Law:

Section:

Section 264 of the Income-tax Act, 1961 - Revision - Of other orders - Assessee along with his wife had constructed a hotel a building - ITO worked out cost of hotel more than that as declared by assessee and his wife and added difference as unexplained investments - There was no appeal by department to raise actual cost of construction - On revision, Commissioner did not consider assessee's contentions and held that cost of construction fixed by ITO was low and, therefore, dismissed revision - Whether order of Commissioner was bad and liable to be quashed - Held, yes (matter remanded back) FACTS The assessee along with his wife constructed a hotel building. The ITO worked out the cost of the hotel at Rs. 1,57,608 than of Rs. 1,19,700 as that declared by the assessee and added the difference as the unexplained investment in the hands of the assessee and his wife. On revision application under section 264, the petitioner-assessee submitted that the ITO did not take into consideration the fact that the hotel was constructed under the personal supervision of the assessee and that the cost of electricity and sanitary fittings could not have been more than 10 per cent of the cost of the building. It was also said that he extra cost of mosaic flooring should have been taken at the rate of Rs. 2.30 per sq. ft only. However, the Commissioner held that the cost of the construction as fixed by the ITO was low and it should have been Rs. 1,55,000 plus 25 per cent of the cost towards electricity and sanitary fittings and that the cost of construction for the 4th floor was Rs. 24 per sq. ft. and for the 5th floor Rs. 22 per sq. feet. He, therefore, dismissed the revision petition. On writ: HELD There was no appeal by the department to raise the actual cost of construction. The figure of Rs. 1,57,608, as fixed by the ITO, therefore, could not have been enhanced. Further, the argument advanced on behalf of the assessee was not considered at all. The order of the Commissioner, therefore, was bad and it was accordingly quashed and the case was sent back to the Commissioner for disposal after hearing the parties in accordance with law. Note: The case was decided in favour of the…

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