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2015 (7) TMI 250 - ITAT DELHI

2015 (7) TMI 250 - ITAT DELHI - TMI - Understatement of investment - Assessing Officer had treated the difference between the purchase consideration shown by the assessee and the fair market value as on the date of purchase determined by the DVO as unexplained money paid by the assessee for the purchase or the property - CIT(A) deleted the addition - Held that:- There was no reference whatsoever made by the AO to any material/evidence/information on the basis of which it could be said that the s .....

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ed out any defects in the books as far as related to the investment made by the appellant.

Assessing Officer has erred in referring the matter to the DVO and consequently the DVO's report on the value of investment in the property cannot replace the actual purchase value shown in the purchase deed of the aforesaid property at J-1/161, Rajouri Garden, New Delhi. Hence, the Assessing Officer has erred in adopting the value of the property at J-1/161, Rajouri Garden, New Delhi estimated .....

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is is against the principle of natural justice. In this regard it is seen that the AO had issued a show cause notice dated 21-03-2013 for submitting reply on 22-03- 2013 i.e. immediately next date, Therefore, assessing officer has not given sufficient opportunity of being heard to the assessee. It cannot be said that by giving opportunity of being heard for hearing immediately one day assessing officer has discharged his obligation of giving opportunity of being heard. Thus Ld. CIT(A) was right .....

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no mention about the admission of additional evidence - Decided against revenue.

Claim of assessee u/s. 54 - CIT(A) rightly directed the AO to consider the claim u/s 54 - Held that:- As during the relevant assessment year, the assessee has sold a property at 20C/72, West Punjabi Nagar, New Delhi for the consideration of ₹ 95,00,000/- as per the registered value of the property (whereas during the course of survey, the same property was found to be valued at ₹ 3,87,00,000/ .....

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ble Supreme Court of India in the case of National Thermal Power Co. Ltd. vs. CIT 229 ITR 383. The AO has not considered the claim of exemption of the assessee u/s. 54 in respect of the capital gain arose in respect of the sale of property at 20C/72, West Punjabi Bagh, New Delhi. In view of the above, in our considered opinion, the Ld. CIT(A) rightly directed the AO to consider the aforesaid claim of the assessee of exemption u/s 54 of the I.T. Act, while computing the income of the assessee. We .....

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eals filed by the Revenue and Assessee emanate out of the Order passed by the Ld. CIT(A)-XXIV, New Delhi pertaining to assessment year 2009-10. Since the issues are common and identical, hence, these are being decided by this common Order for the sake of convenience. 2. The grounds raised in the Revenue s Appeal No. 5698/Del/2014 read as under:- On the facts and circumstances of the case and in law CIT(A) has erred in:- 1. Deleting the addition of ₹ 3,53,30,000/- made by the AO on account .....

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r CIT(A) has reproduced ground no. 4 also. 2. The AO erred in taking sales consideration u/s. 48 on the basis of market value as per old valuation report instead of actual sales consideration of ₹ 95,00,000/- as per registered sales deed and as such additions be deleted. 3. That exemption u/s. 54 be allowed to the assessee in respect of residential property purchased by the assessee. 4. That CIT(A) erred in holding that case of the assessee is squarely covered u/s. 292BB. 5. The assessee c .....

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a report was prepared by the ADIT (Inv) Unit-Ill, Delhi and the same was forwarded to the Assessing Officer of the appellant. As per information and documents seized, it was found that the assessee had made investment in the following property:- S.No. Address of property Date of Purchase Value (In Rs.) 1. J-1/161, Rajouri Garden, New Delhi 19.05.2008 88,58,420/- It was also noted that during the year, the assessee has also sold property no. 20C/72, West Punjabi Bagh, New Delhi on 17-09-2008 for .....

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essee submitted the copies of purchase deeds of the aforesaid properties on 02.09.2011. However, the assessee did not make any submission regarding the source of investment in the J-1/161, Rajouri Garden, New Delhi. In the absence of any explanation from the assessee about the source of investment in the aforesaid property, the Assessing Officer formed an opinion that the investments made by the assessee are unexplained and after recording reason to believe, he issued a notice u/s 148 of the I T .....

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nce the assessee submitted before the Assessing Officer that the purchases were made through banking channels and in support of her contention, she submitted the copy of the bank statement at BOI Kirti Nagar Branch and Axis Bank, New Delhi. However, the Assessing Officer was not satisfied with the explanation of the assessee and vide letter dated 21.11.2012, he referred the matter to the valuation officer for estimation of value officer for estimation made by the assessee in the property J-1/161 .....

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not the aforesaid property should be valued at ₹ 3,53,30,000/- as per the Report of the Valuation Officer by 22.03.2013. The assessee could not explain the difference in the valuation of the aforesaid property. Therefore, the Assessing Officer. concluded that the assessee failed to explain the investments in the property by establishing the genuineness and her creditworthiness and he added the aggregate values of the property at ₹ 3,53,30,000/- (i.e. at J-1/161, Rajouri Garden, New .....

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port. No explanation/documentary evidence in this regard has been furnished by the assessee. Hence, long term capital gain on this property for the Assessment year 2009-2010 is computed as under and added back to the total income of the assessee:- Sales Consideration (as per Valuation report) 3,87,00,000 Less: Index cost of acquisition 891000*582/259 20,02,170 Long Term Capital Gain 3,66,97,830 4.3 Thereafter, the AO completed the assessment u/s 147/143(3) of the I T Act vide order dated 25.03.2 .....

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addition in dispute on account of unexplained income which has rightly been made by the AO. He further stated that Ld. CIT(A) has admitted the additional evidence produced by the assessee without giving proper opportunity to the AO which is contrary to Rule 46A of the Income Tax Rules, 1962. Therefore, he requested that the issue in dispute may be set aside to the file of the Ld. CIT(A) to decide the same afresh, after giving adequate opportunity on the admission of additional evidence to the AO .....

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stated that the Ld. CIT(A) has rightly deleted the addition of ₹ 3,53,30,000/- on account of unexplained income for which the assessee has produced sufficient opportunity before the Revenue Authority. He further stated that the assessee has not filed any additional evidence before the Ld. CIT(A), therefore, there is no question to giving the opportunity to the AO under Rule 46 of the I.T. Rules, 1962. He further stated that the sale consideration received by the assessee is ₹ 95 lac .....

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following decisions of the Hon ble Delhi High Court:- CIT vs. Smt. Nilofer I. Singh [2009] 176 TAXMANN 252 (Delhi) - CIT vs. Aerens Inrastructure & Technology Ltd. vs. DCIT [2011] 16 taxmann.com 400 (Delhi). - CIT vs. Anil Arora ITA No. 340/2015 & CM No. 9241/2015 vide order dated 22.5.2015. In view of above discussions and precedents, Ld. Counsel of the Assessee requested that the Appeal filed by the Revenue may be dismissed. 9. We have heard both the parties and perused the records, e .....

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as held expression full value of consideration used in section 48 does not have any reference to market value but only to consideration referred to in sale deeds as sale price of assets which have been transferred. 10.1 We further find that in the case of - CIT vs. Aerens Inrastructure & Technology Ltd. vs. DCIT [2011] 16 taxmann.com 400 (Delhi), the Hon ble High Court has confirmed the order of the ITAT wherein the Tribunal deleted the addition of ₹ 48,68,774/- made by the AO on accou .....

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Anil Arora decided on 22.5.2014 wherein vide para no. 8 & 9 of the said order the Court has observed as under:- 8. Having heard the learned counsel for the Revenue, we find the contentions urged in the appeal to be wholly misplaced. It is fairly concede (at bar) by the counsel for the Revenue that the reference to DVO for estimation of the market value of the property in Punjabi Bagh was not based on any material discovered' or seized during the search operations. The counsel, however, r .....

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oubtedly no material available to even remotely reflect that consideration over and above what was shown to be paid in the registered sale deed of the West Punjabi Bagh property was made over to the seller. In these circumstances, it was not fair in the first place to refer the said property for estimation of its market value by DVO. 9. The assessment of the value by DVO cannot hold primacy over the consideration for which the property was actually acquired. If there is any difference in the sha .....

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explain further source of deposits in the bank account, the assessee explained the source of investment in the aforesaid property as follows:- S.No. Date Ch.No. Amount Name of the party Particulars Bank 1 5.5.2008 017903 44,30,000 Gagan Preet Singh J-1/161Rajouri Garden New Delhi Axis Bank Ltd. West Punjab i Bagh. 2 5.5.2008 017904 44,30,000 Rishi Preet Singh J-1/161 Rajouri Garden New Delhi Axis Bank Ltd. West Punjab i Bagh. 3 19.5.2008 Paid By cash Rs.3,54,400 Stamp Duty paid J-1/161 Rajouri G .....

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bi Bagh, J-1/161, Rajouri Garden, New Delhi 3 22.4.2008 000016 26,786 Rent Rent Recd. From Care Zone from DE- 85, Tagore Garden, New Delhi Axis Bank Ltd., West Punjabi Bagh, J-1/161, Rajouri Garden, New Delhi 4 26.4.2008 000005 26,739 Rent Rent Recd. From Bharti Celuler Ltd., from DE-85, Tagore Garden, New Delhi Axis Bank Ltd., West Punjabi Bagh, J-1/161, Rajouri Garden, New Delhi 5. 19.5.2008 3,50,000 Stamp Duty Cash Withdrawn from BOI A/c BOI Kirit Nagar J-1/161, Rajouri Garden, New Delhi The .....

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rchase of property at J-1/161, Rajouri Garden, New Delhi. However, it seems that the Assessing Officer has ignored all the explanations given by the assessee during the course of assessment. From the assessment order, it is also evident that the Assessing Officer has not controverted the explanation given by the assessee regarding the investments made in the aforementioned property. Further, no material has been brought on record by the Assessing Officer to show that the assessee has made any ex .....

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elhi over and above the value of investment shown in the sale deed at ₹ 88,59,420/- has referred the matter to the District Valuation officer for estimation of the value of the property. Even no opportunity of being heard or a show cause notice was given to the assessee before referring the matter to the DVO for the estimation of the value of investment in the aforesaid properties at J- 1/161, Rajouri Garden, New Delhi. In our considered opinion, without bringing any adverse material on re .....

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he Assessing Officer has not even recorded any reason for referring the matter to the DVO for the estimation of the value of property. The Ld. First Appellate Authority has rightly appreciated the provisions of law. The relevant provision sub-section-t of Sec.142A reads as under:- "142A (1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery o .....

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sessing Officer for making such reference. Requirement would arise or could be felt only when there is some material with the AO to show that whatever amount the assessee has shown is not correct or not reliable. The use of the word "require" is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the AO is necessary which requires him to make a reference to DVO uls 142A. In other words, it is only during the course of pendency of the assessmen .....

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ce/information on the basis of which it could be said that the said that the investment shown by the appellant was understated and that anything above what was disclosed by the appellant. Thus, the condition precedent for making reference to the DVO by invoking the provisions of Sec. 142A was not satisfied in the present case. Moreover, on perusal of the assessment order, it is noted that nowhere the AO has mentioned that what are the mistakes and unreliability has been found out by the AO in th .....

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rt is obtained within the meaning of Sec.142A from the DVO. It is because the use of the report of the DVO obtained u/s. 142A is not mandatory but is discretionary as the word used is 'may' therein. Accordingly, in the present case when AO has not rejected the books of account by pointing out any defects reference to the DVO will not be valid and, therefore, DVO's report could not be utilized for framing assessment even if such a report is considered to be obtained u/s 142A. Since re .....

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been held that :- "Where Assessing Officer made reference to Valuation Officer in respect of a property purchased by assessee and though there was no finding by Assessing Officer that assessee had incurred any expenditure in excess of what had been declared but he had referred issue of valuation to DVO only on basis of speculation alleging information in form of newspaper report about enhanced property prices in area, reference to Assessing Officer and addition based on his report were not .....

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onsideration shown by the assessee and the fair market value as on the date of purchase determined by the ova as unexplained money paid by the assessee for the purchase or the property. 10.9 We further note that there was no finding by the Assessing Officer that the assessee had incurred any expenditure in excess of what had been declared but he had referred the issue of valuation to the ova only on the basis of speculation alleging information in the form of newspaper report about enhanced prop .....

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al decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing, authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. .....

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ssessee is found to have made investment outside the books of account or where any such investment made by him is not fully disclosed in the books of account. The condition precedent for making the reference by invoking the provisions of section 142A thus is that there should be something on record to show that the assessee in the first place has made such investment outside the books or the investment so made by him is not fully disclosed in the books of account and once this condition is satis .....

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ment order, however, shows that there was no reference whatsoever made by the AO to any material / evidence / information on the basis of which it could be said that the said consideration shown by the assessee had actually been paid as consideration. The condition precedent for making a reference to the DVO by invoking the provisions of section 142A thus was not satisfied in the present case and neither the said reference nor the addition made on the basis of report obtained from the DVO in res .....

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arghese. v. ITO [1981] 131 ITR 597 (SC). 10.13 Under these circumstances, We are of the opinion that the Assessing Officer has erred in referring the matter to the DVO and consequently the DVO's report on the value of investment in the property cannot replace the actual purchase value shown in the purchase deed of the aforesaid property at J-1/161, Rajouri Garden, New Delhi. Hence, the Assessing Officer has erred in adopting the value of the property at J-1/161, Rajouri Garden, New Delhi est .....

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ed. This is against the principle of natural justice. In this regard it is seen that the AO had issued a show cause notice dated 21-03-2013 for submitting reply on 22-03- 2013 i.e. immediately next date, Therefore, assessing officer has not given sufficient opportunity of being heard to the assessee. It cannot be said that by giving opportunity of being heard for hearing immediately one day assessing officer has discharged his obligation of giving opportunity of being heard. In the case of Sahar .....

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, particularly when the order can have adverse civil consequences for the party likely to be affected." 9.14 In an another case title as Assistant Director of Income-tax, Circle 1 (2), International Taxation, New Delhi v. Ranjay Gulati, [2011] 14 taxmann.com 161 (Delhi) ITAT Delhi has held as under:- "Section 50C, read with sections 45 and 48, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2007-08 - Ass .....

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noted from records that value of assessee's property as per circle rates was ₹ 2 crores as against sale consideration of ₹ 2.90 crores admitted by assessee - Further, there was nothing on record to suggest that assessee had received more than what was stated in sale deed - Whether in aforesaid circumstances, Assessing Officer had to adopt amount received by assessee as full value of sale consideration for calculating capital gain liable to tax - Held, yes - Whether even otherwis .....

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n account of unexplained income of the assessee and accordingly rightly directed the AO to delete the addition in dispute, which in our opinion, does not need any interference on our part, hence, we uphold the same. Accordingly, the Ground no. 1 raised by the Revenue stands dismissed. 11. With regard to ground no. 2 regarding admitting the additional evidence without giving the opportunity to AO under Rule 46A is concerned, we find that no additional evidence have been filed by the Assessee befo .....

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i for the consideration of ₹ 95,00,000/- as per the registered value of the property (whereas during the course of survey, the same property was found to be valued at ₹ 3,87,00,000/- by a registered valuer). The assessee has claimed that the sale proceed of the aforesaid property at 20C/72, West Punjabi Bagh, New Delhi was invested in the purchase of property in the same assessment year at J-1/161, Rajouri Garden, New Delhi. We observed that the assessee was entitled for deduction u/ .....

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ur considered opinion, the Ld. CIT(A) rightly directed the AO to consider the aforesaid claim of the assessee of exemption u/s 54 of the I.T. Act, while computing the income of the assessee. We also find considerable cogency in the assessee s counsel that Ld. DR itself was saying that the assessee has sold one property and purchased another, then there is no question why exemption u/s. 54 should not be given. In view above, we find that the CIT(A) has given a well reasoned finding on the issue i .....

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