ACIT Cen Cir Kolhapur, Kolhapur V. Smt Neeta Sanjay Ghodawat, Kolhapur

ITA 1749/PUN/2012

• Counselvise Citation: 174924514 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-08-2012

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1916 TO 1921 /PN/2012 (ASSESSMENT YEARS : 2004-05 TO 2009-10) ACIT, CENTRAL CIRCLE, KOLHAPUR .. APPELLANT VS. SANJAY DANCHAND GHODAWAT (INDL.) SUSHREYA, YASHWANT HOUSING SOCIETY, JAYSINGPUR, TAL : SHIROL, DIST : KOLHAPUR - 416103 .. RESPONDENT PAN NO. ADLPG5040N ITA NO.1807/PN/2012 (ASSESSMENT YEAR : 2005-06) SANJAY DANCHAND GHODAWAT (INDL.), SUSHREYA, YASHWANT HOUSING SOCIETY, JAYSINGPUR, TAL : SHIROL, DIST : KOLHAPUR- 416103 .. APPELLANT PAN NO. ADLPG5040N VS. DY.CIT, CENTRAL CIRCLE, KOLHAPUR .. RESPONDENT CO NOS. 73 TO 77/PN/2013 (ASSESSMENT YEARS : 2004-05 & 2006-07 TO 2009-10) SANJAY DANCHAND GHODAWAT. SUSHREYA, YASHWANT HOUSING SOCIETY, JAYSINGPUR, TAL : SHIROL, DIST : KOLHAPUR- 416103 .. CROSS OBJECTOR PAN NO. ADLPG5040N VS. DY.CIT, CENTRAL CIRCLE, KOLHAPUR .. RESPONDENT ITA NO.1749/PN/2012 (ASSESSMENT YEAR : 2008-09) ACIT, CENTRAL CIRCLE, KOLHAPUR .. APPELLANT VS. SMT. NEETA SANJAY GHODAWAT, SUSHREYA, YASHWANT HOUSING SOCIETY, JAYSINGPUR, TAL : SHIROL, DIST : KOLHAPUR - 416103 .. RESPONDENT PAN NO.ADLPG5041P 2 ITA NO.1806/PN/2012 (ASSESSMENT YEAR : 2005-06) SMT. NEETA SANJAY GHODAWAT, SUSHREYA, YASHWANT HOUSING SOCIETY, JAYSINGPUR, TAL : SHIROL, DIST : KOLHAPUR - 416103 .. APPELLANT PAN NO.ADLPG5041P VS. DY.CIT, CENTRAL CIRCLE, KOLHAPUR .. RESPONDENT ASSESSEE BY : SHRI BHARAT SHAH REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 17-12-2014 DATE OF PRONOUNCEMENT : 30-01-2015 ORDER PER BENCH : ITA NOS. 1916 & 1918 TO 1921/PN/2012 FILED BY THE REVENUE AND CO NOS. 73 TO 77/PN/2012 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 09-07-2012 OF THE CIT(A) KOLHAPU R RELATING TO ASSESSMENT YEARS 2004-05 AND 2006-07 TO 2008-09 RES PECTIVELY. ITA NO.1917/PN/2012 FILED BY THE REVENUE AND ITA NO.1807/PN/2012 FILED BY THE ASSESSEE ARE CROSS APP EALS AND ARE DIRECTED AGAINST THE ORDER DATED 09-7-2012 OF THE CIT(A) KOL HAPUR RELATING TO ASSESSMENT YEAR 2005-06. ITA NOS.1749/PN/2012 FILED BY THE REVENUE AND ITA NO.1806/PN/2012 FILED BY THE ASSESSEE ARE CROSS APP EALS AND ARE DIRECTED AGAINST THE ORDER DATED 29-06-2012 OF THE CIT(A) KO LHAPUR RELATING TO ASSESSMENT YEAR 2008-09. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS AND CROSS OBJECTIONS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. 3 ITA NO.1916/PN/2012 (BY REVENUE) (A.Y. 2004-05) : 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE A DDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT IN THIS GROUP OF CASES SEARCH OPERATION U/S.132 WAS CARRIED OUT AND DURING POST S EARCH ENQUIRIES IT WAS ESTABLISHED THAT THE GROUP IS GENERATING UNACCOUNTE D CASH BY WAY OF UNACCOUNTED SALE. IT WAS FURTHER ESTABLISHED THAT WHILE PURCHASING THE REAL ESTATE BEING LAND, THE GROUP IS PAYING EQUAL A MOUNT IN CASH AS COMPARED TO THE DOCUMENTATION PRICE. THE ASSESSING OFFICER FURTHER NOTED THAT IN THE CASE OF SUSHILA D. GHODAWAT CHARI TABLE TRUST, LAND SELLERS WERE VERIFIED BY THE INVESTIGATION WING. T HE NUMBER OF PERSONS WHO HAVE SOLD LAND TO THE TRUST ARE 16 AND EVERY ON E OF THEM HAS STATED TO HAVE RECEIVED ON MONEY OVER AND ABOVE THE DOCU MENTATION PRICE. SIMILARLY, IT WAS NOTICED DURING POST SEARCH ENQUIR IES IN CASE OF GHODAWAT FOOD INTERNATIONAL PVT. LTD., THAT 3 SUCH LAND SELLERS WERE VERIFIED WHO HAVE STATED TO HAVE RECEIVED CASH OVER AND ABOVE DOCUMENTATION PRICE. IN ANOTHER CASE, I.E. GHODAWA T INDUSTRIES (INDIA) PVT. LTD., WHERE ONE SELLER WAS VERIFIED, HE HAD AL SO STATED TO HAVE RECEIVED CASH OVER AND ABOVE DOCUMENTATION PRICE. IN THE CASE OF THE MAIN PERSON OF GHODAWAT GROUP, I.E. SHRI SANJAY GHO DAWAT (INDIVIDUAL), ONE LAND SELLER WAS VERIFIED WHO HAS ALSO STATED TO HAVE RECEIVED CASH OVER AND ABOVE DOCUMENTATION PRICE. THE ASSESSING OFFICER, IN THE LIGHT OF THE ABOVE, CONFRONTED THE ASSESSEE AND ASKED HIM 4 TO EXPLAIN AS TO WHY THE SAME RATIO SHOULD NOT BE A PPLIED IN ALL CASES OF THE GROUP WHEREVER LAND PURCHASES ARE SHOWN. IN AB SENCE OF ANY REPLY FROM THE ASSESSEE, THE ASSESSING OFFICER MADE ADDIT ION OF RS.52,850/- TO THE TOTAL INCOME OF THE ASSESSEE SINCE THE ASSESSEE HAS PURCHASED LAND DURING THE YEAR THE PRICE OF WHICH WAS SHOWN IN THE BOOKS AT RS.52,850/. 3. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSIN G OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT EQUIVAL ENT AMOUNT OF CASH HAS BEEN PAID OVER AND ABOVE THE DOCUMENTATION PRIC E. NO INCRIMINATING DOCUMENT IN THIS REGARD WAS FOUND DURING THE COURSE OF SEARCH. IT WAS ARGUED THAT THE REFERENCE MADE BY THE ASSESSING OFF ICER OF THE TRANSACTIONS MADE IN EXCESS OF OTHER FIRMS/INDIVIDU ALS OF THE GROUP HAS NO BEARING TO THE CASE OF THE ASSESSEE. IT WAS ALS O STATED THAT THE LAND OWNER IN QUESTION WAS NOT SUMMONED DURING THE ASSES SMENT PROCEEDINGS. FURTHER, THE STATEMENT RECORDED OF TH E LAND OWNER WAS ALSO NOT BROUGHT TO THE NOTICE OF THE ASSESSEE. IT WAS ARGUED THAT THE ASSESSEE HAS NOT PAID ANYTHING MORE THAN THE SALE DEED PRICE FOR PURCHASE OF THE LAND. FURTHER, ERSTWHILE LAND OWNER SHRI IRGONDA S ATGONDA PATIL HAD CONFIRMED IN HIS STATEMENT THAT HE HAD RECEIVED RS. 95,000/- IN CASH FROM THE ASSESSEE IN RESPECT OF LAND PURCHASED FOR A TOT AL CONSIDERATION OF RS.75,000/-. RELYING ON VARIOUS DECISIONS IT WAS S UBMITTED THAT THE ADDITION, WHICH WAS MADE ON THE BASIS OF CONJECTURE S AND SURMISES, SHOULD BE DELETED. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING AS UNDER : 36. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS ON RECORD. IT IS OBSERVED THAT IN THE CASE O F THE APPELLANT, THE 5 LANDLORDS FROM WHOM THE LAND WAS PURCHASED IN THE PREV IOUS YEARS RELEVANT TO ASSESSMENT YEARS 2004-05, 2005-06 AND 2008-0 9 WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DESPI TE HIS REQUEST FOR PRODUCING THE WITNESS. SIMULTANEOUSLY IT IS ALSO T RUE THAT THE ASSESSING OFFICER, WHO COULD HAVE USED THE POWERS UNDER SE CTION 131 TO ENFORCE THE ATTENDANCE OF WITNESS, CHOSE NOT TO DO SO. IT IS A FACT THAT SIXTEEN LAND OWNERS IN THE TRUST CASES, ONE LAND OWNER I N THE CASE, OF SHRI SANJAY GHODAWAT, INDIVIDUAL AND GHODAWAT INDUST RIES INDIA PVT. LTD. AND THREE LAND OWNERS IN THE CASE OF GHODAWAT FOODS IN DUSTRY PVT. LTD. HAD STATED THAT THEY HAD RECEIVED MONIES OVER AND ABO VE THE PRICE DOCUMENTED. THE ASSESSING OFFICER CONCLUDED THAT THE A PPELLANT HAD PAID AN EQUAL AMOUNT OF UNACCOUNTED CASH, OVER AND ABOVE THE PRICE SHOWN AS LAND PURCHASED IN THE BOOKS OF ACCOUNT AND THEREFORE MADE THE IMPUGNED ADDITION. 37. IN MY OPINION, THOUGH IT IS WELL-KNOWN THAT REA L ESTATE TRANSACTIONS MORE OFTEN THAN NOT INVOLVE PAYMENTS IN C ASH WHEREBY THE UNTAXED MONEY EARNED BY THE BUYER IS SIEVED OFF IN TH E FORM OF 'ON MONEY' AND PAID TO THE SELLERS. THIS IS A BANE OF INDIA N ECONOMY AND IS A TRUTH WHICH EVERYONE ACCEPTS AS CORRECT. YET THIS IS NOT THE GOSPEL TRUTH I.E. IT IS NOT POSSIBLE TO STATE WITH UTMOST CERTA INTY THAT EACH AND EVERY REAL ESTATE DEAL INVOLVES A CASH COMPONENT WHICH IS NOT A PART OF THE DOCUMENTATION PRICE. THEREFORE, FOR THE PURPOSE OF INCOME-TAX, ONE CANNOT MAKE AN ADDITION MERELY ON AN ASSUMPTION THAT BECAUSE OTHER INDIVIDUALS OR PERSON HAVE MADE PAYMENT OF ON MONEY I N REAL ESTATE PURCHASES, ANOTHER PERSON BELONGING TO THE SAME GROUP WOULD HAVE ALSO MADE A SIMILAR PAYMENT OF ON MONEY TO ACQUIRE RE AL ESTATE IN HIS OR HER OWN NAME. THERE IS NO PRESUMPTION IN LAW THAT THERE HAS TO BE AN UNACCOUNTED TRANSACTION WHEN THERE IS A DEALING IN REAL ESTATE. IT HAS TO BE NOTED THAT SEARCH AND SEIZURE WAS CONDUCTED ON T HE PREMISES OF THE APPELLANT AND NO DOCUMENT OR EVIDENCE WHATSOEVER WAS FOUND WHICH WOULD INDICATE UNACCOUNTED TRANSACTIONS IN LAND DEALING BETWEEN THE MEMBERS OF THE GHODAWAT GROUP AND THE SEL LERS. IT IS ONLY THE STATEMENT MADE BY SOME OF THE LANDLORDS WHO HAD SOL D LANDS TO THE GHODAWAT GROUP WHICH IMPLICATED SOME MEMBERS OF THE G HODAWAT GROUP OF INDULGING IN TRANSACTIONS OF ON MONEY PAYMEN TS. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE ORAL EVIDEN CE OF LANDLORDS IN OTHER CASES CANNOT BE USED TO JUSTIFY AN ADDITION OF ON MONEY PAYMENT IN THE HANDS OF THE APPELLANT. THE ASSESSING OFFICER HA S NOT SPECIFIED THE RELEVANT ASSESSMENT YEAR IN RESPECT OF WHICH ONE SELLER H AD CONFIRMED THAT HE HAD RECEIVED A SUM OVER AND ABOVE THE DOCUM ENTED PRICE IN THE ASSESSMENT ORDERS FOR THE YEARS IN WHICH THIS ADDITION IS M ADE. HENCE, HE IS DIRECTED TO FIND OUT THE RELEVANT ASSESSMENT YEAR FOR WHICH THE STATEMENT WAS MADE AND RETAIN THE ADDITION TO THAT EX TENT IN THE CONCERNED ASSESSMENT YEAR. CONSEQUENTLY, THE APPELLANT G ETS RELIEF IN TWO ASSESSMENT YEARS AND PARTIAL RELIEF IN ONE ASSESSMENT YE AR. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D AN IDENTICAL ISSUE 6 HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF HUF OF THE ASSESSEE FOR A.Y.2009-10. WE FIND THE TRIBUNAL IN THE CONSOLIDA TED ORDER DATED 16- 07-2014 VIDE ITA NOS. 621 TO 625 & 627/PN/2013 FOR A.YRS. 2003-04 & 2007-08 AND 2009-10 HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE AND DISMISSED THE APPEAL FILED BY THE REVENUE BY OB SERVING AS UNDER : 18. AFTER HEARING BOTH THE SIDES, WE FIND AN IDENTIC AL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF DCIT VS. GHODAW AT FOODS INTERNATIONAL PVT. LTD. VIDE ITA NOS.2147 TO 2150/PN /2012 ORDER DATED 31-12-2013 FOR A.Y. 2005-06, 2007-08, 2008-09 & 200 9-10. WE FIND THE TRIBUNAL AT PARA 3 OF THE ORDER HAS OBSERVED AS UNDER : 3. THE ASSESSING OFFICER HAS MADE ADDITION OF RS.39,68,0 39/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN LAND. DURING T HE A.Y. 2005-06, 2007-08, 2008-09 AND 2009-10, THE ASSESSEE HAD PURCHASED LAND COSTING RS.39,68,039/-, RS.11,20,245/-, RS.92,040/- AND RS.11,7 6/227/- RESPECTIVELY. THE ASSESSING OFFICER OBSERVED THAT IN POST SEARCH ENQUIRIES MADE, THE PERSONS WHO SOLD LAND TO THE OTHER CONCERNS / INDIVIDUALS OF THE GHODAWAT GROUP, HAVING RECEIVED SA LE CONSIDERATION OVER AND ABOVE THE DOCUMENTATION PRICE. KEEPING THI S IN VIEW, IN THE INSTANT CASE, HE REQUIRED THE ASSESSEE TO PRODUCE THE SELL ER OF THE LAND FOR EXAMINATION. HOWEVER, SINCE THE ASSESSEE WAS UNABLE TO P RODUCE THE CONCERNED SELLER OF THE LAND, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD PAID AN EQUAL AMOUNT OVER AND ABOVE THE PURCHASE CONSIDERATION SHOWN IN BOOKS AND MADE AN ADDITION OF RS.39,68,039/-, RS.11,20,245/-, RS.92,040/- AND RS.11,76,227/- TO THE ASSESSEE'S TOTAL INC OME FOR 3 ASSESSMENT YEARS 2005-06, 2007-08, 2008-09 AND 2009-10 R ESPECTIVELY. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUT HORITY, WHEREIN, THE ASSESSEE STATED THAT ASSESSING OFFICER HAS NOT BROUGHT ANY E VIDENCE ON RECORD TO ENABLE HIM TO MAKE THESE ADDITIONS. IT WAS ALSO CONTENDED ON BEHALF OF ASSESSEE, THERE WAS NO INCRIMINATING DOCUMENT DURING THE COURSE OF SEARCH IN THIS REGARD. THE ASSESSING OFFICER HAS REFERRED TO TRANSACTIONS MADE IN CASES OF OTHER FIRM / INDIVIDUALS O F THE GROUP, WHICH HAS NO BEARING TO THE ASSESSEE'S CASE. THE ASSESSEE CONTEND ED THAT IT HAD NOT PAID ANYTHING MORE THAN THE SALE DEED PRICE FOR PURCHASE OF THE LAND AND HENCE, THE ADDITION WAS NOT JUSTIFIED. THE LAND OWNERS FROM WHOM LAND WAS PURCHASED IN THE PREVIOUS YEARS RELEVANT TO ASSE SSMENT YEARS 2005-06, 2007-08, 2008-09 AND 2009-10 WERE NOT PROD UCED AS WITNESS FOR CROSS EXAMINATION. THE ASSESSING OFFICER COULD HAVE USED THE POWERS UNDER SECTION 131 TO ENFORCE THE ATTENDANCE OF WITNE SS, BUT HE DID NOT CHOSE TO DO SO. SIXTEEN LAND OWNERS IN THE TRUST CASE S, ONE LAND OWNER IN THE CASE OF SHRI SANJAY GHODAWAT, INDIVIDUAL AND GHODAWAT INDUSTRIES INDIA PVT. LTD. AND THREE LAND OWNERS IN THE CASE OF GHODAWAT FOODS INDUSTRY PVT. LTD. HAS STATED THAT THEY HAD RECEIV ED MONIES OVER AND ABOVE THE DOCUMENTED PRICE. THE ASSESSING OFFICER CONC LUDED THAT THE ASSESSEE HAS ALSO PAID AN EQUAL AMOUNT OF UNACCOUNTED CASH , OVER AND ABOVE THE PRICE SHOWN AS LAND PURCHASED IN THE BOOKS OF ACCOUNT, THEREFORE MADE THE ADDITION IN EVERY CASE OF LAND P URCHASE. THOUGH IN THE REAL ESTATE TRANSACTIONS THERE IS A ROLE OF ON MON EY. BUT IT COULD NOT BE SAID THAT EACH OF EVERY REAL ESTATE TRANSACTION INV OLVED CASH COMPONENT WHICH IS NOT PART OF DOCUMENTATION PRICE F OR THE PURPOSE OF INCOME TAX. ONE CANNOT MAKE ADDITION MERELY ON ASSUM PTION THAT BECAUSE OTHER INDIVIDUALS OR PERSONS HAVE MADE PAYMENT OF EARNED MONEY IN REAL ESTATE PURCHASES, ANOTHER PERSON BELONGI NG TO THE SAME 7 GROUP WOULD HAVE ALSO MADE A SIMILAR PAYMENT OF ON MO NEY TO ACQUIRE REAL ESTATE IN HIS OR HER OWN NAME. THERE IS NO PRESUM PTION IN LAW THAT THERE HAS TO BE AN UNACCOUNTED TRANSACTION WHEN THERE IS A DEALING IN REAL ESTATE. IT IS PERTINENT TO MENTION THAT SEARCH AN D SEIZURE WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE AND NO DOCUMENT OR EVIDENCE WHATSOEVER WAS FOUND WHICH COULD INDICATE UNACCOUNTED TRANSACTIONS IN LAND DEALING BETWEEN THE MEMBERS OF THE GHODAWAT GRO UP AND THE SELLERS. IT IS ONLY THE STATEMENT MADE BY SOME OF THE LA NDLORDS WHO HAD SOLD LANDS TO CERTAIN GHODAWAL GROUP WHICH IMPLICATED SOME MEMBERS OF THE GHODAWAT GROUP OF INDULGING IN TRANSACTIONS OF ON MONEY PAYMENTS. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE ORA L EVIDENCE OF LANDLORDS IN OTHER CASES COULD NOT BE USED TO JUSTIFY TH E ADDITION OF ON MONEY PAYMENT IN THE HANDS OF THE ASSESSEE. THEREFORE, THE ASSESSEE WAS GIVEN RELIEF FOR ALL THE YEARS AND IN THE YEARS BEFO RE US. HOWEVER, THE RELIEF HAS NOT BEEN GRANTED IN RESPECT OF THE LAND SOL D BY THE THREE LANDOWNERS WHO HAVE MENTIONED THAT THEY HAVE RECEIVE D EXTRA MONIES THAN WHAT WAS RECORDED AND DOCUMENTED IN SALE DEED. T HIS IS FOR THE REASON THAT THOUGH THEIR STATEMENT WAS GIVEN TO THE ASSE SSEE, THE ASSESSEE DID NOT DENY THESE TRANSACTIONS. HENCE, ADDITION MADE TO THAT EXTENT WAS CONFIRMED WHICH IS NOT SUBJECT MATTER BEFOR E. IN VIEW OF ABOVE, WE ARE NOT INCLINED TO INTERFERE IN FINDINGS OF CIT(A) BECAUSE ADDITION BASED ON PRESUMPTION CANNOT BE SUSTAINED. WE UPHOLD THE SAME. THIS TAKE CARES OF SIMILAR ISSUE AROSE IN THE A.YS. 2007-08 AND 2008-09. FACTS BEING SIMILAR, SO FOLLOWING THE SAME RE ASONING, ORDER OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOL D THE SAME. 18.1 SINCE THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL CITED (SUPRA), WE FIND NO I NFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. WE ACCORDINGLY U PHOLD THE SAME AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 5.1 SINCE THE FACTS OF THE INSTANT CASE ARE IDENTIC AL TO THE FACTS OF THE RELATED CONCERNS DECIDED BY THE TRIBUNAL, THEREFORE , IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) GRANTING RELIEF TO THE ASSESSEE FOR T HE IMPUGNED ASSESSMENT YEAR. GROUND RAISED BY THE REVENUE IS A CCORDINGLY DISMISSED. 6. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF INVESTMENT IN CARS FOR THE A.Y. 2004-05 OF RS.7,00,000. A.Y. 2008-09 OF RS.42,78,736/ - AND A.Y. 2009-10 OF RS.1,56,03,000/-. 6.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT SECO ND HAND CARS USED FOR A SPAN OF LESS THAN SIX MONTHS WERE PURCHASED B Y THE ASSESSEE AT 8 ABOUT HALF THE PRICE OF ITS ORIGINAL COST. SIMILARL Y, IN SOME CASES THE ASSESSING OFFICER NOTICED THAT ONLY 50% OF THE COST AT WHICH SUCH CARS WERE PURCHASED WAS REFLECTED IN BOOKS. IN THIS REGA RD, FEW INSTANCES HAVE BEEN BROUGHT OUT IN THE ASSESSMENT ORDER. THE ASSES SING OFFICER OBSERVED THAT A SECOND HAND SKODA OCTAVIA WAS SHOWN TO HAVE BEEN PURCHASED FROM ONE SHRI KUDBUDDIN R SHAIKH, SATARA ON 11/09/2003 AT RS. 4,00,000/- WHEREAS THE ORIGINAL PRICE OF THE CA R WAS RS. 11 LAKHS. FURTHER, IN THE STATEMENT RECORDED DURING ASSESSMEN T PROCEEDINGS, ONE SHRI PONKSHE STATED TO HAVE SOLD MARUTI-SX4 CAR TO GHODAWAT GROUP AT RS.7,00,000/- ON 18-09-2007, WHEREAS THE AMOUNT REF LECTED IN THE BALANCE SHEET WAS RS.3.50 LAKHS ONLY. THE DIFFERENC E, IT IS MENTIONED, COULD NOT BE EXPLAINED BY THE AUTHORIZED REPRESENTA TIVE. ANOTHER INSTANCE WHICH CAME TO THE NOTICE OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD PURCHASED A LOGAN-MH-10-AG-1846 FROM M /S S F CHOUGULE, SANGLI AT RS.3,00,000/- WHICH WAS ORIGINA LLY PURCHASED BY M/S S F CHOUGULE AT A PRICE OF RS.6,26,500/-. BASED ON THESE OBSERVATIONS, THE ASSESSING OFFICER ADDED RS.7,00,0 00/- BEING THE DIFFERENCE BETWEEN THE PRICE SHOWN IN THE BOOKS AND THE ORIGINAL PRICE OF THE CAR TO THE TOTAL INCOME OF THE ASSESSEE TREATIN G IT AS ASSESSEE'S UNACCOUNTED INVESTMENT. 7. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ADDITION WAS MADE IN ABSENCE OF ANY DOCUMENTARY EVIDENCE. THE ASSESSEE A RGUED THAT SHRI VIKRAM PONKSHE WAS NOT PRODUCED FOR CROSS EXAMINATI ON IN CONNECTION WITH PURCHASE OF MARUTI-SX4/MH-10-AG-1266. AS REGAR DS THE ADDITION MADE ON PURCHASE OF LOGAN-MH-10-AG-1846 IS CONCERNED, IT WAS SUBMITTED THAT THE SAID ADDITION WAS ALSO WITHOUT A NY BASIS AS THE SELLER 9 OF THE CAR HAD CONFIRMED BEFORE THE ASSESSING OFFIC ER THAT FOR VARIOUS REASONS HE HAD SOLD THE CAR AT A LOWER PAISE. IN TH E CASE OF HEMI-MP-45- D-0555 PURCHASED ON 28/11/2007 FROM TINA BINDRA, TH E ASSESSEE ARGUED THAT ADDITION OF THE ENTIRE PURCHASE AMOUNT OF RS.4 0 LAKHS WAS UNREASONABLE AS THE ASSESSING OFFICER HAD BROUGHT N OTHING ON RECORD REGARDING THE ORIGINAL PURCHASE PRICE, CONDITION OF THE VEHICLE DUE TO NORMAL WEAR AND TEAR ETC. 7.1 THE ASSESSEE FURTHER ARGUED THAT ONCE SEARCH E XERCISE IS CARRIED OUT, IT WOULD BE WRONG TO PRESUME THAT THE ASSESSEE MUST HAVE ENTERED INTO MORE UNACCOUNTED TRANSACTIONS OTHER THAN THE O NE FOUND DURING SEARCH UNLESS MATERIAL FOUND INDICATE OTHERWISE. RE LIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF STATE OF KERALA V/S C VELLUKUTTY REPORTED IN 60 TIR 239 (SC) TO THE PROPOSITION THAT IN SEARCH CASES, NOTHING CAN BE PRESUMED AGAINST THE A PPELLANT FOR ALL THE YEARS ON THE BASIS OF MATERIAL FOUND IN THE COURSE OF SEARCH. THE ASSESSEE ALSO PLACED RELIANCE IN THE CASES OF (I) CIT V/S DR M K MEMON 248 ITR 310 (BOM) (II) SAMRAT BEER 75 ITD 19 PUNE (TM) AND (III) DHAKESHWARI COTTON MILLS LTD. V/S CIT (1954) 26 ITR 775 (SC). 7.2 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE, THE LD.CIT(A) CONFIRMED THE ADDITION MADE IN RESPECT OF VEHICLE S OLD BY SHRI PONKSHE. HOWEVER, HE DELETED THE ADDITION MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF PURCHASE OF CARS FOR OTHER YEARS. WHILE DOING SO, HE OBSERVED THAT THE ASSESSING OFFICER HAS NOT EXAMINED ANY OF THE SELLERS AND THAT HE HAS RELIED UPON THE CONCLUSIONS DRAWN BY THE INVEST IGATION WING. HE NOTED THAT THE VEHICLE WAS PURCHASED FROM MR. POKSH E IN THE ASSESSMENT YEAR 2008-09 WHICH IS CLEAR FROM THE DOCUMENTS. HEN CE THE FINDINGS 10 WOULD BE RELEVANT FOR THE ASSESSMENT YEAR 2008-09. FURTHER THE ASSESSING OFFICER HAS NOT GIVEN AN OPPORTUNITY OF CROSS EXAMI NATION TO THE ASSESSEE. HOWEVER, HE NOTED THAT THE ASSESSEE HAS ALSO NOT DE MANDED AN OPPORTUNITY OF CROSS EXAMINATION IN ASSESSMENT STAG E. 7.3 IN RESPECT OF THE TRANSACTION OF PURCHASES OF S CLASS MERCEDES BENZ AND PAJERO, HE NOTED THAT THE VEHICLES WERE PU RCHASED AFTER TWO YEARS FROM ORIGINAL SALE. ACCORDING TO LD.CIT(A), T HE COST OF VEHICLES UNDERGO SUBSTANTIAL EROSION WITHIN A COUPLE OF YEAR S OF PURCHASES; ESPECIALLY IN LUXURY SEGMENT. THIS IS FOR THE REASO N THAT THESE VEHICLES HAVE AN ELITIST VALUE ATTACHMENT. THE PERSONS WHO C AN BUY THESE CARS WILL NOT PURCHASE IT AT A HIGHER VALUE BECAUSE MORE OFTE N THAN NOT THE PERSON IS QUITE CAPABLE OF PURCHASING THE VEHICLE FIRST-HA ND. HENCE HE ALWAYS HUNTS FOR A BARGAIN TO PURCHASE A VEHICLE FOR LESSE R THAN THE DEMANDED PRICE. UNLESS AND UNTIL THE BUYER GETS A GOOD BARGA IN PRICE, HE WILL NOT PURCHASE THE VEHICLE. THIS PHENOMENON ACCORDING TO LD.CIT(A) IS COMMON ACROSS ALL MARKETABLE ITEMS OF LUXURY SEGMEN T. FURTHER THE PRICE OF A VEHICLE DEPENDS UPON ITS CONDITION. A RUN DOWN VEHICLE, A VEHICLE WHICH HAS MET WITH AN ACCIDENT OR A VEHICLE WITH RE CURRING TECHNICAL FAULT WILL FETCH LOWER PRICE IN THE MARKET EVEN THO UGH IT MAY BE SIX MONTHS OLD. A VISIT BY THE ASSESSING OFFICER TO THE USED CAR SALES DIVISION OF MERCEDES AND MITSUBISHI VEHICLES WOULD HAVE REVE ALED WHETHER THE VEHICLES WERE APTLY VALUED AT THE PRICE IT WAS SOLD . IN THE END, PRICE OF LUXURY SEGMENT VEHICLES IS A MATTER OF PERCEPTION. ITS VALUE LARGELY LIES IN THE EYES OF THE PURCHASER. SINCE WE ARE DEALING WIT H SPECIFIC INSTANCES OF SALES, A GENERALISATION CANNOT BE DRAWN THAT SINCE THE VEHICLES WERE ONLY TWO YEARS OLD THEY SHOULD HAVE BEEN VALUED AT TWICE THE AMOUNT AT WHICH 11 THEY WERE BROUGHT. IN FACT THE ASSESSING OFFICER HA S NOT EVEN BOTHERED TO FIND OUT THE VALUE OF FIRST HAND VEHICLES OF THE SA ME MAKE. THE ASSESSEE HAS CLEARLY BROUGHT OUT THAT THE ORIGINAL COST OF M ERCEDES WAS RS.56 LAKHS. MOST CERTAINLY A SECOND HAND CAR OF THE SAME MAKE WOULD NOT HAVE COST RS.61 LAKHS, WHICH WOULD BE THE PRICE IF THE LOGIC OF THE ASSESSING OFFICER IS FOLLOWED. IN MOST CASES, BY DO UBLING UP THE COST OF PURCHASE, THE PRICE OF SECOND HAND CARS HAS EXCEEDE D THE ORIGINAL COST OR SHOWROOM PRICE OF THE SAME VEHICLE 7.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND AN IDEN TICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF HUF OF THE AS SESSEE, I.E, SHRI SANJAY D. GHODAWAT (HUF) FOR A.Y. 2003-04. WE FIND THE TRIBUNAL AT PARA 5 OF THE ORDER HAS DECIDED THE ISSUE AND THE A PPEAL FILED BY THE REVENUE HAS BEEN DISMISSED BY OBSERVING AS UNDER : 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE AL SO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSI NG OFFICER IN THE INSTANT CASE MADE ADDITION OF RS.8 LAKHS BEING UNAC COUNTED INVESTMENT IN CARS ON THE BASIS OF THE FINDING OF THE I NVESTIGATION WING OF THE DEPARTMENT, ACCORDING TO WHICH THE ASSESSEE USED TO BUY SECOND HAND CARS USED FOR A SPAN OF LESS THAN 6 MONTHS BY THE P REVIOUS OWNER AT HALF THE PRICE OF ITS ORIGINAL PRICE AND USED TO P AY EXTRA MONEY TO THE CAR OWNERS. FOR THE PURPOSE OF MAKING THE ADDITION F OR THE IMPUGNED ASSESSMENT YEAR THE ASSESSING OFFICER BROUGHT ON RECORD 4 C ASES WHEREIN SECOND HAND CARS ARE PURCHASED. HOWEVER, WE F IND THE DATE OF PURCHASE OF THE CARS BY THE PREVIOUS OWNERS ARE NOT GIVEN BY THE ASSESSING OFFICER. HE HAS NOT EXAMINED ANY OF THE SELLER S. HE HAS NOT GIVEN THE COST PRICE OF THE CARS. THE ENTIRE ADDITION IT APPEARS WAS BASED ON THE BASIS OF THE STATEMENT OF ONE PERSON, I.E. MR. VIKRAM PONKSHE WHO HAD STATED THAT HE RECEIVED TWICE THE AMO UNT OF MONEY 12 THAN WHAT WAS RECEIVED BY HIM IN CHEQUE. NO OTHER E VIDENCE WHATSOEVER WAS BEFORE THE ASSESSING OFFICER TO TAKE SUCH A VIEW IN THE CASE OF THE ASSESSEE. IT HAS BEEN HELD BY THE HONBLE S UPREME COURT IN THE CASE OF DHAKESHWARI COTTON MILLS REPORTED IN 26 IT R 715 THAT PRESUMPTIONS AND SURMISES HOWEVER STRONG MAY BE CANNOT BE THE BASIS FOR AN ADDITION. FURTHER, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ONCE THE CAR IS USED, IT S RESALE VALUE IS LESS THAN THE ORIGINAL PRICE. THEREFORE, IT CANNOT B E SAID IN ALL THE CASES THAT A SECOND HAND CAR WILL FETCH THE SAME PRICE AS T HE COST OF A NEW CAR. IN THIS VIEW OF THE MATTE AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) WE FIND NO INFIRMITY IN HIS O RDER. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENU E ARE DISMISSED. 8.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN THE CASE OF THE HUF OF THE ASSESSEE AND IN ABSENCE OF ANY CONTR ARY MATERIAL BROUGHT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE ON ACCOUNT OF INVESTMENT IN CARS EXCE PT IN THE CASE OF VEHICLE SOLD BY SHRI PONKSHE FALLING IN A.Y. 2008-0 9. GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 9. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UN DER : 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTE D COMMISSION OF RS.16,54,052/- FOR A.Y. 2005-06. 9.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT T HE ASSESSEE, DURING THE IMPUGNED ASSESSMENT YEAR, HAS OFFERED COMMISSIO N INCOME OF RS.5,61,20,197/-. THE ASSESSEE ALSO FURNISHED FORM NO.16A IN SUPPORT OF THE TDS CLAIMED. HOWEVER, FROM THE TDS CERTIFIC ATE, THE ASSESSING OFFICER NOTED THAT THE GROSS AMOUNT OF COMMISSION R ECEIVED DURING THE YEAR WAS RS.5,77,74,249/-. IN ABSENCE OF ANY PROPE R EXPLANATION BY THE ASSESSEE, THE ASSESSING OFFICER ADDED THE DIFFERENC E OF RS.16,54,052/- TO THE TOTAL INCOME OF THE ASSESSEE. 13 10. BEFORE CIT(A) IT WAS ARGUED THAT THE GROSS AMOU NT OF RS.5,77,74,249/- AS PER TDS CERTIFICATE WAS INCLUSI VE OF SERVICE TAX OF RS.16,54,052/-. SINCE SERVICE TAX OF RS.16,54,052/ - WAS PAID WITHIN THE TIME ALLOWED, THE SAID AMOUNT WAS NOT THE INCOME OF THE ASSESSEE. 11. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 56. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT WITH REFERENCE TO THE FACTS OF THE CASE. A PERUSAL OF COMMISSION ACCOUNT SUBMITTED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS SHOWS THAT THE APPELLANT HAD RECEIVED COMMISSION OF RS.5,61,20,197/- FROM SEVEN DIFFERENT PERSONS. ON THIS AMOUNT, SERVICE TAX OF RS.16, 54,054/- WAS ADDED. THE NET BILL AMOUNT COMES TO RS.5,77,74,251/-. ON THIS AMOUNT TDS OF RS.31,89,970/- WAS DEDUCTED AND A NET AMOUNT OF RS.5,45,84,281/- WAS RECEIVED BY THE APPELLANT. THE A SSESSING OFFICER HAS HELD THAT AS PER THE TDS CERTIFICATES, THE BILL AMOU NT IS RS.5,77,74,249/- WHICH SHOULD HAVE BEEN OFFERED FOR TAXATION. HENCE, THE AMOUNT OF RS.16,54,052/- WAS ADDED BACK. NOW, THIS AMOUNT OF RS.1 6,54,052/- PERTAINS TO THE SERVICE TAX COMPONENT IN THE BILL FO R THE SERVICES RENDERED TO EARN THE COMMISSION INCOME. SERVICE TAX I S AN INDIRECT LEVY OF TAX ON THE PERSONS WHO RECEIVE THE SERVICES. SINCE I T IS AN INDIRECT TAX, ITS INCIDENCE IS ON THE SERVICES PROVIDER AS FAR AS COLLE CTION GOES. HOWEVER, THE REAL INCIDENCE IS ON THE SERVICE SEEKER S. THEREFORE, THE BILL AMOUNT WHICH INCLUDES THE SERVICE TAX COMPONENT DOES N OT BEAR THE CHARACTER OF INCOME TO THE EXTENT OF THE AMOUNT OF SERVICE TAX UNLESS THE SAME IS RETAINED BY HIM. IT IS A RECOVERY FROM THE PE RSON TO WHOM SERVICES ARE GIVEN WHICH IS TO BE MADE OVER TO THE SER VICE TAX DEPARTMENT. IF THIS AMOUNT IS ADDED BACK TO THE APPE LLANTS INCOME, THEN A CORRESPONDING DEDUCTION OF AN EQUAL AMOUNT WILL BE ALLOWABLE AS A BUSINESS EXPENSE INCURRED FOR EARNING OF COMMISSION BECA USE SERVICE TAX IS A DEDUCTIBLE ITEM. ACCORDINGLY, I HOLD THAT THE ADDITION SHOULD BE DELETED. 11.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 12. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRM ITY IN THE ORDER OF THE CIT(A). THE ASSESSEE HAS CLARIFIED THAT THE GR OSS COMMISSION OF RS.5,77,74,249/- AS PER TDS CERTIFICATE WAS INCLUSI VE OF SERVICE TAX OF RS.16,54,052/-. THE ASSESSEE HAS ALSO PRODUCED THE RELEVANT DOCUMENTS BEFORE THE CIT(A). THE LD.CIT(A), WHOSE POWERS ARE CO-TERMINOUS 14 WITH THAT OF THE ASSESSING OFFICER, AFTER VERIFICAT ION OF THE SAME HAS DELETED THE ADDITION. THE LD. COUNSEL FOR THE ASSE SSEE ALSO PRODUCED A COPY OF SUCH SERVICE TAX PAYMENT BEFORE THE BENCH. UNDER THESE CIRCUMSTANCES AND IN ABSENCE OF ANY CONTRARY MATERI AL BROUGHT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE ORDER OF THE CI T(A) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. WE ACCORDI NGLY UPHOLD THE ORDER OF THE CIT(A) AND THE GROUND RAISED BY THE RE VENUE IS DISMISSED. 13. GROUND OF APPEAL NO.4 BY THE REVENUE READS AS U NDER : 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT( A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTE D INVESTMENTS IN SHARES OF RS.75,21,72,000/- FOR THE A.Y. 2008-09. 13.1 AFTER HEARING BOTH THE SIDES, WE FIND THIS GRO UND DOES NOT ARISE FOR THE IMPUGNED ASSESSMENT YEAR AND RELATES TO A.Y. 20 08-09. THE REVENUE HAS TAKEN THIS GROUND INADVERTENTLY. SINCE THIS GR OUND DOES NOT ARISE EITHER OUT OF THE ORDER OF ASSESSING OFFICER OR THE CIT(A) FOR THE IMPUGNED ASSESSMENT YEAR, THEREFORE, THIS GROUND BE ING INFRUCTUOUS IS DISMISSED. 14. GROUND OF APPEAL NO.5 BY THE REVENUE READS AS U NDER : 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT( A) HAS ERRED IN DELETING THE ADDITION MADE ON DISALLOWANCE OF DEPREC IATION ON WINDMILLS FOR A.Y. 2004-05 TO 2009-10. 14.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION, INSTALLED NEW WIND MILLS. ON P ERUSAL OF DETAILS FURNISHED BEFORE HIM, IT WAS NOTICED THAT THE ASSES SEE HAD CLAIMED DEPRECIATION ON THE ENTIRE EXPENDITURE INCLUDING PU RCHASE AND INSTALLATION OF THE WIND MILL. THE ASSESSEE WAS ASK ED TO SUBSTANTIATE ITS 15 CLAIM MADE ON THE ASSETS OTHER THAN WIND MILL. IT WAS SUBMITTED THAT THERE WAS NO CIVIL WORK INVOLVED FOR ERECTION OF TH E WIND TURBINE AS PARTS LIKE CONTROL PANELS AND DISPLAY METERS WERE H OUSED WITHIN THE TOWER ITSELF. IT WAS SUBMITTED THAT THE CIVIL WORK DONE IN THE FORM OF FOUNDATION WORK COULD NOT BE SEPARATED FROM THE WIN D TURBINE AND THEREFORE IT WAS ENTITLED FOR DEPRECIATION ON THE E NTIRE COST OF THE WIND TURBINE. NOT BEING SATISFIED WITH THE CONTENTION OF THE ASSESSEE, THE ASSESSING OFFICER, AFTER PERUSING VARIOUS BILLS IN CONNECTION WITH EXPENSES INCURRED ON WIND TURBINE, HELD THAT THE AS SESSEE WAS NOT ENTITLED FOR DEPRECIATION ON CIVIL WORK, ERECTION W ORK, INSTALLATION WORK AND PAYMENT TOWARDS DEVELOPMENT CHARGES. FOR THE ABOVE PROPOSITION, THE AO RELIED ON THE DECISION OF THE ITAT IN POONAWALA FINWEST & AGRO (P) LTD. V/S ACIT [2008] 118 TTJ 68 (PUNE). THE ASSESSING OFFICER ALSO REFERRED TO RULE 32(1) OF THE INCOME-TAX RULES 1962 , APPENDIX I, PART A, ITEM 111(3)(XIII)(I). BASED ON THE ABOVE OBSERVATIO NS, HE DISALLOWED THE CLAIM OF EXCESS DEPRECIATION MADE BY THE ASSESSEE. 15. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT IN THE CASE OF POONAWALA FINWEST AGRO PVT. LTD., (SUPRA) THE COST OF TRANSFORMER UP TO DP STRUCTURE AND INTERNAL LINE UP TO THE METER WAS HELD AS AN INTEGRAL PART OF THE MAIN PLANT, I.E. WIND TURBINE AND DEPRECIATI ON @100% WAS ALLOWED. IT WAS SUBMITTED THAT NECESSARY CIVIL WOR KS TOWARDS ERECTION AND INSTALLATION OF THE WIND TURBINE ARE INTEGRAL P ART OF THE WIND MILL WITHOUT WHICH THE WIND MILL CANNOT COME INTO EXISTE NCE AND GENERATE ELECTRICITY AND THEREFORE THE SAME HAS TO BE TREATE D AS PART OF THE WIND MILL. 16 16. IN APPEAL THE LD.CIT(A) FOLLOWING HIS DECISION IN THE CASE OF M/S. CHHAPALKAR BROTHERS FOR A.Y. 2008-09 HELD THAT COST OF NEW WIND TURBINE WILL INCLUDE COST OF COMPONENT AND ACCESSOR Y, COST OF COMPONENT FOR GENERATION OF ELECTRICITY SUPPLY OF ROTOR BLADE S, ELECTRICAL ITEMS, COMPONENT OF RE DEVICE, COST OF TUBULAR TOWER, COST OF WORK INCLUDING FOUNDATION WORK AND LABOUR RELATED COST. ACCORDING LY, HE HELD THAT DEPRECIATION HAS TO BE COMPUTED IN THE LIGHT OF THE FOLLOWING : I) COST OF NEW WINDMILL WILL BE INCLUSIVE OF ALL ITEMS MENTIONED AT 1 TO 5 ABOVE. II) COST OF POWER EVACUATION FACILITY AND INFRASTR UCTURE WILL BE APPORTIONED BETWEEN THE RATES APPLICABLE TO BUILDIN G/ROADS AND WINDMILL IN 60 : 40 RATIO, III) COST OF OTHER MISCELLANEOUS EXPENSES WILL BE APPO RTIONED ON PRORATA BASIS BETWEEN WINDMILL AND INFRASTRUCTURE FACI LITIES. 16.1 ON BEING ASKED BY HIM, THE ASSESSEE FILED A RE VISED WORKING OF DEPRECIATION WHICH HAS BEEN CLAIMED TO BE IN ACCORD ANCE WITH THE ABOVE GUIDELINES. THE CIT(A) ACCORDINGLY DIRECTED THE ASS ESSING OFFICER TO GO THROUGH THE REVISED WORKING AND ALLOW DEPRECIATION AS PER HIS DIRECTION. AGGRIEVED WITH SUCH ORDER OF THE LD.CIT(A) THE REVE NUE IS IN APPEAL BEFORE US. 17. AFTER HEARING BOTH THE SIDES WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF HUF OF THE ASSES SEE NAMELY SANJAY D. GHODAWAT (HUF) FOR A.Y. 2004-05. WE FIND THE TR IBUNAL VIDE CONSOLIDATED ORDER DATED 16-07-2014 IN ITA NOS. 621 TO 625 AND 627/PN/2013 FOR A.YRS. 2003-04, 2007-08 TO 2009-10 HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH CER TAIN DIRECTIONS. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER : 17 8. AFTER HEARING BOTH THE SIDES, WE FIND THE COORDIN ATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 29-11-2013 IN THE CASE OF ACIT VS. STAR FLEXIPACK INDUSTRIES & VICE-VERSA VIDE ITA NOS. 530 & 531/PN/2013 AND ITA NOS. 615 TO 620/PN/2013 AND BATCH OF APPEALS HAS D ECIDED AN IDENTICAL ISSUE AND HAS OBSERVED AS UNDER : 15. AFTER HEARING BOTH THE SIDES, WE FIND THE COORDI NATE BENCH OF THE TRIBUNAL VIDE ORDER OF EVEN DATE IN ITA NO. 609 TO 614/PN/2013 AND CO NOS. 80 TO 85/PN/2013 IN THE CASE OF ACIT VS. M/S. EVERREADY INVESTMENT PVT. LTD., (WHICH IS A SI STER CONCERN OF THE ASSESSEE GROUP) HAS DECIDED AN IDENTICAL ISSUE AND HAS OBSERVED AS UNDER : 4. THE REVENUE HAS CONTESTED THE PARTIAL RELIEF ALLO WED BY THE CIT(A) WHEREAS THE ASSESSEE BY WAY OF CROSS-OBJECTION NO .3 HAS CONTESTED THAT THE ENTIRE CIVIL COST OF RS.20,00,000/- BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDMILL BY APPLYING THE FUNCTIONAL TEST AND THUS BE ALLOWED DEPRECIATIO N AT THE HIGHER RATE. 5. IN THIS BACKGROUND, WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT WAS A CONVERGENCE OF OPINION BETWEEN TH E ASSESSEE AND THE LEARNED CIT(DR) THAT SO FAR AS THE COST OF FOUNDATION OF WINDMILL IS CONCERNED, THE SAME IS LIABL E TO BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDMILL HAVING REGARD TO THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF AMINITY DEVELOPERS & BUILDERS VIDE ITA NO. 1505/PN/2011 DATED 12.12.2012 AND ALSO IN TERMS OF TH E JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. COOPER FOUNDARY PVT. LTD. VIDE INCOME TAX AP PEAL NO. 1326 OF 2010 DATED 14.06.2011. THE TRIBUNAL IN THE CASE OF AMINITY DEVELOPERS & BUILDERS (SUPRA) BY APPLYING THE FUNCTIONAL TEST HELD THAT THE COST INCURRED ON THE FOUNDATION O F THE WINDMILL IS TO BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDMILL ERECTION AND IS THUS ELIGIBLE FOR THE DEPRECIATION @ 80%, PRESCRIBED FOR WINDMILL. THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF COOPER FOUNDARY PVT. LTD. (SUPRA) HAS ALSO UPHE LD THE PROPOSITION THAT CEMENT, CONCRETE FOUNDATION IS TO BE INCLUDED IN THE COST OF WINDMILL, WHILE GRANTING DEPRECIATION @ 80% ON THE WINDMILL. THEREFORE, ON THE BASIS OF THE AFORESAID, I N-PRINCIPLE THE PLEA OF THE ASSESSEE IS LIABLE TO BE UPHELD. 6. SO, HOWEVER IT IS PERTINENT TO OBSERVE THAT THE CO ST OF CIVIL WORKS, ETC. AMOUNTING TO RS.20,00,000/- INCURRED BY T HE ASSESSEE CANNOT BE SAID TO BE ENTIRELY TOWARDS THE COST OF CIVI L WORK FOUNDATION FOR THE WINDMILL. THE LEARNED COUNSEL HA S REFERRED TO THE COPY OF INVOICE RAISED BY SUZLON DEVELOPERS PRIVA TE LIMITED FOR THE COST OF CIVIL WORK, ETC. AMOUNTING TO RS.20,0 0,000/- WHICH SHOWS THAT IT IS A COMPOSITE BILL FOR FOUNDATION OF WI NDMILL, PLINTH FOR TRANSFORMER, WINDMILL CONTROL ROOM, SITE DEVELOP MENT AND INTERNAL ROAD DEVELOPMENT, ETC. IT IS IN THIS CONTE XT, ON BEING UNABLE TO DECIPHER THE EXACT COST OF THE CIVIL FOUND ATION WORK FOR WINDMILL/TRANSFORMER, THE LEARNED CIT(A) HAS APPORTIO NED THE COST BETWEEN THE BUILDINGS/ROADS AND WINDMILL IN THE R ATIO OF 60:40. THE LEARNED COUNSEL VEHEMENTLY POINTED OUT T HAT THOUGH SEPARATE COSTS WERE NOT ENUMERATED BY SUZLON DEVELOPER S PRIVATE LIMITED WHO HAD UNDERTAKEN THE EXECUTION OF WORK, Y ET THE ITEMS OF CIVIL WORK ON ACCOUNT OF BUILDINGS/ROADS WAS MINIM AL AND THEREFORE APPORTIONMENT MADE BY THE CIT(A) WAS UNJUST IFIED. THE LEARNED COUNSEL FURTHER POINTED OUT THAT THE MAJOR C OSTS ARE IN 18 RELATION TO THE CONSTRUCTION OF CIVIL FOUNDATION FOR THE WINDMILL/OTHER EQUIPMENT REQUIRED FOR POWER GENERAT ION AND IS LIABLE TO BE CONSIDERED AS A PART OF WINDMILL FOR T HE PURPOSES OF GRANT OF DEPRECIATION @ 80%. 7. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, AND ALSO THE PLEA RAISED BEFORE US, IN OUR CONSIDERED OPINION IT WO ULD MEET THE ENDS OF JUSTICE IF 60% OF COST OF CIVIL WORK IS APPORTI ONED TO CIVIL WORK INVOLVED IN THE ERECTION OF FOUNDATION OF WIND MILL/OTHER POWER EQUIPMENT AND 40% BE APPORTIONED TOWARDS OTHER CIVIL WORKS WHICH SHALL BE ELIGIBLE FOR THE LOWER RATE OF DEPRECIATION. THE COST OF CIVIL WORK APPORTIONED TOWARDS THE ERECTI ON OF FOUNDATION FOR WINDMILL SHALL BE ELIGIBLE FOR DEPREC IATION @ 80% AND THE BALANCE OF THE COST SHALL BE ELIGIBLE FOR DEP RECIATION @ 10%, AS ALLOWED BY THE ASSESSING OFFICER. THE ORDER OF THE CIT(A) IS THEREFORE SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTE D TO RE- COMPUTE THE ALLOWANCE OF DEPRECIATION ACCORDINGLY. 15.1 SINCE BOTH THE SIDES AT THE TIME OF HEARING HAD EXPRESSED THEIR WILLINGNESS TO FOLLOW THE OUTCOME OF THE ABOVE DECISION, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF TH E CO-ORDINATE BENCH OF THE TRIBUNAL CITED (SUPRA) WE RESTORE THE I SSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-COMPUTE THE DEPRECIATION IN THE LIGHT OF THE ABOVE DECISION OF T HE TRIBUNAL. THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8.1 RESPECTFULLY FOLLOWING THE ABOVE DECISION CITED ( SUPRA) WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO RECOMPUTE THE DEPRECIATION IN THE LIGHT OF THE DIRE CTION OF THE TRIBUNAL. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOW ED FOR STATISTICAL PURPOSES. 17.1 SINCE THE FACTS OF THE INSTANT CASE ARE IDENTI CAL TO THE FACTS OF THE HUF OF THE ASSESSEE, THEREFORE, WE RESTORE THE ISSU E TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RE-COMPUTE THE DEPRECIATION IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL IN THE C ASE OF THE HUF CITED (SUPRA). GROUND RAISED BY THE REVENUE IS ACCORDING LY ALLOWED FOR STATISTICAL PURPOSES. 18. GROUNDS OF APPEAL NO.6 AND 7 BEING GENERAL IN N ATURE ARE DISMISSED. ITA NO.1918/PN/2012 (A.Y. 2006-07) : ITA NO.1919/PN/2012 (A.Y. 2007-08) : ITA NO.1921/PN/2012 (A.Y. 2009-10) : 19. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS TAKEN BY THE REVENUE IN THE ABOVE APPEALS ARE IDENTICAL TO THE G ROUNDS OF APPEAL IN 19 ITA NO.1916/PN/2012. WE HAVE ALREADY DECIDED THE I SSUES. FOLLOWING THE SAME RATIO, GROUNDS OF APPEAL NO.1 TO 3 IN ALL THESE APPEALS ARE DISMISSED. GROUNDS OF APPEAL NO.4 IN ALL THESE APP EALS BEING INFRUCTUOUS ARE DISMISSED. GROUNDS OF APPEAL NO.5 IN THE ABOVE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. GROUNDS OF A PPEAL NO. 6 AND 7 BEING GENERAL IN NATURE ARE DISMISSED. ITA NO.1917/PN/2012 (A.Y. 2005-06) : ITA NO.1807/PN/2012 (A.Y. 2005-06) : 20. GROUNDS RAISED BY THE REVENUE IN ITA NO.1917/PN /2012 AND ASSESSEE IN ITA NO.1807/PN/2012 ARE AS UNDER : GROUNDS BY REVENUE : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A ) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE ADDI TION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE CIT{A) HAS ERRED IN / DELETING THE ADDITION MADE ON ACCOUNT OF INVES TMENT IN CARS FOR THE A.Y. 2004-05 OF RS.7,00,000/-, A.Y. 2008-09 OF RS.42,78,736/- AND A.Y. 2009-10 OF RS. 1,56,03,000/-; 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF U NACCOUNTED COMMISSION OF RS. 16,54,052/-FOR AY 2005-06; 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOU NTED INVESTMENTS IN SHARES OF RS.75,21,72,000/- FOR THE AY 2008-09; 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CI T(A) HAS ERRED IN DELETING THE ADDITION MADE ON DISALLOWANCE OF DEPRECIA TION ON WINDMILLS FOR AY 2004-05 TO 2009-10; 6. THE APPELLANT PRAYS THAT THE ORDER OF THE LD CI T(A) BE VACATED AND THAT OF THE AO'S ORDER MAY BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY AN Y OF THE ABOVE GROUNDS RAISED, ANY OTHER GROUNDS AT THE TIME O F PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL WHICH MAY PLEASE BE GRANTE D. GROUNDS BY ASSESSEE : 1) THE LEARNED CIT(APPEALS) HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN ENHANCING THE ASSESSMENT FOR AY 2005/2006 BY RS16,12,62,000 ON AN ISSUE WHICH WAS NOT A SUBJECT MA TTER OF APPEAL/ASSESSMENT/RETURN PERTAINING TO AY 2005/2006. THE 20 ENHANCEMENT SO ORDERED IS WITHOUT JURISDICTION. THE AP PELLANT PRAYS THAT THE ADDITION SO MADE MAY KINDLY BE DELETED. 2) WITHOUT PREJUDICE TO GROUND OF APPEAL NO. 1 (A) THE LEARNED CIT (APPEALS) HAS ERRED IN FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW IN MAKING AN ADDITION U/S 69B TO EXTENT OF RS.16,12,62,000/- ON ACCOUNT OF ALLEGED UNACCOUNTED INVESTMENT IN 5000 SHARES OF M/S. M. D. PROPERTIES PVT. LTD, IN AY 2005/2006 AS ENHANCEMENT. THE ADDITION SO MADE MAY KINDLY BE DE LETED. (B) THE LEARNED CIT (APPEALS) HAS ERRED IN FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW IN HOLDING THAT THE MEMORANDUM O F UNDERSTANDING DATED 24/01/2005 SEIZED DURING THE COUR SE OF SEARCH AND ACTED UPON FOR PURCHASE OF SHARES IS AN UNREL IABLE DOCUMENT. (C) THE LEARNED CIT (APPEALS) HAS ERRED IN FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW IN VALUING THE SHARES OF M. D. PRO PERTIES PVT. LTD. A PRIVATELY HELD UNTRADED COMPANY, ON THE SINGL E STREAM VALUATION / ECONOMIC VALUE APPROACH / YIELD METHOD. (D) THE APPELLANT SUBMITS THAT IT HAS PURCHASED THE SHARES OF M. D. PROPERTIES PVT. LTD, A NEWLY FORMED COMPANY, AT ITS BOOK VALUE. ALSO THE PROPERTY PURCHASED BY M. D. PROPERTIES PVT. L TD. ON FORMATION WAS VALUED BY THE DVO, BANGALORE AND A VER Y NEGLIGIBLE DIFFERENCE WAS REPORTED BY HIM. ACCORDING LY, THERE IS NO CASE FOR THE DEEMING PROVISIONS OF SECTION 69B BEIN G ATTRACTED. 3) WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 1 AND 2 AND ON FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LA W IT BE HELD THAT THE ADDITION MADE IS BEYOND THE SCOPE AND PROVISIONS OF SECTION 153A. NO INCRIMINATING DOCUMENT / MATERIAL WAS FOUND DURI NG THE COURSE OF SEARCH. 4) THE LEARNED CIT(APPEALS) ERRED IN FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW IN DISALLOWING THE CLAIM OF DEPR ECIATION @80% ON THE TOTAL COST OF THE WINDMILL BY TREATING PART OF T HE COST AS BEING INCURRED FOR CIVIL WORKS AND THEREBY ALLOWING DEPREC IATION @10% ONLY ON SUCH COSTS. IT BE HELD THAT THE ENTIRE COSTS OF WIND MILL, ERECTION, FOUNDATION, INFRASTRUCTURE, INSTALLATION ETC. ARE TO BE ALLOWED DEPRECIATION @80% AS THEY FORM A INTEGRAL PART OF WI NDMILL BY APPLYING THE FUNCTIONAL TESTS. 5) THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, MO DIFY, RECTIFY, DELETE, RAISE ANY GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARING. 21. AFTER HEARING BOTH THE SIDES, WE FIND GROUNDS O F APPEAL NO. 1 TO 3 BY THE REVENUE ARE IDENTICAL TO GROUNDS OF APPEAL I N ITA NO.1916/PN/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS 21 RAISED BY THE REVENUE ARE DISMISSED. FOLLOWING THE SAME REASONINGS THE ABOVE 3 GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 21.1 GROUNDS OF APPEAL NO.5 BY THE REVENUE AND GROU NDS OF APPEAL NO.4 BY THE ASSESSEE RELATE TO DEPRECIATION OF WIND MILL. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE IN ITA NO.1916/PN/2012 HAS BEEN RESTORED TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH ADJUDICATION. FOLLOWING THE SAME RATIO, GROUNDS OF APPEAL NO. 4 IN ASSESSEES APPEAL AND GROUNDS OF APPEAL NO.5 I N REVENUES APPEAL ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER F OR DECIDING THE ISSUE IN THE LIGHT OF THE DIRECTION GIVEN IN ITA NO.1916/PN/ 2012. ACCORDINGLY, THE ABOVE GROUNDS ARE ALLOWED FOR STATISTICAL PURPO SES. 21.2 GROUND OF APPEAL NO.3 WAS NOT PRESSED BY THE A SSESSEE FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTIO N. ACCORDINGLY, THIS GROUND BY THE ASSESSEE IS DISMISSED. 21.3 GROUNDS OF APPEAL NO.5 BY THE ASSESSEE AND GRO UNDS OF APPEAL NO.6 AND 7 BY THE REVENUE BEING GENERAL IN NATURE A RE DISMISSED. 22. THAT LEAVES US GROUNDS OF APPEAL NO. 4 BY THE R EVENUE AND GROUNDS OF APPEAL NO.1 & 2 BY THE ASSESSEE WHICH R ELATE TO SAME ISSUE WHICH IS BEING DECIDED IN THE SUBSEQUENT PARAS WITH GROUNDS OF APPEAL NO.4 IN ITA NO.1920/PN/2012 FOR A.Y. 2008-09. ITA NO.1920/PN/2012 (A.Y. 2008-09 : 23. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSES WITH REGARD TO THE AD DITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND; 22 2. ON THE FACTS AND CIRCUMSTANCES OF THE. CASE THE CIT{A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF INVESTMENT IN CARS FOR THE A.Y. 2004-05 OF RS.7,00,000/-, A.Y. 2008-09 OF RS.42,78,73 6/- AND A.Y. 2009- 10 OF RS. 1,56,03,000/-; 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF U NACCOUNTED COMMISSION OF RS,1 6,54,052/- FOR AY 2005-06; 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CI T(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTE D INVESTMENTS IN SHARES OF RS.75,21,72,000/- FOR THE AY 2008-09; 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON DISALLOWANCE OF DEPRECIAT ION ON WINDMILLS FOR AY 2004-05 TO 2009-10; 6. THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT(A) BE V ACATED AND THAT OF THE AO'S ORDER MAY BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY ANY OF THE ABOVE GROUNDS .RAISED, ANY OTHER GROUNDS AT THE TIME OF PROC EEDINGS BEFORE THE HON'BLE TRIBUNAL WHICH MAY PLEASE BE GRANT ED. 24. AFTER HEARING BOTH THE SIDES, WE FIND GROUNDS O F APPEAL NO. 1 TO 3 FILED BY THE REVENUE ARE IDENTICAL TO GROUNDS OF AP PEAL IN ITA NO.1916/PN/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWI NG THE SAME RATIO, THE ABOVE 3 GROUNDS ARE DISMISSED. 24.1 GROUNDS OF APPEAL NO.5 RELATES TO DEPRECIATION OF WINDMILL WHICH HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH ADJUDICATION IN THE PRECEDING PARAGRAPHS. ACCORDIN GLY, THE GROUNDS OF APPEAL NO.5 IS ALLOWED FOR STATISTICAL PURPOSES. 24.2 GROUNDS OF APPEAL NO.6 AND 7 BEING GENERAL IN NATURE ARE DISMISSED. 25. GROUNDS OF APPEAL NO.4 IN ITA NO.1920/PN/2012 A ND GROUNDS OF APPEAL NO. 4 IN ITA NO.1917/PN/2012 AND GROUNDS OF APPEAL NO.1 & 2 BY THE ASSESSEE IN ITA NO.1807/PN/2012 RELATE TO PA RTIAL RELIEF GIVEN BY 23 THE CIT(A) ON ACCOUNT OF ADDITION U/S.69B AND THE Y EAR OF TAXABILITY, I.E., MAKING THE ADDITION IN A.Y. 2005-06 AS AGAINST A.Y. 2008-09 BY THE ASSESSING OFFICER. 26. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT CERTAIN DOCUMENTS WERE SEIZED DURING THE COURSE OF SEARCH ACTION IN THE CA SE OF GHODAWAT GROUP, JAYSINGHPUR. AS PER THE SEIZED DOCUMENTS, IT WAS R EVEALED THAT PROPERTY OF VALUE EXCEEDING RS.250 CRORES HAS BEEN TRANSFERR ED FROM MEMBERS OF THE VIRWANI FAMILY, BANGALORE TO GHODAWAT GROUP OF JAYSINGHPUR BY TAKING OVER THE SHARES OF MD PROPERTIES PVT. LTD. A T FACE VALUE AND FOR AN APPARENT CONSIDERATION OF ONLY RS.10 LAKHS. THE AS SESSING OFFICER NARRATED THE EXACT MODUS OPERANDI AND THE CONSEQUEN CE OF EVENTS THAT HAVE BEEN UNEARTHED DURING THE COURSE OF SEARCH WHI CH HE HAS NARRATED AT PARA 10.3.1 TO 10.3.3 OF HIS ORDER AND WHICH READS AS UNDER : 10.3.1 M/S.GOLFLINK SOFTWARE; PARK PVT.LTD. (M/S.GSP PL), BELONGING TO VIRWANI GROUP HAVE CONSTRUCTED PROPERTY KNOWN AT 'GOLFLINK SOFTWARE PARK TOWER A - PINEHURST' ADMEASUR ING 2.5 LAC SQ.FT. AT SURVEY NO.6, CHALLAGHATTA, BANGLORE AND FOR WHICH T HE OCCUPATION CERTIFICATE WAS RECEIVED ON 16/04/2004. AT THE STAGE OF CONSTRUCTION ITSELF, M/S.GSPPL HAD ENTERED INTO A LEASE AGREEMENT W ITH M/S. FIDELITY INFORMATION SYSTEMS (I) CO. PVT. LTD. (M/S. FISCPL); WHEREBY IT WAS AGREED THAT ON COMPLETION OF CONSTRUCTION FOR THIS PR OPERTY, THE SAME WILL BE LEASED TO THE LATTER @ RS.72.5 LACS PER MONTH FOR A PERIOD OF FIVE YEARS. THIS PROPERTY WAS EVENTUALLY LEASED TO M/S. FISCP L IN THE LATER HALF OF THE YEAR 2004. 10.3.2 SIMULTANEOUSLY, AT THE CONSTRUCTION STAGE ITSEL F, GHODAWAT GROUP EXPRESSED DESIRE TO BUY THIS PROPERTY FOR WHICH L EASE; RENTAL INCOME OF RS.72.5 LACS PER MONTH FROM M/S.FISCPL WAS A SSURED FOR A PERIOD OF THE NEXT FIVE YEARS. GHODAWAT GROUP HAVE E NTERED INTO ONE MOU DATED 01/07/2004 WITH VIRWANI GROUP (THIS DOCU MENT HAS BEEN SEIZED DURING SEARCH ACTION) WHEREIN IT HAS CLEARLY B EEN STATED THAT THE BASIC PURPOSE IS TO TRANSFER THE SAID PROPERTY TO THE X LATTER BY INITIALLY TRANSFERRING IT FROM M/S. GSPPL TO ONE ANOTHER CONCER N OF VIRWANI GROUP, M/S. M.D. PROPERTIES PVT. LTD. ,AND THEREAFTER , TRANSFERRING THE SHARES OF M/S. M.D. PROPERTIES PVT. LTD. TO THE MEMBERS OF GHODAWAT GROUP AT FACE VALUE, FOR A TOTAL CONSIDERATION OF ON LY RS.10 LACS. IN THIS MOU, IT HAS ALSO BEEN STATED THAT THE BANK ACCOUNT OPE RATION, RECEIVING OF LEASE RENTALS, APPROPRIATION OF FUNDS, ETC. WILL BE HA NDLED BY GHODAWAT GROUP. IT HAS ALSO BEEN STIPULATED IN THIS MOU THAT GHO DAWAT GROUP HAS A RIGHT TO USE THE PROPERTY PAPERS TO AVAIL ANY LOAN, E TC. 24 10.3.3 AS PER ONE SUBSEQUENT MOU DATED 24/01/2005 BET WEEN THESE TWO GROUPS, IT HAS FURTHER STATED THAT THE SAID PR OPERTY HAS BEEN REGISTERED IN THE NAME OF M/S. M.D. PROPERTIES PVT. LT D. AND THE OWNERSHIP OF WHICH WILL SUBSEQUENTLY BE TAKEN OVER BY GHODAWAT GROUP. IT HAS FURTHER BEEN STATED THAT THE SHARES OF M/S. M.D. PROPERTIES PVT. LTD ALONGWITH BLANK SHARE TRANSFER DEEDS DULY SIGNED BY THE THEN SHAREHOLDERS OF M/S. M.D.PROPERTIES PVT.LTD, WILL BE HA NDED OVER TO GHODAWAT GROUP. IT HAS FURTHER BEEN STIPULATED IN THI S MOU THAT THE BANK ACCOUNT WILL BE OPERATED BY GHODAWAT GROUP AND THE RENTAL INCOME WILL ALSO BELONG TO GHODAWAT GROUP ONLY. 26.1 THE ASSESSING OFFICER OBSERVED THAT THE SEARC H PARTY IN THE COURSE OF SEARCH ACTION SEIZED A LOOSE PAPER ANNEXED AT PAGE NO.L & 2 OF BUNDLE NO. 1 SEIZED AS PER PANCHANAMA DATED 05/02 /2009 FROM THE RESIDENTIAL PREMISES OF SHRI.SANJAY DHANCHAND GHODA WAT. THE ENTRIES DEPICTED ON THE SEIZED PAPERS GIVE THE COMPLETE POS ITION OF PAYABLES AND RECEIVABLES BETWEEN EMBASSY GROUP OF VIRWANIS, BANG ALORE AND SANJAY GHODAWAT GROUP OF JAYSINGHPUR, KOLHAPUR. ON EXAMINA TION OF THE SEIZED PAPER, HE NOTED THAT SHRI.SANJAY GHODWAT AND HIS WI FE SMT.NEETA GHODAWAT HAVE TAKEN OVER THE COMPANY NAMELY M.D.PRO PERTIES PVT. LTD. BY TRANSFER OF SHARES OF THE COMPANY AT MEAGER VALUE OF RS.10 LACS. HOWEVER, IT IS NOTED BY THE SEARCH PARTY THAT BY VI RTUE OF TRANSFER OF- SHARES OF M.D.PROPERTIES PVT. LTD., SANJAY GHODAWAT AND HIS WIFE BECAME THE OWNERS OF THE PROPERTY BEING 'GOLF LINKS SOFTWARE PARK TOWER A KNOWN AS PINEHURST' WHICH AS PER THE VALUAT ION REPORT SEIZED IS WORTH RS.250 CRORES. THUS, IN A NUTSHELL, THE SA NJAY GHODAWAT GROUP ACQUIRED THE PROPERTY WORTH RS.250 CRORES MEREL Y BY TRANSFER OF SHARES OF THE COMPANY AT FACE VALUE OF RS.10 LACS. THE MOD US OPERANDI ADOPTED BY THE ASSESSEE TO ACQUIRE THE PROPERTY WOR TH RS.250 CRORES BY TRANSFER OF SHARES IN CONNIVANCE WITH THE EMBA SSY GROUP, BANGALORE IS CLEARLY TRANSPIRED FROM THE SERIES OF TRANSACTIO NS BETWEEN THE GHODAWAT GROUP AND THE EMBASSY GROUP AND THE TRANSA CTIONS BETWEEN 25 THE GROUP CONCERNS OF EMBASSY GROUP ITSELF WHICH IS EMANATED FROM THE SEIZED PAPERS & DOCUMENTS AND THE SWORN STATEMENTS OF SHRI SANJAY GHODAWAT RECORDED U/S. 132(4) ON OATH ON 5 TH & 6 TH FEB. 2009 AND 7* FEB. 2009 AND THE SUBSEQUENT STATEMENTS RECORDED U/ S.131 ON 02/03/2009 AND 16/03/2009 OF THE ACT ON THE ISSUE OF ACQUISITI ON OF IMMOVABLE PROPERTY BY GHODAWAT GROUP FROM EMBASSY GROUP. 26.2 THE ASSESSING OFFICER ALSO INCORPORATED CERTAI N REPLIES GIVEN BY THE ASSESSEE DURING THE COURSE OF RECORDING OF HIS STATEMENT U/S.132(4) ON THIS ISSUE. THE RELEVANT QUESTIONS AND ANSWERS ARE AS UNDER : 'Q.NO.17 DURING THE COURSE OF SEARCH, CERTAIN DOCUMEN TS WERE SEIZED FROM YOUR RESIDENCE. I AM SHOWING YOU COPIES OF TWO PA GES THEREOF WHICH ARE MADE PART OF THIS STATEMENT AS ANNEXURE-1 AND ANNE XURE-2. PLEASE GO THROUGH THE SAME AND COMMENT. ANS. I HAVE GONE THROUGH THE PAGES SHOWN BY YOU. THESE PAGES ARE IN RESPECT OF PROPERTY TRANSACTION PURCHASED FROM EMBASSY G ROUP OF BANGALORE. THIS TRANSFER IS BY WAY OF ACQUISITION OF CO MPANY HAVING A PROPERTY AT BANGALORE, OPPOSITE KARNATAKA GOLF ASSOCIA TION CLUB (KGA). THE ONLY AMOUNT PAID IS COST OF SHARES AT FACE VALUE OF RS. 9.50 LAKHS. THE SHARES WERE PURCHASED FROM SHRI.JITENDRA VIRWANI AND H IS FAMILY MEMBERS. IN ADDITION WE HAVE TAKEN OVER ALL THE ASSETS AND LIABILITIES OF THE COMPANY. THIS PROPERTY WAS GIVEN ON RENT TO FIDEL ITY FOR A MONTHLY RENT OF RS. 72,52,000. AT THE TIME OF ACQUISITION OF COMPANY, NO RE- VALUATION OF THE ASSETS OF THE COMPANY WAS MADE. THE I NITIAL NOTINGS ON ANNEXURE-1 IS IN RESPECT OF LOAN OF RS. 10 CRORES TAKEN BY ME IN INDIVIDUAL CAPACITY FROM JITENDRA VIRWANI AND WORKING OF INTER EST PAYABLE THEREUPON FROM 4/1/2006 TO 31/1/2009 AT RS.2.47 CROR ES. IT IS ALSO MENTIONED THAT THERE IS PREVIOUS BALANCE OF RS. 0.08 CRORE PAYABLE TO MR. VIRWANI AND THUS THE TOTAL AMOUNT PAYABLE AS ON 31/1/ 2009 IS WORKED OUT AT RS.12.55 CRORES. AS REGARD OTHER NOTING MADE ON THIS ANNEXURE 1, I HAVE TO SAY THAT MANY OF THE NOTING ARE WRONG AND NO T RELEVANT. HOWEVER, I WILL FURNISH THE EXPLANATION WITHIN THREE DAYS. Q.NO.18 DO YOU HAVE ANY CORROBORATIVE DOCUMENTARY E VIDENCES TO SHOW AS TO HOW THE WORKING GIVEN IS NOT CORRECT? ANS. AS STATED ABOVE, I WILL FILE THE EXPLANATION W ITHIN 3 DAYS IN THIS REGARD. Q.NO. 19 AS ALREADY MENTIONED, NO RE-VALUATION OF ASSE T ON THE DATE OF TRANSFER OF THE COMPANY WAS MADE BY YOU. UNDER THE CI RCUMSTANCES, PLEASE EXPLAIN AS TO HOW YOU DETERMINE FACE VALUE OF SHARES OF RS.9.5 LAKHS AS VALUE OF THE COMPANY? ANS. THERE IS NO VALUATION OF ASSET MADE ON THE DATE OF TRANSFER. IT IS A FRIENDLY TRANSACTION WITHOUT CONSIDERING ANY COMMERCI AL ANGLE. 26 Q.NO.20 THE PROPERTY IN QUESTION HAS BEEN GIVEN ON L EASE TO M/S.FIDELITY BUSINESS SERVICES INDIA PVT. LTD., @ RS.72.5 LAKHS PER MONTH IMMEDIATELY ON TRANSFER. BY ADOPTING A RETURN OF 1% PER MONTH ON THE INVESTMENT, THE TOTAL INVESTMENT FOR THIS PROPERTY CAN BE WORKED AT RS.72.5 CRORES. IF THIS MARKET VALUE IS CONSIDERED, THE NET WORTH OF THE COMPANY AT THE TIME OF TRANSFER OF SHARES WORKS OUT AT RS.40.02 CRORES (RS.72.5 CR (-) BANK LIABILITY OF RS.32.48 CR). BY DO ING THIS YOU HAVE AVOIDED CAPITAL GAIN OF RS.39.945 CRORES (40.02 - 0.0 95 CR) IN THE HANDS OF VIRWANI FAMILY, THE TRANSFEROR, STAMP DUTY OF RS. 3.62 5 CRORES @ 5% AND ALSO PAID THE MARKET VALUE OF THE BUILDING IN CASH. P LEASE COMMENT ON THIS OBSERVATION? ANS. I AGREE WITH THE FACTS THAT LEASE RENT WAS FIXED A T RS. 72.5 LAKHS PER MONTH. HOWEVER, WE TOOK A CALCULATED RISK'WHILE ACQ UIRING THE PROPERTY. IF THE COMPANY - FIDELITY VACATES THE PREMISES, NO OTH ER COMPANY WILL COME AT THIS RATE. Q.NO.21 PLEASE CONFIRM WHETHER ANY STAMP DUTY HAS BEEN PAID BY YOU ON THE SAID TRANSACTION? ANS. NO. Q.NO.22 WHETHER THE TRANSFEROR HAS PAID ANY CAPITAL GAIN TAX ON SALE OF SHARES? ANS. I AM NOT AWARE OF THE SAME. I WILL CHECK UP WI TH VIRWANI FAMILY AND LET YOU KNOW SHORTLY. Q.NO.23 WHETHER ANY WRITTEN AGREEMENT WAS MADE BET WEEN YOU AND VIRWANI FAMILY WHILE ACQUIRING THE SAID PROPERTY BY TRANSFER OF SHARES OF THE COMPANY? ANS. NO. NO WRITTEN AGREEMENT WAS MADE BETWEEN U S AND VIRWANI FAMILY WHILE ACQUIRING THE SAID PROPERTY BY TRANSFER OF SHARES OF THE COMPANY. 26.3 THE AO NOTED THAT THE VALUATION REPORT FOUND A ND SEIZED DURING THE COURSE OF SEARCH ACTION WAS BY A PRIVATE VALUER . HE, THEREFORE, MADE A REFERENCE U/S. 142A TO THE DVO BANGALORE TO ASCERTA IN THE FAIR MARKET VALUE OF THE PROPERTY 'PINEHURST' AS ON 6.10.2007, I.E THE DATE ON WHICH THE SHARES OF M.D.PROPERTIES PVT.LTD. WERE ACTUALLY TRANSFERRED IN THE NAME OF SHRI SANJAY GHODAWAT AND SMT NEETA GHODAWAT . THE DVO SUBMITTED HIS REPORT ON 30/12/2010 DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY AT RS.106,78,00,000/-. 26.4 THE AO NOTED THAT AS ON THE DATE OF TRANSFER O F SHARES OF M.D. PROPERTIES TO SHRI SANJAY AND NEETA GHODAWAT, THE V ALUE OF THE PROPERTY IS TAKEN AT FACE VALUE. SHRI SANJAY GHODAWAT HAD BE EN ASKED A SPECIFIC 27 QUESTION ABOUT WHETHER ANY REVALUATION OF THE SAID PROPERTY WAS DONE OR NOT TO WHICH HE HAD CATEGORICALLY STATED THAT THERE IS NO VALUATION OF ASSET MADE ON THE DATE OF TRANSFER AND THAT IT IS A FRIEN DLY TRANSACTION WITHOUT CONSIDERING ANY COMMERCIAL ANGLE. HE THEREFORE WAS OF THE OPINION THAT THE WHOLE TRANSACTION APPEARS TO HAVE BEEN ARRANGED VERY DELIBERATELY AND TOTALLY IN COLLUSION WITH EACH OTHER. ACCORDING TO HIM, THE TRANSACTION IS SUCH THAT IT DOES NOT MEET THE TEST OF HUMAN PROBABILITY AS WARRANTED BY THE APEX COURT IN THE CASE OF SUMATI D AYAL VS. CIT 214 1TR 801 (SC). ACCORDING TO THE AO, THE MOST OBVIOUS QUESTION THAT ARISES IS WOULD A PRUDENT BUSINESSMAN TRANSFER AN A SSET HAVING FMV MUCH HIGHER THAN THE BOOK VALUE OF THE ASSET ONLY A T THE FACE VALUE OF THE SHARE? WOULD HE NOT, IN THE ORDINARY COURSE OF BUSI NESS, GET A REVALUATION OF THE ASSETS DONE BEFORE THE TRANSFER? EVEN IF HE INTENDED TO TRANSFER THE SHARES ONLY, THAT NONETHELESS AMOUNTS TO 'THE TRANSFER OF EFFECTIVE CONTROL AND MANAGEMENT OF THE ASSET IN TH E HANDS OF THE TRANSFEREE. WHY WOULD THE TRANSFEROR LIKE TO LET GO OF A MASSIVE PROFIT WHICH IS CLEARLY EMBEDDED IN THE TRANSACTION OF TRA NSFER OF SHARES HAD THEY BEEN REVALUED? 26.5 IN VIEW OF THE ABOVE THE AO WAS OF THE OPINION THAT THE ENTIRE TRANSACTION IS SHAM. IT IS OBVIOUSLY NOT CARRIED OU T AT ARM'S LENGTH AND DOES NOT MEET THE TEST OF HUMAN PROBABILITY. SUCH A TRANSACTION HAPPENS ONLY IN MOVIES. THE WHOLE TRANSACTION IS NOTHING BU T A COLORABLE DEVISE WHICH IS AIMED AT HIDING THE TRUE INTENT AND TRANSA CTION BEHIND AN APPARENTLY LEGAL VEIL. THE OBVIOUSLY GLARING CONCLU SION IN THIS MATTER IS THAT THE TRANSFEREE, SHRI SANJAY GHODAWAT HAS ACQUI RED THE PROPERTY 'PINEHURST; AT A DIRT CHEAP PRICE. FOR THIS, THE DI FFERENCE IN THE SHARE VALUE 28 AFTER REVALUATION CONSIDERING THE FMV OF THE PROPER TY ON 6.10.2007 AND THE BOOK VALUE MUST HAVE EXCHANGED HANDS IN CASH. T HIS DIFFERENCE REPRESENTS THE UNEXPLAINED INVESTMENT BY SHRI GHODA WAT. 26.6 THE ASSESSING OFFICER PROVIDED A COPY OF THE D VOS REPORT AND ASKED THE ASSESSEE TO STATE ITS OBJECTIONS, IF ANY. THE ASSESSEE WAS ALSO ASKED TO EXPLAIN AS TO WHY THE DIFFERENCE IN THE SH ARE VALUE AFTER REVALUATION CONSIDERING THE FAIR MARKET VALUE OF TH E PROPERTY ON 06-10- 2007 AND THE BOOK VALUE SHOULD NOT BE TREATED AS UN EXPLAINED INVESTMENT U/S.69B. 27. THE ASSESSEE STRONGLY OBJECTED TO THE REFERENCE MADE BY THE ASSESSING OFFICER U/S.142A TO THE DVO ON THE GROUND THAT THE SAME WAS NOT INTIMATED TO HIM. FURTHER, THE WORKING OF THE VALUATION BY THE DVO WAS ALSO STATED TO BE INCORRECT SINCE HE HAS ADOPTE D RENT CAPITALISATION METHOD. THE ASSESSEE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT ON 28-07-2010 WHEN THE DVO, BANGALORE, A DIFFEREN T INCUMBENT, VALUED THE SAME PROPERTY THEN ALSO THE PROPERTY WAS FULLY DEVELOPED AND PUT INTO FULL USE LEGALLY PERMISSIBLE AND ECONOMICA LLY JUSTIFIABLE. THE SAID DVO HAS VALUED THE PROPERTY ON THE BASIS OF SA LE INSTANCES AND NOT ON RENT CAPITALISATION METHOD. IT WAS SUBMITTED TH AT THE DVO, MUMBAI IN 3 OF THE PROPERTIES OF THE SISTER CONCERN OF THE ASSESSEE NAMELY TOPAZ INVESTMENT PVT. LTD., WHICH ARE ALSO TENANTED PROPE RTIES, HAS PREPARED A VALUATION REPORT ON THE BASIS OF THE REFERENCES MAD E TO HIM BY THE SAME ASSESSING OFFICER (I.E. THE PRESENT ASSESSING OFFIC ER) AND THE DVO HAS ADOPTED THE VALUE OF THE PROPERTY BY ADOPTING SALE INSTANCES AND NOT BY RENT CAPITALISATION METHOD. THE ASSESSEE SUBMITTED THAT IF THE PRESENT DVO COULD NOT FIND THE SALE INSTANCES BECAUSE OF TI ME CONSTRAINTS THEN 29 HE COULD HAVE DEFERRED THE REPORT. HOWEVER, IT IS NOT UNDERSTOOD AS TO WHY IN A HURRY AND AT WHOSE INSTANCE THE DVO HAS FU RNISHED SUCH REPORT. 27.1 THE ASSESSEE ALSO BROUGHT TO NOTICE THE AMENDM ENT TO SECTION 56(2) AS A RESULT OF WHICH RULE 11UA HAS BEEN INTRO DUCED IN THE INCOME- TAX RULES FOR THE DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY OTHER THAN IMMOVABLE PROPERTY. AS PER THE SAID RUL E 11UA (C)(B) UNQUOTED EQUITY SHARES SHALL BE VALUED AS FOLLOWS : FMV OF UNQUOTED EQUITY SHARES = (A-L) X (PV) ______ (PE) A - BOOK VALUE OF ASSETS L - BOOK VALUE OF LIABILITIES PE=TOTAL PAID UP CAPITAL PV=PAID UP VALUE OF EQUITY SHARES IT WAS ARGUED THAT EVEN AFTER THE AMENDMENT AND INS ERTION OF NEW RULES FOR VALUATION OF PROPERTIES OTHER THAN IMMOVABLE PR OPERTIES IN THE VALUATION OF UNQUOTED EQUITY SHARES, THERE IS NO PR OVISION TO SUBSTITUTE THE ASSETS OF THE COMPANY. IT WAS ARGUED THAT IN A SSESSEES CASE THE INVESTMENT, THAT IS REFERRED TO IS THE INVESTMENT IN UNQUOTED EQUITY SHARES OF THE PVT. LTD. COMPANY AND THERE IS NO PRO VISION IN THE I.T. ACT EVEN TODAY TO RECAST THE BALANCE SHEET. IT WAS ACC ORDINGLY REQUESTED NOT TO FRAME THE ASSESSMENT ON PRESUMPTIONS, ASSUMPTION S, SURMISES, CONJECTURES AND ON THE LINES OF THEORETICAL CALCULA TIONS WHICH IS NOT PERMISSIBLE IN THE INCOME TAX ACT. 28. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. AS REGARDS THE OBJECTION OF THE ASSESSEE THAT THERE WAS NO NEED TO MAKE A REFERENCE TO THE DVO BECAUSE OF A VALUATION REPORT OBTAINED BY THE ASSESSEE WHIC H IS PART OF THE SEIZED 30 MATERIAL, THE ASSESSING OFFICER HELD THAT THE SAID REPORT PREPARED BY SHRI DESHMUKH AND ASSOCIATES OF SANGLI HAS VALUED THE SA ME PROPERTY AT RS.250 CRORES ON 19-04-2008, I.E. JUST 6 MONTHS AFT ER THE SHARES WERE ACQUIRED BY THE ASSESSEE. HOWEVER, IT WAS CONSIDER ED FIT TO REFER TO THE DVO WHO HAS VALUED UNDER THE ACT WHEREAS THE REPORT OBTAINED BY THE ASSESSEE IS FROM A PRIVATE VALUER. THE CONTENTION O F THE ASSESSEE THAT PROPERTY WAS REFERRED TO DVO ON 22-12-2010 WAS ALSO REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE PROPERTY I N QUESTION WAS ALREADY REFERRED TO 07-10-2010, A COPY OF WHICH WAS ENDORSED TO THE ASSESSEE AND SERVED UPON THE AUTHORISED REPRESENTAT IVE ON 09-10-2010. AS REGARDS THE OBJECTION TO THE METHOD ADOPTED BY T HE DVO FOR COMPUTING THE FAIR MARKET VALUE IS CONCERNED, THE ASSESSING OFFICER NOTED THAT THE DVO IS A TECHNICAL PERSON AND CHOICE OF METHOD FOR DETERMINING THE FAIR MARKET VALUE IS HIS OWN PREROG ATIVE. THEREFORE, IT IS NOT POSSIBLE TO COMMENT AS TO WHY THE DVO HAS ADOPT ED RENT CAPITALISATION METHOD AND NOT ADOPTED SALE INSTANCE METHOD. AS REGARDS THE OBJECTION OF THE ASSESSEE THAT VALUE OF UNQUOTE D EQUITY SHARES SHOULD HAVE BEEN CALCULATED U/R. 11UA OF THE I.T. RULES, T HE ASSESSING OFFICER HELD THAT THE FAIR MARKET VALUE OF SHARES IS DETERM INED BY SUBSTITUTING NET ASSETS OF THE COMPANY WHICH IS ONE OF THE ACCEPTED METHOD. HE NOTED THAT THE FAIR MARKET VALUE OF THE ASSETS WAS DETERM INED USING SCHEDULE III OF THE WEALTH TAX ACT. THEREFORE, THE SUBMISSION O F THE ASSESSEE THAT RECOURSE TO SECTION 56(2) AND RULE 11UA SHOULD HAVE BEEN TAKEN IS NOT APPLICABLE. 28.1 THE ASSESSING OFFICER FURTHER NOTED THAT THE A SSESSEE IS THE MAIN PERSON OF GHODAWAT GROUP. DURING SEARCH SUBSTANTIAL EVIDENCES WERE 31 FOUND AND SEIZED ESTABLISHING UNACCOUNTED SALE IN T HE HANDS OF THE ASSESSEE. THE COMPANY IS EARNING SUBSTANTIAL UNACC OUNTED CASH BY WAY OF UNACCOUNTED SALES. THEREFORE, IT IS OBVIOUS THA T THE ASSESSEE IS PARKING THESE UNACCOUNTED CASH BY ACQUIRING PROPER TY OF A MUCH HIGHER VALUE BY SIMPLY ACQUIRING SHARES OF THE COMPANY AT A FACE VALUE WHICH IS CLANDESTINE AND NOT TRUE TRANSACTION. RELYING ON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MRS. SUMATI DA YAL VS. CIT REPORTED IN 214 ITR 801, THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLDING S BV VS. UNION OF INDIA AND ANOTHER, THE DECISION OF HONBLE MADRAS H IGH COURT IN THE CASE OF INDO TECH ELECTRIC COMPANY JAYALAKSHMI ESTA TES VS. DCIT THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE T RANSACTION IN THE PRESENT CASE IS A VERY CLEVER TAX PLANNING CARRIED OUT WITH A VIEW TO CAMOUFLAGE THE ACTUAL TRANSACTION. THE ASSESSING OF FICER REFERRED TO THE PROVISIONS OF SECTION 69B AND PROVISIONS OF SECTION 56 AND CONCLUDED THAT THE DIFFERENCE IN THE FAIR MARKET VALUE OF THE SHARE ON 06-10-2007 AND THE FACE VALUE AT WHICH SHARES WERE TRANSFERRED REPRESENTS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE U/S.69B. TH E ASSESSING OFFICER DETERMINED THE FAIR VALUE PER EQUITY SHARE AT RS.79 27.60 BY CONSIDERING THE FAIR MARKET VALUE OF THE BUILDING AT RS.106,70, 00,000/- AS AGAINST THE BOOK VALUE FOR EQUITY SHARE AT RS.610.83. HE ACCOR DINGLY CAME TO THE CONCLUSION THAT THE ASSESSEE HAS ACQUIRED 95000 SHA RES OF MD PROPERTIES VALUED AT RS.75,31,22,000/- FOR RS.9,50,000/- ONLY. THUS, THE DIFFERENCE COMES TO RS.75,21,72,000/- WHICH IS THE DEEMED INCO ME OF THE ASSESSEE U/S.69B OF THE I.T. ACT. HE ACCORDINGLY MADE ADDIT ION OF THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S.69B OF THE INCOME TAX ACT. 32 29. BEFORE CIT(A) THE ASSESSEE MADE ELABORATE ARGUM ENTS AND SUBMISSIONS BASED ON WHICH LD.CIT(A) PROCEEDED TO D ECIDE THE ISSUE FROM THE FOLLOWING ANGLES : 1. IS THE MOU DATED 24/01/2004 A SHAM DOCUMENT AN D HENCE SHOULD BE DISREGARDED? 2. WAS THE ASSESSING OFFICER COMPETENT TO REFER TH E MATTER OF VALUATION OF SHARES OF M D PROPERTIES UNDER SECTION 142A OF THE INCOME-TAX ACT? 3. WHAT IS THE SUBJECT MATTER OF VALUATION - (A) T HE PROPERTY I.E. 'PINEHURST' OR (B) SHARES OF M/S. MD PROPERTY WHICH HAVE TRANSFERRED HANDS I.E. WHETHER THE DVO HAS ADOPTED T HE CORRECT METHOD OR SOME OTHER METHOD HAS TO BE APPLIED. 4. WHAT IS THE DATE OF TRANSFER OF SHARES OR EFFECTI VE DATE OF OWNERSHIP OF THE SANJAY GHODAWAT GROUP IN M/S M D PROPERTIES PV T. LTD. I.E. WHETHER IT IS 06/10/2007 - THE DATE ON WHICH THE NAM ES OF SHAREHOLDERS WERE RECORDED IN THE REGISTRY OF SHAREHOL DERS OR 25/01/2005 WHEN THE MOU WAS SIGNED BETWEEN THE VIRWAN I GROUP AND THE SANJAY GHODAWAT GROUP. 5A. WAS THE ASSESSING OFFICER CORRECT IN INVOKING TH E PROVISIONS OF SECTION 69B TO TREAT THE DIFFERENCE BETWEEN VALUE OF SHARES ARRIVED AT BY ADOPTING THE 'YIELD METHOD' AND THE FACE VALUE OF SH ARES TO MAKE AN ADDITION OF UNEXPLAINED INVESTMENT IN SHARES? 5B. IS THE VALUATION METHODOLOGY ADOPTED BY THE DVO CORRECT? IS THE MULTIPLIER VALUE OF 12.5 ASSIGNED TO ARRIVE AT THE FA IR MARKET VALUE OF PROPERTY CORRECT OR NOT? IF NOT, THEN WHAT WOULD BE THE CORRECT MULTIPLIER VALUE? 6. WAS SUFFICIENT OPPORTUNITY PROVIDED TO THE APPE LLANT AND THEREFORE THERE WAS NO VIOLATION OF PRINCIPLES OF NATURAL JUSTIC E. 29.1 SO FAR AS THE OBSERVATION OF THE ASSESSING OFF ICER THAT THIS WAS AN INSTANCE OF VERY CLEVER TAX PLANNING CARRIED OUT W ITH A VIEW TO CAMOUFLAGE THE ACTUAL TRANSACTION IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INTERNATI ONAL HOLDINGS B.V. (SUPRA) AND THE DECISION IN THE CASE OF SUMATIDAYAL (SUPRA) ETC., THE LD.CIT(A) HELD THAT THE MOU DATED 24-01-2005 WAS A POTENTIALLY COLOURABLE DOCUMENT WHICH COULD FACILITATE EVASION OF TAX IN THE HANDS OF VIRWANIS. ACCORDING TO HIM, THE MOU REVEALS LESS A ND KEPT THE ISSUE OF VALUATION UNDER WRAPS. IT DID NOT REVEAL THE WHOLE TRANSACTION AND WAS 33 AN INCOMPLETE BOOK. HE RELIED ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLDING S B.V. NETHERLANDS VS. UNION OF INDIA REPORTED IN 345 ITR 1 WHERE THE HONBLE SUPREME COURT HAS ADVOCATED THAT A TRANSACTION MUST BE LOOK ED AT AND NOT LOOKED THROUGH. HE ALSO REFERRED TO THE NEW EXPLANATION ( 2) TO SECTION 2(47) OF THE I.T. ACT WITH RETROSPECTIVE EFFECT FROM 01-04-1 962 AS INSERTED BY THE FINANCE BILL 2012 AND ITS IMPACT. ACCORDING TO THE LD.CIT(A) THE SHARES OF MD PROPERTIES WERE PURCHASED BY THE ASSESSEE. A SHARE IS A BUNDLE OF RIGHTS AND IS DISTINCT FROM THE ASSETS OF THE COMPA NY. SHARE ALSO REFERS TO THE VOTING POWER AND IN CASE THE ASSESSEE IS HAVING MORE THAN THE PARTICULAR NUMBER OF SHARES THEN IT CAN HAVE A CONT ROLLING INTEREST. THEREFORE, A TRANSACTION HAS TO BE VIEWED FROM A CO MMERCIAL AND REALISTIC PERSPECTIVE AND IT HAS TO BE DETERMINED W HETHER IT IS A SHARE OF SALE OR AN ASSET SALE. ACCORDING TO THE LD.CIT( A) A TRANSACTION INVOLVING TRANSFER OF SHARES LOCK, STOCK AND BARRE L CANNOT BE BROKEN UP INTO SEPARATE INDIVIDUAL COMPONENTS, ASSETS OR RIGH TS SUCH AS RIGHT TO VOTE, RIGHT TO PARTICIPATE IN COMPANY MEETINGS, MAN AGEMENT RIGHTS, CONTROLLING RIGHTS, ETC.ETC., 29.2 ACCORDING TO THE LD.CIT(A), THE ASSESSEE, IN T HE INSTANT CASE, HAS NEVER DENIED THE FACT THAT THE PURPOSE OF THE TRANS ACTION WAS TO ACQUIRE ASSET PINEHURST EXTRACTED FROM GOLF LINK SOFTWARE PARK BELONGING TO THE VIRWANI GROUP. THIS COULD HAVE BEEN DONE BY WA Y OF OUTRIGHT PURCHASE OF THE ASSET OR THROUGH ACQUIRING CONTROL OVER THE ENTITY WHO OWNED THE ASSET. IF THE PROPERTY WAS ACQUIRED THRO UGH OUTRIGHT PURCHASE, THEN THE PROPERTY COULD NOT BE VALUED MORE THAN RS. 40 CRORES AS THE DVO, BANGALORE HAS DONE AT THE INSTANCE OF THE DEPA RTMENT. ANOTHER 34 WAY OF ACQUIRING THE PROPERTY WAS TO ACQUIRE THE SH ARES OF CONTROLLING INTEREST OVER THE COMPANY BY ACQUIRING THE SHARES O F THE COMPANY IN WHICH THE ASSET IS VESTED. THIS WOULD ENTAIL TAKIN G OVER THE DEBTS OF THE COMPANY AS A WHOLE WHICH IN THIS CASE WAS AROUND RS .43 CRORES, I.E. RS.39 CRORES FOR LAND AND BUILDING AND RS.4 CRORES BEING THE ADVANCE RECEIVED FROM TENANT. HE OBSERVED THAT THE HONBLE SUPREME COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLDINGS BV (SUP RA) HAS UPHELD THE PRINCIPLE ENUNCIATED IN MC DOWELL CASE THAT TAX PL ANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF L AW AND THAT COLOURABLE DEVICE CANNOT BE A PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE THE BELIEF THAT IT IS HONOURABLE TO AVOID PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS. 29.3 HE OBSERVED THAT IN THE INSTANT CASE THE ASSE T 'PINEHURST' HAS PASSED ON TO THE GHODAWATS AS A RESULT OF TRANSFER OF SHARES IN M.D. PROPERTIES. HOWEVER, IT CANNOT BE INFERRED AS A COR OLLARY THAT THE TRANSFER OF SHARES WAS DONE WITH THE SOLE INTENT OF TRANSFER OF THE ASSET IN LAND AND BUILDING. ACCORDING TO LD.CIT(A) ONE CANNOT FORGET THAT ALONG WITH THE ASSETS, THE APPELLANT'S GROUP (GHODAWATS) ACQUIRED CONTROLLING INTEREST IN M D PROPERTIES AND THEREBY BECAME OWNERS OF THE EXI STING REVENUE STREAM IN PERPETUITY AS WELL. THE ASSESSING OFFICER HAS ERRED IN VIEWING THE ENTIRE TRANSACTION THROUGH THE SPECTRUM OF ASSE T TRANSFER. THIS WAS A CASE OF TRANSFER OF SHARES WHEREBY THE COMPANY M.D. PROPERTIES WAS TRANSFERRED AS A GOING CONCERN BECAUSE OF THE FOLLO WING FACTS:- 1. THE BUILDING WAS A PART OF A SOFTWARE PARK WHICH POSSESSED THE INFRASTRUCTURE THAT WOULD AID SETTING UP OF INFORMATI ON TECHNOLOGY BUSINESS. 35 2. THE STRUCTURE OF THE BUILDING FACILITATED SETTIN G UP OF INFORMATION TECHNOLOGY BUSINESS I.E. IT FACILITATED SETTING UP SHOPS OF I.T. INDUSTRY AND THEREFORE IT POSSESSED THE VALUE IN THE PRESENT OR IN FU TURE WHICH WOULD BE ATTRACTIVE TO POTENTIAL LESSEES OR BUYERS. 3. THE INHERENT POTENTIAL OF THE BUILDING AS A SPECIA LISED I.T. BUILDING VESTED IN IT THE POTENTIAL TO EARN INCOME IN FUTURE. 4. THE LOCATION OF THE BUILDING WAS AT BENGALURU AND IT IS A FACT THAT BENGALURU WAS AND STILL IS THE PREFERRED INDIAN DESTINA TION OF I.T MAJORS OF THE WORLD. 5. THE BUILDING WAS ALREADY LET OUT TO FIDELITY INFO RMATION SYSTEM (INDIA) LTD. IT IS AN INDIAN ARM OF GLOBAL PROVIDER OF BANKING AND PAYMENTS TECHNOLOGIES. FIDELITY STARTED ITS INDIAN OPER ATIONS IN SEPTEMBER, 2001 AT GURGAON AND LATER EXPANDED TO BA NGALORE IN NOVEMBER, 2003. THE BUILDING WAS LET OUT TO FIDELITY FOR A SUM OF 72.50 LAKHS PER MONTH EVEN AT THE TIME OF ENTERING INTO MO U BETWEEN THE VIRWANIS AND THE GHODAWATS. 6. THE GHODAWATS WERE NOT INTO SOFTWARE OR REALTY BU SINESS. THIS WAS AN OPPORTUNITY FOR THEM TO INVEST IN A COMPANY WH ICH WOULD OFFER STEADY STREAM OF INCOME WHILE APPRECIATING IN VALUE I N FUTURE BECAUSE OF THE ASSET WHICH IT HELD. 29.4 ADVERTING BACK TO THE FACTS OF THE CASE, HE N OTED THAT BOTH THE MOUS DATED 01- 07-2004 AND 25-01-2005 DID NOT RECIT E THE TERMS ON WHICH THE SHARES WERE TRANSFERRED AND THE RATIONALE FOR VALUING THE SHARES OF M.D. PROPERTIES AT PAR WITH FACE VALUE. I T WAS DONE IN DISREGARD OF KNOWN TENETS OF VALUATION OF SHARES RECOGNISED B Y THE ICAI, THE INSTITUTE OF COMPANY SECRETARIES, THE ERSTWHILE CCI AND IN ACADEMICS. HE THEREFORE HELD THAT THE MOU DATED 24-01-2005 WAS A POTENTIALLY COLOURABLE DOCUMENT WHICH COULD FACILITATE EVASION OF TAX IN THE HANDS OF VIRWANIS. 29.5 AS REGARDS THE VALUATION OF SHARES OF MD PROPE RTIES U/S.142A OF THE I.T. ACT IS CONCERNED, THE LD.CIT(A) OBSERVED T HAT THE ENTIRE CHAIN OF EVENTS HAS LED TO CREATION OF VARIOUS RIGHTS IN A COMPANY WHICH IS STATUTORILY AND LEGALLY RECOGNIZED AS SUCH. THE GH ODAWATS, BY PURCHASING THE SHARES IN M D PROPERTIES ACQUIRED A BUNDLE OF RIGHTS AND OBLIGATIONS IN M D PROPERTIES INCLUDING THE RIGHT I N THE ASSET TO THE 36 EXTENT OF THEIR HOLDING. THERE IS NOTHING WRONG IN THE TRANSACTION EXCEPT THE METHODOLOGY UTILIZED IN VALUATION OF SHARES OF M D PROPERTIES. HE WAS OF THE OPINION THAT THE ASSESSING OFFICER COULD NOT HAVE REFERRED THE MATTER OF VALUATION OF THE ASSET (LAND AND BUILDING ) BELONGING TO M D PROPERTIES WHILE COMPLETING THE ASSESSMENT OF THE A SSESSEE WHO HAD PURCHASED THE SHARES OF M.D PROPERTIES. IF THE BUIL DING HAD TO BE VALUED, THEN ITS REFERENCE SHOULD HAVE BEEN MADE UNDER SECT ION 142A WHILE MAKING THE ASSESSMENT OF M.D PROPERTIES. WHAT THE A SSESSING OFFICER HAS DONE BY THIS ACTION IS TO VALUE AN ASSET BELONGING TO A THIRD PARTY DURING THE COURSE OF ASSESSMENT OF ANOTHER PERSON BECAUSE IN THE CASE OF M D PROPERTIES, THE REQUIREMENT WAS TO ESTIMATE THE VAL UE OF INVESTMENT MADE BY M D PROPERTIES IN PURCHASING THE BUILDING A ND LAND APPURTENANT THERETO FROM GOLF LINK SOFTWARE PARK PVT. LTD. THIS COULD HAVE BEEN DONE UNDER SECTION 142A. BUT SHARES, WHICH ARE THE SUBJECT MATTER OF TRANSFER IN THIS CASE, CANNOT BE REFERRED FOR VALUA TION BY THE DVO UNDER THE FACTS OF THE CASE. HE ACCORDINGLY HELD THAT A R EFERENCE UNDER SECTION 142A COULD NOT HAVE BEEN MADE TO ESTIMATE THE VALUE OF PROPERTY WHILE COMPUTING THE INCOME OF THE ASSESSEE. HENCE, ALL SU BSEQUENT PROCEEDINGS ARE VOID AND THE ASSESSEE SUCCEEDS ON T HIS ISSUE. 29.6 AS REGARDS THE QUESTION RELATING TO WHAT IS TH E PROPERTY UNDER VALUATION, I.E. THE BUILDING OR SHARES, THE LD.CIT( A) HELD THAT IN THE INSTANT CASE, IT IS UNDISPUTED THAT THERE HAS BEEN TRANSFER OF SHARES RESULTING IN A CONVEYANCE OF OWNERSHIP OF THE COMPA NY M.D. PROPERTIES LOCK STOCK AND BARREL FROM VIRWANIS TO THE GHODAWAT S. THIS TRANSFER BEGETS THE ASSETS OF THE COMPANY NAMELY 'PINEHURST' AND APPURTENANT LAND TO THE TRANSFEREES ALONG WITH THE RIGHT TO RECEIVE THE CURRENT AND FUTURE 37 INCOME RECEIVABLE FROM AN EXISTING LEASEHOLDER AS A LSO ANY FUTURE INCOME RECEIVABLE FROM THE ASSET. THUS THE COMPANY AND NOT MERELY THE ASSETS WERE TRANSFERRED IN THIS DEAL. IF ONE REMOVE S THE ASSETS FROM THE OTHER EMBEDDED RIGHTS INCLUDING THE RIGHT TO RECEIV E THE PRESENT AND FUTURE INCOMES AND CONSIDER THE TRANSACTION AS AN E XAMPLE OF SALE OF ASSETS ALONE, THEN THE TRANSACTION WOULD LOSE ITS I DENTITY I.E. ONE OF A SALE OF AN ENTERPRISE AS A GOING CONCERN. IN FACT THIS I S A CASE OF SALE OF COMPANY LOCK, STOCK WITH 'SMOKING' BARREL. IT IS NO T A CASE OF SALE OF REAL ASSETS BELONGING TO M D PROPERTIES BUT A CASE OF SA LE OF SHARES OF M D PROPERTIES. 29.7 AS REGARDS THE DATE OF TRANSFER OF SHARES IS C ONCERNED, THE LD.CIT(A) HELD THAT BETWEEN THE TRANSFEROR (VIRWANI GROUP) AND THE TRANSFEREE (GHODAWAT GROUP), THE TRANSACTION WAS CO MPLETE WHEN THE SHARE CERTIFICATES AND BLANK TRANSFER FORMS WERE HA NDED OVER IN CONSEQUENCE OF THE SIGNING OF MOU DATED 24-01-2005 AND THAT THE DATE OF MOU IS THE DATE OF TRANSFER. HE OBSERVED THAT IT IS A FACT THAT THE AGREEMENT TO TAKE OVER THE COMPANY M.D. PROPERTIES WAS SIGNED ON 24- 01-2005. IT IS ALSO A FACT THAT CONSIDERATION FOR P URCHASE OF SHARES WAS PAID ON VARIOUS DATES IN FEBRUARY 2005. IT IS A FAC T THAT SIMULTANEOUSLY, ACTUAL DELIVERY OF SHARES AND TRANSFER DEED HAD OCC URRED. IT IS A FACT THAT THE MORATORIUM IMPOSED ON TRANSFER OF SHARES WAS NO T INIMICAL TO THE TRANSACTION. IT IS ALSO A FACT THAT THE SHARES OF M .D. PROPERTIES WERE FINALLY REGISTERED IN THE NAMES OF MEMBERS OF GHODA WAT GROUP. UNDER THESE CIRCUMSTANCES THE MERE FACT THAT THE SHARES W ERE REGISTERED IN THE BOOKS AND SHAREHOLDER REGISTER OF M. D. PROPERTIES ON 06-10-2007 IN THE NAMES OF VARIOUS MEMBERS OF THE GHODAWAT GROUP WOUL D NOT JUSTIFY THE 38 CONCLUSION THAT THE TRANSFER TOOK PLACE LATER AND N OT ON 24-01-2005. AS A RESULT, THE ISSUE OF APPLICATION OF SECTION 69B WIL L BE RELEVANT IN THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005 -06 AND NOT THE ASSESSMENT YEAR 2008-09. 29.8 AS REGARDS THE APPLICABILITY OF PROVISIONS OF SECTION 69B IS CONCERNED THE LD.CIT(A) JUSTIFIED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF THE DIFFERENCE IN VALUE OF SHARE S AS UNEXPLAINED INVESTMENT U/S.69B OF THE INCOME TAX ACT. THE RELE VANT OBSERVATION OF THE LD.CIT(A) READS AS UNDER : 94. IT IS APPARENT THAT IN THE ENTIRE EPISODE OF TR ANSFER OF THE COMPANY M.D. PROPERTIES THE CONDUCT OF THE VIRWANIS ( VENDORS) AND THE GHODAWATS (VENDEES) WAS SUCH WHICH WAS UNLIKELY TO HAPPE N IN COMMON COURSE OF NATURAL EVENTS, HUMAN CONDUCT AND. P UBLIC AND PRIVATE BUSINESS. THE APPELLANT'S HUSBAND, WHO IS THE PRI ME MOVER OF THE TRANSACTION ON BEHALF OF GHODAWATS, HAS ADMITTED THAT VALUATION OF SHARES WAS NOT UNDERTAKEN AND THAT THE ENTIRE EXERCISE WAS A 'FRIENDLY TRANSACTION WITHOUT CONSIDERING ANY COMMERCIAL ANGLE. (SEE ANSWER TO Q. NO. 19 IN THE STATEMENT RECORDED U/S. 132(4)). THIS IS INDEED SURPRISING BECAUSE SEIZED MATERIAL INDICATE THE EXISTENCE OF INTE NSE BUSINESS RELATIONS BETWEEN THE GHODAWATS AND THE VIRWANIS, WHER E MONEYS HAVE EXCHANGED HANDS BY ENTITIES BELONGING TO THE GHODAWAT GROUP ON COMMERCIAL BASIS. (SEE ANSWER TO Q. NO. 1 & 27 IN THE STATEMENT RECORDED U/S. 132(4)). IT IS INDEED SURPRISING THAT IN MAKING OF THE BALANCE SHEET, THE VALUE FUTURE INCOMES FROM FIDELITY HAS NOT BEEN INCORPORATED AND LIABILITY OF PREMIUM AMOUNT TO THA T EXTENT NOT BEEN RECOGNISED. WE KNOW THAT SHARES OF A COMPANY DO NOT SPE CIFY MERELY A SUM OF MONEY BUT THAT THEY DENOTE AN INTEREST IN VARI OUS RIGHTS CONFERRED BY THE ARTICLES OF ASSOCIATION MEASURED BY A SUM OF MONEY. THERE ARE NUMEROUS INHERENT ELEMENTS IN THE SPECIE OF PROPERTY CALLED SHARES WHICH HAS TO BE EVALUATED IN ORDER TO ARRIVE AT A 'FAIR VALUE' OF SHARES. FROM THE POINT OF VIEW OF VIRWANIS, THE SELLERS OF SHARES, THE FACTORS WHICH INDUCED THEM TO SELL THE SHARES OF M.D. P ROPERTIES CAN ONLY BE SPECULATED UPON. CERTAINLY, ATTAINING LIQUIDITY C OULD NOT HAVE BEEN THE DRIVING FORCE BEHIND THE DECISION, OR ELSE THEY WOULD NOT HAVE SLICED OUT THE REAL ESTATE (PINEHURST OR TOWER 'A' AND LAND APPU RTENANT THERE TO) FROM THE GOLF LINK SOFTWARE PARK AND LET GO OF A RE VENUE STREAM YIELDING RS.870.00 PER ANNUM FOR A MERE RS.9.50 LAKHS. WE KNOW THAT THIS ASSET WAS SOLD FOR RS.3900.00 LAKHS, WHICH WAS THE SALE PRICE O F THE REAL ESTATE ASSET IN QUESTION AND WOULD ALSO INCLUDE PROFITS. THE CO ST OF CONSTRUCTION COULD HAVE ONLY BEEN LOWER. IF THE VIRWANIS WERE IN NEED OF CAPITAL THEN THEY COULD HAVE EASILY DISCOUNTED THE FUTURE EARNINGS FROM TOWER 'A' TO RAISE THE CAPITAL AS GHODAWATS DID WHILE ACQUIRING THE PROPERTY COMPRISING OF SHARES AND OWNERSHIP OF M.D. PROPERTIES AN D THEREBY RETAINED THE OWNERSHIP OF ASSETS WHOSE INTRINSIC VALUE WO ULD HAVE INCREASED IN FUTURE. (THE REAL ESTATE BOOM IN BANGALO RE STARTED FROM 2007-08 ONWARDS). ONE CAN ONLY SPECULATE ON THE MOTIV E BEHIND THE 39 ENTIRE TRANSACTION. THE CONDITIONS IN WHICH A SELLER SELLS HIS PROPERTY IS BEST DESCRIBED BY THE HONBLE SUPREME COURT IN THE CA SE OF CWT V. MAHADEO JALAN [1972] 86 ITR 621 (SC) IN THE FOLLOWI NG WORDS: NOW, WHAT ARE THE FACTORS WHICH A SELLER WILL TAKE IN TO CONSIDERATION WHEN HE WANTS TO SELL HIS SHARES? WHERE HE IS NOT OBLIGED TO SELL BECAUSE HE IS NOT IN NEED OF MONEY, HE WOULD FIRST CONSIDER WH ETHER THE RETURN HE IS GETTING IS REASONABLE HAVING REGARD TO THE CURRENT MARKET PRICE. HERE AGAIN THE FACTOR OF YIELD WOULD ENTER INTO HIS CONSID ERATION NOT SO MUCH ON THE CAPITAL HE INITIALLY INVESTED BUT ON THAT WHI CH HE EXPECTS TO REALISE ON THE SALE. HE MAY HAVE A BETTER INVESTMENT IN VIEW WHICH WILL GIVE ON IT A HIGHER YIELD OR ENSURE FOR HIS CAPITAL BETTER PROSP ECTS. IT MAY BE HE MAY NOT EXPECT A HIGHER DIVIDEND TO BE MAINTAINED OR TH AT THESE DIVIDENDS ARE LIKELY TO BE REDUCED OR THERE IS A LIKELIHOOD OF THE SECURITY OF CAPITAL BEING IN JEOPARDY, AND THEREFORE HE WISHES TO MAKE A PRUDENT SALE. FROM WHAT WE HAVE STATED, AMONG THE FACTORS WHICH GOVERN T HE CONSIDERATION OF THE BUYER AND THE SELLER WHERE THE ONE DESIRES TO PURCHASE AND THE OTHER WISHES TO SELL, THE FACTOR OR BREAKUP VALUE OF A SHARE AS ON LIQUIDATION HARDLY ENTERS INTO CONSIDERATION WHERE TH E SHARES ARE OF A GOING CONCERN. THE BASIC YIELD METHOD IN CASES WHERE SHARES ARE QUOTED AND TRANSACTIONS TAKE PLACE ON THE SHARE MARKET MAY NO T BE DIFFERENT BUT WHERE SHARES ARE NOT QUOTED, IT IS IN THESE LATTER CASES THE YIELD MUST BE DETERMINED AFTER TAKING INTO ACCOUNT VARIOUS FACTORS AS TO WHICH A REFERENCE HAS BEEN MADE EARLIER. 95. HAVING ESTABLISHED THAT LIQUIDITY WAS NOT THE ESSENC E OF TRANSFER OF SHARES @ RS.10/SHARE AND THE MANDATE OF THE HON'BLE SUP REME COURT IN THE CASE OF MAHADEO JALAN (SUPRA), ARRIVED AT AFTER C ONSIDERING VARIOUS CIRCUMSTANCES LIKE LOW INCOME DISTRIBUTION, EXCEPTIONA L CIRCUMSTANCES, POSSIBILITY OF DIVIDEND PAY OUTS, ETC. THAT 'THE GENER AL PRINCIPLE OF VALUATION IN A GOING CONCERN IS THE YIELD ON THE BASI S OF AVERAGE MAINTAINABLE PROFITS, SUBJECT TO ADJUSTMENT, ETC., WHI CH THE CIRCUMSTANCES OF ANY PARTICULAR CASE MAY CALL FOR', IT IS INDEED SURPRISING THAT BOTH PARTIES TO THE TRANSACTION CONVENIENTLY DI SCARDED THE NEED FOR VALUATION OF SHARES OF M.D. PROPERTIES TO ASSIGN A 'FAIR VALUE' TO THE EQUITY. NO PRUDENT OR ORDINARY PERSON WOULD SELL A PR OPERTY WORTH CRORES FOR A PALTRY RS.9.50 LAKHS MERELY BECAUSE A DEB T OF RS.38.90 CRORES WAS ATTACHED ALONG WITH AND CONVENIENTLY DISREG ARD THE FACT THAT THE ASSET WAS ALSO CAPABLE OF EARNING RS.8.70 CRORES GRO SS PER ANNUM. ACCORDING TO THE DATA SUPPLIED IN APPELLATE PROCEEDI NGS, M.D. PROPERTIES HAD TAKEN A LOAN OF RS.38.33 CRORES FROM HDFC BANK TO FINANCE THIS DEAL. THIS WAS LEVERAGED AGAINST FUTURE INCOME RECEIVABLE FR OM 'FIDELITY' TO THE EXTENT OF RS.43.50 CRORES OVER A PERIOD OF 5 YEAR S. THE ENTIRE OUTFLOW ON PURCHASE OF PROPERTY WAS RS.51.98 CRORES. THUS THE EX POSURE OF GHODAWATS WAS ONLY TO THE EXTENT OF RS.8.48 CRORES. IF WE INCREASE THE EXPOSURE BY MUNICIPAL TAX PAYABLE (RS.4.27 CRORES), IN COME TAX PAYABLE (RS.2.91 CRORES), ADMINISTRATIVE EXPENSES (@1% OF RENT I S RS.0.44 CRORES), AND INSURANCE (RS.1.60 CRORES) THEN THE TOTAL OUTFLOW IS RS.17.70 CRORES. NOW THE VALUE OF PROPERTY AT 2005 VALUATION ON COMPARABLE PRICE IS RS.40 CRORES. THUS THERE APPEARS TO BE AN APPARENT AD VANTAGE OF RS.22.30 CRORES WHICH HAS ACCRUED TO THE GHODAW ATS ON THIS DEAL. HOWEVER, IT SHOULD BE NOTED THAT THIS IS NOT THE ABSOLU TE ADVANTAGE THAT THE GHODAWATS HAVE RECEIVED IN THIS TRANSACTION. THE T ENOR OVER WHICH THIS ADVANTAGE SPREADS IS 5 YEARS. HENCE THE FUTURE STREA MS OF REVENUE HAVE TO BE DISCOUNTED TO THE PRESENT VALUE TO ARRIVE AT THE FAIR ADVANTAGE THAT THE GHODAWATS HAVE RECEIVED. THIS ASPECT WILL BE DISCUSSED LATER IN THE ORDER. HOWEVER FOR THE MOMENT, THE FACT THAT TH E WHOLE TRANSACTION WAS SKEWED IN FAVOUR OF THE GHODAWATS BY SEVERAL CRORE S IS APPARENT AND THIS ASPECT COULD NOT HAVE GONE UNNOTICED EITHER BY THE VIRWANIS BY THE GHODAWATS. IT IS INDEED SURPRISING THAT THE VIRWANI S WOULD 40 SURRENDER THIS HUGE ADVANTAGE TO THE GHODAWATS FOR SUCH A HEAVY DISCOUNT. CERTAINLY, RS.9.50 LAKHS CANNOT BE THE SURRE NDER VALUE OF RS.22.30 CRORES UNDER ANY CIRCUMSTANCE. IT IS IN THESE CASES WHERE THE TEST OF HUMAN PROBABILITY HAS TO BE APPLIED. THE HON .BLE SUPREME COURT IN THE CASE OF CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 HAS HELD THAT THE COURTS AND TRIBUNAL HAVE TO JUDGE THE EVIDENCE B EFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. SIMILARLY, THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V. CIT [1995] 214 ITR 801 HELD THAT 'THE COURTS AND TRIBUNAL SHOULD CONSIDER THE SURROUNDI NG CIRCUMSTANCES BY APPLYING THE TEST OF HUMAN PROBABILIT IES'. 96. THE DECISION IN SUMATI DAYAL V. CIT [1995] 214 ITR 80 (SC) WAS RENDERED BY THE HONBLE SUPREME COURT IN THE CONTEX T OF S.68 OF THE INCOME-TAX ACT. ACCORDING TO THE DECISION WHEN ANY A MOUNT IS SOUGHT TO BE TAXED AS INCOME, THE ONUS LIES ON THE DEPARTMENT TO PROVE THAT THE RECEIPT IS WITHIN THE TAXING PROVISION. HOWEVER WHERE THERE IS NO DOUBT ABOUT THE NATURE OF RECEIPT I.E. IT IS INCOME, THEN THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE SAME IS NOT TAXABLE BECAUSE OF CERTAIN PROVISIONS OF LAW APPLICABLE TO THE RECEIPT. HOWEVER, IN CASES OF CASH CREDIT AND THE LIKE, WHICH FALL UNDER SECTION 68, 69 A, 69B, 69C, AND 69D, CERTAIN AMOUNTS UNDER SPECIFIC CIRCUMSTANCES CAN BE DEE MED TO BE INCOME OF THE ASSESSEE IF THE ASSESSEE DOES NOT OFFER A GENU INE AND ACCEPTABLE EXPLANATION TO THE ASSESSING OFFICER. IN THE SE CASES, THE OPINION OF THE ASSESSING OFFICER THAT THE EXPLANATION I S NOT SATISFACTORY RENDERS THE FACT OF RECEIPT OR INVESTMENT OR EXPENSE U NREBUTTED AND THE RECEIPT OR INVESTMENT OR EXPENSE BEAR THE CHARACTER O F INCOME CHARGEABLE TO TAX. THE DECISION IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A RECE IPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATU RE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE - PARIMISETTI SEETHARAMAMMA'S CASE (SUPRA) AT P. 536. BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF T HE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHARGED TO INCOME-TAX A S THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OF FERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE O PINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONE Y, AND IF HE FAILS TO REBUT, THE SAID EVIDENCE BEING UNREBUTTED, CAN BE USE D AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. W HILE CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEPARTMENT CANNOT, HOWE VER, ACT UNREASONABLY. 97. THE HONBLE SUPREME COURT HELD THAT IN CASES PERT AINING TO S.68, IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATU RE AND SOURCE OF CASH CREDITS APPEARING IN THE BOOKS OF THE ASSESSEE IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY THEN THERE IS, PRI MA FACIE, EVIDENCE OF RECEIPT OF MONEY AGAINST THE ASSESSEE AND THAT RECEIP T BEING OF INCOME CHARACTER REMAINS UNREBUTTED. SIMILARLY, UNDER SECTIO N 69B, IF THE ASSESSING OFFICER FINDS THAT THE ASSESSEE HAS EXPENDED AMOUNT S IN MAKING INVESTMENTS IN ANY BULLION, JEWELLERY, OR OTHER VALUA BLE ARTICLE OVER AND ABOVE THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNTS, A ND THE ASSESSEE DOES NOT OFFER ANY EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AN D SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACT ORY, THEN THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE OF MAKING INV ESTMENT OVER AND ABOVE THE AMOUNT RECORDED IN BOOKS AND THE FACT THAT EXTRA INVESTMENT BEING OF INCOME CHARACTER REMAINS UNREBUTTED. THE ASSE SSING OFFICER IS EMPOWERED TO WADE INTO SUCH SITUATIONS AND FIND OUT IF THE MACHINATION 41 WHICH ENABLED THE POSSIBILITY OF TAX EVASION AND PASSING OF UNDECLARED MONIES BETWEEN THE PERSONS PARTY TO THE TRANSACTION. SE CTION 69B EXTENDS THE SCOPE OF SECTION 69 AND 69A TO A CASE WHER E A PART OF THE MONEY LAID OUT AND ON INVESTMENT OR ARTICLE IS ACCOUN TED FOR BY THE ASSESSEE IN THE BOOKS. WHERE SECRET BUSINESS DEALINGS OF THE ASSESSEE INVOLVE UNEXPLAINED INVESTMENTS, THE AMOUNT INVESTED I S ASSESSABLE UNDER SECTION 69B. UNDER THESE CIRCUMSTANCES, WHERE THE BURDEN OF PROOF HAS NOT BEEN DISCHARGED BY THE APPELLANT, IT IS PERFECTLY REASONABLE TO PRESUME THAT IT IS IMPOSSIBLE THAT THE VIRWANIS WOUL D HAVE LET GO OF AN ADVANTAGE SEEMINGLY WORTH RS.22.30 CRORES FOR A MEAGRE RS.9.50 LAKHS. AT THIS JUNCTURE, IT WILL BE WORTHWHILE TO REFER TO FORMULATION OF LEGAL POSITION ON RULE OF EVIDENCE AND PRESUMPTION AS TO EXI STENCE OF FACTS AS ENUNCIATED BY THE HON'BLE SUPREME COURT IN KUNDAN L AL RALLARAM V. CUSTODIAN, EVACUEE PROPERTY AIR 1961 SC 1316 '5. ....THE RULES OF EVIDENCE PERTAINING TO BURDEN O F PROOF ARE EMBODIED IN CHAPTER VII OF THE EVIDENCE ACT. THE PHRASE 'BURDEN OF PROOF HAS TWO MEANINGONE THE BURDEN OF PROOF AS A MATTER OF LAW A ND PLEADING AND THE OTHER THE BURDEN OF ESTABLISHING A CASE; THE FORM ER IS FIXED AS A QUESTION OF LAW ON THE BASIS OF THE PLEADINGS AND IS UNC HANGED DURING THE ENTIRE TRIAL, WHEREAS THE LATTER IS NOT CONSTANT BUT SH IFTS AS SOON AS A PARTY ADDUCES SUFFICIENT EVIDENCE TO RAISE A PRESUMPTION IN H IS FAVOUR. THE EVIDENCE REQUIRED TO SHIFT THE BURDEN NEED NOT NECE SSARILY BE DIRECT EVIDENCE, I.E., ORAL OR DOCUMENTARY EVIDENCE OR ADMISSIONS MADE BY OPPOSITE PARTY; IT MAY COMPRISE CIRCUMSTANTIAL EVIDENC E OR PRESUMPTIONS OF LAW OR FACT. TO ILLUSTRATE HOW THIS DO CTRINE WORKS IN PRACTICE, WE MAY TAKE A SUIT ON A PROMISSORY NOTE. UND ER SECTION 101 OF THE EVIDENCE ACT, 'WHOEVER DESIRES ANY COURT TO GIVE JUDGMENT AS TO ANY LEGAL RIGHT OR LIABILITY DEPENDENT ON THE EXISTENCE OF FACTS WHICH HE ASSERTS, MUST PROVE THAT THOSE FACTS EXIST.' THEREFORE, TH E BURDEN INITIALLY RESTS ON THE PLAINTIFF WHO HAS TO PROVE THAT THE PROMI SSORY NOTE WAS EXECUTED BY THE DEFENDANT. AS SOON AS THE EXECUTION OF THE PROMISSORY NOTE IS PROVED THE RULE OF PRESUMPTION LAID DOWN IN SE CTION 118 OF THE NEGOTIABLE INSTRUMENTS ACT HELPS HIM TO SHIFT THE BURDE N TO THE OTHER SIDE. THE BURDEN OF PROOF AS A QUESTION OF LAW RESTS, TH EREFORE, ON THE PLAINTIFF; BUT AS SOON AS THE EXECUTION IS PROVED, SECTI ON 118 OF THE NEGOTIABLE INSTRUMENTS ACT IMPOSES A DUTY ON THE COURT TO RAISE A PRESUMPTION IN HIS FAVOUR THAT THE SAID INSTRUMENT WAS M ADE FOR CONSIDERATION. THIS PRESUMPTION SHIFTS THE BURDEN OF PRO OF IN THE SECOND SENSE, THAT IS, THE BURDEN OF ESTABLISHING A CASE SHIFTS T O THE DEFENDANT. THE DEFENDANT MAY ADDUCE DIRECT EVIDENCE TO PROVE T HAT THE PROMISSORY NOTE WAS NOT SUPPORTED BY CONSIDERATION, AND IF HE ADD UCED ACCEPTABLE EVIDENCE, THE BURDEN AGAIN SHIFTS TO THE PLAINTIFF, A ND SO ON. THE DEFENDANT MAY ALSO RELY UPON CIRCUMSTANTIAL EVIDENCE AND, IF THE CIRCUMSTANCES SO RELIED UPON ARE COMPELLING, THE BURD EN MAY LIKEWISE SHIFT AGAIN TO THE PLAINTIFF. HE MAY ALSO RELY UPON P RESUMPTIONS OF FACT, FOR INSTANCE THOSE MENTIONED IN SECTION 114 AND OTHER SECTIONS OF THE EVIDENCE ACT. UNDER SECTION 114 OF THE EVIDENCE ACT, 'THE COURT MAY PRESUME THE EXISTENCE OF ANY FACT WHICH IT THINKS LIKE LY TO HAVE HAPPENED, REGARD BEING HAD TO THE COMMON COURSE OF N ATURAL EVENTS, HUMAN CONDUCT AND PUBLIC AND PRIVATE BUSINESS, IN THEI R RELATION TO THE FACTS OF THE PARTICULAR CASE.' ILLUSTRATION (G) TO THAT SECTION SHOWS THAT THE COURT MAY PRESUME THAT EVIDENCE WHICH COULD BE AND I S NOT PRODUCED WOULD, IF PRODUCED, BE UNFAVOURABLE TO THE PERSON WH O WITHHOLDS IT. A PLAINTIFF, WHO SAYS THAT HE HAD SOLD CERTAIN GOODS TO T HE DEFENDANT AND THAT A PROMISSORY NOTE WAS EXECUTED AS CONSIDERATION FO R THE GOODS AND THAT HE IS IN POSSESSION OF THE RELEVANT ACCOUNT BOOKS TO SHOW THAT HE WAS IN POSSESSION OF THE GOODS SOLD AND THAT THE SALE WAS EF FECTED FOR A PARTICULAR CONSIDERATION, SHOULD PRODUCE THE SAID ACC OUNT BOOKS, FOR HE IS 42 IN POSSESSION OF THE SAME AND THE DEFENDANT CERTAINLY CA NNOT BE EXPECTED TO PRODUCE HIS DOCUMENTS....' [EMPHASIS SUPPLIED] 98. AS STATED EARLIER, IN THIS TRANSACTION THE CONDUCT OF THE VIRWANIS (VENDORS) AND THE GHODAWATS (VENDEES) IS SUCH WHICH IS U NLIKELY TO HAPPEN IN COMMON COURSE OF NATURAL EVENTS, HUMAN COND UCT AND PUBLIC AND PRIVATE BUSINESS. THE GHODAWATS HAVE GIVEN NO REASO N TO THEIR HIGHLY DOUBTFUL ACTION OF NOT VALUING THE SHARES OF M .D. PROPERTIES. IT IS ALREADY ESTABLISHED THAT THERE IS MORE THAN FAIR REA SON TO ASSUME THAT THE PROPERTY HAS PASSED HANDS WITH SOME UNDER THE TABLE DEAL ING IN CASH. THE APPELLANT HAS BEEN ABLE TO GIVE ABSOLUTELY NO JUST IFICATION IN NOT VALUING THE SHARES ACCORDING TO THE KNOWN TENETS OF VA LUATION TO ARRIVE AT THE FAIR VALUE OF THE SHARES OF M.D. PROPERTIES. IN TH E CASE OF GOPALDAS T. AGARWAL V. CIT[1978] 113 ITR 447 (BOM.) IT HAS BEEN HELD ONE THING WHICH CAN BE SAID WITHOUT MUCH HESITATION IS THAT THE BURDEN IS ALWAYS ON THE ASSESSEE, IF AN EXPLANATION IS ASKED FOR B Y THE TAXING AUTHORITIES OR THE TRIBUNAL, TO INDICATE THE SOURCE OF ACQUISITION OF A PARTICULAR ASSET ADMITTEDLY OWNED BY THE PERSON CONCER NED. IT WILL DEPEND UPON THE FACTS OF EACH CASE TO DECIDE WHAT TYP E OF FACTS WILL BE REGARDED AS SUFFICIENT TO DISCHARGE SUCH ONUS, NOR CAN T HE ONUS BE DIFFERENT QUA DIFFERENT PERSONS, NAMELY, ONE TYPE OF BURDEN ON THE ASSESSEE AND ANOTHER TYPE OF BURDEN ON THE LEGAL HEIR. 99. UNDER THESE CIRCUMSTANCES THE PRESUMPTION UNDER THE EVI DENCE. ACT WHICH IS APPLICABLE TO THE FACTS OF THIS CASE IS THAT T HE APPELLANT HAS GIVEN THE AMOUNT IN CASH TO VIRWANIS. THE ASSESSING OFFICER WAS THEREFORE RIGHT TREATING THE DIFFERENCE IN VALUE OF SHARES ARRIVED AT BY ADOPTING THE YIELD METHOD AND THE FACE VALUE OF SHARES AS UNEXPLAINED INV ESTMENT IN SHARES OF M.D. PROPERTIES UNDER SECTION 69B. 30. SO FAR AS THE QUESTION RELATING TO CORRECTNESS OF METHOD OF VALUATION OF EQUITY SHARES OF A PRIVATE LIMITED COM PANY ADOPTED BY THE AO IS CONCERNED, THE LD.CIT(A) NOTED THAT THERE ARE 3 IMPORTANT METHODS OF VALUATION NAMELY NET ASSET VALUE (NAV), PROFIT EARNING CAPACITY VALUE (PECV) AND MARKET VALUE IN THE CASE OF LISTED COMPANIES. APART FROM THESE THERE ARE CERTAIN OTHE R METHODS ALSO. HE OBSERVED THAT SINCE IT IS NOT A LISTED COMPANY, THE REFORE, THE THIRD METHOD IS NOT APPLICABLE TO THE COMPANY. AFTER CONSIDERIN G THOROUGHLY THE VARIOUS METHODS THE LD.CIT(A) HELD THAT THE SINGLE PERIOD CAPITALISATION METHOD OR CCI FORMULA IS AN ACCEPTED METHOD FOR DET ERMINING THE VALUE OF SHARES OF CLOSELY HELD COMPANIES. ACCORDING TO HIM, CAPITALISATION RATE OF 20% AS APPLICABLE TO TRADING COMPANIES SHOU LD BE APPLIED IN THE INSTANT CASE. THIS RATE ACCORDING TO HIM WOULD ADDR ESS ITSELF TO THE 43 CONCERNS OF SERVICE TAX, COST OF INSURANCE, COLLECT ION AND ADMINISTRATIVE CHARGES, THE CHARGE OF INCOME TAX AND DIVIDEND DIST RIBUTION TAX ETC WHICH WOULD BE PLAYING IN THE MINDS OF THE INVESTORS. T HEREFORE, ACCORDING TO HIM THE MULTIPLIER IS 5. ACCORDING TO HIM, PREMIUM CHARGEABLE OVER AND ABOVE THE FACE VALUE OF THE SHARES CAN BE FOUND OUT CREDIBLY BY APPLYING THE SINGLE PERIOD CAPITALISATION METHOD WITH EXCESS EARNING TECHNIQUE PRESCRIBED IN THE ECONOMIC VALUE ADDITION APPROACH/ METHOD. ACCORDING TO LD.CIT(A) IN THE CONTEXT OF THIS APPEAL, THE ECO NOMIC VALUE ADDED APPROACH/METHOD APPEARS TO BE APPROPRIATE BECAUSE I T CONSIDERS ADDING THE CAPITALISED EARNING STREAM TO THE NET VALUE OF ASSETS. 30.1 APPLYING THIS METHOD HE COMPUTED THE AMOUNT OF PREMIUM WHICH IS THE REAL WORTH OR VALUE OF THE SHARE OF THE COMP ANY FOR THE PURPOSES OF SECTION 69B WHICH IS AS UNDER : COMPUTATION OF INCOME-TAX ON INCOME FROM HOUSE PROPE RTY INCOME FROM HOUSE PROPERTY 8,70,00,000.00 DEDUCTION U/S.23 (MUNICIPAL TAX) 85,39,264.00 NET ANNUAL VALUE 7,84,60,736.00 LESS : DEDUCTION U/S.24 STANDARD DEDUCTION (1/3) 2,35,38,220.00 INTEREST (@8% ANNUALISED) 3,06,62,278.00 5,42,00,498.00 2,42,60,238.00 TAX THEREON @30.90% 74,96,413.00 PREMIUM CHARGEABLE APPLYING THE ECONOMIC VALUE ADDE D OR YIELD METHOD GROSS RENT : 8,70,00,000.00 LESS : MUNICIPAL TAX (ACTUAL 89,35,264.00 INTEREST (@8% ANNUALISED) 3,06,62,278.00 (383278478 X8%) (ACTUAL RATE OF INTEREST CHARGED BY HDFC) INSURANCE (DVO REPORT) 32,00,000.00 COLLECTION CHARGES @1% 8,70,000.00 INCOME-TAX @30.90% 74,96,413.00 5,11,63,955.00 PROFIT AFTER TAX & INTEREST 3,58,36,045.00 (NORMALISED EARNINGS) 44 PREMIUM (3,58,36,045 X5) 17,91,80,225.00 (CAPITALISATION MULTIPLIER OF 5 AS PER CCI FORMULA) FAIR VALUE PER EQUITY SHARE OF RS. 10 EACH (17,91,80,225 + 1,00,000) 1,791. 80 PREMIUM ON 90000 EQUITY SHARES 16,12,62,000.00 (IN ADDITION TO FV OF RS.10/SHARE) RELIEF (75,21,72,000 16,12,62,000) 59,09,10,00 0.00 30.2 SO FAR AS THE ARGUMENT OF THE ASSESSEE BEFORE HIM THAT NO SUFFICIENT OPPORTUNITY WAS GIVEN AND THERE WAS VIOLATION OF PR INCIPLES OF NATURAL JUSTICE THE LD.CIT(A) DISMISSED THE ARGUMENTS ADVAN CED BEFORE HIM 30.3 FINALLY THE LD.CIT(A) WHILE SUSTAINING AN ADDI TION OF RS.16,12,62,000/- U/S.69B IN A.Y. 2005-06 AND DELET ING THE ADDITION FROM A.Y. 2008-09 CONCLUDED AS UNDER : 204.SINCE I HAVE ALREADY HELD IN THE FOREGOING PAR AGRAPHS THAT THE ASSESSING OFFICER WAS NOT COMPETENT TO REFER THE MATTER OF VALUATION OF AN ASSET BELONGING TO ANOTHER ASSESSEE UNDER SECTION 142A AND ADOPT THE VALUE OF THAT ASSET IN FINDING OUT THE BOOK VALUE OF SHARES IN M D PROPERTIES PVT. LTD. AND HENCE THAT ALL ACTIONS FOLLO WING THEREFROM ARE ILLEGAL AND VOID, THE ADDITION DOES NOT SUSTAIN IN ASSE SSMENT YEAR 2008- 09. I HAVE ALSO HELD THAT THE TRANSFER OF SHARES OF M D PROPERTIES PVT. LTD. TOOK PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR 2005-06. HENCE, ON THIS GROUND ALSO, THE ADDITION COULD NOT HA VE BEEN MADE IN THE ASSESSMENT YEAR 2008-09. IN VIEW OF THIS, THE APPELLANT GETS RELIEF ON ACCOUNT OF ADDITIONS MADE UNDER SECTION 69B OF THE IN COME-TAX ACT IN RESPECT OF ASSESSMENT YEAR 2008-09. 205. SIMULTANEOUSLY, I HAVE ALSO HELD THAT THE MOU DA TED 24/01/2005, THOUGH NOT A SHAM DOCUMENT IN ENTIRETY, WAS AN UNRELI ABLE DOCUMENT FOR THE REASON THAT IT WAS AN OPAQUE DOCUMENT WHICH DID N OT REVEAL THE TRUE WORTH OF THE CLOSELY HELD PRIVATE COMPANY, M D PROPE RTIES PVT. LTD. THE MOU WAS UNRELIABLE BECAUSE IT APPLIED THE FORMULA, WI THOUT STATING, OF ARRIVING AT THE NET WORTH OF A COMPANY BY APPLYING THE LIQUIDATION APPROACH TO VALUATION. IN MY DISCUSSIONS (SUPRA) I HAVE GIVEN EXAMPLES OF VARIOUS METHODS OF VALUATION AND HAVE FINALLY HE LD THAT THE SINGLE STREAM VALUATION OR THE ECONOMIC VALUE ADDED APPROA CH OR THE YIELD METHOD OF VALUATION WOULD GIVE THE MOST APPROXIMATE VALUE OF THE SHARES OF M D PROPERTIES PVT. LTD. IN THE DISCUSSION I HA VE HELD THAT IT IS NOT POSSIBLE TO ARRIVE AT A FAIR MARKET VALUE OF SHARE S OF A PRIVATELY HELD UNTRADED COMPANY AND THAT A REASONABLE ATTEMPT CAN B E MADE TO ARRIVE AT THE FAIR VALUE OF SHARES OF SUCH COMPANY. VALUATION CANNOT BE REDUCED TO AN INFLEXIBLE MATHEMATICAL EXERCISE AND DIFFERENT VALUERS WILL GIVE DIFFERENT VALUATION TO A PROPERTY, DEPENDING UPON THE PERSPECTIVES WHICH HAVE BEEN ANOINTED AS THE MOST IMPORTANT ONES. HENCE, IT IS NOT POSSIBLE TO ARRIVE AT ANY ONE VALUE OF AN ASSET OR A PR OPERTY BY APPLYING 45 DIFFERENT METHODS. AS STATED EARLIER IN THIS ORDER ONE HAS TO STRIVE TOWARDS ADOPTING THE MOST APPROPRIATE OR APT METHODOL OGY. AFTER APPLYING THE ACADEMIC INPUTS, I HAVE FURTHER HELD TH AT ONE HAS TO APPLY THE TEST OF PREPONDERANCE OF PROBABILITIES AND PRESUME THE EXISTENCE OF A FACT WHICH IS MOST LIKELY TO HAVE OCCURRED HAVING REG ARD TO THE COMMON COURSE OF NATURAL EVENTS, HUMAN CONDUCT AND PRIVATE B USINESS IN RELATION TO THE FACTS IN THE CASE. ACCORDINGLY, I HAVE HELD TH AT THE PROVISIONS OF SECTION 69B ARE APPLICABLE IN THE INSTANT CASE. IN VIE W OF THIS, THE APPELLANT WAS REQUIRED TO EXPLAIN AS TO WHY THE ADDIT ION SHOULD NOT BE MADE IN THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06. THE APP ELLANT WAS GIVEN A CHANCE FOR HEARING AND REPLIES WERE TAKEN ON 20/06/2012 AND 27/06/2012. THE APPELLANT REITERATED THE STANCE TAKE N DURING THE COURSE OF APPELLATE PROCEEDINGS IN THE ASSESSMENT YEAR 2 008-09. SINCE I HAVE ALREADY DEALT WITH THE ISSUE AT LENGTH SUPRA, I H OLD THAT THE ADDITION UNDER SECTION 69B TO THE TUNE OF 16,12,62,000/- IS RE QUIRED TO BE MADE IN THE ASSESSMENT YEAR 2005-06. ACCORDINGLY, THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 IS ENHANCED TO THIS EFFECT. 31. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY LD.CIT (A) THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 3.2 THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALL ENGED THE ORDER OF LD.CIT(A) SUSTAINING ADDITION OF RS.16,12,62,000/- IN A.Y. 2005-06. AS REGARDS THE ALLEGATION OF THE REVENUE THAT TRANS ACTION OF PURCHASE OF SHARES OF M.D PROPERTIES PVT. LTD IS A SHAM TRANSAC TION AND IS DONE FOR AVOIDANCE OF TAX, AS IT INVOLVED THE TRANSFER OF PR OPERTY WORTH RS 250 CRORE BELONGING TO M D PROPERTIES PVT. LTD BY MERE TRANSFER OF SHARES OF M.D PROPERTIES PVT. LTD BY VIRWANI FAMILY TO GHODAW AT FAMILY AT FACE VALUE IS CONCERNED HE SUBMITTED THAT THIS OBSERVATI ON IS FACTUALLY WRONG. REFERRING TO PARAGRAPH 10.3.2 PAGE NO 8 OF THE ASSE SSMENT ORDER, HE DREW THE ATTENTION OF THE BENCH WHERE THE AO HAS OB SERVED THAT AT THE CONSTRUCTION STAGE ITSELF GHODAWAT GROUP EXPRESSED ITS DESIRE TO BUY THE PROPERTY FOR WHICH LEASE RENTAL INCOME OF RS.72.5 L AKHS PER MONTH FROM FIDELITY WAS ASSURED FOR A PERIOD OF 5 YEARS. THE SUBSEQUENT MOU DATED 1/07/2004 AND 24/01/2005 REFERRED TO IN THE O RDER ALSO TRANSPIRED AS A RESULT OF THIS INTENTION. HE SUBMITTED THAT AS PER THE TERMS OF THE MOU DATED 24/01/2005 GHODAWAT GROUP HAS PAID RS 9,5 0,000/- BEING 46 CONSIDERATION FOR 95,000 EQUITY SHARES @ RS 10 EACH TO THE ERSTWHILE HOLDERS M.D PROPERTIES PVT. LTD ON 23/02/2005 .AS I NVESTMENT IS MADE IN FINANCIAL YEAR 2004-2005 ITSELF THE PROVISION OF SECTION 69B CANNOT BE APPLIED TO FINANCIAL YEAR 2007-2008. REFERRING TO PARA 10.3.3 OF THE ASSESSMENT ORDER HE SUBMITTED THAT THE AO IN THE OR DER ITSELF HAS MENTIONED THAT AS PER THE TERMS OF THE MOU DATED 2 4/01/2005 SHARES OF M.D PROPERTIES PVT. LTD ALONG WITH BLANK TRANSFER D EEDS DULY SIGNED BY THE THEN SHARE HOLDERS OF M.D PROPERTIES PVT. LTD W ILL BE HANDED OVER TO GHODAWAT GROUP. SO EFFECTIVELY GHODAWAT GROUP BECAM E THE OWNERS OF M.D PROPERTIES PVT. LTD ON 23/02/2005 AND NOT ON 06 -10-2007 WHEN THE SHARES ARE REGISTERED. REFERRING TO PAPER BOOK PAGE S 41 TO 47 HE SUBMITTED THAT THE DEPARTMENT HAS REFERRED THE PROP ERTY OF M.D PROPERTY PVT. LTD TO THE DVO FOR ASCERTAINING THE FMV OF THE PROPERTY AS ON 24- 01-2005 AND DEPARTMENTAL VALUER HAS VALUED THIS PRO PERTY FOR RS 40 CRS AS PER THE VALUATION REPORT DATED 28/07/2010. HE S UBMITTED THAT M/S. M.D PROPERTIES PVT. LTD. HAS PURCHASED THIS PROPERT Y FOR RS 39 CRORE AND HAS ALSO TAKEN OVER THE LIABILITY OF RS 4.35 CR ORE (DEPOSIT OF FIDELITY AN EXISTING LESSEE), AND IT HAS AVAILED A LOAN FROM HDFC BANK PVT. LTD. SO EFFECTIVELY AS ON THE DATE WHEN GHODWAT GROUP BE CAME THE OWNER OF M.D PROPERTIES PVT. LTD AS PER THE TERMS OF AN MOU DATED 24/01/2005 THE FMV OF SHARES OF M.D PROPERTIES PVT. LTD AS ON 23-02-2005 WILL BE VALUE OF THE PROPERTY PURCHASED FOR RS 39 CR LESS L OAN FROM HDFC BANK AND DEPOSIT OF FIDELITY, I.E THE FACE VALUE OF SHARES OF RS 10 LACS. HE SUBMITTED THAT THE PROPERTY OF MDPL WAS VALUED B Y GHODAWAT GROUP THROUGH A VALUER IN 2009 FOR THE PURPOSE OF O BTAINING CREDIT RATING FOR MDPL. IF THE CREDIT RATING IS GOOD THE INTEREST RATE CHARGED BY THE 47 BANK IS LESS. TO SHOW THAT THE LOAN OF THE BANK T O MDPL IS VERY MEAGER COMPARED TO THE VALUE OF THE PROPERTY, A VALUATION REPORT VALUING THE PROPERTY AT RS 250 CRORE WAS OBTAINED IN 2008. THIS VALUATION REPORT WAS IN THE BANK FILE OF MDPL AND WAS SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. HE SUBMITTED THAT T HIS VALUATION WAS NOT FOR THE PURPOSE OF ACQUIRING THE ASSET BUT ONLY FOR THE PURPOSE OF BANK. THE SAME HAS BEEN OBTAINED BY GHODAWAT GROUP MU CH AFTER THE ACQUISITION OF MDPL. HOWEVER, SINCE THE AO HAS NO T MADE ADDITION ON THE BASIS OF THIS REPORT, THEREFORE, THE SAME HAS T O BE DISCARDED AND THE OBSERVATION THAT PROPERTY WORTH RS 250 CRORE B ELONGING TO M.D PROPERTIES PVT. LTD WAS ACQUIRED BY MERE TRANSFER OF SHARE OF M.D PROPERTIES PVT. LTD BY VIRWANI FAMILY TO GHODAWAT F AMILY AT FACE VALUE IS INCORRECT. 32.1 HE SUBMITTED THAT A REFERENCE U/S 142A WAS MAD E BY THE AO ON 22-12-2010 TO THE DVO FOR ASCERTAINING THE FMV AS O N 06-10-2007 OF THE PROPERTY OWNED BY M. D PROPERTIES PVT. LTD AND ADOPTING THE SAME TO ASCERTAIN THE FMV OF SHARES OF M. D PROPERTIES PVT. LTD BY RECASTING THE BALANCE SHEET OF M.D PROPERTIES PVT. LTD AS AT 06-10-2007. THE DVO DETERMINED THE FMV OF THE PROPERTY AS ON 06/10/2007 AT RS. 106.78CR AND ACCORDINGLY ON RECASTING THE BALAN CE SHEET AS ON 06-10- 2007 THE FMV OF EACH SHARE OF FACE VALUE OF RS.10 O F M.D. PROPERTIES WAS CALCULATED AT RS.7927.60. STRONGLY CHALLENGING THE METHOD ADOPTED BY THE DVO FOR VALUATION OF THE PROPERTY THE LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE DVO, BANGALORE HAS USED THE RENT CAPITALIZATION METHOD TO DETERMINE VALUE OF PROPER TY AS ON 06/10/2007, WHEREAS, DVO, MUMBAI IN RESPECT OF 3 OF OTHER TENAN TED PROPERTIES 48 OWNED BY ANOTHER GROUP COMPANY HAS USED THE COMPARA BLE SALE INSTANCES TO ARRIVE AT THE VALUE OF PROPERTY. 32.2 HE SUBMITTED THAT THE DVO, BANGALORE HAD VALUE D THE SAME BUILDING ON COMPARABLE SALE INSTANCES VIDE REPORT D ATED 28-07-2010 FOR VALUATION AS ON 24-01-2005 WHEN AT THAT TIME ALSO T HE PROPERTY WAS OCCUPIED BY THE SAME TENANT AT THE SAME TERMS AND C ONDITIONS. HE SUBMITTED THAT THE ASSESSING OFFICER, BEFORE OBTAIN ING THE DVOS REPORT, HAD VALUED THE PROPERTY ON RENT CAPITALISATION METH OD AND THE DVO HAS SUBSEQUENTLY JUST RATIFIED IT. HE SUBMITTED THAT T HOUGH THE REFERENCE GIVEN BY THE ASSESSING OFFICER VIDE LETTER DATED 07 /10/2010 TO VALUE THE PROPERTY AS ON MARCH 31 EVERY YEAR FROM 2003 TO 200 9 TO THE DVO WAS PENDING WITH HIM, HOWEVER, HE HAS PROMPTLY ACTED UP ON ANOTHER REFERENCE GIVEN TO HIM BY THE ASSESSING OFFICER VID E LETTER DATED 22/12/2010 TO VALUE THE PROPERTY AS ON 06/10/2007. HE SUBMITTED THAT A LETTER DATED 31/12/2010 WAS SUBMITTED TO THE ADDL. CIT, CENTRAL RANGE 1, PUNE REQUESTING HIM TO ISSUE NECESSARY DIRECTION U/S 144 A TO THE ASSESSING OFFICER IN RESPECT OF THE PROPOSED ACTION OF THE ASSESSING OFFICER TO RECAST THE BALANCE SHEET OF MDPL TO VALUE THE SH ARES. IT WAS ALSO REQUESTED THAT THE ASSESSMENT ORDER SHOULD BE FRAME D BY FOLLOWING RULES OF NATURAL JUSTICE, EQUITY AND GOOD CONSCIENCE AND NOT BY WILD ESTIMATES, GUESS WORK AND PRESUMPTIONS AND ASSUMPTIONS. HOWEVE R, THIS REQUEST WAS ALSO UNHEEDED TOO. 32.3 HE SUBMITTED THAT DURING THE COURSE OF SEARCH NOT A SINGLE DOCUMENT WAS FOUND TO SHOW THAT THE ASSESSEE HAD MA DE ANY PAYMENT OVER AND ABOVE THAN RECORDED IN THE BOOKS OF ACCOUN T. THE STATEMENT OF THE VENDORS WAS ALSO RECORDED BY THE INVESTIGATION WING AND THEY HAVE 49 CONFIRMED THAT THEY HAVE NOT RECEIVED ANY CONSIDERA TION OVER AND ABOVE THAT WAS PAID BY CHEQUE. 32.4 HE SUBMITTED THAT REFERENCE U/S.142A WAS MADE IN THE CASE OF M. D. PROPERTIES PVT. LTD. AND NOT IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAD INVESTED IN SHARES OF M.D. PROPERTIES PVT. LTD. AND NOT IN THE PROPERTY OF M. D. PROPERTIES PVT. LTD. HE SUBMITTE D THAT THERE IS NO PROVISION IN THE INCOME TAX ACT TO RECAST THE BALAN CE SHEET OF A COMPANY TO DETERMINE ITS FAIR MARKET VALUE. DEEMIN G FICTION CONTAINED IN SECTION 69B CANNOT BE DEEMED FURTHER BY ARRIVING VALUE OF AN ASSET OWNED BY COMPANY. THE LEGAL FICTIONS ARE C REATED ONLY FOR A DEFINITE PURPOSE AND THEY ARE LIMITED TO THE PURPOS E FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYOND THEIR LEG ITIMATE FIELD. IT IS NOT PERMISSIBLE TO IMPOSE A SUPPOSITION ON A SUPPOSITIO N. IT IS ALSO NOT PERMISSIBLE TO SUBJOIN OR TACK A FICTION ON FICTION . 32.5 HE SUBMITTED THAT RULE 11U AND 11UA SPECIFY TH E RULES FOR DETERMINING THE FAIR MARKET VALUE OF SHARES. AS PE R RULE 11UA(C)(B) THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARE SHALL BE ON THE BASIS OF THE BOOK VALUE OF THE ASSETS AND LIABILITIES OF THE COM PANY. SINCE THE ASSESSEE HAS PURCHASED EQUITY SHARES WHICH ARE UNQU OTED, THEREFORE, FOLLOWING RULE 11UA(C)(B), NO ADDITION CAN BE MADE AS THE INVESTMENT MADE BY THE ASSESSEE IS AT THE BOOK VALUE. HE SUB MITTED THAT THE SHARES OF MDPL WERE TRANSFERRED ON SIGNING THE MOU ON 24/0 1/2005 AND THE TRANSFER WAS REGISTERED ON 06/10/2007. THEREFORE, T HE ACTUAL DATE IS 24/01/2005 AND THERE IS NO TRANSACTION ON 06/10/200 7 WHICH IS ALSO BORNE OUT FROM THE DOCUMENTS SEIZED DURING THE COUR SE OF SEARCH. 50 32.6 REFERRING TO THE FOLLOWING DECISIONS HE SUBMIT TED THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND TO SHOW THAT AS SESSEE HAS PAID ANY EXTRA MONEY OVER AND ABOVE THE DOCUMENTED PRICE, NO ADDITION U/S.69B CAN BE MADE : I. CIT VS. DINESH JAIN (HUF) 352 ITR 629 (DELHI) II. CIT VS. AGILE PROPERTIES (P) LTD. 45 TAXMANN.COM 512 (DELHI) III. CIT VS. ABHINAV KUMAR MITTAL 30 TAXMANN.COM 35 7 (DELHI) IV. CIT VS. BAJRANG LAL BANSAL ITA NO.182/2010 ORDE R DATED 20-08- 2010 (DELHI) 32.7 REFERRING TO THE DECISION OF HONBLE GUJARAT H IGH COURT IN THE CASE OF ME & MUMMY HOSPITAL VS. ACIT REPORTED IN 45 TAXMANN.COM 248 (GUJ.), HE SUBMITTED THAT IT IS ONLY WHEN ON BA SIS OF MATERIAL AVAILABLE ON RECORD, THE ASSESSING OFFICER FORMS AN OPINION THAT PROVISIONS OF SECTION 69, 69A OR 69B WOULD APPLY TO ASSESSEES CASE, HE CAN RESORT TO PROVISIONS OF SECTION 142A FOR ESTIMA TING VALUE OF SUCH INVESTMENT OR EXPENDITURE. HOWEVER, ASSESSING OFFI CER CANNOT CALL FOR REPORT OF VALUER U/S.142A MERELY TO DETERMINE WHETH ER THERE HAS BEEN ANY UNEXPLAINED INVESTMENT OR EXPENDITURE. HE ACCO RDINGLY SUBMITTED THAT THERE CANNOT BE ANY ADDITION U/S.69B AND THE A DDITION HAS TO BE DELETED AS NOTHING WAS FOUND DURING THE COURSE OF S EARCH OF ANY EXTRA CONSIDERATION PAID TO THE VIRWANIES. 33. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT T HE FIRST MOU WAS ENTERED INTO BETWEEN GODAWAT GROUP AND THE VIRWANI GROUP ON 01-07- 2004 WHICH WAS SEIZED DURING THE COURSE OF SEARCH. IT HAS BEEN CLEARLY MENTIONED IN THE SAID DOCUMENT THAT THE BASIC PURPO SE WAS TO TRANSFER THE SAID PROPERTY TO GHODAWAT GROUP BY INITIALLY TRANSF ERRING THE SHARES OF 51 M.D. PROPERTIES PVT. LTD. TO THE MEMBERS OF THE GHO DAWAT GROUP AT FACE VALUE FOR A TOTAL CONSIDERATION OF RS.10 LAKHS. HE SUBMITTED THAT THE SECOND MOU WAS SIGNED ON 24-01-2005. HOWEVER, THE SHARES WERE TRANSFERRED ON 06-10-2007. THUS, TILL 06-10-2007 T HERE WAS ONLY SHARE APPLICATION MONEY. HE SUBMITTED THAT IN THE SECOND MOU NO DATES ARE SPECIFIED EXCEPT STATING THAT MR. SANJAY GHODAWAT W OULD BRING MONEY, OPERATE BANK ACCOUNT, RECEIVE THE RENTAL ETC. HE S UBMITTED THAT IGNORING THE CORPORATE ENTITY NORMS, THE MOU WAS SIGNED LIKE AN AGREEMENT BETWEEN 2 INDIVIDUALS WHICH IS VERY SKETCHY. REFER RING TO PAGE 24 TO 31 OF THE PAPER BOOK, THE LD. DEPARTMENTAL REPRESENTAT IVE DREW THE ATTENTION OF THE BENCH TO THE DETAILS OF CHEQUES PA ID TOWARDS PURCHASE OF SHARES. HE SUBMITTED THAT THE LD.CIT(A) HAD GIVEN AN OBSERVATION THAT THE ENTIRE MONEY WAS PAID IN F.Y. 2004-05. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE PROVISIONS OF SEC TION 56(2) AND SECTION 11UA ARE NOT APPLICABLE TO THE PRESENT ASSESSMENT Y EAR SINCE IT CAME TO THE STATUTE BOOK W.E.F. 01-10-2009. HE SUBMITTED T HAT THE VALUATION OF THE PROPERTY WAS DONE BY THE ASSESSEE AT RS.250 CRO RRES DURING APRIL 2008. THE AO IN PARA 10.14 OF THE ORDER QUANTIFIES AND MAKES ADDITION U/S.69B ON THE BASIS OF VALUATION OF SHARES. HE SU BMITTED THAT THE LD.CIT(A) AT PAGE 46 OF THE ORDER HAS FOLLOWED THE METHOD AVAILABLE UNDER THE WEALTH TAX ACT FOR VALUATION OF THE PROPE RTY. HOWEVER, THERE IS NO PROVISION FOR VALUATION OF UNQUOTED SHARES OR SHARES TRANSFERRED OF A GOING CONCERN UNDER WEALTH TAX ACT OR GIFT TAX. TH E COMPANY HAD ONLY ONE ASSET, I.E. IMMOVABLE PROPERTY WHICH IS GE NERATING RENTAL INCOME OF RS.72.5 LAKHS PER MONTH FOR 5 YEARS. THE REFORE, 5 YEARS RENTAL ACCRUAL IS DEFINITE AT THAT PERIOD. THEREFORE, THE AO WAS JUSTIFIED IN 52 ADOPTING THE RENT CAPITALISATION METHOD FOR DETERMI NING THE FAIR MARKET VALUE OF THE SHARES. HE SUBMITTED THAT THE VALUATI ON ADOPTED BY THE DVO AS PER PAGES 51 TO 52 OF THE PAPER BOOK IS THE CORR ECT METHOD. 33.1 AS REGARDS THE OBSERVATION OF THE LD.CIT(A) TH AT REFERENCE COULD NOT HAVE BEEN MADE BY THE AO FOR VALUATION OF THE P ROPERTY AND THEREFORE ALL SUBSEQUENT PROCEEDINGS ARE VOID IS CO NCERNED, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE INVE STMENT FALLS UNDER THE PROVISIONS OF SECTION 69B. THERE IS NO BAR ON THE PART OF THE ASSESSING OFFICER TO REFER THE MATTER TO THE DVO U/ S.142A. IT IS RELATED TO ASSESSMENT AND SINCE THE PAPER CONTAINING THE VA LUATION OF PROPERTY AT RS.250 CRORES WAS FOUND, THEREFORE, THE ASSESSING O FFICER WAS DUTY BOUND TO REFER THE MATTER TO THE DVO ESPECIALLY WHE N HE IS NOT A TECHNICAL PERSON. 33.2 AS REGARDS THE METHOD OF VALUATION OF THE PROP ERTY IS CONCERNED, HE SUBMITTED THAT PROPERTY HAS BEEN TRANSFERRED AND THAT IS THE ONLY ASSET IN THE BALANCE SHEET, THEREFORE, ALL TANGIBLE AND I NTANGIBLE RIGHTS ATTACHED TO THE PROPERTY ARE TO BE CONSIDERED WHILE VALUING THE SHARES. AS REGARDS THE DATE OF TRANSFER OF THE PROPERTY IS CONCERNED, HE SUBMITTED THAT THE DATE OF REGISTRATION OF THE SHARES IN THE RECORDS O F THE COMPANY IS THE DECIDING FACTOR AND THEREFORE THE SAME HAS TO BE AS SESSED IN THE A.Y.2008-09 AND NOT IN THE A.Y. 2005-06. HE ACCORD INGLY SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BE REVERSED AND THA T OF THE ASSESSING OFFICER BE RESTORED. 34. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT DURING THE COURSE OF SEARCH IN THE GHODAWAT GROUP GENERATION O F UNACCOUNTED 53 MONEY WAS FOUND. THEREFORE, IT IS OBVIOUS THAT SUC H UNACCOUNTED MONEY IS BEING UTILISED FOR PURCHASE OF IMMOVABLE PROPERT Y AND SAME HAS BEEN PASSED ON TO DIFFERENT PERSONS FROM WHOM IMMOVABLE PROPERTY/ASSETS HAVE BEEN PURCHASED AND CASH HAS BEEN PAID OVER AND ABOVE THE CONSIDERATION MENTIONED IN THE SALE DEEDS. HE ACCO RDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT O F THE ASSESSING OFFICER BE RESTORED. 35. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE M/S. GOLFLINK SOFTWARE PARK PVT. LTD. (GSPPL) BELONGING TO VIRWANI GROUP OF BANGALORE HAVE CONSTRUCTED A PROPERTY KNOWN AS G OLFLINK SOFTWARE PARK, TOWER-A PINEHURST ADMEASURING 2.5 LAKHS SQ. FT. AT SURVEY NO.6, CHALLAGHATTA, BANGALORE. THE OCCUPATION CERTIFICA TE FOR THE SAID PROPERTY WAS RECEIVED ON 16-04-2004. AT THE START OF CONSTRUCTION ITSELF, M/S. GSPPL HAD ENTERED INTO A LEASE AGREEMENT WITH M/S. FIDELITY INFORMATION SYSTEMS (I) CO. PVT. LTD., (M/S. FISCPL ) IN THE LATTER HALF OF THE YEAR 2004. THERE IS ALSO NO DISPUTE TO THE FAC T THAT AT THE CONSTRUCTION STAGE ITSELF, THE GHODAWAT GROUP HAD EXPRESSED ITS DESIRE TO BUY THE SAID PROPERTY FOR WHICH LEASE RENTAL INCOME OF RS.72.54 LAKHS PER MONTH FROM M/S. FISCPL WAS ASSURED FOR A PERIOD OF THE NEXT 5 YEARS. 35.1 AS PER THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH ACTION, THE GHODAWAT GROUP HAVE ENTERED INTO AN MOU DATED 0 1-07-2004 WITH VIRWANI GROUP ACCORDING TO WHICH THE BASIC PURPOSE IS TO TRANSFER THE SAID PROPERTY TO THE FORMER BY INITIALLY TRANSFERRI NG IT FROM M/S. GSPPL 54 TO ANOTHER CONCERN OF VIRWANI GROUP, I.E. M/S.M.D. PROPERTIES PVT. LTD. AND THEREAFTER TRANSFERRING SHARES OF M.D. PROPERTI ES PVT. LTD., TO THE MEMBERS OF GHODAWAT GROUP AT FACE VALUE FOR A TOTAL CONSIDERATION OF ONLY RS.10 LAKHS. IN THIS MOU IT HAS ALSO BEEN STA TED THAT THE BANK ACCOUNT OPERATION, RECEIVING OF LEASE RENTALS, APPO RTIONING OF FUNDS ETC. WILL BE HANDLED BY THE GHODAWAT GROUP. IT HAS ALSO BEEN STIPULATED IN THIS MOU THAT GHODAWAT GROUP HAS A RIGHT TO USE THE PROPERTY PAPERS TO AVAIL ANY LOAN ETC. THERE IS ALSO ONE SUBSEQUENT M OU DATED 24-01-2005 BETWEEN THESE TWO GROUPS ACCORDING TO WHICH THE SAI D PROPERTY HAS BEEN REGISTERED IN THE NAME OF M/S. M.D. PROPERTIES PVT. LTD. AND THE OWNERSHIP OF WHICH WILL SUBSEQUENTLY BE TAKEN OVER BY GHODAWAT GROUP. IT HAS FURTHER BEEN STATED THAT THE SHARES OF M.D. PROPERTIES PVT. LTD., ALONG WITH BLANK SHARE TRANSFER DEEDS DULY SIGNED B Y THE THEN SHAREHOLDERS OF M.D. PROPERTIES PVT. LTD. WILL BE H ANDED OVER TO GHODAWAT GROUP AND THE RENTAL INCOME WILL ALSO BELO NG TO GHODAWAT GROUP. THERE IS ALSO NO DISPUTE TO THE FACT THAT T HE ASSESSEE HAS PAID RS.9.50 LAKHS BEING THE CONSIDERATION FOR 95000 EQU ITY SHARES IN THE MONTH OF FEBRUARY, 2005. 35.2 ACCORDING TO THE ASSESSING OFFICER THE TRANSAC TION OF PURCHASE OF SHARES OF M.D. PROPERTIES PVT. LTD. IS A SHAM TRAN SACTION AND IS DONE FOR AVOIDING OF TAX AS IT INVOLVED THE TRANSFER OF PROP ERTY WORTH RS.250 CRORES BELONGING TO M.D. PROPERTIES PVT. LTD. BY ME RE TRANSFER OF SHARE OF M.D. PROPERTIES PVT. LTD. BY VIRWANI FAMILY TO G HODAWAT FAMILY AT FACE VALUE. THE ASSESSING OFFICER, THEREFORE, REFE RRED THE MATTER U/S.142A TO THE DVO FOR ASCERTAINING THE FAIR MARKE T VALUE AS ON 06-10- 2007. THE DVO DETERMINED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 55 06-10-2007 AT RS.106.78 CRORES. ACCORDINGLY, THE A SSESSING OFFICER RECASTED THE BALANCESHEET AS ON 06-10-2007 AND DETE RMINED THE VALULE OF EACH SHARE OF M.D. PROPERTIES PVT. LTD. AT RS.7927. 60 AS AGAINST THE BOOK VALUE PER EQUITY SHARE OF RS.610.83 (FACE VALUE RS. 10/-). THE ASSESSING OFFICER ACCORDINGLY CALCULATED THE VALUE OF 95000 S HARES HELD BY MR. SANJAY GHODAWAT AT RS.75,31,22,000/- WHICH WAS OBTA INED BY HIM ONLY AT RS.9,50,000/-. HE ACCORDINGLY MADE ADDITION OF RS.75,21,72,000/- AS THE DEEMED INCOME OF THE ASSESSEE U/S.69B OF THE I. T. ACT. 35.3 WE FIND IN APPEAL THE LD.CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT COMPETENT TO REFER THE MATTER TO THE DVO U/ S.142A AND ADOPT THE VALUE OF THAT ASSET IN FINDING OUT THE BOOK VAL UE OF SHARES IN M.D. PROPERTIES PVT. LTD AND THEREFORE THAT ACTION IS IL LEGAL AND VOID AND DOES NOT CALL FOR ANY ADDITION IN A.Y. 2008-09. HOWEVER , HE HELD THAT THE TRANSFER OF SHARES OF M.D. PROPERTIES PVT. LTD. TOO K PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2005-06. HE FURTHER OBSERVED THAT ALTHOUGH THE MOU DATED 24-01-2005 IS NOT A SHAM DOCUMENT IN ENTI RETY, HOWEVER THE SAME WAS AN UNRELIABLE DOCUMENT SINCE IT DOES NOT R EVEAL THE TRUE WORTH OF THE CLOSELY HELD PRIVATE LIMITED COMPANY, I.E. M /S. M.D PROPERTIES PVT. LTD. ACCORDING TO HIM, THE SAID MOUS ARE UNRE LIABLE BECAUSE IT APPLIES THE FORMULA WITHOUT STATING OF ARRIVING AT THE NET WORTH OF A COMPANY BY APPLYING THE LIQUIDATION APPROACH TO VAL UATION. ACCORDING TO HIM, IT IS NOT POSSIBLE TO ARRIVE AT THE FAIR MA RKET VALUE OF SHARES OF A PRIVATELY HELD UNTRADING COMPANY AND THEREFORE A RE ASONABLE ATTEMPT CAN BE MADE TO ARRIVE AT THE FAIR VALUE OF SHARES OF SU CH A COMPANY. AFTER APPLYING THE TEST OF PREPONDERANCE OF PROBABILITIES AND PRESUMING THE EXISTENCE OF A FACT WHICH IS MOST LIKELY TO HAVE OC CURRED HAVING REGARD TO 56 THE COMMON COURSE OF NATURAL EVENTS, HUMAN CONDUCT AND PRIVATE BUSINESS IN RELATION TO THE FACTS OF THE CASE HE HE LD THAT PROVISIONS OF SECTION 69B ARE CLEARLY APPLICABLE. THEREFORE, THE LD.CIT(A), APPLYING THE CAPITALISATION MULTIPLIER OF 5 AS PER THE CCI F ORMULA, DETERMINED THE ADDITION OF RS.16,12,62,000/- AND DIRECTED THE SAM E TO BE ADDED U/S.69B IN THE A.Y. 2005-06. 35.4 IT IS THE CONTENTION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT THE GHODAWAT GROUP AT THE CONSTRUCTION STAGE ITSELF HAS EXPRESSED ITS DESIRE TO BUY THE PROPERTY. THE MOUS DATED 01-07-2004 AND 24-01-2005 REFERRED TO IN THE ORDER ARE AS A RESULT OF THIS IN TENTION. AS PER THE TERMS OF THE MOU DATED 24-01-2005 THE GHODAWAT GROUP HAS PAID RS.9,50,000/- BEING CONSIDERATION FOR 95000 EQUITY SHARES @10/- EACH TO THE ERSTWHILE HOLDERS OF M.D. PROPERTIES PVT. LTD. ON 23-02-2005. SINCE THE INVESTMENT IS MADE IN A.Y. 2004-05 ITSELF THE P ROVISIONS OF SECTION 69B CANNOT BE APPLIED TO F.Y. 2007-08 RELEVANT TO A .Y. 2008-09 SINCE AS PER THE MOU DATED 24-01-2005 SHARES OF M.D. PROPERT IES PVT. LTD. ALONG WITH BLANK TRANSFER SHARE DEEDS DULY SIGNED BY THE THEN SHAREHOLDERS OF M.D. PROPERTIES PVT. LTD. WERE HANDED OVER TO GHODA WAT GROUP. THEREFORE, EFFECTIVELY GHODAWAT GROUP BECAME THE OW NERS OF M.D. PROPERTIES PVT. LTD. ON 23-02-2005 AND NOT ON 06-10 -2007 WHEN THE SHARES ARE REGISTERED. ACCORDING TO HIM THE DEPART MENT HAS REFERRED THE PROPERTY OF M.D. PROPERTIES PVT. LTD. TO THE DVO FO R ASCERTAINING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 24-01-2005 AND THE DVO HAS VALUED THIS PROPERTY VIDE VALUATION REPORT DATED 28 -01-2010 FOR RS.40 CRORES. ACCORDING TO HIM SINCE M.D. PROPERTIES PVT . LTD. HAS PURCHASED THIS PROPERTY FOR RS.39 CRORES AND HAS ALSO TAKEN O VER THE LIABILITY OF 57 RS.4.35 CRORES BEING DEPOSIT OF FIDELITY, THE LESSE E AND HAS ALSO AVAILED LOAN FROM HDFC BANK PVT. LTD., THEREFORE, WHEN GHOD AWAT GROUP BECAME THE OWNER OF M.D. PROPERTIES PVT. LTD. AS PE R THE TERMS OF MOU DATED 24-01-2005 THE FAIR MARKET VALUE OF SHARES OF M.D. PROPERTIES PVT. LTD. AS ON 23-02-2005 WILL BE THE VALUE OF THE PROP ERTY PURCHASED FOR RS.39 CRORES LESS LOAN FROM HDFC BANK AND THE SECUR ITY DEPOSIT FROM THE LESSEE. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DURING THE COURSE OF SEARCH NO DOCUMENT WAS FO UND TO SHOW THAT ASSESSEE HAD MADE ANY PAYMENT OVER AND ABOVE THAT H AS BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE STATEMENT OF THE VEND OR WAS ALSO RECORDED BY THE INVESTIGATION WING AND THEY HAVE ALSO CONFIR MED THAT THEY HAVE NOT RECEIVED ANY CONSIDERATION OVER AND ABOVE WHAT WAS PAID BY CHEQUE. FURTHER, REFERENCE WAS MADE U/S.142A OF THE I.T. AC T IN THE CASE OF M.D. PROPERTIES PVT. LTD. AND NOT IN THE CASE OF THE ASS ESSEE. ACCORDING TO LD. AUTHORISED REPRESENTATIVE, THE ASSESSEE HAD INVESTE D IN SHARES OF M.D. PROPERTIES PVT. LTD AND NOT IN THE PROPERTY OF M.D. PROPERTIES PVT. LTD. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THERE IS NO PROVISION IN THE I.T. ACT TO RECAST THE BALANCESHEET OF A COMPANY TO DETERMINE THE FAIR MARKET VALUE. ACCORDING TO HIM DEEMING FICTION CON TAINED UNDER SECTION 69B CANNOT BE DEEMED FURTHER BY ARRIVING AT THE VAL UE OF AN ASSET OWNED BY A COMPANY. FURTHER RULE 11U AND 11UA SPECIFIES THE FORMULA FOR DETERMINING THE FAIR MARKET VALUE OF SHARES AND AS PER RULE 11UA(C)(B) THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARE WAS ON THE BASIS OF THE BOOK VALUE OF THE ASSETS AND LIABILITY OF THE COMPA NY. THEREFORE, NO ADDITION CAN BE MADE SINCE THE ASSESSEE HAS PURCHAS ED EQUITY SHARES WHICH ARE UNQUOTED AND THE SHARES ARE PURCHASED AT BOOK VALUE. 58 35.5 WE FIND FORCE IN THE ABOVE ARGUMENTS OF THE LD . COUNSEL FOR THE ASSESSEE. ADMITTEDLY, THE VALUATION REPORT VALUING THE PROPERTY AT RS.250 CRORES FOUND DURING THE COURSE OF SEARCH WAS NOT AC TED UPON BY THE ASSESSING OFFICER SINCE HE HAS NOT CONSIDERED THE S AME FOR MAKING ANY ADDITION. THEREFORE, WE ARE NOT CONCERNED WITH THE SAME. AS PER THE REPORT OF THE DVO, BANGALORE DATED 28-01-2010, THE FAIR MARKET VALUE OF THE PROPERTY AS ON 24-01-2005 WAS ARRIVED AT RS.40 CRORES. A COPY OF THE SAME IS PLACED AT PAGES 41 TO 46 OF THE PAPER B OOK. THE SAME WAS BASED ON THE BASIS OF SALE INSTANCES. NO DOCUMENT WHATSOEVER WAS FOUND DURING THE COURSE OF SEARCH TO SHOW THAT ASSE SSEE HAD MADE ANY PAYMENT OVER AND ABOVE THAT RECORDED IN THE BOOKS O F ACCOUNT. THE STATEMENT OF THE VENDORS WERE RECORDED DURING THE C OURSE OF SEARCH BY THE INVESTIGATION WING AND THEY HAVE ALSO CONFIRMED THAT THEY HAVE NOT RECEIVED ANY CONSIDERATION OVER AND ABOVE THAT WAS PAID BY CHEQUE. ALTHOUGH THE ASSESSEE ALONG WITH HIS WIFE HAD ACQUI RED THE SHARES OF M.D. PROPERTIES PVT. LTD. FOR A CONSIDERATION OF RS .10 LAKHS, AT THE SAME TIME, IT HAS ALSO TAKEN OVER THE LIABILITIES OF THE COMPANY DUE TO HDFC BANK LTD AT RS.38.90 CRORES. THEREFORE, IT IS WRON G TO SAY THAT THE ASSESSEE HAS ACQUIRED THE PROPERTY AT RS.10 LAKHS. WHEN THE ASSESSEE ENTERED INTO THE MOU WITH THE VIRWANI GROUP FOR ACQ UISITION OF THE PROPERTY, THE FAIR MARKET VALUE DETERMINED BY THE D VO ON THE BASIS OF COMPARATIVE SALE INSTANCE WAS RS.40 CRORES AS ON 24 -01-2005. THEREFORE, IT CANNOT BE SAID THAT THERE WAS HUGE EV ASION OF TAX OR THE TRANSACTION IS CLANDESTINE. 59 35.6 IT HAS BEEN HELD IN VARIOUS JUDICIAL DECISIONS THAT UNLESS THERE IS ANY MATERIAL THAT ASSESSEE HAD INVESTED MORE THAN W HAT WAS RECORDED IN BOOKS OF ACCOUNT, PROVISIONS OF SECTION 69B CANNOT BE INVOKED. 35.7 WE FIND IN THE CASE OF CIT VS. DINESH JAIN HUF REPORTED IN 352 ITR 629 CERTAIN MATERIAL WAS SEIZED DURING THE COUR SE OF SEARCH WHICH REVEALED THAT ASSESSEE HAD PURCHASED A FLAT FOR RS. 17.55 LAKHS AND THE FLAT WAS FETCHING THE RENTAL INCOME OF RS.7.02 LAKHS PER ANNUM. THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF UNEXP LAINED INVESTMENT ON THE GROUND THAT A PROPERTY WHICH WAS FETCHING SU CH A SUBSTANTIAL RENTAL INCOME COULD NOT BE ACQUIRED WHICH IS FOR RS .17.55 LAKHS. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT THE FA IR MARKET VALUE OF THE PROPERTY SHOULD BE ESTIMATED IN ACCORDANCE WITH RUL E 3 SCHEDULE (III) OF THE WEALTH TAX ACT, 1957. ACCORDINGLY THE DIFFEREN CE BETWEEN THE VALUE OF THE PROPERTY CALCULATED IN ACCORDANCE WITH THE S AID RULE AND THE AMOUNT SHOWN IN THE SALE DOCUMENT WHICH CAME TO RS. 65.32 LAKHS WAS ASSESSED AS UNEXPLAINED INVESTMENT. IN APPEAL THE LD.CIT(A) UPHELD THE VIEW TAKEN BY THE ASSESSING OFFICER IN PRINCIPLE. HOWEVER, HE GAVE PARTIAL RELIED ON ACCOUNT OF THE ADDITION. THE TRI BUNAL DELETED THE ENTIRE ADDITION. ON FURTHER APPEAL BY THE REVENUE THE HON BLE HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL BY OBSERVING AS UN DER : 7. WE SHOULD HAVE THOUGHT THAT THE QUESTION IS CONCLUD ED BY THE JUDGMENTS CITED ABOVE, BOTH OF THE SUPREME COURT AND OF THIS COURT, BUT THE CONTENTION OF MR. SABHARWAL FOR THE REVENUE IS THAT WHERE THE FACTS AND CIRCUMSTANCES PERMIT AN INFERENCE OF UNDERSTA TEMENT OF CONSIDERATION, IT IS NOT NECESSARY TO LOOK FOR DIRECT E VIDENCE OF UNDERSTATEMENT WHICH, IN THE VERY NATURE OF THINGS, I S IMPOSSIBLE TO OBTAIN. HE POINTS OUT TO WHAT HE DESCRIBES AS 'DISPROPOR TIONATELY HIGH RETURNS FOR THE INVESTMENT' IN THE PROPERTIES - T HE RENTAL INCOME IS 40% OF THE INVESTMENT IN THE FIRST YEAR, AND THAT W OULD NOT HAVE BEEN POSSIBLE UNLESS A MUCH HIGHER AMOUNT THAN WHAT WAS DECLARED HAD BEEN INVESTED BY THE ASSESSEE. THE RETURNS, ACCORDING TO HIM, ARE SO HIGH THAT THEY SHOCK THE CONSCIENCE OF THE COURT. H E CONTENDS THAT JUDICIAL NOTICE CAN BE TAKEN NOTE OF THE FEET, UNDE R SECTION 57 OF THE 60 EVIDENCE ACT, THAT NOTIFICATIONS HAVE BEEN ISSUED UNDE R SECTION 75 OF THE STAMP ACT PRESCRIBING CIRCLE RATES FOR THE PROPER TIES AND RARELY DO PROPERTIES GET TRANSFERRED FOR SUCH RATES. 8. THESE ARGUMENTS ARE CERTAINLY ATTRACTIVE BUT THE L ANGUAGE EMPLOYED BY SECTION 69B IS THE FIRST STUMBLING BLOCK W HICH MR. SABHARWAL HAS TO OVERCOME. THE SECTION IS IN THE FOLLO WING TERMS: 'SECTION 69B - AMOUNT OF INVESTMENTS, ETC., NOT FUL LY DISCLOSED IN BOOKS OF ACCOUNT. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTM ENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY, OR OTHER VALUABLE ARTICLE, AND THE ASSESSING OFFICER FINDS THAT THE AMOUN T EXPENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUCH BULLION, J EWELLERY OR OTHER VALUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED I N THIS BEHALF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUC H EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE EXCESS AMOUNT MAY BE D EEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR.' THE SECTION IN TERMS REQUIRES THAT THE ASSESSING OFFICER H AS TO FIRST 'FIND' THAT THE ASSESSEE HAS 'EXPENDED' AN AMOUNT WHICH HE HAS NOT FULLY RECORDED IN HIS BOOKS OF ACCOUNT. IT IS ONLY THE N THAT THE BURDEN SHIFTS TO THE ASSESSEE TO FURNISH A SATISFACTORY EXPLANATION . TILL THE INITIAL BURDEN IS DISCHARGED BY THE ASSESSING OFFICER, TH E SECTION REMAINS DORMANT. 9. A 'FINDING' OBVIOUSLY SHOULD REST ON EVIDENCE. IN T HE PRESENT CASE, IT IS COMMON GROUND THAT NO INCRIMINATING MATERIAL W AS SEIZED DURING THE SEARCH WHICH REVEALED ANY UNDERSTATEMENT O F THE PURCHASE PRICE. THAT IS PRECISELY THE REASON WHY THE ASSE SSING OFFICER HAD TO RESORT TO RULE 3 OF SCHEDULE III TO THE WEALT H TAX ACT. THIS RULE DOES NOT EVEN CLAIM TO ESTIMATE THE 'FAIR MARKET VALU E' OF AN ASSET; IT MERELY LAYS DOWN A PROCEDURE FOR COMPUTING THE VALUE OF AN ASSET FOR THE PURPOSES OF THE WEALTH TAX ACT. THE SCHEDULE DERI VES ITS AUTHORITY FROM SECTION 7(1) OF THE WEALTH TAX ACT. THE SECTION, AS IT NOW STANDS, HAS DROPPED ALL PRETENSIONS TO ASCERTAINING T HE FAIR MARKET VALUE OF AN ASSET FOR THE PURPOSES OF THE WEALTH TAX ACT. PRIOR TO THE AMENDMENT MADE W.E.F 1-4-1989 THE SECTION PRO VIDED FOR THE ESTIMATION OF THE FAIR MARKET VALUE OF AN ASSET ON THE PRINCIPLE OF WHAT IT WOULD FETCH IF SOLD IN THE OPEN MARKET. THIS INVOLVED AN ASSUMPTION OF AN OPEN MARKET, BE IT FICTIONAL, A WILL ING SELLER AND A WILLING BUYER, ALL FICTIONAL. THIS FICTION FACILITAT ED A REALISTIC ESTIMATION OF THE FAIR MARKET VALUE OF THE PROPERTY, AND IT MO VED WITH THE UPS AND DOWNS OF THE MARKET. NOT ANYMORE. FROM 1-4-1989, THE VALUE WAS FROZEN. FOR ALL TIMES TO COME, AN IMMOVABLE PROPE RTY THAT FETCHES RENT SHALL BE VALUED AT 12.5 TIMES THE NET MAI NTAINABLE RENT. 10. THERE IS A FUNDAMENTAL FALLACY IN INVOKING THE P ROVISIONS OF THE WEALTH TAX ACT TO THE APPLICATION OF SECTION 69B OF THE INCOME TAX ACT, NOTWITHSTANDING THAT BOTH THE ACTS ARE COGNATE A ND HAVE EVEN BEEN SAID TO CONSTITUTE AN INTEGRATED SCHEME OF TAXATI ON. UNDER THE INCOME TAX ACT, WE ARE TO FIND WHAT WAS THE REAL AN D ACTUAL CONSIDERATION PAID BY THE ASSESSEE AND WHETHER THE FULL CONSIDERATION HAS BEEN RECORDED IN THE BOOKS. UNDER SECTION 7(1) OF THE WEALTH TAX ACT AS IT STOOD BEFORE 1 -4-1989, WE ARE TO ESTIMATE T HE FAIR MARKET VALUE OF THE ASSET; AFTER THIS DATE, IT IS NOT EVEN ESTI MATION OF THE FAIR MARKET VALUE, BUT COMPUTATION OF THE VALUE OF THE A SSET ON THE BASIS OF CERTAIN RULES PRESCRIBED BY THE STATUTE. IF A DIES LEAV ING PRIME PROPERTY IN CONNAUGHT PLACE TO HIS SON B, B PAYS NOTH ING FOR THE 61 PROPERTY; THE PROPERTY MAY COMMAND A MARKET PRICE O F SEVERAL CRORES. IF 'A', BECAUSE OF HIS LOVE AND AFFECTION FOR 'B', SELLS THE PROPERTY FOR RUPEE ONE TO 'B'; IN THIS CASE, THE CON SIDERATION PAID IS ONLY RUPEE ONE, THOUGH THE PROPERTY IS WORTH SEVERAL MILLIONS. IF THE ASSESSING OFFICER HAVING JURISDICTION OVER 'B' HAS TO MAK E AN ADDITION UNDER SECTION 69B, HE CAN DO SO ONLY IF HE 'FINDS' THA T B HAS 'EXPENDED' MONEY WHICH HE HAS NOT FULLY RECORDED IN THIS BOOKS OF ACCOUNT; HE CANNOT MAKE ANY ADDITION MERELY BECAUSE THE PROPERTY COULD FETCH SEVERAL CRORE OF RUPEES IN THE MARKET. 11. SECTION 69B DOES NOT PERMIT AN INFERENCE TO BE DRAWN FROM THE CIRCUMSTANCES SURROUNDING THE TRANSACTION THAT THE PURC HASER OF THE PROPERTY MUST HAVE PAID MORE THAN WHAT WAS ACTUALLY R ECORDED IN HIS BOOKS OF ACCOUNT FOR THE SIMPLE REASON THAT SUCH AN INF ERENCE COULD BE VERY SUBJECTIVE AND COULD INVOLVE THE DANGEROUS CONSEQ UENCE OF A NOTIONAL OR FICTIONAL INCOME BEING BROUGHT TO TAX C ONTRARY TO THE STRICT PROVISIONS OF ARTICLE 265 OF THE CONSTITUTION OF INDIA AND ENTRY 82 IN LIST I OF THE SEVENTH SCHEDULE THERETO WHICH DEALS WITH 'TA XES ON INCOME OTHER THAN AGRICULTURAL INCOME'. THIS WAS ONE OF THE MAJOR CONSIDERATIONS THAT WEIGHED WITH THE SUPREME COURT HI K.P. VARGHESE (SUPRA) IN WHICH CASE THE PROVISIONS OF SUB-SECTION (2) OF SECTIO N 52 FELL FOR INTERPRETATION. IT WAS OBSERVED THAT PARLIAMENT C ANNOT CHOOSE TO TAX AS INCOME AN ITEM WHICH IN NO RATIONAL SENSE CAN BE RE GARDED AS A CITIZEN'S INCOME OR EVEN RECEIPT. SECTION 52(2) (WHI CH NOW STANDS OMITTED) APPLIED TO THE TRANSFEROR OF PROPERTY FOR A CONSIDERATION THAT WAS LESSER THAN THE FAIR MARKET VALUE BY 15% OR MORE; IN SUCH A CASE, THE ASSESSING OFFICER WAS CONFERRED THE POWER TO ADOPT THE F AIR MARKET VALUE OF THE PROPERTY AS THE SALE PRICE AND COMPUTE THE CAP ITAL GAINS ACCORDINGLY. THE SUPREME COURT HELD THAT IT WAS THE BURDEN OF THE ASSESSING OFFICER TO PROVE THAT THERE WAS UNDERSTATEMENT OF CONSIDERATION AND ONCE THAT BURDEN WAS DISCHARGED IT W AS NOT REQUIRED OF HIM TO PROVE THE PRECISE EXTENT OF UNDERSTATEMENT AND HE COULD ADOPT THE DIFFERENCE BETWEEN THE STATED CONSIDERATION AND T HE FAIR MARKET VALUE OF THE PROPERTY AS THE UNDERSTATEMENT. THE SUB- SECTION WAS HELD TO PROVIDE FOR A 'STATUTORY BEST JUDGMENT' ONCE ACTUAL U NDERSTATEMENT WAS PROVED; IT OBVIATED THE NEED TO PROVE THE EXACT AMO UNT OF UNDERSTATEMENT. ADDITIONAL REASONS FOR THE RESULT WERE (A) THAT THE MARGINAL NOTE TO THE SECTION REFERRED TO 'CASES OF U NDERSTATEMENT'; (B) THE SPEECH OF THE FINANCE MINISTER WHILE INTRODUCING THE PROVISION; AND (C) THE ABSURD OR IRRATIONAL RESULTS THAT WOULD FLOW F ROM A LITERAL INTERPRETATION OF THE SUB-SECTION, WHICH COULD NOT HA VE BEEN INTENDED BY THE LEGISLATURE. 12. WHILE THE OMITTED SECTION 52(2) APPLIED TO THE T RANSFEROR OF THE PROPERTY, SECTION 69B APPLIES TO THE TRANSFEREE - THE PURCHASER - OF THE PROPERTY. IT REFERS TO THE MONEY 'EXPENDED' BY THE A SSESSEE, BUT NOT RECORDED IN HIS BOOKS OF ACCOUNT, WHICH IS A CLEAR REF ERENCE TO UNDISCLOSED INCOME BEING USED IN THE INVESTMENT. APPLYI NG THE LOGIC AND REASONING IN K.P. VARGHESE ( SUPRA} IT SEEMS TO US THAT EVEN FOR THE PURPOSES OF SECTION 69B IT IS THE BURDEN OF THE ASSESSING OFFICER TO FIRST PROVE THAT THERE WAS UNDERSTATEMENT OF THE CONSIDERATI ON (INVESTMENT) IN THE BOOKS OF ACCOUNT. ONCE THAT UNDERVALUATION IS ESTABLISHED AS A MATTER OF FACT, THE ASSESSING OFFICER, IN THE ABSENCE O F ANY SATISFACTORY EXPLANATION FROM THE ASSESSEE AS TO THE SOURCE OF THE UND ISCLOSED PORTION OF THE INVESTMENT, CAN PROCEED TO ADOPT SOME DEPENDAB LE OR RELIABLE YARDSTICK WITH WHICH TO MEASURE THE EXTENT OF UNDERSTA TEMENT OF THE INVESTMENT. ONE SUCH YARDSTICK CAN BE THE FAIR MARKET VALUE OF THE PROPERTY DETERMINED IN ACCORDANCE WITH THE WEALTH T AX ACT. WE HOWEVER CLARIFY THAT THIS COURT IS NOT CONCLUDING THA T SUCH YARDSTICK IS DETERMINATIVE; IN VIEW OF THE FINDINGS ARRIVED AT BY US THAT THE ASSESSING OFFICER DID NOT GATHER FOUNDATIONAL FACTS TO POINT T O UNDERVALUATION THE 62 ADOPTION OF THE NORMS UNDER THE WEALTH TAX ACT IS NOT COMMENTED UPON BY US. 13. THE ERROR COMMITTED BY THE INCOME-TAX AUTHORITIES IN THE PRESENT CASE IS TO JUMP THE FIRST STEP IN THE PROCESS OF APPLYING SECTION 69B - THAT OF PROVING UNDERSTATEMENT OF THE INVESTMENT - AND APP LY THE MEASURE OF UNDERSTATEMENT. IF ANYTHING, THE LANGUAGE EMPLOYED I N SECTION 69B IS IN STRICTER TERMS THAN THE ERSTWHILE SECTION 52(2). IT DOE S NOT EVEN AUTHORISE THE ADOPTION OF ANY YARDSTICK TO MEASURE THE PRECISE EXTENT OF UNDERSTATEMENT. THERE CAN THEREFORE BE NO COMPROMISE IN THE APPLICATION OF THE SECTION. IT WOULD SEEM TO REQUIRE THE ASSESSING OFFICER EVEN TO SHOW THE EXACT EXTENT OF UNDERSTATEMENT OF TH E INVESTMENT; IT DOES NOT EVEN GIVE THE ASSESSING OFFICER THE OPTION OF A PPLYING ANY REASONABLE YARDSTICK TO MEASURE THE PRECISE EXTENT OF U NDERSTATEMENT OF THE INVESTMENT ONCE THE FACT OF UNDERSTATEMENT IS PROV ED. IT APPEARS TO US THAT THE ASSESSING OFFICER IS NOT ONLY REQUIRED TO PRO VE UNDERSTATEMENT OF THE PURCHASE PRICE, BUT ALSO TO SHOW THE PRECISE EXTENT OF THE UNDERSTATEMENT. THERE IS NO AUTHORITY G IVEN BY THE SECTION TO ADOPT SOME REASONABLE YARDSTICK TO MEASURE THE EXTE NT OF UNDERSTATEMENT. BUT SINCE IT MAY NOT BE POSSIBLE IN ALL CASES TO PROVE THE PRECISE OR EXACT AMOUNT OF UNDISCLOSED INVESTMENT, IT I S PERHAPS REASONABLE TO PERMIT THE ASSESSING OFFICER TO RELY ON SO ME ACCEPTABLE BASIS OF ASCERTAINING THE MARKET VALUE OF THE PROPERTY TO ASSESS THE UNDISCLOSED INVESTMENT. WHETHER THE BASIS ADOPTED BY TH E ASSESSING OFFICER IS AN ACCEPTABLE ONE OR NOT MAY DEPEND ON TH E FACTS AND CIRCUMSTANCES OF THE PARTICULAR CASE. THAT QUESTION MAY HOWEVER ARISE ONLY WHEN ACTUAL UNDERSTATEMENT IS FIRST PROVED BY TH E ASSESSING OFFICER. IT IS ONLY TO THIS EXTENT THAT THE RIGOUR OF THE BURD EN PLACED ON THE ASSESSING OFFICER MAY BE RELAXED IN CASES WHERE THERE IS EVIDENCE TO SHOW UNDERSTATEMENT OF THE INVESTMENT, BUT EVIDENCE TO SHOW THE PRECISE EXTENT THEREOF IS LACKING. 14. IN LALCHAND BHAGAT AMBICA RAM V. CIT [[959] 37 ITR 288 , THE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING ADD ITIONS IN THE ASSESSMENTS ON MERE SUSPICION AND SURMISE OR BY TAKING NOTE OF THE NOTORIOUS PRACTICES PREVAILING IN TRADE CIRCLES. AT PA GE 299 OF THE REPORT, IT WAS OBSERVED AS FOLLOWS : 'ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGHE D WITH THE INCOME- TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SM UGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQU IRED BY SARUBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO NIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHA LF' THIS TAKES CARE OF THE ARGUMENT OF MR. SABHARWAL THAT JUDICIAL NOTICE CAN BE TAKEN OF THE PRACTICE PREVAILING IN THE PROPERTY MARKET OF NOT DISCLOSING THE FULL CONSIDERATION FOR TRANSFER OF PROPE RTIES. 15. SINCE THE ENTIRE CASE HAS PROCEEDED ON THE ASSUMPT ION THAT THERE WAS UNDERSTATEMENT OF THE INVESTMENT, WITHOUT A FINDING T HAT THE ASSESSEE INVESTED MORE THAN WHAT WAS RECORDED IN THE BOOKS OF A CCOUNT, WE ARE UNABLE TO APPROVE OF THE DECISION OF THE INCOME-TAX AUTHORITIES. SECTION 69B WAS WRONGLY INVOKED. THE ORDER OF THE TRIBUNAL I S APPROVED; THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN THE NEGATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE CIT. 16. SINCE THE BASIS OF THE ADDITIONS MADE IN ALL THE O THER CASES IS THE SAME AS IN ITA NO.1814/2010, THE SUBSTANTIAL QUESTIONS OF LA W IN THOSE CASES ARE ALSO SIMILARLY ANSWERED. 63 17. THE APPEALS FILED BY THE CIT ARE DISMISSED WITH NO ORDER AS TO COSTS.' 35.8 IN THE CASE OF CIT, DELHI-1 VS. AGILE PROPERTI ES PVT. LTD REPORTED IN (2014) 45 TAXMANN.COM 512 (DELHI), THE ASSESSEE PURCHASED AGRICULTURAL PROPERTY, THE VALUE OF WHICH WAS DISCL OSED AT RS.5.22 CRORES. THE ASSESSING OFFICER, FINDING CERTAIN DISCREPANCIE S WITH RESPECT TO THE INVESTMENT, REFERRED THE MATTER TO THE DVO WHO VALU ED THE AGRICULTURAL PROPERTY AT RS.10.51 CRORES. RELYING UPON THE REP ORT OF THE DVO, THE ASSESSING OFFICER MADE ADDITION TO THE ASSESSEES I NCOME ON ACCOUNT OF UNEXPLAINED INVESTMENT. IN APPEAL THE LD.CIT(A) DE LETED THE ADDITION WHICH WAS UPHELD BY THE TRIBUNAL. ON FURTHER APPEA L BY THE REVENUE, THE HONBLE HIGH COURT FOLLOWING ITS EARLIER DECISI ON IN THE CASE OF DINESH JAIN HUF (SUPRA) HAS OBSERVED AS UNDER : 4. THIS COURT NOTICES THAT THE TRIBUNAL REJECTED THE REVENUE'S CONTENTIONS HOLDING THAT THE ONUS TO PROVE UNDER VALU ATION THROUGH POSITIVE EVIDENCE IS UPON THE REVENUE. THE TRIBUNAL H AD RELIED UPON ITA 176-14 PAGE 2 THE JUDGMENTS OF THE SUPREME COURT REP ORTED AS CIT V. DAULAT MAL RAWAT MAL, 87 ITR 349 (SC), K.P. VERGHESE V. ITO, 131 ITR 597 (SC) AND CIT V. BEDI & COMPANY, 230 ITR 580 (SC). THE ENTIRETY OF THE CIRCUMSTANCES, I.E., THE EXAMINATION OF THE ASSESSEE' S REPRESENTATIONS, THE REPORT OF THE DVO ETC. WERE CONSIDERED AND DISCUSSE D BY THE TRIBUNAL IN THE OPERATIVE PART OF ITS REASONING AT PARAGRAPH 6 -8. THE RELEVANT DISCUSSION IS EXTRACTED BELOW: - '7. NOW, AS PER SECTION 69B OF THE ACT, THE REQUIREM ENTS WHICH NEED TO BE SATISFIED ARE THAT THE ASSESSEE HAS MADE INVESTMENT, OR THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE AND IT IS FOUND THAT THE INVESTMENT EXCEEDS THE CORRESP ONDING AMOUNT RECORDED IN THE BOOKS OF ACCOUNT AND EITHER THE ASSESSE E OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT, OR THE EXPLANATI ON OFFERED IS NOT SATISFACTORY. THUS, THE SINE QUA NON U/S 69B OF THE ACT IS FOR THE ASSESSING OFFICER TO REACH A FINDINGS ON THE BASIS OF EVID ENCE, THAT THE ASSESSEE HAS MADE INVESTMENT OUTSIDE ITS BOOKS OF ACCOUNT. O NLY ON THE BASIS OF SUCH A FINDING CAN AN ADDITION BE MADE U/S 69B . SO FAR AS REGARDS INVESTMENT OVER AND ABOVE THAT RECORDED IN THE BOOKS OF ACCOUNT, THE ONUS, RATHER THE BURDEN, IS ON THE DEPARTMENT TO PROV E SUCH ALLEGATION, AS HAS BEEN HELD IN, INTER ALIA, CIT V. DAULAT MAL RAWA T MAL, 87 ITR 349 (SC), K.P. VERGHESE V. ITO, 131 ITR 597 (SC) AND CIT V. BE DI & CO. (P) LTD., 230 ITR 580 (SC). THE DEPARTMENT HAS ARGUED THAT IN THE PRESENT CASE, THE ASSESSEE DID NOT COOPERATE IN THE ASSESSMENT PROCEEDINGS WI TH THE ASSESSING OFFICER AND SO, THE ONUS ON THE DEPARTMENT IS D EEMED TO HAVE BEEN DISCHARGED. IN THIS REGARD, IT IS SEEN THAT BEFORE MAKING THE REFERENCE TO THE DVO, THE ASSESSING OFFICER EXAMINED ON E OF THE REPRESENTATIVES OF THE ASSESSEE, ASKING IF THE SELLERS COULD BE IDENTIFIED 64 AND PRODUCED. TO THIS, HE EXPRESSED HIS INABILITY. IT I S SEEN THAT IN THE SALE DEED (COPY AT APB 13-36), THE NAME AND ADDRESS OF TH E SELLER IS VERY MUCH THERE. THIS SALE DEED HAD BEEN DULY PRODUCED BEF ORE THE ASSESSING OFFICER. THE ASSESSING OFFICER RECORDED, U/S 131 OF ITA 176-14 PAGE 3 THE ACT, A STATEMENT OF SHRI NAVEEN KUMAR GOYAL, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY ON 20.08.2009. THEREIN, A SPECIFIC QUEST ION (QUESTION 12) WAS ASKED AS TO IF THE DEPONENT COULD IDENTIFY AND PRODUCE THE SELLERS OF THE LAND. SHRI GOYAL RESPONDED BY SAYING THA T HE COULD NOT PRODUCE THE SELLERS. NOW, WHEN, UNDISPUTEDLY, THE DETA ILS OF THE SELLERS OF THE LAND TO THE ASSESSEE WERE ON RECORD BEFORE THE ASSESSI NG OFFICER AND THE ASSESSING OFFICER HAD ALL POWER TO MAKE INQUIRY UND ER THE ACT FROM SUCH SELLERS AND THE ASSESSING OFFICER, FOR REASONS BEST KN OWN TO HIM, DID NOT MAKE ANY SUCH INQUIRY, THE ONUS ON THE DEPARTMENT TO PROVE THAT THE INVESTMENT MADE BY THE ASSESSEE WAS IN FACT MORE THAN THA T DEPICTED IN ITS BOOKS OF ACCOUNT, DID NOT GET DISCHARGED AT ALL. I N THE FOLLOWING CASES, AS CORRECTLY NOTED BY THE LD. CIT (A), IT HAS BEEN HE LD THAT THE ONUS IS ON THE REVENUE TO SUBSTITUTE APPARENT CONSIDERATION AND T HAT ADDITION U/S 69B OF THE ACT CAN BE MADE ONLY ON THE BASIS OF POSIT IVE MATERIAL OR EVIDENCE REGARDING CONSIDERATION IN EXCESS OF WHAT IS R ECORDED IN THE BOOKS AS HAVING BEEN PAID AND THAT NO ADDITION U/S 69B OF THE ACT CAN BE MADE SIMPLY ON THE BASIS OF DIFFERENCE OF OPINION AS TO THE MARKET VALUE OF THE ASSET: - (I) CIT VS. BANWARILAL MURWATIYA , 2008-TIOL-124-HC-RAJ-IT. (II) SANJAY CHAWLA V. ITO, 89 ITD 586-606 (III) ITO VS. SATYANARAYAN AGARWAL, 112 TTJ 717 (JD ) (IV) JAI MARWAR CO. (P) LTD. V. ACIT, 79 TTJ 178 ( JD) (V) DILSHAD TRADING CO. (P) LTD. VS. ITO , 49 ITD 348 (BOM) 8. IT IS ONLY ON THE BASIS OF A DEFINITE FINDING OF THE ASSESSING OFFICER TO THE FORGOING EFFECT THAT A REFERENCE CAN BE MADE TO THE VALUATION OFFICER U/S 142A OF THE ACT. IT GOES WITHOUT SAYING THAT THE P ROVISIONS OF SECTION 142A(1) OF THE ACT ARE MERELY MACHINERY PROVISIONS AN D THE SUBSTANTIVE PROVISIONS OF SECTION 69B CANNOT BE OVERRIDDEN BY THE M. IN THE PRESENT; ;CASE, ON THE OTHER HAND, UNDISPUTEDLY, THE ASSESSING OF FICER DID NOT HAVE ANY SUCH MATERIAL BEFORE HIM, WHICH COULD FORM THE B ASIS FOR REFERENCE BEING MADE TO THE DVO U/S 142A OF THE ACT, AS HAS BEEN RIGHTLY HELD BY THE LD. CIT (A).' 5. THIS COURT HAD IN THE DECISION REPORTED AS CIT V. DINESH JAIN, ITA 176- 14 PAGE 4 HUF, ITA 1667/2010 DATED 28.09.2012 AND I TA 85/2011 AND CONNECTED CASES OCCASIONED TO CONSIDER AN IDENTICAL QU ESTION. AFTER NOTICING THE RELEVANT PROVISION, I.E. SECTION 69B, T HE COURT NOTICED IN PARAGRAPH 9 AS FOLLOWS: - '9. A 'FINDING' OBVIOUSLY SHOULD REST ON EVIDENCE. IN THE PRESENT CASE, IT IS COMMON GROUND THAT NO INCRIMINATING MATERIAL WAS SEIZ ED DURING THE SEARCH WHICH REVEALED ANY UNDERSTATEMENT OF THE PURCH ASE PRICE. THAT IS PRECISELY THE REASON WHY THE ASSESSING OFFICER HAD TO RESO RT TO RULE 3 OF SCHEDULE III TO THE WEALTH TAX ACT. THIS RULE DOES NO T EVEN CLAIM TO ESTIMATE THE 'FAIR MARKET VALUE' OF AN ASSET; IT MEREL Y LAYS DOWN A PROCEDURE FOR COMPUTING THE VALUE OF AN ASSET FOR THE PURPOSES OF THE WEALTH TAX ACT. THE SCHEDULE DERIVES ITS AUTHORITY FR OM SECTION 7(1) OF THE WEALTH TAX ACT. THE SECTION, AS IT NOW STANDS, HAS D ROPPED ALL PRETENSIONS TO ASCERTAINING THE FAIR MARKET VALUE OF A N ASSET FOR THE PURPOSES OF THE WEALTH TAX ACT. PRIOR TO THE AMENDMEN T MADE W.E.F. 1-4- 65 1989 THE SECTION PROVIDED FOR THE ESTIMATION OF THE F AIR MARKET VALUE OF AN ASSET ON THE PRINCIPLE OF WHAT IT WOULD FETCH IF SO LD IN THE OPEN MARKET. THIS INVOLVED AN ASSUMPTION OF AN OPEN MARKET, BE IT F ICTIONAL, A WILLING SELLER AND A WILLING BUYER, ALL FICTIONAL. THIS FICTI ON FACILITATED A REALISTIC ESTIMATION OF THE FAIR MARKET VALUE OF THE PROPERTY, AND IT MOVED WITH THE UPS AND DOWNS OF THE MARKET. NOT ANYMORE. FROM 1-4-19 89, THE VALUE WAS FROZEN. FOR ALL TIMES TO COME, AN IMMOVABLE PROPE RTY THAT FETCHES RENT SHALL BE VALUED AT 12.5 TIMES THE NET MAINTAINAB LE RENT. 10. THERE IS A FUNDAMENTAL FALLACY IN INVOKING THE P ROVISIONS OF THE WEALTH TAX ACT TO THE APPLICATION OF SECTION 69B OF THE INCOME TAX ACT, NOTWITHSTANDING THAT BOTH THE ACTS ARE COGNATE AND HA VE EVEN BEEN SAID TO CONSTITUTE AN INTEGRATED SCHEME OF TAXATION. UNDER THE INCOME TAX ACT, WE ARE TO FIND WHAT WAS THE REAL AND ACTUAL CONSIDERA TION PAID BY THE ASSESSEE AND WHETHER THE FULL CONSIDERATION HAS BEEN RECO RDED IN THE BOOKS. UNDER SECTION 7(1) OF THE WEALTH TAX ACT AS IT STOOD BEFORE 1-4- 1989, WE ARE TO ESTIMATE THE FAIR MARKET VALUE OF TH E ASSET; AFTER THIS DATE, IT IS NOT EVEN ESTIMATION OF THE FAIR MARKET VA LUE, BUT COMPUTATION OF THE ITA 176-14 PAGE 5 VALUE OF THE ASSET ON THE BA SIS OF CERTAIN RULES PRESCRIBED BY THE STATUTE. IF A DIES LEAVING PRIME PRO PERTY IN CONNAUGHT PLACE TO HIS SON B, B PAYS NOTHING FOR THE PROPERTY; T HE PROPERTY MAY COMMAND A MARKET PRICE OF SEVERAL CRORES. IF 'A', BEC AUSE OF HIS LOVE AND AFFECTION FOR 'B', SELLS THE PROPERTY FOR RUPEE ONE TO 'B'; IN THIS CASE, THE CONSIDERATION PAID IS ONLY RUPEE ONE, THOUGH THE PROP ERTY IS WORTH SEVERAL MILLIONS. IF THE ASSESSING OFFICER HAVING JURISDIC TION OVER 'B' HAS TO MAKE AN ADDITION UNDER SECTION 69B, HE CAN DO SO O NLY IF HE 'FINDS' THAT B HAS 'EXPENDED' MONEY WHICH HE HAS NOT FULLY R ECORDED IN THIS BOOKS OF ACCOUNT; HE CANNOT MAKE ANY ADDITION MERELY BECAUSE THE PROPERTY COULD FETCH SEVERAL CRORE OF RUPEES IN THE M ARKET. 11. SECTION 69B DOES NOT PERMIT AN INFERENCE TO BE D RAWN FROM THE CIRCUMSTANCES SURROUNDING THE TRANSACTION THAT THE PURC HASER OF THE PROPERTY MUST HAVE PAID MORE THAN WHAT WAS ACTUALLY R ECORDED IN HIS BOOKS OF ACCOUNT FOR THE SIMPLE REASON THAT SUCH AN INF ERENCE COULD BE VERY SUBJECTIVE AND COULD INVOLVE THE DANGEROUS CONSEQ UENCE OF A NOTIONAL OR FICTIONAL INCOME BEING BROUGHT TO TAX C ONTRARY TO THE STRICT PROVISIONS OF ARTICLE 265 OF THE CONSTITUTION OF INDIA AND ENTRY 82 IN LIST I OF THE SEVENTH SCHEDULE THERETO WHICH DEALS WITH 'TA XES ON INCOME OTHER THAN AGRICULTURAL INCOME'. THIS WAS ONE OF THE MAJOR CONSIDERATIONS THAT WEIGHED WITH THE SUPREME COURT IN K.P. VARGHESE (SUPRA) IN WHICH CASE THE PROVISIONS OF SUB-SECTION (2) O F SECTION 52 FELL FOR INTERPRETATION. IT WAS OBSERVED THAT PARLIAMENT C ANNOT CHOOSE TO TAX AS INCOME AN ITEM WHICH IN NO RATIONAL SENSE CAN BE RE GARDED AS A CITIZENS INCOME OR EVEN RECEIPT. SECTION 52(2) (WHI CH NOW STANDS OMITTED) APPLIED TO THE TRANSFEROR OF PROPERTY FOR A CONSIDERATION THAT WAS LESSER THAN THE FAIR MARKET VALUE BY 15% OR MORE; IN SUCH A CASE, THE ASSESSING OFFICER WAS CONFERRED THE POWER TO ADOPT THE F AIR MARKET VALUE OF THE PROPERTY AS THE SALE PRICE AND COMPUTE THE CAP ITAL GAINS ACCORDINGLY. THE SUPREME COURT HELD THAT IT WAS THE BURDEN OF THE ASSESSING OFFICER TO PROVE THAT THERE WAS UNDERSTATEMENT OF CONSIDERATION AND ONCE THAT BURDEN WAS DISCHARGED IT W AS NOT REQUIRED OF HIM TO PROVE THE PRECISE EXTENT OF UNDERSTATEMENT AND HE COULD ADOPT THE DIFFERENCE BETWEEN THE STATED CONSIDERATION AND T HE FAIR ITA 176-14 PAGE 6 MARKET VALUE OF THE PROPERTY AS THE UNDERSTATE MENT. THE SUB- SECTION WAS HELD TO PROVIDE FOR A 'STATUTORY BEST JUDGM ENT' ONCE ACTUAL UNDERSTATEMENT WAS PROVED; IT OBVIATED THE NEED TO PR OVE THE EXACT AMOUNT OF UNDERSTATEMENT. ADDITIONAL REASONS FOR THE R ESULT WERE (A) THAT THE MARGINAL NOTE TO THE SECTION REFERRED TO 'C ASES OF UNDERSTATEMENT'; (B) THE SPEECH OF THE FINANCE MINISTE R WHILE INTRODUCING THE PROVISION; AND (C) THE ABSURD OR IRRA TIONAL RESULTS THAT 66 WOULD FLOW FROM A LITERAL INTERPRETATION OF THE SUB- SECTION, WHICH COULD NOT HAVE BEEN INTENDED BY THE LEGISLATURE. 12. WHILE THE OMITTED SECTION 52(2) APPLIED TO THE T RANSFEROR OF THE PROPERTY, SECTION 69B APPLIES TO THE TRANSFEREE - THE PURCHASER - OF THE PROPERTY. IT REFERS TO THE MONEY 'EXPENDED' BY THE A SSESSEE, BUT NOT RECORDED IN HIS BOOKS OF ACCOUNT, WHICH IS A CLEAR REF ERENCE TO UNDISCLOSED INCOME BEING USED IN THE INVESTMENT. APPLYI NG THE LOGIC AND REASONING IN K.P. VARGHESE (SUPRA) IT SEEMS TO US THAT E VEN FOR THE PURPOSES OF SECTION 69B IT IS THE BURDEN OF THE ASSESSING OFFICER TO FIRST PROVE THAT THERE WAS UNDERSTATEMENT OF THE CONSIDERATI ON (INVESTMENT) IN THE BOOKS OF ACCOUNT. ONCE THAT UNDERVALUATION IS ESTABLISHED AS A MATTER OF FACT, THE ASSESSING OFFICER, IN THE ABSENCE O F ANY SATISFACTORY EXPLANATION FROM THE ASSESSEE AS TO THE SOURCE OF THE UND ISCLOSED PORTION OF THE INVESTMENT, CAN PROCEED TO ADOPT SOME DEPENDAB LE OR RELIABLE YARDSTICK WITH WHICH TO MEASURE THE EXTENT OF UNDERST ATEMENT OF THE INVESTMENT. ONE SUCH YARDSTICK CAN BE THE FAIR MARKET VALUE OF THE PROPERTY DETERMINED IN ACCORDANCE WITH THE WEALTH T AX ACT. WE HOWEVER CLARIFY THAT THIS COURT IS NOT CONCLUDING THA T SUCH YARDSTICK IS DETERMINATIVE; IN VIEW OF THE FINDINGS ARRIVED AT B Y US THAT THE ASSESSING OFFICER DID NOT GATHER FOUNDATIONAL FACTS TO POINT T O UNDERVALUATION THE ADOPTION OF THE NORMS UNDER THE WEALTH TAX ACT IS NOT COMMENTED UPON BY US. 13. THE ERROR COMMITTED BY THE INCOME-TAX AUTHORITI ES IN THE PRESENT CASE IS TO JUMP THE FIRST STEP IN THE PROCESS OF APPLYING SECTION 69B - THAT OF PROVING UNDERSTATEMENT OF THE INVESTMENT - AND APP LY THE MEASURE OF UNDERSTATEMENT. IF ANYTHING, THE LANGUAGE EMPLOYED I N SECTION 69B IS IN STRICTER TERMS THAN THE ERSTWHILE SECTION 52(2). IT DOE S NOT EVEN AUTHORISE THE ADOPTION OF ANY YARDSTICK TO MEASURE THE ITA 176-14 PAGE 7 PRECISE EXTENT OF UNDERSTATEMENT. THERE CAN THEREFO RE BE NO COMPROMISE IN THE APPLICATION OF THE SECTION. IT WOU LD SEEM TO REQUIRE THE ASSESSING OFFICER EVEN TO SHOW THE EXACT EXTENT OF U NDERSTATEMENT OF THE INVESTMENT; IT DOES NOT EVEN GIVE THE ASSESSING OFFI CER THE OPTION OF APPLYING ANY REASONABLE YARDSTICK TO MEASURE THE PREC ISE EXTENT OF UNDERSTATEMENT OF THE INVESTMENT ONCE THE FACT OF UND ERSTATEMENT IS PROVED. IT APPEARS TO US THAT THE ASSESSING OFFICER IS N OT ONLY REQUIRED TO PROVE UNDERSTATEMENT OF THE PURCHASE PRICE, BUT ALSO T O SHOW THE PRECISE EXTENT OF THE UNDERSTATEMENT. THERE IS NO AUTHORITY G IVEN BY THE SECTION TO ADOPT SOME REASONABLE YARDSTICK TO MEASURE THE EXTE NT OF UNDERSTATEMENT. BUT SINCE IT MAY NOT BE POSSIBLE IN ALL CASES TO PROVE THE PRECISE OR EXACT AMOUNT OF UNDISCLOSED INVESTMENT, IT I S PERHAPS REASONABLE TO PERMIT THE ASSESSING OFFICER TO RELY ON SOM E ACCEPTABLE BASIS OF ASCERTAINING THE MARKET VALUE OF THE PROPERTY TO ASSESS THE UNDISCLOSED INVESTMENT. WHETHER THE BASIS ADOPTED BY TH E ASSESSING OFFICER IS AN ACCEPTABLE ONE OR NOT MAY DEPEND ON TH E FACTS AND CIRCUMSTANCES OF THE PARTICULAR CASE. THAT QUESTION MAY HOWEVER ARISE ONLY WHEN ACTUAL UNDERSTATEMENT IS FIRST PROVED BY TH E ASSESSING OFFICER. IT IS ONLY TO THIS EXTENT THAT THE RIGOUR OF THE BURD EN PLACED ON THE ASSESSING OFFICER MAY BE RELAXED IN CASES WHERE THERE IS EVIDENCE TO SHOW UNDERSTATEMENT OF THE INVESTMENT, BUT EVIDENCE TO SHOW THE PRECISE EXTENT THEREOF IS LACKING.' 6. IN THE MATTER CIT V. DINESH JAIN (SUPRA), THIS COURT ALSO RELIED UPON THE RULING IN LALCHAND BHAGAT AMBICA RAM V. COMMISSIONER OF INCOME TAX, BIHAR & ORISSA, (1959) 37 ITR 288 (SC) WHICH HELD THAT MERE SUSPIC ION CANNOT TAKE THE PLACE OF PROOF. THE COURT WAS OF THE OPINION THAT MERE RELIANCE UPON THE REPORT OF THE VALUATION OFFICER E XPRESSING HIS OPINION AS TO THE TRUE VALUE WOULD BE INADEQUATE MATERIAL FO R THE AO TO CONSTITUTE EVIDENCE IN THE ABSENCE OF POSITIVE EVIDENC E. IN THE PRESENT 67 CASE TOO, THE APPROACH OF THE TRIBUNAL IS IN ACCORD W ITH WHAT HAS BEEN EXPRESSED IN DINESH JAIN ITA 176-14 PAGE 8 HUFS MATTER AND THE OTHER JUDGMENTS OF THE SUPREME COURT NOTICED EARLIER. AS SUC H NO SUBSTANTIAL QUESTION OF LAW ARISES. 7. SO FAR AS THE SECOND QUESTION RELATES, ISSUE OF SHORT TERM CAPITAL GAIN, IN THIS REGARD THE TRIBUNAL HAD RECORDED AS FOLLOWS: - '11. THE ASSESSEE, DURING THE YEAR, HAD SOLD LAND MEASURI NG 1.26 ACRES IN VILLAGE KHAIRA FOR RS.12 LAC AS AGAINST PURCHASE COST O F RS.13,75,550/-. THE ASSESSING OFFICER OBSERVED THAT SINCE THE PURCHASE COST HAD BEEN UNDERSTATED BY AN AMOUNT OF RS.29,80,511/-, CORRESPOND INGLY THE SALE PRICE WAS ALSO UNDERSTATED BY AN EQUAL AMOUNT OF RS.29, 80,511/-, DUE TO WHICH, ACCORDING TO THE ASSESSING OFFICER THE SHORT-TERM CAPITAL GAIN OF RS.29,80,511/- HAD ALSO BEEN UNDERSTATED BY THE ASSESSEE I N ITS RETURN OF INCOME. THE LD. CIT (A) DELETED THE ADDITION MADE B Y THE ASSESSING OFFICER. 12. IN THIS REGARD, IT HAS BEEN CORRECTLY FOUND THAT THE ASSESSING OFFICER HAD ERRED IN TAKING THE COST OF ACQUISITION WITHOUT C ONSIDERING THE STAMP DUTY TOWARDS SUCH COST OF ACQUISITION. THE SALE CONSIDER ATION WAS ALSO TAKEN AT A RATE HIGHER THAN THE CIRCLE RATE. THUS, W HEREAS THE STAMP DUTY PAYABLE AND THE CORRECT SALE CONSIDERATION, BASED ON T HE CIRCLE RATES, AS PER THE PROVISIONS OF SECTION 50C OF THE ACT WERE TO BE CONSIDERED. THIS ERROR HAS APPROPRIATELY BEEN RECTIFIED BY THE LD. CI T (A) WHILE DIRECTING THE ASSESSING OFFICER TO RECOMPUTED THE STCG BY TAKING THE COST OF PLOT AT RS.12 LAC TO INCLUDE THE STAMP DUTY TOWARDS THE COST OF ACQUISITION. THE LD. CIT (A) ALSO CORRECTLY DIRECTED TO APPLY THE STAM P DUTY RATES TO THE SALE PRICE OF THE PLOT FOR ARRIVING AT THE STCG IN V IEW OF THE PROVISIONS OF SECTION 50C OF THE ACT, WHILE CORRECTLY HOLDING ADD ITION OF VARIOUS AMOUNTS TOWARDS SALE OF LAND OVER AND ABOVE THE STAMP D UTY RATES, TO BE NOT JUSTIFIABLE, AS PER THE PROVISIONS OF SECTION 50C O F THE ACT.' 8. WE NOTICED THAT THE CIT (A) HAD IN FACT DIRECTED THE AO TO RE- COMPUTE THE SHORT TERM CAPITAL GAIN BY TAKING THE COST OF PLO T AT RS.12 ITA 176-14 PAGE 9 LAC AND TO INCLUDE THE STAMP DUTY TOWARDS THE COST OF ACQUISITION. NO FAULT WAS FOUND WITH THIS ORDER BY THE TRIBUNAL. W E ARE UN-PERSUADED WITH THE REVENUE'S CONTENTION THAT THE TRIBUNAL FELL INTO ERROR IN CONFIRMING THE CIT (A)'S ORDER. 9. IN VIEW OF THE ABOVE FINDINGS, THE APPEAL HAS TO F AIL; IT IS ACCORDINGLY DISMISSED. 35.9 IN THE CASE OF CIT VS. ABHINAV KUMAR MITTAL RE PORTED IN 30 TAXMANN.COM 357 (DELHI) NOTICE U/S.153C WAS ISSUED TO THE COMPANY AND ITS DIRECTORS AS A RESULT OF SEARCH CONDUCTED U /S.132. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE HAD PURCHASED 3 PROPERTIES WHICH INCLUDED 2 OFFICE PREMISES AT AHMEDABAD AND 1 COMMERCIAL PROPERTY AT KOLKATA. TH E ASSESSING OFFICER REFERRED THE QUESTION OF VALUATION OF THE S AID PROPERTIES TO THE DVO. THE VALUE DETERMINED BY THE DVO WAS SUBSTANTI ALLY HIGHER THAN 68 THE VALUE DECLARED BY THE ASSESSEE. THE ASSESSING OFFICER ON THE BASIS OF SUCH REPORT OF THE DVO MADE ADDITION TO THE TOTAL I NCOME OF THE ASSESSEE U/S.69 AS UNEXPLAINED INVESTMENT. THE LD.CIT(A) DE LETED THE ADDITION MADE BY THE ASSESSING OFFICER WHICH WAS UPHELD BY T HE TRIBUNAL. ON FURTHER APPEAL FILED BY THE REVENUE, THE HONBLE HI GH COURT DISMISSED THE APPEAL FILED BY THE REVENUE. THE RELEVANT OBSE RVATION OF THE HONBLE HIGH COURT IS AS UNDER : 2. THE FACTS ARE THAT THE RESPONDENT/ ASSESSEE HAD FILED A RETURN DECLARING AN INCOME OF RS.9,90,410/- ON 18.07.2006. SUBSEQUENTLY, A SEARCH WAS CONDUCTED UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE SAID ACT) ON 26.04.2 007 AS ALSO A SURVEY OPERATION UNDER SECTION 133A IN THE PREMISES OF A.K. CAPITAL SERVICES LIMITED AND ITS GROUP COMPANIES AS ALSO IN THE PREMISES O F THE DIRECTORS OF THOSE COMPANIES AND THEIR RELATIVES. THEREAFTER, A NOTICE UNDER SECTION 153C OF THE SAID ACT WAS ISSUED ON 07.10.2009. A RESPONSE WAS ISSUED BY THE ASSESSEE BY THEIR LETTER DATED 13.10.2009 A ND THE RETURN ALREADY FILED ON 18.07.2006 WAS REQUESTED TO BE TREAT ED AS THE RETURN IN RESPONSE TO THE SAID NOTICE UNDER SECTION 153C. 3. THE ASSESSING OFFICER, IN THE COURSE OF THE ASSESSMENT PR OCEEDINGS, CONSIDERED THE VALUATION OF THREE PROPERTIES WHICH HA D BEEN PURCHASED BY THE ASSESSEE IN THE RELEVANT YEAR. THE THREE PROPERT IES INCLUDED TWO OFFICE PREMISES AT AHMEDABAD AND ONE COMMERCIAL PROPE RTY AT KOLKATA. THE ASSESSING OFFICER REFERRED THE QUESTION OF VALUATION OF THE SAID PROPERTIES TO THE DISTRICT VALUATION OFFICER (DVO). T HE DVO SUBMITTED HIS REPORT ON 14.12.2009 IN RESPECT OF THE AHMEDABAD PRO PERTIES AND ON 24.12.2009 IN RESPECT ON THE KOLKATA PROPERTY. AS PER THE SAID REPORT, THE DVO HAS VALUED THE SAID PROPERTIES AS UNDER:- SL NO. ADDRESS OF THE PROPERTY VALUE DETERMINED BY DVO [IN RS.] VALUE DECLARED BY THE ASSESSEE [IN RS.] DIFFERENCE [IN RS.] (I) 101, KAIVANA BUILDING MALKANS, NEAR POLYTECHNIC AHMEDABAD 44,00,600/- 18,00,000/- 26,00,600/- (II) 102, KAIVANA BUILDING MALKANS, NEAR POLYTECHNIC AHMEDABAD 41,57,300/- 17,36,000/- 24,21,300/- (III) COMMERCIAL PROPERTY CHOWRANGHEE, KOLKATA 43,19,800/- 32,11,680/- 11,08,120/- 4. THE DIFFERENCE IN THE VALUES, AS DECLARED BY THE A SSESSEE AND AS OPINED BY THE DVO, AMOUNTED TO RS. 50,21,900/- IN RESPECT OF THE PROPERTIES AT AHMEDABAD AND AN AMOUNT OF RS. 9,57,038/- WAS THE DIF FERENCE IN RESPECT OF THE KOLKATA PROPERTY. THESE ADDITIONS WERE MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF THE SAID ACT. 69 5. BEING AGGRIEVED BY THE SAID ADDITIONS, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) , WHO DELETED THE ADDITIONS. THE INCOME TAX APPELLATE TRIBUNAL CON FIRMED THE SAID DELETION. THE ISSUE THAT IS SOUGHT TO BE RAISED HERE IS T HAT THE DELETION WAS NOT IN ACCORDANCE WITH LAW. HOWEVER, WE FIND THA T THE INCOME TAX APPELLATE TRIBUNAL AS WELL AS THE COMMISSIONER OF INCOM E TAX (APPEALS) HAD CONCLUDED, ON FACTS, THAT THERE WAS NO MATERIAL F OUND DURING THE SEARCH TO JUSTIFY THE REFERENCE TO THE DVO FOR HIS VAL UATION OF THE SAID PROPERTIES. THE TRIBUNAL HELD THAT THERE MUST BE SOME MATERIAL TO SHOW THAT THE INVESTMENT MADE BY THE ASSESSEE WAS OUTSIDE THE B OOKS. THIS, ACCORDING TO THE TRIBUNAL, WAS A CONDITION PRECEDENT FOR MAKING A REFERENCE TO THE DVO. THE TRIBUNAL ALSO HELD THAT, I N ANY EVENT, THE DVO'S REPORT WAS BASED ON INCOMPARABLE SALES AND, THEREFORE, COULD NOT BE RELIED UPON. THE TRIBUNAL ALSO HELD THAT THE BURDEN WAS ON THE REVENUE TO SHOW THAT THE REAL INVESTMENT IN THE SAID PROPERTIE S WAS GREATER THAN THE APPARENT INVESTMENT, AS DISCLOSED BY THE RESPONDENT/ ASSESSEE. THE TRIBUNAL HELD, ON FACTS, THAT THE SAID BURDEN HAD NOT BEEN DISCHARGED BY THE REVENUE. CONSEQUENTLY, THE TRIBUNAL HELD IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE AND FOUND THAT THE REFERENCE TO THE DVO ITSELF WAS NOT IN ACCORDANCE WITH LAW. 6. WE HAVE NO REASON TO DIFFER FROM THE VIEW TAKEN B Y THE TRIBUNAL, PARTICULARLY, AS NO MATERIAL WAS FOUND IN THE SEARCH A ND SEIZURE OPERATIONS, WHICH WOULD JUSTIFY THE ASSESSING OFFICER'S AC TION IN REFERRING THE MATTER TO THE DVO FOR HIS OPINION ON VALUATION O F THE SAID PROPERTIES. IF THAT BE THE CASE, THEN THE VALUATION ARRIVED AT B Y THE DVO WOULD BE OF NO CONSEQUENCE. IN ANY EVENT, THE TRIBUNAL HAS ALSO, O N FACTS, HELD THAT THE DVO'S VALUATION WAS BASED ON INCOMPARABLE SALES, WHI CH IS NOT PERMISSIBLE IN LAW. 7. FOR THESE REASONS, NO QUESTION OF LAW ARISES FOR OUR CONSIDERATION. THE APPEAL IS DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 35.10 IN THE CASE OF CIT VS. SHRI BAJRANG LAL BANSA L VIDE ITA NO.182/2010 ORDER DATED 20-08-2010 (DELHI HIGH COUR T) A SEARCH WAS CONDUCTED AT THE RESIDENCE OF THE ASSESSEE BY THE D EPARTMENT. WHILE UNEXPLAINED CASH OF RS.68,943/- AND FDR OF RS.5,49, 433/- FOUND DURING THE SEARCH NO EVIDENCE WAS FOUND SUGGESTING A HIGHE R VALUATION FOR THE PROPERTY BEARING NO.A-156, NEW FRIENDS COLONY, NEW DELHI. HOWEVER, THE AO SOLELY ON THE BASIS OF THE REPORT O F THE DVO MADE AN ADDITION OF RS.99,33,000/- U/S.69B OF THE I.T. ACT ON ACCOUNT OF UNDISCLOSED INVESTMENT. THE LD.CIT(A) DELETED THE ADDITION BY RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF K.P. VARGHESE VS. ITO REPORTED IN 131 ITR 597. THE TRIB UNAL UPHELD THE ORDER OF THE CIT(A). ON FURTHER APPEAL FILED BY TH E REVENUE, THE 70 HONBLE DELHI HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE BY OBSERVING AS UNDER : 6. IT IS SETTLED LAW THAT THE PRIMARY BURDEN OF PROO F TO PROVE UNDER- STATEMENT OR CONCEALMENT OF INCOME IS ON THE REVENUE AND IT IS ONLY WHEN SUCH BURDEN IS DISCHARGED THAT IT WOULD BE PERMISSI BLE TO RELY UPON THE VALUATION GIVEN BY THE DVO. (SEE K.P. VARG HESE (SUPRA), CIT VS. SHAKUNTALA DEVI, (2009) 316 ITR 46, CIT VS. MANOJ JA IN, 287 ITR 285 AND ITA NO. 482/2010 DECIDED BY THIS COURT ON 5TH MAY, 2 010). 7. IN ANY EVENT, THE OPINION OF THE DVO, PER SE, IS NOT AN INFORMATION AND CANNOT BE RELIED UPON WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED-- WHICH HAS NOT BEEN DONE IN THE PRESENT CASE. THE SUPRE ME COURT IN ITS ORDER DATED 19TH OCTOBER, 2009 IN CIVIL APPEAL NO. 6973/2009 HAS HELD AS UNDER:- 'DELAY CONDONED. LEAVE GRANTED. IN THE PRESENT CASE, WE FIND THAT THE TRIBUNAL DECIDE D THE MATTER RIGHTLY IN FAVOUR OF THE ASSESSEE INASMUCH AS THE TRIBUNAL CAME T O THE CONCLUSION THAT THE ASSESSING AUTHORITY (AO) COULD NOT H AVE REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER (DVO) WITHOUT BOOKS OF ACCOUNTS BEING REJECTED. IN THE PRESENT CASE, A CATEG ORICAL FINDING IS RECORDED BY THE TRIBUNAL THAT THE BOOKS WERE NEVER R EJECTED. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE HIGH COURT. IN THE CI RCUMSTANCES, RELIANCE PLACED ON THE REPORT OF THE DVO WAS MISCONCEIVED. FOR THE ABOVE REASONS, THE IMPUGNED JUDGMENT OF THE H IGH COURT IS SET ASIDE AND THE ORDER PASSED BY THE TRIBUNAL STANDS RESTORE D TO THE FILE. ACCORDINGLY, ASSESSEE SUCCEEDS. CIVIL APPEAL IS ALLOWED. NO ORDER AS TO COSTS.' 8. FURTHER THE SUPREME COURT IN ITS ORDER DATED 16TH FEBRUARY, 2010 IN CIVIL APPEAL NO. 9468/2003 HAS HELD AS UNDER:- 'HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS CA SE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION G IVEN BY THE DISTRICT VALUATION OFFICER (DVO). OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDE R SECTION 147 OF THE INCOME TAX ACT, 1961. THE AO HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIE F THEREON. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. CIVIL APPEAL IS, ACCORDINGLY, DISMISSED. NO ORDER AS TO COSTS.' 9. MOREOVER, IN THE PRESENT CASE, NO EVIDENCE MUCH LE SS INCRIMINATING EVIDENCE WAS FOUND AS A RESULT OF THE SEARCH TO SUGGEST T HAT THE RESPONDENT-ASSESSEE HAD MADE ANY PAYMENT OVER AND ABOVE THE CONSIDERATION MENTIONED IN THE RETURN OF THE RESPONDE NT-ASSESSEE. 10. CONSEQUENTLY, NO SUBSTANTIAL QUESTION OF LAW ARISES I N THE PRESENT APPEAL, WHICH IS DISMISSED IN LIMINE. 71 35.11 IN THE CASE OF ME & MUMMY HOSPITAL VS. ACIT R EPORTED IN 44 TAXMANN.COM 248 THE ASSESSEE PARTNERSHIP HAD PURCHA SED THE PROPERTY FOR A HOSPITAL JOINTLY WITH AN HUF. THE ASSESSEE D ECLARED COST OF THE PROPERTY AT RS.83.87 LAKHS. THE AO REFERRED THE MA TTER TO THE DVO U/S.142A TO CALCULATE THE CORRECTNESS OF THE COST O F INVESTMENT. THE ASSESSEE FILED A PETITION BEFORE THE HONBLE HIGH C OURT CONTENDING THAT THE AO HAD NO REASON TO CALL FOR THE VALUERS REPOR T AND, THE VALUERS REPORT WAS CALLED FOR ONLY BY WAY OF FISHING AND RO VING ENQUIRY WHICH WAS NOT PERMISSIBLE. THE HONBLE GUJARAT HIGH COUR T ALLOWED THE PETITION OF THE ASSESSEE BY OBSERVING AS UNDER : 8. FROM THE RECORD, IT EMERGES THAT THE ORDER OF RE FERENCE WAS PASSED ON 30.3.2005. THOUGH LOOSELY MENTIONED IN THE SAID ORD ER BUT EXPLAINED IN THE AFFIDAVIT-IN-REPLY FILED BEFORE THE COURT, THE ASSESSMENT WAS NOT YET OVER ON THE DAY ON WHICH THE SAID REFERENCE ORDER WA S PASSED. ADMITTEDLY, THE ORDER OF ASSESSMENT WAS PASSED ONLY ON 31. 3.2005. AS HELD BY THIS COURT IN THE CASE OF COMMISSIONER OF INCOM E-TAX VS. UMIYA CO-OP. HOUSING SOCIETY LTD. (SUPRA) THE MATTER CAN BE REFERRED TO VALUATION OFFICER ONLY WHEN THE PROCEEDINGS OF ASSESSMEN T OR REASSESSMENT AREC/SCA/7543/2005 JUDGMENT PENDING BEFORE THE ASSESSING OFFICER. IN THE PRESENT CASE, HOWEVER, SUCH PROC EEDINGS WERE NOT YET TERMINATED AND WERE THUS PENDING. EVEN WITHO UT, THEREFORE, RESORTING TO THE LOGIC ADOPTED BY UTTARAKHAND HIGH C OURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. RAJENDRA AGGARWAL (SUPRA), IT CAN BE SAFELY TAKEN THAT ASSESSING OFFICER, IF OTHER PARAMETERS OF SECTION 142A WERE SATISFIED, DID HAVE JURISDICTION TO CALL FOR THE REPORT FROM THE VALUER. UTTARAKHAND HIGH COURT IN THE SAID DECISION, CONSIDERE D PENDENCY OF APPEAL AGAINST ORDER OF ASSESSMENT AS CONTINUATION OF THE ASSESSMENT, AND THEREFORE, HELD THAT DURING THE PENDENCY OF SUCH APPELLATE PROCEEDINGS ALSO POWER UNDER SECTION 142A CAN BE EXERC ISED BY THE ASSESSING OFFICER. THE DECISIONS OF DELHI, ALLAHABAD AND KARNATAKA HIGH COURTS TAKING CONTRARY VIEW WERE NOT FOLLOWED. IN TH E PRESENT PETITION, WE ARE NOT CONCERNED WITH THIS CONTROVERSY AND WOULD, THEREFORE, REFRAIN FROM GIVING ANY EXPRESSION OF OUR OPINION ON THE SAME. SUFFICE TO CONCLUDE THAT ASSESSMENT PROCEEDINGS WERE PENDING BEFOR E THE ASSESSING OFFICER WHEN THE REFERENCE ORDER WAS PASSED. 9. DESPITE SUCH CONCLUSION THE CRUCIAL QUESTION IS WHETH ER THE REQUIREMENTS OF EXERCISING SUCH POWERS UNDER SECTION 142 A CALLING FOR DVO'S REPORT ARE SATISFIED. IN THIS CONTEXT, WE MAY PER USE THE PROVISIONS OF SECTION 142A MORE MINUTELY. SECTION 142A PERTAINS TO ESTIMATE BY VALUATION OFFICER IN CERTAIN CASES AND READS AS UNDER:- 'ESTIMATE BY VALUATION OFFICER IN CERTAIN CASES. 142A(1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSE SSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY B ULLION, JEWELLERY OR 72 OTHER VALUABLE ARTICLE REFERRED TO IN SECTION 69A OR SECTION 69B OR FAIR MARKET VALUE OF ANY PROPERTY REFERRED TO IN SUB-SECTI ON (2) OF SECTION 56 IS REQUIRED TO BE MADE, THE ASSESSING OFFICER MAY REQUIR E THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO HIM. (2) THE VALUATION OFFICER TO WHOM A REFERENCE IS MAD E UNDER SUB-SECTION (1) SHALL, FOR THE PURPOSES OF DEALING WITH SUCH REFERE NCE, HAVE ALL THE POWERS THAT HE HAS UNDER SECTION 38A OF THE WEALTH-TAX ACT, 1957(27 OF 1957). (3) ON RECEIPT OF THE REPORT FROM THE VALUATION OFF ICER, THE ASSESSING OFFICER MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY O F BEING HEARD, TAKE INTO ACCOUNT SUCH REPORT IN MAKING SUCH ASSESSMENT OR REA SSESSMENT: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RESPECT OF AN ASSESSMENT MADE ON OR BEFORE THE 30TH DAY OF SEPTEMB ER, 2004, AND WHERE SUCH ASSESSMENT HAS BECOME FINAL AND CONCLUSIVE ON O R BEFORE THAT DATE, EXCEPT IN CASES WHERE A REASSESSMENT IS REQUIRE D TO BE C/SCA/7543/2005 JUDGMENT MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A.' EXPLANATION: IN THIS SECTION, 'VALUATION OFFICER' HAS THE SAME MEANING AS IN CLAUSE (R) OF SECTION 2 OF THE WEALTH-TAX ACT, 195 7(27 OF 1957)' 10. POWER OF THE ASSESSING OFFICER FOR MAKING A REFEREN CE TO THE VALUATION OFFICER SEEKING THE ESTIMATE FLOWS FROM SUB-SE CTION (1) OF SECTION 142A. IT PROVIDES THAT FOR THE PURPOSES OF MAKI NG ASSESSMENT OR REASSESSMENT UNDER THE ACT, WHERE AN ESTIMATE OF THE VAL UE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERR ED TO IN SECTION 69A OR SECTION 69B OR FAIR MARKET VALUE OF ANY PROPERTY REF ERRED TO IN SUB- SECTION (2) OF SECTION 56 IS REQUIRED TO BE MADE, SUCH REFERENCE TO MAKE AN ESTIMATE OF SUCH VALUE CAN BE MADE TO THE VALUATIO N OFFICER. 11. WE ARE NOT CONCERNED WITH THE FAIR MARKET VALUE OF THE PROPERTY REFERRED TO IN SUB-SECTION (2) OF SECTION 56. WE WOULD , THEREFORE, CONFINE OUR INQUIRY WITH RESPECT TO THE PROVISIONS CONTAINED I N SECTIONS 69, 69A AND 69B OF THE ACT. SINCE SUB-SECTION(1) PERMITS THE A SSESSING OFFICER TO CALL FOR THE VALUER'S C/SCA/7543/2005 JUDGMENT REPO RT WHERE AN ESTIMATE OF THE VALUE OF SUCH INVESTMENT OR VALUE OF B ILLION OR JEWELLERY OF VALUABLE ARTICLE IS REQUIRED TO BE MADE, FOR THE PUR POSES OF INVOKING POWERS UNDER SUB-SECTION (1) OF SECTION 142A, THEREFORE , THERE MUST BE A CASE WHERE AN ESTIMATE OF THE VALUE OF SUCH INVESTMENT OR VALUE OF BILLION OR JEWELLERY OR VALUABLE ARTICLE IS REQUIRED TO BE M ADE. 12. SECTION 69 OF THE ACT PERTAINS TO UNEXPLAINED IN VESTMENT AND STARTS WITH THE EXPRESSION ' WHERE IN THE FINANCIAL YEAR IMM EDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH AR E NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINE D BY HIM FOR ANY SOURCE OF INCOME AND THE ASSESSEE OFFERS NO EXPLANATION A BOUT THE NATURE AND SOURCE OF INVESTMENTS....' 13. SECTION 69A PERTAINS TO UNEXPLAINED MONEY ETC. A ND STARTS WITH THE EXPRESSION 'WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS F OUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VAL UABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME AND THE C/SCA/7543/2005 JUDGMENT ASSESSEE OFFERS NO EXPLANA TION ABOUT THE NATURE OF SOURCE OF ACQUISITION OF THE MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE....' 73 14. LIKEWISE SECTION 69B OF THE ACT PERTAINS TO AMOUNT OF INVESTMENTS ETC., NOT FULLY DISCLOSED IN BOOKS OF ACCOUNT. THE SAID SECTION STARTS WITH EXPRESSION 'WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION , JEWELLERY OR OTHER VALUABLE ARTICLE, AND THE ASSESSING OFFICER FINDS THAT T HE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUC H BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE EXCEEDS THE AMOU NT RECORDED IN THIS BEHALF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSE E FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT...' 15. ALL THESE THREE PROVISIONS GIVE RISE TO DEEMING FIC TION AND CONSIDER SUCH UNEXPLAINED INVESTMENT, UNEXPLAINED MONEY OR INV ESTMENT NOT FULLY DISCLOSED TO BE DEEMED INCOME OF THE ASSESSEE. THESE PROVISIONS START WITH AN ESSENTIAL REQUIREMENT THAT THE ASSESSEE HAS M ADE SUCH INVESTMENTS OR THAT THE ASSESSEE IS FOUND TO BE THE OWNER OF SUCH MONEY, BULLION, C/SCA/7543/2005 JUDGMENT JEWELLERY ETC. OR WHERE ASSESSEE HAS MADE INVESTMENT OR IS FOUND TO BE THE OWNER OF BUL LION, JEWELLERY ETC. WHICH ARE NOT RECORED IN THE BOOKS OF ACCOUNT AND T HE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH INVEST MENT OR EXPENDITURE OR THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY. COMMON THREAD WHICH RUNS THROUGH ALL THESE THREE PROVISIONS IS THAT THE ASSESSEE HAS MADE CERTAIN INVESTMENTS OR EXPENDITURE OR IS FOUND TO BE THE OWNER OF ANY BILLION, JEWELLERY ETC. AND THE SAME ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. 16. THE VALUER'S REPORT UNDER SECTION 142A OF THE ACT IS FOR THE PURPOSE OF ESTIMATING VALUE OF SUCH INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY O R OTHER VALUABLE ARTICLE REFERRED TO IN SECTION 69A OR SECTION 69B OF THE ACT. UNLESS, THEREFORE, THERE IS PRIMA FACIE APPLICATION OF SECTIONS 69, 69A A ND 69B OF THE ACT, REFERENCE TO THE VALUER IS SIMPLY NOT PERMISSIBLE. IT I S ONLY WHEN THERE IS SOME MATERIAL BEFORE THE ASSESSING OFFICER TO HOLD THAT IN CASE OF AN ASSESSEE FALLS UNDER SECTIONS 69, 69A AND 69B AS THE CASE MAY C/SCA/7543/2005 JUDGMENT BE, THAT HE CAN, TO EST IMATE THE VALUE OF SUCH UNEXPLAINED INVESTMENT OR EXPENDITURE IN BULL ION, JEWELLERY ETC., CALL FOR THE REPORT OF THE VALUER. INITIAL STARTING POINT FOR TRIGGERING A REFERENCE TO THE VALUER, THEREFORE, HAS TO BE INVOCA TION OF SECTIONS 69,69A OR 69B OF THE ACT. IT IS ONLY WHEN ANY OF THESE PROVI SIONS COME INTO PLAY THAT THE ASSESSING OFFICER CAN RESORT TO SECTION 142A FOR ESTIMATING THE VALUE OF SUCH INVESTMENT OR EXPENDITURE. SEQUENCE CAN NOT BE PUT IN THE REVERSE. IN OTHER WORDS, THE ASSESSING OFFICER WOULD HAV E NO AUTHORITY TO CALL FOR THE REPORT OF THE VALUER UNDER SECTION 142A TO JUDGE WHETHER THERE HAS BEEN ANY UNEXPLAINED INVESTMENT OR EXPENDIT URE AS REFERRED TO IN SECTIONS 69, 69A AND 69B OF THE ACT. IT WOULD ONLY AMOUNT TO FISHING INQUIRY AND NOT INVESTIGATION UNDER SECTION 142A OF THE ACT. IN OUR OPINION, THE SCHEME OF THE PROVISIONS WHEN READ HARMON IOUSLY WOULD LEAD TO A SITUATION WHERE IN CASE THE ASSESSING OFFICER, DURING THE PENDENCY OF ASSESSMENT OR REASSESSMENT, IS OF THE OPINION TH AT SECTIONS 69, 69A AND 69B OF THE ACT CAN BE INVOKED; IN ORDER TO ESTIMATE SUCH UNEXPLAINED INVESTMENT OR EXPENDITURE IN ACQUISITION OF BULLION, JEWELLERY OR VALUABLE ARTICLE, HE CAN RESORT TO VAL UATION BY THE C/SCA/7543/2005 JUDGMENT VALUATION OFFICER IN TERMS OF SUB-SECTION (1) OF SECTION 142A OF THE ACT. IN THE PRESENT CASE, N O SUCH MATERIAL EMERGES FROM THE RECORD. TO THE CONTRARY, NEITHER FR OM THE ORDER OF REFERENCE NOR FROM ANY OTHER MATERIAL, THE RESPONDEN T COULD POINT OUT THAT THE ASSESSING OFFICER HAD INVOKED THE PROVISIONS OF SECTIONS 69,69A OR 69B OF THE ACT AND IN THE PROCESS DESIRED TO OBTAIN THE ESTIMATE OF UNEXPLAINED INVESTMENT OR EXPENDITURE AND FOR WHICH PURPOSE DVO'S REPORT WAS CALLED. HE SIMPLY GAVE NO REASONS IN THE ORD ER. NO 74 INDEPENDENT REASONS, EITHER FLOWING FROM THE FILE OR EVEN IN THE FORM OF AN AFFIDAVIT ASSUMING THE SAME WOULD BE PERMISSIBLE, ARE BROUGHT TO OUR NOTICE. THUS QUITE APART FROM THE PETITIONER'S GRIEVA NCE THAT THE ASSESSING OFFICER MERELY ACTED UNDER THE DIRECTIVES OF T HE SUPERIOR AND DID NOT, ON HIS OWN APPLICATION OF MIND, DESIRE TO CA LL FOR THE REPORT, IN ABSENCE OF ANY VALID REASONS FOR MAKING A REFERENCE, I N OUR OPINION, THE ORDER MUST FAIL. 17. THE OBJECTION OF THE REVENUE THAT THE PETITION IS PREMATURE MUST BE REJECTED OUT OF HAND. IF THE REFERENCE TO DVO IS SIMP LY NOT COMPETENT, WE FAIL TO SEE WHY THE PETITIONER SHOULD BE MADE TO GO THROUGH C/SCA/7543/2005 JUDGMENT THE GAMUT OF SUPPL YING DETAILS PERMITTING THE VALUER TO MAKE HIS ESTIMATE. IF EVENTU ALLY SUCH REPORT ITSELF CAN BE OF NO LEGAL VALUE, THE INQUIRY MUST BE TERMINATED AT THE THRESHOLD. WE DO NOT SEE ANY OTHER STAGE WHERE THE ASSESSE E CAN OPPOSE THE REFERENCE TO THE VALUER ITSELF. 18. UNDER THE CIRCUMSTANCES, IMPUGNED ORDER DATED 30. 3.2005 IS QUASHED. THE PETITION IS ALLOWED. RULE IS MADE ABSOLUTE . NO ORDER AS COSTS. 35.12 SINCE IN THE INSTANT CASE NO INCRIMINATING MA TERIAL WHATSOEVER WAS FOUND SUGGESTING THAT ASSESSEE HAS PAID ANYTHING OV ER AND ABOVE THE RECORDED AMOUNT IN THE BOOKS , THEREFORE, NO ADDITI ON U/S.69B IS PERMISSIBLE IN VIEW OF THE DECISIONS CITED (SUPRA). ONCE IT IS HELD THAT NO ADDITION IS PERMISSIBLE U/S.69B OF THE I.T. ACT, IT HAS TO BE HELD THAT THE ASSESSING OFFICER HAS NO POWER TO CALL FOR VALUATIO N U/S.142A. WE ACCORDINGLY HOLD THAT NO ADDITION CAN BE MADE IN TH E HANDS OF THE ASSESSEE EITHER IN A.Y. 2005-06 WHEN THE MOUS WERE SIGNED AND BLANK SHARE TRANSFER FORMS DULY SIGNED WERE HANDED OVER O R IN THE A.Y. 2008- 09 WHEN THE SHARES WERE REGISTERED IN THE BOOKS OF THE COMPANY IN ASSESSEES NAME. ACCORDINGLY, THE GROUNDS BY THE A SSESSEE ARE ALLOWED AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . CO NOS.73 TO 77/PN/2013 (A.Y. 2004-05 & 2006-07 TO 2009-10) : 36. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESS EE IN ALL THE CROSS OBJECTIONS. FIRST WE TAKE UP CO NO.73/PN/2013 WHER E THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 75 1. THE LEARNED CIT(APPEALS) ERRED IN FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW IN DISMISSING THE GROUND OF APPEAL RAISE D BEFORE HIM THAT THE IMPUGNED ADDITIONS IN THE ASSESSMENT ARE BEYOND THE SCOPE AND PROVISIONS OF SECTION 153 A AS THEY ARE NOT BASED ON AN Y SEIZED/ INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEA RCH. 2. THE LEARNED CIT(APPEALS) ERRED IN FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW IN DISALLOWING THE CLAIM OF DEPRECIA TION @ 80% ON THE TOTAL COST OF THE WINDMILL BY TREATING PART OF THE C OST AS BEING INCURRED FOR CIVIL WORKS AND THEREBY ALLOWING DEPRECIATION @ 10% ONLY ON SUCH COSTS. IT BE HELD THAT THE ENTIRE COSTS OF WINDMILL, ERECTI ON, FOUNDATION, INFRASTRUCTURE, INSTALLATION ETC ARE TO BE ALLOWED DE PRECIATION @ 80% AS THEY FORM A INTEGRAL PART OF WINDMILL BY APPLYING T HE FUNCTIONAL TESTS. 3. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, MOD IFY, RECTIFY, DELETE, RAISE ANY GROUND OF CROSS-OBJECTION AT OR BEF ORE THE TIME OF HEARING. 36.1 AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND OF CO NO.1 FOR WHICH THE LD. DEPARTMEN TAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, GROUND OF CO NO.1 I N ALL THE COS ARE DISMISSED AS NOT PRESSED. 37. GROUND OF CO NO.2 BY THE ASSESSEE RELATES TO CL AIM OF DEPRECIATION ON WINDMILL. 37.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUND IS IDENTICAL TO THE GROUND OF APPEAL NO.4 BY THE REVENUE IN ITA NO.1916/PN/2012. WE HAVE ALREADY RESTORED THE ISSUE RELATING TO DEPR ECIATION ON WINDMILL TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN D IRECTIONS. FOLLOWING THE SAME RATIO, THIS GROUND BY THE ASSESSEE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE ISSUE IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL. THUS, GROUND OF CO NO. 2 IS ACCOR DINGLY ALLOWED. FOR STATISTICAL PURPOSES. 38. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESS EE IN THE REMAINING COS, THEREFORE FOLLOWING THE REASONINGS GIVEN ABOVE , GROUND OF CO NO.2 IN ALL THE ABOVE COS ARE ALLOWED FOR STATISTIC AL PURPOSED. 76 39. GROUND OF CO NO.3 IS GENERAL IN NATURE. ACCORD INGLY, GROUND OF CO NO.3 IN ALL THE ABOVE COS ARE DISMISSED. ITA NO.1806/PN/2012 (BY ASSESSEE) (A.Y. 2005-06) (N EETA GHODAWAT): 40. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1) THE LEARNED CIT(APPEALS) HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN ENHANCING THE ASSESSMENT FOR AY 2005-2006 BY RS.89,59,000 ON AN ISSUE WHICH WAS NOT A SUBJECT MATT ER OF APPEAL/ASSESSMENT/RETURN PERTAINING TO AY 2005-2006 . THE ENHANCEMENT SO ORDERED IS WITHOUT JURISDICTION. THE APPELLANT P RAYS THAT THE ADDITION SO MADE MAY KINDLY BE DELETED. 2) WITHOUT PREJUDICE TO GROUND OF APPEAL NO.L (A) THE LEARNED CIT (APPEALS) HAS ERRED IN FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW IN MAKING AN ADDITION U/S 69B TO EX TENT OF RS .89,59,000/- ON ACCOUNT OF ALLEGED UNACCOUNTED INVESTMENT IN 500 0 SHARES OF M/S. M. D. PROPERTIES PVT. LTD, IN AY 2005/2006 AS ENHANCEMENT. THE ADDITION SO MADE MAY KINDLY BE DELETED. (B) THE LEARNED CIT (APPEALS) HAS ERRED IN FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW IN HOLDING THAT THE MEMORANDUM OF UN DERSTANDING DATED 24/01/2005 SEIZED DURING THE COURSE OF SEARCH AND ACTE D UPON FOR PURCHASE OF SHARES IS AN UNRELIABLE DOCUMENT. (C) THE LEARNED CIT (APPEALS) HAS ERRED IN FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW IN VALUING THE SHARES OF M. D. PROP ERTIES PVT. LTD. A PRIVATELY HELD UNTRADED COMPANY, ON THE SINGLE STREAM VALUATIO N / ECONOMIC VALUE APPROACH / YIELD METHOD. (D) THE APPELLANT SUBMITS THAT IT HAS PURCHASED THE SHARES OF M. D. PROPERTIES PVT. LTD, A NEWLY FORMED COMPANY, AT ITS BOOK VALUE. ALSO THE PROPERTY PURCHASED BY M. D. PROPERTIES PVT. LTD. ON FORMATION WAS VALUED BY THE DVO, BANGALORE AND A VERY NEGLIGIBLE DIFFERE NCE WAS REPORTED BY HIM. ACCORDINGLY, THERE IS NO CASE FOR THE DEEMING PROVISI ONS OF SECTION 69B BEING ATTRACTED. 3) WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 1 AND 2 AND ON FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LAW IT BE HELD THAT THE ADDITION MADE IS BEYOND THE SCOPE AND PROVISION S OF SECTION 153A. NO INCRIMINATING DOCUMENT / MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. 4) THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, MODIFY, RECTIFY, DELETE, RAISE ANY GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARING. 77 40.1 AT THE TIME OF HEARING, THE LD. COUNSEL FOR TH E ASSESSEE DID NOT PRESS GROUND OF APPEAL NO.3 FOR WHICH THE LD. DEPAR TMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 41. GROUNDS OF APPEAL NO. 1 &2 BY THE ASSESSEE ARE IDENTICAL TO GROUNDS OF APPEAL IN ITA NO.1807/PN/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE A RE ALLOWED. FOLLOWING THE SAME REASONING GROUNDS OF APPEAL NO. 1 & 2 ARE ALLOWED. ITA NO.1749/PN/2012 (BY REVENUE)(A.Y. 2008-09) (NEE TA GHODAWAT): 42. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE CIT(A) IS ERRED IN FACTS IN APPLYING YIELD CA PITALIZATION METHOD PRESCRIBED BY CCI TO ARRIVE AT MARKET VALUE O F UNQUOTED EQUITY SHARE. 2. THE CIT(A) IS ERRED IN FACTS IGNORING THE SPECIFIC PROVISIONS UNDER RULE 1D (NOW STANDS DELETED) OF W.T. ACT FOR THE PURP OSE OF VALUATION OF UNQUOTED SHARES. 3. MARKET VALUE OF SHARES IS MAINLY DEPENDANT ON THE HEALTH OF THE BALANCE SHEET OF THE COMPANY. THE SAME FACTOR IS IGNO RED BY CIT(A). 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 42.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUNDS BY THE REVENUE ARE CORRELATED TO GROUND OF APPEAL NO.4 IN ITA NO.1920/PN/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWIN G THE SAME REASONINGS THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED. 43. IN THE RESULT, ITA NOS. 1916 TO 1921/PN/2012 FI LED BY THE REVENUE, ITA NO.1807/PN/2012 AND CO NOS. 73 TO 77/P N/2013 BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S. ITA 78 NO.1806/PN/2012 FILED BY THE ASSESSEE IS ALLOWED AN D ITA NO.1749/PN/2012 FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-01-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PAN DA) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 30 TH JANUARY 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE