High Court upholds Tribunal's income assessment based on construction cost. Referral to Valuer justified. Income addition reduced.

The High Court affirmed the Tribunal's decision to assess income from undisclosed sources based on the cost of construction of a commercial building. The appellant's challenge against the referral to the Departmental Valuer was rejected, with the court finding that the assessing authority was justified in not accepting the appellant's accounts due to lack of supporting documentation. The addition to income was reduced to Rs. 2 lakhs from the original assessment, a decision upheld by the Tribunal and subsequently by the High Court, which dismissed the appeal, finding no substantial question of law.

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Issues:
Assessment of income from undisclosed sources based on cost of construction of a commercial building.

Analysis:
The appellant, a dealer in rice, was assessed for the assessment year 1990-91, where the assessing authority determined the cost of construction of a commercial building named "S.K. Towers" at Rs. 24,56,812, differing from the appellant's claimed cost of Rs. 18,49,189. The assessing authority treated the variance of Rs. 6,07,623 as income from undisclosed sources. In subsequent appeals, the Commissioner of Income-tax (Appeals) reduced the addition to Rs. 2 lakhs, which was further confirmed by the Tribunal.

The appellant contended that the assessing authority should not have referred the matter to the Departmental Valuer and should have relied on the appellant's regular books of account. The appellant argued that the entire addition should have been deleted as there was no justification for the valuation report. However, the senior standing counsel for the Revenue defended the referral to the Departmental Valuer, stating that the Tribunal had sufficient reasons to reject the appellant's accounts and rely on the valuation report.

The Tribunal's remand report highlighted that while the appellant maintained regular books of account, not all expenditures were supported by bills or vouchers. Due to this lack of supporting documentation, the assessing authority was justified in not accepting the accounts and had to determine the cost of construction to identify any unaccounted expenditures. The assessing authority's decision to obtain a valuation report from the Departmental Valuer was deemed appropriate in this context.

The first appellate authority granted relief to the appellant by reducing the addition to Rs. 2 lakhs from the original assessment. The Tribunal upheld this decision after considering all relevant circumstances. The High Court, after careful consideration, agreed with the Tribunal's findings, stating that no substantial question of law arose from the order. Consequently, the appeal was dismissed, affirming the Tribunal's decision regarding the assessment of income from undisclosed sources based on the cost of construction of the commercial building.

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