TMI Blog2014 (4) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purchase price, but also to show the precise extent of the understatement - There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement - since it may not be possible in all cases to prove the precise or exact amount of undisclosed investment, it is perhaps reasonable to permit the AO to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment - It is only to the extent that the rigour of the burden placed on the AO may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking - mere suspicion cannot take the place of proof - mere reliance upon the report of the Valuation Officer expressing his opinion as to the true value would be inadequate material for the AO to constitute evidence in the absence of positive evidence – thus, no substantial question of law arises foe consideration – Decided against Revenue. Short Term Capital Gain - Stamp duty - Held that:- the Tribunal rightly was of the view that direction to correctly apply the stamp duty rates to the sale price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that the report of the DVO had high evidentiary value given the circumstance that the assessee did not cooperate in the enquiry by the AO. It is contended that the DVO s report took into consideration all the relevant materials such as the value of the surrounding lands and the market value thereof. In view of these circumstances as well as the inability of the assessee to produce the sellers of the land purchased by it, the approach and order of the AO was justified. 4. This Court notices that the Tribunal rejected the Revenue s contentions holding that the onus to prove under valuation through positive evidence is upon the Revenue. The Tribunal had relied upon the judgments of the Supreme Court reported as CIT v. Daulat Mal Rawat Mal, 87 ITR 349 (SC), K.P. Verghese v. ITO, 131 ITR 597 (SC) and CIT v. Bedi Company, 230 ITR 580 (SC). The entirety of the circumstances, i.e., the examination of the assessee s representations, the report of the DVO etc. were considered and discussed by the Tribunal in the operative part of its reasoning at paragraph 6-8. The relevant discussion is extracted below: - 7. Now, as per Section 69B of the Act, the requirements which need to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following cases, as correctly noted by the Ld. CIT (A), it has been held that the onus is on the revenue to substitute apparent consideration and that addition u/s 69B of the Act can be made only on the basis of positive material or evidence regarding consideration in excess of what is recorded in the books as having been paid and that no addition u/s 69B of the Act can be made simply on the basis of difference of opinion as to the market value of the asset: - i) CIT vs. Banwarilal Murwatiya , 2008-TIOL-124-HC-RAJ-IT. ii) Sanjay Chawla v. ITO , 89 ITD 586-606 iii) ITO vs. Satyanarayan Agarwal , 112 TTJ 717 (JD) iv) Jai Marwar Co. (P) Ltd. v. ACIT , 79 TTJ 178 (JD) v) Dilshad Trading Co. (P) Ltd. vs. ITO , 49 ITD 348 (Bom) 8. It is only on the basis of a definite finding of the Assessing Officer to the forgoing effect that a reference can be made to the valuation officer u/s 142A of the Act. It goes without saying that the provisions of Section 142A(1) of the Act are merely machinery provisions and the substantive provisions of Section 69B cannot be overridden by them. IN the present; ;case, on the other hand, undisputedly, the Assessing Officer did not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en estimation of the fair market value, but computation of the value of the asset on the basis of certain rules prescribed by the statute. If A dies leaving prime property in Connaught Place to his son B, B pays nothing for the property; the property may command a market price of several crores. If A , because of his love and affection for B , sells the property for Rupee One to B ; in this case, the consideration paid is only Rupee One, though the property is worth several millions. If the Assessing Officer having jurisdiction over B has to make an addition under section 69B, he can do so only if he finds that B has expended money which he has not fully recorded in this books of account; he cannot make any addition merely because the property could fetch several crore of rupees in the market. 11. Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. We however clarify that this Court is not concluding that such yardstick is determinative; in view of the findings arrived at by us that the Assessing Officer did not gather foundational facts to point to undervaluation the adoption of the norms under the Wealth Tax Act is not commented upon by us. 13. The error committed by the income-tax authorities in the present case is to jump the first step in the process of applying section 69B - that of proving understatement of the investment - and apply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorise the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,75,550/-. The assessing Officer observed that since the purchase cost had been understated by an amount of Rs.29,80,511/-, correspondingly the sale price was also understated by an equal amount of Rs.29,80,511/-, due to which, according to the Assessing Officer the short-term capital gain of Rs.29,80,511/- had also been understated by the assessee in its return of income. The Ld. CIT (A) deleted the addition made by the Assessing Officer. 12. In this regard, it has been correctly found that the Assessing Officer had erred in taking the cost of acquisition without considering the stamp duty towards such cost of acquisition. The sale consideration was also taken at a rate higher than the circle rate. Thus, whereas the stamp duty payable and the correct sale consideration, based on the circle rates, as per the provisions of Section 50C of the Act were to be considered. This error has appropriately been rectified by the Ld. CIT (A) while directing the Assessing Officer to recomputed the STCG by taking the cost of plot at Rs.12 lac to include the stamp duty towards the cost of acquisition. The Ld. CIT (A) also correctly directed to apply the stamp duty rates to the sale price of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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