COMMISSIONER OF INCOME TAX Vs. VASUDEV CONSTRUCTION

JUDGEMENT

(1.) The revenue has preferred this appeal under Section 260-A of the Income Tax Act, 1961 (for short 'the Act'), being aggrieved by the order dated 22-9-2006 made in IT(SS)A No.186/Bang/2002 passed by the Income Tax Appellate Tribunal, Bangalore Bench-B, (hereinafter referred to as 'the Tribunal' for short) whereby the Tribunal dismissed the appeal filed by the revenue and confirmed the order passed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as 'First Appellate Authority' for short), setting aside the order passed by the Assessing Authority pertaining to the Block Period from 1-4-1989 to 28-1-2000.

(2.) The brief facts of the case are as follows: The respondent is a Partnership Firm, engaged in the business of construction of building and development of properties. The Firm came into existence from 28-01-1998. A search was conducted on 28-01-2000 under Section 132 of the Act in the business premises and residence of the Managing Partner of the respondent-Firm, Sri.Nagendra Baliga, who is a Jeweller by profession. During the search, certain documents like bills of material purchased, labour charges paid and the cheques relating to the assessee-Firm were found and seized. On the basis of the said records, notice under Section 158-BD was issued calling upon the respondent-Firm to file their returns for the Block Period from 01-04-1989 to 28-01-2000. The assessee-Firm filed return of income on 30-11-2000 declaring 'NIL' income. On the basis of the said returns, a notice under Section 143(2) and 142(1) of the Act was issued calling upon the assessee to produce necessary documents. An authorized representative of the assessee appeared and produced the computerized books of accounts. As per the records produced by the assessee, the assessee-Firm had started constructing two buildings, i.e. Vasudev Towers and Vasudev Plaza. Vasudev Towers was nearing completion and Vasudev Plaza was just started at the time of search. The assessee contended that the building is yet to be completed. The expenditure incurred for construction of the building has been mentioned in the books of accounts. The authorized representative of the company contended that they have incurred expenditure of Rs.42,15,111/- towards construction of Vasudev Towers and Rs.4,49,386/- towards Vasudev Plaza as on the date of search. The Assessing Officer in order to verify the expenditure incurred for the construction of buildings, referred the matter to the District Valuation Officer (for short 'DVO'). The DVO submitted a report estimating the cost of construction of two buildings at Rs.64,71,483/- and Rs.4,72,426/- respectively. The Assessing Officer taking into consideration the difference of cost of construction of the buildings as undisclosed income at Rs.20,97,351/-and assessed to tax for the Block assessment period by its order dated 28-06-2002.

(3.) The assessee being aggrieved by the order passed by the Assessing Authority preferred an appeal before the Appellate Authority in ITA No.236/2002-03, contending that the order passed by the Assessing Authority is contrary to law. The report submitted by the DVO is also contrary to law. The Appellate Authority after considering the matter in detail held that the difference between the valuation adopted by the assessee and the DVO was a matter of opinion based upon which, the undisclosed income computed on such opinion cannot be brought to tax in the block period. Accordingly by its order dated 16-09-2002 allowed the appeal in part and set aside the order insofar as the block assessment period is concerned.