COMMISSIONER OF INCOME TAX Vs. S R CONSTRUCTION

JUDGEMENT

(1.) THE Commissioner of Income-tax seeks a reference under Section 256(2) of the Income-tax Act, 1961. For the assessment years 1990-91, 1991-92 and 1992-93, the assessee filed its returns which were accepted. THE assessee is a firm engaged in the business of building flats and selling them. THE assessee filed the returns declaring an income of Rs. 56,680, Rs. 48,716 and Rs. 84,168 for the assessment years 1990-91, 1991-92 and 1992-93. THE assessee constructed 10 flats and 3 garages on a certain piece of land and declared the cost of construction at the rate of 138.80 per sq. ft.

(2.) THE Assessing Officer later on issued a notice under Section 148 for reopening the assessment. During the course of reopening of assessment, the Assessing Officer made reference to the Valuation Officer to determine the cost of construction, who submitted a report on cost of construction on November 19, 1993. THE Assessing Officer on the basis of a subsequent report of the Valuation Officer, made certain additions, which on appeals being filed by the assessee, were upheld by the Commissioner of Income-tax (Appeals).

(3.) THE question urged by learned counsel for the Revenue is that the Tribunal was not justified in setting aside the proceedings for reopening of assessment. He submits that sufficient grounds existed for reopening of assessment under Section 148 of the Income-tax Act. He further submits that the cost of construction has been found by the Valuation Officer to be Rs. 178.56, whereas the cost was shown by the assessee to be Rs. 138.80 per sq. ft. which was on the lower side. He further submits that the area was also not correctly shown in the return. Hence, the Assessing Officer was justified in reopening the assessment. THE assessee's stand was that the valuation mentioned by him was accepted and was the correct valuation, his account books were accepted and after the sale of flats certain fresh construction was raised by the purchaser such as kitchen flooring, furnishing, kota stones, etc. THE built up area which was sold was disclosed and subsequent addition and alteration could not have been attributed to the assessee. It was also the case set up in the original return that the assessee disclosed the necessary facts truly and completely, therefore, reassessment proceedings are bad in law. THE assessee had maintained regular books of account, wherein the cost of construction is duly reflected supported by vouchers and they were produced before the Assessing Officer on several occasions, but no defects were found in the books as maintained by the assessee. Thus, on a different view on the same facts reassessment proceedings could not be set in motion. THE cost of construction estimated by the Valuation Officer is far more than the sale consideration received by the assessee from the sale of the buildings at the two sites and the subsequent report of the Valuation Officer could not be made a ground to reopen the assessment.