TMI Blog2006 (2) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of bank accounts in Canada. 3. That the CIT(A) was not justified in upholding the addition of Rs. 53,48,882 out of addition of Rs. 97,20,482 made by the Assessing Officer in Long-Term Capital Gains. 4. That the CIT(A) has wrongly adopted the sale price of land @ Rs. 400 per sq. yard against Rs. 112.50 declared by the assessee as per the actual registered sale deeds. Neither the CIT(A) nor Assessing Officer were competent to estimate the sale proceeds by ignoring the registered sale deeds. 5. That at any rate the estimate made by the CIT (A) is on a higher side." 4. As against the same, the revenue has raised the following three effective grounds: "1. That on the facts and in the circumstances of the case, the learned CIT (A) has erred in estimating the sale consideration of the land sold by the assessee at Rs. 400 Per Sq. Yard instead of Rs. 500 Per Sq. Yard determined by the Assessing Officer, in the assessment order, when he agreed with the reasons given by the Assessing Officer for determining the sale consideration at Rs. 500 per Sq. yard. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1) of section 142 and sub-section (2) of section 143. 6. Being aggrieved, the assessee filed an appeal against the order of the Assessing Officer where action of the Assessing Officer for completion of assessment under section 144 was inter alia challenged. It was argued that the information called for by the Assessing Officer was not at all relevant for the purpose of completion of assessment for the assessment year under consideration and also the Assessing Officer had no powers to call for such information. Therefore, it was argued that the Assessing Officer was not justified in completing the assessment under section 144 of the Act. However, these submissions did not find favour with the ld. CIT(A), who observed that the information called for by the Assessing Officer in the form of copies of Income-tax returns filed with the Tax Authorities in Canada, Social Security Number of the assessee in Canada and copies of Bank Account in Canada were quite relevant for completing the assessment particularly in the context of sale of agricultural land claimed by the assessee at the rates which were considered by the Assessing Officer to be too low. However, the assessee failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts and the ITO made a best judgment assessment, the assessee must show sufficient reasons for noncompliance with both the provisions and he cannot get the best judgment assessment order passed under section 23(4) of the Act cancelled merely by showing sufficient cause only for one of the two defaults. He further relied on the judgment of Hon'ble Nagpur High Court in the case of Tejmal Bhojraj v. CIT [1952] 22 ITR 208, where it was held that a best judgment assessment under section 23(4) of the old Act would follow the failure to comply with the nature of the terms of notice issued under section 22(4) or under section 23(2) of the old Act and a partial default involved the same consequences as a total default. He submitted that in the present case, the assessee had declared ridiculous low sale consideration of land and, therefore, information asked for by the assessee in the form of copy of foreign bank account a return filed before the Tax authorities in Canada and social security number were relevant for completing the assessment. He submitted that since the assessee failed to furnish this information, the Assessing Officer was justified in completing the assessment unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, we are of the considered opinion that the Assessing Officer was not correct in completing the assessment under section 144 of the Act. Accordingly, we set aside the order of the CIT(A) and treat the assessment under section 143(3) of the Act. This ground of appeal is allowed. 10. The next grievance of the assessee is that the Ld CIT(A) was not justified in upholding the addition of Rs. 53,48,882 out of the addition of Rs. 97,20,482 made by the Assessing Officer in the Long-Term Capital Gains. Corresponding to this is the grievance of the revenue for reducing the addition made by the Assessing Officer in Long-Term Capital Gains. The facts of the case are that the assessee was a N.R.I. settled in Canada. He was having a Saving Bank A/c. No. 14312817 with Bank of Punjab, Golden Temple Branch at Amritsar. The Investigation Wing of the Income-tax Deptt. At Amritsar made enquiry and found substantial deposits in the Saving Bank A/c. with Bank of Punjab, Golden Temple, Amritsar. The assessee was not being assessed to tax. No Permanent Account Number was also allotted to the assessee. This information was passed onto Assessing Officer. The Assessing Officer, therefore, issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Singh who made first deal with the assessee and their statements were recorded under section 131 of the Act on 19-11-2003, wherein they stated that they had entered into deal with the assessee on telephone for purchase of 18 acres approximately. The agricultural land of the assessee located at Vill. Heir, Amritsar was purchased at the rate of 22 lakhs per acre and they deposited cash of Rs. 10 lakhs in the Bank A/c. on 9-6-2001 as earnest money '(Biana)' as per instructions of the assessee. They further stated that the deal could not be materialized because the assessee got better offer from some other party. The relevant extracts of their statements have been reproduced on pages 9 to 11 of the assessment order. S. Sukhbinder Singh also stated that he was being assessed to tax. He derived rental income from Property Nos. 1 2 at Lawrence Road, Amritsar let out to two tenants, namely, M/s. Burger King and M/s. Trendy Shoes. He owned 17 acres of ancestral agricultural land at Village Dhaul Kalan, Ram Tirath Road, Amritsar and further cultivated 20 acres of agricultural land situated in the same village on contract basis. He stated that the earnest money was paid after the deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The Assessing Officer further observed that the assessee's brother had sold agricultural land measuring 1 Kanal 17 Marlas for a consideration of Rs. 19 lakhs i.e., Rs. 2,054 per sq. yard on 30-9-2003 i.e., @ Rs. 82.16 lakhs per acre. The Assessing Officer further noted that Rajasansi Air Port was declared International Air Port in May, 2000. As a result of these developments and boom in real estate prices, the District Revenue Authorities raised minimum rate of Registry in Vill. Heir at Rs. 30 lakhs per acre for agricultural land on the road side with effect from 1-4-2003 and Rs. 18 lakhs at the back side. Taking into account these facts, the Assessing Officer came to the view that the assessee had grossly understated sale consideration in the Sale Deeds with a view to understate the Long-Term Capital Gains. He, therefore, proposed to take the sale rate of land at Rs. 500 per sq. yard i.e., Rs. 24.20 lakhs per acre and issued a show-cause notice to the assessee. Along with the show-cause notice, the Assessing Officer forwarded copies of statements of S/Sh. Sukhbinder Singh Gurvinder Singh, copies of purchase deeds of land belonging to M/s. K.R. Resorts Pvt. Ltd., copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice. It was also stated that the minimum rate fixed by the revenue authorities at Rs. 30 lakhs per acre was with effect from 1-4-2003 whereas the assessee had sold the land in June, 2001. The assessee also furnished some other sale instances of land sold on 16-3-1999 at Rs. 1.50 lakhs per acre, on 4-5-2000 at Rs. 3.50 lakhs, on 12-11-2001 @ Rs, 4.38 lakhs, on 12-11-2001 at Rs. 4.61 lakhs per acre. Thus, it was stated that the proposed action of the Assessing Officer to adopt sale rate of land at Rs. 500 per sq. yd. i.e., Rs. 24.40 lakhs per acre for the purpose of computing the capital gains was without any basis and unjustified. However, the Assessing Officer did not accept these submissions and by referring to the statements of S/Sh. Sukhbinder Singh Gurwinder Singh, the land purchased by M/s. K.R. Resorts Pvt. Ltd. about 41/2 years before @ Rs. 7.84 per acre, the sale of land by assessee's brother at much higher rate and finding contradiction in assessee's stand in letter dated 23-2-2004 that he had not struck deal with S/Sh. Sukhbinder Singh and Gurwinder Singh and they had deposited such amounts in the Bank A/c. of their own and initial stand in assessee's letter dated 10-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer under section 52, which was omitted with effect from 1-4-1988. The assessee also relied on various judgments noted by the CIT(A) on page 9 of the impugned order. 12. These written submissions were referred to the Assessing Officer for his remand report. The Assessing Officer submitted the remand report vide his letter dated 6-1-2005. It was stated that the status of International Airport was granted to Amritsar Airport in May, 2000 and 80 per cent of the work relating to this project has been completed by 24-12-2004. The Sub-Registrar, Amritsar informed that the rates of land for the purpose of stamp duty in respect of agricultural land at Vill. Heir were fixed at Rs. 30 lakhs per acre abutting road and Rs. 18 lakhs per acre behind the road and Rs. 750 per sq. yard for residential plots with effect from 1-4-2003. The Assessing Officer also stated that the land purchased by M/s. K.R. Resorts Pvt. Ltd. on 28-10-1997 was further away from city from the assessee's land and, therefore, was at disadvantaged place than the land owned by the assessee. Besides, the land purchased by M/s. K.R. Resorts Pvt. Ltd. was about 4 to 5 years before than the land sold by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee also returned the said amount by A/c. payee cheques issued in their names. He also noted that the understatement of consideration was evident by the fact that the property belonging to M/s. K.R. Resorts Pvt. Ltd. was at disadvantaged place vis-a-vis assessee's property because the same was located at a further distance of 1.5 KM away from assessee's land and the assessee's land was located just about 2 Km. away from the city. The price paid by M/s. K.R. Resorts at Rs. 25 lakhs for 25 Kanal 10 Marlas @ Rs. 7.84 lakhs per acre showed that the consideration shown in the sale deed @ Rs. 112.50 per sq. yd. was not correct. This fact also got reinforced from the sale instances of land belonging to assessee's brother on 30-9-2003 @ Rs. 2,054 per sq. yd. even though such sale was made after about a period of two years from the date of assessee's land. The revision in the rates for the purpose of stamp duty with effect from 1-4-2003 to Rs. 30 lakhs also showed that the prices of the land in this area had been steadily increasing and had not gone up just in a overnight. Taking into account all these facts and surrounding circumstances, the Assessing Officer observed that sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the area had been steadily rising and subsequent sale of land by the assessee's brother i.e., by Dr. Santokh Singh @ Rs. 2,054 per sq. yd., the ld. CIT(A) held that it would be fair to adopt the sale consideration at Rs. 400 per sq. yard instead of Rs. 500 per sq. yd. adopted by the Assessing Officer. In this manner, the learned CIT(A) reduced the addition to Rs. 53,48,882 and allowed a relief of Rs. 43,71,600. Both the assessee and the revenue are aggrieved with the order of the CIT(A). Hence, these cross appeals before us. 14. The Ld. Counsel for the assessee, Sh.Y.K Sud, reiterated the submissions, which were made before the authorities below. He also drew our attention to pages 1 to 7 of the paper book, which is a copy of written submissions filed before the CIT(A). He further drew our attention to pages 8 to 38 of the paper book, which are copies of the sale deeds, executed by the assessee for sale of 4.90 acres of agricultural land for a total consideration of Rs. 22,10,500. He further drew our attention to pages 37 and 38 of the paper book, which is a copy of rate fixed for stamp duty by the District Authorities prior to 1-4-2003 at Rs. 4.95 lakhs per acre. for agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer while deciding the case. Similarly, the ld. CIT(A) has also not considered these cases while reducing the addition made by the Assessing Officer. He further stated that the statements of the purchasers of the land were also recorded. He particularly drew our attention to pages 72 to 87 of the paper book which are copies of these statements where they have confirmed that they had purchased the land at the rate given in the sale deeds. He further stated that Department has not taken any action against the purchasers. He further referred to the statements of the broker, namely, Shri Veer Singh Chauhan at pages 90 and 91 of the paper book and Kanwaljit Singh at pages 92 and 93 of the paper book where they confirmed having sold the property at the rate mentioned in the deeds. Thus, he submitted that, the authorities below have failed to appreciate the relevant facts and material on record while sustaining the impugned additions. He also relied on the following judgments in support of the proposition that the onus is entirely on the revenue to establish that the assessee had received consideration over and above the consideration shown in the sale deeds: (i) K.P. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subsequent return of the same by A/c. payee cheques that statements of these parties were recorded. He submitted that it was not necessary that they must have filed a suit against the assessee for not honouring the deal to sell the land to them. He particularly drew our attention to page 15 of the assessment order where he replied that there was a saying in Punjab that if person backed out from his word or mouth then there was no remedy. Therefore, they did not file any suit against the seller. He further stated that in May, 2000, Amritsar Airport was declared as International Airport. Thereafter, the prices of land on airport road where the assessee's land was located at a distance of 2 KM from the city showed quantum jump in the rates. He further stated that the land measuring 25 Kanal 10 Marlas was purchased by M/s. K.R. Resorts Pvt. Ltd on 28-10-1997 at the rate of Rs. 7.84 lakhs per acre. He submitted that the land purchased by M/s. K.R. Resorts was further at a distance of 1.5 KM. Away from assessee's land towards Airport and was at disadvantaged position as compared to the location of assessee's land. He submitted that the assessee sold the land after a gap of 41/2 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asers also and added that the mere fact that the action has not been taken against the buyers does not mean that the sale consideration shown by the assessee in the sale deeds was correct. He, therefore, concluded that the order of CIT(A) deserves to be set aside and that of Assessing Officer restored. 16. We have heard both the parties in extenso and given our thoughtful consideration to the rival contentions. We have examined the facts, evidence and material placed on record and also gone through the orders of the authorities below. We have also referred to the relevant pages of the paper book to which our attention was drawn by the parties and also the judgments cited at the Bar. Now the main issue that requires to be decided by this Bench is whether the Assessing Officer was justified in coming to the conclusion that the sale consideration shown in the sale deeds was not correct and the land indeed was sold at the rate adopted by the Assessing Officer or by the CIT(A). As per provisions of section 48 of the Income-tax Act, the capital gains is required to be computed by deducting from the full value of the consideration received or accrued as a result of transfer of the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statements of S/Sh. Sukhbinder Singh Gurwinder Singh, who stated that they had entered into deal with the assessee for purchase of his agricultural land measuring 18 acres @ Rs. 22 lakhs per acre. They also stated that such deal was entered into on telephone in the first week of June, 2001 and they paid Bianal/Earnest Money of Rs. 5 lakhs each by depositing the same in the bank account of the assessee at Amritsar. The fact that both S/Sh. Sukhbinder Singh Gurwinder Singh had deposited cash of Rs. 10 lakhs in the Bank A/c. is not denied by the assessee and is duly supported by such deposits in the Bank A/c. on 9-6-2001. It is further supported by the fact that subsequently after the assessee agreed to sell the land to some other parties and received earnest money of Rs. 15 lakhs in similar manner, by way of cash deposit in the bank A/c. on 30-6-2001, the assessee returned the amount of Rs. 5 lakhs each to S/Sh. Sukhbinder Singh and Gurwinder Singh by two A/c. payee cheques and these also find debited to the Bank A/c. of the assessee on 23-7-2001. Not only this, the assessee also paid a brokerage of Rs.10,000 to Sh. Pargat Singh through whom deal with S/Sh. Sukhbinder Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urwinder Singh have not been able to adduce any documentary evidence is without any substance. There is no bar in making an oral/verbal deals and these are also acted upon. Such verbal deals are valid in the eyes of law. The deposit of Rs. 10 lakhs made in the Bank A/c. of the assessee further confirms the facts stated in their examination and cross-examination that deal was struck with the assessee and an amount of Rs. 10 lakhs was paid as Earnest Money. There was no written agreement because at the relevant time, the assessee was in Canada. In fact subsequent deal to which the assessee actually sold the land was also made in similar manner without making any written agreement to sell. Only cash of Rs. 15 lakhs was deposited in the Bank A/c. of the assessee. Even though there was no written agreement made by the assessee with the buyers, yet such oral agreement was acted upon and assessee indeed sold the land to those parties. During the course of cross-examination, S. Sukhbinder Singh was specifically asked to explain the source from which purchase consideration of Rs. 4 crores i.e., @ Rs. 22 lakhs per acre proposed to be made. Sh. Sukhbinder Singh replied that at the time of dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count other surrounding circumstances which lend support to the fact that the statements given by both S/Sh. Sukhbinder Singh Gurwinder Singh confirming the deal for purchase of land at Rs. 22 lakhs per acre were correct. It is settled law that while deciding the matters, Income-tax authorities can take into account the surrounding circumstances and also apply the test of human probability and preponderance of probability. In the case of CIT v. Durga Prasad More [1971] 82 ITR 540, the Hon'ble Supreme Court has held that though an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals. The taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. The Hon'ble Supreme Court observed that the Tribunal did not interpret the two deeds but merely found itself unable to accept the correctness of the recitals in those documents. The Supreme Court observed that to accept those recitals or not was within the province of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer @ Rs. 5 lakhs per acre). The land purchased by M/s. K.R. Resorts Pvt. Ltd. was at a distance of 1.5 KM from the land of the assessee. The assessee's land is located at a distance of 2 KM from the city of Amritsar. Thus, the distance of the land purchased by M/s. K.R. Resorts Pvt. Ltd. was at a distance of 3.5 KM from the city. It is also a fact that at the time when M/s. K.R. Resorts Pvt. Ltd. purchased the land, Amritsar Airport was not declared as International Airport. This happened only in May, 2000. If the Amritsar Airport was declared International Airport in the year 1997, obviously the land near to the Airport which M/s. K.R. Resorts Pvt. Ltd. had used for commercial purposes by building a hotel, the same would have commanded more price. It is common knowledge that the status of International Airport accorded to a particular Airport results in overall development of the area and even the prices of Real Estate in the surrounding areas increase considerably. The persons arriving from late-night flights and also those who are leaving in the early hours of the morning would need accommodation near the Airport. Besides, crew of the various Airlines also need ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the colony developed for this purpose but even to the adjoining areas. None of these developments had taken place when M/s. K.R. Resorts Pvt. Ltd. purchased the land, but this existed at the time when the assessee sold the land. Even during the period when the assessee sold the land, the assessee's brother Dr. Santokh Singh had sold the land at much higher rates that varying from Rs. 800 to Rs. 1,137 per sq. yd. The Assessing Officer further noted that Dr. Santokh Singh had sold one plot measuring 1 Kanal 17 Marlas on 30-9-2003 for Rs. 19 lakhs @ Rs. 2,054 per sq. yd. i.e., more than Rs. 80 lakhs per acre. This deal was made after a period of two years from the sales made by the assessee. Considering the fact that the said plot was fully developed and was in the PUDA approved colony, still the price at which it was sold was considerably higher than shown by the assessee in the sale deeds moreso when the land owned by assessee's brother was being developed simultaneously. 16.5 The most important piece of evidence discussed by the authorities below is the rates revised by the District Revenue authorities for registration of the land at Village Heir with effect from 1-4-2003. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial in the form of statements of the earlier purchaser who stated that deal was struck at a particular rate adopted by the Assessing Officer. But in this case, the direct evidence placed on record in the form of statements of S/Sh. Sukhbinder Singh Gurwinder Singh and other relevant factors detailed above show that the assessee had entered into a deal for sale of land to those parties at the rate of Rs. 22 lakhs per acre. The judgment of Supreme Court in the K.P. Verghese 5 case relied upon by the learned CIT(A) was with reference to the provisions of sub-section (2) of section 52 of the Income-tax Act and this section stood omitted from the Act with effect from 1-4-1988. In this case the Supreme Court had observed that the object of sub-section (2) of section 52 was not to strike honest and bona fide transaction where the consideration for transfer was correctly disclosed by the assessee. But to bring within the net of taxation those transactions where the consideration in respect of transfer was shown at a lesser figure than that actually received by the assessee so that they do not escape the charge of tax on capital gains by understatement of the consideration. In this contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there should be a direct evidence about the person in whose presence such money was received. It is common knowledge that most of such transactions take place in clandestine manner and money is not being exchanged in the presence of other. The issue whether the onus is discharged or not by the Revenue has to be seen in the light of facts and circumstances of each case. In this case, we feel that such onus stands discharged. 16.8 The Ld. counsel further relied on the statements of the persons to whom the assessee had actually sold the land where they stated that the land was purchased at the rates mentioned in the sale deeds. It is an admitted fact that there are two parties to the same transaction. If the sale consideration was understated, those parties were equally liable to action as they too had understated the purchase consideration and the difference in the consideration shown in the purchase deed and actual consideration would be liable to addition in their hands under section 69 as unexplained investment. Therefore, admittedly nobody would come forward and admit that they had paid over and above the price shown in the sale deeds because it benefits them. Same is the posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq. yard. But the information placed on page 11 of the assessment order shows that assessee's brother Dr. Santokh Singh had sold the residential plots at the rate varying from Rs. 800 to Rs. 1,137 per sq. yds during the period from 21-5-2002 to 1-7-2002. He also sold one plot measuring 1 Kanal 17 Marlas on 30-9-2003 at Rs. 2,054 per sq. yard as against rate fixed by the Distt. Revenue Authorities at Rs. 750 per sq. yd. But it does not mean that Revenue Authorities revised the rates immediately on 30-9-2003. In places like Bombay rates of commercial property located at Nariman Point - increase almost every month. But this does not mean that the State Revenue Authorities revise the rates for stamp duty every month. This only show that the rates fixed by the State Revenue Authorities for the purpose of stamp duty are not conclusive about the market rates of the property. The same depends on several other factors as detailed in the preceding paragraphs. Therefore, this plea is also of no help to assessee. 16.11 Thus, in the light of detailed discussions in the preceding paragraphs and the legal position discussed above, we are of the considered opinion that the authorities below were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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