Joginder Singh, J. M. - (1.) THESE are the two appeals preferred by the assessee against the orders of the CIT(A), dt. 3rd Dec., 2001, in ITA No. 34 & 35/W 7(3)/CIT(A)III/00-01 on the following grounds: (i) That the CIT(A) misdirected himself in sustaining an addition of Rs. 2,95,500 as against Rs. 4,96,500 added by the AO and further failed to note the wrong approach committed in quantifying the alleged unaccounted investment. (ii) That the CIT(A) could not note that the alleged unaccounted investment. If any, have been spread over the various asst. yrs. 1985-86 to 1992-93 as the construction started in 1985 and was in progress till 31st March, 92. (iii) That the CIT(A) failed to consider a sum of Rs. 50,000 as advance received from two tenants as amounts available for construction of the commercial building (shops) and also considering the corresponding rents received from the said two tenants.
(2.) For the sake of convenience, both these appeals are being disposed of by a common and consolidated order. 1992-93 The assessee (HUF) represented by its Karta is Shri M. Papaiah Reddy, basically is an agriculturist. The assessee is aggrieved by the addition of Rs. 4,96,500 made by the AO, which was reduced to Rs. 2,95,500 by the first appellate authority. As per the assessment order, the impugned addition was made by the AO on the belief that the assessee invested unaccounted funds of Rs. 4,96,500 in the construction of a farm house and a commercial complex (shops) over and above the declared cost of Rs. 6 lakhs and Rs. 2 lakhs, respectively, as on 31st March, 1992. As per the assessee, the construction of the farm house commenced in 1984 and remained unfinished till 31st March, 1992. Similarly, the construction of the commercial complex (shops) was started in 1989 and was incomplete till 31st March, 1992. The assessee declared as on 31st March, 1992, in respect of two buildings under construction-- (1) Farm House construction from 1st April, 1985, to 31st March, 1992--Rs. 6 lakhs. (2) Commercial complex (shops) construction from 1st April, 1989, to 31st March, 1992--Rs. 2 lakhs = total Rs. 8 lakhs. The assessee filed its return of income for asst. yr. 1992-93 on 28th March, 1995, in response to notice issued under Section 148 of the IT Act, 1961, declaring 'Nil1 income and the agricultural income at Rs. 48,000. The assessment was completed under Section 143(3) on 26th March, 1997, determining the total income at Rs. 60,000, which was set aside by the first appellate authority vide its order, dt. 3rd Nov., 1998, with a direction to complete afresh after giving opportunity to the assessee and after making proper inquiry regarding the estimation of income. Notice under Section 143(2) of the Act was issued to which the authorised representative for the assessee appeared and the case was discussed.
(3.) THE assessee constructed a residential building (farm house) which, was valued by the Department Valuation Officer vide its report dt. 15th Dec., 1994. THE residential building was valued at Rs. 11,48,000 and the other building at Rs. 3,26,000. THE Department Valuation Officer stated that the construction started in 1985. THE assessee through its letter dt. 14th Feb., 2000, stated that the investment in the building on year ending 31st March, 1991, is Rs. 45,000 but the AO vide its letter dt. 6th Aug., 2000, estimated the investment in the building from asst, yrs 1986-87 to 1990-91 at Rs. 75,000. THE assessee vide its letter dt. 24th Aug., 2000, informed the AO that Shri Papaiah Reddy (Individual) has provided an amount of Rs. 1,05,000 on 31st March, 1991, for construction of the properties and further told that the investment in the construction of the building as on 31st March, 1991, and 31st March, 1992, at Rs. 1,20,000 but the AO estimated the farm house as well as the other building at Rs. 8 lakhs and thus the total investment at Rs. 10,95,000. As per the Department Valuation Officer, the buildings were valued at Rs. 14,72,000 as on 15th Feb., 1994 (Rs. 11,48,000 + Rs. 3,26,000). THE AO opined that there is no investment from HUF towards the construction of the building. As per the assessee, upto asst. yr 1994-95 the investment is Rs. 10,95,000. Thus, there a difference in valuation between the assessee and the Departmental value of Rs. 2,16,000. THE AO worked out the unexplained investment at Rs. 4,96,500 and further opined that there is no possibility of investment from HUF funds as the agricultural income earned by the HUF is not sufficient for household expenses considering the family size and thus added back Rs. 4,96,500. THE total income of the assessee was computed at Rs. 6,94,750. THE assessee felt aggrieved and preferred appeal before the learned CIT(A). THE learned CIT(A) deleted Rs. 2,01,000 and confirmed the addition of Rs. 2,95,500 and partly allowed the appeal of the assessee. THE assessee is in further appeal before the Tribunal. 1993-94;