2012 (4) TMI 321 - HC - Income Tax

Addition made in the income as an unexplained investment - AO noticing the valuation report from DVO made an addition Held that - the seller of the property was not called by the AO nor there was any material to come to a conclusion that the amount which has been added in the income was actually paid by the assessee - DVO s reported value as 17 lacs does not leads to the conclusion that unexplained consideration of Rs. 5 lacs was actually paid by the assessee -the burden is on the Department to show that the fair market value of the assets as on the date of purchase was more than the value declared by the assessee and that the amount paid has been understated and the assessee has actually paid more than what has been declared in favour of assessee.

Summary

Issues:
Assessment of unexplained investment in income based on valuation report and sale deed.

Analysis:
The appeal was filed against an order passed by the Income Tax Appellate Tribunal regarding the addition of Rs.12,91,432 in the income of the assessee as an unexplained investment for the assessment year 1998-1999. The Assessing Officer had made the addition based on a valuation report obtained from DVO, which estimated the value of the property at Rs.17,91,432, whereas the sale deed recorded the consideration as Rs.5 lacs. The CIT(A) partly allowed the appeal, stating that the burden is on the department to prove that the fair market value of the assets was more than the value declared by the assessee and that the amount paid was understated. The appellate authority held that the addition made solely on the basis of the valuation report could not be sustained without evidence that the actual consideration passed between the parties exceeded what was declared by the appellant.

The Department contended that the addition of Rs.12,91,432 was justified as unexplained investment under Section 69 of the Income Tax Act, emphasizing that the DVO's valuation indicated ownership by the assessee. However, the counsel for the assessee argued that the valuation report did not prove actual payment beyond the declared consideration. The High Court noted the Assessing Officer's observations that the difference in property value constituted unexplained investment under Section 69, but emphasized the necessity for the department to establish that the assessee had actually paid more than declared. The Court agreed with the Appellate Authority's findings that there was no evidence showing the actual consideration exceeded the declared amount, and affirmed the dismissal of the appeal, stating that no substantial question of law was involved.

In conclusion, the High Court upheld the decision based on factual findings, emphasizing the burden on the department to prove discrepancies in declared values and actual payments. The Court dismissed the appeal, maintaining that no substantial legal issue arose from the case.