2005 (9) TMI 68 - HC - Income Tax

Unexplained investment purchase of shop value of investment - The terms and conditions mentioned in the agreement dated May 12, 1997, are revealing. The agreement clearly stipulates an amount of Rs. 49,91,842 as the value of shop The fact that the assessee had paid advance has also been mentioned in the agreement dated May 12, 1997. There is no dispute to that effect. Further, it is also clear that the assessee had declared payment of Rs. 12,50,000 at the time of the agreement under the Voluntary Disclosure of Income Scheme - burden of proof is on the respondent to show that the assessee had actually paid more than what was actually disclosed - assessee had not correctly declared or disclosed the consideration received by him and there is understatement or concealment of consideration assessee s appeal dismissed

Summary

Issues:
Assessment of unexplained investment as income under section 69 of the Income-tax Act based on discrepancy in declared and actual payment for a property purchase.

Detailed Analysis:

The appellant, a dealer in steel wares, filed an income tax return for the assessment year 1998-99, declaring a total income of Rs. 55,920 along with agricultural income. A survey under section 133A of the Income-tax Act was conducted at the appellant's business premises, leading to scrutiny of the case. An agreement dated May 12, 1997, between the appellant and the prompters of a shopping complex was obtained during the survey. The agreement involved the purchase of a shop room for Rs. 49,91,842, with an initial payment of Rs. 12,50,000 and subsequent monthly instalments. The assessing authority considered the actual investment to be Rs. 49,91,842, leading to a discrepancy of Rs. 37,41,842, treated as unexplained investment under section 69 of the Act.

The appellant's appeal before the Commissioner of Income-tax (Appeals) and subsequently before the Tribunal was rejected, prompting the current appeal. The appellant's counsel argued that the burden of proof lies with the Revenue to establish the actual payment made for the property. The Revenue contended that the agreement was genuine and acted upon, justifying the treatment of the difference as income from an unexplained source.

Upon meticulous consideration of the contentions and relevant legal precedents, the court noted the terms of the agreement and the declared advance payment by the appellant. Referring to the apex court's decision in K.P. Varghese's case, the court emphasized the Revenue's burden to prove that the appellant paid more than disclosed. In this case, the Revenue successfully demonstrated the discrepancy between the declared and actual payment. The court agreed with the authorities below, concluding that the Revenue had discharged its burden by establishing facts indicating understatement or concealment of consideration. Consequently, the appeal was dismissed, affirming the treatment of the unexplained investment as income under section 69 of the Income-tax Act.