Income Tax Appellate Tribunal - Delhi
Raj Kumar Jain, New Delhi vs Assessee on 27 April, 1989
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'E' NEW DELHI
BEFORE RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
I.T.A .No.-1911/Del/2012
(ASSESSMENT YEAR-2007-08)
Mr. Raj Kumar Jain Vs. ACIT
H-82 South Extension part-I Central Circle-12
New Delhi. Jhandewala Extension
New Delhi.
PAN: AALPJ6435F
I.T.A .No.-2340/Del/2012
(ASSESSMENT YEAR-2007-08)
ACIT Vs. Mr. Raj Kumar Jain
Central Circle-12, H-82,
Room No. 330, South Extn. Part-I
ARA Centre New Delhi.
Jhandewalan Extn.
PAN: AAACE0763B
I.T.A .No.-1912/Del/2012
(ASSESSMENT YEAR-2007-08)
Mr. Ravinder Kumar Jain Vs. ACIT
H-82 South Extension part-I Central Circle-12
New Delhi. Jhandewala Extension
New Delhi.
PAN: AALPJ7472P
2
I.T.A .No.-2339/Del/2012
(ASSESSMENT YEAR-2007-08)
ACIT Vs. Mr. Ravinder Kumar Jain
Central Circle-12, H-82,
Room No. 330, South Extn. Part-I
ARA Centre New Delhi.
Jhandewalan Extn.
PAN: AALPJ7472P
I.T.A .No.-1913/Del/2012
(ASSESSMENT YEAR-2007-08)
Mr. Rajesh Kumar Jain Vs. ACIT
H-78 South Extension part-I Central Circle-12
New Delhi. Jhandewala Extension
New Delhi.
PAN: AALPJ6432C
I.T.A .No.-2342/Del/2012
(ASSESSMENT YEAR-2007-08)
ACIT Vs. Rajesh Kumar Jain
Central Circle-12, H-78,
Room No. 330, South Extn. Part-I
ARA Centre New Delhi.
Jhandewalan Extn.
PAN: AALPJ6432C
I.T.A .No.-1914/Del/2012
(ASSESSMENT YEAR-2007-08)
Mr. Mahabir Prasad Jain ACIT
G-19 South Extension part-I Central Circle-12
New Delhi. Jhandewala Extension
New Delhi.
PAN: AALPJ6433D
3
I.T.A .No.-2343/Del/2012
(ASSESSMENT YEAR-2007-08)
ACIT Vs. Mahabir Prasad Jain
Central Circle-12, G-19,
Room No. 330, South Extn. Part-I
ARA Centre New Delhi.
Jhandewalan Extn.
New Delhi. PAN: AALPJ6433D
(APPELLANT) (RESPONDENT)
Assessee by:-Sh. M.P. Rastogi Adv. &
Sh.P.N. Shastri,
Revenue by:-Sh. Sukhveer Choudhary, Sr. DR
ORDER
PER BENCH.
The assessees and revenue are in Cross-appeals against the separate orders of even date i.e. 15.03.2012 passed on the respective appeals of the assessees in A.Y. 2007-08 by ld. CIT (A). The issues involved in all the appeals are common, therefore, we heard them together and deem it appropriate to dispose off them by this common order.
2. In brief the issue involved is that assessees have purchased a property bearing no. E-24, on 18.12.2006 for a consideration of Rs.35 lacs. The ld. AO has determined the value of the property for investment at Rs.27525780/- on the basis of DVO's report and held that assessees have made an unexplained investment. Each assessees had ¼ share, in this way ld. 4 AO has divided the total value by ¼ and made the addition of unexplained investment in hands each assessee. The addition has been made at Rs.60,06,445/- in the hand of each assessee.
3. On appeal ld. CIT (A) held that adoption of value as per DVO's report is not correct, he took the value as per the circle rate and determine the value of unexplained investment at Rs.76,41,100/-. The ld. CIT (A) had divided this amount amongst the four assessees and confirmed the addition to that extent.
4. The assessees are aggrieved with confirmation of additions partly by the ld. CIT (A), whereas revenue is aggrieved with the deletion of additions. Thus the common issue required to be adjudicated by us is, whether any addition is required to be made in the hands of assessees on account of unexplained investment in purchase of house property bearing no. 24-E Block South Extension Part-1?
5. The facts on this issue are common in all the appeals. It emerges out from the record that plot bearing no. 24 in Block E of South Extension, I comprising an area of 212 Sq.yd. was purchased by Smt. Dhan kaur Wife of Sardar Ganga Singh on 27.11.1961. She has constructed first floor of the house. She had made a will on 2.05.1979 in favour of her grand son Sh. Tarsem Singh solitary son of Sh. Gurdayal Singh. Sh. Gurdayal Singh was 5 married with Smt. Sushila Ganga Singh and out of this Wedlock Tarsem Singh was born. Smt. Sushila, died on 24.03.1988, on the death of Smt. Dhan Kaur the property devolved upon Shri Tarsem Singh who was stated to be minor at that point of time.
6. Shri Mahabir Prasad father of other three assessees had occupied the rear portion of this building as a tenant in the year 1985. It also emerges out from the compromise deed and other details available on record, that Shri Gurdayal Singh had entered into an agreement with Shri M.P. Jain for sale of this house, the agreement was executed on 27.04.1989 copy of the agreement is available on page 32 of the paper book. As per this agreement a sum of Rs.20 lac was paid by Shri M.P. Jain vide cheque No. 078981 dated 27.04.1989. Some how a dispute arose between the parties,Sh. M.P. Jain had filed a Civil Suit bearing no. 1345/1989 in the Hon'ble Delhi High Court for permanent injunction. During the pendency of Civil Suit, a compromise was entered into and as per the compromise assessee M.P. Jain had paid a sum of Rs.10 lacs through account payee cheque bearing no. 78982 dated 06.09.1989. The compromise deed was drawn, and an application under order 23 Rule 3 r.w.s. 151 of CPC was filed for disposal of the suit. Shri Gurdayal Singh had appeared in the Court. The statement of Shri Mahabir Prasad Jain and Shri Gurdayal Singh were recorded on 18.09.1989. It is also 6 brought to our notice that Shri Gurdayal Singh was expired on 13.12.1994 and Tarsem Singh died on 13.08.1996. The dispute of inheritance continued, it is also the case of assessee that after the death of Sushila Ganga Singh i.e. first wife of Shri Gurdayal Singh, he had contracted second marriage with Kamlesh Kaur. Smt. Kamlesh Kaur and others have signed the sale deed as a vendor and the plot in dispute has been purchased by all the assessee in equal share on 18.12.2006 for a consideration of Rs.35 lacs which was agreed in the agreement dated 27.04.1989.
7. The ld. AO has observed that a search and seizure operation was carried out at the premises of Shri Mahabir Prasad Jain, during the course of search the copy of the agreement to sale dated 27.04.1989, "Deed of Declaration -Cum-Bond" have been seized. The AO has expressed his suspicion as to why the sale deed was not registered upto 2006, he did not dispute all these facts but formed an opinion that agreement dated 27.04.1989 might have not been given effect, because sale deed, has been executed on 18.12.2006. In his opinion, assessee, must have paid the market price on the date of sale deed which they are not disclosing, thus they must have made unexplained investment in purchase of the property. He made a reference to the DVO for determining the fair market value of the property on the date of the sale. Ld. DVO on the basis of sale instances effected 7 during an auction in the area of Green Park conducted in 2008 has determined the fair market value of the property at Rs.27,525,780/-. The ld. AO took this amount as a fair market value of the property and held that assessees have made an unexplained investment of Rs.24,025,780/-. He worked out this amount by debiting a sum of Rs.35 lacs from the value of Rs.27,525,780/- determination by the DVO. The amount of Rs.24,025,780/- has been divided equally amongst all the assessees, because they are the co- sharer, hence an addition of Rs.60,06,445/- was made in the hands of each assessee.
8. On appeal ld. first appellate authority did not agree with the conclusions drawn by the AO, because ld. AO has made the addition of unexplained investment on the basis of DVO's report, and the DVO has determined the fair market value on the basis of property sold in auction in 2008, which is in a different area. The ld. CIT (A) was of the opinion that Delhi Government has notified the property rates in different parts of the Delhi for the purpose of stamp duty payments while registering the sale deeds on transfer of properties. According to the CIT (A) these rates are the best guiding factor for determining the fair market value of a property at a particular time in a particular area. According to the ld. CIT (A) the South Extension Part-1 is a good colony and the circle rate of the properties in this 8 area was at Rs.43,000/- per Sq. meter. On the basis of this rate ld. CIT (A) has worked out the fair market value of the property at Rs.76,41,100/-, she observed that this amount has to be added in the income of all the assessees, on account of unexplained investment in the purchase of a house property. Accordingly ld. CIT (A) has divided this amount in four equal share and directed the AO to make the addition of this amount.
9. Dissatisfied with the orders of ld. CIT (A), ld. counsel for the assessee submitted that both the revenue authorities have not disputed about existence of an agreement executed on 27.04.1989. The ld. revenue authorities have totally ignored the compromise arrived at between assessees and the vendor. The sale deed executed on 18.12.2006 is in pursuance of the agreement entered on 27.04.1989. He further contended that assessees are in possession of the premises. The electricity connection is in the name of M/s Dhan Kaur who died in 1980, the assessees are paying electricity bill, evidence of the payment was brought to the notice of the ld. revenue authorities. The assessee M.P. Jain has got a telephone connection in this premise in the year 1991. Sh. Mahabir Prasad Jain has filed his wealth tax return in 1991 and in the computation of return, he has shown payment of Rs.30 lacs for purchase of an immovable property as an advanced to Shri Gurdayal Singh. This advancement of Rs.30 lacs has been shown under the head movable 9 property. Ld. counsel for the assessee drew our attention towards page 38 of the paper book where computation of wealth tax return is available. He further contended that assessment for A.Y. 1991 was passed u/s 16(3) of the Wealth Tax Act 1952. The ld. counsel for the assessee further submitted that copies of the agreement and other evidences were found at the premises of the assessees during the course of search, hence the property was under an encumbrance. It is deemed to have been purchased in 1989, the only thing is that it was not registered in the name of the assessees, because of the demise of Shri Gurdayal Singh, his son Tarsem Singh. The delay occurred on account of taking up succession certificate etc. He further contended there is no evidence with the AO to suggest that assessees have made payments over and above the one stated in the sale deed as well as in agreement to sell. The assessees have also produced rent receipt before the AO, indicating the fact that this property was taken on rent by Shri Mahabir Prasad Jain for a monthly rent of Rs.1200/- per month. He drew out attention towards the compromise deed available at page 45-46 of the paper book as well as the statement of Shri Mahabir Prasad, and Shri Gurdayal Singh given on oath before Hon'ble High Court in pursuance of the compromise.
10. The ld. counsel for the assessee further contended that ld. CIT (A) has confirmed the addition with the help of section 50C of the Income Tax Act 10 1961, Hon'ble Delhi High Court has held in the case of CIT Vs. Khoobsurat Resorts reported in 211 Taxman page 510 that section 50C is not applicable in the case of the purchaser, the fiction created by virtue of section 50C applies only in respect of escaped income of a seller, for the determination of true capital gain, such a special provision has to be considered narrowly, having regard to the subject matter and the fiction cannot be extended for presuming unexplained investment etc. Thus on the basis of section 50C no addition on account of unexplained investment can be made in the hands of the assessee.
11. The ld. DR on the other hand submitted that alleged agreement was entered on 27.04.1989 the compromise was also arrived in the month of September 1989, in pursuance of the compromise Hon'ble Court must have passed a decree in the Civil Suit. The assessees failed to file copy of the decree before the AO. In spite of the compromise, why assessees failed to get the sale deed executed for a such a long period. The sale deed has been executed in the year 2006. The vendors who are stated to be residing abroad would have not turned up for executing the sale deed unless some payment was made to them. He submitted that it is beyond comprehension that such a property would have been agreed by the vendors to be sold on such a rate. The assessees must have paid something over and above the amounts stated 11 in the sale deed. He further contended that AO has rightly made a reference to the DVO for working out the fair market value of the property on the date of sale deed.
12. The ld. counsel for the assessee, on the other hand submitted that sum of Rs.5 lacs was paid to the vendors which is the balance. Smt. Kamlesh is basically resident of village Paldi, District Hoshiarpur, Punjab, the other children of Gurdayal Singh are residing in New Zealand but they used to come to India. Assessees have not paid any amount except Rs.5 lac paid on 15.12.1006 through cheque no. 988344. He further relied upon the judgments of Hon'ble Delhi High Court in the case of CIT vs. Naveen Gera reported in 328 ITR 516 and CIT Vs. Smt. Suraj Devi reported in 328 ITR
604. The ld. counsel for the assessee also relied upon the judgment of Hon'ble Delhi High Court in the case of CIT vs. Puneet Sabharwal reported in 338 ITR 485.
13. We have duly considered the rival contentions and gone through the record carefully. The AO in the assessment order has raised some suspicion about existence of alleged agreement dated 27.04.1989, though he has not specifically rejected the existence of the agreement. His peripheral objections were that authenticity of agreement cannot be proved because neither Smt. Dhan Kaur, Shri Tarsem Singh or Shri Gurdayal Singh are 12 alive. The persons, who have sold the property are living in, New Zealand, except Smt. Kamlesh Kaur who lives in Hoshiarpur, Punjab. Why sale deed was not executed for such a long period? Contrary to these apprehensions, the evidences produced by the assessee are, (a) copy of the sale agreement,
(b) copy of Wealth Tax Return for A.Y. 1990-91, (c) computation of wealth of Sh. M.P. Jain, where he has shown a sum of Rs.30 lacs paid as advance for house to Shri Gurdayal Singh, (d) the assessment in this year was passed u/s 16(3) of the Wealth Tax. The assessee M.P. Jain is a tenant over the property. He got a telephone connection, he has filed a suit for permanent injunction in the year 1989, a compromise was arrived at between him and Shri Gurdayal Singh, Shri Gurdayal Singh has alleged that Tarsem Singh was a minor and he in the capacity of guardian has entered into an agreement for sale of this property. The relevant Clauses of the compromise deed read as under:
"c) That the Defendant agree and confirms that he has received a sum of Rs.20,00,000/- (Rupees twenty lakhs) from the plaintiff vide cheque 078981-1100290081 dated 27.4.1989 drawn on Vijaya Bank, Hauz Khas, New Delhi. The Defendant also confirms that the amount of Rs.20,00,000/- was received as part consideration from the plaintiff and the amount of the consideration of property bearing No.E-24 N.D.S.E. Part-I, 13 New Delhi, with all rights was offered and accepted at Rs.35,00,000/-.
e) That the Defendant confirms that he is the guardian of Minor Tarsem Singh alias Terry and is competent to sell the aforementioned property situated at E-24 N.D.S.E. Part-I, New Delhi, to the plaintiff. That the Defendant further confirms that the said property is free from all sorts of encumbrances, charges, liens, demands, gifts, mortgages, legal defects, litigation, court decree, injunction etc. except for the present pending proceedings between the parties before this Hon'ble court.
f) That the Defendant confirms having received from the plaintiff another sum of Rs.10,00,000/- (Rupees ten lakhs) towards the consideration of the aforesaid property / house bearing no. E-
24. N.D.S.E. Part I, New Delhi, vide cheque No. 078982 dated 6.9.89 drawn on Vijaya Bank, Hauz Khas, New Delhi. The balance consideration amount is Rs.5,00,000/- which amount shall be paid by the plaintiff to the Defendant when all the documents an executed by Defendant in favour of the plaintiff with respect to the sale of the aforesaid property. The Defendant thus confirms having received a sum of Rs.30 lakhs by way of earnest money from plaintiff for conducting the negotiations."
14. Shri Gurdayal Singh and Shri M.P. Jain had appeared as a plaintiff and defendant before the Hon'ble Delhi High Court and in their statement they have confirmed the execution of compromise deed which is 14 inconsonance with agreement to sell; their statement were recorded on oath before Hon'ble Justice Sunanda Bhandare. Their statements read as under: "S.No. 1345/89
18.9.89 Statement of Shri Mahabir Prasad Jain, plaintiff on S.A.:-
I have compromised the matter with the defendant and have signed the application filed under order 23 Rule 3 being I.A. 6932/89. I have paid a sum of Rs.20 lakhs on 27.4.89 and I am paying a further sum of Rs.10 lakhs by way of Cheque No.78982 dated 6.9.89 drawn on Vijaya Bank, in Court today. I pray that the suit may be decreed in terms of the compromise.
R.O. & A.C. Sunanda Bhandare, J.
18th September 1989
Statement of S. Gurdial Singh, defendant, on S.A.:-
I have signed the application under Order 23 Rule 3 being I.A. 6932/89. I have also sworn an affidavit in support of the said application and I have Rs.20 lakhs on 27.4.89 from the plaintiff and I have received today a cheque for Rs.10 lakhs. I will be bound by the terms of the compromise stated in the application.
Sd/-
R.O. & A.C. Sunanda Bhandare, J.
18th September 1989
*Nangia*"
15
15. In the present appeals, we are not deciding the question of title, our limited concern is, 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. The authenticity of the agreement has not been challenged by the vendors. In pursuance of the agreement they have executed the sale deed in favour of the assessee. Thus all peripherals suspicious raised by the AO are not relevant. His Endeavour should be to collect evidence indicating the unexplained investment by the assessee in that year, he measurably failed. Such type of additions have been made in the past also, the dispute traveled upto the Hon'ble Delhi High Court. In the case of Puneet Sabharwal, the assessee had purchased three properties, ld.
AO had made an addition on account of unexplained investment u/s 69B. The ld. CIT (A) has deleted the addition, the tribunal upheld the deletion. When the dispute traveled up to the Hon'ble High Court, the Hon'ble High Court has upheld the deletion. The question considered by the Hon'ble High Court reads as under:
"1. Whether the Assessing Officer was right in referring the question of fair market value of the property sold by the assessee to the District Valuation Officer in terms of section 55A of the Income-tax Act, 1961 ('the Act')? Alternatively, was the Assessing Officer in terms of section 48 read with section 16 45(5) of the Act bound to accept the value stated in the registered sale deed?
2. Whether the Income-tax Appellate Tribunal was right in holding that notwithstanding the report of the District Valuation Officer, the Revenue had to prove that the assessee had in fact received extra consideration over and above the declared value of the sale?"
16. The Hon'ble High Court has upheld the order of the Tribunal the discussion made by the Hon'ble High Court is worth to note it read as under:
"7. Coming to the first question, it does not arise for consideration.
As per the question formulated, the property was sold by the assessee whereas, in the instant case, the properties in question were purchased by the assessee and were not sold by him. Even if we treat the same as typographical mistake, we are of the view that it would not be necessary to decide this question in view of the answer that we propose to give to question No. 2.
8. As far as the question no. 2 is concerned, as already indicated above, the AO solely relied upon the report of the DVO. Apart from this, there was admittedly no evidence or material in his possession to come to the conclusion that the assessee had paid extra consideration over and above what was stated in the sale deed. This very issue has come up for consideration before this Court repeatedly and after following the judgment of the Supreme Court in the case of K.P. Varghese (supra), the aforesaid proposition of law is reiterated time and again. For our benefit, we may refer to the latest judgment of this Court in 17 the case of CIT vs. Smt. Suraj Devi (2010) 328 ITR 604 (Del) wherein this Court had held 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 reply upon the valuation on given by the DVO. It was also held that the opinion of the valuation officer, per se, was not information and could not be relied upon without the books of accounts being rejected which had not been done in that case.
9. The aforesaid principle of law has been reaffirmed in CIT vs. Naveen Gera (2011) 56 DTR (Del) 170 : (2010) 328 ITR 516 (Del) stating that opinion of the DVO per se was not sufficient and other corroborated evidence is required. Mr. Maratha, learned counsel appearing for the Revenue submitted that the judgment of the Supreme Court in K.P. Varghese (supra) has been explained by the Rajasthan High Court in the case of Smt. Amar Kumari Surana vs. CIT (1996) 134 CTR (Raj) 313 :
(1997) 226 ITR 344 (Raj). 10. Having regard to the consistent views taken by this Court in the aforesaid and other judgments which bind us, we decide the question of law no. 2 in favour of the assessee and against the Revenue, as a consequence, this appeal is dismissed."
17. Similar are the view of Hon'ble Delhi High Court in the judgment of Naveen Gera and Smt. Suraj Devi, thus unless AO is able to lay his hand on any evidence indicating that assessees have made payment over and above the sale consideration stated in the sale deed addition on account of 18 unexplained investment cannot be made simply relying upon the DVO's report.
18. Apart from this position of law, it is to be seen that this property is in the possession of Shri M.P. Jain, who is a tenant since 1985, the agreement to sell is in his favour. He has paid a sum of Rs.30 lacs in 1989 thus an encumbrance is there on this property in favour of Shri M.P. Jain. The AO is taking up the rates on the basis of DVO's report obtained on the rates achieved in auction carried out in 2008. He has to ascertain what was the value of the property in 1989. He has totally ignored the payment of Rs.30 lac in 1989. The AO has to see, had anybody invested a sum of Rs.30 lacs in this area in 1989? What would be the consideration in terms of return in 2006? In the year 1989, if a person made fixed deposits in a post office, then, the deposit would be doubled in a period of 5-½ years. Even from that angle, appreciation of payment of Rs.30 lacs in the year 1989 is considered then, by the year 2006, it would become 2.40 crore, which is nearer to the value determine by the DVO. How, the ld. AO can allege that property was not purchased at market rate.
19. As far as the orders of ld. CIT (A) are concern, he is again applying the position of 2006 instead of 1989, moreover Hon'ble Delhi High Court has held in the case of Khoobsurat Restaurant that section 50C applies only 19 in respect of escaped income of a seller. It is not applicable in the case of a purchaser. Thus fiction is for the determination of true capital gain and not for an unexplained investment. No material is brought on the record by the AO that vendors have objected the existence of agreement or have taken any legal proceedings against Shri M.P. Jain for eviction from the house. By registering the sale deed at the same rate, they have approved and ratified the agreement and conduct of Shri Gurdyal Singh. Thus taking into consideration all the facts and circumstances, we are of the view that, AO is unable to bring any evidence on record to say that assessees have paid more than the one stated in the sale deed. Therefore, all the appeals of assessee are allowed, additions made by AO are deleted. Consequently appeals of the revenue are dismissed.
Order pronounced in the open Court on 8/08/2013.
Sd/- Sd/-
( T. S. KAPOOR ) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 8/08/2013
*AK VERMA*
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(Appeals)
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