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Shri Daljeet Singh, Versus ACIT, Central Circle 17, New Delhi

2015 (5) TMI 725 - ITAT DELHI

Unexplained investment - addition u/s 69 - Held that:- Incidentally in the case under dispute, the AO had neither applied his mind nor formed a belief, but, merely came to the conclusion, based on the report of the approved valuer found during the search operation at the premises of Tinna Group of cases, that the value of the land under dispute was shown highly understated and, accordingly, initiated proceedings u/s 147 of the Act. Moreover, in the course of assessment proceeding of the seller, .....

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uch above the guideline/circle rate.Taking into account all the facts and circumstances we are of the view that the CIT (A) was not justified in sustaining the addition of ₹ 3,45,75,000/-made by the AO u/s 69 of the Act as the AO had solely placed reliance on the report of the approved valuer. It is ordered accordingly.

Reopening of assessment - Held that:- In the course of original assessment proceeding, the AO was made aware of the purchase of the impugned property and the sal .....

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nd seizure action conducted in the premises of the assessee, the reopening of the assessment was merely based on change of opinion of the AO. For taking the above view, we are fortified by the judgments of the Hon’ble Jurisdictional High Court in the cases of (i) Global Signal Cables (India) (P) Ltd v. DCIT (2014 (10) TMI 547 - DELHI HIGH COURT) and (ii) CIT v. Usha International Ltd reported in (2012 (9) TMI 767 - DELHI HIGH COURT). Also see Mahashay Chunnilal v. DCIT [2014 (2) TMI 950 - DELHI .....

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s of appeal has raised seven grounds. During the course of hearing, the learned AR did not press ground No.6. Hence, ground No.6 is dismissed as not pressed . Ground No.7 is regarding levy of interest under sections 234A, 234B and 234C of the Act. Levy of interest under the above provisions are consequential in nature and, hence, ground No.7 is dismissed as no adjudication is required on the same. The surviving grounds, namely, ground Nos.1 to 4 relate to theissue of validity of the re-opening o .....

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cluded the assessment u/s 143(3) of the Act on 31.12.2008 on a total income of ₹ 9,00,29,900/-. Subsequently, the assessment in this case was reopened by issuance of a Notice u/s 148 of the Act on 28.3.2013. After taking into account the assessee s contentions made during the course of re-assessment proceedings and also the detailed reasons as recorded in the impugned assessment order under dispute, the AO concluded the reassessment order u/s 143(3) r.w.s. 147 of the Act dated 26.3.2014, d .....

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r a consideration of ₹ 4 crores by the assessee (having 25% share), Rachpal Singh ( 50% share) and Harinder Singh (25% share).There was a search and seizure action u/s 132 of the Act in the premises of Tinna group on 11.11.2012. The seller of the impugned property namely M/S.SATSPL was part of the group concern of Tinna group of companies. In the course of search proceedings conducted in the premises of Tinna group of cases, the Revenue seized a valuation report of the impugned property pr .....

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3 crores, a sum of ₹ 3.45,75,000/- was added by the AO as unexplained investment u/s 69 of the Act in the hands of the assessee. While doing so, the AO brushed aside the assessee s objection with regard to the validity of reopening of the assessment and also on merits that the addition cannot be made merely on the basis of a report of an approved officer which was recovered from the premises of the seller (SATSPL) without any other corroborative evidence. 5. Aggrieved, the assessee took up .....

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nt of some unexplained expenditure. It was only during the search/survey on 11/11/2000 on Tinna Group that the Approved Valuer's report was found, which valued the transacted property at ₹ 17.83 crores as on 1611212006, as against its reported sale consideration of ₹ 4 crores on 28/3/2007, that led to the reasonable belief of the AO that the property transaction had been under-reported by the buyer and the seller, resulting in income escaping assessment. In this background, the c .....

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had lapsed, the AO categorically informed the appellant that the re-opening of assessment had been approved by the competent authority. Now, since the re-opening of the appellant's case was-after the, expiry of 4 years from the end of the relevant AY, in terms of the proviso to section 151 (1), the approval of the Commissioner on the reasons recorded by the AO was mandatory. As the perusal of the assessment record reveals, the reasons recorded by the AO were considered by the Commissioner a .....

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n the basis of which he had reasons to believe about the income escaping assessment, and by informing that the notice had been issued with the prior approval of the competent authority, the AO disposed the objection raised by the appellant in his letter filed on 2112/2013. 5.4. Sheer obduracy of the appellant in persisting with objection to the reassessment proceedings by subsequent letters filed on 13/,1/2014 and 26/2/2014, and then claiming in the appellate proceedings that the objections rais .....

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(filed on 02.12.2013, 13.01.2014, 26.02.2014) referred to any decision of any judicial authority. 5.5. Since the AD had provided the copy of the Approved Valuer's report, on the basis of which he had formed his satisfaction to re-open the assessment, and which was found by the department during search/survey on 11111/2010 in the Tinna group, much after the assessment order u/s 143(3) had been passed on 31.l2.2008,and also because the Commissioner was satisfied on the reasons recorded by him .....

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rket value fixed by the approved valuer in his report which was seized during the course search and seizure proceedings in the premises of the seller s group namely Tinna group of cases. The CIT (A) also did not accept the DVO s report who had fixed the value of the impugned property at ₹ 1.64,28,000/- [the DVO s report was taken by the AO during the course of assessment proceedings of the seller]. The relevant findings of the CIT (A) with reference to issue on merit read as follows 6.3.4. .....

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s P Ltd to 'obtain high finance' or 'negotiate on the basis of Inflated value' and 'get good price' for the property - lies in the realm of imagination. In any case, as evident from the sale deed, the property was not mortgaged by the seller to obtain finance. As for the 'purpose of negotiation', it may be stated that once the market value of the property became known at ₹ 17.83 crores, and in the absence of distress sale, it would have been a mindless propo .....

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17.83 crores, the buyers paid only ₹ 4 crores in cheque and the balance of ₹ 13.83 crores was paid ill cash out of undisclosed income. Now, since the appellant's share in the property was25%, the total consideration paid by him was held to be ₹ 4,45,75,000, of which ₹ 1 crore was paid through banking channel and the remaining ₹ 3,45,75,000 was held to have been paid in cash .out of undisclosed income. Thus the AO was justified in adding ₹ 3,45,75,000 to th .....

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e, was not maintainable since the seller was never posited by the AO as his witness. 6.3.7. Therefore, grounds 1, 4, 5, 6, 7, 8 and 10 of the appeal are dismissed. 7. Being aggrieved, the assessee has come up before us with the present appeal. During the course of hearing, the submissions made by the learned AR are summarized as under: (i) that the valuation report which has been sought to be relied on by the department for re-opening of the assessment under section 148 of the Act was not a fres .....

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eedings u/s 143(3) of the Act and that in the present case, the said disclosure by the AO was absent in the reasons recorded and, thus, the reassessment order requires to be quashed on this count alone - Refer: Global signatures Cable (India) Ltd. v. DCIT [368 ITR 609 (Del)] (iii) that the reopening of the assessment was merely based on change of opinion of the AO as all the necessary details were filed before the AO during the course of original assessment proceedings and, as such, the reopenin .....

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ddition could have been made in the hands of the assessee. Refer: (a) CIT v. Naveen Gera - 328 ITR 516 (Del); (b) CIT v. Puneet Sabharwal - 338 ITR 485 (Del); (c) CIT v. Suraj Devi - 328 ITR 604 (SC); (d) CIT v. Ved Prakash Chowdhary - 305 ITR 245 (Del); & (e) CIT v. Naresh Khattar HUF - 261 ITR 664 (Del) (v) that notice u/s 143(2) of the Act dt. 18.3.2014 was issued by the AO by ignoring the basic fact that no return of income was filed by the assessee in pursuance of a notice u/s 148 of th .....

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Hon ble jurisdictional High Court in the case of Bawa Abhai Singh v. DCIT reported in (2002) 253 ITR 0083 (Del). The learned A Rin his rejoindersubmitted that the very case relied on by the learned DR was taken note of by the Hon ble jurisdictional High Court in its subsequent judgment in the case of Mahashay Chunnilal v. DCIT reported in (2014) 362 ITR 0314 (Del) and had, in fact, distinguished the judgment relied on by the Revenue in the case of Bawa Abhai Singh (supra). 9. We have carefully c .....

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ribunal restored the appeals before the CIT (A) and it in this context the matter is still pending for disposal before the CIT (A). Similarly, the issue in the hands of the seller is also pending for adjudication before the CIT (A). 10. The twin issues that arise for our consideration are, namely : (i) Whether the reopening of the assessment by issuance of a notice u/s 148 of the Act is valid? and (ii) Whether the CIT (A) was justified in confirming the AO s action in making an addition of ͅ .....

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of the impugned property at ₹ 17.83 crores. Accordingly, the AO had come to a conclusion that the assessee had under-stated the value of the subject property by ₹ 13.83 crores [Rs.17.83 - ₹ 4 crores]. Apart from this, there was, apparently, no documentary evidence or material in his possession to come to a definite conclusion that the assessee had made extra consideration over and above what was described in the sale deed with reference to the purchase of impugned property. Tho .....

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the property in the sale deed. In the absence of any material or proof, the AO cannot proceed to rely upon the valuation arrived at by an approved valuer and, thus, come to a conclusion that the subject property has been understated in its value. The valuation report prepared by the approved valuer and seized from the premises of the seller had not divulged the reason for which it was prepared. The seller itself objected to the value to be adopted in its hands for the purpose of capital gains. .....

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urts have held that the primary burden of proof to prove under-statement or concealment of income of the assessee was on the Revenue. For ready reference, the judgments delivered by various Hon ble Courts on a similar issue are mentioned hereunder: (i) In the case of CIT v. Naveen Gera reported in (2010) 328 ITR 0516 (Del), the Hon ble Delhi High Court had held that - …………….that the concealed income was detected during the course of search or any evidence was f .....

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Revenue to show that there has been an understatement or concealment of income. It is only when such burden has been discharged, would it be permissible to rely upon the valuation given by the DVO. Further, the opinion of the DVO, per se, is not an information and cannot be relied upon in the absence of other corroborative evidence…. (ii) In CIT v. Puneet Sabharwal (supra), the Hon ble Jurisdictional High Court had held that - ….the assessing officer solely relied upon the report .....

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we may refer to the latest judgment of this court in the case of CIT v. Smt. Suraj Devi (2010) 328 ITR 604 (Delhi), wherein this court had held that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. It was also held that then opinion of the Valuation Officer per se was not information and could not be relied up .....

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(2009) 316 ITR 46 (Del) and CIT v. Vinodsinghal [I.T.A NO.482 OF 2010 decided by this court on May 5, 2010]. In any event, the opinion of the DVO, per se is not an information and cannot be relied upon without the books of account being rejected which has not been done in the present case….. (iv) The Hon ble Supreme Court in the case of Asst. ACIT v. Dhariya Construction Co. (2010) 328 ITR 515 (SC) had held (on Page 515) that …the Department sought reopening of the assessment based .....

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d valuer found during the search operation at the premises of Tinna Group of cases, that the value of the land under dispute was shown highly understated and, accordingly, initiated proceedings u/s 147 of the Act. Moreover, in the course of assessment proceeding of the seller, the impugned property was referred to the DVO of the Department for valuation and he arrived at the value of ₹ 1.64crores which was much below than the price mentioned in the sale deed of the impugned property. The v .....

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s (supra), we are of the view that the CIT (A) was not justified in sustaining the addition of ₹ 3,45,75,000/-made by the AO u/s 69 of the Act as the AO had solely placed reliance on the report of the approved valuer. It is ordered accordingly. 15. With regard to the assessee s objection to the re-opening of the assessment by issuance of a notice u/s 148 of the Act, our findings are as follows: In the instant case, there was a search in the premises of the assessee on 18.01.2007. Admittedl .....

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with the reply filed in the course of original assessment proceeding. The assessee s reply along with the enclosed document to the AO s query in the original proceeding was placed at pages 14- 76 of the Paper Book furnished by the assessee. The AO, in the course of original proceeding, did not refer to the DVO to ascertain the market value of the impugned property. Undisputedly, in this case, notice u/s 148 of the Act was issued beyond four years from the date of the end of the assessment year a .....

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chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 16. From the above proviso, it is clear, the AO must have a reason to believe that the escapement of income from assessment must be occasioned by the fail .....

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d truly disclose the material facts for assessment, he has not indicated as to which material fact had not been fully and truly disclosed. In such circumstances, the re-opening of the assessment has been held to be invalid by the Hon ble jurisdictional High Court in the case of Global Signal Cables (India) (P) Ltd v. DCIT reported in (2015) 54 taxmann.com 114(Delhi). The relevant findings of the Hon ble High Court read as under: 17. It is evident that while the assessing officer mentioned that i .....

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nly reason for the reopening of the assessment was the alleged seizure of the valuation report of the approved valuer from the premises of the sellers of the impugned property. The valuation report of the approved valuer was nothing but an opinion expressed by him. Therefore, when all the necessary details were filed and taken note of by the AO during the course of the original assessment proceeding pursuant to the search and seizure action conducted in the premises of the assessee, the reopenin .....

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