2016 (2) TMI 81 - AT - Income Tax

Unexplained investment in purchase of flat - Valuation of the residential flat - adoption of value as per jantri rate by CIT(A) - Held that - The assessee who is not having any business income and is only earning income from salary and interest is not required to maintain any books of account. However, assessee has submitted details of cash book ledger, balance sheet and purchase bills and submitted that all the investments made in residential flat are having proper source in the form of accumulated capital balance of the assessee for past few years as well as housing loan from Canara Bank. We are further of the view that valuation report cannot be taken as an evidence for arriving at valuation of the residential flat as it was dated before the date of purchase/sale deed. As it can be seen from the record available and the valuation report by the Registered Valuer is dated 4th January, 2005 whereas the sale deed is dated 25.1.2005. Certainly section 50C of the Act refers to the value adopted or assessed by any authority of State Government for the purpose of payment of Stamp duty and ld. CIT(A) has rightly taken the value as per jantri rate at ₹ 4,79,400/-. The assessee s submissions that the income surrendered at ₹ 2 lacs during the statement given u/s 132(4) of the Act should not be given any cognizance as the same has been given on oath and has not been retracted in a reasonable time. Also the fact remains that assessee has been unable to support the opening capital balance of ₹ 6,52,730/- shown in the balance sheet before the lower authorities and nor has been able to submit financial statement of previous years to depict that how assessee has been able to arrive at this capital of ₹ 6,52,730/-. However, we agree to the value of the residential flat at ₹ 7,49,970/- arrive at by the ld. CIT(A) but we differ on the deduction which has been restricted by ld. CIT(A) to ₹ 4,00,000/- as received by assessee as housing loan because some element of savings of previous years cannot be eliminated and in the interest of natural justice, we think that assessee certainly should have possessed its own fund and also in view of the surrender made by the assessee we sustain the addition to ₹ 2,00,000/- and thus assessee will get relief of ₹ 1,49,970/-. - Decided partly in favour of assessee

Summary

Issues Involved:
1. Legitimacy of the addition of Rs. 6,06,000/- under Section 69B of the Income Tax Act for unexplained investment in a residential flat.
2. Validity of the valuation report by the Registered Valuer.
3. Consideration of the assessee's statement under Section 132(4) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of the Addition of Rs. 6,06,000/- under Section 69B:
The case originated from a search action at the assessee's residence, which revealed a valuation report showing the value of a flat at Rs. 9,67,000/-. The registered sale deed indicated a purchase consideration of Rs. 3,61,000/-, while the Sub-Registrar valued the flat at Rs. 4,79,400/-. The Assessing Officer (AO) concluded that the difference of Rs. 6,06,000/- was unexplained investment under Section 69B. The CIT(A) partially allowed the appeal, reducing the addition to Rs. 3,49,970/-, considering the jantri rate and the assessee's disclosure of Rs. 2,00,000/- for furniture and fixtures.

2. Validity of the Valuation Report by the Registered Valuer:
The assessee argued that the valuation report was irrelevant as it was prepared for obtaining a housing loan, which resulted in a loan of only Rs. 4,00,000/-. The Tribunal noted that the valuation report was dated before the sale deed and could not be taken as evidence for the flat's valuation. The CIT(A) correctly used the jantri rate of Rs. 4,79,400/- for valuation purposes, aligning with Section 50C of the Act.

3. Consideration of the Assessee's Statement under Section 132(4):
The assessee's statement under Section 132(4) included a voluntary surrender of Rs. 2,00,000/- for investment in the flat and renovation. The CIT(A) found that the assessee did not retract this statement and failed to provide evidence for the source of the Rs. 2,00,000/- investment. The Tribunal upheld the CIT(A)'s decision but provided partial relief by considering the assessee's possible savings, thus sustaining an addition of Rs. 2,00,000/- and granting relief of Rs. 1,49,970/-.

Conclusion:
The Tribunal agreed with the CIT(A) on the flat's valuation at Rs. 7,49,970/- but differed on the deduction, allowing for some personal savings. The final addition was sustained at Rs. 2,00,000/-, providing the assessee relief of Rs. 1,49,970/-. The appeal was partly allowed, and the order was pronounced on 5th January 2016.