Income Tax Appellate Tribunal - Delhi
Sanjay Chawla vs Income Tax Officer on 14 November, 2003
Equivalent citations: [2004]89ITD586(DELHI), (2004)82TTJ(DELHI)407
ORDER
T.N. Chopra, A.M.
1. These two appeals filed by the assessee, are directed against separate orders of the learned CIT(A), dt. 27th Jan., 1999 and dt. 18th March, 2002, for asst. yr. 1995-96. Vide the first order dt. 27th Jan., 1999, learned CIT(A) set aside the assessment dt. 17th March, 1998 with the directions to the AO for further verification of facts and allowing proper opportunity to the assessee. The second appellate order dt. 18th March, 2002, has been passed by the CIT(A) in the second round of litigation disposing of assessee's appeal against the fresh assessment dt. 27th Feb., 2001 passed in pursuance of the first appellate order. Since facts and issues are substantially similar, these appeals have been heard together and are disposed of by a single order.
2. At the outset, relevant facts may be briefly indicated. For asst. yr. 1995-96, the assessee filed the return of income on 30th June, 1995, showing total income of Rs. 1,00,200 including, inter alia, commission income of Rs. 18,370 and income from share trading Rs. 52,250. This income from commission and share trading aggregating to Rs. 70,260 has been shown under the head income from other sources. AO selected the case under random sampling for scrutiny and issued statutory notices under Sections 143(2) and 143(2)(1). With regard to sale-purchase of shares as well as commission income, AO while making the assessment estimated the income at Rs. 90,000 as against Rs. 70,620 shown by the assessee. Further the AO made addition on account of understatement of purchase consideration in respect of two properties, situated at Jagrati Enclave and Patparganj Industrial Area aggregating to Rs. 11,86,897. These two properties were purchased by the assessee jointly with other co-owners as under:
(i) Plot No. 225, Jagriti Enclave measuring 320 sq. yds. purchased for Rs. 5,60,000 along with three other co-owners, namely, S/Shri Ajay Chawla, Rajiv Chawla and Raj Kumar Chawla. The assessee has 1/4th share in the property and contributed a sum of Rs. 1,40,000 towards his 1/4th share in the purchase consideration.
(ii) Plot No. 2001 measuring 450 sq. yds. situated in Functional Industrial Estate Patparganj, Delhi, purchased for a sum of Rs. 2,80,000 on 22nd March, 1995. The assessee has one-half share in the property and contributed a sum of Rs. 1,40,000 towards his share of the purchase consideration.
Since the AO felt that the purchase consideration mentioned in the conveyance deeds were understated, he referred the matter to the valuation officer for determination of the market value of the two properties as on the respective dates of purchase. The valuation officer determined the market value of the properties vide separate reports dt. 24th Feb., 1998 as under :
S. No. Name of the Property Letter No. & date of the Valuation Cell Valuation as determined by the AV Officer
1.
Plot measuring 450 sq. yards situated in the layout plan of Functional Industrial Estate, Patparganj, Delhi-92 AVO-I/I.T 5/97-98, dt. 24th Feb., 1998 Valuation as on 21st/22nd March, 1995 at Rs. 16,59,150
2. Plot measuring 320 sq. yards situated in the layout plan of Jagriti nagar, CHBS Ltd, Colony Named as Jagriti Enclave, Delhi-92 AVO-I/I.T. 4/97-98/216, dt. 24th Feb., 1998 Valuation as on 21st/22nd March, 1995 at Rs. 25,49,300 The AO held that the difference in the declared consideration as well as the fair market value determined by the valuation officer would be treated as unexplained investment in the purchase of the aforesaid properties and accordingly worked out the addition on the basis of valuation officer's report as under :
(i) Jagriti Enclave's Property Rs. 4,97,322
(ii) Patparganj Indl. Area's Property Rs. 6,89,875 Total Rs. 1,86,897 Thus, AO made an addition of Rs. 11,86,897 on account of income from undisclosed sources. Assessment was made on total income of Rs. 13,12,530 vide order dt. 17th March, 1998.
3. Aggrieved with the above assessment order, the assessee preferred appeal before the learned CIT(A). Before the CIT(A), the assessee made two-fold submission regarding unexplained investment in the properties :
(i) The assessee furnished comparable sales instances in support of his contention that the consideration recorded in the sale deeds of the two properties, namely, Jagriti Enclave and Patparganj Industrial Area were fair and reasonable; and
(ii) Relying upon the decisions of the Supreme Court in the case of K.P. Varghese and Ors. v. ITO (1981) 131 ITR 597 (SC) and CIT v. Shivakami Co. (P) Ltd. (1986) 159 ITR 71 (SC), it was argued that onus of proving understatement of sale consideration is on the Revenue and such onus is not discharged merely on the basis of the valuation reports based on subjective opinion of the valuer.
CIT(A) observed that the addition has been made without proper verification of the facts by the AO. The matter of the addition on account of unexplained investment was accordingly restored to the AO for further verification and allowing opportunity to the assessee. Similarly, with regard to estimation of income from commission as well as share trading, CIT(A) restored the issue to the AO for allowing further opportunity. With regard to the plea of the assessee against making scrutiny assessment in violation of Board's instructions, CIT(A) directed that the matter would be considered by the AO while making fresh assessment.
4. ITA No. 1392/99 before us relates to the first round of litigation and following grounds have been raised by the assessee:
"1. Learned CIT(A) is not justified in law and facts and circumstances of the case in setting aside assessment which was non est from the beginning; the selection of the case under scrutiny was contrary to the direction issued by CBDT by instruction number 1939 dt. 17th May, 1996. The action of the AO which was bad from the inception cannot be held good in the appellate proceeding.
2. Learned CIT(A) is not justified in law and facts and circumstances of the case in setting aside the issue of addition of Rs. 4,97,322.00 made on account of alleged undisclosed investment in the property situated at Jagriti Enclave, on the basis of estimation made by the valuation officer in view of legal pronouncement made by Hon'ble Supreme Court in case of K.P. Varghese v. ITO an Anr. (supra).
3. Learned CIT(A) is not justified in law and facts and circumstances of the case in setting aside the issue of addition of Rs. 6,89,575.00 made on account of; alleged undisclosed investment in the property situated at Patparganj Industrial Area on the basis of estimation made by the valuation officer in view of legal pronouncement made by Hon'ble Supreme Court in case of K.P. Varghese v. ITO and Anr. (supra).
4. Learned CIT(A) is not justified in law and facts and circumstances of the case in setting aside the issue of addition in share trading income amounting to Rs. 17,750.00 under the circumstances, when the payment was received by assessee through account payee cheque.
5. Learned CIT(A) is not justified in law and facts and circumstances of the case in setting aside the issue of addition of Rs. 1,63,0.00 in commission income."
5. Shri K. Sampath, learned counsel for the assessee, challenging the impugned appellate order, focussed his arguments on ground No. 1 and vehemently urged that since the impugned assessment is contrary to CBDT's Instruction No. 1939 dt. 17th May, 1996, the assessment is ab initio void and should have been cancelled by the learned CIT(A). He devoted considerable time and energy in his valiant effort to persuade us to hold that the impugned assessment, being violative of aforesaid Board's circular, is bad in law.
6. Learned counsel filed a detailed compilation of papers including, inter alia Board's Instruction No. 1939 dt. 17th May, 1996 in respect of guidelines for selection of cases for scrutiny during the financial year 1996-97 appearing at pp. 12 and 13. Vide the said instructions, the CBDT has divided the income-tax cases into three broad classes A, B and C. Class A comprises categories of cases for compulsory scrutiny like search cases, survey cases, set aside cases, etc. Class B relates to sample scrutiny cases and the procedure for selection of cases on random sampling basis has been laid down in the Board's instruction. The relevant portion of the instruction under class B of cases read as under:
"After selection of cases for compulsory scrutiny under class A and after excluding exceptions provided below, the officer will select cases for sample scrutiny out of the remaining cases in the following manner:
(i) 50 per cent of the returns with income or loss of Rs. 10 lakhs and above;
(ii) 33 per cent of the returns with income or loss of Rs. 2 lakhs and above but below Rs. 10 lakhs (in case of company returns 'Rs. 2 lakhs' may be read as 'Rs. 50,000'); and
(iii) 3 per cent of the returns with income or loss of less than Rs. 2 lakhs (in case of company returns 'Rs. 2 lakhs, may be read as 'Rs. 50,000')."
The instructions further provide that certain categories of cases falling in class B shall not be picked up for scrutiny. One of such category excluded from the sample, relevant for our purposes, as indicated in the Board's instruction read as under:
"i. All cases of individual residents with returned income of Rs. 1.20 lakhs or less where such income does not include income from business or profession and also there is no b/f and c/f loss (other than c/f loss from house property)."
7. Class C relates to information based scrutiny cases where information has been received from various Departments like CIB Wing of the IT Department, Sales-tax Department, Customs and Central Excise, any other AO, etc.
8. Apart from the aforesaid three categories, there is a fourth category also providing for limited scrutiny of cases not covered in classes A, B and C, above assessed with special ranges and company cases.
9. The procedure for random sampling of cases for scrutiny to be followed by the AO's has also been indicated with regard to three special categories (i), (ii) and
(iii) of class B cases. Learned counsel emphasised that since, in the case of assessee, returned income is less than Rs. 1.20 lakhs and further that income does not include business income, the case would not fall within the random sample as envisaged in special category (iii) of class B as indicated in the aforesaid circular. On this basis, learned counsel assailed the impugned legality of the scrutiny assessment and argued that since case has been selected for scrutiny in violation of Board's circular, the assessment is liable to be cancelled and there was no justification for the learned CIT(A) to set aside the assessment to be made afresh by the AO. In support of his contentions, learned counsel placed reliance on the following decisions:
(i) Navneet Lal Jhaveri v. K.K. Sen (1965) 56 ITR 198 (SC)
(ii) Ellerman Lines Ltd. v. CIT (1971) 82 ITR 913 (SC).
(iii) K.P. Varghese v. ITO (supra)
(iv) Collector of Central Excise v. Dhiren Chemical Industries (2002) 254 ITR 554 (SC)
10. Learned Departmental Representative on the other hand, strenuously urged that the case has been selected on random sampling basis on scrutiny in accordance with the guidelines issued by the CBDT from time to time and there is no violation of instructions or circular by the AO. Learned Departmental Representative furnished during the hearing bunch of instructions issued by the Chief Commissioner, Delhi, Chairman-CBDT, on the subject and stated that as per these instructions, the AO is entitled to select 3 per cent of the cases on random sampling basis where the return of income filed shows income less than Rs. 2 lakhs. Learned Departmental Representative further submitted that in the case of the assessee income from commission as well as profit from share trading disclosed in the return clearly partakes of the character of business income and, therefore, there was absolutely no restriction in any of the instructions or circular issued by the Departmental authorities for excluding such cases from the random sample basket. Learned Departmental Representative further raised an alternative argument to the effect that even if there is any perceived deviation from the guidelines issued by the CBDT, this would not be a ground for holding that notice under Section 143(2) issued by the AO in legitimate and proper exercise of his powers under the IT Act is ab initio illegal and void. In support of his contentions, reliance is placed on the following decisions :
(i) State Bank of Travancore v. CIT (1986) 158 ITR 102 (SC).
(ii) Janta Metal Works v. ITO (1990) 186 ITR 458 (All).
(iii) Kerala Financial Corporation v. CIT (1994) 210 ITR 129 (SC).
(iv) Himachal Pradesh State Forest Corporation Ltd. v. Dy. CIT (1998) 231 ITR 556 (HP).
(v) CIT v. ITAT and Anr. (1998) 232 ITR 207 (Del).
(vi) CIT v. Anjum M.H. Ghaswala and Ors. (2001) 252 ITR 1 (SC).
(vii) CIT v. Blaze Advertising (P) Ltd. (2002) 255 ITR 460 (Del).
(viii) Shiva Kant Jha v. Union of India and Ors. (2002) 256 ITR 563 (Del).
Learned Departmental Representative placing heavy reliance on the Allahabad High Court decision in Janta Metal Works cited above, strongly urged that the decision is a direct authority in support of his contention that administrative instructions issued by the Chairman, CBDT cannot deprive AO's all powers vested in them by the IT statute.
11. We have carefully considered the rival contentions and gone through the instructions/circulars etc. issued by the CBDT which have been placed before us by the parties. The main stay of the assessee's case against validity of the impugned assessment is based on the document filed by the learned counsel at pp. 12 and 13 of the paper book which, according to the learned counsel, is the copy of Board's Instruction No. 1939 dt. 17th May, 1996 which has already been referred by us hereinbefore. The Bench called upon the learned counsel to file an authentic copy of the Board's instruction being relied upon so that the matter could be examined. He, however, insisted that the document placed in the paper book is an authentic extract from the Board's Instruction No. 1939 dt. 17th May, 1996. Be that as it may, we find that the instruction being cited by the learned counsel contained the following para appearing at p. 2 :
"These guidelines are applicable in respect of returns of income filed on or after 1st April, 1996 except in respect of cases mentioned at IV above."
Since the assessee has filed the return on 30th June, 1995, i.e., prior to 1st April, 1996, it is amply clear that the instruction being cited by the learned counsel would not be applicable in the case of the assessee. Thus, the entire edifice of assessee's case challenging the legality of the impugned assessment so assiduously built up on the basis of a document, which is not relevant, crumbles to the ground.
12. Apart from the above, we find that the case of the assessee is clearly covered under the guidelines laid down in the circular for selection of scrutiny case on random sampling basis from class B of cases. The income of the assessee is below Rs. 2 lakhs and, therefore, it falls under class B and 3 per cent of such cases are liable to be selected on random sampling basis for scrutiny. The action of the AO, therefore, for selecting the case for scrutiny cannot possibly be faulted with. Regarding the contention of the learned counsel that the assessee's case falls in the excluded category since income returned is below Rs. 1.20 lakhs which does not include business income, we are not inclined to accept the submission. A bare perusal of the return of income filed by the assessee would indicate that the assessee has shown income from commission as well as share trading aggregating to Rs. 70,260. This income in clearly of the character of business income. The mere fact that the assessee claims this income as non-business income would not by itself clinch the issue is favour of the assessee. While looking into the instructions or circular issued by an executive authority laying down guidelines for the field officers, we have to keep in mind the object and purpose of such instructions and the real intent underlying the guidelines issued by the executive authority. Learned representatives on both sides advanced detailed arguments before us on the issue of binding nature of the instructions issued by the CBDT. However, we feel that it would not be necessary to adjudicate this larger question in the facts of the instant case before us since the selection of the present case for scrutiny by the AO on random sampling basis is, in our opinion, in accordance with the guidelines issued by the CBDT. As we have already pointed out, the learned Departmental Representative has filed before us copies of the instructions issued by the Board laying down guidelines for selection of cases for scrutiny by the field officers. Instruction No. 1917 dt. 3rd June, 1994 pertains to selection of cases during the financial year 1994-95. For the next financial year Board has issued further instructions vide letter dt. 9th March, 1995. Instruction No. 1942 dt. 11th July, 1997 relates to the financial year 1997-98. In these instructions, except for minor variations, guidelines indicated by the CBDT are substantially similar. With regard to sample scrutiny cases, the Board has advised the field formation to exclude, inter alia, non-business cases with income below Rs. 1.20 lakhs. The object and purpose in laying down the guideline is to exclude cases from the pale of scrutiny where potential for tax evasion is minimal. However, the interpretation sought to be placed on such instruction by the assessee is, in our opinion, entirely misconceived. Assessee has done trading in shares and has also earned income from business of commission. Merely because the assessee has shown such income in the return under the head 'other sources' would not by itself disentitle the AO to include the case in the random basket for sample selection of 3 per cent. Even, in the matter of interpretation of statutes literal perfectionists are fast losing ground to intention seekers and Courts have increasingly opted for purposive approach as a cardinal principle of interpretation of statutes. Justice Learned Hand observed (as quoted by Allahabad High Court in CIT v. Nitro Phosphetic Fertiliser (1988) 174 ITR 269 (All)(FB) (at p. 285 of the reports) that statutes should be construed not as theorems of Euclid but with imagination of purpose behind them. This interpretative shift towards purposive approach arises from the concern and anxiety of the judicial authorities that the purpose of the law is not defeated because the entire legislative process is influenced by considerations of justice and reason which constitute general legislative intent in every piece of legislation. If legislative intention is the primary guiding factor of interpretation of statutes, this would be all the more so when we are considering the instruction issued by the executive authority. Even if such instructions are to be construed as falling under the ambit of Section 119 of the IT Act, such instructions would necessarily be construed so as to harmonise with the spirit and letter of the law as well as the object and purpose for which the instruction has been issued by the CBDT. For these reasons, we have no hesitation in holding that the AO has selected the case for sample scrutiny in conformity with the guidelines issued by the CBDT and proceeded to frame the scrutiny assessment in proper exercise of the powers conferred under Sections 143(2) and 143(3). The objection of the assessee based on Board's instruction is, therefore, without substance and is dismissed. Ground No. 1 is, therefore, dismissed.
13. Ground Nos. 2 to 5 are directed against action of the CIT(A) in setting aside to the file of the AO for fresh adjudication the following four additions:
(i) Rs. 4,97,322 made on account of investment in the Jagriti Enclave property;
(ii) Rs. 6,89,575 made on account of investment in Patparganj industrial estate property;
(iii) Rs. 17,750 on account of addition in the share trading account; and (iv) Rs. 1,630 addition in the commission account.
14. CIT(A) set aside the aforementioned additions with the direction that these issues may be considered afresh after further verification of facts and allowing suitable opportunity to the assessee. Though the learned counsel reiterated the aforesaid grounds yet no arguments with regard to these grounds were advanced before us by the learned representatives on both sides. On perusal of the impugned order of the learned CIT(A), we feel that no interference on our part is called for with regard to these grounds and, therefore, ground Nos. 2 to 5 are dismissed.
15. In the result, the appeal of the assessee is dismissed.
16. Now we take up assessee's appeal-ITA No. 3647/2002.
17. The main dispute arising in this appeal is against the addition of Rs. 11,86,897 made by the AO under the head addition on account of income from commission and share trading based on the valuation made by the valuation cell.
18. This assessment has been made, as we have already pointed out above, in pursuance of the appellate order of the CIT(A) dt. 22nd Jan., 1999. In the earlier assessment order, AO had, inter alia, made an addition of Rs. 11,86,897 under the head 'income from undisclosed sources' being undisclosed investment in the purchase of the two immovable properties, namely, Jagriti Enclave and Patparganj Industrial Estate, Delhi. However, while framing de novo assessment, AO adopted the figure of unexplained investment in the two properties being Rs. 11,86,897 as undisclosed income earned by the assessee from commission and share trading. Learned representatives on both sides were agreed that the core issue involved in the present appeal is the same as in the earlier appeal being the unexplained investment in the two immovable properties made by the assessee amounting to Rs. 11,86,897.
19. Regarding the purchase of the two properties, we have already referred to the same while considering assessee's appeal in ITA No. 1392/99. The case of the Revenue is that the purchase consideration paid by the assessee with regard to purchase of the two properties, namely, Jagriti enclave and Patparganj industrial estate are more than the consideration stated in the respective conveyance deeds in respect of such transfer. The Revenue has placed reliance on the valuation report of the valuation officer in support of the conclusion of understatement of purchase consideration. Learned Departmental Representative filed a paper book containing the valuation report of the Jagriti Enclave property dt. 24th Feb., 1998 as prepared by the Asstt. valuation officer, IT Department. In this report, the market value of the Plot No. 225, Jagriti Enclave, Delhi purchased by the assessee on 1st Feb., 1995 has been determined at Rs. 25,49,300. In support of the valuation, the valuation officer has placed reliance on two sales instances in Sawastaya Vihar as well as Preet Vihar Colonies. Comparative particulars of assessee's transaction as well as the sales instances cited by the DVO are indicated in the following chart :
Sh. Sanjay Chawla Instances cited by DVO Valued by DVO for Assesses 's Property Date of Purchase 1-2-1995 23-12-1994 20-8-1992
--
Property Address Plot No. 225 Jagriti Enclave, Delhi A-27; Swasth Vihar, Delhi Delhi G-1, Preet Vihar, Delhi Plot No. 225 Jagriti Enclave, Delhi.
Area 320 Sq. yds.
326.09 Sqm 296.82 Sqm.
320 Sq. yd.
Consideration Rs. 5,60,000 Rs. 53,61,000 Rs. 26,82,000 Rs. 25,49,300 Rate per Sqm.
Rs. 1,750 Rs. 16,440 Rs. 9,036 Rs. 7,966
20. Regarding the second property purchased by the assessee, learned Departmental Representative has placed reliance on the valuation report of the DVO dt. 24th Feb., 1998; copy of the report has, however, not been filed in the paper book. As per the particulars furnished during the course of hearing by the learned counsel, the comparative chart in respect of assessee's purchase transaction and the sale instances relied upon by the DVO as reproduced hereunder :
Sh. Sanjay Chawla Instances cited by DVO Valued by DVO for Assesses 's Property Date of Purchase Address of Property 21-3-1995 Indl. Plot NO. 201 Block No. 3 Functional Indl. Estate, Patparganj, Delhi Date not given Indl. Area Jhilmil Colony, Delhi Date not given Kirti Nagar, Delhi 21-3-1995 -Indl. Plot No. 201 Block No. 3 Functional Indl. Estate Patparganj, Delhi Area 450 Sqm Not given Not given 450 Sqm.
Consideration Rs. 2,80,000 Not given Not given Rs. 16,59,150 Rate per Sqm.
Rs. 622 Rs. 8,340 Rs. 12,500 Rs. 3,687 The DVO has worked out the valuation of the property at Rs. 16,59,150 as against Rs. 2,80,000 declared by the assessee. According to the learned Departmental Representative, valuation report of the DVO is binding upon the AO and provides rational basis for the conclusion that purchase consideration paid by the assessee in respect of purchase of the two properties is more than the consideration declared before the IT authorities.
21. Before the AO, the assessee has relied upon sales instances of certain plots in support of his contention that consideration paid by the assessee is fair and reasonable and accords with the prevalent market value of the properties. The sales instances cited by the assessee are duly mentioned by the AO at p. 5 of the impugned assessment order. With regard to the Jagriti enclave property, the instances cited by the assessee, as indicated in the assessment order are as under :
Sh. Sanjay Chawla Instances cited by Assesses Date of Purchase 1-2-1995 23-2-1998 15-1-1998 23-1-1996 Property Address Plot No. 225 Jagriti Enclave Delhi Plot No. 19, Block A, Priyadarshini Vihar, Delhi-92 Plot No. 6, Block B, Ashok Niketan, Delhi-02 Kothi No. 28, Dayanand Vihar, Delhi Area 320 Sq. yds.
360 Sq. yds.
282.986 Sq. yds.
208.33 Sq. yds.
Consideration Rs. 5,60,000 Rs. 3,55,000 Rs. 3,50,000 Rs. 3,50,000 Rate per Sqm.
Rs. 1,750 Rs. 986 Rs. 1,296 Rs. 2,160 Regarding the second property cited in Patparganj industrial estate, the assessee has cited the following comparable instances:
Sh. Sanjay Chawla Other Instances cited by Assessee Date of Purchase 21-3-1995 8-8-1991 25-2-1992 Address of Property Indl. Plot No. 201 Block No. 3 Functional Indl. Estate, Patparganj, Delhi Indl. Plot No. 119 Block No. 2 Functional Indl. Estate, Patparganj, Delhi Indl. Plot No. 359 Functional Indl. Estate, Patparganj, Delhi Area 450 Sqm.
450 Sqm.
450 Sqm.
Consideration Rs. 2,80,000 Rs. 3,00,000 Rs. 2,70,000 Rate per Sqm.
Rs. 622 Rs. 666 Rs. 600
22. In the impugned assessment order, the AO has rejected these sales instances cited by the assessee with the observations, "The 'Valuation Cell' while arriving at the valuation of these two properties took all issues and other related issues into consideration. I feel no need to change the valuation arrived at by the experts in this field and as submitted by Department's 'valuation cell'."
23. In appeal, the CIT(A) has upheld the impugned addition.
24. Shri K. Sampath, learned counsel, assailing the impugned addition strongly urged that the onus to prove that the sale consideration paid by the assessee in respect of the two properties exceeded the value as declared in the conveyance deeds of the two properties squarely lay upon the Revenue. According to him, the Revenue was under an obligation to discharge the onus that there was material to show that the purchase consideration had been understated or the assessee had paid anything directly or indirectly over and above the declared value. According to the learned counsel, no material has been brought on record by the Revenue to establish payment of any extra consideration by the assessee. Shri Sampath argued that the valuation reports, which is the sheet anchor of the Department's case, are highly unreliable inasmuch as comparable sales instances relied upon by the valuer do not bear any semblance of similarity with the vital characteristics of the properties purchased by the assessee like location, situation, development, potential, etc. It is further submitted that the DVO has relied upon sales instances in Jhilmil colony and Kirti Nagar for ascertaining the market value of the plot purchased by the assessee in the Patparganj Industrial Estate. As against this, the assessee has cited comparable instances of the same locality, i.e., Patparganj Industrial Estate which support the purchase consideration paid by the assessee in respect of this property. Similarly with regard to the plot purchased by the assessee in Jagriti enclave colony, learned counsel submitted that DVO has cited sales instances in two colonies, namely, Swastaya Vihar and Preet Vihar which have much better location and are nearer to the centrel of the town. He submitted that Jagriti enclave is situated much farther from these colonies and "ganda'nala" located in between has to be crossed over to reach the Jagriti enclave. The sales instances, cited by the assessee before the Revenue authorities, according to the learned counsel, are comparable in respect of quality of location and situation inasmuch as these sales instances are in respect of plots in Priyadarshni Vihar, Ashok Niketan and Dayanand Vihar which are adjoining to Jagriti enclave. On these facts, learned counsel submitted that the basis adopted by the DVO for working out the market value of the plots purchased by the assessee in Jagriti enclave and Patparganj Industrial estate are totally ill-conceived and erroneous. Reliance is placed on the decision of Supreme Court in the case of Administrator General of West Bengal v. Collector, Varanasi AIR 1988 SC 943. Learned counsel referred to the principle enunciated by the apex Court observing that, "Determination of market value of a piece of land with potentialities for urban use is an intricate exercise which calls for collection of diverse economic criteria. The market value of a piece of property, for purposes of Section 23 of the Act, is stated to be the price at which the property changes hands from a willing seller to a willing, but not too anxious a buyer, dealing at arms length. The determination of market value, as one author put it, is the prediction of an economic event, viz., the price outcome of a hypothetical sale, expressed in terms of probabilities. Prices fetched for similar lands with similar advantages and potentialities under bona fide transactions of sale at or about the time of the preliminary notification are the usual, and indeed the best, evidences of market value. Other methods of valuation are resorted to if the evidence of sale of similar lands is not available."
25. Learned counsel further argued that valuation report of the DVO cannot be the sole basis for coming to the conclusion that extra consideration over and above the value stated in the conveyance deeds has been paid by the assessee. Learned counsel submitted extensive arguments in support of this proposition and cited a number of decisions of Hon'ble Supreme Court as well as various other High Courts. Synopsis of arguments was filed in this behalf indicating the judicial authorities cited in support of the basic proposition. Since this forms the central focus of assessee's case, we reproduce in extenso the note regarding the series of judicial authorities furnished by the learned counsel during the hearing before us :
"1. K.P. Verghese v. ITO and Ors. (1981) 131 ITR 597 (SC). In this case it has been held that reference between market value and consideration declared not sufficient. Assessee must be shown to have received more than what was declared or disclosed by him as consideration. Burden of proof on Department.
2. The same view has also been held in CIT v. Shivakami Co. (P) Ltd (1986) 159 ITR 71 (SC) in which it has been held that since the Tribunal had found that the consideration was not understated and there was no evidence direct or indirect to show that consideration actually received was more than what was disclosed or declared by recipient, the proviso to Section 12B(2) could not be invoked.
3. CIT v. Ms. Sushila Mittal and Ors. (LRs. of Tulsi Ram Arun) (2001) 250 ITR 531 (Del), held that since the difference between the consideration indicated by the assessee and the valuation made by the valuation officer was more than 15 per cent, the question of applicability of Section 52(2) would arise. But there was no material which would indicate any receipt over and above the consideration indicated in the document. There was no such finding in the assessment order or the appellate order passed by the AAC. Hence, Section 52(2) had no application.
4. Vorion Chemicals & Distilleries Ltd v. IAC and Ors. (1999) 104 Taxman 604 (Mad) 627, held that in the rent control proceedings and the land acquisition proceedings, to fix the value of the land in order to determine the fair rent and the compensation respectively, the parties concerned to the sale deed are to be examined by the parties who rely upon those sale deeds for determination of the value of the land. Without examining such persons, who are concerned with the document, the same cannot be relied upon or cannot be taken into consideration.
5. D.R. Chawla, WTO v. Ram Das Kilachand SLP (Civil) No. 5663 of 1980 have held that Departmental valuation report cannot be considered as an information for the purpose of the reassessment. Special leave petition filed by Department against the judgment of Bombay High Court dt. 10th Jan., 1980 in CA No. 447 of 1979, whereby the High Court dismissed in limine the Department's appeal against the judgment of a single Judge allowing the assessee's writ petition on the point whether, the WTO having completed the assessment on the basis of the Departmental valuer's report and whether the Departmental valuer's valuation report constitutes 'information' within the meaning of Section 17(1)(b) of the WT Act, 1957.
6. Baldev Krishan Kapoor v. Asstt. CIT (1999) 65 TTJ (Chd)(TM) 254 : (1999) 68 ITD 37 (Chd)(TM). In this case, it has been held that the price recorded in the sale deed is to be presumed as correct price as sale deed was duly registered and there is a presumption of the correctness in the file therein.
7. Administrator-General of West Bengal v. Collector AIR 1988 SC 943, Mehta Ravindrarai Ajitrai v. State of Gujarat AIR 1989 SC 2051, 2053 held that prices fetched for similar lands with similar advantages and potentialities under bona fide transactions of sale at or about the relevant time are the usual and indeed the best, evidences of market-value.
8. Carmichael Shikarkunj Co-operative Housing Society Ltd. v. Union of India (1991) 189 ITR 441 (Bom) 450 held that comparison is not possible with a land or property situated in a different nature of locality.
9. CIT v. Duncans Agro Industries Ltd. (1991) 192 ITR 310 (Del) held that, thus, in valuing leasehold land, taking instances of sale of freehold land of smaller areas ignoring comparable instances of sale of land in the same area is wholly erroneous".
Learned counsel further relied upon the following decisions of Delhi Benches of the Tribunal, copies of the decisions were placed on record:
(i) Dy. CIT v. Ashok Verma, Greater Kailash, New Delhi, Order dt. 1st Oct., 2002 in ITA No. 2163/97
(ii) Order of the Tribunal dt. 3rd Jan., 2001 in the case of Shri Sankata Prasad Gupta in ITA No. 1428/2002.
26. Shri R.R. Prasad, leaned Departmental Representative, on the other hand, heavily relied upon the valuation reports of the DVO and argued that on the basis of such reports, it is clear that assessee has understated the purchase consideration in the conveyance deeds and the addition on account of unexplained investment for acquisition of properties made by the AO has, therefore, been rightly sustained by the learned CIT(A). Learned Departmental Representative further submitted that the decisions cited by the learned counsel before us have already been considered by the AO while passing a detailed order and the impugned addition has rightly been confirmed by the learned CIT(A).
27. We have carefully considered the rival submissions and gone through the orders of the tax authorities below as well as paper books filed by the learned representatives of both sides before us. Various judicial pronouncements of the Hon'ble Supreme Court, Delhi High Court as well as other High Courts relied upon by the parties have also been gone through by us. The basic issue which falls for consideration before us is whether consideration actually paid by the assessee for the purchase of two properties were more than what was disclosed or declared before the IT authorities. It has been held by the Hon'ble Supreme Court in K.P. Varghese case (supra) that the onus was on the Revenue to prove that there was understatement of consideration in the sale document. K.P. Varghese case (supra) is a landmark judgment which has considerably enriched tax jurisprudence. This decision rendered in the context of Section 52(2) of the Act, 1961 enunciated the proposition that mere difference between market value and consideration declared by the assessee in the sale document was not sufficient and assessee must be shown by the Revenue by adducing evidence on record to have received more than what was declared or disclosed by him as sale consideration. Regarding the market value, Supreme Court observed at p. 615 of the report, "it is a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guess work and despite the utmost bona fides, the estimate of the fair market value is bound to vary from individual to individual." A similar view has been taken by the Supreme Court in CIT v. Shivakami Co. (P) Ltd. (supra). In Shivakami Co. (P) Ltd. (supra), shares have been sold by the company at prices considerably less than their break-up value to the companies who were directly or indirectly connected with the assessee-company. The Supreme Court observed that the relationship between the parties have been established and the desire to defeat the claims of the Revenue has also been established. Even after reaching these findings, the apex Court observed that the Revenue has not discharged the onus that the consideration for sale indicated in the sale document was understated and that a particular higher amount was in fact received by the assessee.
28. We may next refer to the Supreme Court decision in CIT v. Godavari Corporation Ltd. (1993) 200 ITR 567 (SC) wherein their Lordships following their earlier decision in K.P. Varghese case (supra) have laid down the same proposition that the burden of proving understatement of consideration in a sale document lies on the Revenue.
29. The aforesaid decisions have been rendered in the context of computation of capital gain by invoking Section 52. Section 52 enacted a deeming fiction into the statute whereby the AO was entitled in certain situations to adopt the market value of an asset as the actual consideration received by the assessee for the purpose of computation of capital gain. The Supreme Court, invoking the doctrine of reading down statutory provision, observed that the Revenue would be required to establish by adducing evidence that the sales consideration has been understated. This section has been omitted by the Finance Act, 1987 w.e.f. 1st April, 1988 not because the social evil of understatement of sales consideration of properties for the purpose of tax evasion has been rooted out. The reasons for such deletion have been indicated by the Hon'ble Delhi High Court in the case of CIT v. Gulshan Kumar (2002) 123 Taxman 1111 (Del), as under :
"It is always a difficult task for the Revenue to establish this and perhaps for this reason the legislature in its wisdom had rightly decided to delete Section 52 from the statute book w.e.f. 1st April, 1988."
30. Viewed in the backdrop of the aforesaid discussion, we have no hesitation in holding that the Revenue has failed to adduce any material on record, to establish understatement of consideration in the sale document of the two properties. Valuation reports of the DVO heavily relied upon by the Revenue did not in any manner support the charge of understatement of consideration in the sale documents of the properties. In respect of the immovable properties, there is no fixed market such as market for shares, bonds, debentures or other commodities like sugar, cloth, steel, etc. In order to arrive at a valuation in respect of the property, there must necessarily be certain amount of guess work involved. In the instant case, the method adopted by the valuation officer is the comparable sales instances method. However, we find that the sales instances relied upon by the DVO in his reports are in respect of property situated in far off localities which do not provide a reasonable guideline for determining the market value of the properties in question. In respect of property in Patparganj industrial estate, the valuation officer has cited the sales instances of Jhilmil colony and Kirti Nagar which are not comparable. Even the dates of such transactions have not been indicated by the valuation officer. What the valuation officer has done is the mere totalling up of sale price in the two instances cited by him and finding out the average sale price. This is not a permissible method of determining the value from sale instances. Each and every transaction of sale must be critically examined and analysed before accepting them as the base evidence regarding the market value of property in question. This has not been done by the valuation officer. As against this, the assessee has cited sales instances of property situated in Patparganj Industrial Area wherein the property in question has been purchased by the assessee. These instances relating to property in the same locality are thus comparable with the transaction entered into by the assessee.
31. Similarly, with regard to Jagriti enclave property, we find that the valuation officer has cited sales instances of Swastaya Vihar and Preet Vihar which are colonies having much better location and situation as compared with Jagriti enclave wherein the assessee has purchased the property. Here again, the DVO has taken the average of the sale consideration of the two instances which worked out to Rs. 16,440 per sq. mtr. and Rs. 9,036 per sq. mtr. The wide variation in the two instances appears to have been ignored by the DVO while considering these instances as comparable with that of the assessee. As against this, the assessee has cited sales instances of Priyadarshni Vihar, Ashok Niketan and Dayanand Vihar which are colonies contiguous to Jagriti enclave wherein the assessee has purchased the property. Such sales instances in respect of contiguous areas would provide more reliable guideline for determining the market value of the property in question.
32. Apart from the aforesaid facts, it is relevant to note here that neither the DVO nor the AO has at any such stage examined the comparable sales instances cited by the assessee in respect of Jagriti enclave as well as Patparganj industrial estate. The AO has brushed aside such instances with the facile plea that valuation officer has already considered these issues. However, there is no such discussion in the valuation reports of the DVO. It appears to us that despite the fact that the original assessment was set aside by the CIT(A) for necessary enquiries and investigations by the AO, no attempt appears to have been made by the AO to appraise and evaluate the facts and evidence cited by the assessee in support of correctness of the consideration declared in the sale documents. The AO has merely proceeded on the basis of the valuation reports without carrying out critical analysis and scrutiny of the relevant facts and material on record. The conveyance deeds of the two properties purchased by the assessee have been filed by the assessee before the Revenue authorities and these are placed in the paper book filed before us. A duly executed conveyance deed or agreement for sale indicating the sale consideration paid by the assessee obviously constitute the direct evidence which cannot be ignored. The assessee has further filed the sale documents in respect of comparable transactions cited before the Revenue authorities and these transactions support and substantiate the reasonableness of the consideration declared in the sale documents for the properties purchased by the assessee. As against these evidences relied upon by the assessee, the Revenue has based its case on the valuation reports of the DVO. For the reasons discussed hereinbefore, we feel that the Revenue has failed to substantiate understatement of consideration in the sale documents by the assessee. The valuation reports relied upon by the Revenue is merely expert evidence which would have to be evaluated in the backdrop of the aforesaid facts and circumstances of the case. There is no rule of law nor any rule of prudence which has crystallised into a rule of law that the opinion evidence of an expert has to be accepted as gospel truth. Reasons for the opinion must be carefully considered and examined and all other relevant evidence must be considered. In appropriate cases, corroboration must be sought. This is particularly so because the science of valuation of properties has not attained an order of perfection and the risk of incorrect opinion is much higher. In the instant case, valuation report of the DVO based on sales instances of much better situated and located colonies having no contiguity with the colonies in which the properties have been purchased by the assessee and in the light of the fact that sales instances of the same colony or contiguous colonies cited by the assessee are totally ignored by the Revenue effectively demolishes the credibility of valuation report of the DVO. In our opinion, Revenue has not been able to adduce evidence, direct or circumstantial, to support or substantiate the conclusion that market value of the properties purchased by the assessee are higher than the consideration paid for their acquisition.
33. Without prejudice to our finding that there is no evidence on record, to say that the market value of the properties in Jagriti enclave and Patparganj industrial estate acquired by the assessee are higher than the consideration shown by the assessee, we are of the considered opinion that the basic ingredient of the Revenue's case that higher consideration has been paid by the assessee has not been established in the instant case. Even if market value of the property appears to be higher than the consideration declared by the assessee in the sale document, this cannot by itself be the sole ground for treating the difference between the declared consideration and the market value as unexplained investment of the assessee. The Revenue is saddled with the onus to establish that the higher consideration has been paid over and above the consideration indicated in the sale documents. A number of decisions rendered by the apex Court supporting this view have already been indicated by us above, namely, K.P. Varghese (supra), Shivakami Co. (P) Ltd. (supra) and Godavari Corporation Ltd. (supra), etc. Further reliance has been placed on the following decisions of Delhi High Court :
(i) CIT v. Ms. Sushila Mittal and Ors. (supra)
(ii) CIT v. Gulshan Kumar (supra) The two decisions of the Delhi Bench of the Tribunal in the case of Shri Ashok Verma (ITA No. 2163/97) and Shri Sankat Parkash Gupta (ITA No. 1428/2002) (supra) cited by the learned counsel further lend support to the view taken by us.
34. Before parting with this order, we may note that the assessee has filed a copy of the latest decision of the Supreme Court in the case of Smt. Amiya Bala Paul (2003) 262 ITR 407 (SC) wherein after elaborate discussion of powers and functions of the valuation officer, the apex Court has held that the AO cannot refer the matter to the valuation office for estimating the cost of construction of the house property. Copy of this decision has been filed much after the close of the hearing. It appears to us that the assessee has relied upon this decision to support his argument that reference to the valuation cell in the instant case is incompetent and the valuation reports of the DVO cannot be relied upon by the Revenue. However, since the issue has not been argued from this angle and hearing has already been concluded and the impugned addition has been deleted by us as above, we do not consider it necessary to dwell upon the matter any further.
35. For the aforesaid reasons, we hold that there is no evidence on record to prove that assessee has paid consideration higher than the figure indicated in the sale documents for the purchase of the property in question. The addition of Rs. 11,86,897 sustained by the learned CIT(A) is, therefore, deleted. The appeal of the assessee is, therefore, allowed.
36. In the result, the assessee's Appeal No. 1392/Del/1999 is dismissed and assessee's Appeal No. 3647/Del/2002 is allowed.