Law:

Section:

JUDGMENT L. Narasimha Reddy, J. - The respondent is a firm and is assessed to tax. In its returns submitted for the year 1991-92, it has disclosed a sum of Rs. 23,75,000 towards cost of construction of a building. Incidentally, the firm was maintaining books of account. During the course of processing the return, the Assessing Officer referred the matter to a valuer, who, in turn, reported that the estimated cost of the building is Rs. 41,33,000. Taking the same into account, the Assessing Officer added a sum of Rs. 17,48,000 as unexplained investment. Feeling aggrieved by that, the respondent filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) took the view that the Assessing Officer could not have added the amount unless he rejected the books of account. Accordingly, he remanded the matter to the Assessing Officer. 2. Not satisfied with the outcome of the appeal before the Commissioner (Appeals), the respondent filed I.T.A. No. 1040/Hyd/96 before the Hyderabad Bench A of the Income-tax Appellate Tribunal. Through its order dated October 25, 2002, the Tribunal allowed the appeal holding that the very reference to the Valuation Officer could not have been made, unless the Assessing Officer rejected or doubted the veracity of the books of account of the respondent. The said order is challenged in this appeal filed under section 260A of the Income-tax Act (for short "the Act"). 3. Heard Sri J.V. Prasad, learned standing counsel for the appellant and Sri Y. Ratnakar, learned counsel for the respondent. 4. The only dispute is about the value of the building constructed by the respondent firm. The respondent furnished its value at Rs. 23,75,000. The particulars thereof were mentioned in the books of account. The Assessing Officer could have doubted the value of the building, if only he did not believe the books of account or rejected them. However, straightaway, he referred the matter to the valuer. The report was taken into account and the difference of the amount was treated as unexplained investment. 5. The Commissioner (Appeals) made an observation that no amount could have been added as unexplained investment, unless the books of…

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