2013 (1) TMI 81 - HC - Income Tax

Unexplained investment in immoveable properties - ITAT deleted the addition - order passed by the AO adopting the Fair Market Value - assessee is a Hindu Undivided Family - Held that - Following the decision in the case of Shri Dinesh Jain Versus DCIT, Central Circle-21, NEW DELHI 2009 (9) TMI 676 - ITAT DELHI It is undisputed fact that department has not referred any incriminating material having been found during the course of search and investigation made thereafter which indicate that assessee had paid anything more than what has been stated in the sale deeds. It was also not the allegation of the Department that there was any difference in the value of the property as accepted by the Sub Registrar for the purpose of stamp duty valuation. As decided in K P Verghese Vs. ITO 1981 (9) TMI 1 - SUPREME COURT onus lies on the department to prove that some consideration over and above the consideration stated in the sale deed have been invested, no addition can be made on presumptions and suspicions. As decided in CIT Vs. Ashok Khetrpal 2007 (7) TMI 36 - HIGH COURT , DELHI by referring to the report of valuation officer in the absence of any incriminating documents found in the course of a search no addition could be made by treating investment as undisclosed on the basis of any DYC s report - thus CIT(A) in the present case was not justified in estimating the value of the investments in the properties contrary to the amount mentioned in the conveyance deeds. Accordingly, set aside the order of the CIT(Appeals) and direct the AO to accept the value of the properties as declared in sale deeds - in favour of assessee.

Summary

Issues:
1. Addition of unexplained investment in immovable properties.
2. Quashing of order based on fair market value.
3. Perversity of the order passed by ITAT.

Analysis:

Issue 1: Addition of unexplained investment in immovable properties
The assessing officer invoked Section 69B of the Income Tax Act, 1961 to add Rs. 3,72,86,412 as undisclosed investment in rent-yielding properties. The CIT(Appeals) reexamined the case and directed a rework of the addition, considering the fair valuation of the properties. The Tribunal, citing previous cases, emphasized the lack of evidence to prove understatement or suppression of sale consideration. It highlighted that no material indicated any payment beyond what was stated in the sale deeds. The Tribunal, following precedent, directed the assessing officer to accept the value declared in the sale deeds, ultimately deleting the entire addition made under Section 69B.

Issue 2: Quashing of order based on fair market value
The CIT(Appeals) reevaluated the fair market value of the properties based on rent capitalization method, leading to a reduction in the sustained addition. However, the Tribunal, in line with previous decisions, emphasized the importance of concrete evidence to show any understatement of sale consideration. It noted that the assessing officer had not provided any material to suggest undervaluation, leading to the deletion of the entire addition.

Issue 3: Perversity of the order passed by ITAT
The High Court upheld the Tribunal's decision to delete the entire addition under Section 69B, emphasizing the need for concrete evidence to prove any understatement of sale consideration. The Court clarified that the assessing officer failed to provide sufficient evidence to show any understatement, leading to the dismissal of the revenue's appeal.

In conclusion, the High Court dismissed the revenue's appeal, affirming the Tribunal's decision to delete the addition made under Section 69B due to the lack of concrete evidence supporting any understatement of sale consideration.