ITO, New Delhi V. Shri. Dharamveer Sardana, New Delhi

ITA 5330/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3789 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS Y KAKKAR
• Assessee Lawyers: TARUN ASHWANI
• Keywords: Opportunity of being heard; Date of conversion; Fair market value; Valuation report; Reassessment proceedings; Capital Gains
• Section: 69B; 143(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.5330/D/2010 ASSESSMENT YEAR :2006-07 INCOME TAX OFFICER, VS. SHRI DHARAMVEER SARDANA, WARD 23(2), G-70, 1 ST FLOOR, MASJID MOTH, NEW DELHI G.K.-III, NEW DELHI PAN NO.AHMPS 1039G (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. Y. KAKKAR, SR. DR RESPONDENT BY : SHRI TARUN ASHWANI, ADVOCATE ORDER PER K.G. BANSAL: AM: THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED HIS R ETURN OF INCOME ON 29.03.2007. SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED ON 04.07.2008 AFTER OBTAINING THE APPROVAL OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX. IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAD FILED THE RETURN ON 2 9.03.2007, IN WHICH ALL PARTICULARS OF INCOME HAD BEEN FURNISHED. THEREFORE, IF ANY FURTHER INFORMATION IS REQUIRED, THE SAME MAY BE COMMUNICATED FOR COMPLIANCE. T HEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S 143(2) ON 01.09.20 08 FOR STARTING REASSESSMENT PROCEEDINGS. 5330-2010-DS 2 1.1 THE ASSESSEE HAD PURCHASED AN IMMOVABLE PROPERTY SITUA TED AT G-70, MASJID MOTH, NEW DELHI, FOR A CONSIDERATION OF `26.00 LACS ON 14.09.2005. THE ASSESSING OFFICER REFERRED THE MATTER FOR VALUATION OF THE PROPERTY BY INVOKING THE PROVISIONS CONTAINED IN SECTION 142A OF THE INCOME-TA X ACT, 1961. THE ASSTT. VALUATION OFFICER DETERMINED ITS VALUE AT `58,86,634/-. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING HIM TO EXPL AIN AS TO WHY A SUM OF `32,86,634/- (`58,86,634 - `26,00,000), SHOULD NOT BE ADDED TO HIS NOTICE IN TERMS OF SECTION 69B READ WITH SECTION 142A OF THE ACT. THE ASSESSEE SUBMITTED HIS OBJECTIONS AND ALSO FILED THE VALUATION REPORT FROM THE REGISTERED VALUER, SHOWING THE VALUE OF THE PROPERTY AT `25.50 LAKHS. HOWEVER, THE AS SESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE. SHE BROUGHT AN AMO UNT OF `32,86,634/- TO TAX AND THE TOTAL INCOME WAS DETERMINED AT `35,34,670/- AGAINST THE RETURNED INCOME OF `2,58,040/-. 2. THE MATTER WAS AGITATED BEFORE THE CIT(A)-XXIII, NEW DELHI. BEFORE HIM, THE VALUATION MADE BY THE ASSTT. VALUATION OFFICER WAS CHA LLENGED. IT WAS SUBMITTED THAT THERE IS NO EVIDENCE, DIRECT OR INDIRECT, IN RESPECT O F UNDERSTATEMENT OF PURCHASE CONSIDERATION. THEREFORE, IT WAS ARGUED THAT TH E ASSESSING OFFICER COULD NOT HAVE SUBSTITUTED THE PURCHASE CONSIDERATION WITH THE FAIR MARKET VALUE FOR MAKING ADDITION U/S 69B OF THE ACT. THE LEARNED CIT(A) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. HE CAME TO THE CONC LUSION THAT NO EVIDENCE REGARDING SUPPRESSION OF PURCHASE CONSIDERATION EX ISTS ON RECORD. THE MATERIAL QUESTION IN THIS CASE IS NOT AS TO WHAT IS TH E MARKET VALUE BUT WHETHER THE ASSESSEE HAS PAID HIGHER AMOUNT THAN THE AMOUNT RECORDED I N THE INSTRUMENT OF PURCHASE. IN ABSENCE OF ANY EVIDENCE TO THE CONTRARY, IT C ANNOT BE HELD THAT THE ASSESSEE HAD PAID A HIGHER AMOUNT. THEREFORE, THE ADDITION HAS BEEN DELETED. 5330-2010-DS 3 3. BEFORE US, THE LEARNED DR SUBMITTED THAT THE COMPARABLE INSTANCE CITED BY THE REGISTERED VALUER OF THE ASSESSEE IS OF THE PROPERTY SITUA TED FAR AWAY FROM THE PROPERTY PURCHASED BY THE ASSESSEE. THE ASSISTANT VALUAT ION OFFICER HAS VALUED THE PROPERTY AT `58,86,634/-. THE ASSESSEE DID NOT CO-OPERAT E WITH THE ASSTT. VALUATION OFFICER BY GRANTING HIM INGRESS ON THE APPOI NTED DATE AND HE HAD TO VALUE THE PROPERTY BY EXTERNAL EXAMINATION OF THE PROPERTY. HOWEVER, IT WAS SUBMITTED THAT IF ANY DEFICIENCY IS FOUND IN THE VALUAT ION REPORT, THE MATTER MAY BE REFERRED AGAIN TO HIM FOR REVALUATION. 3.1 IN REPLY, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THERE IS A WIDE DIFFERENCE IN THE VALUATIONS MADE BY THE ASSTT. VALUATION OFFICER AND THE REGISTERED VALUER. IT IS FURTHER SUBMITTED THAT THE VALUE RECORDED I N THE INSTRUMENT HAD BEEN ACCEPTED BY THE REGISTRAR OF ASSURANCES. THEREFORE, IN ABS ENCE OF ANY EVIDENCE REGARDING SUPPRESSION OF PURCHASE CONSIDERATION, THE VAL UATION COULD NOT HAVE BEEN REFERRED TO THE VALUATION CELL FOR MAKING ANY ADDITIO N U/S 69B. ACCORDINGLY, IT WAS URGED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE UPHEL D. 3.2 IN THE REJOINDER, THE LEARNED DR SUBMITTED THAT THERE IS A VAST DIFFERENCE BETWEEN THE VALUATION MADE BY THE ASSTT. VALUATION OFFICER AND THE RECORDED CONSIDERATION, LEADING TO UNMISTAKABLE IMPRESSION THAT THE CONSIDERATION HAS BEEN SUPPRESSED. THEREFORE, THE PROVISIONS CONTAINED IN SECTION S 69B AND 142A WERE RIGHTLY INVOKED BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION S MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE HAD SHOWN PURCHASE CONSIDER ATION OF THE IMMOVABLE PROPERTY AT `23,50,000/-. THE ASSTT. VALUATION OFFIC ER VALUED THE PROPERTY ON THE DATE OF PURCHASE AT `58,86,634/-. THE REGISTERED VALUER, M/S MANJEET SINGH AND 5330-2010-DS 4 ASSOCIATES, VALUED THE PROPERTY AT `25.50 LACS. THE QU ESTION IS WHETHER THE ASSESSING OFFICER WAS RIGHT IN ADDING THE SUM OF `32,8 6,634/- TO THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF UNDERSTATEMENT OF PURCHASE CO NSIDERATION? 4.1 AT THIS JUNCTURE, WE MAY STATE THE GROUND TAKEN BY THE REVENUE, WHICH IS THAT THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF `32,86,634/-, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED INVESTMENT IN PURCHASE OF PROPERTY WITHOUT AFFORDING AN OPPORTUN ITY TO THE AVO AND THE ASSESSING OFFICER. FROM THE GROUND, IT APPEARS THAT SI GNIFICANT EMPHASIS HAS BEEN LAID ON THE FAILURE OF THE LEARNED CIT(A) IN GRANTING A N OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER AS WELL AS THE AVO. 4.2 IN CASE OF CIT VS. UMEDBHAI INTERNATIONAL (P) LIMI TED, (2011) 330 ITR 506 (CAL.), RELIED UPON BY THE LEARNED COUNSEL, THE FACTS ARE THAT THE ASSESSEE-COMPANY PURCHASED AN OLD RICE MILL WITH APPURTENANT LAND ON 15 .09.1977 FOR `2.35 LACS. THE ASSESSEE COULD NOT RUN THE MILL AND IT CONVERTED THE ENTIRE LAND INTO STOCK IN TRADE AND STARTED SELLING IT BY PART. ITS FAIR MARKET VALUE WAS GOT DETERMINED FROM THE REGISTERED VALUER ON THE DATE OF CONVERSION AT `3,06,37,28 1/-, WHICH WAS TAKEN AS THE VALUE OF OPENING STOCK. THE ASSESSING OFFICER REFERRED THE MATTER TO THE VALUATION CELL, WHICH DETERMINED THE FAIR MARKET VALUE AS ON 01.04.1981 AT `18,73,800/-. THUS, ON THIS BASIS, HE CAME TO THE CON CLUSION THAT THE ASSESSEE OVERSTATED THE VALUE OF OPENING STOCK BY AN AMOUNT OF `2 ,26,54,893/-. THE HONBLE COURT HELD THAT THE FORMATION OF THE OPINION BY THE ASSESSING OFFICER THAT THE VALUE CLAIMED BY THE ASSESSEE WAS LESS THAN THE FAIR MARKET VALUE IS SINE QUA NON FOR REFERRING THE MATTER TO VALUATION OFFICER. IN ABSENCE TH EREOF, THE TRIBUNAL RIGHTLY HELD THAT THE PROVISION CONTAINED IN SECTION 55A(B) IS NOT APPLICABLE. FURTHER, IN THE CASE OF K.V. VARGHESE VS. INCOME TAX OFFICER (1981) 131 ITR 597 (SUPREME COURT), IT HAS 5330-2010-DS 5 BEEN HELD THAT FOR SUBSTITUTING FAIR MARKET VALUE IN PLA CE OF RECORDED SALE CONSIDERATION FOR COMPUTING CAPITAL GAINS BY INVOKIN G THE PROVISIONS CONTAINED IN SECTION 52(1), IT IS INCUMBENT UPON THE ASSESSING OFFIC ER TO SHOW THAT THAT CONSIDERATION MORE THAN THE STATED CONSIDERATION WAS RECEI VED BY THE ASSESSEE. 5. AT THIS JUNCTURE, WE MAY ALSO BRIEFLY STATE THE PROVI SION CONTAINED IN SECTION 69B OF THE ACT. THE PROVISION IS APPLICABLE WHERE ASSESS EE HAS MADE INVESTMENT IN ANY ASSET AND THE ASSESSING OFFICER FINDS THAT THE AMOU NT EXPENDED ON MAKING THE INVESTMENT EXCEEDS THE AMOUNT RECORDED IN BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION OF SUCH EXCESS AMOUNT OR THE EXPLANATION IS NOT SATISFACTORY. IN SUCH A SITUATION, THE EXCESS AMOUNT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE. THUS, FOR INVOKING THE PROVISION, IT HAS TO BE SEEN THAT THE AMOUNT INVESTED IS MORE THAN THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OR THE STATED CONSIDERAT ION. THE QUESTION OF DETERMINING THE EXCESS WILL COME THEREAFTER ONLY. IN THIS CASE, THERE IS NO DIRECT OR INDIRECT EVIDENCE REGARDING EXCESS INVESTMENT IN THE PROPERTY THAN WHAT IS RECORDED IN THE PURCHASE DOCUMENT, WHICH HAS BEEN ACCEPTED BY THE R EGISTRAR. FURTHER, THIS PROVISION IS BASED UPON THE ACTUAL EXCESS OF THE INVESTMEN T AND IT DOES NOT REFER TO SUCH EXCESS ESTIMATED ON THE BASIS OF VALUATION REPORT. ALTHOUGH, THE DECISION IN THE CASE OF K.P. VARGHESE (SUPRA) DEALS WITH COMPUTATION OF CAPITAL GAINS IN THE CASE OF A SELLER, THE RATIO OF THE CASE, IN OUR HUMBLE OPINION, WILL APPLY MUTATIS MUTANDIS IN THE CASE OF PURCHASE OF A PROPERTY ALSO. SIMILARLY, THE CASE OF UMEDBHAI INTERNATIONAL (P) LIMITED DEALS WITH CONVERSION OF A CA PITAL ASSET INTO STOCK IN TRADE FOR DEALING THEREIN, THE RATIO OF THE CASE THAT THERE SHOUL D BE FORMATION OF OPINION OF THE ASSESSING OFFICER AT THE OUT SET SHALL ALSO APPLY MU TATIS MUTANDIS WHERE ITS PURCHASE CONSIDERATION IS ALLEGED TO HAVE BEEN SUPPRESSED. THERE IS NO SUCH INITIAL OPINION FORMED BY THE ASSESSING OFFICER NOR THERE IS ANY EVIDENCE REGARDING 5330-2010-DS 6 SUPPRESSION ON RECORD. IN SUCH A CASE, THE REFERENCE TO AV O IS NOT SUSTAINABLE. ACCORDINGLY, IT IS HELD THAT THE LEARNED CIT(A) WAS RIG HT IN DELETING THE ADDITION. FURTHER, AS THE REFERENCE FOR VALUATION IS NOT SUSTAINAB LE, IT IS HELD THAT NOS USEFUL PURPOSE WILL BE SERVED BY HEARING THE AVO OR THE ASSESSING OFFICER. 6. IN RESULT, THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- ( C.L. SETHI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.17.06.2011. NS COPY FORWARDED TO:- 1. INCOME TAX OFFICER, WARD 23(2), NEW DELHI. 2. SHRI DHARAMVEER SARDANA, G-70, 1 ST FLOOR, MASJID MOTH, G.K.-III, NEW DELHI-48 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).