COMMISSIONER OF INCOME TAX Vs. SUDHISH KUMAR

JUDGEMENT

(1.) wherein it held that the AO does not have the power under the Act to refer to the Valuation Officer, the question of cost of construction of the property, subject -matter of the present writ petition.

(2.) THE assessee had filed return for the asst. yr. 1996 -97 declaring a total income of Rs. 59,210 which was processed competent authority, a notice under s. 143(2) of the IT Act, 1961 (hereinafter referred to as 'the Act') was issued. The assessee attended the proceedings in furtherance to the said notice. Documents including the map plan of the property was also filed. The cost of construction was shown as Rs. 5,50,000 for 4000 sq. ft. approximately, giving the rate of Rs. 140 per sq. ft. The AO felt that normally the cost of construction should be Rs. 500 per sq. ft. and he rejected the accounts produced by the assessee as unreliable under s. 145 of the Act. During the course of proceedings, the AO referred the matter to a valuer and after seeking the report of the valuer, made additions to the income of the assessee. certain aspects, but answering the question of jurisdiction of the AO, as afore -referred, against the assessee, whereafter the assessee challenged the order of the authorities before the Tribunal.

(3.) BOTH the Revenue as well as the assessee went up in appeal before the Tribunal. During the course of hearing, though the assessee had raised various grounds but it has been recorded by the Tribunal that only one ground was pressed, i.e., in regard to questioning the addition of Rs. 1,02,137 out of a total addition of Rs. 7,05,000. The Tribunal recorded its finding as under : "After hearing the rival parties, we find that the entire addition was based on a contracted price of Rs. 25 lakhs adopted by the AO purely on hypothetical considerations. As noted by us in the earlier paragraphs, Smt. Narang has affirmed the contract price of Rs. 5.50 lakhs and that there was no evidence or material with the AO that the assessee had received anything over and above the stated price. Under such circumstance, the action of the AO in resorting to estimation clearly lacked factual support. Thus, we sustain the conclusions drawn by CIT(A) in this regard. The Revenue, accordingly fails on this ground also. Ground No. 3 : The AO made an addition of Rs. 4,91,000 under s. 69 of the IT Act on account of unexplained investment in the property No. 2059, Outram Lanes, Kingsway Camp, Delhi. The facts are that during the year under consideration, the assessee purchased the ground floor of the said property for a consideration of Rs. 2,75,000 and sold it for Rs. 2,90,000, thereby earning a short term capital gain of Rs. 15,000. From a perusal of purchase and sale deeds, the AO inferred that assessee remodeled the property before selling and presumed that certain investments must have been made which has not been disclosed. The AO referred the matter to the valuation cell to estimate the cost of construction. On the basis of the report of the DVO, he treated an amount of Rs. 4,91,100 as unexplained investment under s. 69. The CIT(A) has since deleted the addition by noticing various infirmities. Without going in detail into the merits of the impugned issue, we are of the view that the said ground can be disposed of by adverting to the following short premise that the Revenue has not doubted the sale consideration received. The impugned addition is only towards alleged low cost of construction and has been made merely on the basis of the DVO's report is also not disputed. Under the aforesaid undisputed circumstances, the impugned addition is untenable having regard to the decision of the apex Court in the case of Smt. Amiya Bala Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC). It is settled by the Hon'ble apex Court that in the course of assessment proceedings, the AO does not have power under the Act to refer to the Valuation Officer the question of the cost of construction of house property. Therefore, in this view of the matter, the reference made to the Valuation Officer was itself without jurisdiction and, therefore, any addition made in pursuance to such reference is liable to be set aside. In view of the aforesaid, we sustain the conclusion drawn by the CIT(A) in deleting the impugned addition, albeit on different grounds."