2015 (5) TMI 725 - AT - Income Tax

Unexplained investment - addition u/s 69 - Held that - Incidentally in the case under dispute, the AO had neither applied his mind nor formed a belief, but, merely came to the conclusion, based on the report of the approved valuer found during the search operation at the premises of Tinna Group of cases, that the value of the land under dispute was shown highly understated and, accordingly, initiated proceedings u/s 147 of the Act. Moreover, in the course of assessment proceeding of the seller, the impugned property was referred to the DVO of the Department for valuation and he arrived at the value of ₹ 1.64crores which was much below than the price mentioned in the sale deed of the impugned property. The valuation report being only an opinion, the same cannot be a sole basis for making an addition without any corroborative evidence to hold that there is an undisclosed payment in purchase of the impugned property, especially, when the sale prices mentioned in the sale deeds are much above the guideline/circle rate.Taking into account all the facts and circumstances we are of the view that the CIT (A) was not justified in sustaining the addition of ₹ 3,45,75,000/-made by the AO u/s 69 of the Act as the AO had solely placed reliance on the report of the approved valuer. It is ordered accordingly. Reopening of assessment - Held that - In the course of original assessment proceeding, the AO was made aware of the purchase of the impugned property and the sale deed was duly enclosed in the assessee s reply to the AO s query. The only reason for the reopening of the assessment was the alleged seizure of the valuation report of the approved valuer from the premises of the sellers of the impugned property. The valuation report of the approved valuer was nothing but an opinion expressed by him. Therefore, when all the necessary details were filed and taken note of by the AO during the course of the original assessment proceeding pursuant to the search and seizure action conducted in the premises of the assessee, the reopening of the assessment was merely based on change of opinion of the AO. For taking the above view, we are fortified by the judgments of the Hon ble Jurisdictional High Court in the cases of (i) Global Signal Cables (India) (P) Ltd v. DCIT (2014 (10) TMI 547 - DELHI HIGH COURT) and (ii) CIT v. Usha International Ltd reported in (2012 (9) TMI 767 - DELHI HIGH COURT). Also see Mahashay Chunnilal v. DCIT 2014 (2) TMI 950 - DELHI HIGH COURT . - Decided partly in favour of assesse.

Summary

Issues Involved:
1. Validity of reopening the assessment by issuance of notice under Section 148 of the Income Tax Act.
2. Addition of Rs. 3,45,75,000/- on account of alleged unexplained investment in a property.

Detailed Analysis:

1. Validity of Reopening the Assessment:
The assessee challenged the reopening of the assessment under Section 148 of the Income Tax Act. The original assessment was completed under Section 143(3) on 31.12.2008. The assessment was reopened on 28.3.2013, beyond the four-year limit stipulated under the first proviso to Section 147. The CIT (A) upheld the reopening, stating that the AO had a reasonable belief based on a valuation report found during a search on the Tinna Group, which valued the property at Rs. 17.83 crores against the reported sale consideration of Rs. 4 crores. The CIT (A) noted that the original assessment did not consider the property transaction, and the reopening was justified as the AO had obtained necessary approvals from the competent authority.

However, the Tribunal found that the reasons recorded for reopening did not specify which material facts were not fully and truly disclosed by the assessee. The Tribunal referred to the judgments of various courts, including the Hon'ble Delhi High Court in Global Signal Cables (India) (P) Ltd v. DCIT, which held that failure to specify undisclosed material facts renders the reopening invalid. The Tribunal concluded that the reopening was based on a change of opinion and not on new tangible material, thus invalidating the reassessment proceedings.

2. Addition of Rs. 3,45,75,000/- as Unexplained Investment:
The AO added Rs. 3,45,75,000/- to the assessee's income as unexplained investment under Section 69, based on a valuation report seized during a search at the Tinna Group. The report valued the property at Rs. 17.83 crores, while the sale deed recorded Rs. 4 crores. The AO concluded that the balance amount was paid outside the books. The CIT (A) upheld this addition, rejecting the assessee's argument that the valuation report alone could not substantiate the addition without corroborative evidence.

The Tribunal, however, found that the AO relied solely on the valuation report without any corroborative evidence to prove that the assessee made extra payments. The Tribunal referred to several judgments, including CIT v. Naveen Gera and CIT v. Puneet Sabharwal, which established that the primary burden of proof lies with the Revenue to show understatement or concealment of income. The Tribunal noted that the AO did not discharge this burden and that the documented sale price was above the guideline rates. The Tribunal concluded that the addition based solely on the valuation report was unjustified and deleted the addition.

Conclusion:
The Tribunal allowed the appeal in part, holding that the reopening of the assessment was invalid as it was based on a change of opinion without specifying undisclosed material facts. Additionally, the Tribunal deleted the addition of Rs. 3,45,75,000/- as unexplained investment, concluding that the AO failed to provide corroborative evidence beyond the valuation report.