ITO,Ward-11(2), Kolkata, Kolkata V. M/s. Zenith Logistics (P)Ltd, Kolkata

ITA 1288/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78294 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 10-09-2012
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Deemed to accrue or arise in india; Fair market value; Valuation report; Onus to prove
• Section: 143(3); 50C

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1288/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER, WD-11(2), KOLKATA. VS. M/S. Z ENITH LOGISTICS PVT. LTD. (PAN:AAACZ2508H) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 24.04.2014 DATE OF PRONOUNCEMENT: 24.04.2014 FOR THE APPELLANT: SHRI P. K. CHAKRABORTY, JCIT, SR . DR FOR THE RESPONDENT: SHRI SOMNATH GHOSH, ADVOCATE $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXX, KOLKATA IN APPEAL NO. 172/CIT(A)-XXX/WD-11(2)/2011-12 DATED 11.05.2012. ASSESSMENT WAS FRAMED BY ITO, WARD-11(2), KOLKATA U/S. 143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2008-09 VIDE HIS ORDER DATED 31.12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO BY INVOKING THE PROVISIONS OF S ECTION 69B OF THE ACT ON THE BASIS OF VALUATION ESTIMATED BY DVO. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION U/S. 69B IN SPITE OF THE FACT THAT THE ASSESSEE INVESTED MORE THAN THE AMOUNT RECORDED IN ITS BOOKS OF ACCOUNTS? 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS P URCHASED TWO FLATS DECLARING VALUE OF RS. 9 LACS AND RS.10 LACS RESPECTIVELY IN THE CONVEYANCE DEEDS (SALE DEEDS). THE AO NOTICED FROM THE SALE DEEDS THAT AS PER CIRCLE RATES, THE STAMP DUTY VALUATION MADE BY SUB-REGISTRAR REGARDING THESE TWO FLATS IS AT RS.26,95,500/- AND RS.25,53,750/-. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE CIRCLE RATES AS ADOPTED BY STAMP DUTY VALUATION BY THE SUB-REGISTRAR BE NOT ADDED AS THE UNEXPLAINED INVESTMENT OF THE A SSESSEE BECAUSE THE ASSESSEE HAS SHOWN LOWER CONSIDERATION THAN THE CIRCLE RATES. ON OBJE CTION, THE AO REFERRED THE MATTER TO DVO, 2 ITA NO.1288/K/2012 M/S. ZENITH LOGISTICS PVT. LTD . AY:2008-09 WHO SUBMITTED HIS REPORT WHEREIN THE VALUE OF TWO F LATS WERE MADE AT RS.26,53,500/- AND RS.25,14,000/-. THE AO REJECTED THE EXPLANATION OF THE ASSESSEE AND TREATED THE EXCESS AMOUNT OF RS.31,67,500/- AS DEEMED INCOME OF THE ASSESSEE U/S. 69B OF THE ACT (EXCESS AMOUNT BEING THE VALUE DECLARED BY THE ASSESSEE OF BOTH THE FLAT S AT RS.19 LACS AND VALUATION MADE BY DVO AT RS.51,67,500/- = RS.31,67,500/-). AGGRIEVED, ASSES SEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION BY OBSERVING IN PARA 3 AND 3.1 AS UNDER: 3. THE ABOVE SUBMISSIONS OF THE APPELLANT HAVE BEE N CONSIDERED AND IT IS SEEN FROM THE SAME THAT THE AO HAS NOT APPRECIATED THE PROVISIONS OF THE LAW BEFORE IMPLEMENTING THE SAME AND HE WAS MISTAKEN IN INVOKING THE PROVISIONS OF SECTION 142A FOR REFERRING THE CASE FOR VALUATION. THIS PROVISION UNDER THE ACT IS TO BE INVOKED IN THE FORM OF ISSUE OF SUMMONS U/S.131(1)(D) TO THE DVO BY THE ASSESSING O FFICER FOR ESTIMATING THE COST OF CONSTRUCTION OF A PROPERTY. THE APPLICABILITY OF TH E VALUATION REPORT COULD NOT BE STRETCHED TO INCLUDE ESTIMATION OF THE VALUE OF THE PURCHASED PROPERTY BUT IS TO BE UTILIZED IN THE LIMITED CONTEXT OF ARRIVING AT THE INVESTMENT MADE IN CONSTRUCTION OF A PROPERTY I.E. FOR DETERMINING OR ESTIMATING THE ACT UAL COST OF CONSTRUCTION OF ANY PROPERTY BY AN ASSESSEE. IN THE ABOVE CASE THE A.O. HAS USED THE VALUATION REPORT FOR ESTIMATING THE INVESTMENT FOR PURCHASE OF A PROPERT Y SINCE THE CONVEYANCE DEEDS HAVE BEEN REGISTERED AT A STAMP VALUE HIGHER THAN THE SA LE CONSIDERATION. IT MAY BE MENTIONED HERE THAT THIS RNECHANISM IS UTILIZED FOR ARRIVING AT THE DEEMED CAPITAL GAINS IN RESPECT OF A PROPERTY SOLD BY AN ASSESSEE WHERE THE REGISTERED VALUE BY THE STAMP DUTY AUTHORITIES S HGHER THAN THE SALE CONSIDERAT ION RECEIVED BY AN ASSESSEE FOR THE PURPOSE OF DETERMINING CAPITAL GAINS AS PER PROVISI ONS OF SECTION 50C. AS PER PROVISIONS OF THIS SECTION THE VALUE WOULD BE DEEMED TO BE THE VALUE AS TAKEN THE STAMP AUTHORITIES AND IN CASE OF THE SAME BEING CHALLENGED BY AN ASSE SSEE THE MATTER COULD BE REFRRRED BY THE A.O. TO THE VALUATION OFFICER FOR DETERMINING T HE FAIR MARKET VALUE OF THE PROPERTY. IT MAY BE MENTIONED THAT THERE IS NO PROVISIONS UND ER THE LAW FOR TAKING THE DEEMED SALE PRICE AS DETERMINED ABOVE FOR THE PURPOE OF ADDITIO N IN THE HANDS OF THE PURCHASER OF THE PROPERTY. THE PROVISIONS OF LAW ONLY PROVIDE FO R DEEMED VALUE FOR COMPUTING CAPITAL GAINS IN THE HANDS OF THE SELLER. THE RELIANCE OF T HE APPELLANT IN THE TWO DECSIONS CITD BY IT I.E. IN THE CASE OF RUPEE FINANCE & MANAGEMENT P VT. LTD. V. ACIT AND K.P. VARGHESE V. ITO, SUPRA IS FOUND TO BE JUSTIFED. IN THE FORM ER DECISION IT HAS BEEN POINTED OUT BY THE HONBLE MUMBAI TRIBUNAL WHEREIN IT HAS BEEN HEL D BY THE TRBUNAL THAT NO ADDITION CAN BE MADE U/S.69 IN RESPECT OF SHARES PURCHASED B Y THE APPELLANT AT A PRICE BELOW THE MARKET PRICE IN THE ABSENCE OF ANY EVIDENCE AND FUR THER IT WAS ON THE REVENUE TO ESTABLISH THE FACT THAT THE ASSESSEE HAD RECEIVED M ORE THAN WHAT WAS DISCLOSED BY HIM AS A CONSIDERATION OVER AND ABOVE THE DOCUMENTARY EVID ENCE. IN THE CASE OF CAPITAL GAINS ON SALE OF PROPERTY, THE DEEMING PROVISION U/S.50C FOR CHARGING THE CAPITAL GAINS IN RESPECT OF PROPERTY REGISTERED BY THE STAMP AUTHORI TIES AT A HIGHER VALUE IS TO BE CONSIDERED AS TAKEN AS THE DEEMED CONSIDERATION BY VIRTUE OF THE PROVISIONS OF SECTION 50C AND THE ASSESSING OFFICER HAS BEEN EMPOWERED TO REFER THE VALUE OF CAPITAL ASSET TO THE VALUATION OFFICER AND DETERMINE THE DEEMED CONS IDERATION IN THE HANDS OF THE SELLER ON THE BASIS OF SUCH VALUATION REPORT. IT IS THEREF ORE SEEN THAT FIRSTLY THS IS A DEEMING PROVISION WHEREIN THE SALE CONSIDERATION WOULD BE D EEMED TO BE THAT AS TAKEN BY THE STAMP AUTHORITIES OR DETERMINED BY THE VALUATION F FICER AS AGAINST ACTUAL SALE CONSIDERATION. SECONDLY, THIS PROVISION IS ONLY APP LICABLE FOR THE PURPOSE OF DETERMINING CAPITAL GAINS IN THE HANDS OF THE SELLER AND THERE IS NO PROVISION IN LAW TO DETERRNINE THE UNDISCLOSED INVESTMENT IN THE HANDS OF THE PURCHASE RS BY VIRTUE OF THE ABOVE PROVISION IN THE ACT. 3.1 FURTHERMORE, THERE IS NO PROVISION IN THE INCOM E TAX LAW FOR USING SUCH VALUATION REPORT IN TAXING THE DEEMED CONSIDERATION BOTH IN T HE HANDS OF THE SELLER (BY VIRTUE OF 3 ITA NO.1288/K/2012 M/S. ZENITH LOGISTICS PVT. LTD . AY:2008-09 PROVISION 50C) AND AS WELL AS IN THE HANDS OF THE P URCHASER. AT MOST THE A.O. COULD HAVE PASSED ON THE INFORMATION REGARDING THE DEEMED CONSIDERATION ARRIVED T ON THE BASIS OF SUCH A VALUATION REPORT IN RESPECT OF THE SELLER OF THE PROPERTY TO THE JURISDICTIONAL ASSESSING OFFICER. IN FACT THE INVOC ATION OF SECTION 69B IS ALSO MISGUIDED AS THIS SECTION CANNOT BE INVOKED TO MAKE THE ADDIT ION ON THE BASIS OF THE REPORT OF THE VALUATION OFFICER AND TAKING THE VALUE AS DETERMINE D ONLY FOR THE PURPOSE OF DEEMING PROVISIONS OF SECTION 50C AND USING THE SAME TO MAK E ADDITION U/S.69B. IN FACT, SECTION 69B PROVIDES FOR ADDTION IN RESPECT OF AN AMOUNT EX PENDED BY AN ASSESSEE IN MAKING AN INVESTMENT EXCEEDING THE AMOUNT RECORDED IN HIS BOO KS OF ACCOUNTS AND THE AMOUNT WOULD BE DEEMED TO BE IS INCOME IN THE FINANCIAL YE AR. IN THIS CASE, THERE IS NO EVIDENCE TO SHOW THAT AN INVESTMENT ABOVE IS BEYOND THAT REC ORDED IN THE BOOKS OF ACCOUNTS HAD ACTUALLY BEEN MADE BY THE APPELLANT SINCE THE VALUA TION REPORT IS ONLY FOR THE PURPOSE OF DEEMING PROVISION OF SECTION 50C. THEREFORE, CON SIDERING THE PROVISIONS OF LAW, IT IS CLEAR THAT THE ADDTION MDE BY THE ASSESSING OFFICE R IN RESPECT OF INVESTMENT U/S. 69B ON THE BASIS OF FAIR MARKET VALUE DETERMINED BY THE VA LUATION OFFICER IN THE VALUATION REPORT IS NOT JUSTIFIED. THE ADDITION MADE IS ACCO RDINGLY DELETED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS ARE THAT THE AO MADE ADDITION BY INVOKING THE PROVISIONS OF SECTION 69B OF THE ACT ON THE FOOTING THAT THE AMOUNT OF DIFFERENCE OF RS. 31,67,500/- IS UNDISCLOSED INVESTMENT IN THESE TWO FLATS BEING DIFFERENCE BETWEEN THE VALUAT ION MADE BY DVO RELYING ON FIGURES ADOPTED BY SUB-REGISTRAR, KOLKATA WHO VALUED THE PR OPERTY FOR THE PURPOSE OF STAMP DUTY AND THE AMOUNT OF INVESTMENT DISCLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE ASSESSEES STAND FROM THE VERY BEGINNING AND EVEN NOW BEFORE U S IS THAT IT HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT U/S. 44AA OF THE ACT, WHICH ARE DULY AUD ITED UNDER THE STATUTORY REQUIREMENTS. ACCORDING TO ASSESSEE, THE INVESTMENTS ARE DECLARED IN THE BOOKS OF ACCOUNT, WHICH ARE NOT REJECTED BY THE AO FOR MAKING REFERENCE TO DVO. NE ITHER THE AO HAS BROUGHT ON RECORD ANY EVIDENCE REGARDING ANY INVESTMENT MADE BY ASSESSEE IN THE PROPERTIES IN EXCESS OF THE AMOUNT MENTIONED IN THE SALE DEEDS. THE LD. SR. DR HAS NO T DISPUTED THESE FACTS. ADMITTEDLY, THE CORRECTNESS OF THE FIGURES INCORPORATED IN THE BOOK S OF ACCOUNT ARE NOT DISPUTED BY THE AO, SO THERE CANNOT BE ANY REFERENCE TO DVO WITHIN THE PRE MISE OF SECTION 142A OF THE ACT. THIS VIEW IS SETTLED BY HONBLE SUPREME COURT IN THE CAS E OF SARGAM CINEMA VS. CIT (2010) 328 ITR 513 (SC), WHEREIN IT IS HELD THAT THE AO COULD NOT HAVE REFERRED THE MATTER TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT. HERE, IN T HE PRESENT CASE ALSO, THE BOOKS OF ACCOUNT ARE NOT REJECTED BY AO. HENCE, REFERENCE IS BAD IN LAW. 5. ANOTHER ASPECT ARGUED BY LD. COUNSEL IS THAT IT IS AN ACCEPTED PRINCIPLE THAT THE EXISTENCE OF EVIDENCE FOR EXCESS CONSIDERATION IS A PRE-CONDITION FOR INVOKING THE PROVISIONS OF 4 ITA NO.1288/K/2012 M/S. ZENITH LOGISTICS PVT. LTD . AY:2008-09 SECTION 69B OF THE ACT. IT IS SETTLED LAW THAT PRI MARY BURDEN OF PROOF OF UNDER STATEMENT IS ON THE REVENUE AND IT IS ONLY WHEN SUCH BURDEN IS DISC HARGED THAT IT WOULD BE PERMISSIBLE TO RELY ON THE VALUATION GIVEN BY DVO. HONBLE SUPREME COU RT IN THE CASE OF K. P. VARGHESE VS. ITO (1981) 131 ITR 597 (SC) HELD THAT THERE IS NO OMNIB US POWER VESTED WITH THE AO FOR ASSUMING JURISDICTION TO MAKE SUCH REFERENCE TO THE DVO FOR ESTIMATING THE INVESTMENT WITHOUT A CLEAR FINDING THAT THE VALUE OF INVESTMENT IN THE PROPERT IES HAS BEEN UNDER STATED BY THE ASSESSEE. IN THE PRESENT CASE, THE AO HAS NOT GIVEN ANY FINDING AND HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO JUSTIFY THE UNDISCLOSED INVESTMENT IN THE ACQUIS ITION OF THESE PROPERTIES I.E. TWO FLATS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE AO HAS N OT RIGHTLY PROCEEDED FOR INVOCATION OF THE PROVISIONS OF SECTION 69B OF THE ACT. ACCORDINGLY, THE UNEXPLAINED INVESTMENT ADDED BY THE AO IS WITHOUT ANY BASIS AND AGAINST THE PROVISIONS OF LAW. WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION. APPEAL OF REVENUE IS DISMIS SED. 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24TH APRIL, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- ITO, WARD-11(2), KOLKATA. 2 ./,- / RESPONDENT M/S. ZENITH LOGISTICS PVT. LTD., 156 /89, B. T. ROAD, NORTHERN PARK, KOLKATA-123. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .