2010 (8) TMI 194 - HC - Income Tax

Voluntary Dis-closure of Income Scheme, 1997 (VDIS) - assessee had made investment in two plots of agricultural land - sources and the investment made thereof in these two plots had been declared by the respondent-assessee - search and seizure under section 132 of the Act, 1961 - sale deeds of the abovesaid properties were found - AO referred the properties for valuation to the District Valuation Officer - alleging that the respondent-assessee had invested a huge amount in the purchase of the farm house over and above the investment disclosed in the VDIS - Commissioner of Income-tax (Appeals) - deleted the addition made by the Assessing Officer - based on the DVO s report could not be sustained as no adverse material had been found during the search Held that - since the details of the properties had already been disclosed under the VDIS, it cannot be said that the Department came in possession of any information which it did not possess earlier.

Summary

Issues:
Challenge to order dated September 11, 2009 passed by the Income-tax Appellate Tribunal for the block period April 1, 1988 to August 20, 1998.

Analysis:
The respondent-assessee made investments in agricultural land in December 1996, in the name of his father, for a total consideration of Rs. 41,35,700. The properties were bought from a company where the assessee was a director. A search and seizure under section 132 of the Income-tax Act, 1961 was conducted on August 20, 1998, revealing the sale deeds of the properties.

The Assessing Officer referred the properties for valuation to the District Valuation Officer, alleging undisclosed investment. The addition of Rs. 2,24,08,820 was made based on the DVO's report. However, the Commissioner of Income-tax (Appeals) allowed the appeal and deleted the addition, which was upheld by the Tribunal.

The Revenue challenged this decision, arguing that the addition should stand based on the DVO's report. The respondent-assessee contended that no incriminating evidence was found during the search to justify the addition. The court noted that the burden of proof lies with the Revenue to show understatement of income before relying on the DVO's valuation.

The court emphasized that the DVO's opinion alone is not sufficient evidence and must be corroborated. The Supreme Court's decision in a related matter was distinguished, highlighting the lack of new information post-search. The court also addressed the retrospective effect of section 142A, stating it did not apply to assessments made before September 30, 2004.

Given the timeline of events, with the assessment and appeal decision predating the cut-off date, the court dismissed the appeal for lack of merit. The judgment underscores the importance of substantive evidence in tax assessments and the limitations on retrospective application of tax provisions.