ITA. SAKTHI TOURIST HOME V. 4HE COMMISSIONER OF INCOMETAX

ITA/173/2000

AI Insights

The case involves M/S. Sakthi Tourist Home, a firm running a tourist home, which appealed against the addition of Rs. 22,77,068 as unexplained investment income under Section 69B of the Income Tax Act. This addition was based on a valuation of a building asset that significantly exceeded the assessee's reported investment. The C.I.T.(Appeal) reduced the addition to Rs. 8,44,475 after accepting some explanations from the assessee, but both parties' appeals to the Tribunal were dismissed. The High Court's decision focused on the valuation issue, which it deemed a factual matter, and the legal permissibility of spreading the unexplained investment over several years, which it found not permissible under Section 69B.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 727092 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 26-05-2008
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P K R MENON
• Assessee Lawyers: C NAIR; DALE KURIEN
• Keywords: Income tax appeal; Unexplained investment; Valuation of assets; CIT appeal; IT Tribunal
• Section: 69B

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 26TH MAY 2008 / 5TH JYAISHTA 1930 ITA.No. 173 of 2000() --------------------- AGAINST THE ORDER DATED 27/04/2000 IN ITA.898/COCH/1992 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ASSESSEE: ----------------- M/S.SAKTHI TOURIST HOME, BAKER JUNCTION, KOTTAYAM, REP. BY ITS MANAGING PARTNER SHRI.MATHEW PHILIP. BY ADV. SRI.C.KOCHUNNY NAIR SRI.DALE P.KURIEN RESPONDENTS: ------------- THE COMMISSIONER OF INCOME-TAX, ERNAKULAM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 26/05/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.173 of 2000 .................................................................... Dated this the 26th day of May, 2008. JUDGMENT Ramachandran Nair, J. This is an appeal filed by the assessee challenging the addition sustained by the Tribunal under Section 69B of the Income Tax Act. Assessee is a firm which was engaged in running of a tourist home. During search conducted on 9.10.1987, the department noticed creation of asset in the form of a building constructed by the assessee. The investment accounted by the assessee for the building was only Rs.23 lakhs and odd. However, department got the same valued at above Rs.49 lakhs. After giving some deductions, the Assessing Officer refixed the value at Rs.45,82,327/-. After taking into account the amount of investment accounted by the assessee, the Assessing Officer made addition of Rs.22,77,068/- as income in the form of unexplained investment under Section 69B of the Act. However, in first appeal, the C.I.T.(Appeal) accepted explanation offered by the assessee and reduced the addition to Rs.8,44,475/-. Even though assessee as well as department filed separate appeals to the Tribunal against the order of C.I.T.(Appeal), the Tribunal 2 dismissed both the appeals leading to finality of order of C.I.T.(Appeal). 2. Even though assessee has raised several questions of law, we do not think any question raised is a substantial question of law on which only appeal is maintainable under Section 260A of the Income Tax Act. The unexplained investment is deemed income of the year in which ivnestment is made as provided under Section 69B of the Act. The issue raised in this case only involves the actual amount of investment which is a matter of valuation. In fact it is seen that the valuation made by the department valuer is substantially reduced by the C.I.T.(Appeal) which found acceptance by the Tribunal. We do not find we have any authority to enter into the controversy on valuation of assests which is a pure factual issue. Therefore, there is no question of law involved so far as valuation of asset is concerned, which led to specific addition reduced by the C.I.T.(Appeal). So far as the next aspect of the question raised i.e. assessee's request for spreading over of unexplained investment for several years, we do not think the same is permissible because Section 69B specifically states that the unexplained investment should be treated as the income of the year in which investment is made. There is nothing on record to prove the stage of construction of the building at the time of acquisition by the firm and the period during which subsequent additions to the building was made. The 3 claim for spreading over of the investment for several years can be granted only if it is proved that the investment is made in several years. There is no such evidence in this case. Therefore, the Tribunal rightly rejected the claim of spreading over. Further, the assessee has raised this question for the first time before the Tribunal and therefore, we do not find any ground to interfere with the order in appeal on this issue also. The appeal is consequently dismissed. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms "