BHANWARLAL LAXMINARAYAN GOUR V. ASSISTANT COMMISSIONER OF INCOME TAX

TAXAP/164/2018

AI Insights

The case revolves around a tax dispute where the assessee, Bhanwarlal Laxminarayan Gour, challenged the addition of Rs.1,10,00,000 as unexplained investment in a property transaction. The property, which included a hotel and other fixtures in Baroda, was initially agreed to be purchased for Rs.4.25 crores as per a 'banakhat' (agreement to sale) dated 03.03.2006. However, the final sale deed dated 26.05.2006 reflected a reduced consideration of Rs.2.05 crores. The reduction was attributed to the sellers' allowance to sell furniture and fixtures separately, fetching Rs.90 lakhs, and the reassessment of the property's value. The Assessing Officer and subsequent appellate authorities found the explanation for the drastic reduction in sale price unsatisfactory, leading to the addition of the unexplained investment to the assessee's income.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 753619 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 18-04-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Assessment; Banakhat; Conveyance deed; Property; Purchase consideration; Search operation; Unexplained investment; Valuation report
• Section: 69

Judgement Text

"C/TAXAP/164/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 164 of 2018 ========================================================== BHANWARLAL LAXMINARAYAN GOUR Versus ASSISTANT COMMISSIONER OF INCOME TAX ========================================================== Appearance: MR.TUSHAR HEMANI, ADVOCATE with MS VAIBHAVI K PARIKH(3238) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 18/04/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the assessee challenging the judgment of the Income Tax Appellate Tribunal dated 01.06.2017. Following questions are presented for our consideration: “(i) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the addition of Rs.1,10,00,000/­ made under section 69 of the Act in respect of alleged unexplained investment in the property in question on account of difference in purchase consideration as per the banakhat and the final Conveyance Deed found during the course of search despite the fact that no iota of evidence as to payment of any unaccounted purchase consideration was found during the extensive search operation ? (ii) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in heavily relying Page 1 of 7 C/TAXAP/164/2018 ORDER on the banakhat despite the fact that the deal as per such banakhat was called off and thereafter, fresh arrangement was made as per which, the purchase consideration was reduced from Rs.4.25 crore to Rs.2.05 crore and the conveyance deeds as well as affidavit of seller substantiating the purchase consideration of Rs.2.05 crore were also found during the course of search itself ? (iii) Whether in the facts and circumstances of the case, the order passed by the Income Tax Appellate Tribunal is perverse inasmuch as the same has been passed without properly appreciating various facts and documentary evidences furnished by the appellant and also without dealing with the valuation report of the property obtained from the office of the Stamp Duty Value Organization which, to a great extent, justifies the value of property at the amount reflected in the final conveyance deeds?” 2. Briefly stated, facts are that the assessee's premises were searched on 11.02.2010, during which, certain incriminating documents were found and impounded. These documents principally were the banakhat dated 03.03.2006, under which, the assessee and other co­purchasers (representing 50% share each) had agreed to purchase land with hotel, building, furniture and fixtures, situated in the city of Baroda, for the total sale consideration of Rs.4.25 crores. The second document was a sale deed dated 26.05.2006, under which, the assessee and the co­ Page 2 of 7 C/TAXAP/164/2018 ORDER purchasers purchased the very same property for a reduced sale consideration of Rs.1,14,50,000/­. Third document was an affidavit also dated 26.05.2006, in which, the reason for reduction in the total sale consideration were sought to be explained. As per the affidavit, the property owners were allowed to sell certain furniture and fixtures as which fetched Rs.90 lakhs by way of sale price. The affidavit also recorded that the property in question was under attachment of the lending bank. The owners have directly paid inclusive of the payments made by the purchasers a total sum of Rs.2.05 crores to the bank for lifting the attachment. 3. The Assessing Officer was of the opinion that the reduction in the reflected sale price as compared to the banakhat price was not properly explained. He confronted the assessee with such drastic reduction in such a short span of time. The assessee mainly raised following contentions: I. The land bearing block No.210/B was eventually not purchased though shown in the banakhat since it was a new tenure land. Page 3 of 7 C/TAXAP/164/2018 ORDER II. The sale of furniture and fixtures fetched Rs.90 lakhs to the land owners. III. After agreeing to purchase the entire property for Rs.4.25 crores, it was realized that the building which was supposed to be a hotel was not a modern building. The furniture and fixtures were old and unused for long, virtually worthless for restarting the hotel. 4. The Assessing Officer was however unmoved. He took into account the final sale consideration reflected in the sale deed, added a sum of Rs.90 lakhs directly received by the sellers through sale of furniture and fixtures and came to the conclusion that the reduction of Rs.2.20 crores from the agreed sale price was not explained. In the process, he also took note of the fact that the same property was valued by the Government Approved Valuer as on 02.08.2000 at Rs.3.13 crores (rounded off). This included the land cost of Rs.1.17 crores (rounded off). As against this, the assessee wanted to project the land cost in May, 2006, at Rs.80 lakhs which was not believable. He accordingly added 50% Page 4 of 7 C/TAXAP/164/2018 ORDER of Rs.2.20 crores by way of assessee's unaccounted investment. 5. Commissioner of Income Tax (Appeals) also in a detailed consideration, confirmed the view of the Assessing Officer and rejected the appeal of the assessee. In further appeal, the Tribunal confirmed the view of the Revenue officers, upon which, the present appeal has been filed. 6. Having heard learned counsel for the assessee, we do not find any question of law arising for the following reasons: I. As noted, the notarized banakhat executed on 03.03.2006 had disclosed a total sale consideration of Rs.4.25 crores for the entire property. The last date for completing the sale by making full payment was 31.05.2006. On 26.05.2006 itself, the final sale deed was executed. In such sale deed, there was drastic reduction in the reflected sale consideration from a total of Rs.4.25 crores shown in the agreement to sale, the sale deed only evidenced payment of Rs.1,14,15,000/­. Only component principally missing was the furniture and fixtures which the owners were Page 5 of 7 C/TAXAP/164/2018 ORDER themselves allowed to sale which fetched a sum of Rs.90 lakhs. There still remained a shortfall of Rs.2.20 crores which had to be explained by the assessee. His only explanation was, after executing the agreement to sale, the property was revalued and assessee realized that the building was not suitable for running a hotel and furniture was too old. II. Though no break­up of valuation of the property was given in the agreement to sale, in the affidavit dated 26.05.2006, such break­up was given. Pre and post agreement to sale in which the valuation of building and furniture was drastically reduced, the Assessing Officer and higher authorities correctly noted that the valuation of Rs.80 lakhs for the land defies logic where merely 6 years earlier the Government Approved Valuer valued the land at Rs.1.17 crores. The explanation of the assessee that a portion of the land did not form part of final sale deed is not sufficient to explain such dramatic downward revision. Nothing was brought on record to suggest that such land which is omitted from final sale deed, represented significant portion of the total land area. It is not as if the fact that such Page 6 of 7 C/TAXAP/164/2018 ORDER omitted land was new tenure land, was not noticed by the purchasers. In the banakhat itself, there is a reference to this parcel of land. The assessee's oral assertion that the valuation report of the year 2000 was not accurate and that the valuation was inflated only in order to obtain higher loan from the bank, cannot be accepted for the mere asking. There was no material in support of such assertion. Secondly, this would also cast serious aspersions on the Government Approved Valuer. Once agreement to sale was executed for price of Rs.4.25 crores, it is difficult to comprehend why the sellers would agree to execute the sale deed at half the agreed consideration. No material was brought on record to show the reason for the sellers to act in such fashion, against their own interests. 7. All and all, the disputes are purely factual in nature. No question of law arises. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 7 of 7 "