Income Tax Appellate Tribunal - Hyderabad
P.Srinivas Reddy, Hyderabad vs Department Of Income Tax on 27 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B, HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
I.T.A. No. 1487/Hyd/2008
Assessment year 2006-07
The Asst. CIT vs. Sri P. Srinivas Reddy
Central Circle-6 Hyderabad
Hyderabad PAN: AECPP6016M
Appellant Respondent
Appellant by: Sri K. Gnana Prakash
Respondent by: Sri A.V. Raghuram
Date of hearing: 27.09.2012
Date of pronouncement: 16.11.2012
ORDER
PER CHANDRA POOJARI, AM:
This appeal by the Revenue is directed against the order of the CIT(A)-I, Hyderabad dated 15th July, 2008 for A.Y. 2006-07.
2. The Revenue raised the following grounds of appeal:
1. The order of the CIT(A) is erroneous and contrary both on law and facts of the case.
2. The learned CIT(A) ought to have considered the fact that the valuation of the property was got done by the person from whom assessee purchased the property and that the valuation of the building was done by the registered valuer in semi-finished condition only, thereby rendering valuation report non-genuine.
3. The learned CIT(A) erred to consider that even the Stamp Valuation Authorities have valued the property for stamp duty purposes at a much higher value than shown by the assessee.
4. The learned CIT(A) erred to consider that the property is located in a prime locality of Hyderabad and the value of the land itself would be much more than the value (including land and structure) shown by the assessee.2 ITA No. 1487/Hyd/2008
Sri P. Srinivas Reddy ==================
3. Brief facts of the issue are that a search and seizure operation was conducted in the case of the assessee on 5-8-2005. During the course of search, additional income was offered u/s. 132(4) of the Act for an amount of Rs. 50 lakhs, which was spread over various years and returns of income filed on which there is no dispute. However, the assessee vide a sale deed executed on 23.7.2005 purchased a semi- finished building bearing municipal door No. 6-1-82 and 6-1-83, situated at Lakdikapool, opp. Dwaraka Hotel, Saifabad, Hyderabad from M/s. Sandhya Hotels Pvt. Ltd., for an apparent consideration of Rs. 3 crores. The total investment by the assessee including all incidental expenditure was shown at Rs. 3,66,41,837. The Assessing Officer found that for the purposes of stamp duty, the value adopted by the Stamp Valuation Authority was for Rs. 5,53,40,000. Further, the Assessing Officer observed that during the course of survey in the case of M/s. Sandhya Hotels Pvt. Ltd, documents impounded shows that the property was valued by an approved valuer for Rs. 8 crores. The Assessing Officer during the course of assessment proceedings, proposed to adopt the investment made in the property at Rs. 8 crores in accordance with valuation report of the approved valuer and accordingly proposed to assess the difference between value adopted by the approved valuer and the value mentioned in the registered document, amounting to Rs. 5 crores as unexplained investment by the assessee u/s. 69 of the I.T. Act. The assessee objected to the proposal of the Assessing Officer, however, the Assessing Officer observed that the property got valued by the vendor by an approved valuer before it was sold. Further, the Assessing Officer has taken support from seized document in the case of Sandhya Hotels Pvt. Ltd, wherein another building in the vicinity was sold at Rs. 2830 per sq. ft and applying that rate, the value of the property sold to the assessee could work out to Rs. 12,73,50,000. Also while following Wealth Tax valuation method taking rental income into account, the Assessing Officer has computed the value of the building at Rs. 8 crores. Accordingly, the Assessing 3 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== Officer has considered investment made by the assessee in purchase of the said property at Rs. 8 crores. Since value has been shown at Rs. 3 crores in the registered deed, the balance of Rs. 5 crores has been added by the Assessing Officer to the total income as unexplained investment u/s. 69 of the IT Act.
4. On appeal, the CIT(A) observed that the addition made by the Assessing Officer is only on the basis of report of registered valuer which has been impounded in the case of M/s. Sandhya Hotels Pvt. Ltd. and not in the case of the assessee. Accordingly, the valuation report cannot be held against the assessee since the presumption u/s. 132(4) of the Income-tax Act does not hold against the assessee and its only a supporting evidence. Further, even otherwise, the registered valuer's report or the valuation adopted by the stamp valuation authorities cannot be said that correctly reflect market value of the property which was in a semi finished condition and he deleted the entire addition. Against this, the Revenue is in appeal before us.
5. The learned DR submitted that the assessee acquired the property located in a prime commercial area, opposite to Dwarka Hotel, Lakdikapool, Hyderabad and the property was registered for a stamp value of Rs. 5,53,40,000 and it was also valued by the approved valuer for Rs. 8 crores. However, the assessee had shown the above consideration at Rs. 3 crores which is totally unbelievable. Even otherwise, he submitted that, the director of the assessee-company Sri S. Sridhar Rao also undertaken construction of another building by name 'SSR Chambers' in the immediately adjacent site and the space is sold at Rs. 2,830 per sq. feet (sft) which is evidenced by the seized material marked as A/SSR/2/page No. 282, seized from the residence of Sri Sridhar Rao during the course of search operation. As per this, the value of the assessee property is worked out at Rs. 12,73,510,000. Further he submitted that even otherwise as per Rule 3 of Wealth-tax Rules, the value of the property being a building or land appurtenant 4 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== thereby or part thereof shall be the amount arrived at by multiplying the net maintainable rent by the figure of 12.5. According to the learned DR, if we apply this formula the value of the property is worked at an amount of Rs. 8 crores after considering the maintainable rent, He supported the order of the Assessing Officer. He also relied on the judgement of Kerala High Court in the case of Capricon Shopping Complex v. CIT (260 ITR 647).
6. On the other hand, the learned AR submitted that the document seized/impounded from M/s. Sandhya Hotels Pvt. Ltd., cannot be used against the assessee since it was not seized from him being and it is a third party evidence. The property was got valued by M/s. Sandhya Hotels Pvt. Ltd for purposes of getting bank loan, hence do not reflect correct value of the property. The assessee was subjected to search and seizure operation, but no evidences were found regarding unexplained investment by the assessee. The valuation of the property by stamp valuation authorities could not be considered as the true value of the property and in any case there is no evidence that the assessee has paid the amount as valued by the stamp valuation authorities. The AR submitted that no addition could be made u/s. 69 of the IT Act on hypothetical basis without actual cash outgo. Further, even on a reference by the Assessing Officer, the Valuation Officer of the department proposed to adopt the value of at Rs. 3,87,73,000, though the valuation report has not been received, which is substantially lower than the value adopted by the Registered Valuer and Stamp Valuation Authority. The AR relied upon the decisions in the cases of CIT Vs. Nitin Kumar (2001) 248 ITR 478, Smt. Bhanu R. Shah vs. DCIT (2004) 3 SOT 792 (Bang) and CIT vs. Bhanwarlal Morwatiya (2008) 215 CTR 489 (Raj).
7. The AR submitted that as per the purchase document total amount of investment viz., consideration which has actually passed between the buyer and seller is Rs. 2,76,41,837 plus registration 5 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== charges. The transaction took place in financial year 2005-06 relevant to assessment year 2006-07. The extent of investment as recorded in the purchase document including registration charges is Rs. 3,66,41,837. The same has been reflected in the balance sheet as on 31.03.2006. Assessee's premises was searched and no evidence whatsoever was discovered showing any additional investment by way of payment of on money to the seller. In course of assessment proceeding the Assessing Officer resorted to an exercise to work out the extent of investment by adopting the following method:
a) Fair market value for the purpose of stamp duty as reflected in the purchase document Rs. 5,53,40, 000/-.
b) Fair market value worked by the seller through a Registered valuer for obtaining bank loan -Rs. 8 crores
c) Cost of construction of a neighbouring building worked out by adopting sq. feet rate of Rs. 2830 on estimate on the basis of some stray notings/scribblings seized during the course of search of the residence of one Sri Sridhar Rao thus Rs. 12, 73,53,000/-.
d) Fair market value on the basis of wealth tax rules - Rs. 12.50 crores.
e) Fair market value of the property as determined by the Departmental Valuer is at Rs. 3,87,73,000/-. Interestingly although a reference was made the assessing officer who received the order prior to completion of the assessment he did not make any mention of the same in the assessment order. Out of the above, the Assessing Officer adopted Rs. 8 crores which represented the fair market value as worked out by the seller through a registered valuer for obtaining bank loan as reasonable investment for the purpose of s. 69 of the IT Act.6 ITA No. 1487/Hyd/2008
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8. The AR submitted that there is fallacy in the working made by the Assessing Officer and making addition under section 69. The Assessing Officer has fully misconstrued the provisions of section 69 of the Act. In case of a sale which is evidenced by a statutory registered document, the consideration recorded in the said document cannot be disbelieved or disregarded or construed as incorrect in the absence of material evidence in the possession of the department that additional amount has passed between the buyer and seller. The other situation where such consideration as mentioned in the document is not taken as true when either under the Indian Registration Act or any other statute specific provisions are made taking care of specific situations to depart from the consideration stated in the registered document. In the case of the assessee there is no evidence in possession of the department, although a search was authorised to disbelieve the consideration mentioned in the registered document. There is no enabling provision in the Income tax Act for the purposes of section 69 to disregard the stated consideration. Hence the exercise resorted to by the Assessing officer to work out cost for which the property could have been transferred is imaginary, based on suppositions and without jurisdiction. The Assessing Officer should not have ignored the sale consideration recorded in the registered sale deed which was duly reflected in the balance sheet as on 31.03.2006 as having been incurred during financial year 2005-06 relevant to assessment year 2006-07. Investment for the purposes of section 69 represents the actual cash outgo during a financial year. On the other hand, fair market value of a property connotes a notional value which the property would fetch if sold in the open market. Wherever fair market value is to be adopted for taxation purposes, the same has been specified in the Act by the legislature. Section 69 does not refer to adoption of fair market value but the actual investment.
9. The AR submitted that there could be no addition under section 69 on a hypothetical basis, particularly in case of sale transactions 7 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== evidenced by registered documents wherein consideration has been mentioned unless Department as a matter of fact brings in evidence that the assessee has paid on-money over and above the stated consideration. Ignoring consideration mentioned in a document as having been passed between the buyer and seller is ignoring the provisions of an All India statute when judicial notice is taken of such documents unless there is evidence to the contrary in possession of the Department. In such a situation an imaginary exercise to fix the consideration cannot dislodge the evidentiary value of the document. It is brought to the kind notice of the CIT(A) that the revenue was not in possession of any evidence as to the passing on additional amount over stated consideration. Therefore, the Assessing officer's exercise is not authorised by law. The same cannot be utilized against the assessee to work out unexplained investment u/s. 69 of the IT Act. As regards stamp duty value, the same is guidance value for payment of stamp duty and the same has no connection with actual investment or payment by the buyer as otherwise in the same document there was no need to indicate the two amounts. Moreover, under IT Act, the stamp duty value, by operation of provisions of section 50C are adopted as full value of consideration for working out capital gain. This deeming provision cannot be imported for any other purpose. A deeming provision which is has a specific objective, cannot be applied departing from the stated purposes for which the same is enacted. There is no overlapping between section 69 and 50C which is enacted for the purposes of section 48. They operate in their respective fields for the purposes of levy of tax under respective heads of income.
10. The AR further submitted that as regards the investment made by a third party in a neighbouring building the same cannot be an yardstick for there are so many parameters to be judged in the context of construction as distinguished from a simple purchase-like period of construction, quality of construction etc. Moreover, a sale differs from construction. Both the transactions are not comparable to arrive at any 8 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== conclusion-one being a sale simplicitor and another being investment in construction. Moreover, a third party evidence cannot be utilized against the appellant to determine investment as recorded in sale transaction evidenced by a statutory registered document. Hence the assessing officer went wrong in applying estimated sq. feet rate of Rs. 2830 for estimating the investment in the property which was a outright purchase. The fair market value determined by Assessing Officer following wealth tax rules as one of the parameters has no relevance with reference to section 69. While former speaks about the fair market value which is value for wealth tax purposes, the later speaks about the actual investment made during a financial year. In the case of the assessee the actual investment is as recorded in the registered document in the absence of any evidence that actual consideration passed is more than the stated consideration.
11. The AR submitted that the assessing officer has referred the case of valuation cell to determine the fair market value of the property. This was determined at Rs. 3,87,73,000. Although the report indicating the fair market value was available with the assessing officer for the reasons best known to the revenue there is no mention about the same in the assessment order. Be that as it may, this report has no relevance for the reasons stated in the pre para for the purpose of section 69 as the same represents the fair market value of the property. The Assessing Officer has adopted the value of the property at Rs. 8 crores on the basis of fair market value of the property worked out by registered valuer. Column 1 of the said valuation report submitted to State Bank of India, SIB Branch, Haca Bhavan, Saifabad, Hyderabad reads as under:
"01. Purpose for which the valuation is made: To evaluate the fair market value of the commercial property for mortgaging as collateral security, against loan advance to M/s. Sandhya Hotels (P) Ltd, under rent Plus scheme."9 ITA No. 1487/Hyd/2008
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12. The AR further submitted that this would show that the fair market value was worked out for obtaining loan from the bank. It is submitted that fair market value of a property as an a particular date is different from the sale value as mentioned in a registered document. While the former refers to the value which the property would fetch if sold in the open market, the later represents the actual consideration passed on between the buyer and seller. Therefore as per the provisions of section 69 the fair market value cannot be adopted for working out unexplained investment u/s. 69. The action on the part of the assessing officer is legally not tenable. Legally the Assessing Officer is not permitted to indulging such an exercise as no incriminating evidence was found to indicate payment of additional consideration in case of purchase of a ·property. Even in such an event the investment for the purpose of section 69 should be limited to the evidence found. In case of a sale transaction evidence by a document, the assessing officer is totally precluded from estimating the investment except adopting the sale value as mentioned in the document. There could be no presumption that" the buyer might have paid more amount than what is stated in the deed in the absence of corroborative evidence. To sum up it is submitted that the Assessing Officer fell into serious error by ignoring the document value as mentioned in the "registered deed and resorting to his own estimate for the purposes of determination of unexplained investment u/s. 69 of the IT Act. In this context the AR furnished the gist of various decisions decided in the context of addition u/s. 69 of the IT Act when the transaction is evidenced by a registered document.
Case-law Gist of the decision
CIT vs. Nitin Kumar The addition made under section 69 on
248 ITR 478 estimated basis over and above the stated
consideration in the Deed was detected as
no evidence was found in course of search
that the assessee has paid more amount
than what was stated in the document.
10
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Bhanu R. Shah Smt. Vs. Addition ignoring the document value and DCIT, 3 SOT 792 Bang. estimating the value not sustainable unless there is positive evidence that the document value is understated. Stamp duty value has no application in the context of section 69 which is for a different purpose. This is a search case where no evidence was found to indicate that the assessee has paid more amount than what was stated in the document.
CIT vs. Bhanwarlal The facts of the case is similar to the one Murwatiya before the CIT. In this case the sale deed 2008, 215 CTR (RAJ) was registered for a consideration of Rs. 9 lakhs. Basing on the statement of the seller the department added Rs. 61 lakhs as unexplained investment u/s. 69 of the IT Act. In this regard the Hon'ble Court observed as under:
"Apart from the fact, that even if, it were to be assumed that the price of the land was different than the one recited in the sale deed unless it is established on record by the department, that as a matter of fact the consideration as alleged by the department did pass to the seller from the purchaser it cannot be said that the department had any right to make an addition. If The case of the appellant stands in a much better footing in as much as there is no iota evidence found in course of search that the appellant had paid more money than what was stated in the purchase document. In the case of the appellant the exercise carried out by the assessing officer is without the authority of law and therefore the same cannot be a basis for addition.
u/s. 69 of the IT Act."
13. The AR submitted that as far as the value adopted by the Stamp Duty Authorities are concerned, in the course of hearing of the appeal, CIT(A) directed the assessee to explain as to why the stamp duty value mentioned in the registered document should not be adopted as market value for which the property for the purposes of section 69 of IT Act.
11 ITA No. 1487/Hyd/2008Sri P. Srinivas Reddy ================== The AR submitted that the Stamp Duty value is formulated under executive instruction for guidance of the registering authorities in the matter of collection of stamp duty. For the purpose, a register is maintained which is called Basic value Register which indicates the market value of the property in a particular area so as to enable the registering authorities to levy stamp duty in a transaction of immovable property. It serves as a guideline only for collection ot stamp duty. Courts have consistently held that it has no binding effect on either party. The evidentiary value of the market rate as mentioned in such Basic value Register was subject matter of discussion by Hon'ble Bombay High Court in the case of Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority, 223 ITR 572. The relevant portion of the judgment is extracted below:
"However, as regards the contention raised on behalf of the petitioner that the market rate fixed for the area in question at the relevant time in the land rates fixed by the Nagpur Municipal Corporation, Nagpur, as well as by the stamp authority for the purposes of levy of stamp duty on registration of the documents was Rs. 1,500 per sq. meter, i.e., Rs. 145 per sq. ft. and therefore, the rate of Rs. 225 per sq. ft. agreed to between the parties for purchase of the suit land was more than the market rate for such land, it may be seen that the rates of properties maintained by the above authority or officers for the purpose of checking evasion of stamp duty upon transfer deeds are not pursuant to the provision in any statute, relating even to stamp duty. At any rate it cannot be a basis for determination of the market value for acquisition of or for compulsory purchase of any land where the usual test is of a prudent buyer and a prudent seller determined by the evidence of sale transaction, if available in the vicinity, of the land in question whose market rate is to be determined possessing the same or more or less similar advantageous features. This is the view taken by the Supreme Court in the case of Jawajee Nagnatham v. The Revenue Divisional Officer [1994] 2 JT (SC) 604; AIR 1994 SCW 2852. The submission on behalf of the petitioners based upon the rates of properties maintained by the State Government for the purpose of checking evasion of stamp duty on transfer deeds cannot, therefore be accepted. "12 ITA No. 1487/Hyd/2008
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14. In the case of CGT V R Jawahar, 1996, 217 ITR 59 .Mad., the emphasis on guideline value adopted for registration did not find favour with the Hon'ble Court to determine the value of a gifted property The same principle was reiterated in the case of CGT V R Damodaran 2001,.247 ITR 698 (Mad). In this case the registered conveyance deed showed the value of Rs. 1,70,000. The Commissioner has found that the enhanced stamp duty was paid as the registering authorities had their own method of evaluating properties. It was held that stamp duty value has no relevance for determining the actual consideration which has passed between the parties. The basic valua- tion is only for the purposes of collection of stamp duty and it cannot form the basis to determine the market value. UP Jal Nigam, Lucknow vs. Kalra Properties P. LTD (AIR 1996 SC 1170). This decision was followed by the ITAT in the case of JAI MAR WAR A COMPANY V ACIT 2004, 2 SOT 847 Jodh on the issue of addition under section 69 of the IT Act. The AR submitted that as per narration in Page 7, 8 on of the sale deed the assessee has paid Rs. 3,00,00,000 and the seller has accepted the same as actual consideration before SRO who is a quasi judicial authority. The narration in the document is taken judicial notice unless something contrary is found to indicate that more amount has actually passed between the buyer and the seller. He relied on the case of K.P. Verghese v. ITO 9 131 ITR 597) and the judgement of P & H High Court in the case of CIT vs. Chandni Buchar (323 ITR 510). The AR also relied on the order of the Tribunal in the case of Suresh Kumar Agarwal dated 15.10.2010 in ITA No. 995/Hyd/10 wherein held as under:
" We have considered the rival submissions and perused the material available on record. It is an undisputed fact that the assessee sold the property within a span of 11 days from the date of purchase which proves that the assessee would have sold away the property at the same sale consideration due to compelling circumstances like threatening and illegal encroachment etc., which is beyond the control of the assessee and the assessee had 13 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== no alternative except to dispose of the property. Under these compelling circumstances, the assessee cannot expect profit or gain on the sale of the said property. The Assessing Officer not doubted the purchase cost of the property at Rs. 14,93,000 but at the same time, the Assessing Officer assumed the sale consideration of the property including the on-money payment at Rs. 74,06,300. In our considered opinion, within the span of 11 days, it is impracticable to imagine that the assessee made a huge gain of Rs. 59,13,300 from this transaction. The action of the Assessing Officer in making the addition of Rs. 59,13,300 is based on purely conjectures and suspicions. The theory of receipt of on-money fastened on the assessee is totally arbitrary without any basis. We also find that the assessee gave a statement in response to summons under section 131, as stated in the assessment order, categorically denied having received any on money over and above the sale consideration stated in the document for the sale of the property. We have gone through the order of the learned CIT(A) and found that he has extracted in his order, oath taken on 16-11-2007 i.e., statement under section 132(4) of the Act which was recorded from Sri G. Janardhan Reddy which is appearing at pages 8 and 9 of the CIT(A) order. It was found from the assessment order that Sri G. Janardhan Reddy has principally greed on the issue of payment of on money in the said transaction. Further, the statement of Sri G. Janardhan Reddy did not mention about the receipt of money by the assessee. After considering the facts and the circumstances of the case, we see merit in the contentions of the learned counsel for the assessee that the additions have been made based on surmises, conjectures and suspicion without any basis by the Assessing Officer against the principles of natural justice. We also find that the addition made by the Assessing Officer is without any basis and the Assessing Officer collected the material behind the back of the of the assessee which was used against him without giving any opportunity to cross examine the person whose statement had been used by the Assessing Officer against the interest of the assessee. In view of the above and after considering the totality of facts and the circumstances of the case, no interference is called for. Accordingly, the order of the CIT CA) is confirmed and the appeal filed by the revenue is dismissed."14 ITA No. 1487/Hyd/2008
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15. For the same proposition, he relied on the order of the Tribunal dated 31.10.2011 in ITA No. 572/Hyd/10 and CO No. 31/Hyd/2010 in the case of Bharat Kumar. The DR relied on the order of AO.
16. We have heard both the parties and gone through the material available on record. The assessee shown the sale consideration of property purchased from M/s. Sandhya Hotels Pvt. Ltd. at a value of Rs. 3 crores. As against this the Assessing Officer adopted the value of Rs. 8 crores on the basis of registered valuer report. According to the assessee's counsel report of the registered valuer cannot be relied upon as it has been prepared for the purpose of obtaining bank loan and it is a common practice to inflate value of the property with a motive to avail higher bank loan. The CIT(A) agreed with the contention of the assessee's counsel and directed the Assessing Officer to adopt the consideration reflected by the assessee's books of account as a true consideration. Though the value of the property was registered for stamp value purposes at Rs. 5,53,40,000, the Assessing Officer based his conclusion on the basis of registered valuer's report. The CIT(A) not given any credence to the report of the registered valuer on the basis that it was motivated and obtained for the purpose of availing bank loan. To that extent the CIT(A) is correct in brushing aside the report of the registered valuer but at the same time he observed that the Assessing Officer not collected any corroborative circumstantial evidence in support of the report of the registered valuer . However, he has not considered the comparable case brought on record by the Assessing Officer with reference to the construction undertaken by Sri S. Sridhar Rao of M/s. Sandhya Hotels Pvt. Ltd. by name SSR Chambers in the immediately adjacent site of the impugned property and the space is sold at Rs. 2830 per sft evidenced by seized material. Being so, the CIT(A) is not correct in totally brushing aside the contemporaneous evidence.-
15 ITA No. 1487/Hyd/2008Sri P. Srinivas Reddy ==================
17. Under section 142A, the Assessing Officer is empowered to refer any case to the valuation cell for the purpose of making an assessment or re-assessment where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable articles referred to in section 69A or section 69B of the Act. Thus, provisions of section 142A are applicable where the value of investment is to be determined. Provisions of section 142A are not applicable for the purpose of determination of full value of consideration. The Assessing Officer had to adopt the value for the purpose of stamp valuation as on the date of transfer. For the purpose of determining the sale consideration in the case of computation of capital gain. Now coming to the determination of investment made by the assessee, the Assessing Officer can make use of the provisions of section 142A of the Act which are brought into the statute book by Finance (No. 2) Act, 2004 with effect from 15.11.1972. There is also one more amendment with effect from 1.7.2010 wherein property referred in subsection (2) of section 56 also brought into this provision. Thus section 69 of the Act deals with the unexplained investment not recorded in books of account if not maintained by the assessee for any source of income. We are concerned with only provisions of section 69 in this case. Being so, the Assessing Officer to estimate the value of such investment in assets may refer the matter to the valuation officer and consider the value on the basis of valuation report. On the other hand, the Assessing Officer also can adopt rent capitalisation method which is one of the methods recognised by law prescribed in Wealth-tax Act. It is also applicable for valuation of a property covered by sections 69/69A/69B of the Act. During the course of hearing the learned AR has not denied the applicability of capitalisation method of valuation of property.
18. Being so, now the option before us is either to consider the matter to refer to the DVO u/s 142A of the Act or to follow the rent capitalization method of valuation of property as per the provisions of 16 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== Wealth-tax Rules or to consider the value adopted by the state authorities for registration purposes. As there was a huge difference in the amount shown to have expended by the assessee on purchase of the impugned immovable property and the amount representing the similar property in the area and the difference is not small. In our opinion, considering the facts of the case as the assessee did not disclose proper value of investment made by the assessee in its books of account and there was under statement of investment, the provisions of section 69 are clearly attracted and there was a time lapse of more than 6 years and there is no useful purpose will be served now referring the matter to the DVO. The value shown by the assessee which is very low as compared to the prevailing market conditions as brought on record by the Assessing Officer in his order that the director Sri S. Sridhar Rao constructed another building in the immediate vicinity by name SSR Chambers and the space is sold for Rs. 2830 per sft. This is reflected in the seized material found during the course of search. Though it is relating to other person the property is very much situated very next to the assessee's building and closing our eyes really leads to miscarriage of justice. Being so, considering the facts and circumstances of the present case the CIT(A) is not justified in deleting the entire edition. Accordingly we direct the Assessing Officer to adopt value of the property as per Rule 3 of Schedule III of the Wealth Tax Act, 1957 and determine the income of the assessee accordingly.
19. Coming to the reliance placed by the assessee's counsel on various orders of the tribunal, we have gone through the orders of the Tribunal relied on by the assessee counsel cited supra. There orders are decided on different set of facts and circumstances and the addition was deleted by the Tribunal on the reason that the Assessing Officer made the addition without any basis and the Assessing Officer collected the material on the back of the assessee which was used against the assessee without giving opportunity to cross examine those persons whose statements have been relied on by the Assessing Officer against 17 ITA No. 1487/Hyd/2008 Sri P. Srinivas Reddy ================== the assessee. In the present the case this is not the fact. Various evidences brought on record by the Assessing Officer which show the value of the asset is understated. Further the judgement of Supreme Court in the case of K.P. Varghese (131 ITR 597) supra and also the judgement of P & H High Court in the case of CIT vs. Chandni Buchar (323 ITR 510) cannot be applied to the facts of the present case. A judgement of the Supreme Court was delivered where there were no provisions of the section 50C and there were also no provisions of section 142A of the Act. Further, the judgement of P & H High Court was also delivered on different set of facts.
20. In the result, the revenue appeal is allowed.
Order pronounced in the open court on 16th November, 2012.
Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 16th November, 2012 tprao Copy forwarded to:
1. The Asst. CIT, Central Circle-6, Room No. 706, 7th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad-500 004.
2. Sri P. Srinivas Reddy, 5-8-74, Nampally Station Road, FS Lane, Hyderabad.
3. The CIT(A)-I, Hyderabad.
4. The CIT (Central), Hyderabad
5. The DR - B Bench, ITAT, Hyderabad