Income Tax Appellate Tribunal - Delhi
Nirmal Rani, New Delhi vs Department Of Income Tax on 30 March, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `E': NEW DELHI
BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T. A. No.2786/Del/2010
Assessment Year : 2007-08
Dy. Commissioner of Income-tax, Smt. Nirmal Rani,
Central Circle-11, New Delhi. Vs. 54, Sukh Chain Marg,
DLF Ph-1, Gurgaon
(Haryana).
PAN: AAIPK8710F
(Appellant) (Respondent)
Appellant by: Mrs. Anusha Khurana, Sr. DR.
Respondent by: Shri Satyen Sethi, Advocate.
ORDER
PER C.L. SETHI, JUDICIAL MEMBER:
The revenue is in appeal against the order dated 30.03.2010 passed by the learned Commissioner of Income-tax (Appeals) in an appeal arising from the assessment order passed by the Assessing Officer under sec. 143(3) of the Income-tax Act, 1961 (the Act) for the Assessment Year 2007-08.
2. The various grounds of appeal raised by the revenue are directed against the learned CIT(A)'s order in deleting the addition of Rs.11,21,476/- made by the AO on account of difference in the purchase consideration shown by the assessee and value ascertained by the Departmental Valuation 2 Officer in a reference under sec. 142A of the Act. The assessee submitted her return on 6.4.2009 declaring total income at Rs.3,06,844/-. The case was selected for scrutiny by the AO. The AO, therefore, issued a notice and questionnaire u/s 143(2) on 22.9.2009. The assessee's Authorized Representative had appeared before the AO and furnished relevant details as required.
3. During the assessment proceedings, it was noticed by the AO that the assessee purchased certain properties during the year under consideration. A reference u/s 142A of the Act was made by the AO to the DVO for determining the fair market value at the time of acquisition of the following properties acquired by the assessee during the relevant year:-
(a) Residential Plot of 160 sq. yd. at Sector-4A, Dharuhera, Rajasthan.
(b) Residential Plot of 311.11 sq. yd. at Uppal's Southend, Sohna Road, Gurgaon.
4. The Valuation Officer vide his report dated 18.12.2009 estimated the value of the above properties as under:-
Property Details Purchase value FMV determined Difference reported by the by the Valuation between the assessee Officer. FMV by the VO and value reported by the assessee.
Residential Plot Rs.2,00,000/- Rs.5,12,000/- Rs.3,12,000/- of 160 sq. yd.
Residential Plot Rs.16,56,652/- Rs.25,45,030/- Rs.8,88,378/- of 311.11 sq. yd.3
5. Since there was a difference in the consideration shown by the assessee and the value determined by the DVO, the AO issued a show cause notice to the assessee as to why the difference of Rs.3,12,000/- and Rs.8,88,378/- respectively should not be treated as assessee's undisclosed investment in the relevant year. In reply thereto, the assessee submitted the following explanation:-
a) The Plot at Dharuhera was acquired for a total purchase, consideration of Rs.2,78,902/- out of which Rs.2,00,000/-
was paid by the original allottee and the balance amount of Rs.78,902/- was paid by the assessee after acquisition. The assessee furnished the relevant details in this regard which were examined by me and found to be in order.
b) The DVO has out rightly applied the circle rate of Rs.3,200/- per sq. yard for the property at Dharuhera without considering certain factors as mentioned by the assessee in her submissions like Small Size of the Plot, South Facing Plot, Poor Surroundings and Crossing of High Tension Electricity Cables etc.
c) In the case of property at Uppal's Southend also, the DVO has applied circle rate without considering certain negative points as mentioned by the assessee in her submission like Heavy Traffic, Noise Pollution, Narrow Approach Road, closeness to Public Health Water Tank, adjoining plots lying vacant, not an East Facing Plot etc.
d) The assessee also furnished valuation reports from M/s. R.S. Yadav & Associates for the above two properties as per which the property at Dharuhera has been valued at Rs.2,10,000/- and that of Uppal's Southend is valued at Rs.17,70,000/-.
4
6. The above submissions were examined and considered by the AO and following comments were made by him:-
a) The District Circle Rates for properties are arrived at after taking into account all the relevant factors and same are fixed scientifically. Therefore, the emphasis given by the assessee to the negative factors have no merit as the same have already been considered in fixing the District circle Rate.
b) The DVO has applied the District Circle Rate for arriving at respective fair market value, which is a proper and superior method.
c) Merely because the agreement to sell was registered with the Registrar would not mean that adverse inference cannot be taken or that the department has to prove any under hand dealing by the assessee.
d) The AO has made a reference to the insertion of a new clause in section 56 of the Act dealing with such difference between reported sale consideration and District Circle Rates.
e) The Valuation report of the registered Valuation Officer submitted by the assessee is very vague inasmuch as the Valuation Officer had arrived at value after taking into account comparative sale instances but he valued the property at a value more than that of comparative sales instances without giving any basis.5
7. In the light of the aforesaid reasons, the AO made the addition of difference amount of Rs.2,33,098/- (Rs.3,12,000/- - Rs.78,902/-) and Rs.8,88,378/- as the unexplained investment of the assessee.
8. Being aggrieved, the assessee preferred an appeal before the learned CIT(A).
9. Before the learned CIT(A), the assessee made a detailed submission and arguments as narrated by the learned CIT(A) in Para 3.1(a) to 3.1(i) at pages 2 to 9 of his order.
10. After considering the assessee's submissions and the findings of the AO, the learned CIT(A) deleted the addition by observing and holding as under:-
"4.1(a) The written as well as oral submission(s) of the appellant and findings of the AO in the order of assessment have been carefully considered. The AO has made addition of Rs.11,21,476/- on the basis DVO Report based on the DC Rate. The AO was not able to justify as to what prompted him to seek the valuation report without making any enquiry from the purchaser and or seller in as much as without bringing any material on record to justify that the purchase consideration declared by the assessee was under stated especially under the circumstances, in one of the case no sale deed was executed and in other case the sale deed was registered at the lesser price then the purchase consideration declared by the assessee.
4.1(b) Reliance is placed upon -
NAVNEET KUMAR THAKKAR Vs. ITO (2007) 112 TTJ (JD) 76 CIT vs. SHIVKAMI CO. PVT. LTD. 159 ITR 71 (SC).6
K.P. VERGHESE vs. ITO 131 ITR 597 (SC) CIT vs. NARESH KHATTAR (HUF) 261 ITR 664 (Del.2003) ITO vs. SMT. ANSHU JAIN (2010) 36 SOT 263 (JP).
4.2 The appellant has been able to justify the rates for the plots purchase during the year under reference and also pointed out that there were various negative factors which ahs been overlooked by the DVO while making its report. Moreover, the DVO has never cited any comparable instances to justify its stand. He has simply adopted the DC rate of the area without giving any reason for applying the same. At the same time the AO has also ignored the Govt. approved valuer report, containing therein various negative character of the plots purchased by the appellant and also citing comparable instances to justify its stand that the plots in the said area are being sold and registered at much lower price then the DR Rate.
The Govt. approved valuer has also given reason for adopting the lesser rate then the DC Rate.
4.3 Under the facts and circumstances of the case and case laws cited by the assessee it is held that the AO was not justified that making addition of Rs.1121476/-. Accordingly the addition is hereby deleted, as a result Ground of Appeal No.1 and 2 is allowed."
11. Hence, the department is in appeal before us.
12. The learned DR has contended that the AO has made the addition on the basis of valuation report submitted by the Departmental Valuation Officer in pursuance to a valid and legal reference made by the AO u/s 142A of the Act. She further contended that in the light of sec. 142A, it is not the requirement for the AO to bring on record any material to justify under 7 statement of purchase consideration. She further contended that the reference made u/s 142A was valid and nothing has been pointed out by the learned CIT(A) or by the assessee to render the same to be void and without jurisdiction. It was further contended by the learned DR that the assessee has failed to rebut the DVO's finding and the value ascertained by him. She, therefore, contended that the CIT(A) was not justified in deleting the addition of Rs.11,21,476/- on account of difference in value shown by the assessee and the value determined by the DVO.
13. The learned counsel for the assessee reiterated the contentions and arguments made before the CIT(A) which are narrated by the learned CIT(A) in Para 3.1(a) to 3.1(i) at pages 2 to 9 of his order.
14. We have considered the rival contentions of both the parties and have carefully perused the orders of the authorities below.
15. In this case, the assessee has acquired by way of purchase of two residential plots situated at Dharuhera and Sohna Road, Gurgaon respectively. The purchase value shown in the sale document of Rs.2,00,000/- and Rs.16,56,652/- respectively. The assessee has also paid the sum of Rs.78,902/- in respect of the first property over and above the sum of Rs.2,00,000/- paid by the assessee to original allottee. The AO had referred the matter to the DVO to estimate the market value of these plots. 8 The DVO estimated the value by applying district circle rates applicable for relevant areas. The DVO determined the value of the property equal to the value based on district circle rates specified by the respective authority. It is well-known that district circle rates are fixed for the purpose of stamp duty valuation of the property. U/s 50C(1), the full consideration received or accruing as a result of transfer of assets being land or building or both shall be equal to the value adopted or assessed or assessable by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer. However, sec.50C(1) shall not apply where the assessee claims before any officer that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer and in that case, the AO shall refer the valuation of the capital asset to a valuation officer. From this provision, it is thus clear that the value adopted or assessed or assessable by any authority of State Government for the purpose of payment of stamp duty may vary from the fair market value of the property. In the present case, the DVO has determined the fair market value by applying circle rate by applying rate adopted for the purpose of payment of stamp duty. He has not independently determined the fair market value of the property as per the method of valuation provided in that regard. However, on the other hand, 9 the assessee submitted the valuation report from the Valuation Officer who determined the market value after taking into account comparative sale instances. The sale instances referred to by the registered valuer were transacted at the value less than the value adopted by the registered valuer for the purpose of determining the fair market value of the property in question. The Approved Valuer has valued the value of first floor at Rs.2,10,000/- by applying the land rate of Rs.1800/- per sq. yard after citing the sale instances where the land were sold at Rs.1100/- per sq. yard. In respect of second property, registered valuer has adopted the land rate of Rs.5500/- per sq. yd. after citing the sale instances where the land was sold at Rs.2913/- and Rs.2700/- per sq. yd. The sale instances referred to by the Registered Valuer has not been found to be not relevant by the departmental authorities having regard to the nature and location of the land of the assessee vis-à-vis the land of comparable cases.
16. We further find that the circle rates are fixed in respect of any specific area covering all the plots of land falling within that area. In the present case, the assessee has pointed out certain negative factors in respect of both the plots. From the AO's order, we find that the AO has not disputed the existence of negative factors pointed out by the assessee. The AO has merely rejected the assessee's contention with regard to the negative factors 10 by saying that the district circle rates for properties are arrived at after taking into account all the relevant factors. The AO has not considered the fact that the district circle rates for properties are arrived at for whole of the specified area and not with reference to each and every plot falling within that area. Therefore, the negative factor pointed out by the assessee in respect of plots purchased by him as against the other plots falling within the same area should have been taken into account before applying district circle rates to arrive at the fair market value of the property.
17. Further, it is not in dispute that the AO has not made any enquiry from the seller to determine as to whether any amount over and above the amount shown in the agreement was paid by the assessee for purchasing the property. The AO has merely made the addition on the basis of the DVO's report which in turn based on the district circle rate and not on the basis of any scientific method prescribed for determining the fair market value of the property purchased.
18. In the case of ITO vs. Satyanarayan Aggarwal (2007) 12 TTJ 717 (at page 725), ITAT, Jodhpur Bench has held that on the basis of stamp duty charged by the Sub-Registrar, no addition can be made on account of estimated investment made in the purchase of the property. In this decision, the ITAT relied upon the earlier decision of ITAT, Jodhpur Bench in the 11 case of Jai Malwar Co. Pvt. Ltd. vs. Assistant CIT, in ITA No.2226, reported in (2003) 79 TTJ (Jodhpur) 178, in which it was held, by relying on the decision of Hon'ble Supreme Court in the case of UP Jal Nigam vs. Kalra Property, AIR 1966 SC 1170 and that of the Hon'ble Rajasthan High Court in the case of CIT vs. Raja Narendra (1995) 123 CTR (Raj) 459 = (1994) 74 Taxman 157 (Raj) that the rate fixed for collection of stamp duty cannot be relied jupon to determine the fair market value of the land.
19. Further, in the case of ITO vs. Smt. Anshu Jain (2010) 36 SOT 263 (Jaipur), the ITAT, Jaipur Bench `A' has held that there was no corroborative piece of evidence placed on record by the revenue in form of verification from seller that there was under statement or concealment of consideration in respect of transfer of property to the assessee, the addition on the basis of value of land for stamp duty purposes, or on the basis of DVO's report cannot be made.
20. In the case of CIT vs. Naresh Khattar, HUF, 261 ITR k664 (Del), the Hon'ble Delhi High court has held to invoke the provisions of sec. 69B of the Act, the burden is on the revenue to prove that the real investment exceeds the investment shown in the books of account of the assessee.
21. In the light of the discussions made above, we find no justification to interfere with the order of the learned CIT(A) in deleting the addition of 12 Rs.11,21,476/- made by the AO on the basis of district circle rate applied by the DVO to determine the fair market value. Thus, the order of the learned CIT(A) is upheld.
22. In the result, the appeal filed by the revenue stands dismissed.
23. This decision is pronounced in the Open Court on 15th July, 2011.
Sd/- Sd/-
(SHAMIM YAHYA) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 15th July, 2011.
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
By Order
*mg Deputy Registrar, ITAT.