COMMISSIONER OF INCOME TAX Vs. MOHAMMAD KUNHI

JUDGEMENT

(1.) THIS is a reference at the instance of the Commissioner of Income-tax under Section 256(1) of the Income-tax Act and the question of law referred is:

(2.) THE assessee is an individual and he returned an income of Rs. 5,731 and Rs. 1,359 for the assessment years 1960-61 and 1961-62 respectively. THE assessee began the construction of a hotel building at Kasaragod and completed it by the end of December, 1970. THE total cost of construction of the building according to his books of account was Rs. 86,081. THE Income-tax Officer estimated the cost of construction at Rs. 2,29,460. He arrived at the sum of Rs. 1,13,400 being the excess investment of the assessee in the building not accounted for by him and included the sum as his undisclosed income for the two years, since the source of the fund remained unexplained. THE Income-tax Officer, therefore, passed an order on April 27, 1962, under Section 23(3) of the Income-tax Act (for short " the Act") on that basis. An appeal was filed by the assessee to the Appellate Assistant Commissioner. He reduced the estimate of the cost of construction, of the building to Rs. 1,70,000 relying on the inspector's valuation report. THE assessee's undisclosed income for each year was thus reduced to Rs. 41,958. THE assessee appealed to the Income-tax Appellate Tribunal against the Assistant Commissioner's order. THE Tribunal appointed an engineer as commissioner under Section 37(1)(d) for valuing the cost of construction of the assessee's building and the commissioner submitted a report. On the basis of the report the Tribunal reduced the income from the undisclosed source in respect of each year to Rs. 33,385.

(3.) SEE also our judgment in I.T.R. No. 11 of 1969 dated 17-8-1971, Dawn & Co. v. Commissioner of Income-tax, 1973 87 ITR 71.