Tribunal dismisses revenue's appeal, upholds deletion of undisclosed loan & construction cost addition.

The revenue's appeal against the Commissioner of Income-tax (Appeals) order was dismissed. The Tribunal upheld the deletion of the undisclosed loan addition as it was found reflected in the balance sheet under 'Term Loan'. Additionally, the estimated addition for cost of construction was deleted as the books of account were not rejected, following the principle from the Sargam Talkies case. The Tribunal noted the minor cost discrepancy was within a 10% margin, possibly due to self-supervision, further supporting the deletion of the addition. The cross objection of the assessee was allowed.

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Issues involved: Appeal by revenue against order of Commissioner of Income-tax (Appeals) regarding undisclosed loan for house construction and estimated addition for cost of construction.

Regarding undisclosed loan for house construction: The revenue contended that the loan taken by the assessee was not disclosed in the balance sheet, supporting the Assessing Officer's decision. However, the assessee presented the balance sheet showing the loan under 'Term Loan'. The Tribunal found that the loan amount was indeed reflected in the balance sheet, hence upheld the decision of the Commissioner of Income-tax (Appeals) to delete the addition.

Regarding estimated addition for cost of construction: The Assessing Officer made an estimated addition based on the variance between the departmental valuation officer's cost of construction and the assessee's disclosure. The assessee argued that since their books of account were not rejected, no addition on an estimated basis should be made. Citing the case of Sargam Talkies, the Tribunal agreed that without rejection of the books of account, no such addition should be made. As the books of account regarding the cost of construction were not rejected, the Tribunal deleted the sustained addition of Rs. 1 lakh. Additionally, the Tribunal noted that the difference in cost of construction was within a 10% margin, which could be attributed to self-supervision, further supporting the deletion of the addition.

Result: The appeal by the revenue was dismissed, and the cross objection of the assessee was allowed.

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