2006 (8) TMI 242 - AT - Income Tax

Tribunal partially allows appeals, annulls assessment reopening, adjusts charges, remands interest matter.

SMT. SAROJ GUPTA. Versus Income-Tax Officer.

SMT. SAROJ GUPTA. Versus Income-Tax Officer. - TTJ 106, 1073, Issues Involved:1. Reopening of assessment under Section 147 after four years.2. Addition of unexplained investments in house property under Section 69.3. Non-allowance of self-supervision charges at 10% while determining the estimated cost of construction.4. Charging of interest under Sections 217 and 234B of the Income Tax Act.Issue-wise Detailed Analysis:Reopening of Assessment under Section 147 After Four Years:The assessee challenged the reopening of assessments for the assessment years 1988-89 and 1989-90 under Section 147 of the Income Tax Act, arguing that the reopening was barred by limitation and constituted a change of opinion. The CIT(A) had directed the AO to take remedial action to tax unexplained investments in the relevant assessment years. The Tribunal observed that the CIT(A)'s direction did not constitute a 'finding' or 'direction' within the meaning of Section 150(1), and thus, the reopening was not justified. The Tribunal annulled the reopening of assessments for both years, emphasizing that the reasons for reopening were not properly recorded and were vague.Addition of Unexplained Investments in House Property Under Section 69:The AO had added Rs. 1,39,219 and Rs. 1,26,299 as unexplained investments for the assessment years 1988-89 and 1989-90, respectively, based on the DVO's report. The assessee argued that the DVO used CPWD rates instead of UPPWD rates, which were more appropriate for the region. The Tribunal noted that the CIT(A) had already confirmed a portion of the investment in the assessment year 1990-91 and recalculated the cost of construction, allowing for self-supervision charges. The Tribunal found that the difference between the declared investment and the recalculated cost was negligible and deleted the additions for both years.Non-Allowance of Self-Supervision Charges at 10%:The assessee contended that self-supervision charges should be allowed at 10%, as per precedent cases, instead of the 7.5% allowed by the AO. The Tribunal agreed with the assessee, noting that self-supervision charges at 10% were generally allowed in similar cases. The Tribunal adjusted the cost of construction accordingly, providing relief to the assessee.Charging of Interest Under Sections 217 and 234B of the Income Tax Act:The assessee argued against the charging of interest under Sections 217 and 234B. For the assessment year 1988-89, the Tribunal found that interest under Section 217 could not be charged in a reassessment under Section 147, as it was not a regular assessment. Thus, the interest levied was deleted. For the assessment year 1989-90, the CIT(A) had remanded the matter back to the AO to provide reasons for charging interest under Section 234B. The Tribunal confirmed this decision, noting that the assessee would have the opportunity to present its case before the AO.Conclusion:The Tribunal allowed the appeals partly, annulling the reopening of assessments and deleting the additions for unexplained investments while adjusting the self-supervision charges. The interest charged under Section 217 was deleted, and the matter of interest under Section 234B was remanded for further consideration.