2015 (7) TMI 449 - HC - Income Tax

Addition on account on expenditure on undisclosed construction - Ignoring the expert opinion of the valuation officer - Held that - A perusal of the paperbook would go on to show that the houses were situated at different places in the town of Ludhiana and as noticed, the construction was also at various stages and the Tribunal had rightly granted the benefit of the margin that some houses were half complete whereas the valuation had been done for the finished houses and additions were made accordingly. Thus, the questions which are sought to be raised for consideration are not questions of law, as such, but are pure questions of fact. The Tribunal being the final forum for deciding such issues, has rightly exercised this discretion by adding a sum of ₹ 15 lacs each, to both the brothers, over and above the income which was declared and in the opinion of this Court, no substantial question of law, thus, arises for consideration. - Accordingly appeal dismissed.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding addition of expenditure on undisclosed construction and valuation of property.

Analysis:
The judgment pertains to ITA Nos. 365 & 368 of 2013, with common legal questions. The challenge under Section 260A of the Income Tax Act, 1961, questions the Tribunal's order in ITA No. 453/CHD/2012 for the assessment year 2008-09. The substantial questions of law raised include the correctness of the ITAT's direction to the Assessing Officer to add Rs. 15 lakhs for undisclosed construction expenses instead of the amount sustained by the CIT(A), the ITAT's expertise in property valuation, and the application of CPWD rates by the Valuation Cell.

A search under Section 132 of the Act was conducted on the respondent, a builder, leading to the assessment of income at Rs. 1,12,25,326 after objections were raised and not accepted. The CIT(A) confirmed an addition of Rs. 49,43,391 based on valuation of one property. The Tribunal modified the orders, adding Rs. 15 lakhs each towards undisclosed income expenditure for both brothers, considering surrendered income and factors like wholesale material purchase by builders. The Tribunal's decision was based on the understanding that some properties were incomplete, warranting adjustments in valuation.

The Court observed that the Tribunal rightly considered the varying stages of construction and granted margin benefits for incomplete houses. It concluded that the issues raised were factual in nature rather than legal questions, as the Tribunal's discretion in adding Rs. 15 lakhs to each brother was appropriate. Consequently, the appeals were dismissed, affirming the Tribunal's decision.