2014 (4) TMI 77 - HC - Income Tax

Onus to prove Actual expenses not declared Undervaluation made by the assessee Undisclosed investment - Held that - The oral evidence, which is supported by Section 132(4) statement and the affidavit of Mr. Noushad, which is uncontroverted even during cross examination, can be treated as sufficient evidence to show that the property has been sold for ₹ 78,20,000 - The first appellate authority had gone a little further and had indicated that the revenue has not adduced any further evidence to show that Mr. Noushad had paid ₹ 66,20,000/- to Smt. Mariamma Kurian for purchasing the property and the assessee has paid the differential amount to Mr. Noushad - these are all instances where the parties do not maintain any records and they deal in undisclosed amounts Relying upon Commissioner of Income-tax v. Medical Trust Hospital and others 2008 (3) TMI 645 - KERALA HIGH COURT the evidence made available by the Revenue is a probable evidence. If at all the assessee wanted to disprove the evidence given by Mr. Noushad, the assessee could have proved otherwise by giving some evidence to show the market value of the land in the locality. No such evidence is adduced by the assessee - the revenue has to prove the existence of a fact that undervaluation was made by the assessee and that the assessee has paid more amounts for purchase of property amounting to ₹ 54,20,000 - When that fact is proved, the burden shifts to the assessee to prove otherwise - even in the absence of any other material produced by the revenue, the uncontroverted evidence of Mr. Noushad was in favour of coming to a finding that the assessee has not declared the actual investment made for acquiring the building thus, the order of the CIT(A) set aside Decided in favour of Revenue.

Summary

Issues:
Revenue's appeal against ITAT order for assessment year 2006-2007 - Inclusion of undisclosed investment based on information obtained during search and seizure operation - Tribunal dismissed appeal based on Supreme Court judgments - Substantial questions of law raised by revenue.

Analysis:
The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal (ITAT) regarding the assessment year 2006-2007. The assessing officer had included an amount of Rs. 54,20,000 as undisclosed investment based on information obtained during a search and seizure operation at the residence of an individual. The assessee, owner of a shopping complex, had submitted the return of income for the assessment year. The Commissioner of Income-tax (Appeals) allowed the appeal, deleting the said addition, which led the revenue to approach the Tribunal. The Tribunal dismissed the appeal relying on Supreme Court judgments in K.P. Varghese v. Income-tax Officer, Ernakulam and Commissioner of Income-tax v. P.V. Kalyanasundaram.

The revenue raised substantial questions of law, challenging the Tribunal's reliance on the sale deed and the decisions of the Supreme Court. The main argument was that the Supreme Court judgment in K.P. Varghese's case did not apply to the current scenario. In K.P. Varghese's case, the Supreme Court clarified the conditions under sub-section (2) of Section 52 of the Income-tax Act, emphasizing the burden of proof on the revenue to establish understatement of consideration and actual receipt of more than declared amount by the assessee. In P.V. Kalyanasundaram's case, the Supreme Court highlighted the reliance on contradictory statements for property valuation.

The Revenue strongly relied on evidence, including an affidavit and statements, to prove the actual value of the land transaction. The Tribunal upheld the decision, stating it aligned with Supreme Court precedents. However, the Revenue contended that the evidence was sufficient to show the undisclosed investment. The Court analyzed the evidence, emphasizing the uncontroverted statements and lack of contradictory proof from the assessee. The Court noted the absence of evidence to disprove the transaction value and highlighted the burden on the assessee to counter the revenue's claims.

The Court referred to a previous judgment regarding retracted statements and emphasized the need for concrete evidence to challenge the revenue's claims. The Court concluded that the evidence presented by the Revenue, supported by statements and affidavits, was substantial. The Tribunal's decision was deemed perverse, and the Court ruled in favor of the Revenue, setting aside the orders of the Commissioner of Income-tax (Appeal) and the Tribunal, confirming the Assessing Officer's order.