Case Law Details
DCIT Vs M/s Riar Builders Pvt. Ltd. (ITAT Amritsar)
Section 69B cannot be invoked on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account.
Sec. 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a al or fictional income being brought to tax contrary to the strict visions of Article 265 of the Constitution of India and Entry 82 in List 1 of the seventh schedule thereto which deals with “Taxes on income other than agricultural income.”
For the purposes of Section 69B it is the burden of the Assessing Oficer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Oficer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act.
The error committed by the Income Tax authorities in the present case is to jump the first step in the process of applying section 69B-that of proving understatement of the investment- and reply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorize the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the Assessing Oficer even to show the exact extent of understatement of the investment; it does not even give the Assessing Oficer the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears that the Assessing Oficer is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount undisclosed investment, it is perhaps reasonable to permit the Assessing Oficer to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the Assessing Oficer is an acceptable or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is first proved by the Assessing Oficer. It is only to this extent that the rigour of the burden placed on the Assessing Oficer may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking.
Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, the decision of the Income Tax Authorities cannot be approved. Section 69B was wrongly invoked. The order of the Tribunal is approved; the substantial question of law is answered in the negative, in favour of the assessee and against the CIT.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
These are three appeals filed by revenue against the orders of Ld. CIT(A), all dated 2 1.12.2016 for Asst. Year 2009-10, relating to three different assessees. Common issues are involved in these appeals and these were heard together and therefore for the sake of convenience, a common and consolidated order is being passed. The common ground taken by revenue in these appeals is the action of Ld. CIT(A), by which he has deleted the additions made by Assessing Officer u/s 69B of the Act.
2. The assessees has also filed cross objections to the appeals filed by revenue and has taken similar grounds of appeal where by the assessees has challenged the reopening of the cases u/s 148 of the Act.
3. At the outset, the Ld. AR submitted that he will not be pressing cross objections therefore the same may be treated as withdrawn.
4. The Ld. DR had no objection to withdrawal of cross objections and therefore the cross objections filed by assessee are dismissed as withdrawn.
As regards the issue under appeals, the Ld. AR submitted that the issue under appeals is duly covered in favour of assessees by the order of Tribunal in the case of Sh. Kulwinder Singh and M/s Harman Builders Pvt. Ltd. vide its order dated 01.08.2016 in ITA No. 659 & 660/Asr/2014. The Ld. AR submitted that the Ld. CIT(A) has followed the order of Hon’ble ITAT and had deleted the additions.
5. The Ld. DR fairly conceded that the issue under appeals was duly covered in favour of assessees.
6. We have heard the rival parties and have gone though the material placed on record. We find that the assessments in the case of assessees were reopened u/s 148 of the Act, for the reason that during the year under consideration, the assessees had made investment in purchase of land sold by M/s Punjab Iron & Steel Co. Ltd. During the course of search proceedings in the group companies of PISCO a vital document was found which was a copy of agreement entered into by M.D. of PISCO with Sh. Mohinder Singh Bajwa and Joginder Singh for the sale of land measuring 24 Kanal situated at Vill. Birring, G.T. Road, Jalandhar. The Assessing Officer observed from the copy of agreement that the rate of land was fixed at Rs. 11,05,00,000/- per acre. The Assessing Officer also observed that the Khasra Nos. of land mentioned in the agreement were ultimately purchased by Mohinder Singh Bajwa, M/s Harman Builders Pvt. Ltd., Sh. Kulwinder Singh, M/s Lakhan Pal Designs Pvt. Ltd., Sh. Ripandeep Takhar, M/s Riar Builders Pvt. Ltd., Smt. Supreet Kaur and Smt. Updesh Jaspal etc. in various financial years. Out of these persons in whose name a part of land was transferred by sale deeds, the three persons are involved in these appeals and therefore the cases of these three persons were reopened. The Assessing Officer during reassessment proceedings observed that assessee M/s Riar Builders Pvt. Ltd. had purchased land measuring 4 Kanal and 8 Marlas for a total consideration of Rs. 1,92,50,000/- whereas as per the rate of Rs. 11,05,00,000/- per acre, the value of land was Rs.6,07,75,000/- and therefore he made additions of Rs.4, 15,25,000/- as unaccounted and undisclosed investment u/s 69B of the Act. Similarly the Assessing Officer observed that Smt. Updesh Jaspal had purchased land measuring 3 Kanal 2 Marlas for a total consideration of Rs.62,00,000/- and whereas the value of such land at the rate of Rs. 11.05 crores per acre comes out to be Rs.4,28, 18750/- and therefore Assessing Officer made an addition of Rs. 183,09375 as unaccounted and undisclosed investment u/s 69B of the Act, similar was the position in the case of Smt Supreet Kaur where Assessing Officer on the same basis made an addition of Rs. 18,30,9375/-.
7. Aggrieved with the additions, the assessees filed appeals before Ld. CIT(A) and Ld. CIT(A) vide separate orders deleted the additions made by Assessing Officer by following the judgments of the Hon’ble Amritsar Bench of Tribunal in the case of Sh. Kulwinder Singh and M/s Harman Builders Pvt. Ltd. and where on similar facts and circumstances, the Appeal of the revenue was dismissed.
The Hon’ble Tribunal in the case of Sh. Kulwinder Singh and M/s Harman Builders Pvt. Ltd. has reproduced the orders of Ld. CIT(A) and after reproducing the same has dismissed the appeals filed by revenue by holding as under:
“7 . We have heard the rival contentions and have perused the material available on record. We have also gone through the very detailed and order of the ld. CIT(A), who has discussed each and every aspect of the matter and has found that the findings given by the ld. CIT(A) based on the facts and circumstances of the case, which do not require any interference on our part. The relevant findings given by the ld. CIT(A) in his order in paras 9 to 24 of the order are as follows:
‘9. I have considered the facts of the case, the basis of addition made by the Assessing Oficer and the arguments of the AR during assessment proceedings as well as appellate proceedings. It is quite apparent that the case of the Assessing Oficer is entirely dependent upon the documents found and seized not in the case of the appellant but from unrelated party being an Accountant of the company which happens to be seller of the land in question. It is also fact that impugned unregistered agreement to sell allegedly entered into by M/s PISCO Ltd. and two other persons is a photo copy of the agreement to sell in respect of land in the same village Birring at the rate of Rs. 11.05 Crore per acre. The said documents further record as to how various payments in cheque as well as In cash have been made by the impugned buyer to M/s PISCO Ltd. and said payments in cheque, as observed by the Assessing Oficer stand recorded in the books of account of buyer. This crucial fact lends credibility to impugned agreement to sell. The action on the basis of such an agreement to sell, even though being a photocopy is warranted in the case of parties to agreement as the evidence in the case of Income Tax proceedings does not have to be in the nature of evidence under section 65 of the Evidence Act, 1872.
10. However the same test regarding admissibility of evidence could not be extended in the case of every other buyer of land in the same village or similarly located land. The presumption u/s 132 (4A) is to be invoked in the case of M/s PISCO Ltd. from whom the document or valuables are found and seized and even in the said case such a presumption is rebuttable. However, it is clear that no evidence whatsoever has been found from the appellant during the course of search operation which could even suggest that there has been unaccounted investment in the purchase of land to the tune of Rs.2.27 Crore. The presumption made by the Assessing Oficer on the basis of the seized documents in the case of M/s PISCO Ltd. in respect of the impugned deal recorded in the said document could definitely be made but same presumption can not be extended to in the case of every other consequential sale of land by ‘M/s PISCO Ltd. The Assessing Oficer has clearly observed in the assessment year that the sale consideration as recorded in the seized copy of agreement of sale has been taken for the purposes of comparative rate at village Birring only and the land purchased by the appellant was diferent than the one mentioned in the impugned seized documents. This issue has been clarified by the Assessing Oficer at para 4.6 in the assessment order. This further underlines the basis of Assessing Oficer’s presumption Here it is important to consider the facts of the case in the light of Judicial Pronouncements in similar cases wherein the documents relied upon by the Assessing Oficer had been seized in the case of third arties. The documents to be relied upon have to be extremely clearly specific and descriptive enough to establish the factum of passing on if unaccounted sale consideration for transfer of property in question. the documents seized in the case of M/s PISCO Ltd only create a doubt or suspicion which cannot take the place of the evidence as has been held in the catena ofjudgments, some of which are as under:-
DCIT Vs. D.N. Kamani (HUF) 70 ITD (Patna- Trib) 77 Commissioner of Income Tax Vs. Ram Narain 224 ITR 180 (P&H)
Elite Developers Vs. Dy. Commissioner of Income Tax 73 ITD (Nagpur- Trib) 379
Monga Metals Pvt. Ltd. Vs. ACIT 67 TTJ (All) 247
JCIT Vs. Gramophone Company of India Ltd.
265 ITR (Kol-Trib) 46(AT)
11. The case of Amarjit Singh Bakshi (HUF) vs ACIT is on similar facts as is clear from the following head note:-
“Search and seizure-Block assessment-Computation of undisclosed income -Addition under section 69B-A loose sheet, purporting to be an agreement, partly written in pencil and partly in pen, found during search of the premises of ‘N’- Said document revealed that agricultural ‘was sold by ‘N’ to assessee (ASB) at a consideration much higher than that declared by ASB-AO, in regular assessment of assessee A SB (HUF) on protective basis, made addition of the difference and in block assessment of ASB’ (individual), made an addition of Rs. 6.8 crores as undisclosed investment-Addition not justified-Such a document could not be said to be an ‘agreement’ nor a ‘dumb document’-‘N’ having changed his stand and retracted his statement at various levels, his testimony could not be said to be reliable-Further, the document in question was not recovered from the possession of assessee and assessee was not given any opportunity to cross-examine ‘N’-In the absence of any reliable evidence, no addition could be made.”
12. Further the decision of Flon’ble Jurisdictional Bench of ITAT in the case of Neena Syal vs Assistant Commissioner of Income Tax 69 (Chd-Trib) 516 is also on similar issue as is clear from following head note: –
“Search and seizure-Block assessment-Computation of undisclosed income-Addition of premium allegedly paid over and above the cost of plot mentioned in the registered deed-Seized documents on the basis of which the impugned addition were made not found at the residence of the assessee but at the residence of a third party- Same have not been specifically confronted to the assessee before making the addition-Explanation given by assessee not controverted by AO-AO has not given any reason for either not accepting the explanation of the assessee or for finding the explanation as unsatisfactory-Thus, AO did not comply with the conditions stipulated in s. 69-Addition deleted-Remand of the case not called for-Power of remand under s. 254 is required to be exercised in a disciplined and responsible manner-Same cannot be invoked in a case where AO has not cared to follow the basic provisions of s. 69/69B.”
13. The decision of the jurisdictional ITATAmritsar in the case of ITO vs. Sh. Surinder Singh is directly on the similar facts as certain documents seized from the third party M/s Dreamland Co-operative which was seller in said case and the documents in question had recorded certain amounts received by M/s Dreamland Co- operative Society from the assessee on account of sale of flat. It is further to be noted that Sh. Rakesh Kumar C/o Dreamland Cooperative Society had given statement to the effect that amount had been received from the assessee. However a mere presumption that sale deed was registered in the impugned assessment year would not mean that cash payment was also in the same year. The presumption available u/s 132(4A) was not available in the case of the assessee as no documents had been seized from his possession. The Hon’ble Court held as under:
“The only piece of paper which is computerized 04.07.2007 seized from a third party ie. M/s Dreamland co-operative Society on 19.0 7.2007 is the only document on the basis of which the Assessing Oficer had made the addition. We concur with the view of the Ld. CIT(A) that except for the only document ie. page No. 66 of annexure 50 seized from M/s Dreamland co-operative Society, a third party there is nothing else to suggest that assessee had in fact paid an amount of Rs. 11,50,000/- in cash to the society. It is undisputed that the document is not seized from assessee. It is also undisputed that the document I not seized from the assessee. It is also undisputed that document is not in handwriting of the assessee and did not belong to assessee. It is also not disputed that there is no date on alleged payment mentioned in this loose document. It is a fact that as per sale deed dated 11.01.2007 the flat was sold by the society to the assessee for a full and final consideration of Rs. 7 lanes paid through cheque No. 346637 dated 08.01.2007 and this value has duly been accepted by the registration authority. The Assessing Oficer has based his entire case on this document and the statement given by Sh. Rakesh Kumar M/s Dreamland Co-operative Society. Moreover, during the assessment of the society a valuation report of the property was filed wherein amount of Rs. 50 lacs had been surrendered by the said Society. In the present case, when document seized is not bearing any date as regard the payment made in cash, the same cannot be linked to the assessee conclusively in the impugned assessment year. A mere ‘Presumption that sale deed is registered in the impugned assessment year and therefore, cash payment is also made in the same year is not enough in the absence of any link in the list of payment. We concur with the view of the Ld. CIT(A) and the cases relied upon by him that presumption is available against the person from whose possession a seizure is made but the same cannot be extended to others. Accordingly, the Ld. CIT(A) has rightly deleted the addition made by the Assessing Oficer and we find no infirmity in his order. Thus all the grounds of the revenue are dismissed.”
14. The issue of alleged understatement of sale consideration in the registration deed has to be proved by the revenue and the same can be done by leading positive evidence either in the form of some documents found during the course of search or otherwise which could prove that consideration over and above the registration deed had been passed on from buyer to seller. The evidence relied upon by the Assessing Oficer in the instant case represents a photocopy of an agreement to sell with regard to a deed between two other persons in respect of diferent piece of land and on a diferent date. The Assessing Oficer on the basis of the said seized documents, which has been denied by all the constituents mentioned therein, could definitely make a presumption on sale price being higher than what was stated in the registration deed by the appellant. However, the said presumption has to be backed up by the some evidence of transfer of such consideration from the buyer to seller. The appellant alongwith seller had been subjected to search operation within the meaning of section 132 of the I. T. Act 1961 but no such evidence could be found to be existing. This means that the presumption of the Assessing Oficer eventually remains a presumption and therefore can not substituted in place of evidence i e. essential requirement to unsettle the sale consideration as recorded in the registered documents. It is also important to appreciate that the said registration between the appellant and seller has been at a price which is at least as per circle – rate approved by the Revenue Authorities and hence can not be said to be below fair market price. The Hon’ble Apex Court in the case of E.P. Varghese Vs. ITO 131 ITR 597 (SC) had given judgment in the context of applicability of Section 52(2) of Income Tax Act 1961 which dealt with the possible under statement of sale consideration. The said section has been omitted by Finance Act 1987 w. e.f. 1.4.88 and the only presumption as of now is in terms of applicability of section 50C in the case of computation of capital gain in the case of the seller. The under statement that could be presumed in such eventuality in the hands of the buyer cannot lead to an addition u/s 69 which clearly shows that it is the evidence of passing on of unaccounted sale consideration that has to be brought on record. The Hon’ble Apex Court clear held as under:-
“It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue and the burden lies on the revenue to show that there is an understatement of the consideration. Moreover, to throw the burden of showing that there is no understatement of the consideration on the assessee would be to almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him.
Once it is establishing by the Revenue that the consideration for the transfer has been understated or, to put it diferently the consideration actually received by the assessee is more than what is declared or disclosed by him, section 52(2) is immediately attracted, subject of course to the fulfillment of the condition of 15% or more diference, and the Revenue is then not required to show what is the precise extent of the understatement or in other words, what is the consideration actually received by the assessee. That would in most cases be dificult, if not impossible, to show and hence sub-section (2) relieves the Revenue of all burden of proof regarding the extent of understatement or concealment and provides a statutory measure of the consideration received in respect of the transfer. It does not create any fictional receipt. It does not deem as receipt something which is not in fact received. It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains on the footing that the fair market value of the capital asset represents the actual consideration received by the assessee as against the consideration untruly declared or disclosed by him.
15. The said judgment of Hon’ble Apex Court has been consistently followed various High Court and Tribunals on the issue of understatement of sale consideration in respect of cases following under the Income Tax Act, 1961. For instant the Hon’ble Delhi High Court in the case of CIT Vs. Smt. Suraj Devi 328 ITR 604 held as under:-
“It is settled law that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to / upon the valuation given by the DVO. In any event, the opinion of a DVO, per se is not an information and cannot be relied upon without the books of account being rejected which has not been done i the present case. Moreover, in the present case, no evidence much ass incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed. A reading of the Assessing Oficer’s order does not disclose that the assessee had made any admission in her alleged statement under section 132(4). In fact, no such statement has been produced. It is also pertinent to mention that no adjustment on account of sales consideration has been made by the Revenue in the case of the seller. Consequently, no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed.- E.P. Varghese vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC), CIT vs. Smt. Shakuntala Devi (2009) 224 CTR (Del) 79: (2009) 316 ITR 46 (Del), Sargam Cinema vs. CIT (2011) 241 CTR (SC) 179 and Asstt. CIT Vs. Dhariya Construction Co. (2010) 236 CTR (SC) 226: (2010) 47 DTR (SC) 288 followed.”
16. The above judgment of the Hon’ble Delhi High Court, which is in the context of validity of report of DVO with regard to fair market price of the property but it clearly underlines that no evidence much less incriminating evidence had been found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed.
17. The Hon’ble Jurisdictional High Court of Punjab & Haryana in the case of Paramjit Singh Vs. ITO has clearly upheld the far reaching importance of the amounts shown in the sale deed. The said judgment has been given in the context of admission of oral evidence as against the terms and condition recorded in the registered sale deed. The Hon’ble Court held as under:-
“There is well-known principle that no oral evidence is admissible once the document contains all the terms and conditions. Secs. 91 and 92 of the Indian Evidence Act, 1872 (for brevity ‘the 1872 Act’) incorporate the aforesaid principle. According to section 91 when terms of a contract, grants or other disposition of property have been reduced to the form of a document then no evidence is permissible to be given in proof of any such terms of such grant or disposition of the property except the document itself or the secondary evidence thereof. According to section 92 of the 1872 Act once the document is tendered in evidence and proved as per the requirements of section 91 then no evidence of any oral agreement or statement would be admissible as between the parties to any such instrument for the purposes of contradicting, varying, adding to or subtracting from its terms. According to illustration ‘b’ to section 92 if there is an absolute agreement in writing between the parties where once has to pay the other a principal sum by specified date then the oral agreement that the money was not to be paid till the specified date cannot be proved. Therefore, it follows that no oral agreement contradicting/varying the terms of a document could be ofered. Once the aforesaid principle is clear then ostensible sale consideration disclosed in the sale deed dated 24th Sept., 2002 has to be accepted and it cannot be contradicted by adducing any oral evidence. Therefore, the order of the Tribunal does not sufer from any legal infirmity in reaching to the conclusion that the amount shown in the registered sale deed was received by the vendors and deserves to be added to the gross income of the assessee.”
18. “The Hon’ble High Court of Rajasthan in the case of COMMlSSIONER OF INCOME TAX vs. BHANWARLALMURWATIYA, reported in (2008) 215 CTR (Raj) 489, held:-
The Question as to what was the price of the land at the relevant time is a pure question of fact. Apart from the fact, that even if it were to be assumed, that the price of the land was diferent than the one, recited in the sale deed, unless it is established on record by the Department, that as a matter of fact, the consideration, as alleged by the Department, did pass to the seller from the purchaser, it cannot be said, that the Department had any right to make any additions. It is a different story as to, to what extent and how, the statement of 5, as given before diferent authorities, at different times, can be used against the assessee. More so, when none of the witnesses was examined before the AO, and the assessee did not have any opportunity to cross examine them. In any case, the question as to whether the consideration of Rs. 61 lacs, or any other higher consideration than the one, mentioned in the sale deed, did pass from the assessee to the seller or not, does not the less remain a question of fact, and it is not shown by the Department, that any relevant material has been ignored, or misread by the CIT(A), or the Tribunal. In that view of the matter, the questions, as framed, cannot be even said to be arising, and in any case, are required to be answered against the revenue, and in favour of the assessee.”
19. The Hon’ble Income Tax Appellate Tribunal, Chandigarh Bench ‘B‘,Chandigarh in the case of I.T.O. vs. Shri Mohinder Singh reported in (2008)ITR 118 (ITAT, Chd), held:-
“Addition made under capital gain on the ground that income by way of sale received by the assessee was more than what it was shown in the deed of registration on the basis of report of investigation wing of the department based on a photocopy of an agreement disowned by the assessee. No evidence on record to show that assessee had received more than what was disclosed on the registered instrument, the burden for which is on revenue. No addition can be made on the basis of the photocopy of a document when the transaction is separately evidenced by a registered sale deed.”
20. The Hon’ble Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh in the case of I. T. 0. v. Shri Manjit Singh reported in (2010) 128 TTJ(Chd)(U0) 82, held:-
“In the absence of any evidence to show that the assessee had received any consideration over and above what is stated in the sale deed, addition could not be made by disregarding the ‘full value of the consideration’ declared by the assessee simply because another portion of land has been sold by the assessee along with his brother at a higher rate,”
21. The Hon’ble Madras High Court in the case of Sivakami Co. v. CIT (1973) 88 ITR 311 (Mad) has held that the burden of proving that certain sales were efected with the object of avoidance or reduction of tax on capital gains is on Revenue and it is not enough in 3 explanation ofered by the assessee was not acceptable and there e strong suspicion as to the real motive, which prompted the ssessee to sell the assets. There must be something positive to suggest that the sales were efected with the object of avoidance or reduction of tax liability for capital gains and this was afirmed by Hon’ble apex court in (1986) 159 ITR 71 (SC). We are of the view that unless there is evidence that more than what is stated in the documents or was received, no higher price can be taken to be the basis for computation of tax either in business transaction or capital gain transactions. The entire onus is on Revenue and the inferences might be drawn in certain cases but come to a conclusion that a particular higher amount was, in fact received must be based on such material from which such an irresistible conclusion follows. In our considered view, in the present case, the Revenue could not primary facts, from which inference can be drawn that the considerations recorded by assessee-firm in its account and the s deeds is not the full consideration or the actual price received by assessee for the transfer of shops was the under-stated price.
22. The Hon’ble Apex Court in the case of CIT Vs. George Handerson & Company Limited 66 ITR 622 has observed that full value of consideration for which the sale, exchange or transfer of the capital asset is made appearing in section 12B of Indian Income Tax Act, 1922 (corresponding to the present section 48 of the Income Tax Act, 1961), does not mean the market value of the asset transferred but the price bargained for by the parties to the sale, The consideration for the transfer of capital asset is what the transferor receives in lieu of the asset he parts with, viz., money or money’s worth. The expression “full consideration” in the main part of section 12B(2) cannot be construed as having a reference to the market value of the asset transferred. The Hon’ble Madras High Court in the case of CIT Vs. P. Suryanaraina 88 ITR 321 held that the full value of consideration in the said section meant only the actual value received by the assessee. However the market value may also be taken in place of full value of the consideration only in the event of the consideration as per registered document being less than the value fixed by revenue authorities for purpose of collection of stamp duty. It means that the full value of consideration as evidenced by the registered document can be constituted for the value meant for the purposes of stamp duty as per section 50c. This section has been introduced by Finance Act 2002, w.e.f. 1.4.2003 and has been titled “special provision for full value of consideration in certain cases” which means that the full value of consideration can be substituted only if the conditions as stipulated in the provisions of section 50C are fulfilled. Apart from the provisions of section 50C, the sale consideration as reflected in the registered document can be substituted by a higher figure if there is evidence on record to suggest that amount over and above the one recorded in the registered documents had passed on from the buyer to the seller.”
23. The Hon’ble High Court of Delhi in the case of Commissioner of Income Tax Vs. Dinesh Jain HUF reported in 254 CTR (Del) 534, held:-
“Section 69B in terms requires that the Assessing Officer has to first “find” that the assessee has “expended” an amount which he has not fully recorded in his books of account. It is only then that the burden shifts to the assessee to furnish a satisfactory explanation. Till the initial burden is discharged by the Assessing Oficer, the section remains dormant.
A “finding” obviously should rest on evidence. In the present case, it is common ground that no incriminating material was seized during the search which revealed any understatement of the purchase e. That is precisely the reason why the Assessing Oficer had to sort to Rule 3 of Schedule III to the Wealth Tax Act. This Rule does not even claim to estimate the “fair market value” of an asset; it merely lays down a procedure for computing the value of an asset for the purposes of the Wealth Tax Act. The Schedule derives its authority from Section 7(1) of the Wealth Tax Act. The section, as it now stands, has dropped all pretensions to ascertaining the fair market value of an asset for the purposes of the Wealth Tax Act. Prior to the amendment made w.e.f. 1-4-1989 the section provided for the estimation of the fair market value of an asset on the principle of what it would fetch if sold in the open market. This involved an assumption of an open market, be itfictional, a willing seller and a willing buyer, all fictional. This fiction facilitated a realistic estimation of the fair market value of the property, and it moved with the ups and downs of the market. Not anymore. From 1-4- 1989, the value was frozen. For all times to come, an immovable property that fetches rent shall be valued at 12.5 times the net maintainable rent.
There is a fundamental fallacy in invoking the provisions of the Wealth Tax Act to the application of Section 69B of the Income Tax Act, notwithstanding that both the Acts are cognate and have even been said to constitute and integrated scheme of taxation. Under the Income Tax Act, we are to find what was the real and actual consideration paid by the assessee and whether the full consideration has been recorded in the books. Under section 7(1) of the Wealth Tax Act as it stood before 1-4-1989, we are to estimate the fair market value of the asset; after this date, it is not even estimation of the fair market value, but computation of the value of the asset on the basis of certain rules prescribed by the statute.
Sec. 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a al or fictional income being brought to tax contrary to the strict visions of Article 265 of the Constitution of India and Entry 82 in List 1 of the seventh schedule thereto which deals with “Taxes on income other than agricultural income.”
For the purposes of Section 69B it is the burden of the Assessing Oficer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Oficer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act.
The error committed by the Income Tax authorities in the present case is to jump the first step in the process of applying section 69B-that of proving understatement of the investment- and reply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorize the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the Assessing Oficer even to show the exact extent of understatement of the investment; it does not even give the Assessing Oficer the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears that the Assessing Oficer is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount undisclosed investment, it is perhaps reasonable to permit the Assessing Oficer to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the Assessing Oficer is an acceptable or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is first proved by the Assessing Oficer. It is only to this extent that the rigour of the burden placed on the Assessing Oficer may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking.
Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, the decision of the Income Tax Authorities cannot be approved. Section 69B was wrongly invoked. The order of the Tribunal is approved; the substantial question of law is answered in the negative, in favour of the assessee and against the CIT.
Conclusion:-
Section 69B cannot be invoked on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account.”
vii) The Hon’ble High Court of Punjab & Haryana in the case of Commissioner of Income Tax Vs. Harpal Singh reported in (2008) 3 DTR 254, held:-
“Tribunal has recorded a pure finding of fact after taking into consideration the evidence/material available on the record to the efect that before the Assessing Oficer there was no material or evidence to conclude that the assessee had paid a consideration and above the amount mentioned in the registered sale deed, ie. @ Rs.2.30 lacs per acre and the addition made by him was without any basis. The only evidence/material available before the Assessing Oficer was the so called statement of ‘S’, which was recorded by the Asstt. Director of IT (Inv.), on 18th Sept., 2001 in which he had deposed that he had sold the land in question @Rs. 4 lacs per acre, and apart from the amount mentioned in the registered sale deed, he had received Rs. 72 lacs cash from the assessee in five installments. Undisputedly, said ‘S’ subsequently retracted from his statement the Asstt. Director of IT (Inv.) itself where by he had confirmed that he had not received any amount over and above the consideration stated in the sale deed. Further, it is also undisputed position that before the Assessing Oficer said ‘S’ did not appear and made any statement nor an opportunity was granted to the assessee to confront the sale deed and cross- examine ‘S’ on the statement which he had made before the Asstt. Director of IT (Inv.). In spite of allthis evidence, the Assessing Oficer made the addition under section 69B only on the basis of conjectures while observing that it is a well known practice that the sale deeds of immovable properties are being registered at the much lower rates than the prevailing in the markets. It is also disputed fact that after selling of the land, ‘S’ was assessed under the Act and at that time the sale value of the said land was taken as indicated in the registered sale deed and that assessment had become final. The Tribunal has duly appreciated the evidence/material available on the record and various contentions raised by the parties, and then came to the aforesaid conclusion, which is a pure finding of fact which does not require any interference by the Court. Therefore, in these appeals no substantial question of law is arising from the impugned order for consideration of the court.”
24. The Hon’ble Apex Court in the case of Commissioner of Income Tax vs. P.V. Kalyanasundaram reported in (2007) 212 CTR (SC) 97, held:-
“The respondent assessee vide a registered sale deed dt. 26th Oct., 1998 purchased certain land at Brindavan Road, Fairlands, Salem for a sum of Rs. 4.10 lakhs. During a search of the ofice and residential premises of Polimer Net Work, certain notes on loose sheets allegedly in the hands of the respondent were found and seized by the Department. In his statement recorded on 8th Dec., 1998, the assessee submitted that he could not remember as to why the notings had been made. The statement was further confirmed by another statement on 11th Dec., 1998. The Department also recorded the statement of the vendor Rajarathinam on 8th Dec., 1998 which too was Confirmed on 11th Dec., 1998 in which he admitted that he had in received a total consideration of Rs. 34.35 lakhs and that the sum 4.10 lakhs reflected in the sale deed had been received by him way of a demand draft and the balance in cash. Rajarathinam however retracted from his statement on 8th Jan., 1999 and filed an afidavit deposing that the sale price was Rs. 4.10 lakhs only and that his statements earlier given to the authorities were incorrect. In a subsequent statement recorded on 20th Nov., 2000 Rajarathinam again reverted to his earlier portion and deposed that the sale price was Rs. 34.85 lakhs. The AO concluded that the sale consideration was actually Rs. 34.85 lakhs and not Rs. 4.10 lakhs as had been recited in the sale deed. He accordingly adopted the aforesaid enhanced figure for the purpose of assessment and made an addition of Rs. 3,75,005 as undisclosed income for the broken period Ist April, 1998 to 8th Dec., 1998. The matter was thereafter taken to the CIT(A), who after examining the entire matter, observed that the statements given by Rajarathinam could not be relied upon more particularly as the floor price fixed by the authorities for such property was much lower than the value which would result if the sale deed had been registered at Rs. 34.85 lakhs. The CIT accordingly deleted the addition made. An appeal was thereafter preferred by the Revenue against the order of the CIT before the Tribunal. The Tribunal in its order dt. 6th July, 2005 held that the notings on the loose pieces of paper on the basis of which the initial suspicion with regard to the undervaluation had been raised were vague and could not be relied upon as it appeared that the total area with respect to the sale deeds and that reflected in the loose sheet was discrepant. It was also observed that as per the guidelines for registration the fair value for registration on the relevant date was Rs. 244 to Rs. 400 per sq. ft. and the sale consideration for Rs. 850 per sq.ft. claimed by the Revenue was unrealistic and ignored the ground situation. It was further held that the tax of approximately Rs. 1,84,000 determined on the basis of the addition would not show that the assessee had acquiesced in the addition made by the Department or that it was conclusive evidence of the sale price as the deposit had been made in an obvious efort to save himself from further substantial questions of law were raised:
a. Whether or not when the returns and the statements of the seller admit higher sale consideration actually received, the Revenue is justified in fixing the sale consideration at the higher amount than what has been declared?
b. When the assessee did not give any explanation to the notings found and at the same time the Revenue is able to corroborate the same with the statement of the seller for the purpose of determination of actual sale value, would the lower authority be justified in interfering with the same?
c. When consistent sworn (statements) were taken into consideration along with evidences found at the time of search, would (they) all be liable to be rejected on the basis of one statement in between contradicting the earlier ones which was also explained away as a result of intimidation?
The High Court relying heavily on the order of the CIT and the Tribunal held that no substantial questions of law had been raised and accordingly dismissed the appeal. It is this situation that the present matter is here before us.
Mr. G.N. Vahanvati, the learned Solicitor General has at the very outset raised serious objection to the order of the High Court pointing out that Division Bench had merely plagiarized substantial portions from the order of the CIT and Tribunal in arriving at its conclusion and no independent assessment on the questions of law that arose for consideration, had been made. He also pointed out that several questions of law pertaining to the implications of the statements and the counter statements made by Rajarathinam did arise in the case and the matter had not been dealt with by the High Court in that perspective and it was therefore appropriate that the matter be remitted for fresh decision. The learned counsel representing the assessee respondent has however pointed out that the CIT in particular, had after a very elaborate discussion of the matter, concluded on a finding of fact with regard to the nature of the transaction and this view had been accepted by the Tribunal as well, has accordingly submitted that no substantial questions of law have been raised in this matter and the issues raised were purely questions offact.
We have heard the learned counsel for the parties and have gone through the record. It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the CIT and passed them of as if they were themselves the authors. We feel that quoting from an order of some authority particularly specialized one cannot per se be faulted as this procedure can often help in making for brevity and precision, but we agree with Mr. Vahanavati to the extent that any ‘borrowed words’ used in a judgment must be acknowledged as such in any appropriate manner as a courtesy to the true author(s). Be that as it may, we are of the opinion that the three questions reproduced above can, in no way, be called substantial questions of law. The fact as to the actual sale price of the property, the implication of the contradictory statements made by Rajarathinam or whether reliance could be placed on the loose sheets recovered in the course of the raid is all questions of fact. We therefore find no infirmity in the order of the High Court. Accordingly, we dismiss the appeal.”
In view of the above detailed analysis offacts and circumstances of the case and analysis ofjurisdictional pronouncement on the issue, the addition made by the Assessing Oficer by presuming the sale consideration at Rs. 11.05 crore per acre is directed to be deleted.”
8. From the rival contentions and the material on record, the following facts emerge:
(i) The agreement seized was only a photocopy of the original.
(ii) It was seized not from the assessee, but from the third party.
(iii) The seller refused to identity the agreement.
(iv)The buyer refused to identify the agreement.
(v) The witnesses to the agreement refused to identify it.
(vi) The AO did not make total addition on account of total value of the transactions in the cases of the other buyers or sellers, as mentioned in the agreement.
(vii) The assessee was not a party to the agreement.
(viii) The assessee was not witness to the agreement.
(ix) The assessee was not related to either any party or any witness to the agreement.
(x) The assessee purchased his land directly from PISCO.
xi) The assessee purchased the land at the prevalent circular
xii) The assessee paid due stamp duty on the transaction
xiii) The purchase deed of the assessee was registered with the Registrar at Jalandhar.
xiv) In the assessee’s purchase deed, the rate mentioned was of Rs. 4 crore per acre = 2.50 lakhs per marla, as against that of Rs. 11.05 crore per acre, as mentioned in the agreement seized.
xv) Action on the basis of the agreement seized was warranted in the cases of the parties thereto, due to the presumption u/s 132(4A) of the Act, which presumption, noticeably, is rebuttable.
xvi) No such action can be taken in the case of a party whose transaction was with regard to land contiguous or similarly situated to the land mentioned in the agreement seized.
xvii) No action is called for in a case of transaction consequential to the transaction mentioned in the agreement seized.
xviii) There is no evidence of unaccounted investment by the
xix) The AO himself clarified to the assessee that the sale consideration in the agreement seized was taken for the purpose of comparative rate only.
xx) The land purchased by the assessee was diferent from that mentioned in the agreement seized.
xxi) It is the burden of the department to prove under-statement of sale consideration.
xxii) This burden has not been discharged.
xxiii) There is no positive evidence against the assessee.
xxiv) Thus, the AO’s presumption did not materialize into conclusive evidence against the assessee.
xxv) Such a presumption cannot be accorded the status of fool-proof evidence against the assessee.
xxvi) Such a presumption cannot lead to a conclusion of under investment by the assessee, liable for addition.
9. The ld. CIT(A) has duly considered all the above said facts as well as the relevant case laws. There has been no efective rebuttal to the well reasoned elaborate findings recorded by the ld. CIT(A).
10. In view of the above discussion, we are of the considered view that the ld. CIT(A) has passed a detailed, well reasoned and well versed order, which does not require any interference and accordingly, the same is Ground no.1 is, thus, rejected.”
We find that the issues involved in these appeals is pari materia with the issue decided by Hon’ble Tribunal in the above noted cases and therefore respectfully following the same appeals filed by revenue are dismissed.
8. In nutshell, the appeals filed by revenue as well as cross-objections filed by assessee are dismissed.
Order pronounced in the open Court on 26.09.20 17.
