Income Tax Appellate Tribunal - Amritsar
Asstt. Cit vs Radhey Shyam Poddar on 8 January, 2003
Equivalent citations: (2004)86TTJ(ASR)558
ORDER
N.K. Saini, A.M..
This is an appeal by the department against the order of the Commissioner (Appeals) dated 18-6-1997, relating to assessment year 1994-95.
2. The first ground of appeal relates to the deletion of addition of Rs. 8,97,000 made by the assessing officer on account of unaccounted investment made in the purchase of property in Aggar Nagar, Ludhiana.
2.1. The facts of the case in brief are that the assessee filed its return of income declaring net income of Rs. 11,700 on 2-4-1996. The assessee also claimed long-term capital gain exempt under section 54 of the Income Tax Act in the aforesaid return. During the assessment proceedings, the assessing officer noted that the assessee had purchased within a period of one year before the date of sale, a residential ready-built double storey house known as Kothi No. 509-B, Aggar Nagar, Ludhiana on 15-9-1993, for the total declared sale consideration of Rs. 14 lacs vide purchase deed dated 23-2-1994. The assessing officer referred the valuation of the said property to the valuation officer who valued the property at Rs. 22,97,200. The assessing officer treated the difference of Rs. 8,97,200 as investment from undisclosed sources and made the addition under section 69 of the Income Tax Act.
2.2. The assessee carried the matter to the Commissioner (Appeals) and submitted that the amount of consideration related to the property purchased for Rs. 14 lacs was evidenced by the registered sale deed and the provisions of section 69 had been wrongly applied because there was absolutely no provision in the Income Tax Act for making any addition to the assessee's income simply because the fair market value of the property was more than the consideration mentioned in the deed. It was pointed out that section 52 of the Income Tax Act had since been deleted, but even when section 62 was in operation, the Supreme Court had made it clear in the case of K.P. Verghese v. Income Tax Officer & Anr. (1981) 131 ITR 597 (SC) that section 52 could not be invoked simply because the fair market value of the property happened to be more than as mentioned in the deed and after applying section 52, the department was required to prove that the actual consideration was more than that mentioned in the deed. It was further stated that there was no material or evidence to show that the assessee had spent something more than the amount shown in the deed and the report given by the DVO was not only erroneous but also merely based upon estimate and such estimated value could not take the place of actual consideration supported by the documentary evidence. It was further stated that the value estimated by the DVO at Rs. 22,97,200 consisted of :
Rs.
Value of structure 16,18,815 Value of land 6,78,375 It was explained that the value of the structure which was constructed in the assessment year 1990-91 was determined by the DVO at Rs. 10,61,400, but the cost was accepted by the assessing officer at Rs. 9,90,323 and with the passage of time, the value of superstructure depreciated year after year. Therefore, it was very strange that the value of the super-structure which had depreciated till the date of transaction had been valued at Rs. 16,18,815 against the original cost of Rs. 9,90,323.
Regarding the valuation of the land, it was submitted that the value had been estimated at Rs. 1,350 per sq. yard as against Rs. 200 per sq. yard fixed by the Dy. CIT, Ludhiana, for the relevant period. Therefore, there was no justification in estimating the value at Rs. 6,78,375. The reliance was placed on the following case laws :
(1) Dilshad Trading Co. (P) Ltd. v. Income Tax Officer (1994) 49 ITD 348 (Bom) (2) CIT v. Partapsingh Amrosingh Rajendrasingh (1993) 200 ITR 788 (Raj) (3) Income Tax Officer v. WD. Estate (P) Ltd. (1993) 45 ITD 473 (Bom) (4) Income Tax Officer v. Tek Chand (1995) 52 ITD 197 (JP) 2.3. The learned Commissioner (Appeals) after considering the submissions of the assessee observed that there was no provision under the law as per which the actual consideration paid vide registration deed could be enhanced on the basis of a report by the Valuation Officer. He further relied on the decision of Hon'ble Supreme Court in the case of CIT & Anr. v. George Henderson & Co. Ltd. (1967) 66 ITR 622 (SC) wherein it has been held that "the actual consideration did not mean that market value of the property, but the price bargained by the two parties entering into the contract." He further observed that section 69 pre-supposes an investment which had been made but not recorded in the books of account and such an investment can be deemed as the income of the assessee only when he offered no explanation about the nature and source of the investment or the explanation offered by him was not satisfactory. According to him, in the present case, the assessing officer had presumed an investment merely because the valuation officer gave a different figure for the actual consideration paid by the assessee on the purchase of the property and there was no provision under the law to justify such an action. He further stated that section 69 of the Act is a deeming provision and for considering a deemed income, the investment which has to be the basis for this purpose cannot also be deemed to have been made, and it must be actual. According to him since the decision of the assessing officer was just conjectural, the same could not be upheld. He, therefore, deleted the addition of Rs. 8,97,200.
2.4. Before us, the learned Departmental Representative strongly supported the order of the assessing officer and vehemently argued that the assessing officer was justified in referring the case to the Valuation Officer to estimate the correct price of the property purchased by the assessee and since the value determined by the DVO was higher than that disclosed by the assessee, therefore, the assessing officer was justified in making the addition, The reliance was placed on the following case laws.
(1) Income Tax Officer v. Smt. Gita Rani Banik (2001) 251 ITR 712 (Gau) (2) Daulatram & Ors. v. Income Tax Officer & Anr (1990) 181 ITR 119 (AP) (3) C.T. Laxmandas vs, Asstt. CIT & Anr. (1994) 208 ITR 859 (Md) On the basis of the aforesaid case laws, the learned departmental Representative vehemently argued that the assessing officer was justified in referring the case under section 55A of the Act to the Valuation Officer to determine the value of the property purchased by theassessee.
2.5. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the learned Commissioner (Appeals) and submitted that the property in question purchased was a built house and the property was not constructed by the assessee. He further stated that it was not a case of wealth-tax or of capital gain, so the assessing officer was not justified in referring the case to the Valuation Officer under section 65A of the Income Tax Act. He further submitted that there was nothing on record to show that more payment has been made by the assessee than the amount shown in the purchase deed and declared by the assessee. It was vehemently argued that the difference on account of fair market value could not be added when nothing was on record to suggest that more amount had been paid and accordingly, it was submitted that the provisions of section 69 of the Act were also not applicable to the facts of the present case since the assessing officer could not prove that the excess amount was paid than mentioned by the assessee. He further submitted that the property which had been purchased by the assessee was constructed by the seller in the year 1990 and the value of the same was taken by the assessing officer at Rs. 9,90,323 and it is the common knowledge the while value of the land may increase with the passage of time, however, the value of the super-structure depreciated year after year. Therefore, there was no justification in estimating the cost of the building at Rs. 16,18,815 by the DVO as against the original cost of Rs. 9,90,323 accepted by the department in the assessment year 1990-91.
As regards to the valuation of the land, the learned counsel for the assessee submitted that the rato had been taken by the DVO at Rs. 1,350 per sq. yard as against the rate fixed by the Dy. CIT, Ludhiana, at Rs. 200 per sq. yard for the relevant period. So there was no base with the DVO in estimating the value of the land at Rs. 6,78,685. He, therefore, prayed that the order of the Commissioner (Appeals) should not be disturbed on this issue. He also placed reliance on the following case laws :
(1) Dr. Arjun D. Bharad v. Income Tax Officer (2002) 83 ITD 774 (Nag) (2) M. Selvaraj v. Income Tax Officer (2002) 258 ITR 82 (Chennai)(AT) The learned counsel for the assessee has also placed his reliance on the case laws referred to by the learned Commissioner (Appeals) during the first appellate proceedings.
2.6. We. have heard both the parties at length and carefully gone through the material available on the record. In the instant case, it is not in dispute that the property in question purchased by the assessee was a built house and not constructed by the assessee. It is also true that the property was constructed by the seller in a period related to the assessment year 1990-91 and the value of the said property was accepted by the department at Rs. 9,90,323. Admittedly, the assessee purchased the property on 15-5-1993, and the assessing officer had not brought out any material on record to substantiate that any modification or addition had been made by the seller in the said property during the period ranging from 1990-91 to 16-5-1993. In that view of the matter, the assessing officer was not justified in taking the value of the building at Rs. 16,18,815 as determined by the DVO. It is further noticed that the value estimated by the DVO and accepted by the assessing officer at Rs. 22,97,200 also included the value of land at Rs. 6,78,386 as mentioned hereinabove. While estimating the value of land, the DVO has taken the rate at Rs. 1350 per sq. yard as against Rs. 200 per sq. yard fixed by the Dy. CIT, Ludhiana. The Valuation Officer has not given any basis for adopting the value of the land @ Rs. 1350 per sq. yard. In that view of the matter, it seems that the value adopted by the DVO and taken into consideration by the assessing officer was only on estimate basis. On the contrary, the assessee produced evidence in the shape of purchase deed in support of its contention that the property was purchased at Rs. 14 lacs, the assessing officer could not bring any material on record that the assessee made the payments more than Rs. 14 lacs to the seller. It is also true that the assessing officer had not examined the seller to prove that the assessee made the payment more than Rs. 14 lacs as it was declared in the purchase deed. It is true that the onus was on the assessee to prove the investment to the extent of Rs. 14 lacs. However, before applying section 69, the onus was on the department to prove that the assessee had actually invested any amount over and above Rs. 14 lacs but no material had been brought on record by the assessing officer to suggest that the assessee invested any amount over and above Rs. 14 lacs to purchase the property in question. Therefore, the action of the assessing officer was based merely on estimation which is not tenable in the eyes of law. In that view of the matter, we do not see any infirmity in the order of the learned Commissioner (Appeals) on this issue.
3. The next issue raised by the department vide ground No. 2 rebates to the deletion of addition of Rs. 2,21,000 on account of under-statement of sale consideration of property.
3.1. The assessing officer observed that the assessee had sold a house for Rs. 9,50,000 and claimed exemption of gross capital gain of Rs. 8,28,000 under section 54 of the Income Tax Act. While claiming the exemption of capital gain, notional value of the house as on 1-4-1981 was taken at Rs. 50,000 instead of Rs. 32,786 which was the value of the property acquired in August, 1976. The assessing officer referred the case to the DVO in order to arrive at the fair market value of the property, who determined the same at Rs. 11,71,000. The assessing officer considered the difference of Rs. 2,21,000 as income of the assessee from undisclosed sources and made the addition under section 69 of the Income Tax Act.
3.2 The learned Commissioner (Appeals) deleted the addition by observing that no receipt can be taxed merely because the DVO held the view that the consideration received while selling the property would have been more than that shown in the registration deed. According to him, only the real income which has been received or accrued or arisen or was deemed to be received or accrued or arisen could only be taxed. Accordingly, the addition of Rs. 2,21,000 was deleted.
3.3. Before us, the learned Departmental Representative supported the order of the assessing officer.
3.4. In his rival submissions, the learned counsel for the assessee submitted that the amount of Rs. 9,50,000 actually received by the assessee was duly evidenced by registered sale deed and since there was a -sale of the property and not the investment in the property, the provisions of section 69 of the Act were not applicable. Therefore, the assessing officer was not justified in making the addition under section 69 of the Income Tax Act. It was further submitted that there was no evidence on record with the DVO while adopting the value of the property at Rs. 11,71,000 instead of Rs. 9,50,000 disclosed by the assessee. Accordingly, it was submitted that the learned Commissioner (Appeals) rightly deleted the addition made by the assessing officer.
3.5. We have heard the rival submissions and also gone through the material available on the record. It is true that the addition had been made by the assessing officer by invoking the provisions of section 69 of the Income Tax Act. The provisions contained in section 69 of the Income Tax Act relate to the unexplained investment, and read as under :
"Sec. 69 : Unexplained investments-Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year."
From the language of section 69, it would be -clear that it relates to the investments which are not recorded in the books of account, if any, maintained by the assessee and he offers no explanation about the nature and source of the investments or explanation offered by him is not in the opinion of the assessing officer satisfactory, the value of the investaients may be deemed to be the income of the assessee. In the instant case, the assessee had not made any investment rather property has been sold. Furthermore, it is noticed that the assessee claimed exemption under section 54 of the Income Tax Act since whole of the sale proceeds were invested in the purchase of built house within a period of one year before the date of sale of the property. In the present case, the assessee sold the residential house No. B-II/1693, G.P. Road, New Power House, Ludhiana on 30-9-1993, for a sale consideration of Rs. 9,50,000 and purchased another house on 16-5-1993. In that view of the matter, there was no taxable long-term capital gain since entire sale consideration has been utilised by the assessee for purchasing the residential house.
We also confirm this view of the Commissioner (Appeals) that the provisions of section 69 are not applicable to the facts of the present case, therefore, the assessing officer was not justified in making the impugned addition and the learned Commissioner (Appeals) rightly deleted the same.
4. The last issue relates to the deletion of addition of Rs. 11,000 on account of low household withdrawals.
4.1. The assessing officer during the assessment proceedings noticed that the assessee had shown total 'withdrawals of Rs. 85,000 for household expenses while in the preceding year, the withdrawal shown was at Rs. 87,000. According to him, there was no change in the constitution of the family of the assessee and if approved cost inflation index over the earlier years had to be applied than the assessee ought to have shown the withdrawal at Rs. 96,193 - (Rs. 87,000 x 244/223) as against Rs. 85,000. He, therefore, estimated the household expenses at Rs. 96, 000 and made the addition of Rs. 11, 000.
4.2. The learned Commissioner (Appeals) deleted the addition by stating that the withdrawals shown were quite adequate and there was absolutely no material to come to the conclusion that there was more expenditure incurred by the assessee than the amount disclosed. Accordingly, the addition of Rs. 11,000 was also deleted.
4.3. We have heard both the parties on this issue. In the instant case, it appears that the assessing officer made the addition merely on the basis of surmises and conjectures. In fact, he has not brought out any material on record that the assessee spent more than what has been disclosed. The addition had been made by the assessing officer on the basis of a mere estimate which is not tenable in the eyes of law. It is true that in the preceding year, the assessee had shown household expenses at Rs. 87,000 in comparison to Rs. 85,000 for the year under consideration and, therefore, the difference was petty, i.e., Rs. 2,000 only. The assessing officer has not pointed out any item of expenses which had been suppressed by the assessee. Considering the totality of the facts, we are of the view that the learned Commissioner (Appeals) rightly deleted the addition made by the assessing officer which had been made without bringing any material on record. In that view of the matter, we do not see any valid ground to interfere with the findings of the learned Commissioner (Appeals) on this issue also.
5. In the result, the appeal of the department is dismissed.