Brief of the case:
Tribunal examined two main issues in this case firstly, whether any addition is required to be made in the hands of assessee on account of unexplained investment in purchase of house property. Secondly, whether assessees have paid any amount over and above the consideration shown in the sale deed which can be added u/s 69B on account of unexplained investment.
While dismissing the appeal filed by revenue the ITAT took note of several decisions, including CIT vs. Naveen Gera 2010 328 ITR 516 (Delhi) and other decisions, including that of K.P. Varghese vs. Income Tax Officer [1981] 131 ITR 597 (SC) of Supreme Court to show that the AO has to base his view with regard to under valuation, upon objective material.
Facts of the case:
- During search & Seizure operation sale agreement of property in dispute found in the possession of Sh. M. P. Jain.
- Property in question was agreed to be sold by one Sh.Gurdayal Singh, acting as the guardian of owner – Sh. Tarsem Singh who was the sole legal heir of the property by virtue of a Will of his grandmother.
- There was an agreement between Sh.Gurdayal Singh and Sh.Tarsem Singh with the purchaser Sh.M.P. Jain. The latter was occupying a portion, being tenant, since 1985.
- 20 lacs had been paid by the MP Jain by a cheque dated 27.04.1989. Some disputes arose which led to the filing of the suit by Sh.M.P.Jain, being Suit No.1345/1989 on the file of this Court.
- During the course of the suit proceedings, apparently a compromise was arrived at and Sh.M.P.Jain paid further Rs. 10 lakhs by way of an Account Payee cheque dated 06.09.1989.
- A compromise application under Order 22 Rule 3 CPC was moved and the statement of parties was recorded. Sh. Gurdayal Singh died on 13.12.1994 and the original owner of the property Sh.Tarsem Singh died on 13.08.1996.
- This did not resolve the entire issue because some dispute between the Legal Representatives of Tarsem Singh broke out.
- By that time agreement to sell had not been acted upon and the conveyance deed had not been executed by Sh.Tarsem Singh. Ultimately, the LRs parted with the property for a consideration of Rs. 35 lakhs, which was received by them in equal shares on 18.12.2006. This was the total value of the property mentioned in the original Agreement to Sell.
- When these transactions were reported, the AO doubted the valuation that why the sale deed was not registered upto 2006. He formed an opinion that the agreement dated 27.04.1989 might have not been given effect to because the sale deed had been executed on l8.12.2006 which ultimately led to the suspicion of under valuation of the property and was referred to the District Valuation Officer (DVO).
- Based upon his determination, the value of the property was decided to be Rs. 2,75,25,780/-. After adjusting the sum of Rs. 35 lakhs, the AO brought to tax the balance amount and determined the tax liability of Rs. 60,06,445/-
- CIT (A) accepted appeal and directed that instead of market value indicated by the DVO, the circle rate was to be looked into.
- ITAT allowed appeal filed by assessee and deleted the appeals filed by revenue.
Contention of the revenue:
