COMMISSIONER OF INCOME TAX MADURAI Vs. P JEYAVELAN

JUDGEMENT

(1.) THE tax case appeal is filed against the common order of the Income-tax Appellate Tribunal in ITA No. 524 and 530/mds/2004 dated 13. 01. 2006 for the assessment year 1998-1999 and 1999-2000.

(2.) THE material facts, as culled out from the statement of facts in the memorandum of grounds of appeal, are as follows : the respondent-assessee along with his daughter put up a hospital at the cost of Rs. 22,25,000/ -. The construction commenced in September, 1997 and was completed in February, 1999. The assessing officer referred the matter to the valuation cell and the cost of construction was estimated by the cell at Rs. 43,45,300/- as against the cost of Rs. 22,25,000/- admitted by the assessee and his daughter in the books of accounts. The assessing officer proposed to asses the difference as unexplained investment for the assessment years 1998-99 and 1999-2000. It was the case of the assessee that the construction was undertaken by a contractor by name P. Manoharan and according to him, the rate of construction was at Rs. 420/- per sq. ft. Rejecting the explanation offered by the assessee, the assessing officer proceeded to determine the cost of construction on the basis of the report received from the valuation cell after allowing certain deductions, by determining the excess investment in the building at Rs. 14,81,300/- and apportioned the same in the ratio of 50% : 50% in respect of the assessee and his daughter respectively as unexplained investment. The addition for the assessment years 1998-99 and 1999-2000 were at Rs. 3,06,247/- and Rs. 4,14,404/- in respect of the assessee.

(3.) THE assessee filed an appeal before the Commissioner of Income-tax (Appeals), who, by order dated 28. 11. 2003 in Appeal No. 157/2003-04 held that the assessing officer has no power to refer the matter to the valuation cell and that the rates adopted by the assessing officer are higher and excessive and on that ground allowed the appeal. The revenue, not satisfied with the order of the Commissioner of Income Tax (Appeals) filed an appeal before the Income Tax Appellate Tribunal. The Tribunal, by its common order dated 13. 01. 2006 made in I. T. A. Nos. 524 and 530 (Mds)/2004 for the assessment years 1998-99 and 1999-2000 in respect of the assessee and ITA Nos. 525 and 529 (Mds)/2004 for the very same assessment years in respect of the assessee's daughter, dismissed the appeals. Aggrieved by the order made in respect of ITA No. 530 (Mds)/2004, this appeal is filed by the revenue by formulating the following substantial questions of law : 1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that CPWD rates cannot be adopted for valuation of cost of construction of the property, and only state PWD rates are to be adopted ? 2. Whether in the facts and circumstances of the case, the Tribunal was right in rejecting the valuation report in toto, without giving any factual finding as to whether the rates adopted in respect of various items is excessive ?