COMMISSIONER OF INCOME TAX Vs. C ASHOKAN NAMBIAR

JUDGEMENT

(1.) AT the instance of the revenue, following questions have been referred under section 256(1) of the Income Tax Act, 1961 Income Tax Act by the Tribunal, Cochin Bench, for opinion of this Court:

(2.) FACTUAL position, as set out in the statement of case, is as follows: The assessee is an Associate Professor of Cardiology in Calicut Medical College. He had not maintained accounts for his professional income. Search was conducted in his residential premises under section 152 of the Act on 26-6-1985 and certain documents were seized. During the search, a statement was recorded from him. Therein he had stated that he was engaged in private practice for 22 days in a month, and consulting fees received by him were Rs. 200 to 250 per day. The assessing officer was of the view that considering his professional reputation and also investments made by him and expenditure incurred during the year, his statement that he was receiving consulting fees at the aforesaid rates was not acceptable. During the previous year corresponding to the assessment year in question, i.e., 1984-85, the assessee had completed construction of a residential building. Cost of the construction, according to the assessee, was Rs. 4,35,000. A reference was made to the Valuation Cell, which determined the cost of construction at Rs. 5,40,550. The assessing officer determined the 'unexplained investment' and expenses at Rs. 1,02,640. Considering the variation between cost of construction disclosed and determined by the Valuation Cell, the assessing officer determined income from profession at Rs. 1,05,000 as against Rs. 45,000 admitted by the assessee. Matter was carried in appeal before the Commissioner (Appeals), Calicut, who held that cost of construction would be Rs. 4,44,673 and since it was marginally higher than the cost of Rs. 4,35,000 declared by the assessee, addition was deleted. So far as addition towards drawings is concerned, a sum of Rs. 11, 100 was sustained. The revenue preferred appeal before the Tribunal. It was contended that the Commissioner (Appeals) should have given an opportunity to the Valuation Officer before accepting the cost of construction as admitted by the assessee. An additional ground was taken to the effect that the Commissioner (Appeals) should have determined professional income on the basis of the assessee's statement made during search. The Tribunal did not find substance in either of these stands. In regard to the grant of opportunity, it was observed that reference was not under section 16A of the Wealth Tax Act, 1957 and, therefore, there was no requirement to grant opportunity to the Valuation Officer. So far as professional income is concerned, the Tribunal observed that in the absence of any specific addition by the assessing officer on the basis of the assessee's statement, though referred to for a minor variation of Rs. 2,500, no interference with the Commissioner (Appeals)'s order was warranted.

(3.) ACCORDING to the learned counsel for the revenue, the words used in section 55A being 'for the purposes of this Chapter', it cannot have application only to Part E of section 14 dealing with 'Capital gains'. On the contrary, the learned counsel for the assessee submitted that it is exclusively meant for income from 'Capital gains'. In order to appreciate these rival submissions, apart from section 55A , some other provisions of the Act having bearing need to be noted. Section 2(14) of the Act deals with 'capital asset', which has been referred to in section 55A . Same reads as follows :