Income Tax Appellate Tribunal - Delhi
Rakesh Narang, New Delhi vs Department Of Income Tax on 16 February, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : F : NEW DELHI
BEFORE SHRI R.S. SYAL, AM AND SMT.DIVA SINGH, JM
ITA No.4137/Del/2011
Assessment Year : 2008-09
ACIT, Vs. Rakesh Narang,
Circle 32(1), B-2, Lajpat Nagar-III,
New Delhi. New Delhi.
PAN: AAFPN7809P
(Appellant) (Respondent)
Assessee By : Shri Subir Gautam, CA
Department By : Shri Vikram Sahay, Sr. DR
ORDER
PER R.S. SYAL, AM:
This appeal by the Revenue is directed against the order passed by the CIT(A) on 27.06.2011 in relation to the assessment year 2008-09. ITA No.4137/Del/2011
2. The only ground raised herein is against the deletion of addition of Rs.49,15,000/- made by the Assessing Officer (AO) u/s 69B on the basis of the report of the Departmental Valuation Officer (DVO).
3. Briefly stated, the facts of the case are that the assessee purchased during the relevant year a property, B-79, Lajpat Nagar-I, New Delhi, for a consideration of Rs.34 lac. The AO opined that the declared purchase price was far less than its fair market value. A reference was made to the DVO for determining the fair market value of the property. Such value was determined at Rs.83.15 lac. This led to the making of an addition of Rs.49.15 lac (Rs.83.15 lac minus Rs.34 lac) u/s 69B of the Act. The ld. CIT(A) ordered for the deletion of the addition, against which the Revenue is aggrieved before us.
4. We have heard the rival submissions and perused the relevant material on record. It is noticed that the extant addition was made by the AO u/s 69B of the Act. The relevant part of this section stipulates that:
'Where in any financial year the assessee has made investments or ...... and the Assessing Officer finds that the amount expended on making 2 ITA No.4137/Del/2011 such investments or .... 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 Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.' The pre-requisite conditions for making an addition under this section are that firstly, the assessee should have made investment and then the AO should find that the amount actually expended on making such investment is more than the amount recorded in the books of account. In other words, there should be some positive evidence with the AO to find that the assessee had, in fact, invested more amount than that actually recorded in the books of account. Such a finding by the AO can be based on some positive evidence about the making of more investment than that declared in the books of account. This section cannot be triggered on a mere presumption of the AO. When the legislature has unambiguously provided so, it is impermissible to substitute such a finding with a presumption about actual investment having been made by the assessee 3 ITA No.4137/Del/2011 at a level higher than that depicted in the books of account. Only some positive and irrefutable evidence converts a presumption into a finding. Absent affirmative evidence, what remains is a mere supposition of unexplained investment etc., which cannot take the place of a finding of the AO towards unexplained investment.
5. Adverting to the facts of the instant case, we find that the only so called evidence in the hands of the AO for the assessee having made investment of Rs.49.15 lac outside the books of account, is a report of the DVO. There is hardly any need to accentuate that a Valuer's report is nothing but an estimate of cost of construction. There can be several factors affecting valuation or the price finally bargained. Valuation is not a fool-proof scientific tool of the measurement of the cost of construction. Ordinarily, there arises difference in two valuations. Even rates for valuation under CPWD and State PWD for estimating the cost of construction differ. As regards the price settled in a transaction, here again we find that there are several factors affecting the same. The price finally bargained depends upon a host of factors, such as, terms and 4 ITA No.4137/Del/2011 conditions of payment, need and capacity of the buyer or seller to buy/sell, peculiar features attached to property suiting or not suiting a particular customer etc. The crux of the matter is that the value of a property estimated by the DVO or the Registered Valuer, can never be conclusive of the price finally bargained. Reverting to the facts of the case, we find that the AO made addition u/s 69B of the Act only on the basis of the DVO's report. If such a report, which is a mere estimate of the cost of construction of the property is kept aside, there is nothing to show that the assessee, in fact, made more investment than that declared, calling for an addition u/s 69B.
6. The Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC) has held that the onus of establishing that the conditions of taxability are fulfilled, is always on the Revenue. It is for the Revenue to show that there is an understatement of the consideration. It further laid down that to throw the burden of showing that there is no understatement of the consideration on the assessee, would be to cast an almost impossible burden upon him to establish a 5 ITA No.4137/Del/2011 negative. Similar view has been reiterated in CIT vs. Shivakami Co. P. Ltd. (1986) 159 ITR 71 (SC). In this case, their Lordships have laid down that no addition can be made unless there is evidence that more consideration than what was stated in the document, was received. In the light of the above decisions, it is manifest that no addition can be made unless the Revenue proves understatement of consideration with some cogent evidence, apart from a mere estimate of the cost of valuation.
7. At this juncture, it would be relevant to note that in order to tap the cases of such understatement of consideration yielding less than the due collection of tax, the legislature stepped in by inserting section 50C which is a 'Special provision for full value of consideration in certain cases'. This section came to be inserted by the Finance Act, 2002 w.e.f. 1.4.2003. Relevant part of sub-section (1) of this section provides that :
'Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a 6 ITA No.4137/Del/2011 State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.'. It is ostensible that this deeming provision deals with a situation in which the consideration received as a result of transfer of a capital asset by an assessee is, less than the stamp value. When this condition is met with, then the section operates to substitute the stamp value with the full value of the consideration received or accruing as a result of such transfer for the purposes of computing capital gain u/s 48 of the Act. Thus it is evident that section 50C is a deeming provision, which is applicable only 'for the purposes of section 48'.
8. A deeming provision or a legal fiction, as it is commonly called, is one whose mandate does not exist but for such provision. Due to such provision only, the given imaginary state of affairs is taken as reality despite it being at variance with the scope of the enactment. It is trite 7 ITA No.4137/Del/2011 law that a deeming provision cannot be extended beyond the purpose for which it is intended. The Hon'ble Supreme Court in CIT vs. Amarchand N. Shroff (1963) 48 ITR 59 (SC) considered the scope of a deeming provision and held that the fiction cannot be extended beyond the object for which it is enacted. In CIT vs. Mother India Refrigeration Industries P. Ltd.(1985) 155 ITR 711 (SC) the same view has been reiterated by holding that the "legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond their legitimate field."
9. Coming back to our context, we find that section 50C is a deeming provision, which is applicable only for the purpose of section 48. The latter section spells out the mode of computation of capital gain. To put it simply, the substitution of 'full value of consideration received' with 'the stamp value' in terms of section 50C, is applicable in the hands of the seller of the property who has to compute capital gains u/s 48 pursuant to the transfer of a capital asset in the nature of land or building or both. On the contrary, section 69B, which is again a deeming 8 ITA No.4137/Del/2011 provision, governs the cases in which investment made by the assessee is not fully disclosed. In other words, section 69B applies to the purchaser of an asset, in contradistinction to sec. 50C, which applies to the seller of an asset.
10. The position about the substitution of 'stamp value' with the 'consideration received' in case the latter is lower than the former, in the hands of the seller only, leaving the differential investment made by the buyer untaxed, appears to have been realized by the Parliament. That is why, the legislature has inserted clause (vii) to section 56(2) by the Finance (No.2) Act, 2009 w.e.f. 1.10.2009, inter alia, providing that where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,-- (b) any immovable property,-- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property shall be considered as income under the head 'Income from other sources' and ; (ii) for a consideration which is less than the stamp duty value of the property by 9 ITA No.4137/Del/2011 an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration, shall be considered as income under the head 'Income from other sources'.
11. A conjoint reading of sections 50C and 56(2)(vii) makes it vivid that whereas 'stamp value' has been substituted with the 'full value of consideration' in case the later is less than the former in the hands of the seller by virtue of section 50C, the substitution of the 'stamp value' with the 'actual purchase price, in excess of Rs.50,000/-' has been made effective in the hands of the buyer only where any immovable property is purchased after 1.10.2009. As the assessee before us is a buyer, naturally, his case will not be covered u/s 50C but will be governed by section 56(2)(vii). Since section 56(2)(vii) is applicable on cases in which the individual or HUF receives immovable property on or after 1.10.2009 and we are dealing with a case in which the property has been purchased by the assessee in the financial year 2007-08, the mandate of section 56(2)(vii) cannot apply retrospectively. Once this provision is not applicable, the ratio decidendi in the case of K.P. Varghese (supra) 10 ITA No.4137/Del/2011 and Shivakami Co. P. Ltd. (supra) would apply leaving no scope for making addition in the circumstances as are prevailing in the instant case. We, therefore, uphold the view taken by the ld. CIT(A) on this issue.
12. In the result, the appeal is dismissed.
The order pronounced in the open court on 16.02.2015.
Sd/- Sd/-
[DIVA SINGH] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 16th February, 2015.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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