CIT-II, LUDHIANA V. RUPEN KAUSHAL C/O NEW ERA INDUSTRY

ITA/742/2008

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax-II, Ludhiana against Rupen Kaushal concerning the valuation of property for the assessment year 2004-05. The primary legal issue was whether the ITAT was justified in deleting the addition of Rs.52,38,720 made under Section 69B of the Income Tax Act, which pertained to the difference between the valuation determined by the DVO and that shown in the books of account of the assessee. The Tribunal and CIT(A) had previously ruled in favor of the assessee, leading to the revenue's appeal to the High Court. The court examined the valuations presented and found that the DVO's assessment lacked a scientific basis and was not supported by any specific material or comparable sales data.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 720563 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 17-09-2013
• Assessment Year: misc
• Other Referred Cases: K.P. Verghese v. Income Tax Officer, Paramjit Singh v. Income Tax Officer, ACIT Vs. Radhay Shyam Podar (HUF), Dilbagh Trading Co. (P) Ltd. Vs. ITO, CIT V. Partap Singh Amro Singh Rajendra Singh, ITO V. W.D. Estate (P) Ltd., ITO Vs. Tek Chand, ITO V. Smt. Gita Rani Banik, Dularam and others V. ITO and another, C.T. Laxmandas V. ACIT & Another, Dr. Arjun D. Bharad V. ITO, M. Selvaraj V. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVI SHANKER
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Deemed income; Departmental Valuation Officer; Unexplained investment; Valuation
• Section: 143(3); 69B; 260A

Judgement Text

"ITA No. 742 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 742 of 2008 Date of Decision: 17.9.2013 Commissioner of Income Tax-II, Ludhiana ....Appellant. Versus Rupen Kaushal C/o New Era Industry Campa Cola Lane ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE JASPAL SINGH. PRESENT: Ms. Savita Saxena, Advocate for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 28.3.2008 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 866/Chandi/2007 relating to the assessment year 2004-05 for claiming the following substantial questions of law:- “1. Whether the reasoning given by ITAT in discarding the just and reasoned valuation done by the D.V.O. is neither sustainable nor maintainable, in the facts and circumstances of the case? 2. Whether on the facts and in law the ITAT was Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -2- justified in deleting the addition of Rs.52,38,720/- made u/s 69B on account of difference between the valuation determined by the Departmental Valuation Officer to that shown in the Books of account of the assessee?” 2. The facts necessary for adjudication of the present appeal as narrated therein are that the assessee filed his return on income on 1.11.2004 declaring an income of ` 17,72,612/-. The said return was processed on 24.1.2005 and the assessment was completed under Section 143(3) of the Act by the Assessing Officer vide order dated 22.12.2006 (Annexure A-1) at taxable income of ` 70,19.732/- including an addition of ` 52,38,720/- as deemed income under Section 69B of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT (A)”] who vide order dated 13.8.2007 (Annexure A-II) allowed the appeal and deleted the addition of ` 52,38,720/- made by the Assessing Officer. Against the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide order dated 28.3.2008 (Annexure A-III) upheld the order of the CIT(A) and dismissed the appeal of the revenue. Hence, the instant appeal by the revenue. 3. Learned counsel for the revenue submitted that the respondent-assessee purchased various plots bearing Nos. 304 to 313 for a total amount of ` 32,54,000/- whereas the Departmental Valuation Officer (in short “the DVO”) vide his valuation report had determined the value at ` 84,92,720/-. It was urged that the Assessing Officer had, thus, rightly assessed ` 52,38,720/- income under Section 69B of the Act on Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -3- account of unexplained investment. It was argued that the CIT(A) as well as the Tribunal were in error in deleting the addition made by the Assessing Officer. 4. On the other hand, learned counsel for the respondent- assessee besides supporting the orders passed by the CIT(A) as well as the Tribunal submitted that the assessee had purchased the plots in the financial year 2003-04 for ` 32,54,000/- and there was no undervaluation and, thus, no addition under Section 69B of the Act as made out by the Assessing Officer could be legally sustained. It was further argued that for making an addition under Section 69B of the Act, it was incumbent upon the revenue to establish that something more than what was shown by way of sale consideration in the sale deed had passed as held by the Hon'ble Apex Court in K.P. Verghese v. Income Tax Officer, (1981) 131 ITR 597. Relying upon a judgment of this Court in Paramjit Singh v. Income Tax Officer, (2010) 323 ITR 588, learned counsel for the assessee submitted that in view thereof consideration shown in the sale deed which was the correct value has been rightly adopted by the CIT(A) as well as the Tribunal. 5. After hearing learned counsel for the parties and perusing the record, we do not find any merit in the appeal. 6. Examining the factual matrix herein, the assessee had purchased various plots from colonizer during the financial year 2003-04 at the rate of ` 1,000/- per square yard which was purchased by the colonizers at ` 310/- per square yard. The plots which were purchased were forming part of Fatehgarh village at the time of their purchase, however, which were subsequently merged in Sukhmani Enclave by the promoters and colonizers. The assessee had purchased the plots at Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -4- higher rates in comparison to circle rates. A copy of the valuation report was produced in the Court. A perusal thereof shows that the Valuation Officer while adopting the rate at ` 2330/- per square yard for the plot which was one side open, ` 2560/- per square yard in respect of the plot which was two sides open and ` 2680/- per square yard in respect of corner plot had not relied upon any transaction or the document on the basis of which he had arrived at the aforesaid valuation on the date of purchase by the assessee. In the absence of any specific material, the report of the Valuation Officer could not form the basis for making the addition. 7. The Tribunal while upholding the findings of the CIT(A) came to the following conclusion:- “Now the question arises which valuation is correct one i.e. valuation shown by the assessee and another one determined by the valuation officer. Another question arises, whether the assessee paid any money over and above which has been reflected in the purchase deeds. In the present appeal, the ld. Assessing Officer adopted the value which was estimated at Rs.84,92,720/- by the valuation officer in comparison to Rs.32,54,000/- valued by registered valuer, and shown by the assessee in the purchase deeds. The assessee has contested the adoption of valuation by the departmental valuation officer for applying development method for estimating the valuation of the plots. On the other hand, the contention on behalf of the assessee is that the Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -5- assessee purchased the plots at higher rates in comparison to circle rates. As far as the contention of the revenue that Sukhmani Enclave and Fatehgarh Village are different, the ld. Counsel for the assessee clarified that the land purchased by the assessee was merged in Sukhmani Enclave by the promoters and colonizers subsequent to the purchases made by him and the registration was also done by the sub registrar without any objection. It was also explained by the assessee that the land which was purchased by the assessee at the rate of Rs.1000/- per square yard was earlier purchased by the colonizers at the rate of Rs.310/- per square yard on 17.7.2003 whereas the assessee purchased at the rate of Rs.1000/- within less than one month from the date of its purchase by the colonizers. In view of these facts there is a force in the contention which supports the conclusion in the impugned order that the assessee purchased the land which is inclusive of all charges and subsequent development charges. Even otherwise, the valuation officer has merely estimated the value of the land without assigning any scientific formula, therefore, addition or the basis of fair market value determined by the valuation officer may not be justified. Not a single sale instance has been quoted by the valuation officer in coming to a particular valuation evidencing that the plots in the area were Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -6- sold at higher rates in comparison to the rates shown by the assessee during the same period. In view of these facts we are in agreement with the finding of the Ld. CIT(A) that the fair market rate determined/ estimated by the valuation officer may not stand on its own legs. As far as the presumption of the ld. Assessing Officer that the assessee might have paid some underhand money over and above, which has been shown in the purchase deed is also not supported by any corroborative evidences. As far as the reliance placed by the ld. Assessing Officer in the case of Shakti Builders is concerned, there is a mention that in the said case one superstructure was in existence on that land but in the present case the plots are vacant land. At the same time, the purchase deeds/sale deeds are duly signed by the parties along with the witnesses and are duly registered by the office of sub registrar. The addition has been made merely on the basis that the valuation officer is a technical person and his report cannot be interfered with. This contention of the assessing officer as well as of the ld. DR though is having some force but at the same time there is no blanket formula that the assessing officer is bound to follow the report blindly which is not supported by any documentary evidence. In the absence of any scientific formula in reaching to a particular conclusion, without bringing any material Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -7- on record that during the relevant time, some plots were purchased/sold at higher prices, the estimation made by the valuation officer cannot be blindly followed. At the same time the registered valuer is also a technical person, therefore, unless and until his valuation which is based on some documents is falsified or proved otherwise, the objections of the assessee registered valuer, simply cannot be brushed aside. On the valuation, the Amritsar Bench of the Tribunal in the case of ACIT Vs. Radhay Shyam Podar (HUF) (ITA No. 486/Asr/97), wherein one of us (Ld. Accountant Member) is signatory to the order, placed reliance upon the following decisions:- Dilbagh Trading Co. (P) Ltd. Vs. ITO (1994) 49-ITD 348 (ITA Bombay). CIT V. Partap Singh Amro Singh Rajendra Singh (1993) 200 ITR 788 (Raj.) ITO V. W.D. Estate (P) Ltd. (1993) 45 ITD 473 (ITAT Bombay E). ITO Vs. Tek Chand (1995) 52 ITD 197 (Jaipur). ITO V. Smt. Gita Rani Banik (2001) 251 ITR 712 (Gauhati). Dularam and others V. ITO and another (1994) 181 ITR 119 (AP). C.T. Laxmandas V. ACIT & Another (1994) 208 ITR 859 (Mad.) Dr. Arjun D. Bharad V. ITO (2002) 83 ITD 774 Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -8- (Nagpur). M. Selvaraj V. ITO (2002) 258 ITR 82 (Chennai). and held that the addition is not justified. In the case of M. Selvaraj (Supra), even it was held that the reference to the valuation officer was not valid, therefore, the report of valuation officer cannot form basis of addition as unexplained investment. Since there is no material brought on record by the revenue evidencing that the assessee paid any underhand money over and above the amount, which has been shown in the sale deed, the addition made by the Ld. Assessing Officer has been rightly deleted in the impugned order. Even otherwise if the explanation of the assessee is not found to be satisfactory, the assessing officer is having a discretion to treat or not to treat such investment as income of the assessee. Section 69 confers only discretion to the ITO to deal with the investment as income of the assessee because the word used in the section is 'may' and not 'shall'. The assessing officer has merely relied upon the estimation of valuation made by the valuation officer and himself has not brought on record any material suggestion either the rates at the relevant time were higher or the plots were sold/purchased at higher price. The assessing officer is supposed to use its discretion judiciously and not in an arbitrary manner. Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 742 of 2008 -9- Admittedly, where the sales/investment are made by the assessee secretly and are not entered in the books of account of such dealings, addition could be made by invoking section 69 of the Act but there must be some corroborative material, for the same. Onus shifts to the revenue if explanation of the assessee is not acceptable. For this proposition reliance can be placed in the case of CIT Vs. Daya Chand Jain Vadhya (98 ITR 280) (All). The burden of showing that assessee has undisclosed income is on the revenue. This burden cannot be said to be discharged by merely referring to the statement of a third party in connection with the transaction and such statement cannot be made sole foundation for making the addition that the assessee has suppressed his income. For this conclusion reliance can be placed upon the decision of the Hon'ble Madras High Court in the case of CIT Vs. N. Swamy (241 ITR 363) (Mad) and Smt. Amar Kumar Surana V. CIT (89 Taxman 544) (Raj).” 8. In view of the above, the substantial questions of law are answered in favour of the assessee and against the revenue. Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE September 17, 2013 (JASPAL SINGH) gbs JUDGE Singh Gurbachan 2013.11.21 14:25 I attest to the accuracy and integrity of this document High Court Chandigarh "