2015 (10) TMI 2503 - AT - Income Tax

Addition u/s 69B on basis of the valuation report of the District Valuation Officer (DVO) - Held that - Here is a case in which the assessee claimed to have purchased the property for a sum of ₹ 3.50 crore and the AO has made addition of ₹ 5,59,66,000/- lac simply on the basis of difference between the DVO s report and apparent sale consideration. No attempt has been made for verifying the price from the seller of the property. There is no positive material evidencing the making of actual investment by the assessee over and above ₹ 3.50 crore. Under such circumstances, there can be no point in making any addition towards unexplained investment u/s 69B of the Act. It is relevant to mention that the legislature has carried out amendment by the Finance Act, 2013 w.e.f. 1.4.2014 by substituting section 56(2)(vii)(b) providing that where an individual or HUF receives any immovable property, inter alia, for a consideration which is less than the stamp duty value of the property by an amount exceeding ₹ 50,000/-, the stamp duty value of such property as exceeded such consideration shall be taxed as Income from other sources. The legislature has brought in section 56(2)(vii)(b) with the sole intention of bringing under-hand payment of sale consideration of immovable property to tax. This provision has been enshrined w.e.f. the A.Y. 2014-15 and is not applicable retrospectively to the A.Y. 2006-07 under consideration. Since this provision is prospective and there is no other authentic evidence of the assessee having actually made any investment over and above the declared sale consideration, we are of the considered opinion that the ld. CIT(A) was justified in deleting the addition to the extent of ₹ 5,59,66,000/-

Summary

Issues:
1. Deletion of addition made by AO under section 69B of the Income-tax Act, 1961 based on valuation report.

Analysis:
The appeal and cross-objection arose from an order by the CIT(A) regarding the assessment year 2006-07. The Revenue challenged the deletion of an addition of Rs. 5,59,66,000 made by the AO under section 69B of the Income-tax Act, 1961. The facts revealed that a search and seizure operation was conducted, and the assessee claimed to have acquired a property for Rs. 3,50,00,000. The Departmental Valuation Officer (DVO) valued the property at Rs. 8,99,66,000, leading to the addition by the AO. However, the CIT(A) deleted the addition, prompting the Revenue's appeal.

Upon review, it was noted that the property's purchase for Rs. 3.50 crore was properly recorded in the assessee's books. The dispute centered on the addition of Rs. 5,49,66,000, representing the variance between the DVO's valuation and the purchase cost. The Tribunal observed a lack of material confirming additional investment by the assessee beyond the declared amount. Notably, no efforts were made to verify the price with the property seller. The legislative amendment introduced by the Finance Act, 2013, effective from 1.4.2014, aimed to tax under-hand property sale considerations exceeding stamp duty value by Rs. 50,000. However, this provision did not apply retrospectively to the relevant assessment year. Given the absence of evidence supporting actual additional investment by the assessee, the deletion of the addition by the CIT(A) was upheld.

The Tribunal referenced a similar decision by the Delhi Bench in support of the CIT(A)'s action. The assessee's Cross Objection was not pursued and was dismissed accordingly. Ultimately, both the appeal and the Cross Objection were dismissed, affirming the deletion of the addition by the CIT(A).