ACIT, New Delhi V. Sh. Rakesh Narang, New Delhi

ITA 4137/DEL/2011

• Counselvise Citation: 413720114 RSA 2011
• Duration Of Justice: 3 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: SUBIR GAUTAM
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset
• Section: 50C; 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SMT.DIVA SINGH, JM ITA NO.4137/DEL/2011 ASSESSMENT YEAR : 2008-09 ACIT, CIRCLE 32(1), NEW DELHI. VS. RAKESH NARANG, B-2, LAJPAT NAGAR-III, NEW DELHI. PAN: AAFPN7809P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUBIR GAUTAM, CA DEPARTMENT BY : SHRI VIKRAM SAHAY, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 27.06.2011 IN RELATION TO THE ASSESSM ENT YEAR 2008-09. ITA NO.4137/DEL/2011 2 2. THE ONLY GROUND RAISED HEREIN IS AGAINST THE DEL ETION OF ADDITION OF RS.49,15,000/- MADE BY THE ASSESSING OFFICER (AO) U /S 69B ON THE BASIS OF THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER (DVO). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE PURCHASED DURING THE RELEVANT YEAR A PROPERTY, B-79, LAJPAT N AGAR-I, NEW DELHI, FOR A CONSIDERATION OF RS.34 LAC. THE AO OPINED TH AT THE DECLARED PURCHASE PRICE WAS FAR LESS THAN ITS FAIR MARKET VA LUE. A REFERENCE WAS MADE TO THE DVO FOR DETERMINING THE FAIR MARKET VAL UE OF THE PROPERTY. SUCH VALUE WAS DETERMINED AT RS.83.15 LAC. THIS LE D TO THE MAKING OF AN ADDITION OF RS.49.15 LAC (RS.83.15 LAC MINUS RS.34 LAC) U/S 69B OF THE ACT. THE LD. CIT(A) ORDERED FOR THE DELETION OF TH E ADDITION, AGAINST WHICH THE REVENUE IS AGGRIEVED BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE EXTANT A DDITION WAS MADE BY THE AO U/S 69B OF THE ACT. THE RELEVANT PART OF THIS S ECTION STIPULATES THAT: WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTMENTS OR AND THE ASSESSING OFFICER FINDS THAT THE AMOUNT EX PENDED ON MAKING ITA NO.4137/DEL/2011 3 SUCH INVESTMENTS OR . EXCEEDS THE AMOUNT RECORDED IN THIS BEHALF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOU T SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE EXCESS AMOUNT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THE PRE-REQUISITE CONDITIONS FOR MAKING AN ADDITION UNDER THIS SECTIO N ARE THAT FIRSTLY, THE ASSESSEE SHOULD HAVE MADE INVESTMENT AND THEN THE A O SHOULD FIND THAT THE AMOUNT ACTUALLY EXPENDED ON MAKING SUCH INVESTM ENT IS MORE THAN THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT. IN OT HER WORDS, THERE SHOULD BE SOME POSITIVE EVIDENCE WITH THE AO TO FIND THAT THE ASSESSEE HAD, IN FACT, INVESTED MORE AMOUNT THAN THAT ACTUAL LY RECORDED IN THE BOOKS OF ACCOUNT. SUCH A FINDING BY THE AO CAN BE BASED ON SOME POSITIVE EVIDENCE ABOUT THE MAKING OF MORE INVESTME NT THAN THAT DECLARED IN THE BOOKS OF ACCOUNT. THIS SECTION CAN NOT BE TRIGGERED ON A MERE PRESUMPTION OF THE AO. WHEN THE LEGISLATURE H AS UNAMBIGUOUSLY PROVIDED SO, IT IS IMPERMISSIBLE TO SUBSTITUTE SUCH A FINDING WITH A PRESUMPTION ABOUT ACTUAL INVESTMENT HAVING BEEN MADE BY THE ASS ESSEE ITA NO.4137/DEL/2011 4 AT A LEVEL HIGHER THAN THAT DEPICTED IN THE BOOKS O F ACCOUNT. ONLY SOME POSITIVE AND IRREFUTABLE EVIDENCE CONVERTS A PRESUM PTION INTO A FINDING. ABSENT AFFIRMATIVE EVIDENCE, WHAT REMAINS IS A MERE SUPPOSITION OF UNEXPLAINED INVESTMENT ETC., WHICH CANNOT TAKE THE PLACE OF A FINDING OF THE AO TOWARDS UNEXPLAINED INVESTMENT. 5. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE F IND THAT THE ONLY SO CALLED EVIDENCE IN THE HANDS OF THE AO FOR THE ASSE SSEE HAVING MADE INVESTMENT OF RS.49.15 LAC OUTSIDE THE BOOKS OF ACC OUNT, IS A REPORT OF THE DVO. THERE IS HARDLY ANY NEED TO ACCENTUATE TH AT A VALUERS REPORT IS NOTHING BUT AN ESTIMATE OF COST OF CONSTRUCTION. THERE CAN BE SEVERAL FACTORS AFFECTING VALUATION OR THE PRICE FINALLY B ARGAINED. VALUATION IS NOT A FOOL-PROOF SCIENTIFIC TOOL OF THE MEASUREMENT OF THE COST OF CONSTRUCTION. ORDINARILY, THERE ARISES DIFFERENCE IN TWO VALUATIONS. EVEN RATES FOR VALUATION UNDER CPWD AND STATE PWD FOR ES TIMATING THE COST OF CONSTRUCTION DIFFER. AS REGARDS THE PRICE SETTLE D IN A TRANSACTION, HERE AGAIN WE FIND THAT THERE ARE SEVERAL FACTORS AFFECT ING THE SAME. THE PRICE FINALLY BARGAINED DEPENDS UPON A HOST OF FACTORS, S UCH AS, TERMS AND ITA NO.4137/DEL/2011 5 CONDITIONS OF PAYMENT, NEED AND CAPACITY OF THE BU YER OR SELLER TO BUY/SELL, PECULIAR FEATURES ATTACHED TO PROPERTY S UITING OR NOT SUITING A PARTICULAR CUSTOMER ETC. THE CRUX OF THE MATTER IS THAT THE VALUE OF A PROPERTY ESTIMATED BY THE DVO OR THE REGISTERED VAL UER, CAN NEVER BE CONCLUSIVE OF THE PRICE FINALLY BARGAINED. REVERTIN G TO THE FACTS OF THE CASE, WE FIND THAT THE AO MADE ADDITION U/S 69B OF THE ACT ONLY ON THE BASIS OF THE DVOS REPORT. IF SUCH A REPORT, WHICH IS A MERE ESTIMATE OF THE COST OF CONSTRUCTION OF THE PROPERTY IS KEPT AS IDE, THERE IS NOTHING TO SHOW THAT THE ASSESSEE, IN FACT, MADE MORE INVESTM ENT THAN THAT DECLARED, CALLING FOR AN ADDITION U/S 69B. 6. THE HONBLE SUPREME COURT IN THE CASE OF K.P. VARGHESE VS. ITO (1981) 131 ITR 597 (SC ) HAS HELD THAT THE ONUS OF ESTABLISHING THAT THE CONDITIONS OF TAXABILITY ARE FULFILLED, IS ALWAYS O N THE REVENUE. IT IS FOR THE REVENUE TO SHOW THAT THERE IS AN UNDERSTATEMENT OF THE CONSIDERATION. IT FURTHER LAID DOWN THAT TO THROW T HE BURDEN OF SHOWING THAT THERE IS NO UNDERSTATEMENT OF THE CONSIDERATIO N ON THE ASSESSEE, WOULD BE TO CAST AN ALMOST IMPOSSIBLE BURDEN UPON H IM TO ESTABLISH A ITA NO.4137/DEL/2011 6 NEGATIVE. SIMILAR VIEW HAS BEEN REITERATED IN CIT VS. SHIVAKAMI CO. P. LTD. (1986) 159 ITR 71 (SC). IN THIS CASE, THEIR LORDSHIPS HAVE LAID DOWN THAT NO ADDITION CAN BE MADE UNLESS THERE IS E VIDENCE THAT MORE CONSIDERATION THAN WHAT WAS STATED IN THE DOCUMENT, WAS RECEIVED. IN THE LIGHT OF THE ABOVE DECISIONS, IT IS MANIFEST TH AT NO ADDITION CAN BE MADE UNLESS THE REVENUE PROVES UNDERSTATEMENT OF CO NSIDERATION WITH SOME COGENT EVIDENCE, APART FROM A MERE ESTIMATE OF THE COST OF VALUATION. 7. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO N OTE THAT IN ORDER TO TAP THE CASES OF SUCH UNDERSTATEMENT OF CONSIDERATION YIELD ING LESS THAN THE DUE COLLECTION OF TAX, THE LEGISLATURE STEPPED IN BY IN SERTING SECTION 50C WHICH IS A SPECIAL PROVISION FOR FULL VALUE OF CON SIDERATION IN CERTAIN CASES. THIS SECTION CAME TO BE INSERTED BY THE FIN ANCE ACT, 2002 W.E.F. 1.4.2003. RELEVANT PART OF SUB-SECTION (1) OF THIS SECTION PROVIDES THAT : WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BU ILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A ITA NO.4137/DEL/2011 7 STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRE D TO AS THE 'STAMP VALUATION AUTHORITY') FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR A SSESSED OR ASSESSABLE SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER.. IT IS OSTENSIBLE THAT THIS DEEMING PROVISION DEALS WITH A SITUATION IN WHICH THE CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF A CAPITAL ASSET BY AN ASSESSEE IS, LESS THAN THE STAMP VALUE. WHEN THIS C ONDITION IS MET WITH, THEN THE SECTION OPERATES TO SUBSTITUTE THE STAMP V ALUE WITH THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESU LT OF SUCH TRANSFER FOR THE PURPOSES OF COMPUTING CAPITAL GAIN U/S 48 OF TH E ACT. THUS IT IS EVIDENT THAT SECTION 50C IS A DEEMING PROVISION, WH ICH IS APPLICABLE ONLY FOR THE PURPOSES OF SECTION 48 . 8. A DEEMING PROVISION OR A LEGAL FICTION, AS IT IS COMMONLY CALLED, IS ONE WHOSE MANDATE DOES NOT EXIST BUT FOR SUCH PROVI SION. DUE TO SUCH PROVISION ONLY, THE GIVEN IMAGINARY STATE OF AFFAIR S IS TAKEN AS REALITY DESPITE IT BEING AT VARIANCE WITH THE SCOPE OF THE ENACTMENT. IT IS TRITE ITA NO.4137/DEL/2011 8 LAW THAT A DEEMING PROVISION CANNOT BE EXTENDED BEY OND THE PURPOSE FOR WHICH IT IS INTENDED. THE HONBLE SUPREME COURT IN CIT VS. AMARCHAND N. SHROFF (1963) 48 ITR 59 (SC) CONSIDERED THE SCOPE OF A DEEMING PROVISION AND HELD THAT THE FICTION CANNOT BE EXTEN DED BEYOND THE OBJECT FOR WHICH IT IS ENACTED. IN CIT VS. MOTHER INDIA REFRIGERATION INDUSTRIES P. LTD.(1985) 155 ITR 711 (SC) THE SAME VIEW HAS BEEN REITERATED BY HOLDING THAT THE LEGAL FICTIONS ARE CREATED ONLY F OR SOME DEFINITE PURPOSE AND THESE MUST BE LIMITED TO THAT PURPOSE A ND SHOULD NOT BE EXTENDED BEYOND THEIR LEGITIMATE FIELD. 9. COMING BACK TO OUR CONTEXT, WE FIND THAT SECT ION 50C IS A DEEMING PROVISION, WHICH IS APPLICABLE ONLY FOR THE PURPOSE OF SECTION 48. THE LATTER SECTION SPELLS OUT THE MODE OF COMPUTATION O F CAPITAL GAIN. TO PUT IT SIMPLY, THE SUBSTITUTION OF FULL VALUE OF CONSI DERATION RECEIVED WITH THE STAMP VALUE IN TERMS OF SECTION 50C, IS APPLI CABLE IN THE HANDS OF THE SELLER OF THE PROPERTY WHO HAS TO COMPUTE CAPIT AL GAINS U/S 48 PURSUANT TO THE TRANSFER OF A CAPITAL ASSET IN THE NATURE OF LAND OR BUILDING OR BOTH. ON THE CONTRARY, SECTION 69B, WHICH IS AG AIN A DEEMING ITA NO.4137/DEL/2011 9 PROVISION, GOVERNS THE CASES IN WHICH INVESTMENT MA DE BY THE ASSESSEE IS NOT FULLY DISCLOSED. IN OTHER WORDS, SECTION 69B APPLIES TO THE PURCHASER OF AN ASSET, IN CONTRADISTINCTION TO SEC. 50C, WHICH APPLIES TO THE SELLER OF AN ASSET. 10. THE POSITION ABOUT THE SUBSTITUTION OF STAMP VALUE WITH THE CONSIDERATION RECEIVED IN CASE THE LATTER IS LOWE R THAN THE FORMER, IN THE HANDS OF THE SELLER ONLY, LEAVING THE DIFFERENTIAL INVESTMENT MADE BY THE BUYER UNTAXED, APPEARS TO HAVE BEEN REALIZED BY THE PARLIAMENT. THAT IS WHY, THE LEGISLATURE HAS INSERTED CLAUSE (VII) TO S ECTION 56(2) BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 1.10.2009, INTER ALIA , PROVIDING THAT WHERE AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY REC EIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS ON OR AFT ER THE 1ST DAY OF OCTOBER, 2009, (B) ANY IMMOVABLE PROPERTY, (I) W ITHOUT CONSIDERATION, THE STAMP DUTY VALUE OF WHICH EXCEED S FIFTY THOUSAND RUPEES, THE STAMP DUTY VALUE OF SUCH PROPERTY SHALL BE CONSIDERED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES A ND ; (II) FOR A CONSIDERATION WHICH IS LESS THAN THE STAMP DUTY VAL UE OF THE PROPERTY BY ITA NO.4137/DEL/2011 10 AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THE STAM P DUTY VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDERATION, SHALL BE C ONSIDERED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 11. A CONJOINT READING OF SECTIONS 50C AND 56(2 )(VII) MAKES IT VIVID THAT WHEREAS STAMP VALUE HAS BEEN SUBSTITUTED WIT H THE FULL VALUE OF CONSIDERATION IN CASE THE LATER IS LESS THAN THE F ORMER IN THE HANDS OF THE SELLER BY VIRTUE OF SECTION 50C, THE SUBSTITUTION O F THE STAMP VALUE WITH THE ACTUAL PURCHASE PRICE, IN EXCESS OF RS.50,000/ - HAS BEEN MADE EFFECTIVE IN THE HANDS OF THE BUYER ONLY WHERE ANY IMMOVABLE PROPERTY IS PURCHASED AFTER 1.10.2009. AS THE ASSESSEE BEFO RE US IS A BUYER, NATURALLY, HIS CASE WILL NOT BE COVERED U/S 50C BUT WILL BE GOVERNED BY SECTION 56(2)(VII). SINCE SECTION 56(2)(VII) IS APP LICABLE ON CASES IN WHICH THE INDIVIDUAL OR HUF RECEIVES IMMOVABLE PROP ERTY ON OR AFTER 1.10.2009 AND WE ARE DEALING WITH A CASE IN WHICH T HE PROPERTY HAS BEEN PURCHASED BY THE ASSESSEE IN THE FINANCIAL YEAR 200 7-08, THE MANDATE OF SECTION 56(2)(VII) CANNOT APPLY RETROSPECTIVELY. O NCE THIS PROVISION IS NOT APPLICABLE, THE RATIO DECIDENDI IN THE CASE OF K.P. VARGHESE (SUPRA) ITA NO.4137/DEL/2011 11 AND SHIVAKAMI CO. P. LTD. (SUPRA) WOULD APPLY LEAVING NO SCOPE FOR MAKING ADDITION IN THE CIRCUMSTANCES AS ARE PREVAIL ING IN THE INSTANT CASE. WE, THEREFORE, UPHOLD THE VIEW TAKEN BY THE L D. CIT(A) ON THIS ISSUE. 12. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.02.201 5. SD/- SD/- [DIVA SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 16 TH FEBRUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.