Honest Group of Hotels (P.) Ltd. v. Commissioner of Income-tax

1. The petitioner-concern had constructed a hotel building. It was indicated that the cost of construction of the building came to Rs. 29,42,304. This figure was disputed by the respondents. The issue was referred to the departmental valuer. According to this valuer, the estimated cost of the land and building should have been Rs. 37,92,200. On this basis, a difference of Rs. 8,49,896 was sought to be added in the account of the assessee as unexplained investment. The initial order in this regard was passed on 17-3-1988. This was challenged before the Commissioner, Amritsar. The matter was remanded. After the remand, the matter was referred to the ITO and ultimately the matter came to be decided by the Commissioner, Amritsar. This was done vide order dated 23-3-1995. The Commissioner was of the view that for the figure of Rs. 29,42,395 it should be Rs. 33,62,477. Accordingly, it was a figure of Rs. 2,18,273 which was sought to be added to the income. In this regard, it would be apt to mention that the petitioner/assessee also wanted to have benefit of 10 per cent for making purchases from the market at its on level and 10 per cent for personal supervision. It was stated that if these two benefits are given, then there would be virtually no addition, as has been proposed by the Commissioner. In addition to this, grievance is also made of the fact that the Commissioner made an observation that there should be an addition to the extent of Rs. 1,12,747, i.e., the amount which would have been paid to the architect or the person who had prepared the plans. Relief is being sought on another ground also. It is urged that if all these facts and figures are taken into consideration and the valuation as given by the assessee and the departmental valuer is noticed, then this difference is less than 10 per cent and this should be ignored. It is stated that even if the last argument put across by the petitioner is taken note of, then the difference being less than 6.95 per cent has to be ignored. For this reliance has been placed on some other earlier decisions of the Tribunals.

2. The learned counsel appearing for the revenue submits that the decision which has been given by the Tribunal and on which reliance is being placed is not part of the statute and this cannot be enforced by this Court. In addition to this, it is submitted that the reasoning given by the Commissioner that the amount which is said to have been incurred by the petitioner on getting the plans prepared, has been rightly taken into consideration and no variation should be made in this regard.

3. After having heard the learned counsels for the parties, I am of the opinion that the view expressed earlier by the Tribunal that if the margin between the value as given by the assessee and the departmental valuer is less than 10 per cent, then this difference is liable to be ignored, has some merit. As a matter of fact, the Tribunal constituted under the Act, has been giving relief in this regard. This aspect of the matter somehow or the other escaped the notice or the Commissioner, Amritsar. Therefore, the matter is remanded to the said Officer who would take notice of the earlier practice which was being enforced by the Tribunal. While doing so, the Commissioner would also take notice of the decision given by the Rajasthan High Court in the case of CIT v. Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar [1993] 200 ITR 788¹ . Other pleas raised and as noticed in this order be also taken note of. The parties to appear before the Commissioner, Jammu, on 27-12-2001.

4. Disposed of accordingly.