IN THE ITAT AHMEDABAD BENCH
Deputy Commissioner of Income-tax
IT APPEAL NO. 369 (AHD.) OF 2010
[ASSESSMENT YEAR 2006-07]
SEPTEMBER 7, 2012
Anil Chaturvedi, Accountant Member
The Revenue filed appeal against the order of Ld. CIT(A)-V, Surat dated 30-10-2009 for the assessment year 2006-07.
2. The assessee is an Individual engaged in the business of diamond manufacturing and its import and export. The assessee filed his return of income on 15-3-2007 declaring total income of Rs. 1,45,04,110/-. The case was taken up for scrutiny. During the course of assessment from the particulars furnished by the assessee, the A.O. noticed that assessee had acquired lot of urban land in the area of Vesu, Surat. The A.O. was of the view that market rate per sq. mtr. was more than Rs. 10,000/- whereas the assessee was showing the cost of land acquired by him as Rs. 74/- per sq. mtr. On verification of Surat Urban Development Authority (SUDA) u/s. 133(6) it came to the knowledge of the A.O. that the auction piece of land is between Rs. 5,000/- per sq. mtr. to Rs. 13,200/- per sq. mtr. The assessee was asked to clarify and show cause as to why the undisclosed investment of land not be estimated at the prevailing jantry rates.
3. The assessee interalia submitted that jantri price cannot be used as a measure to work out estimated investment in the absence of corroborative evidence. It was further submitted that the assessee had purchased the land in July, 2002 but at the time of purchase there were disputes among the sellers with respect to the title of the land and the matter is pending in the court. The assessee also requested the A.O. to provide the copy of Satakhat of the land on which the A.O. was placing reliance to indicate the rate to be of Rs. 11,000/- to 12,000/- per sq. mtr. The assessee submitted that the evidence on which the A.O. relies should be made available so that it can submit the necessary clarification. The assessee also submitted that provision of section 50C cannot be invoked to make addition u/s. 69B and the ingredients for invoking section 69B were absent. The assessee also relied on a number of judgments. The assessee further submitted that the instances relied upon by the A.O. cannot be compared for the reason that the land acquired by the assessee was agricultural land situated at a distance from the main city. The contentions of the assessee were not found acceptable by the A.O. The A.O. after considering the prevailing jantri rates, auction price of SUDA concluded that the price at which the sale deed were executed were quite low. In order to determine the correct value of the properties, the A.O. referred the matter to DVO. Since the case was getting time barred and report from DVO was still pending, he went ahead and estimated the value of land at the rate of Rs. 510/- per sq. mtr. as against the rate of Rs. 74/-per sq. mtr. considered by the assessee and accordingly worked out the value of land at Rs. 97,41,000/-. After considering the value of Rs. 14,13,400/- disclosed by the assessee, he added the net undisclosed investment of Rs. 83,27,600/- to the income of the assessee. Aggrieved by the action of the A.O., the assessee carried the matter before CIT(A).
4. Before CIT(A) it was submitted that the deeming provisions as contained in section 50C cannot be applied while invoking Sec. 69B. It was further submitted that addition if any can be done u/s. 50C in the hands of the seller and no provisions of the Act permits the A.O. to estimate transaction price and add the difference in the hands of purchaser. CIT (A) agreed with the contentions of the assessee and deleted the addition by holding as under:-
“10. It is clear from the aforesaid provision that there has to be finding of fact that the assessee has expended investment more than what is recorded in the books and for such excess investment the assessee has no explanation or the explanation given is not found satisfactory by the A.O. In such a case the excess investment can be considered as unexplained and added u/s. 69 of the Act. In this case undisputedly the appellant had undertaken purchase of land and the purchase prices as shown in the sale deed are recorded in the books of accounts. The A.O. estimated the purchase price higher than what is shown by the appellant in the books of account. While estimating the purchase price, the A.O. has relied on some sale instances collected from SUDA and also the subsequent revised jantri fixed by the Government.
11. In my view, the burden is on the A.O. to prove that the amount expended in making investment in the property exceeds the amount recorded in the books. The A.O. relied on some sale instances with SUDA and estimated fair market price of land. Such presumption cannot be the basis for making the addition as the A.O. has not made any independent enquiry or collected corroborative evidences to justify the addition. The A.O. has failed to bring on record any relevant material to support that amount invested by the assessee corresponds to his estimated transaction price. The comparable sale instances can be constructed as guide to indicate that investment recorded in the books may be understated. But this fact alone is not good enough to justify the addition on account of undisclosed investment in the property. Much more was required to be done by the A.O. by way of adducing supporting evidence to sustain the addition u/s. 69B, which has not been done nor brought out in the assessment order.
12. The only provision under the Act where recourse to the value adopted by the State Valuation authorities can be taken in section 50C.There is no other section in the Act which authorizes the A.O. to take any action particularly under section 69B by placing reliance on the value adopted by the State Valuation authority commonly known as jantry price. Here also, section 50C is very specific and contains a deeming provision where under the value as per jantry price is treated as full value of consideration for the purpose of computing capital gain under section 48. This provision is applicable in the case of a seller of property and cannot be invoked in the case of purchaser of property for the purpose of section 69B. This has been held by the Ahmedabad Bench of ITAT in ITA No.1749/Ahd/2008 dated 29-8-2008 in case of Bharatkumar N. Patel. The present case is not a case where the disclosed consideration is less than value determined by the Stamp Duty Authorities. As stated by the A.O. the assessee purchased the land at Rs. 74 per sq. mtr. which was the prevailing jantry price. In view of this and in absence of fulfilling the basic requirements of section 69B. I am inclined not to agree with the addition made by the A.O. The A.O., is therefore directed to delete Rs. 83,27,600/- made under section 69B of the Act.”
5. Aggrieved by the action of CIT (A), the Revenue is now in appeal before us.
6. Before us the Ld. D.R. submitted that the price at which the assessee had shown the purchase of land is far below the market rates and the Government rates. He further submitted that the market rate, the jantry rate and the auction price of SUDA gives a fair estimate of the prevailing rate. He thus submitted that the A.O. after considering the various factors had rightly made the addition. He thus submitted that the order of the A.O. be upheld.
7. On the other hand the Ld. A.R. submitted and placed on record the copies of the agreements and its English translations. The Ld. A.R. submitted that the assessee was not provided with the copy of any data or evidence based on which the A.O. had stated that the rate of land varies between Rs. 5,000/- to Rs. 13,200/-. Even the copy of Satakhat on which the A.O. had placed reliance was not made available to assessee for offering clarification. The Ld. A. R. also placed on record the copies of the application filed by the sellers of the land before the Court in respect of interest in plot of land. It was further submitted that provisions of section 50C cannot be applied while making addition u/s. 69B. He also placed on record the copy of the decision of the co-ordinate Bench (ITA No.368/Ahd/2010) order dated 25-4-2012 wherein on identical facts the appeal of the Revenue was dismissed. He thus urged that the order of CIT (A) be upheld.
8. We have heard the rival contentions and perused the material on record. In the present case before us, the issue is applicability of provisions of section 69B. Section 69B reads as under:
“Amount of investments, etc., not fully disclosed in books of account – Where in any financial year the assessee had made investments or is found to be the owner of any bullion, jewellery, or other valuable article, and the A.O. finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article 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 about such excess amount or the explanation offered by him is not, in the opinion of the A.O., satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.”
9. When we examine the provisions of Sec.69B, we find that section 69B is a deeming fiction. It is provided that addition can be made by the A.O. when the following three conditions are satisfied:
(1) If it is found that the assessee has made investment or the assessee is found to be the owner of any bullion, jewellery or other valuable article, and
(2) If it is found that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in that behalf in the books of account maintained by the assessee, and
(3) Either the assessee offers no explanation about such extra amount or the explanation offered by him is not satisfactory.
10. The above conditions are cumulative. If all these circumstances exist, the excess amount may be deemed to be the income of the assessee for the financial year in which the said investment was made or the assessee became the owner of bullion etc.
11. The factual position in the present case is that during the year the assessee had purchased agricultural land. The purchase cost of a sq. mtrs. of land was shown to be Rs. 74/- per sq. mtr. The A.O. was of the view that the purchase price shown by the assessee was quite low as compared to the prevailing market rate of the land. According to the A.O. the purchase price should have been Rs. 510/- per sq. mtr. He taking into consideration the prevailing jantry price and the auction price of SUDA, estimated the undisclosed investment at Rs. 97,41,000/-.After adjusting for the value disclosed in the books of accounts of Rs. 14,13,000/- added Rs. 83,27,600/-as the net undisclosed income. The A.O. has thus relied on the jantry price and auction price of SUDA and on that basis presumed that the amount expended is more than the amount recorded in the books. The A.O. has failed to bring on record any material to support his estimated price.
12. Section 50C is a deeming provision where under the stamp duty rate is treated as full value of consideration for the purpose of computing capital gain under section 48. It is applicable in the case of a seller of property and therefore cannot be invoked in case of purchaser of property for the purpose of section 69B. CIT (A) has given a finding that the A.O. has not made any independent enquiry or collected corroborative evidence to justify the addition.
13. In the case of CIT v. Naresh Khattar (HUF)  261 ITR 664 the Hon’ble Delhi High Court has held that to invoke the provisions of Sec.69B, the burden is on the Revenue to prove that the real investment exceeds the investment shown in the books of accounts of the assessee.
14. In the case of Smt. Amar Kumari Surana v. CIT  226 ITR 344 the Hon’ble High Court has observed as under:
“10. It is true that merely on the basis of fair market value no addition can be made u/s. 69B of the Act, 1961, but on the basis of sufficient material on record some reasonable inference can be drawn that petitioner has invested more amount than the shown in account books, then only the addition u/s. 69B can be made. The burden is on the Revenue to prove that real investment exceeds the investment shown in account books of the assessee.”
15. In the case of ITO v. Harley Street Pharmaceuticals Ltd.  38 SOT 486 (Ahd) it has been held that provisions of Sec.50C are applicable only for computation of capital gains in real estate transaction in respect of seller only and not for the purchaser. Legal fiction cannot be extended any further and has to be limited to the area for which it is created. Section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment u/s. 69.
16. The Co-ordinate Bench in the case of Dy. CIT v. Virjibhai Kalyan Bhai Kukadia  26 taxmann.com 13 (Ahd.) had on identical facts dismissed the appeal of the Revenue.
17. In view of the aforesaid facts in view of the fact that the A.O. has failed to bring on record any material to support the rates estimated by him and relying on the decisions of the Hon’ble High Courts and of the co-ordinate Bench, we are of the view that for the reasons stated hereinabove, no addition can be made in the present case and therefore no interference is called for to the order of CIT(A). We thus, uphold the order of CIT(A). In the result the appeal of the Revenue is dismissed.
18. In the result, appeal of the Revenue is dismissed.