD rates, overlooking factors like second-hand materials and personal supervision, leading to an unjustified higher estimate. Considering the appellant's hands-on approach, materials used, and the remodeling's nature, the Tribunal reduced the addition from Rs. 19,000 to Rs. 5,000, finding it fair and just. The appeal was partially allowed, and the assessment was to be revised accordingly.