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2015 (5) TMI 725

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..... 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 sale deed was duly enclosed in the assessee’s reply to the AO’s query. The only 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 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. D .....

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..... stated, the facts with reference to the addition of ₹ 3,45,75,000/- are as follows :- The assessee had 25% share in respect of a property at Satbari Village and paid ₹ 1 crores as sale consideration for the subject property. The property was purchased from M/s. Space Age Technical Services Pvt. Ltd [SATSPL] on 28.3.2007 for 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 prepared by an Approved Valuer, namely, Sri Ashok Raichand. The approved valuer, in his valuation report, arrived at the market value of the said property at ₹ 17.83 crores. According to the AO, since the sale consideration recorded in the sale deed was only ₹ 4 crores for the impugned property, the balance amount of ₹ 13.83 cror .....

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..... rom 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 and the communication of his satisfaction for issue of notice u/s 148 was communicated by letter no. 3961 dated 25.03.2013, which was received by the AO on 26.03.2013. Therefore, the claim of the appellant, that the notice u/s 148 was not valid because it was issued after the expiry of 4 years from the end of the relevant A Y, was not maintainable. 5.3. Thus, by communicating the reasons for re-opening the assessment u/s 147, providing the copy of the material (the Approved Valuer's report) on 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 2 .....

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..... laim - that the value of ₹ 17.83 crores determined by the Approved Valuer as the fair market value did not reflect the real value but represented inflated value to enable Space Age Technical Services 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 proposition for the seller to close the deal at merely ₹ 4 crores. 6.3.5. In view of the above discussion, It is obvious thatthe stated value of consideration at ₹ 4 crores for transaction of property B-3, Ansal Villa, Village Satbari, Tehsil Mehrauli, New Delhi was not correct; that the market value determined by the Approved Valuer at ₹ 17.83 crores as per the valuation report found during search/survey on the Tinna group was the actual sale consideration; and that out of & .....

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..... ll the necessary details were filed before the AO during the course of original assessment proceedings and, as such, the reopening of the assessment was bad in law Refer: CIT v. Usha International Ltd [348 ITR 485 (Del)]; (iv) that even on merits, the addition made by the AO was not sustainable in law as the AO had solely placed reliance on the report of the valuation officer and in doing so, the AO had failed to discharge his initial burden which rests upon him u/s 69 of the Act. Since, the AO had failed to conduct further enquiries and investigation to prove that the alleged payment had been made by the assessee, no addition 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 the Act and, thus, issuance of a notice u/s 143(2) of th .....

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..... d report, the approved valuer had allegedly arrived at the value 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. Though there were agreements for sale for other properties seized in the form of a CD, there was nothing on record to show that those agreements have resulted in sale of properties at the mentioned prices of the agreements. Admittedly, the AO had no material evidence on hand to prove conclusively that the assessee had understated the value of the impugned property. In other-words, the AO had not discharged the primary burden of proof to establish that the assessee, in fact, understated the value of 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 .....

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..... from this, there was admittedly no evidence or material in his possession to come to the conclusion that the assessee had paid extra consideration over and above what was stated in the sale deed. This very issue has come up for consideration before this court repeatedly and after following the judgment of the Supreme Court in the case of K.P. Varghese (1981) 131 ITR 597 (SC), the aforesaid proposition of law is reiterated time and again. For our benefit, 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 upon without the books of account being rejected which had not been done in that case. (ii) In CIT v. Smt. Suraj Devi reported in (2010) 328 ITR 0604 (Del), the Hon ble Court has held that - It is settled that that the pr .....

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..... 00/-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. Admittedly, no incriminating document was found which point out that there was under-statement of the value of the impugned property in the sale deed. The AO, in the course of original assessment proceeding in pursuance of the search, was aware of the purchase of the impugned property by the assessee. The assessee, in his reply dated 25.11.2008 to the AO s query, had mentioned the fact that he made investment in agricultural land for an amount of ₹ 1 crore and the sale deed was also enclosed along 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 th .....

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..... material fact had not been fully and truly disclosed by the petitioner/assessee. 17. In the instant case, as mentioned earlier, in the course of original assessment proceeding, the AO was made aware of the purchase of the impugned property and the sale deed was duly enclosed in the assessee s reply to the AO s query. The only 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 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 (supra) and (ii) CIT v. Usha International Ltd reported in (2012) 348 ITR 0485 (Del). Furthermore, as mentioned earlier, the valuation r .....

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