K.C.Agrawal, C.J. - (1.) THE petitioner, a Hindu undivided family, was assessed to income-tax. In 1968, a plot of land at Chandigarh in sector 17-C was purchased. Constructions were, thereafter, started over the plot in 1969. It continued up to 1975, relevant for the assessment year 1976-77. During the assessment years 1968-69 to 1976-77, the petitioner disclosed investments in the construction of the house at Chandigarh as under : JUDGEMENT_769_ITR195_1992Html1.htm
(2.) THUS, the total investment up to 1976-77 shown by the petitioner was in the sum of Rs. 7,68,897. Assessments for the years 1968-69 to 1973-74 were simultaneously taken up and completed by the Income-tax Officer, Special Ward, Ajmer, On May 13, 1974. In the said assessment proceedings, the petitioner submitted a letter dated April 29, 1974, detailing therein the amount of investment and sources thereof. He also submitted a valuation report from Messrs. Basant Singh and Company, Engineers, Architects, Gazetted Valuers and Construction Agency, No. 18, Sector 3-A, Chandigarh, dated February 4, 1974. As per the report of the aforesaid valuer, the cost of construction at the end of March, 1973, including the cost of land, came to Rs. 5,18,400. It was verified and certified by the valuer that on completion, the total cost would be Rs. 7,01,500 including cost of land, Rs. 92,539. The Income-tax Officer completed assessments for the assessment years 1968-69 to 1973-74 on May 13, 1974. On August 25, 1977, the Income-tax Officer completed the assessment for the year 1975-76. While framing the assessment for the year 1976-77 on January 24, 1978, the Income-tax Officer noted in the order sheet that the report of the Valuation Officer regarding investment in the Chandigarh property had not been received. Since a considerable time had already elapsed, he stated in the order sheet that no purpose would be served in keeping the proceedings pending. He stated "several reminders in this regard have already been sent and it has been gathered that the valuation is at the final stage. The assessment is being completed and if it is found that the unexplained investment had gone into the construction of Chandigarh property, assessment would be reopened under the provisions of the Income-tax Act on receipt of the valuation report from the Valuation Officer." Thereafter, two notices were served under Section 148 of the Income-tax Act reopening the assessments for the years 1975-76 and 1976-77 on the basis of the valuation report which was received on March 14, 1978. The Valuation Officer sent his report on March 14, 1978, intimating that the cost of construction, excluding the cost of land, was Rs. 10,73,900. As against the same, the assessee had disclosed the investment to the Department of Rs. 6,76,358. Thus, the difference between the cost of construction as estimated by the Department's Valuation Officer and the investment disclosed by the assessee worked out to Rs. 3,97,542.
(3.) ON the ground that the assessee had not fully and truly accounted for the investment made in the property, the Income-tax Officer reopened the original assessments made for the year 1974-75 by issuing a notice under Section 147(a) read with Section 148 of the Act. Ultimately, reassessment was made by making an addition of Rs. 3,14,907 during this assessment year. Thus, the amount of unexplained investment was reduced from Rs. 3,26,872 to Rs. 3,14,907. Similar action was taken by the Income-tax Officer in respect of the subsequent year 1975-76 for which an addition of Rs. 70,670 was made in the assessment order. The total of the two additions made for the years 1974-75 and 1975-76 came to Rs. 3,85,577 which was unexplained investment. The addition of the two amounts for these two years was the difference between the amount estimated by the valuer and the amount shown by the petitioner. Aggrieved by the order of the Income-tax Officer, an appeal was filed by the assessee which was allowed by the Commissioner of Income-tax with the following observations : ". . . In this case, as stated earlier, the appellant had intimated the fact about the construction of the house property at Chandigarh, it had also furnished details showing the investment made by it from time to time and had also furnished details showing the amount of rent realised by it from the tenants. Now it was for the Income-tax Officer to examine them and come to a reasonable conclusion. In case he doubted the correctness of those details, he could have made necessary additions at the time of the original assessment and it was not correct for him to leave the matter open for assessment to be made at some later date under Section 147(a) of the Act. Considering the facts of the case and the legal position explained above, I hold that the objections raised by the learned counsel against initiation of reassessment proceedings is well founded. It is accordingly upheld." ;