2011 (8) TMI 615 - HC - Income Tax

Un-explained Investments - Sale of land at prime location - value declared in sale deed as 4,00,000 actual sale consideration as 16,00,000 - Held That - Shri. Gopinath the eldest member of the family,gave statement in his own handwriting stating that the land involved was sold at a price of Rs.1 6,00,000 is an educated person and he has no dealings in foreign exchange and he had nothing to conceal from the Enforcement Department. Similar statements were also given to Chief Enforcement officer. Moreover property sold is situated in the most prime location in Ernakulam city i.e. on the side of M.G. Road, where the value shown is only Rs.4,00,000/-, which everyone knows is notoriously low. - Appeal of department is allowed.

Summary

Issues:
Assessment cancellation on unexplained investment under Section 69 of the Income-tax Act.

Analysis:
The judgment revolves around the cancellation of assessments on the respondent assessees made on unexplained investment under Section 69 of the Income-tax Act. The case involved the sale of land in a prime location in Ernakulam city, jointly owned by family members, with discrepancies in the sale price declared in documents compared to the actual sale price. The eldest family member, Shri. M. Gopinath, who negotiated the sale, provided statements confirming the actual sale price of Rs. 16,00,000 per cent, despite the lower value declared in the sale deeds. The Income Tax authorities initiated assessments against the respondent assessees, who purchased the property, based on the discrepancies in the sale price. The respondents denied paying any amount above the declared sale price, leading to assessments under Section 69 of the Act on the excess amount paid by the respondents.

In the subsequent legal proceedings, different Commissioners (Appeals) handled the appeals filed by the assessees. While one Commissioner confirmed the assessment for a specific year, another Commissioner vacated the assessment for other years. The Tribunal then ruled in favor of the respondent assessees by deleting the addition. The Revenue filed separate appeals challenging these decisions, leading to the High Court's review of the case.

The High Court considered the evidentiary value of statements recorded under the FERA Act, emphasizing the statements made by Shri. M. Gopinath and his brother corroborating the actual sale price. Shri. Gopinath's detailed letters to the Deputy Commissioner of Income Tax further supported the higher sale price, backed by deposits in bank accounts and tax payments. The Court noted the common practice of undervaluing properties in sale deeds to evade stamp duty, highlighting the unrealistic discrepancy between declared and actual sale prices. The Court deemed the Tribunal's orders as perverse and unrealistic, ultimately allowing the appeals and confirming the assessment for one assessee while reversing the decisions for the remaining years and assessees.

In conclusion, the High Court's judgment focused on the discrepancies in sale prices, the evidentiary value of statements, and the common practice of undervaluing properties in sale deeds. The decision highlighted the importance of corroborative evidence, tax payments, and the need to address evasion practices in property transactions.