Income Tax Appellate Tribunal - Chandigarh
Sh. Sumit Aggarwal, Gurgaon vs Acit, Ludhiana on 3 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.716 /Chd/2016
(Assessment Year : 2010-11)
Sh.Sumit Aggarwal Vs. The A.C.I.T.,
Gurgaon. Circle VII,
Ludhiana.
PAN: ACMPA0233B
And
ITA No.717 /Chd/2016
(Assessment Year : 2010-11)
Smt.Ruchika Aggarwal Vs. The A.C.I.T.,
Gurgaon. Circle VII,
Ludhiana.
PAN: ADGPG5708A
(Appellant) (Respondent)
Appellant by : Ms.Hasneeta Matta
Respondent by : Shri S.K. Mittal, DR
Date of hearing : 15.03.2017
Date of Pronouncement : 03.04.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Both the above appeals have been filed by different assessees against separate orders of learned Commissioner of Income Tax (Appeals)-3, Ludhiana each dated 4.3.2016, relating to assessment year 2010-11. Since the issue involved in both the appeals is common, 2 the same were heard together and are being disposed off by this common order.
2. For the sake of convenience we shall be discussing the facts in ITA No. 717/Chandigarh/2016. ITA No. 717/Chandigarh/2016:
3. The facts relevant of the case are that, during the impugned assessment year i.e. assessment year 2010- 11, the assessee had, in his return of Income, claimed loss from business and profession amounting to Rs.26,34,781/- on account of sale of property at Tatvam Villa, Gurgaon, in which the assessee had 50% interest, the balance 50% being that of her husband, The said property had been purchased on 24.9.2007 for Rs.5,18,75,776/- and sold on 31.3.2010 for Rs.5,00,00,000/-. The assessee had also taken a loan for the purchase of the said property and had claimed interest paid on the said loan as an expense and added it to the loss from the sale of property. Thus the total business loss returned by the assessee was Rs.26,34,781/-. The Assessing Officer became suspicious of the sale price of the property considering the general trend in the real state market and in Gurgaon particularly which according to him was in a boom during those years. He, therefore, issued commission u/s 131(1)(d) of the 3 Income Tax Act, 1961 (in short 'the Act') to the Valuation Officer (hereinafter referred to as DVO) to determine the fair market value ( hereinafter referred to as FMV) of the property as on 31.3.2010. The DVO determined the value of the property at Rs.7,38,78,923/-, much higher than Rs.5 crores at which the assessee had sold the property. The same was confronted to the assessee. The assessee responded by stating that there were glaring mistakes in the DVO's report and that the reference to the DVO was also illegal. Further the assessee stated that DVO's report was unreasonable also for the reason that no opportunity was given to the assessee by the DVO to filed its contention/objections on the said report. The Assessing Officer rejected the assessee's contention, stating that the reference was valid and relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of Jindal Strips Ltd. Vs. ITO, 116 ITR 825. The Assessing Officer also stated that the assessee had been given adequate opportunity and further all discrepancies pointed out in the DVO's report by the assessee were brushed aside by the Assessing Officer. The Assessing Officer thereafter substituted the sale consideration by the fair market value determined by the DVO and computed the profits on account of the sale of the impugned property assessable in the assessee's hands at 4 Rs.1,19,39,461/-. The addition to this extent was made to the income of the assessee.
4. Aggrieved by the same, the assessee carried the matter in appeal before the Ld. CIT (Appeals), who upheld the addition made confirming the findings of the Assessing Officer that the reference to the DVO was u/s 131(1)(d) was valid and that adequate opportunity had been given to the assessee. The relevant findings of the Ld. CIT (Appeals) at para 3.4 of the order are as under:
"3.4 I have carefully considered the submissions of file appellant and the facts of the case on record. The appellant has purchased the residential property Villa no 28 a! Tatvam Villas sector 46, Gurgaon as personal asset in sept 2007 and continued to hold the same as personal asset. The asset was not purchased with a view to treat it as a business asset. In the year under consideration, because of financial difficulties, the appellant had to dispose off the property by selling it. The appellant has claimed that after having held the resident property as personal asset for 3 years, sold the same on 30 March 2010 and claimed it as a business loss. The residential property was purchased jointly by Mr Sumit Aggarwal and Mrs Ruchika Aggarwal. The same has been sold jointly by them and the claimed loss. However, the assessing officer has accepted the plea of the assessee that personal asset was converted to business of the assessee.
The assessing officer has made reference for valuation of property U/s Sec 55 A and on objection by the assessee, issued commission U/s 131(1)(d) of the I.T. Act 1961 to the Deptt 5 valuation Officer. The Deptt. Valuation officer after obtaining the requisite details from the assessee and taking into account the relevant facts, prepared the valuation report. Which was duly confronted to the assessee during assessment proceedings. The assessing officer has based on the report of the DVO drawn the inference that value of the property sold was higher than as declared by the assessee and accordingly determined the tax liability of the assessee. The appellant during appeal has given instance of other property which was sold at tower rate than the appellant. It is noticed that size of plot of both the villas is different. The villa sold by the appellant is of much larger size, therefore, the rates are not comparable.
The assessing officer has not based his estimate on general observations rather on the basis of expert i.e D.V.O. He has assessed the correct value of sale of the property and accordingly assessed the gain on sale of the residential property. As for as reference to the Deptt. Valuation officer is concerned the assessing officer has issued letter U/s 131(1)(d) of the I.T Act. For determining value of capital gain and cost of investment separate sections are there in the I.T. Act. 1961 when the residential property was sold as business asset, the assessing officer had to invoke sec 131(1 )(d) for making reference to the DVO. After duly confronting the report of the DVO to the assesses, the assessment has been made by the assessing officer. The case laws relied on by the appellant relate to sale of asset on which capital gain income is earned and not to the sale of residential house sold as business asset. In view of the facts of the case, the addition made by the assessing officer is upheld and ground of appeal taken by the assessee is dismissed."6
5. Aggrieved by the action of the Ld. CIT (Appeals) the assessee has now come up appeal before us and has raised following grounds of appeal:
1. That the order dated 4-03-2016 passed by Learned Commissioner of Income Tax (Appeals) - 3, Ludhiana ("Ld. CIT(A)") u/s. 250(6) of the Income Tax Act, 1961 ("Act") is bad in law as the Ld. CIT(A) erred in upholding the order dated 15-
03-2013 of the ACIT, Circle VII, Ludhiana (AO) u/s. 143(3) of the Act, determining the Income under the head Business and Profession at Rs. 93,04,680/- as against the returned business loss of (Rs. 26,34,781/-) basis valuation report of the Departmental Valuation Officer (DVO), resulting in a net demand of Rs. 49,47,160/-.
2. That on the facts and circumstances of the case, and in law, the Ld. CIT(A) has erred in upholding the addition of Rs.1,19,39,461, under the head Income from Business and Profession, being notional profit on sale of property constituting stock-in-trade, basis value presumed by the DVO, such reference being void ab initio, the addition of Rs.1,19,39,461 may kindly thus be deleted. 2.1. That the Ld. CIT(A) failed to appreciate that the actual sale consideration of the property being the more than the Stamp Duty value, recourse to reference to DVO for valuation of a capital asset is not contemplated under the Act in terms of S.50C, read with S.55A and/or S.131(1)(d) of the Act.
2.2. That the reference made by the AO to the DVOu/s.55Aand/or S.131(1)(d) of the Act for valuation of property is in contravention of the settled position per the Apex Court in 7 Amiya Bala Paul (262 ITR 407) and as further adopted in the relevant Guidelines of the Income Tax Department;
2.3. That further, reference to DVO for valuation u/s. 55A and/or S.131(1)(d) has no application to sale of property constituting stock-in-trade, being the settled position till assessment year 2013-14 [70 DTR 169(AII.) and 320 ITR 345 (Mad)}, thereafter S.43CA being inserted in the Act w.e.f. 1-4-2014 to provide for reference to DVO for valuation of property constituting stock-in-trade
3. That in any case and without prejudice to the above, it is settled law that re-determining sale value by certain notional means is not permitted while computing Income under the head Business and Profession;
4. Notwithstanding and without prejudice to the above, on the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in not considering the alternative prayer of the Appellant challenging the valuation report of the DVO on merits. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal."
6. All the ground raised by the assessee are against the action of the Ld. CIT (Appeals) in upholding the addition made by the Assessing Officer on account of profit earned on sale of property by substituting sale consideration with FMV of the property. The assessee has challenged the reference made to the DVO u/s 131(1)(d) of the Act and has also challenged the addition made stating that it tantamounted to taxing the notional profits of the assessee.
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7. During the course of hearing the assessee filed a brief synopsis in writing of its submissions and summarized the key aspects in the case as follows vis a vis reference made to DVO:
"2.1 Regarding Ground No.2 ,the key aspects concerning the addition are summarized as under f or consideration by yours Honours;
- Whether addition made only on conjectures and surmises is tenable?
- Whether ascribing a notional value is
permissible only on the basis of the
v a l u a t i o n r e p o r t o f a D V O , wi t h o u t b r i n g i n g any cogent material on record?
- Whether the reference to DVO can be made i n i n c o me - t a x a s s e s s me n t s i n g e n e r a l ?
- Whether contractual sales consideration can g e n e r a l l y b e s u b s t i t u t e d wi t h ' f a i r m a r k e t value'?
8. Submissions on all the aspects were made placing reliance on a number of case laws.Further Ld Counsel also made submissions on Ground No.3 relating to impermissibility of taxing notional profits and on Ground No.4 pointing out infirmities in the valuation report. Brief summary of the submissions outlined at para 3 of the submissions is as follows:
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- All particulars, documents and explanations in respect of the sale of property constituting stock in trade have been submitted The agreed sale consideration realized by the assessees is at the price fetched in the open market The Gurgaon property is an outright purchase in 2007 as a "Unit" from Vipul Ltd., not being a property which the assessees have spent money on construction for which cost of construction should be called into question.
- The assessees fully co-operated during assessment, further submitting all details and explanations as sought by the Ld. AO, DVO and the Ld. CIT(A).
- While the Ld. AO and Ld CIT(A) accepted the key facts, they failed to appreciate the explanations submitted in support of market conditions basis CRISIL Report for 2010, and further including Circle Rates, Stamp Valuation, comparable sale value of similar property, report of a Govt Approved Valuer and the applicable provisions of settled law.
- Except the high suspicion that market prices were generally high, no material or evidence has been placed on record to controvert the submissions of the assessee that it wasn't the case
- The actual sale value has been re-determined by the Ld AO, and as upheld by the Ld CIT(A), solely on the basis of the report of the DVO, without placing any material or evidence on record that an amount other than the actual sale consideration was received by the assessees.
- For the relevant year, i.e., there were no specific and/or Special Provisions governing the transfer of immoveable property being stock in trade. The amendment by way of insertion of S.43CA is effective 1.4.2014, and such provisions are pari materia with 10 S.50C that applies to transfer of immoveable assets being "capital assets". Further, as the cost of construction of the property was not in question, the reference to DVO by invoking S.131(l)(d) of the Act is bad in law in view of SC in 262 ITR 407 and the 2009 Guidelines on Valuation of Immoveable Property of the Deptt of Revenue.
- Accordingly, it is respectfully submitted that for the year under consideration, i.e., AY 2010-11, the established principles and settled law would apply to the impugned sale of property constituting stock in trade; that Revenue has no power to estimate/determine notional income unless the Act specifically provides or where cogent evidence is placed on record that an amount other than the stated sale value has been paid/received and that a DVO's report cannot be the sole basis for an addition."
9. The Ld. DR, on the other hand, relied upon the order of the CIT (Appeals) as well as of the Assessing Officer.
10. We have heard both the parties,carefully gone through the documents placed before us and also perused the orders of the authorities below. The undisputed facts which emerge are that the assessee in the course of carrying on its business, sold a property for Rs.5 crores. The said property was in the nature of stock-in-trade and was purchased and sold as such and no construction was done on the same by the assessee. The only issue in the present case is the substitution of the sale price with FMV of the property by the Assessing Officer for determining the profit earned on the sale of the property, the 11 allegation of the Assessing Officer being that the assessee had deliberately shown it at lesser value since it was a prime property which could not have been sold at loss specially when real state was in boom in Gurgaon, where the property was located. The Ld. counsel for the assessee has assailed the action of the Assessing Officer, which has been confirmed by the Ld. CIT (Appeals), on several fronts. The Ld. counsel for the assessee has contested the reference to the DVO and also challenged the substitution of the sale consideration with FMV in the absence of any material to show that any extra consideration was received by the assessee and has also borrowed from the real income theory of taxation to challenge the taxation of the alleged notional profits of the assessee in the present case. We shall take up all the contentions of the Ld. counsel for the assessee one by one.
11. One of the contentions raised by the Ld.Counsel for the assessee in Ground No.2, as stated above is that the Assessing Officer could not have referred the valuation of the property to the DVO under any of the existing provisions of the Act whether sections 55A, 131(1)(d) or 142A or for that matter even section 43CA. The submissions and arguments of the Ld.Counsel for the assessee in this regard are reproduced in para 2.4 of her written submissions, the gist of which is that as per the settled law on the issue by the Hon'ble Apex Court in 12 Amiya Bala Paul Vs. CIT (2003) 262 ITR 407 (SC), the Assessing Officer is empowered to refer a matter for valuation only where specific powers are contained in the Act. Reference u/s 131(1)(d) of the Act being a general power could not have been made and even assuming that reference was made u/s 142A under the said section reference could have been made only for the purpose of determining cost of construction and not sale value of the property. The Ld. counsel for the assessee placed reliance on the following case laws in support of its above contentions:
i) Amiya Bala Paul Vs. CIT (2003) 262 ITR
407 SC).
ii) Memorandum explaining reasons and
objects for introducing section 142A.
iii) 2009 Guidelines on valuation of immovable
property, Department of Revenue
explaining the scope of reference to DVO u/s 142A of the Act.
iv) Namita Singh, New Delhi Vs. Department of Income Tax, ITA No.2256/Del/2008.
12. The Ld. counsel for the assessee also contended that specific provision for substituting sale consideration of immovable property held as stock-in-trade was brought on the Statute by inserting section 43CA of the Act w.e.f. 1.4.2014, which in the first placed does not apply in assessee's case since it relates to assessment year 2010- 11 and even otherwise the said section allows reference to the DVO for determining the FMV only on the insistence of 13 the assessee and the Assessing Officer on his own has no power to make such reference.
13. The contention of the Ld. DR, on the other hand, is that the reference made u/s 131(1)(d) of the Act was valid as per the decision of the Hon'ble Jurisdictional High Court in the case of Jindal Strips Ltd. (supra).
14. We have heard both the parties on the issue. We are inclined to agree with the contentions of the Ld. counsel for the assessee that reference made in the present case to the DVO for determining the FMV of the property sold was not in conformity with law. It is not disputed that the reference in the present case was made u/s 131(1)(d) of the Act and further it is also not disputed that the asset was a stock-in-trade of the assessee. It is settled law that the reference to the DVO can be made only by resorting to specific provision providing for the same by the Legislature and not by virtue of or by invoking any general provision. The Hon"ble Apex Court in the case of Amiya Bala Paul(supra) has held as follows:
" 1 7 Besides s. 55A having expressly set out the circumstances under and the purposes for which a reference could be made to a Valuation Officer, there is no question of the AO invoking the general powers of enquiry to make a reference in different circumstances and for other purposes. [See Padam Sen vs. State of U.P. AIR 1961 SC 218 para 8; Arjun Singh vs. Mohindra Kumar AIR 1964 SC 993 (para 19). It is noteworthy that s. 55A was introduced in the Act by the Taxation Laws (Amendment) Act, 1972, when ss. 131(1), 133(6) and 142(2) were already on the statute book. Learned counsel for the appellant has correctly submitted that if the power to refer any dispute to a Valuation Officer were already available in ss. 131(1), 133(6) and 142(2), there was no need 14 to specifically empower the AO to do so in certain circumstances under s. 55A."
15. The Hon'ble Apex Court has further ruled out the reference for the purpose of valuation being made u/s 131(1)(d) by stating as follows:
"11.The common feature of ss. 133(6) and 142(2) is that the AO is the fact-finding authority. It is his opinion on the basis of the facts as found on an enquiry conducted by himself which results in the assessment order. A report by the Valuation Officer under s. 55A is, on the other hand, the outcome of an inquiry held by the Valuation Officer himself and reflects his opinion on the evidence before him. Such a report would not be the result of an inquiry by the AO under the provisions of s. 133(6) or s. 142(2). It is true that the AO is not bound by strict rules of evidence and a report of a Valuation Officer under s. 55A may be considered by the AO as a piece of evidence if it is relevant [See CIT vs. East Commercial Co. Ltd. (1967) 63 ITR 449 (SC), 457]. However, the power of inquiry granted to an AO under ss. 133(6) and 142(2) does not include the power to refer the matter to the Valuation Officer for an enquiry by him."
16. The reference in the present case having been made under general provision u/s 131(1)(d) is, therefore, illegal and invalid and beyond the powers of the Assessing Officer. Further, even for a moment if we assume that reference was made u/s 142A and the mentioning of section 131(1)(d) was wrong, the reference, we hold, is still not valid since, as rightly argued by the Ld. counsel for the assessee, as per the provisions of section 142A prevailing at the time the reference was made, the reference could have been made only for determining the cost of construction of the asset and not the sale consideration of the asset. Section 142A, inserted by Finance Act 2004 and applicable in the present case states as follows:
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'142A. Estimate by Valuation Officer in certain cases.--(1) For the purposes of making an assessment or re-assessment under this Act, where an estimate of the value of any in- vestment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B or fair market value of any property referred to in sub-section (2) of section 56 is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him.
(2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957).
(3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or re-assessment:
Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A."
17. The said section has been interpreted by the Delhi Bench of the I.T.A.T. in the case of Namita Singh (supra) wherein, the I.T.A.T., we find, has elucidated the scope of reference made u/s 142A of the Act as being applicable only when the value of investment is to be determined and not the value of sale consideration. The Tribunal in the said case observed as under:
" 1 5 . Under s. 142A of the Act the AO is empowered to refer to the valuation cell for the purpose of making an assessment or reassessment where an estimate of the value of any investment referred to in s. 69 or 69B or the value of any bullion, jewellery or other valuable article, referred to in s. 69A or s. 69B. Thus provisions of s. 142A are applicable where the 16 value of investment is to be determined. Provisions of s. 142A are not applicable for the purpose of determination of full value of consideration. Therefore, in our considered opinion, in the absence of any contrary evidence, full value of consideration cannot be estimated under s. 142A."
18. This view is further fortified by the memorandum, explaining the reasons and objects for including provisions 142A and which states that the said provisions has been introduced to remove doubts whether the Assessing Officer can make reference to Valuation Officer for estimating the cost of construction. The relevant portion of the memorandum is reproduced hereunder:
36. Clarificatory amendments regarding estimates by Valuation Officer in certain cases The existing provisions of section 131 provide that the Assessing Officer shall have the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit. One such power which has been provided in clause (d) of sub-
section (1) of section 131, is the power to issue commissions. Section 75 of CPC and order XXVI of the Schedule thereto lays down the power of issuing commission', which inter alia, empowers the Court to make a local investigation and also "to hold a scientific, technical and expert investigation". Using this power, the Assessing Officer has been making a reference to the Valuation Officer for estimating the cost of construction of properties.
The scope of power vested in an Assessing Officer under section 131 to make a reference to the Valuation Officer for estimating the cost of construction of properties has been a subject-matter of litigation.
A new section 142A has been inserted by the Finance (No. 2) Act, 2004 to specifically provide that an Assessing Officer has the power to make a reference to the Valuation Officer for estimating the value of investment, expenditure, etc. This section has been inserted with retrospective effect from 15th November, 1972 to save the cases where such references have been made in the past and are still pending in litigation at one stage or the other.
19. Further 2009 Guidelines of valuation of immovable property Department of Revenue lend credence 17 to the above view. The said guidelines are reproduced hereunder:
2.3.6 Under S ub Se ction 1 of Section 142A of Income Tax A ct, 1961 introduced by the Finance Act of 2004, subsequent to the Supreme Court Judgment in Amiya Bala Pal case, the A ssessing Officer may refer the V a l u a t i o n Officer to make an estimate of the value of an i n v e s t m e n t referred to in Section 69A and 69B of the Income Tax A ct. It is to be unde r s to od t ha t in v es t me nt r ef e r re d to i n th i s se ct io n pe r ta in s to th e investm en t made by the as ses s ee in the constr uct ion of the property and not the investment made in the purchase of the property. The Valuation O f f i c e r u n d e r t h i s s e c t i o n s h a l l h a v e t h e s a m e p o we r s a s h e h a s u n d e r section 38A of the Wealth Tax Act, 1957. The reference made under this section 142A is an Advisory Reference and the Assessing O f f i c e r m a y after giving the assessee an opportunity of being heard take into account s u c h r e p o r t o f t h e V a l u a t i o n O f f i c e r f o r m a k i n g a s s e s s m e n t o r r e assessment.
20. Thus it is amply clear from the above that the Assessing Officer in the present case had no powers under the Act to refer the valuation of the impugned property to the DVO for the purpose of determining the sale consideration of the property. Therefore, we hold that the reference made to the DVO u/s 131(1)(d) was invalid.
21. The Ld. counsel for the assessee further argued that by substituting sale consideration by FMV in the absence of the Act any evidence of the assessee having acquired any sum over and above the stated consideration, the Assessing Officer has attempted to bring to tax the notional profits of the assessee which is impermissible under the law. The Ld. counsel for the assessee has relied upon the following judgments in this regard:
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1) Poona Electric Supply Co. Ltd. Vs. CIT (1965) 57 ITR 521 (SC)
2) CIT Vs. Prafulla Kr Mallick (1969) 73 ITR 119 (Orissa)
3) K.P. Varghese Vs. ITO (1981) 131 ITR 597 (SC)
4) CIT Vs. Shakuntala Devi (2009) 224 CTR 79 (Delhi)
5) Principal CIT-2, Chd. Vs. Quark Media House India (P) Ltd.
(2017) 77 Taxmann.com 301 (P&H)
22. The Ld. counsel for the assessee relied upon the decision of the Hon'ble Jurisdictional High Court in the case of Paramjit Singh Vs. ITO (2010) 195 Taxman 273 (P&H) and stated that the sale consideration disclosed in sale deed has to be accepted and cannot be contradicted merely on the basis of oral evidence. The Ld. counsel for the assessee submitted that the actual sale consideration cannot be substituted by fair market value and relied upon the following decisions in this regard:
1) CIT Vs. Smt.Nilofer I. Singh
(2009) 309 ITR 233 (Del)
2) CIT Vs. George Henderson & Co. Ltd.
(1967) 66 ITR 622 (SC)
3) Gillanders Arbuthnot & Co.
(1973) 87 ITR 407 (SC)
23. The Ld. counsel for the assessee also submitted that in a bonafide sale transaction nothing compels a trader to sell on market rate and sale consideration is to be accepted unless transaction is proven to be sham or bogus, the onus for which lies on the Revenue to 19 establish. Reliance was placed on a number of decisions in this regard, particularly CIT Vs. Calcutta Discount Co. Ltd. (1973) 91 ITR 8.
24. On this score also we are in agreement with the Ld. counsel for the assessee. Evidently, the Assessing Officer has merely substituted the sale consideration with FMV of the property determined by the DVO. No other evidence has been brought on record to prove that the assessee has earned more than the stated consideration. The DVO's report is at best only a pointer to the price that the property can fetch in the market. It does not on its own establish that the assessee has earned more than the stated sale consideration. DVO's report on a stand alone basis merely raises a suspicion that the property must have been sold for a higher price and suspicion, however, grave, cannot the basis for making an addition. Besides we find the assessee had also explained the reasons for fall in price as follows as being due to decline in market on account of economic global downturn. The assessee placed extracts of the CRISIL Residential Real Estate 2010 report before the Ld.CIT(A) placed at P.B
166.The Ld DR has not controverted the same. Besides to demonstrate the prevalent market conditions for the impugned property, report of an approved valuer determining the FMV at Rs.3.52 Crores was filed and also comparable sales in the same development by the same builder during the same period with a third party showing 20 lower per square yard sale price as compared to the assessee was filed placed at paper book pg. no.61-124.No observations with regard to these evidences have been made by the lower authorities or even the Ld.DR before us. The assessee had besides demonstrating the genuineness of the sale consideration received by it also pointed out errors in the DVO's report that it had adopted circle rate of commercial properties while the assessees property was residential and had a much lower circle rate. Detailed submissions were made to the AO vide letter dated 07-3-2013 alongwith copy of expert opinion of a Govt. Approved Valuer pointing out discrepancies in the DVO's report placed at paper book page no 143-163.but the same we find were not considered by the lower authorities .
25. Therefore, considering the fact that the assessee has established the sale consideration received by virtue of the sale deed, coupled with the fact that no shred of evidence, of the assessee having earned more than the stated consideration, has been brought on record by the Revenue, we unhesitantingly hold that the Assessing Officer has erred in taking the fair market value as the sale consideration received by the assessee and by doing so has sought to tax the notional profits of the assessee, which is not permissible under the Act. The reliance placed by the assessee on the decision of the Hon'ble Apex Court in the case of K.P. Varghese (supra) is apt, wherein 21 it has been categorically held that the onus is on the revenue to prove understatement in the document and establish a condition of taxability. There has to be evidence that consideration actually received was more than what was disclosed or declared and it has to be established that the assessee has stated a false fact.
26. The Ld.Counsel for the assessee has rightly referred to the decision of the Apex Court in the case of CIT vs Calcutta Discount Co. Ltd.(1973) 91 ITR 8 wherein it was held that where a trader transfers goods to another trader at a price less than the market price and the transaction is a bonafide one, the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched to ascertain the profit from the transaction.
27. In view of the above, we hold that reference made to the DVO for determining the FMV of the property was invalid and as consequence the sale consideration of the property could not have been substituted by FMV determined by the DVO. We therefore set aside the order of the Ld. CIT (Appeals) and delete the addition made of Rs.1,19,39,461/-.
28. The appeal of the assessee is, therefore, allowed in the above terms 22 ITA No.716/Chd/2016:
29. Since the facts & circumstances and issues involved in this are similar to that in ITA No.717/Chd/2016, therefore, our decision rendered in ITA No.717/Chd/will apply to ITA No.716/Chd/2016 with equal force.
30. The appeal of the assessee is, therefore, allowed in the above terms.
31. In the result, both the appeals of the assessees are allowed.
Order pronounced in the open court.
Sd/- Sd/-
(BHAVNESH SAINI) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 3 r d April, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh