2015 (8) TMI 1080 - AT - Income Tax

Addition u/s 69B on the basis of the report of the Departmental Valuation Officer (DVO) - CIT(A) deleted addition - Held that - Section 69B, which is again a deeming provision, governs the cases in which investment made by the assessee is not fully disclosed. In other words, section 69B applies to the purchaser of an asset, in contradistinction to sec. 50C, which applies to the seller of an asset. A conjoint reading of sections 50C and 56(2)(vii) makes it vivid that whereas stamp value has been substituted with the full value of consideration in case the later is less than the former in the hands of the seller by virtue of section 50C, the substitution of the stamp value with the actual purchase price, in excess of ₹ 50,000/- has been made effective in the hands of the buyer only where any immovable property is purchased after 1.10.2009. As the assessee before us is a buyer, naturally, his case will not be covered u/s 50C but will be governed by section 56(2)(vii). Since section 56(2)(vii) is applicable on cases in which the individual or HUF receives immovable property on or after 1.10.2009 and we are dealing with a case in which the property has been purchased by the assessee in the financial year 2007-08, the mandate of section 56(2)(vii) cannot apply retrospectively. Once this provision is not applicable, the ratio decidendi in the case of K.P. Varghese (1981 (9) TMI 1 - SUPREME Court ) and Shivakami Co. P. Ltd. (1986 (3) TMI 2 - SUPREME Court ) would apply leaving no scope for making addition in the circumstances as are prevailing in the instant case. We, therefore, uphold the view taken by the ld. CIT(A) on this issue. - Decided in favour of assessee.

Summary

Issues:
Deletion of addition under section 69B based on DVO report.

Analysis:
The appeal concerns the deletion of an addition of Rs. 49,15,000 made by the Assessing Officer (AO) under section 69B based on a report by the Departmental Valuation Officer (DVO). The AO contended that the declared purchase price of a property was undervalued compared to its fair market value. However, the Tribunal emphasized that for an addition under section 69B, there must be positive evidence that the assessee made investments exceeding the recorded amount in the books of account. Mere presumption by the AO is insufficient, and only irrefutable evidence can justify such an addition. In this case, the only basis for the addition was the DVO's report, which is an estimate and not conclusive of the actual investment made by the assessee.

The Tribunal cited the Supreme Court's decisions in K.P. Varghese vs. ITO and CIT vs. Shivakami Co. P. Ltd., highlighting that the burden of proof lies with the Revenue to establish understatement of consideration. Mere valuation reports are insufficient without concrete evidence of understatement. The Tribunal emphasized that legal fictions, like deeming provisions, cannot be extended beyond their intended purpose. Section 50C, a deeming provision for stamp valuation, applies only to the seller for computing capital gains, while section 69B, another deeming provision, pertains to undisclosed investments by the buyer.

Furthermore, the Tribunal explained the introduction of section 56(2)(vii) by the Finance Act, 2009, which addresses cases of immovable property transactions post-1.10.2009. As the case in question involved a purchase in the financial year 2007-08, section 56(2)(vii) cannot be applied retrospectively. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the addition under section 69B. The appeal was dismissed, affirming the view taken by the lower authority.

In conclusion, the Tribunal's detailed analysis focused on the legal requirements for additions under section 69B, the burden of proof on the Revenue, limitations of deeming provisions, and the applicability of specific sections based on the nature and timing of property transactions. The judgment clarified the legal principles governing valuation disputes and undisclosed investments, providing a thorough and insightful interpretation of the relevant statutory provisions and judicial precedents.