Vishnuprasad S.Agrawal, Navsari vs Assessee

अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)

Assessee by : Shri S.N. Soparkar Revenue by : Shri J.P. Jangid, Sr.DR

सन ु वाई क तार ख/ Dateof Hearing : 10/07/2015 घोषणा क तार ख / Date of Pronouncement: 17/07/2015

आदे श/O R D E R

PER RAJPAL YADAV, JUDICIAL MEMBER:

In the present appeals, separate orders of the CIT(A) dated 27.7.2011 passed on the respective appeals of the assessees for the Asstt.Year 2008-09, are being challenged.

ITA No.2571 and 2567/Ahd/2011

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2. Since a solitary question is being disputed by both the assessees, therefore, we heard both the appeals together and deem it proper to dispose of these appeals, by this common order, though, the assessees have taken five grounds of appeals, but, the learned counsel for the assessee did not press other grounds, except wherein, the assessee, Shri Vishnuprasad S. Agrawal challenged the addition of Rs.27,39,079/- and Shri Sureshchandra S. Agrawal, Rs.32,20,512/- which have been added by the AO with the aid of section 69B of the Income Tax Act, 1961.

3. With the assistance of the learned representatives, we gave gone through the records carefully.

4. Brief facts of the case, as emerge out from the assessment orders are that (Vishnuprasad S. Agrawal), this assessee has filed return of income electronically on 10.3.2009 declaring total income at Rs.4,79,150/-. The case of the assessee selected for scrutiny assessment and notice under section 143(2) was issued on 1.9.2009, which was duly served upon the assessee on 6.9.2009. On scrutiny of the accounts, it revealed to the AO that Shri Vishnuprasad S. Agrawal) has been drawing income from share of profit from the firm viz. M/s.Jalaram & Co., interest income and rental income He has also shown long term capital gains from sale of plot of land. The learned AO further found that the assessee has sold six plots during the year. Since there is no dispute between parties with regard to computation of capital gain, therefore, we do not deem it proper to note these facts in detail. The assessee has purchased nine plots during the year. The learned AO has noted details of all the purchases in tabular form at page no.9 and 10 of the impugned assessment. According to the AO, out of total nine plots, the assessee has half shares in plot shown at Sr.No.9 and 25% of the shares in plots bearing at Sr.Nos.5, 6, 7 & 8. The rest of the plots were purchased in his exclusive ownership. The ITA No.2571 and 2567/Ahd/2011

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total value as per the purchase deed was Rs.29,12,350/-, whereas, the stamp duty was paid by the assessee on the circle rate notified by the stamp duty authority is on Rs.56,51,429/-. The AO has harboured a belief that the assessee must have made investment of Rs.56,51,429/-, and therefore, the amount of Rs.29,12,350/- (Rs.56,51,429/- minus Rs.29,12,350/-) is to be added as unexplained investment in the total income of the assessee under section 69B of the I.T. Act. The learned AO had issued a show cause notice to the assessee. The assessee has made detailed written submission, which has been reproduced by the AO at page no.11 to 14 of the impugned order. The learned AO did not accept the contentions of the assessee and made addition of Rs.27,39,079/-. Appeal to the CIT(A) did not bring any relief to the assessee.

5. Now, we take the fact in the case of Shri Surehchandra S. Agrawal.

6. The assessee has filed his return of income electronically on 10.3.2009 declaring total income at Rs.1,37,450/- and agriculture income of Rs.3,72,562/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued on 1.9.2009, which was duly served upon the assessee on 3.9.2009. On scrutiny of the accounts, it revealed that the assessee has purchased six plots of land during the year. The learned AO has noted the details of transactions, exhibiting name of purchaser, name of seller, city survey no., area of plot, registration no. and the date of registration, vale as per sale deed, value as per Collector stamp duty, value as per authorized valuation officer. The learned AO further observed that out of six plots, the assessee has equal share in plots bearing at serial nos.3 and 6, and rest of the plots purchased in his exclusively ownership. The total value as per purchase deed has been shown by the assessee at Rs.18,93,000/-. The total value on which stamp duty was paid as per ITA No.2571 and 2567/Ahd/2011

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circle rate is of Rs.51,13,512/-. There is a difference between both these amounts of Rs.32,20,512/-. This amount has been added by the AO on account of unexplained investment under section 69B of the Act. Appeal to the CIT(A) did not bring any relief to the assessee.

7. Before we embark upon inquiry about the quality of evidence possessed by the AO for concluding that the assessees have made unexplained investment which deserves to be added in the total income under section 69B of the Act, we deem it pertinent to take note of section 69B of the Act. It 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."

8. A perusal of the section would reveal that section 69B of the Income Tax Act, authorizes the AO to deem unexplained investment, if he find that the assessee had made investments or owner of any bullion, jewellery, or other valuable article, and the amounts 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. The ld.AO would call for an explanation of the assessee about source of income for making such investment, and if explanation offered by the assessee is not, in the opinion of the AO satisfactory, then, the excess amount would be treated as income of the assessee for such financial year. Thus, the basic condition for applying under section 69B is that it should be found ITA No.2571 and 2567/Ahd/2011

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that the assessee has made investment or the assessee found to be owner of the money, bullion and jewellery. In the present case, both assessees were found to have made investment for purchase of plots. The next question is whether the assessees have made investment exceeding the amount recorded in the books. This is a crucial question, which demonstrates factual position. It is to be proved with the help of evidence available on record. According to the assessee, they have made investment in purchase of plots equivalent to the one disclosed in the sale deed. It is the AO who is disputing and harbouring a belief that the assessees have made investments, over and above, the amount so disclosed in the sale deed. His belief is based on the basis of stamp duty valuation which authorizes the valuation authorities to charge stamp duty on registering the transfer of plots. This type of evidence possessed by the AO is of not such a nature, which empowers him to invoke section 69B of the Act. Stamps duty paid by the assessee on purchase of land is a small portion of the total consideration, say, 8% or 10% of the total value. The assessee might have not disputed levy of that stamp duty on account of smallness of the amounts involved when compared to the litigation cost. But that does not mean that the assessee has accepted the valuation of the property made by the stamp duty valuation authority. This issue has fallen for consideration before the Tribunal on earlier occasions as well as before the Hon'ble jurisdictional High Court. The Tribunal in the order passed in the case of DCIT Vs. Vallabhai, reported in (2012) 27 taxmann.com 306 (Ahd) has considered this issue elaborately and the following findings of the Tribunal is noteworthy, which reads as under:

"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 ITA No.2571 and 2567/Ahd/2011

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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) [2003] 261 ITR 664/ 130 Taxman 15 (Delhi) 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 [1997] 226 ITR 344/[1996] 89 Taxman 544 (Raj.) 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. [2010] 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 ITA No.2571 and 2567/Ahd/2011

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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 [2012] 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."

9. Similarly, the Hon'ble Gujarat High Court in the case of Berry Plastics P. Ltd., 35 taxmann.com 296 and Jayendra N. Shah, 27 taxmann.com 306 made following observations:

"8. Before us counsel for the Revenue vehemently contended that there was considerable gap between the valuation disclosed in the sale deed, which was also adopted for the purpose of assessee's books and what was estimated by the Stamp Duty Authority for the purpose of collecting stamp duty. He submitted that the Assessing Officer, on the basis of DVO's report, found that the investment was much greater than what was reflected in the books made by the assessee in purchase of such property. Counsel placed heavy reliance under Section 142A of the Act in support of his contention.

9. We are of the opinion that CIT(Appeals) as well as the Tribunal committed no error in deleting the additions made by the Assessing Officer. It is undisputed that the sole basis for making the addition was the DVO's report. DVO's report may be a useful tool in the hands of the Assessing Officer, nevertheless it is an estimation and without there being anything more, cannot form basis for additions under Section 69B of the Act. In absence of any other material on record, addition was correctly deleted. Tax Appeal is, therefore, dismissed."

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"9. Coming to the question of addition towards purchase of land, the Commissioner of Income-tax (Appeals) as well as the Tribunal both have examined the issue on the basis of the material available on record. It is noted that the assessee had made no disclosure towards the purchase of land in his statement during the search proceedings. The addition was made merely on the basis of the DVO's report without there being any other material. Moreover, the DVO had also substantially relied on jantri rates and had made other references for arriving at the valuation."

10. In the above three decisions, it has been unanimously held that valuation made for the purpose of stamp duty is an estimated opinion. It can be a corroborative evidence for the help of the AO, but, it cannot be conclusive piece of evidence demonstrating the unexplained investment made by the assessee for purchase of land. Solely on the basis of such estimated opinion, the addition cannot be made. From perusal of record, we find that, apart from this estimated opinion, the AO was not possessing any other evidence. As far as reference made under section 50C of the Act is concerned, we are of the view that section 50C is deeming provision, which authorizes the AO to replace the sale consideration with regard to the full value of consideration disclosed by the assessee for the purpose of computing the capital gain. In that situation, the AO would replace the sale consideration disclosed by the assessee by an amount on which stamp duty was paid by the assessee. Therefore, this section is of no help while determining the unexplained investment of the assessee.

11. In view of the above discussion, we are of the view that the learned Revenue authorities have failed to appreciate the facts and circumstances. The assessees have not made any unexplained investment in purchase of plots, and therefore, no additions deserve to be made.

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12. The assessee have challenged the additions on account of disallowance of interest expenses, but these ground were not pressed by the learned counsel for the assessee, because of the smallness of the amount involved therein. The learned counsel for the assessee did not pres any other grounds. Therefore, we allow the appeals of the assessee partly, and delete the additions of Rs.27,39,079/- in the case of Shri Vishnuprasad S. Agrawal, and Rs.32,20,512/- in the case of Shri Sureschchandra S. Agrawal.

13. In the result both the appeals of the assessee are partly allowed.

Order pronounced in the Court on 17th July, 2015 at Ahmedabad.

Sd/- Sd/- (PRAMOD KUMAR) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 17/07/2015