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2015 (7) TMI 250 - AT - Income TaxUnderstatement of investment - Assessing Officer had treated the difference between the purchase consideration shown by the assessee and the fair market value as on the date of purchase determined by the DVO as unexplained money paid by the assessee for the purchase or the property - CIT(A) deleted the addition - Held that - There was no reference whatsoever made by the AO to any material/evidence/information on the basis of which it could be said that the said that the investment shown by the appellant was understated and that anything above what was disclosed by the appellant. Thus, the condition precedent for making reference to the DVO by invoking the provisions of Sec. 142A was not satisfied in the present case. Moreover, on perusal of the assessment order, it is noted that nowhere the AO has mentioned that what are the mistakes and unreliability has been found out by the AO in the books of accounts of the appellant. Thus, the AO has not pointed out any defects in the books as far as related to the investment made by the appellant. Assessing Officer has erred in referring the matter to the DVO and consequently the DVO s report on the value of investment in the property cannot replace the actual purchase value shown in the purchase deed of the aforesaid property at J-1/161, Rajouri Garden, New Delhi. Hence, the Assessing Officer has erred in adopting the value of the property at J-1/161, Rajouri Garden, New Delhi estimated by the DVO by replacing the value shown in the purchase deed. Ld. First Appellate Authority has rightly appreciated the all evidences as well as the relevant provisions of law and deleted the addition in dispute. It is further observed that even after the receipt of the valuation report from the DVO, the Assessing Officer had given only one day time to the appellant to explain the difference in the value of the property as estimated by the DVO and the value shown by her in the purchase deed. This is against the principle of natural justice. In this regard it is seen that the AO had issued a show cause notice dated 21-03-2013 for submitting reply on 22-03- 2013 i.e. immediately next date, Therefore, assessing officer has not given sufficient opportunity of being heard to the assessee. It cannot be said that by giving opportunity of being heard for hearing immediately one day assessing officer has discharged his obligation of giving opportunity of being heard. Thus Ld. CIT(A) was right in observing that the AO has erred in making the addition ₹ 3,53,30,000/- on account of unexplained income of the assessee and accordingly rightly directed the AO to delete the addition in dispute - Decided against revenue. Additional evidence without giving the opportunity to AO under Rule 46A - Held that - No additional evidence have been filed by the Assessee before the Ld. CIT(A), which required to be sent to the AO under Rule 46A and also in the Ld. CIT(A) s order there was no mention about the admission of additional evidence - Decided against revenue. Claim of assessee u/s. 54 - CIT(A) rightly directed the AO to consider the claim u/s 54 - Held that - As during the relevant assessment year, the assessee has sold a property at 20C/72, West Punjabi Nagar, New Delhi for the consideration of ₹ 95,00,000/- as per the registered value of the property (whereas during the course of survey, the same property was found to be valued at ₹ 3,87,00,000/- by a registered valuer). The assessee has claimed that the sale proceed of the aforesaid property at 20C/72, West Punjabi Bagh, New Delhi was invested in the purchase of property in the same assessment year at J-1/161, Rajouri Garden, New Delhi. We observed that the assessee was entitled for deduction u/s. 54 of the I.T. Act in respect of capital gain on the sale of property at 20C/72, West Punjabi Bagh, New Delhi. We further note that the assessee has also relied upon the decision of the Hon ble Supreme Court of India in the case of National Thermal Power Co. Ltd. vs. CIT 1996 (12) TMI 7 - SUPREME COURT . The AO has not considered the claim of exemption of the assessee u/s. 54 in respect of the capital gain arose in respect of the sale of property at 20C/72, West Punjabi Bagh, New Delhi. In view of the above, in our considered opinion, the Ld. CIT(A) rightly directed the AO to consider the aforesaid claim of the assessee of exemption u/s 54 of the I.T. Act, while computing the income of the assessee. We also find considerable cogency in the assessee s counsel that Ld. DR itself was saying that the assessee has sold one property and purchased another, then there is no question why exemption u/s. 54 should not be given.- Decided against revenue.
Issues Involved:
1. Deletion of addition on account of unexplained income. 2. Admitting additional evidence without giving the opportunity to AO under Rule 46A. 3. Direction to AO to consider the claim of the assessee under Section 54 of the I.T. Act, 1961. 4. The AO's consideration of sales consideration under Section 48 based on market value instead of actual sales consideration. 5. The applicability of Section 292BB to the assessee's case. Issue-Wise Detailed Analysis: 1. Deletion of Addition on Account of Unexplained Income: The Revenue challenged the deletion of an addition amounting to Rs. 3,53,30,000/- made by the AO on account of unexplained income. The AO had referred the property valuation to the District Valuation Officer (DVO) under Section 142A, who estimated the value at Rs. 3,53,30,000/- against the declared value of Rs. 88,60,000/-. The Tribunal found that the AO erred in referring the matter to the DVO without any adverse material or evidence of excess investment. The Tribunal relied on precedents, including the Supreme Court's decision in Sargam Cinema vs. CIT, which held that without rejecting the books of accounts, reference to the DVO is not justified. The Tribunal upheld the CIT(A)'s deletion of the addition, stating that the AO did not bring any evidence on record of excess investment and failed to provide sufficient opportunity of being heard to the assessee. 2. Admitting Additional Evidence Without Giving Opportunity to AO Under Rule 46A: The Revenue contended that the CIT(A) admitted additional evidence without giving the AO an opportunity under Rule 46A. The Tribunal found no mention of additional evidence in the CIT(A)'s order and concluded that no additional evidence was filed by the assessee that required the AO's review under Rule 46A. Consequently, this ground was dismissed. 3. Direction to AO to Consider the Claim of the Assessee Under Section 54 of the I.T. Act, 1961: The CIT(A) directed the AO to consider the assessee's claim for exemption under Section 54 for the capital gains arising from the sale of property at 20C/72, West Punjabi Bagh, New Delhi, which was invested in purchasing another property at J-1/161, Rajouri Garden, New Delhi. The Tribunal upheld this direction, noting that the assessee was entitled to the exemption and the AO had not considered this claim. The Tribunal found the CIT(A)'s direction to be well-reasoned and dismissed the Revenue's ground on this issue. 4. The AO's Consideration of Sales Consideration Under Section 48 Based on Market Value Instead of Actual Sales Consideration: The assessee contested the AO's consideration of the sales consideration based on market value as per an old valuation report instead of the actual sales consideration of Rs. 95,00,000/- as per the registered sales deed. The Tribunal found that the AO's reliance on the market value was not justified in the absence of any evidence that the actual sale consideration was higher than what was declared. The Tribunal upheld the CIT(A)'s decision to use the actual sales consideration of Rs. 95,00,000/- for computing capital gains. 5. The Applicability of Section 292BB to the Assessee's Case: The assessee argued that the CIT(A) erred in holding that their case was squarely covered under Section 292BB. However, this issue was not pressed by the assessee during the hearing, as the Tribunal dismissed the Revenue's appeal. Consequently, the Tribunal did not address this issue in detail. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, remitting ground no. 1 back to the CIT(A) for fresh consideration. The Tribunal upheld the CIT(A)'s deletion of the addition on account of unexplained income, found no merit in the Revenue's contention regarding additional evidence, and confirmed the direction to consider the assessee's claim under Section 54. The Tribunal also upheld the use of actual sales consideration for computing capital gains and did not address the applicability of Section 292BB in detail.
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