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2016 (6) TMI 649 - KARNATAKA HIGH COURT

2016 (6) TMI 649 - KARNATAKA HIGH COURT - TMI - Additions u/s 69 - Valuation made by the District Registrar/Appellate Authority - Held that:- Law is well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of DVO cannot form basis of any addition on the part of the revenue. Since in the said case there was no evidence other than the report of DVO, it could not be relied upon for making a .....

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r such purpose. The payment of additional stamp duty may be on the basis of the valuation of the valuer of the stamp Act authority but same ipso facto cannot be said to be a valid ground to initiate the proceedings under Section 69 of the Act or to invoke power under Section 69 of the Act on the premise that additional consideration was paid or received. Further, if such could not be the basis, subsequent valuation report would also not a ground. In the absence of any independent material, the r .....

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l has been admitted on the following substantial question of law:- Whether the finding of the Tribunal that the valuation made by the District Registrar/Appellate Authority is more effective and realistic without assigning any reasons is perverse, arbitrary and unsustainable? 2. In order to appreciate the controversy and then to address the question, we need to refer certain factual aspects. 3. The appellant is an individual mainly engaged in the transport business and running proprietary concer .....

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referred to as the Act ) as unexplained investment in a residential house at Shimoga. The addition was made with regard to purchase of residential house for a consideration of ₹ 66,56,142/- which included the stamp duty payment. The value of the property by the Assessing Officer was taken at ₹ 90,51,000/- as against actual consideration reflected in the sale deed at ₹ 60,07,377/-. It appears that after document was presented for registration, the objection was raised by the sta .....

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ards cash credit by applying the provisions of Section 68 of the Act and the total income was determined at ₹ 92,16,520/-. 4. The assessee being aggrieved by the said assessment, filed an appeal before the CIT (Appeals), Hubli. In the said appeal, CIT (Appeals) confirmed the additions towards cash credit and with regard to addition made under Section 69 of the Act, he gave partial relief of ₹ 6,09,119/-. 5. The matter was further carried by the appellant before the Tribunal. The Trib .....

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dismissed the appeal on the said ground and determined the value of the land at ₹ 79,61,525/- and of the building at ₹ 21,60,000/-. Therefore, the Tribunal directed the assessing authority to re-compute the capital gain on the basis of the valuation decided by the District Registrar, Shimoga in the proceedings dated 18.05.2006. Under such circumstances, the appellant/assessee has preferred the present appeal. 6. We have heard Sri. S. Parthasarathi, learned counsel appearing for the .....

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to address ourselves to that question only. 8. We may record that the Assessing Officer after considering the matter has concluded as under:- The facts of the cases relied upon by the assessee in this letter are not similar to the facts of present case. Moreover, the Valuation Officer has given the basis of estimating the cost of land in that area and the cost of building after allowing depreciation. Hence, it is not guess work or estimate as relied upon by the assessee. It is based on the rate .....

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he return of income filed i.e., ₹ 51,69,458/- (Rs.1,18,25,600/- ₹ 66,56,142/-). The amount of ₹ 51,69,458/- is added to the total income of the assessee u/s. 69 of the Income-tax Act, 1961. 9. The Commissioner (Appeals) while considering the said aspect observed at para 8.2 as under:- 8.2 I have carefully considered the submissions of the appellant and judicial decisions relied upon and the material facts emanating from the order of the AO and the remand report on this issue. I .....

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d by him from sub-Registrar, Shimoga. The AO has also stated that property is located in the heart of the city and one of the land mark owned by one of the family members of re- known actress namely Mrs.Mumtaz. The AO in the course of remand proceedings provided the appellant an opportunity to explain the discrepancy in the value shown by the DVO, if any. But, as per the AO the appellant could not point out any infirmity or defect in the valuation report of the DVO. Since, the value of the land .....

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,119/-. On careful examination of the facts, it appears that the deficiencies pointed out by the appellant in the valuation of the DVO as regards the valuation of building appears to be genuine therefore this sum of ₹ 6,09,119/- attributable to excessive valuation is required to be reduced from total valuation of the building of ₹ 20,26,793/. As a result the appellant gets a relief of ₹ 6,09,119/- out of the total valuation of the property determined at ₹ 1,18,25,600/-. I .....

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97,98,771/- for land and ₹ 20,26,793/- for the building. The assessees s registered valuer has valued the building at ₹ 18,53,113/- and that of the land at ₹ 51,40,964/-, total of ₹ 69,94,000/-. The valuation of the property was also considered by the District Registrar/the appellate authority. When the matter of under valuation of the property was initiated against the assessee, the District Registrar/the appellate authority has determined the value of the land at ͅ .....

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assessee was that while invoking power under Section 69 of the Income Tax Act, the initial burden would be upon the revenue to prove that unexplained investment has been made by the assessee. It is only after the initial burden is discharged by the revenue, the assessee may be required to rebut the same. In the present case, as per the learned counsel for the assessee, there was no independent material or primary evidence to show unexplained income. In his submission, merely because the assessee .....

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consideration received or paid then so stated in the registered sale deed. As per him, all the lower authorities including the Tribunal have lost sight of the aforesaid aspects and hence the order for addition may be quashed. 12. Whereas, learned counsel for the respondent-revenue contended that valuation made by the authority under the Stamp Act which is so accepted by the assessee for the purpose of payment of stamp duty can be considered as a basis for invoking Section 69 of the Act. In his s .....

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was valued at ₹ 69,94,000/-. As against the same, the District Registrar, for the purpose of stamp duty, had valued land at ₹ 79,61,525/- and for the building ₹ 21,60,000/-. Under these circumstances, as per the learned counsel for the revenue if the Tribunal has exercised the discretion and has gone by the valuation made by the District Registrar for the purpose of said difference which is so accepted by the assessee, the difference in the said valuation and the consideration .....

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the Act. The High Court of Delhi in case of Commissioner of Income Tax vs Puneet Sabharwal reported in (2011) 338 ITR 485, had an occasion to examine the question as to whether the Appellate Tribunal was right in holding that notwithstanding the report of the District Valuation Officer, the Revenue had to prove that the assessee had in fact received extra consideration over and above the declared value of the sale in the sale deed. While answering the said question at para Nos.8 and 9, it was o .....

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t 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 Distr .....

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he Revenue submitted that the judgment of the Supreme Court in K.P. Varghese (1981) 131 ITR 597 (SC) has been explained by the Rajasthan High Court in the case of Smt. Amar Kumari Surana v. CIT (1997) 226 ITR 344 (Raj). 14. The aforesaid shows that the primary burden to prove the understatement or concealment of the income by way of unexplained investment is on the revenue and it is only when such burden is discharged, it would be permissible to rely upon the valuation given by the District Valu .....

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sion of the High Court of Delhi in case of Commissioner of Income Tax vs Sadhna Gupta reported in (2013) 352 ITR 0595, wherein once again similar question came up for consideration to examine as to whether the Tribunal committed an error in not relying upon the District Valuation Officer s Report under Section 142A and thereby deleting addition of the income based on the said report. The High Court of Delhi after considering the aforesaid question, observed at para Nos. 4 and 5 as under:- 4. Onl .....

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ubmitted by the learned counsel for the revenue that the Tribunal had erred in deleting the addition. On the other hand the learned counsel for the respondent referred to a Division Bench decision of this Court in the case of CIT v. Shri Puneet Sabharwal: (2011) 338 ITR 485. In that decision a specific question had been raised as to whether the Income Tax Appellate Tribunal was right in holding that notwithstanding the report of the DVO the revenue had to prove that the assessee had received ext .....

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t of income was on the revenue and it was only when the said burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this Court in the same vein. One such cse being the case of CIT v. Vinod Singhal: (ITANo.482/2010 decided on 05.05.2010) where, again, reliance was placed on the very same decision of the Supreme Court in K.P.Varghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala Devi: (2009) 316 ITR 46. .....

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saction of purchase of property, the report of the DVO cannot form the basis of any addition on the part of the revenue. In the present case there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition. In these circumstances, the question which has been framed is decided in favour of the assessee and against the revenue. The appeal is dismissed. 16. The aforesaid shows that it was observed that the law is well settled that unless an .....

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