2013 (9) TMI 10 - AT - Income Tax

Addition u/s 69B - Nature of transaction - Onus to prove - Reference to valuation officer u/s 142A(1) - Held that - when undisputedly, the details of the sellers of the land to the assessee were on record before the Assessing Officer and the Assessing Officer had all power to make inquiry under the Act from such sellers and the Assessing Officer, for reasons best known to him, did not make any such inquiry, the onus on the department to prove that the investment made by the assessee was in fact more than that depicted in its books of account, did not get discharged at all. In the following cases, as correctly noted by the Ld. CIT (A), it has been held that the onus is on the revenue to substitute apparent consideration and that addition u/s 69B of the Act can be made only on the basis of positive material or evidence regarding consideration in excess of what is recorded in the books as having been paid and that no addition u/s 69B of the Act can be made simply on the basis of difference of opinion - It is only on the basis of a definite finding of the Assessing Officer to the foregoing effect that a reference can be made to the valuation officer u/s 142A of the Act. It goes without saying that the provisions of Section 142A(1) of the Act are merely machinery provisions and the substantive provisions of Section 69B cannot be overridden by them. In the present case, on the other hand, undisputedly, the Assessing Officer did not have any such material before him, which could form the basis for reference being made to the DVO u/s 142A of the Act, as has been rightly held by the Ld. CIT (A) - Decided against Revenue. Valuation u/s 50C - inclusion of stamp duty in the value - Held that - it has been correctly found that the Assessing Officer had erred in taking the cost of acquisition without considering the stamp duty towards such cost of acquisition. The sale consideration was also taken at a rate higher than the circle rate. Thus, whereas the stamp duty payable and the correct sale consideration, based on the circle rates, as per the provisions of Section 50C of the Act were to be considered. This error has appropriately been rectified by the Ld. CIT (A) while directing the Assessing Officer to recompute the STCG by taking the cost of plot at Rs. 12 lac to include the stamp duty towards the cost of acquisition. The Ld. CIT (A) also correctly directed to apply the stamp duty rates to the sale price of the plot for arriving at the STCG in view of the provisions of Section 50C of the Act, while correctly holding addition of various amounts towards sale of land over and above the stamp duty rates, to be not justifiable, as per the provisions of Section 50C of the Act - Decided against Revenue.

Summary

Issues Involved:
1. Admission of additional evidence by CIT(A).
2. Deletion of addition made under Section 69B.
3. Deletion of addition on account of short-term capital gain.
4. Enhancement of cost of acquisition by including stamp duty.

Issue-wise Detailed Analysis:

1. Admission of Additional Evidence by CIT(A):
The department contended that the CIT(A) erred in allowing additional evidence without passing an interlocutory order and without allowing the Assessing Officer (AO) to refer the evidence to the DVO for rebuttal. The Tribunal found no merit in this ground, noting that a remand report was called for and duly furnished by the AO, and the CIT(A) considered both the remand report and the assessee's rejoinder. Thus, Ground No.1 was rejected.

2. Deletion of Addition Made Under Section 69B:
The AO observed discrepancies in the valuation of land purchased by the assessee and referred the matter to the DVO under Section 142A. The DVO's report indicated a higher valuation than recorded by the assessee. The AO made an addition under Section 69B based on this report. The CIT(A) deleted the addition, and the department appealed.

The Tribunal noted that under Section 69B, the AO must find evidence that the investment exceeded the amount recorded in the books. The burden of proof lies with the department. The Tribunal found that the AO did not have any material evidence before making the reference to the DVO. The Tribunal upheld the CIT(A)'s decision, citing various case laws that emphasize the need for positive material evidence for making additions under Section 69B. Ground No.2 was rejected.

3. Deletion of Addition on Account of Short-term Capital Gain:
The AO observed that the purchase cost of land was understated and consequently, the sale price was also understated, leading to an understatement of short-term capital gain. The CIT(A) deleted the addition.

The Tribunal found that the AO erred in not considering the stamp duty towards the cost of acquisition and in taking the sale consideration higher than the circle rate. The CIT(A) correctly directed the AO to recompute the short-term capital gain by including the stamp duty in the cost of acquisition and applying the circle rate for the sale price as per Section 50C. Ground Nos.3 and 4 were rejected.

4. Enhancement of Cost of Acquisition by Including Stamp Duty:
The AO did not consider the stamp duty in the cost of acquisition, which was corrected by the CIT(A). The Tribunal upheld the CIT(A)'s decision to include the stamp duty in the cost of acquisition and to apply the circle rate for the sale price, as per Section 50C. This correction was found appropriate, and the Tribunal rejected the department's grounds on this issue.

Conclusion:
The appeal filed by the department was dismissed in its entirety. The Tribunal upheld the CIT(A)'s decisions on all grounds, finding no merit in the department's contentions. The order was pronounced in the open court on 27.08.2013.