Law:

Section:

Section 69 of the Income-tax Act, 1961 - Unexplained investments - Assessment year 1991-92 - Assessee, engaged in business of construction and sale of flats, admitted cost of construction at Rs. 16.55 lakhs, whereas departmental valuer estimated cost at Rs. 38.95 lakhs - Assessing Officer treated difference as unexplained investment and made addition to assessee's income - Tribunal had taken into account nature of construction and cost of construction and profit margin of assessee on sale of flats - It also found that department had not established huge investment by assessee in construction, that there was an understatement by assessee of sale value of flats and that profit was declared by assessee at 11.5 per cent as against 8 per cent fixed in section 44AD - It ultimately held that no addition was warranted - Whether, any question of law arose out of Tribunal's order warranting interference by High Court - Held, no FACTS The assessee, engaged in the business of construction and sale of flats, filed his return of income including profits from sale of flats constructed by him and admitted cost of construction at Rs. 16.55 lakhs. On the other hand, the departmental valuer estimated cost at Rs. 38.95 lakhs. The Assessing Officer treated the difference as unexplained investment under section 69 and made addition to the assessee's income. On appeal, the Commissioner (Appeals) held that there was no undervaluation in cost of construction by the assessee, but sustained an addition of Rs. 2.5 lakhs to be spread over two years, namely, 1990-91 and 1991-92. On second appeal, the Tribunal found that the valuation made by the Departmental Valuation Officer was arbitrary. The Tribunal also found that the department had not established the case of understatement of sale value of the flats. It held that the cost of construction of the flats could not be taken at Rs. 38.95 lakhs as determined by the Departmental Valuation Officer. As far as the addition sustained by the Commissioner (Appeals) of the sum of Rs. 2.5 lakhs was concerned, the Tribunal made reference to section 44AD, which came into force from the assessment year 1995-96 and in view of the facts that the assessee…

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