2016 (2) TMI 1327 - AT - Income Tax

Addition u/s 69B - Addition on basis of valuation report of the DVO - Onus to prove - HELD THAT - Burden of proof lies upon the person who alleges that the apparent is not real. In the facts of the present case, the ld. Assessing Officer, therefore, must prove that the falsity of the entries/transactions in the books of accounts as maintained by the assessee, on the basis of material/evidences on record. In the facts of the present case, as it is apparent from the assessment order that the ld. AO has not brought any evidence/material on record to show that the assessee has received more than what has been declared by him. AO has merely made an addition on the basis of the report obtained from the DVO without bringing any evidence on record. He has also not established that the details/evidences filed by the assessee are wrong. Under such circumstances, we do not find any infirmity in the findings of the ld. CIT(A) and the ld. CIT(A) has rightly deleted the addition made by the ld. Assessing Officer. We, therefore, dismiss the ground of appeal filed by the revenue.

Summary

Issues:
1. Addition of Rs. 3,35,00,000 based on valuation report of DVO.
2. Admissibility of DVO report as evidence for addition under section 69B.
3. Applicability of section 50C in the case.
4. Burden of proof on the Assessing Officer to establish understatement of consideration.

Detailed Analysis:
1. The case involved the addition of Rs. 3,35,00,000 by the Assessing Officer based on the valuation report of the Departmental Valuation Officer (DVO). The property in question was purchased by the assessee for Rs. 2,25,00,000, but the stamp duty authorities valued it at Rs. 5,60,00,000 for stamp duty purposes. The DVO valued the property at Rs. 5,60,00,000, leading to the addition by the Assessing Officer. The CIT(A) deleted this addition, emphasizing that the Assessing Officer failed to provide evidence to disregard the evidence presented by the assessee. The CIT(A) referred to the Supreme Court's decision in K.V. Verghese vs ITO to support the deletion of the addition, highlighting the need for the revenue to prove any discrepancy in the declared consideration.

2. The issue of the admissibility of the DVO report as evidence for making additions under section 69B was also raised. The Assessing Officer made the addition under section 69B, alleging that the amount expended on the property exceeded the recorded amount in the books of accounts. However, the CIT(A) held that the Assessing Officer could not solely rely on the DVO report without providing contradictory evidence. The CIT(A) referred to the legal principle that the burden of proof lies on the party alleging a discrepancy, and in this case, the revenue failed to substantiate its claim with concrete evidence.

3. The applicability of section 50C was discussed in the context of the case. The revenue argued that section 50C should apply since the stamp duty paid was based on the circle rate. However, the assessee contended that section 50C was not relevant as it pertains to cases where consideration is received, not paid. The assessee provided detailed financial breakdowns to support the purchase cost, construction expenses, and property valuation, challenging the revenue's stance on section 50C.

4. The burden of proof regarding the understatement of consideration was a crucial aspect of the case. The Assessing Officer was tasked with proving any discrepancy in the declared consideration, as established by legal precedents. The Supreme Court's ruling in K.P. Verghese vs ITO was cited to highlight the burden on the revenue to demonstrate any undisclosed consideration. The lack of concrete evidence from the revenue to support their claim of understatement led to the dismissal of the appeal, with the tribunal upholding the CIT(A)'s decision to delete the addition.

In conclusion, the tribunal dismissed the revenue's appeal, emphasizing the importance of providing substantial evidence to support additions based on valuation reports and highlighting the burden of proof on the revenue to establish discrepancies in declared considerations. The case underscored the need for concrete evidence and adherence to legal principles in tax assessments.