Case Law Details

Case Name : R.S. Bedi Vs ACIT (Delhi High Court)
Appeal Number : Income Tax (Appeal) no. 144-146 of 2003
Date of Judgement/Order : 28/10/2015
Related Assessment Year :
Courts : All High Courts (4387) Delhi High Court (1313)

Brief of the Case

Delhi High Court held In the case of R.S. Bedi vs. ACIT that no addition u/s 69B is maintainable on the sole basis of DVO report. In the given case, although AO found some document during the search, but the same was not the basis for addition as also noted by ITAT. The additions were made on the basis of DVO report which is not maintainable in law.

Facts of the Case

The three assessees are brothers. They purchased a farm house at Asola in Delhi and the purchase price recorded in the books of accounts was Rs.8,40,000. A search was carried out in the premises of Mr. R.S. Bedi and a paper was seized which had some notings purportedly disclosing the investment made in a farm to the extent of Rs.76 lakhs. According to the Revenue when the said Assessee was confronted with the said piece of paper, he was unable to explain the details given therein. A presumption was then raised regarding ownership and correctness of the said paper.

In the assessment order dated 27th March 1997, the AO noted that the value per acre shown by the Assessee for the total area of the farm house of 4.73 acres was undervalued. The AO referred the matter to the Department Valuation Cell by issuing a commission under Section 131 for finding out the correct area of the farm and also for finding out the extent of the Assessee investment in the said farm. Then on the basis of DVP report addition u/s 69B was made. It was recorded that for a total amount of Rs.66,47,800 was spent by the three co-owners in acquiring the farm of which only Rs.8,40,000 was recorded in the books of accounts. Accordingly the unrecorded amount of Rs.58,07,000 was added, one-third each, in the hands of each of the Assessee.

Contention of the Assessee

The ld counsel of the assessee relied on the judgment of Commissioner of Income Tax v. Smt. Amiya Bala Paul (2003) 262 ITR 407 (SC) and submitted that in terms of the said decision the very act of the AO seeking the report of the DVO by issuing a commission under Section 131 of the Act was without jurisdiction.

Contention of the Revenue

The ld counsel of the revenue relied on the judgment of the Rajasthan High Court in Smt. Amar Kumari Surana v. CIT (1997) 226 ITR 344 (Raj) to submit that for the purposes of Section 69B of the Act the burden would shift to the Assessee once the Revenue is able to demonstrate, by way of a report of the DVO, that the value disclosed in the sale deed for the purchase of the property by way of investment was less than the market value. Reliance is also placed on the decision in Commissioner of Income-tax v. Narinder Kr. Budhiraja [2015] 56 taxmann.com 315(Delhi).

Held by CIT (A)

CIT (A) dismissed the appeal of the assessee.

Held by ITAT

ITAT held that the basis of the addition was not the said dump document but the report of the DVO which was duly supplied to the Assessee after seeking their comments. Further held that the Revenue had discharged the onus by confronting the Assessee with the report of the DVO and it was for the Assessee to have rebutted the said evidence. Accordingly, it was held that the Assessee had failed to do so and, therefore, the addition under Section 69B was justified.  

Held by High Court

It is a settled position of law that mere on the basis of DVO report, no addition is sustainable unless AO has some material in possession to show that the assessee has paid extra consideration. The said position was comes out form the judgment of Commissioner of Income Tax v. Puneet Sabharwal (2011) 338 ITR 485 (Del) and same was reiterated in the case of Commissioner of Income Tax v. Lahsa Construction Pvt. Ltd. (2013) 357 ITR 671 (Del).

In the facts of the present case it is plain that the seized document, which raised the suspicion of the Revenue about a possible undisclosed investment made by the Assessee, did not form the basis for the additions. The statement made by the DR before the ITAT, which was accepted by the ITAT, makes it clear that the addition was sought to be sustained only on the basis of the report of the DVO.

In regard to the both decision which were relied upon by the ld counsel of the revenue, the Court finds that in both instances the report of the DVO was not the sole basis for sustaining the addition. There was other material available with the Revenue to show that the investment made was not disclosed in the books of accounts. The report of the DVO in both cases was only a corroborative piece of evidence. While in the current case, the report of the DVO forms the sole basis for the additions made by the AO.

Accordingly, appeal of the assessee allowed.

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