2015 (10) TMI 2564 - AT - Income Tax

Unexplained investment in immovable property u/s 69 - Held that - For the provisions of Section 69 of the Act to apply it is necessary that the assessee should have made investments which were not recorded in the books of account. However, when no evidence, much less incriminating evidence, was found as a result of search to suggest that the assessee has made any payment over and above the consideration mentioned, no addition u/s 69 would arise. The Hon ble Delhi High Court in the case of CIT Vs. Smt. Suraj Devi reported in (2010 (8) TMI 217 - Delhi High Court ) has held that the primary burden of proof in such cases 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 Valuation Officer. The Hon ble Delhi High Court in the case of CIT Vs. Bajrang Lal Bansal reported in (2010 (8) TMI 65 - DELHI HIGH COURT ) has held that the primary burden to prove understatement or concealment of income was on the Revenue and it was only when such burden was discharged that it would be permissible to rely upon the valuation given by the DVO. Where there was no evidence found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the return no addition on the basis of report of the DVO could be made. The department has failed to prove understatement or concealment of income vis-a-vis purchase of immovable property. The AO has simply relied on the report of the DVO without applying his mind to the facts of the case and the surroundings circumstances. Addition u/s 69 deleted - Decided against revenue

Summary

Issues:
Revenue's appeal against deletion of addition made under section 69 of the Income Tax Act, 1961 for unexplained investment in immovable property.

Detailed Analysis:

1. Factual Background:
The appeal was filed by the Revenue against the order of the Ld. CIT(A)-III, Lucknow deleting the addition of Rs. 36,69,000 made under section 69 of the Act for unexplained investment in immovable property. The assessment was based on a total income of Rs. 45,05,130 after adding the said amount based on the valuation by the DVO.

2. Assessee's Objections:
The assessee objected to the reference made to the DVO, stating that the property was purchased with disclosed consideration and no construction was done post-purchase. The AO, however, relied on the DVO's valuation without considering the objections raised by the assessee.

3. First Appellate Proceeding:
The Ld. CIT(A) found that the investment in the property was duly disclosed by the assessee in the income tax return. No incriminating material was found during the search operation regarding the investment. The DVO's report was noted to be an estimate of fair market value, not an estimate of investment.

4. Legal Analysis:
The Tribunal analyzed Section 142A of the Act, which requires evidence of investment outside the books or undisclosed investment for reference to the DVO. In this case, the property was purchased with disclosed sources, and no incriminating material was found during the search operation.

5. Judicial Precedents:
The Tribunal referred to various judgments, including those of the Delhi High Court and the Apex Court, emphasizing that the burden of proof lies on the Revenue to establish understatement or concealment of income. Addition solely based on a valuation report was deemed impermissible.

6. Conclusion:
The Tribunal held that since no evidence of understatement or concealment was found, and the AO relied solely on the DVO's report without considering the objections raised by the assessee, the deletion of the addition of Rs. 36,69,000 under section 69 of the Act was upheld. The appeal of the Department was dismissed.

This detailed analysis showcases the procedural and legal aspects considered by the Tribunal in arriving at the decision to dismiss the Department's appeal.