2015 (7) TMI 734 - AT - Income Tax

Addition u/s 69B unexplained investments - AO disputing and harbouring a belief that the assessees have made investments, over and above, the amount so disclosed in the sale deed is based on the basis of stamp duty valuation which authorizes the valuation authorities to charge stamp duty on registering the transfer of plots - Held that - Valuation made for the purpose of stamp duty is an estimated opinion. It can be a corroborative evidence for the help of the AO, but, it cannot be conclusive piece of evidence demonstrating the unexplained investment made by the assessee for purchase of land. Solely on the basis of such estimated opinion, the addition cannot be made. From perusal of record, we find that, apart from this estimated opinion, the AO was not possessing any other evidence. As far as reference made under section 50C of the Act is concerned, we are of the view that section 50C is deeming provision, which authorizes the AO to replace the sale consideration with regard to the full value of consideration disclosed by the assessee for the purpose of computing the capital gain. In that situation, the AO would replace the sale consideration disclosed by the assessee by an amount on which stamp duty was paid by the assessee. Therefore, this section is of no help while determining the unexplained investment of the assessee. Thus Revenue authorities have failed to appreciate the facts and circumstances. The assessees have not made any unexplained investment in purchase of plots, and therefore, no additions deserve to be made. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of unexplained investment under Section 69B of the Income Tax Act, 1961.
2. Disallowance of interest expenses.

Detailed Analysis:

1. Addition of Unexplained Investment under Section 69B of the Income Tax Act, 1961:

The core issue in both appeals was the addition of unexplained investments under Section 69B of the Income Tax Act, 1961. The assessees, Shri Vishnuprasad S. Agrawal and Shri Sureshchandra S. Agrawal, challenged the additions of Rs. 27,39,079/- and Rs. 32,20,512/- respectively, made by the Assessing Officer (AO) based on the difference between the purchase price of plots as per the sale deed and the value assessed by the stamp duty authority.

- Facts of the Case:
- Shri Vishnuprasad S. Agrawal filed his return of income declaring a total income of Rs. 4,79,150/-. The AO noted that the total value as per the purchase deed was Rs. 29,12,350/-, whereas the stamp duty was paid on Rs. 56,51,429/-. The AO added the difference of Rs. 27,39,079/- as unexplained investment under Section 69B.
- Shri Sureshchandra S. Agrawal declared a total income of Rs. 1,37,450/- and agricultural income of Rs. 3,72,562/-. The AO noted the total value as per the purchase deed was Rs. 18,93,000/-, whereas the stamp duty was paid on Rs. 51,13,512/-. The AO added the difference of Rs. 32,20,512/- as unexplained investment under Section 69B.

- Legal Analysis:
- Section 69B authorizes the AO to deem unexplained investment if the amount expended exceeds the amount recorded in the books of account, and the assessee offers no satisfactory explanation.
- The Tribunal noted that the AO's belief was based solely on the stamp duty valuation, which is not conclusive evidence of unexplained investment. The Tribunal referenced various judgments, including the Hon'ble Gujarat High Court and other Tribunal decisions, which held that stamp duty valuation is an estimated opinion and cannot be the sole basis for invoking Section 69B.
- The Tribunal cited the case of DCIT Vs. Vallabhai, where it was held that the AO must bring on record material evidence to support the estimated price, and Section 50C, which deals with capital gains for the seller, cannot be applied to the purchaser for Section 69B purposes.
- The Tribunal concluded that the AO did not possess any other evidence apart from the stamp duty valuation to substantiate the claim of unexplained investment. Therefore, the additions made under Section 69B were not justified.

2. Disallowance of Interest Expenses:

- The assessees also challenged the disallowance of interest expenses, but these grounds were not pressed by the learned counsel due to the smallness of the amounts involved.

Conclusion:

The Tribunal allowed the appeals of the assessees partly, deleting the additions of Rs. 27,39,079/- in the case of Shri Vishnuprasad S. Agrawal and Rs. 32,20,512/- in the case of Shri Sureshchandra S. Agrawal. The Tribunal found that the Revenue authorities failed to appreciate the facts and circumstances, and no unexplained investments were made by the assessees in the purchase of plots.

Order Pronouncement:

The order was pronounced in the Court on 17th July 2015 at Ahmedabad. Both appeals of the assessees were partly allowed.