2008 (6) TMI 607 - AT - Income Tax

Addition u/s. 69B - addition based on the value adopted by the stamp valuation authority - investment made in land - consideration paid higher than that stated in the sale deed - land was agricultural land which was subsequently converted in industrial land - determination of market value for computing payment of stamp duty. HELD THAT - The consideration mentioned in the sale deed differs from the consideration admitted in the course of recording of statement by the AO of the sellers on 5th Jan., 2006. Again, the consideration, as averred in the affidavit made by the sellers before the Civil Judge, on 25th Nov., 2003 reiterates the consideration i.e. as stated in the sale deed. Quite clearly, the statements of the sellers are not only inconsistent but are contradictory. We are also conscious of the fact that both the stands of the sellers were before the AO. Therefore, while recording the statements of the sellers on 5th Jan., 2006, the AO should have made appropriate query and confronted the seller. So, however, neither such action has been taken at the time of recording the statement and nor subsequently before completion of the assessment proceedings. The impact of the aforesaid situation is that the statement attributed to the sellers becomes suspect. Moreover, the statement of the seller given on 5th Jan., 2006 lies uncorroborated. For the reasons enumerated above we are inclined to uphold the stand of the CIT(A) that the statement of the seller is unreliable. If the evidence in the shape of the statement of the seller dt. 5th Jan., 2006 is removed from the scenario, there remains no cogent evidence with the AO to rebut the consideration stated in the sale deed. It is in this manner, in our considered opinion, the legal position emerging in the case of P.V. Kalyanasundaram 2006 (2) TMI 79 - MADRAS HIGH COURT is attracted to the present case. Thus, on the basis of the parity of reasoning upheld in the case of P.V. Kalyanasundaram (supra), the impugned addition is liable to be deleted. We are in agreement with the order of the CIT(A) that the fiction created by s. 50C is for the limited purpose of computing the capital gains. It only seeks to make a special provision for determining the full value of consideration in cases of transfer of immovable properties for the purpose of s. 48 of the Act. Therefore, the fictional regime of s. 50C is not available with the AO in support of his case of invoking s. 69B against the present assessee. Therefore, we hereby sustain the order of the CIT(A) - In the result, the appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition of Rs. 72,66,451 made by the AO based on the alleged actual consideration paid for land.
2. Justification of the AO in invoking the provisions of Section 69B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 72,66,451 Made by the AO:

The Revenue appealed against the CIT(A)'s order which deleted the addition of Rs. 72,66,451 made by the AO. The AO argued that the vendors received more than the amount shown in the agreement, and this excess amount was invested in property and bank accounts. The AO's basis for the addition was the market value of the land determined by the State Revenue authorities at Rs. 95,46,451, whereas the agreement showed Rs. 22,80,000. One of the sellers admitted to receiving Rs. 46,50,000, leading the AO to invoke Section 69B for unexplained investment.

The CIT(A) found that the AO's adoption of the market value on the date of sale deed execution was incorrect since the land was agricultural and later converted to industrial. The CIT(A) also noted that the land was disputed and of inferior quality, which justified the lower purchase price. The sellers' affidavits supported the consideration of Rs. 22,80,000. The CIT(A) concluded that the AO's reliance on the seller's statement was unreliable without cross-examination and corroborative evidence.

2. Justification of the AO in Invoking Section 69B:

Section 69B provides for a deeming fiction where the AO finds that the amount expended on investments exceeds the amount recorded in the books, and the assessee offers no satisfactory explanation. The AO argued that the market value determined by the Revenue authorities and the seller's admission justified the addition. However, the CIT(A) and the Tribunal found the seller's statement inconsistent and unreliable. The Tribunal cited the Supreme Court's decision in P.V. Kalyanasundaram, emphasizing that the burden of proving actual consideration lies on the Revenue, which was not discharged in this case.

The Tribunal noted that the AO failed to establish a direct link between the cash deposits in the sellers' bank accounts and the alleged unrecorded consideration. The sellers' contradictory statements and lack of independent inquiries by the AO further weakened the Revenue's case. The Tribunal agreed with the CIT(A) that the market value for stamp duty purposes under Section 50C does not apply to the buyer under Section 69B.

The Tribunal upheld the CIT(A)'s order, affirming that the AO did not discharge the onus of proof to establish that the assessee paid more than the stated consideration. The addition under Section 69B was deemed unwarranted, as the AO's conclusions were based on surmises and conjectures without cogent evidence.

Conclusion:

The Tribunal dismissed the Revenue's appeal, sustaining the CIT(A)'s order that deleted the addition of Rs. 72,66,451. The Tribunal emphasized the need for reliable evidence and proper discharge of the burden of proof by the AO in cases involving Section 69B.