Income Tax Appellate Tribunal - Jaipur
Shri Johri Lal Sodhani, Jaipur vs Deputy Commissioner Of Income Tax, ... on 20 July, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM
vk;dj vihy la-@ITA No. 1046/JP/2017
fu/kZkj.k o"kZ@Assessment Year: 2011-12
Shri Johri Lal Sodhani Cuke The DCIT
D-105, Shivar Area Vs. Central Circle-2
Bapu Nagar, Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGWPS 7021 B
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by: Shri P.C. Parwal, CA
jktLo dh vksj ls@ Revenue by:Shri A.S. Nehra, JCIT - DR
lquokbZ dh rkjh[k@ Date of Hearing : 11/07/2018
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20 /07/2018
vkns'k@ ORDER
PER BHAGCHAND, AM
The appeal filed by the assessee emanates from the order of the ld.
CIT(A)-4, Jaipur dated 01-11-2017 for the Assessment Year 2011-12.
''1. The ld. CIT(A) has erred on facts and in law in upholding the finding of AO that assessee has purchased 444.44 sq yd. of plot no. C-63, Shivar Area, Bapu Nagar, Jaipur for Rs. 1,68,33,609/- as against actual consideration of Rs. 76 lakhs thereby confirming an addition of Rs.
92,33,609/- by treating it as undisclosed income of the assessee u/s 69 of the I.T. Act, 1961.
ITA No.1046/JP/2017Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur 1.1 The ld. CIT(A) has further erred in relying on the agreement dated 25-06-2009 executed for sale of 266.66 sq. yd area with constructed house thereon for arriving at the sale consideration of the impugned property at Rs. 1,68,33,609/- ignoring that the assessee has not purchased the land as per agreement dated 25-06-2009 but has purchased 444.44 sq. yd of land of the said plot which was under dispute vide sale deed dated 12-05-2010. He further erred in confirming the addition by not giving any on the submission made by the assessee and by assuming incorrect facts.
2.1 Brief facts of the case are that the assessee filed return of income on 15.03.2012 declaring total income of Rs.11,88,320/-. The assessment was completed u/s 143(3) on 31-01-2014 at returned income. Thereafter, an order of revision u/s 263 was passed by the PCIT on 26-02-2016 (PB 56-63) whereby assessment order passed u/s 143(3) on 31-03-2014 was set aside to the AO to make assessment denovo with a direction to collect information relevant to the assessment of AY 2011-12 under consideration, from assessee as well as to make independent enquiries before arriving at the final conclusion. The AO is further directed to complete the assessment in accordance with the direction given above, after affording reasonable opportunity of being heard to the assessee. In pursuance to the said direction, the DCIT in assessment proceeding u/s 263/143(3), issued show cause notice dated 18.05.2016 which is reproduced below:-
2 ITA No.1046/JP/2017Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur
1. You have purchased plot no. C-63, Shivnar Area, Lal Kothi Marg, Bapu Nagar, Jaipur on 12.05.2010 from Shri Rajiv Ratan Shukla. The area of the above purchased plot is 444.44 and the value declared by you is Rs. 76,00,000/-. During search some incriminating documents found which was seized later on. In AS-5 two agreement were found which between you and Shri Rajiv Ratan Shukla pertain to sell of above mentioned plot @ 37876/-
per sq. yard. The value of the above plot comes to Rs. 1,68,33,609/- whereas you have shown the value of above property is Rs. 76,00,000/-. Show cause why the difference amount of Rs. 92,33,609/- is not added in your total income as undisclosed income u/s 69 of the Income Tax Act.
2. You are also requested to provide the copies of sale deed made on dated 12.05.2010 of the above mentioned plot and all the agreement made earlier.
3. As per annexure AS-5, Page No. 22 to 25 an agreement was found. This agreement made on June 2009 to sale the land measuring 222.22 sq. yard on same plot @38,482/- per sq. yards. As per this agreement Rs. 5 lakhs paid in cash. Why the same is not added on your total income.
In response to same, assessee filed the explanation before the AO which is reproduced at page 2 to 4 of the assessment order. However, the AO considered and examined the reply of the assessee but did not find tenable because of the following reasons.
(i) The seized Annexure AS-5 is an agreement to sale dated 25.06.2009 signed by Johari Lal Sodani and owner of the plot which is a sufficient evidence to determine that the rate of plot of the said land is Rs.37,876/- per sq. yards.
(ii) The details of payment mentioned in the sale agreement dated 25.06.2009 are exactly the same as mentioned in sale deed dated 12.05.2010. Thus, it is clear that the same land was registered on 12.05.2010 as mentioned in sale agreement dated 25.06.2009 wherein the rate fixed is Rs.37,876/- per sq. yards. Further, payments have not been disputed during the search and a disclosure of Rs.10 lacs on the same was made in AY 2010-11.3 ITA No.1046/JP/2017
Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur
(iii) The plea of the assessee that there is no material to establish that he has made undisclosed investment of Rs.92,33,069/- is baseless and illogical as the sale agreements seized from the residence of the assessee clearly shows that there was agreement between both the parties to finalise the deal @ Rs.37,876/- per sq. yards.
(iv) The assessee's plea that the agreement was executed for constructed house but the sale deed was executed for the vacant and disputed land (with Smt. Kamla Devi Ghiya) due to which the rates have been drastically reduced is not acceptable as:
(a) The original plot (C-63, Sivad Area, Bapu Nagar, Jaipur) under consideration is 889.00 sq. yards having North-South (N- S) 80 ft. and East-West (E-W) 100 ft.
(b) The agreement dated 20.01.2000 executed between Shri Rajiv Ratan Shukla and Smt. Kamla Devi Ghiya was of 185.80 sq. meter (or 222.22 sq. yard). measuring north south 50 ft and east west 40 ft. This is stated to be disputed area.
© Agreement dated June, 2009 was of 222.22 sq. yard measuring N-S 40 ft. and E-W 50 ft.
(d) Agreement dated 25.06.2009 is of 266.66 sq. yard measuring N-S 40 ft. and E-W 60 ft.
(e) Sale deed was executed on 12-05-2010 for 444.44 sq. yard with construction measuring N-S 40 ft. and E-W 100 ft.
Thus, as per Paras b & d above, the N-S length of the plot under agreement with assessee and Sm.t Kamla Devi Ghiya is 50 ft. and 40 ft. respectively (i.e., 90 ft.) whereas, the N-S length of the original plot was only 80 ft. Thus, 10 ft. of the N-S length was common in both the deals. Therefore, it is clear that the assessee made an agreement of the disputed area @ Rs.37,879/- per sq. yard. Therefore, the assessee's plea that rate of Rs.17,100/- per sq. yard taken in the sale agreement dated 12-05-2010 is due to the disputed area is a framed story to adjust the on-money paid by him in cash.
(v) The assessee's plea that the portion of the plot mentioned in the sale deed is vacant area whereas initially agreement was of constructed area is not acceptable because as per the site plan/MAP attached with the sale deed dated 12-05-2010, the Northern half port of the total area (i.eportiona finally purchased by the assessee) is also partly 4 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur constructed portion. Hence there cannot be much difference in the rates of the same plot.
The AO thereafter held that in case of a party who relies on recitals has to establish the truth of those recitals otherwise, it will be very easy to make self-serving statements in those documents and rely on those recitals. If an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left open to evade tax. The taxing authorities are not required to put on blinkers while looking at the documents produced before them.
They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Accordingly, the AO held that the assessee paid Rs.37,876/- per sq. yard as per the sale agreement dated 25.06.2009 and not Rs.17,100/- per sq. yard as per the sale deed executed. Therefore, the total amount paid is Rs.1,68,33,609/-
and not Rs.76,00,000/-. The difference of Rs.92,33,609/- is paid out of the undisclosed income and the same is added to the total income of the assessee u/s 69 of the Act by observing as under:-
''In the above background of the facts and circumstances surrounding this case, it is beyond the doubt that assessee has finally purchased 444.44 sq. yard of the land @ 17,100/- per sq. yard at the consideration of Rs. 76 lacs but as per agreement to sale dated 25-06- 2009 (i.e. seized as annexure AS 5 page 3 to 8) the rate of this plot/land was fixed at Rs. 37,876/- per sq. yard. Hence, in reality its value paid by the assessee was of Rs. S1,68,33,609/-. Therefore, 5 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur difference amount of Rs. 92,33,609/-paid by the assessee was out of the undisclosed / unexplained income and same is added to the total income of the assessee u/s 69 of the I.T. Act, 1961.'' 2.2 In first appeal, the ld. CIT(A) held that no factual rebuttal is offered to the findings of AO especially to the transaction indicated in the seized document AS-5. The assessee nowhere disputed the contents of seized document AS-5. Details of payment made in cheque and in cash in agreement dated 25.06.2010 exactly matches with the sale deed dated 12.05.2010. A voluntary disclosure of Rs.10 lacs was made by the assessee on the basis of this agreement. Accordingly, he confirmed the addition. The relevant para 5 of ld. CIT(A)'s observation as to his decision is reproduced as under:-
''5. I have perused the order of the AO and submissions made in this regard. It would be very pertinent to reproduce the findings of the AO in para 5 & 6 of the order u/s 143(3)/263. Same is reproduced below for ready reference.
5. The assessee's reply is duly considered and examined but not found tenable because of the following facts/reasons.
(i) The document found and seized as Annexure AS-5 (Page 3 to 8) during search is an agreement to sale dated 25- 06-2009 signed by Shri Johari Lal Sodhani and the owner of the plot Shri Rajeev Ratan Shukla is sufficient evidence to determine the rate of said land at Rs. 37,876/- per sq. yards.
(ii) The details of payments made by cheque and cash as mentioned in the agreement to sale dated 25-06-2009, exactly appears in the registered sale deed dated 12-05- 2010, which clearly states that the property got registered on 12.05.2010 was same piece of land as mentioned in the 6 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur sale agreement dated 25.06.2009, wherein the rate was fixed at Rs. 37,876/- per Sq. Yard.
It is also worthwhile to mention here that the payment mentioned in the agreement to sale dated 25-06-2009 was never disputed by the assessee and during the course of search a disclosure of Rs. 10 lacs was also made by the assessee for AY 2010-11 on account of unexplained/cash payment of Rs 10 lacs to the person with whom said agreement was executed.
(iii) The assessee plea that there is no material to establish that he has made undisclosed investment of Rs. 92,33,609/- in purchase of said property is baseless and illogical with the facts that sale agreements were seized from the residence of the assessee which clearly shows that there was agreement between both the parties to finalize the deal @ 37,876 per sq. yard.
(iv) Further, assessee's plea that difference of the rate of property as per agreement found in the search and sale deed executed on 12-05-2010 was due to the reason that agreement was made for the constructed house area but actual sale deed was executed for the vacant and disputed land (with Smt. Kamla Devi Ghiya) is not acceptable because of the following facts:
(a) the original plot (i.e. C-63, Siwar Area, Bapu Nagar, Jaipur) under consideration is 889.00 Sq Yards (i.e. North-south (N-S) 80 ft. and East-West (E-W) 100 ft.)
(b) Whereas, as per agreement dated 20-01-2000, which was executed between Shri Rajeev Ratan Shukla & Others and Smt. Kamla Devi Ghiya the portion under consideration was North-East (N-E) corner of the original plot measuring 185.80 sq. meter (i.e. North-South (N-S) 50 ft. and East-West (E-W) 40ft.). The same area has been stated as disputed area by the assessee due to which rates have been claimed to have been reduced drastically.
(c) As per agreement dated June 2009, the area under consideration is E-S corner of original plot (i.e. 222.22 sq yard.
N-S 40 ft. and E-W 50 ft.).
(d) As per agreement dated 25 June 2009 the area under consideration is E-S corner of original plot (i.e. 266.66 sq. yards, N-S 40 ft. and E-W 60 ft.).
7 ITA No.1046/JP/2017Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur
(e) finally, sale deed was executed on 12-05-2010 from the portion of N-E corner of the original plot measuring Sq. yard (i.e. N-S 40 ft and E-W 100 ft.) with construction.
Hence, it is worthwhile to mention here that as per Para (b) and (d) mentioned above the N-S length of the plot under agreement with Shri Johari Lal Sodhani and Smt. Kamla Devi Ghiya are 40 ft. and 50 ft. respectively (i.e. 40 + 50 = 90 ft.), whereas total N-S length of the original plot was only 80 ft. Hence, 10 ft. of the N-S length was common in both the deals, therefore, it is clear that Shri Johari Lal Sodhani made an agreement of the disputed area @ 37879/- per sq. yard. Therefore, assessee's plea that rate (i.e. 17100/- per sq. yard) taken in the sale deed dated 12-05-2010 was due to dealing in disputed area is a framed story to adjust the on-money paid by him in cash.
Further, assessee's plea that portion of the plot mentioned in the sale deed is vacant area whereas initially agreement was made of the constructed area is also not acceptable because as per site plan/map attached with the sale dated 12-05-2010, the Northern half part of the total plot area (i.e. portion finally purchased by the assessee) is also partly constructed portion. Hence, there can't be so much difference of the rates on the same plot.
6. Having dealt with each of the contention of the assessee and having found the same to be untenable it is important to place on record certain aspects which have a bearing on the issue at hand. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.'' The perusal of submissions made by the appellant indicates that no factual rebuttal is offered to the finding of the AO especially to the transaction indicated in the seized document AS-5 (Pg 3-5). The appellant nowhere has disputed the contents of the seized document AS-5. It is 8 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur notice worthy that details of payment made in cheque and in cash in agreement dated 25.6.2010 exactly matches with the sale deed dated 12.5.2010. It may be emphasized that a voluntary disclosure of Rs. 10 Lakhs was made by the appellant on the basis of this agreement.
Under these circumstances I am in agreement with the finding of the AO, and uphold the order as it is. The ground raised by the appellant are dismissed.'' 2.3 During the course of hearing, the ld.AR of the assessee prayed that the ld. CIT(A) has erred in confirming the addition of Rs.
92,33,609/- by treating it as undisclosed income of the assessee u/s 69 of the Act for which the ld.AR of the assessee filed the following written submission alongwith case laws.
''1. The complete sequence of the transaction of purchase of the plot measuring 444.44 sq yard from Rajiv Ratan Shukla vide sale deed dated 12-05-2010 for Rs.76 lacs is as under:-
(i) Shri Rajiv Ratan Shukla owns a property at C-63, Siwar Area, Lal Kothi, Bapu Nagar, Jaipur measuring 889 sq. yards having N-S area 80 ft. and E-W area 100 ft. On half portion of this plot i.e., on 444.44 sq. yards, a house is constructed which is occupied by owner as his residence. The remaining 444.44 sq. yards is a vacant area containing a small construction on the backside. The site plan of the land of the plot is at PB 51.
(ii) Shri Rajiv Ratan Shukla intended to sale a part of this property. Accordingly, he and his wife entered into sale agreement in June, 2009 (PB 1-4) with the assessee for sale of S-E corner of the plot measuring 222.22 sq. yards having N-S area 40 Ft. and E-W area 50 Ft. for consideration of Rs.85.51 lakhs. As per this agreement assessee paid advance of Rs.11,000/-.
(iii) Thereafter, the above sale agreement was modified vide sale agreement dated 25.06.2009 (PB 5-10) whereby he agreed to sale S-W corner of the plot measuring 266.66 sq. yards having N-S area 40 Ft. and E-W area 60 Ft. for consideration of Rs.101 lakhs. The assessee 9 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur paid Rs.30 lakhs out of which Rs.20 lakhs was paid by cheque and Rs.10 lakhs by cash.
(iv) On 25.10.2009, a search was carried out at the residence of assessee in which the above two agreements were found. In the statement recorded u/s 132(4), assessee admitted that cash payment of Rs.10 lakhs made by him above is not disclosed and offered the same for tax in the return filed for AY 2010-11.
(v) Subsequently, Shri Rajiv Ratan Shukla, owner of the plot, changed his mind and decided to retain with him the portion of plot with construction which was under his occupation as residence and offered the assessee to buy the vacant land measuring 444.44 sq. yards instead of the land and constructed house as per the earlier agreement. However, since he had already entered into an agreement to sale dated 20.01.2000 (PB 11-16) with Smt. Kamla Devi Ghiya for N-E corner of the plot measuring 185.80 sq. meters (222.22 sq. yards) having N-S area 50 Ft. and E-W area 40 Ft. for consideration of Rs.5 lakhs and had received Rs. 4 lakhs, he offered to sell the entire vacant area of 444.44 sq. yards to the assessee at a lower rate than the rate at which he has earlier agreed to sell the other portion of the plot with constructed house thereon.
(vi) The assessee accepted this proposal and accordingly entered into sale agreement dated 15.01.2010 (PB 17-22) for N-E corner of the plot measuring 444.44 sq. yards having N-S area 40 Ft. and E-W area 100 Ft. for consideration of Rs.76 lakhs with the understanding that assessee would get the agreement with Smt. Kamla Devi Ghiya cancelled and settle the dispute with her. It was also agreed that the amount payable to Smt. Kamla Devi Ghiya for cancellation of the agreement and settling the dispute would be part of the consideration agreed with Shri Rajeev Ratan Shukla, who agreed to it, as he was not in a position to get this plot vacated from Smt. Kamla Devi Ghiya.
(vii) The assessee, thereafter, by using his influence was able to get the agreement cancelled between Shri Rajeev Ratan Shukla and Smt. Kamla Devi Ghiya. This cancellation deed was registered on 11.05.2010 (PB 23-27). For this, assessee paid Rs.8 lakhs to Smt. Kamla Devi Ghiya by cheque (PB 42). After execution of cancellation deed, an application was filed with Session Court to withdraw the ongoing court case between Kamla Devi Ghiya and Rajeev Ratan Shukla (PB 28-31). Thereafter, the said vacant plot of 444.44 sq. yard was registered in favour of assessee vide sale deed dated 12.05.2010 (PB 43-51) after relinquishment of right by two sisters of Shri Rajeev Ratan Shukla (PB 32-41). In this sale deed reference is made to the 10 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur supplementary agreement and also payment of Rs.8 lakhs made to Smt. Kamla Devi Ghiya.
(viii) Thus, the assessee purchased vacant area of 444.44 sq. yards of the plot at C-63, Siwar Area, Bapu Nagar, Jaipur vide sale deed dated 12.05.2010 (PB 43-51) for consideration of Rs.76 lakhs jointly with his wife for which payment of Rs.35 lakhs was made in the preceding years and payment of Rs.41 lakhs is made in the year under consideration as against the earlier agreement for purchase of 266.66 sq. yards area along with construction thereon.
2. From the above facts it can be noted that the property finally purchased by the assessee and the property for which agreement was found is different. The agreement was found for constructed plot and for 222.22 sq. yard whereas the plot finally purchased by the assessee is of 444.44 sq. yard of vacant land with small room constructed of which for part of the area seller has already entered into an agreement for sale in the year 2000. The assessee got vacated this portion of the plot from Smt. Kamla Devi by using his own influence. Thus, both the plots for which agreement was entered on 25-06- 2009 and for which the sale deed is executed are different and can't be compared for determining the rate at which the plot is finally purchased.
3. The CIT in order u/s 263 has specifically directed the AO to make independent enquiries before arriving at the final conclusion. However, he has not made any independent enquiry. Therefore, without any enquiry, the allegation of on money payment made by him is on surmises and conjectures. Further, the AO has not taken any action against the seller of the plot. All these facts and evidences proves that the allegation of on money levied by the AO is only on assumption and presumption without establishing that the assessee has made payment of any extra consideration for purchase of the plot. Therefore, the comparison of the rate made by AO with earlier agreements is incorrect and on that basis addition made by the AO is unjustified and uncalled for.
4. It is a settled law that burden to prove that what is apparent is not real is on the person who alleges so and this burden must be discharged by strict legal proof and not on conjectures and surmises. For this reliance is placed on the following cases:-
CIT Vs. Bedi & Co. Pvt. Ltd 230 ITR 580 (SC) It was held that the burden of showing that the apparent state of affairs was not the real one lay heavily on the department.
CIT Vs. Daulat Ram Rawatmull 87 ITR 349 (SC) The fact that an assessee was unable to satisfy the authorities as to the source from which the depositor derived money cannot be used against 11 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur assessee. The onus of proving that the apparent was not real is on the party who claims it to be so. From the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found false, it would be a remote and far fetched conclusion to hold that money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom
5. AO has made the addition u/s 69. In fact the correct head should be section 69B. As per these sections,where the assessee offers no explanation about the nature & source of investment/ excess amount or the explanation offered by him is not satisfactory, the value of investment/ excess amount may be deemed to be the income of assessee. Therefore, once assessee has furnished an explanation, the burden shifts on the AO to bring cogent material on record to establish as to why the explanation offered by the assessee is not satisfactory. In the present, after providing explanation by the assessee, AO has brought no material on record to disprove the explanation given by the assessee. Hence, the addition made u/s 69/69B is bad in law. Reliance in this connection is placed on the following cases:-
(i) CIT Vs. Khandelwal Shringi & Co. (2017) 159 DTR 59 (Raj.) (HC) CIT(A) having found that the earlier agreement supposedly entered into by the sellers with another party which formed the basis of the opinion of AO that the market value of land purchased by the assessee was Rs.7 crores was never executed and that the AO did not adduce any other evidence to show that the market value of the land was Rs.7 crores as against the declared consideration of Rs.1.87 crore, the impugned addition made by the AO on account of unexplained investment has been rightly deleted.
(ii) CIT Vs. Dinesh Jain(HUF) & OHRS. [2012] 79 DTR 457 (Del) (HC) The facts of this case are that a search operation u/s 132 was conducted at business/residential premises of the assessee. The materials seized in search revealed that assessee purchased one commercial property at Gurgaon for Rs. 17,55,000/- fetching a rental income of Rs. 7.02 lakhs which is stated to be disproportionally high in comparison with the amount invested. AO therefore took the view that the assessee must have invested more than what was disclosed in the sale document which attracted the provisions of section 69B. The assessee denied investing anything over and above the amount declared in the document. AO, however calculated the fair market value of the property as per Wealth Tax Act,1957. He accordingly arrived at the value of the property at Rs. 82,87,800/- and made the addition for the difference. On appeal before the CIT(A), the assessee adduced 12 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur evidence in the form of comparable properties in the same building, and several other instances to demonstrate that the price shown to have been paid by the assessee as per the sale document, represented the real and actual consideration for the properties and nothing was paid as "on-money" over and above the stated consideration. The CIT(A) held that the amount declared by the assessee as per price cannot be taken as sacrosanct and he upheld the view taken by the AO in principle, however, he reduced the additions. The Tribunal ruled in favour of assessee. In appeal by the department before the High Court, it was held as under:-
"We should have thought that the question is concluded by the judgments cited above, both of the Supreme Court and of this court, but the contention of Mr. Sabharwal for the Revenue is that where the facts and circumstances permit an inference of understatement of consideration, it is not necessary to look for direct evidence of understatement which, in the very nature of things, is impossible to obtain. He points out to what he describes as "disproportionately high returns for the investment" in the properties - the rental income is 40% of the investment in the first year, and that would not have been possible unless a much higher amount than what was declared had been invested by the assessee. The returns, according to him, are so high that they shock the conscience of the court. He contends that judicial notice can be taken note of the fact, under section 57 of the Evidence Act, that notifications have been issued under section 75 of the Stamp Act prescribing circle rates for the properties and rarely do properties get transferred for such rates.
These arguments are certainly attractive but the language employed by Section 69B is the first stumbling block which Mr. Sabharwal has to overcome. The section 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 Officer, 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 price. That is precisely the reason why the Assessing Officer had to resort 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, 13 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur 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 it fictional, 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 an 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. If A dies leaving prime property in Connaught Place to his son B, B pays nothing for the property; the property may command a market price of several crores. If "A", because of his love and affection for "B", sells the property for Rupee One to "B"; in this case, the consideration paid is only Rupee One, though the property is worth several millions. If the Assessing Officer having jurisdiction over "B" has to make an addition under section 69B, he can do so only if he "finds" that B has "expended" money which he has not fully recorded in this books of account; he cannot make any addition merely because the property could fetch several crore of rupees in the market.
Section 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 notional or fictional income being brought to tax contrary to the strict provisions of Article 265 of the Constitution of India and Entry 82 in List I of the seventh schedule thereto which deals with "Taxes on income other than agricultural income". This was one of the major considerations that weighed with the Supreme Court in K.P. Varghese in which case the provisions of sub-section (2) of section 52 fell for interpretation. It was observed that Parliament cannot choose to tax as 14 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur income an item which in no rational sense can be regarded as a citizen's income or even receipt. Section 52(2) (which now stands omitted) applied to the transferor of property for a consideration that was lesser than the fair market value by 15% or more; in such a case, the Assessing Officer was conferred the power to adopt the fair market value of the property as the sale price and compute the capital gains accordingly. The Supreme Court held that it was the burden of the Assessing Officer to prove that there was understatement of consideration and once that burden was discharged it was not required of him to prove the precise extent of understatement and he could adopt the difference between the stated consideration and the fair market value of the property as the understatement. The sub-section was held to provide for a "statutory best judgment" once actual understatement was proved; it obviated the need to prove the exact amount of understatement. Additional reasons for the result were (a) that the marginal note to the section referred to "cases of understatement"; (b) the speech of the Finance Minister while introducing the provision; and (c) the absurd or irrational results that would flow from a literal interpretation of the sub-section, which could not have been intended by the legislature.
While the omitted section 52(2) applied to the transferor of the property, section applies to the transferee - the purchaser - of the property. It refers to the money "expended" by the assessee, but not recorded in his books of account, which is a clear reference to undisclosed income being used in the investment. Applying the logic and reasoning in K.P. Varghese it seems to us that even for the purposes of Section 69B it is the burden of the Assessing Officer 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 Officer, 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. We however clarify that this Court is not concluding that such yardstick is determinative; in view of the findings arrived at by us that the Assessing Officer did not gather foundational facts to point to undervaluation the adoption of the norms under the Wealth Tax Act is not commented upon by us.
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 apply the measure of understatement. If anything, the language employed in 15 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur 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 Officer even to show the exact extent of understatement of the investment; it does not even give the Assessing Officer 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 to us that the Assessing Officer 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 of undisclosed investment, it is perhaps reasonable to permit the Assessing Officer 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 Officer is an acceptable one 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 Officer. It is only to this extent that the rigour of the burden placed on the Assessing Officer 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.
In Lalchand Bhagat Ambica Ram Vs. Commissioner of Income Tax, Bihar and Orissa, the Supreme Court disapproved the practice of making additions in the assessments on mere suspicion and surmise or by taking note of the notorious practices prevailing in trade circles.
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, we are unable to approve of the decision of the income-tax authorities. 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.
(iii) CIT Vs. Smt. K. C. Agnes 128 Taxman 848 (Ker.) In this case the sale deed showed that the price was Rs. 8,000 per cent while the agreement showed that the parties agreed purchase the property at Rs. 12,951 per cent. A receipt was also relied in the form of a letter to show that the property was agreed to be purchased at Rs. 12,951 per cent. On these facts the Court held as under:
16 ITA No.1046/JP/2017Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur "When a document shows a fixed price, there would be a presumption that it is the correct price agreed upon by the parties. It is true that on the basis of the agreement, the sale deed is executed. But it is not necessary that price stated in the agreement will be the price shown in the sale deed. Sometimes, it may be higher and sometimes it may be lower. Sometimes intentionally a lesser value may be shown in the sales deed. Even if it is assumed to be so, unless it is proved that the agreement was acted upon and unless the amount stated in the agreement was paid for the sale, we cannot come to the conclusion that the price mentioned in the sale deed is not correct. In this case, further it is found that in the assessment of Pasha, it was finally found that the amount was received only at Rs. 8,000 per cent. It is taking into all these matters into consideration that the Tribunal held that the property was sold at the rate of Rs. 8,000 per cent. Thus, the Tribunal, on the basis of the facts and circumstances of the case and on the appreciation of evidence, came to the conclusion that Rs. 12,951 was not the amount for which the property was sold. According to us, there is no rule that the amount shown in the receipt was the actual amount paid. So far as the other questions are concerned, we do not find that any substantial questions of law arise because as already stated, the only question in this case is whether the amount stated in the sale deed is correct or not. According to us, the amount stated in the sale deed is the correct amount unless there are circumstances to ignore the same."
In view of above, the addition of Rs.92,33,609/- confirmed by Ld. CIT(A) is uncalled for and be directed to be deleted. '' 2.4 On the other hand, the ld. DR supported the orders of the lower authorities.
2.5 We have heard the rival contentions and perused the materials available on record. Brief facts of the case as observed by the AO during assessment proceeding are that the assessee had purchased 444.44 sq. yards of the land @ 17,100/- per sq. yard at the 17 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur consideration of Rs. 76.00 lacs but as per agreement to sale dated 25-06-2009 (i.e. seized as Annexure AS-5, page 3 to 8), the rate of this plot/land was fixed at Rs. 37,876/- per sq. yard. According to the AO the value of the plot/land paid by the assessee was of Rs. 1,68,33,609/-. Therefore, the difference amount of Rs. 92,33,609/-
was paid by the assessee out of the undisclosed / explained income.
The AO thus made the addition of Rs. 92,33,609/- u/s 69 of the Act in the hands of the assessee and added the same to the total income of the assessee. In first appeal, the ld. CIT(A) has confirmed the action of the AO. It is noted from the available records that the Rajeev Ratan Shukla owned a property at C-63, Siwar Area, Lal Kothi, Bapu Nagar, Jaipur measuring 889 sq. yards having N-S area 80 ft and East West Area 100 ft. Initially, Rajeev Ratan Shukla entered into an agreement with the assessee in the month of June, 2009 (PB1-4) to sell 222.222 sq. yd of this land of East South Corner having size at East West 50 ft and North South 40 ft for Rs. 85.51 lacs. This agreement was modified on 15-06-2009 (PBP 5-10) according to which the area was increased to 266.66 sq. yd for Rs. 1.01 crore. As per the agreement on this portion of the land there was constructed house.
Subsequently, Shri Rajeev Ratan Shukla entered into another 18 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur agreement on 15-01-2010 (PBP 17-22) with the assessee whereby he decided to sell North East Portion of this land measuring 444.44 sq. yd having East West 100 Ft and North East 40 ft area of land for Rs.
76.00 lacs . This was a vacant land having a small construction on the back side (PB51) . On 222 sq. yard portion of the impugned area of land, Shri Rajeev Ratan Shukla has earlier entered into an agreement dated 20-1-2000 with Smt. Kamla Devi Ghiya for Rs. 4.98 lacs against which he has received Rs. 4.00 lacs. The agreement with Smt. Kamla Devi Ghiya was duly registered with the office of Sub-Registrar, Jaipur (PB11-16). As per the agreement dated 15-01-2010, the assessee was to get cancelled the agreement dated 20-01-2000 by using his influence and if any amount is was to be paid to Smt. Kamla Devi Ghiya for cancellation of this agreement, the same is to be adjusted against the amount payable by the assessee to Shri Rajeev Ratan Shukla. Thereafter the assessee by using his influence after payment of Rs. 8.00 lacs to Smt. Kamla Devi Ghiya could get the agreement dated 20-01-2000 cancelled by mutual settlement (PBP 23-
29) and the same was duly approved by Distt. And Session Court as per the order sheet dated 11-05-2010 (PBP 30-31). All these facts shows that the earlier agreement of June 2009 was for the different 19 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur portion of the land. The agreement of June 2009 was of that portion of the land on which there was an existing house whereas the subsequent agreement of 15-01-2010 was for the vacant portion of the land on a portion of which there was an encumbrance by way of registered agreement entered by Shri Rajeev Ratan Shukla with Smt. Kamla Devi Ghiya. In these facts, the rate as per the agreement of June 2009 cannot be applied to the land purchased by the assessee in pursuance to agreement dated 15-01-2010. It is also noted that no material was brought on record by the lower authorities to establish that assessee had paid any amount over and above that recorded in the registered sale deed dated 12-05-2010 (PBP 43-51). The AO had made the addition u/s 69 of the Act. As per this section, addition can be made by the AO where the assessee offers no explanation about the nature/ source of investment or the explanation offered by him is not satisfactory. However, in the present case, as discussed above, explanation furnished by the assessee is satisfactory and the AO has not brought any material on record to disprove the explanation given by the assessee. The cases (supra) relied on by the ld.AR of the assessee are squarely applicable and therefore, the addition made by the AO cannot be sustained. In view of the above facts, circumstances 20 ITA No.1046/JP/2017 Shri Johari Lal Sodhani vs DCIT, Central Circle-2, Jaipur of the case and the judgements (supra), we do not concur with the findings of the ld. CIT(A). Thus the appeal of the assessee is allowed.
3.0 In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 20 -07-2018.
Sd/- Sd/- ¼ fot; iky jko ½ ¼HkkxpUn½ (Vijay Pal Rao) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 20 /07/ 2018 *Mishra
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Johari Lal Sodhani, Jaipur
2. izR;FkhZ@The Respondent- The DCIT, Central Circle-2, Jaipur
3. vk;dj vk;qDr¼vihy½@ CIT(A).
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.1046 /JP/2017 ) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 21