TMI Blog2011 (1) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT(A) has erred, both on facts and in law, in sustaining the action of the AO in making an addition to the extent of Rs. 3,89,409/- as undisclosed investment u/s 69 in the purchase of the property. (ii) That the above addition has been made without there being any material or evidence on record regarding any investment having been made by the appellant over and above the amount stated in the sale deed. 4(i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in upholding the action of the AO in making a reference to the Valuation Officer. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in upholding the action of the AO in relying upon the valuation report and ignoring the objection raised by the appellant. (iii) That the learned CIT(A) has erred, both on facts and in law, in ignoring the settled position of law that valuation is an art and as such the valuation report is only an opinion and cannot be the sole basis for making an assumption that the assessee has made investment of the amount stated in the valuation report. 2. Ground Nos. 1 5 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luation Report; that the property was one half undivided portion of the inherited property being in occupation of one co-owner; that the assessee had purchased the said property from the other co-owner, who was not in occupation thereof; that the assessee had made the purchase with the intention that the other portion would also be bought from the other co-owner; that however, the deal could not materialize and the assessee remained unable to get the possession of the half portion of the property from the seller; that even the assessee s Advocate had given a notice for possession to the seller; and that the Valuation Officer had not taken this into consideration for valuation, despite the affidavit given. 7. The AO observed that the Valuation Officer, at Sl.No. 6.5 of his Report, had not commented about the adverse occupancy of the shop; that the objection of the assessee in this regard was correct; that the value of the property certainly gets down, if the same is under the adverse possession of any other person; that this aspect had not been considered by the Valuation Officer; that considering this aspect of the occupancy of the property purchased by the assessee, the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed and the consideration paid were witnessed by Authorities which were Government Authorities. The addition was made merely on surmises and conjectures. It has been contended that addition of only the amount actually spent or invested can be made and no presumption can be drawn against the purchaser/assessee in the absence of any provision to that effect in the Act. It has been contended that the valuation made by the Departmental Valuation Officer is wrong. It has been pointed out that the objections raised by the assessee are at pages 25 to 31 of the assessee s paper book ( APB , for short). It has been contended that while accepting the contention of the assessee regarding adverse occupancy of the property purchased, the AO himself made reduction of 10% of the valuation, whereas he wrongly brushed aside the other objections, on the ground that the Valuation Officer is a technical person. It has been contended that the ld. CIT(A) again decided against the assessee only on the basis of surmises and conjectures, giving just an arbitrary discount of 10% on the value adopted by the AO. It has been contended that the ld. CIT(A) ought to have deleted the entire addition, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee has sought the order under appeal to be set aside and the claim of the assessee to be accepted by allowing the appeal filed by the assessee. 11. The learned DR, on the other hand, has staunchly supported the impugned order. It has been contended that as rightly held by the ld. CIT(A), the value of ₹ 2 lakhs for the purchase of the property by the assessee, as tried to be made out by the assessee, does not represent the full consideration of the purchase; that the AO was, therefore, justified to refer the matter to the Valuation Officer, who determined the value of the property at ₹ 7,36,759/- by considering the land cost and the cost of construction thereon; that as a comparable case, the Departmental Valuation Officer took into consideration a nearby property, located at Srinagar Extn., the sale whereof had taken place on 11.12.95, for ₹ 23,71,000/-; that the said sale, pertinently, had been made by the Delhi Development Authority in an open auction; that moreover, the property in that instance was located in a residential colony, whereas the property purchased by the assessee was a commercial one; that the AO was reasonable enough i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rong. It has been contended that moreover, the property purchased by the assessee was a commercial property, whereas that considered for comparison was a residential property, the sale whereof came about in 1995 and that too, by a Government Agency, i.e., the Delhi Development Authority. It has been contended that as such, the assessee has no case that the comparison to the property sold by the Delhi Development Authority was not apt. It has been contended that the ld. CIT(A) too was reasonable enough in allowing a relief of 10% over and above that allowed by the AO, thereby giving a further benefit of ₹ 73,675/- to the assessee as weightage for adverse occupancy of the shop purchased by him. 12. On the basis of these contentions, the ld. DR has requested for dismissal of the assessee s appeal. 13. We have heard the parties and have perused the material on record. The first issue raised by the assessee is that the AO, at the very outset, went wrong in making a reference to the Valuation Officer, concerning the valuation of the property purchased by the assessee and that the learned CIT(A) erred in upholding such action of the AO. The assessee maintains that in the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference u/s 142A may be made by the AO to the Valuation Officer, to make an estimate of the value of the investment. However, the first and foremost requirement of section 69 is that the investment in question has not been recorded by the assessee in his books of account. In the present case, it is not the case of either of the Authorities below, that the value of the investment in the purchase of the property at ₹ 2,00,000/- has not been recorded by the assessee in his books of account. Rather, the recital in the assessment order is as follows:- .During the year, the assessee purchased a shop at No. 1622 and 1623 (half portion) at Chandraval Road, Subzi Mandi, Ghanta Ghar, Delhi. It was stated by the assessee that he has invested only a sum of Rs. 2,00,000/- in purchase of the portion of the shop under reference. The investment in the purchase of the property was considered low as compared to the prevailing market price for such kind of property. A reference u/s 142A was made to the Valuation Officer of the Income Tax Department 17. Section 69B of the I.T. Act reads as under: 69B Where in any financial year the assessee has made investments or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42A is attracted, inter alia, where the assessee 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 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 satisfied, the quantum of such investment made can be ascertained by the AO by making a reference u/s 142A in order to make the addition u/s 69 or 69B, whichever is applicable. In the present case, the relevant property was purchased by the assessee during the year under consideration for Rs. 15 lakhs and the amount of the said consideration was paid out of its disclosed sources as accepted even by the AO in the reassessment. A perusal of the assessment 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 assesee was und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d there was no evidence that the assessee had received more than the declared value, directly or indirectly, section 52 of the Act, dealing with consideration for transfer in case of understatement, was not applicable and that the assessment of deemed capital gain was not valid. 27. In CIT v. Smt. Nilofer I. Singh , 309 ITR 233(Del), it has been held, inter alia, that full value of consideration does not refer to market value but only to consideration specified in the sale deed. In the present case, even otherwise, the Department has not been able to show any purchase price over and above that stated in the registered sale deed, as having been paid by the assessee. 28. In Dev Kumar Jain v. ITO Another , 309 ITR 240(Del), it was held that where there was no evidence that the assessee received consideration in excess of that shown in the agreement to sell, there was no necessity to compute the fair market value for capital gains and that the full value of the sale consideration was to be taken into account. 29. In view of the preceding discussion, the ld. CIT(A) has clearly erred in holding that the AO was within his jurisdiction to invoke the provisions of section 142A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Hanemp Properties P. Ltd. v. ACIT 101 ITD 19(Del), it may be pointed out that the said decision is not applicable to the present case in view of Ashok Soni v. ITO 102 TTJ(Del)964, wherein it is held that: From the facts available on record it is clear that the sale consideration as per the registered document was only a sum of Rs. 18 lakhs. There was no material available with the AO to show that the assessee received much more than the sum shown in the registered documents. After deletion of s. 52 w.e.f. asstt. year 1988-89 it is not possible for the AO to adopt the market value or any other value other than the apparent consideration for sale. As already observed, there is no evidence before the Revenue Authorities to show or suspect that the sale value declared in the instrument of transfer was understated and that consideration over and above what was started in the instrument of transfer had passed between the parties. Therefore, the action of the AO in substituting the full value of the consideration received by the fair market value as stated by the DVO in his report was not in accordance with law. In the circumstances, there was no capital gain which could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in Janak Puri and Vikas Puri, New Delhi. There was also disadvantage in respect of noise and disturbances which the Valuation Officer himself has noted that the properties are situated near the airport and railway track. This issue also stands covered in favour of the assessee in view of the decision of ITAT in ITO v. Rajeshwar Nath Gupta in ITA No. 4295(Del)2005 dated 9.5.2008 which has also been reaffirmed in the decision of ITAT G Bench in ITA No. 1619(Del)2008 dated 22.4.2009 in Smt. Seema Gupta, where the ITAT held as under:- 5. Learned DR could not produce any material which could require valuation of the property to be referred to Valuation Officer under section 142A of the Act. In these circumstances, on this ground alone, the addition cannot be made and the order is to be vacated. We may also point out that the comparable case referred to by the District Valuation Officer for the purposes of valuation has been found by the CIT(Appeals) to be not a comparable one as it was in respect of a property located at Shri Ram Road which is 9 kms. Away from the property owned by the assessee. Even though, the CIT(Appeals) adopted a rough estimate of Rs. 13,000/- per sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), besides various other decisions on the issue, including those considered herein, there was no occasion to adopt the valuation given by the DVO. 39. The ld. CIT(A), without being in possession of material against the assessee, observed, inter alia, as follows:- It is evident that to the convenience of both, the consideration was understated with a view to escape from tax incidence. As discussed above, the assessee cannot contend that the revenue should accept whatever consideration is (sic) shown in the books by him disregarding the circumstantial evidences which are weighing against him. The arguments put forth by the assessee as regards to existence of any material to show that extra consideration has exchanged hands in order to estimate the investment as per the market value is concerned, it is not possible in every instant to have a direct evidence relating to understatement of consideration. The Valuation Officer has rightly adopted the rate by taking the value of the property sold in the open auction. It gives a reasonable value for comparison . 40. Now, obviously, the aforesaid observations of the ld. CIT(A) are not in consonance with the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in 1956 whereas the father of seller purchased this property in 1956 which was built long back i.e. before 1947 and the depreciated cost of construction is NIL on the date of purchase. 7. That the concerned property is not occupied by the assessee and the ld. Valuation Officer in spite of inspection left the point No. 6.5 blank. The said property is half undivided portion of the inherited property being in occupation of one co-owner. The assessee purchased the said property from other co-owner who is not in occupation of said property with the intention that the other portion will be bought from other co-owner but, unfortunately the deal could not materialize and the assessee is not able to get the possession of half portion fro the seller. Even the assessee s Advocate gave notice for possession to the seller for getting possession. Photocopy of said notice is enclosed herewith. The ld. Valuation Officer has not considered the same for valuation in spite of affidavit given in this respect. Photocopy of affidavit is enclosed herewith. 8. Further, the concerned property is not covered under sec. 142A of the Income Tax Act, 1961 as it refers to only those properties or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for getting possession. Photocopy of said notice is enclosed herewith. The ld. Valuation Officer has not considered the same for valuation in spite of affidavit given in this respect. Photocopy of affidavit is enclosed herewith. After going through the valuation report, it is seen that the Valuation Officer at Sl. No. 6.5 of his report has not commented upon about the adverse occupancy of the shop. The objection of the assessee in this regard appears correct. The value of the property certainly gets down, if the same is under adverse possession of any other person. This aspect has not been considered by the Valuation Officer. Considering this aspect of occupancy of the property purchased by the assessee the value of the shop determined by the Valuation Officer is reduced by 10% i.e. by an amount of Rs. 73,675/-. Thus, the total investment in purchase of the property under reference is estimated at Rs. 6,63,084/-. Therefore, the unexplained investment in purchase of property i.e. shop works out at Rs. 4,63,084/-. The same is being included in the income of the assessee u/s 69 of the I.T. Act, 1961. After discussion and considering the details filed, the income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it was an instance of sale of property situated far away from the property in which the assessee had transacted; that the said sale instance had no co-relation with the property transacted in by the assessee; and that the sale instance wrongly relied on was a DDA property, whereas the property transacted in by the assessee was an old property in the old City, having inferior infrastructure. 49. These objections have not been shown to have been dealt with and disposed of either by the AO, or by the ld. CIT (A). Rather, the ld. CIT (A) has, and, in our opinion, unreasonably so, tried to foist the onus on to the assessee by saying that the Valuation Officer was right in adopting the rate taken for the value of the property sold by the DDA in an open auction. It has not been rebutted that the sale instance relied on as a comparable case, is not, in fact, comparable, in view of the objections specifically raised by the assessee, to the effect that that sale instance was concerning a property distinctly located to the property in which the assessee had transacted. The ld. CIT(A) has stressed that that sale was a sale by the DDA, a Government agency. However, as to how that sale was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, in sustaining th action of the AO in making an addition to the extent of Rs. 50,93,620/- as undisclosed investment under sec. 69 in the purchase of the property. (ii) That the above addition has been made without there being any material or evidence on record regarding any investment having been made by the appellant over and above the amount stated in the sale deed. 4(i) On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law, in upholding the action of the AO in making a reference to the Valuation Officer. (ii) On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law, in upholding the action of the AO in relying upon the valuation report and ignoring the objection raised by the appellant. (iii) That the ld. CIT(A) has erred, both on facts and in law, in ignoring the settled position of law that valuation is an art and as such the valuation report is only an opinion and cannot be the sole basis for making an assumption that the assessee has made investment of the amount stated in the valuation report. 5. Without prejudice to the above and in the alternative, on the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections, observing that the Valuation Officer, who was a Technical Officer, while determining the value of the plots had considered all the aspects raised by the assessee in his submissions. The objections raised by the assessee were that: 1. That the ld. Valuation Officer has erred in taking UPSIDC rates for allotment of land rather than the market rates on which the original allottee can sell. The market rates were lower than the rates of UPSIDC due to many factors like: a) The person who got the allotment from UPSIDC could not start the production/install the unit due to some problems, sells the land in the market at lower rates than the prevailing rates of UPSIDC as if he surrenders the land to UPSIDC then he will receive back original rate and that too after deduction. b) The market rates of land were lower as there was no scarcity of land because UPSIDC was still inviting applications for allotment of land as evident from the Valuation Officer s report by quoting the rates obtained from UPSIDC. c) The market rates of land were lower than UPSIDC rates as the UPSIDC allots land on installment basis. As illustration, a copy of allotment of land by UPSIDC at G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 7,21,200 2,24,100 4,97,100 25 3,80,000 1,95,000 1,85,000 60. The assessee had, further, inter alia, also objected to the reference made u/s 142A of the Act, contending that the concerned property was not covered u/s 142A of the Act, as the said section refers to only those properties or investments, which attract the provisions of section 69 or 69B or bullion, jewellery or other valuable articles referred to in section 69A or section 69B of the Act 61. Apropos the assessee s objection regarding the property not being covered u/s 142A of the Act, the AO disagreed. It was observed that the interpretation of the assessee concerning provisions of section 142A of the Act was not correct; that the legislature while introducing this provision, has specifically kept in mind that in order to curb wide spread practice of the assessees not to disclose the actual consideration/investment specially in the immovable properties, it is necessary to take the opinion of a technical person; that it was therefore, that sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the market, transfer charges have to be paid, has, too, been wrongly not considered, whereas the DVO has added to the UPSIDC rates, rather than deducting therefrom. 67. The ld. DR, per contra, has taken the same stand for the Department as that taken for ITA No.1141(supra). 68. Apropos the legal issue of the validity or otherwise of the reference made by the AO to the VO, in this appeal also, the position remains much the same as in ITA No.1141 (supra). Therefore, our findings recorded in that appeal qua this issue are, mutatis mutandis, applicable hereto and are reiterated as such. 69. So far as regards the assessee s objections on the merits of the valuation of the plots under reference in this appeal, these objections were disposed of summarily by the AO, as noted hereinabove. 70. We find that the AO was not justified in throwing out the assessee s objections neck and crop, observing that they had already been considered by the Valuation Officer, who is a Technical person. These objections, it may be noted, were specifically taken against the valuation by the Valuation Officer and were raised specifically before the AO. It was, therefore, for the AO to decide the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ison, date of purchase should have been taken as July/August, 03 instead of October, 2003 and absence of any corroborative evidences to hold that there is understatement of consideration. As regards to date is concerned it will not make any considerable variation as the date cited in the agreement is 3.09.03 and more ever in October only the assessee/seller has made an application to UPSIDC for permission to transfer. Accordingly, the transfer charges were computed based on rates at which the plots are sold by that agency. No material has been brought to suggest that the rates in August are lower than in October. Assuming there is difference, the same cannot be huge as contended and it will be only marginal. It is because being government agency, selling price would not change so frequently in every month. Hence the objections of appellant are not based on factual information but for the sake argument ony and deserves to be rejected. The next objection raised by the appellant has little consequence since the plot size will not make the valuation baseless altogether. The valuation officer has based his reasoning on UPSIDC rates only. Presuming that there exists some variation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made in installments. It has not been shown otherwise. Still further, the CIT(A) overlooked the fact that on purchase from the market, payment of transfer charges is a necessary concomitant. Remarkably, the DVO had added to the UPSIDC rate. This has also not been taken into consideration by the CIT(A). 75. In view of the above, the grievance of the assessee by way of ground nos.3 4 is found to be justified and is accepted as such. 76. Keeping in view our decision on ground nos. 3 4 as above, ground no.5 becomes infructuous and is rejected as such. 77. Hence, ITA No.1142/Del./08, filed by the assessee for AY 2004-05, is partly allowed. ITA No. 1773/Del./08 78. This is department s appeal for AY 2004-05. It is a cross appeal to the assessee s ITA No.1142/Del./08. The department contends that he CIT(A) has erred in giving relief of ₹ 558580 to the assessee out of an additon of ₹ 59,52,100 on account of unexplained investment. 80. The AO made addition of ₹ 69,52,100. The CIT(A) gave relief of ₹ 858550 to the assessee. The addition was sustained to the extent of ₹ 50,93,620. This action of the CIT(A) has not been agreed to by u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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