A SHANMUGHAM CHETTY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee in this case is an individual and the original assessment for the year 1965-66 was completed on October 8, 1965, computing the total income as Rs. 8, 990, the source of income being property and business in coconuts. Later, the ITO reopened the assessment under s. 147(a) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), determining the total income at Rs. 75, 050. In doing so, he held that the assessee had not disclosed the true cost of construction of the two properties, viz., No. 26, Subbaraya Mudali Street, and No. 41, Bangaru Naicken Street, Madras-5, which amounted to Rs. 87, 300 as against the cost of construction of Rs. 21, 235 disclosed by the assessee.

(2.) THEREFORE, the difference of Rs. 66, 055 in the cost of construction was added to the income originally determined The assessee appealed to the AAC both against the reopening of the assessment as well as on the quantum. The AAC confirmed the quantum of cost of construction but did not give a finding on the validity of the reopening of the assessment. The assessee thereafter appealed to the Income-tax Appellate Tribunal questioning the validity of the reopening of the assessment. In view of the fact that the AAC has not given any finding on that question, the Tribunal remitted the matter back to the AAC to give a finding on that issue. The AAC submitted remand report dated March 15, 1976, and his finding was that on the state of the records, he was unable to give a finding either way.

(3.) THE ITO appears to have accepted the claim made by the assessee without probing into the matter further. It is only when the assessee himself filed a valuation report by a valuer in the wealth-tax proceedings for the year 1969-70, showing the value of the two houses at Rs. 1, 30, 158, that the ITO felt that the matter requires further probe. It is only when the ITO caused a spot inspection to be made, it was revealed that both the houses have a plinth area of 6, 191 sq.ft.