2017 (1) TMI 119 - HC - Income Tax

Undisclosed investment in the cost of construction of the immovable property - valuation of said property revealed that the value as declared by the assessee was not correct - ITAT deleted the addition - reassessment - Held that - The judgment of the Supreme Court which is sought to be relied upon by the Tribunal in the case of Amiya Bala Paul Vs. C.I.T., 2003 (7) TMI 4 - SUPREME Court is fully applicable to the facts of the case. Taking into consideration that the independent valuation was not done on the basis of valuation of DVO, the addition were made and after considering both the orders of CIT(A) and Tribunal and the decision of Hon ble Supreme Court, we are of the opinion that the view taken by the Tribunal is just and proper. - Decided against revenue

Summary

Issues:
Challenge to Tribunal's order confirming CIT(A)'s decision on undisclosed investment in property construction.

Analysis:
1. The appellant challenged the Tribunal's order confirming the CIT(A)'s decision on undisclosed investment in property construction. The substantial question of law framed was whether the Tribunal was justified in deleting the addition of a specific amount as undisclosed investment in the construction of the immovable property. The appellant's return of income was initially declared at a lower value, but subsequent inquiries revealed a higher actual investment in the property. The District Valuation Officer was authorized to determine the correct cost of construction, which was significantly higher than the amount declared by the assessee.

2. The Tribunal's decision was based on the valuation report provided by the DVO, which estimated the value of the building at a much higher amount than what the assessee had declared. Despite receiving a notice under Section 148 of the Income Tax Act, the assessee did not file a return of income. The Assessing Officer then issued a show-cause notice to the assessee, based on the valuation report, questioning the difference in the declared value and the actual construction cost. The Assessing Officer subsequently made an addition to the income as unexplained investment in construction.

3. During the appeal, the appellant's counsel argued that the Tribunal did not consider the timing of the valuation report in relation to the notice issued to the assessee. The counsel relied on a Supreme Court judgment to support this argument. However, the court found that the Supreme Court judgment cited by the appellant was applicable to the case. The court considered that the independent valuation was not conducted based on the DVO's report, and after reviewing the orders of the CIT(A) and Tribunal, along with the Supreme Court decision, concluded that the Tribunal's decision was appropriate.

4. The court noted that the argument raised by the appellant's counsel was not presented before the CIT(A) or the Tribunal. Ultimately, the court ruled in favor of the assessee and against the department, upholding the Tribunal's decision and dismissing the appeal. The judgment emphasized the importance of considering all relevant facts and legal precedents in determining the correctness of additions to income based on undisclosed investments in property construction.