2016 (6) TMI 649 - HC - Income Tax

Additions u/s 69 - Valuation made by the District Registrar/Appellate Authority - Held that - Law is well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of DVO cannot form basis of any addition on the part of the revenue. Since in the said case there was no evidence other than the report of DVO, it could not be relied upon for making addition. The question was decided in favour of the assessee against revenue Addition u/s 69 - Held that - It appears that it is not a case of the revenue that there was any independent or corroborative material for consideration paid or received in addition to than mentioned in the sale deed. The basis of the addition is only valuation report of the District Registrar under the Stamp Act and the Departmental valuer. As such, there is no independent material which had come on record for such purpose. The payment of additional stamp duty may be on the basis of the valuation of the valuer of the stamp Act authority but same ipso facto cannot be said to be a valid ground to initiate the proceedings under Section 69 of the Act or to invoke power under Section 69 of the Act on the premise that additional consideration was paid or received. Further, if such could not be the basis, subsequent valuation report would also not a ground. In the absence of any independent material, the report of the valuer could not be the basis for making addition. Under such circumstances, we find that the addition made by the Assessing Officer and further modified by the CIT (Appeal) as well as by the Tribunal cannot be sustained.- Decided in favour of the assessee

Summary

Issues Involved:
1. Whether the Tribunal's reliance on the valuation made by the District Registrar/Appellate Authority without assigning reasons is perverse, arbitrary, and unsustainable.

Issue-wise Detailed Analysis:

1. Tribunal's Reliance on the Valuation by the District Registrar/Appellate Authority:
The core issue in the appeal was whether the Tribunal's reliance on the valuation made by the District Registrar/Appellate Authority without assigning reasons was perverse, arbitrary, and unsustainable. The appellant, engaged in the transport business, had filed a return of income for the assessment year 2006-07. The Assessing Officer added ?51,69,458/- under Section 69 of the Income Tax Act, 1961, as unexplained investment in a residential house. The property was valued at ?90,51,000/- by the Assessing Officer against the actual consideration of ?60,07,377/- reflected in the sale deed. The appellant paid the difference in stamp duty based on the valuation made for stamp duty purposes, which was considered by the Assessing Officer. The matter was referred to the valuer, resulting in the addition under Section 69 of the Act.

The appellant challenged the assessment before the CIT (Appeals), who confirmed the addition towards cash credit but gave partial relief of ?6,09,119/- regarding the addition under Section 69. The appellant further appealed to the Tribunal, which upheld the addition under Section 68 and decided the value of the property based on the District Registrar/Appellate Authority's valuation for stamp duty purposes, directing the assessing authority to re-compute the capital gain accordingly.

2. Initial Burden of Proof on Revenue:
The appellant's counsel argued that the initial burden to prove unexplained investment under Section 69 lies with the revenue. The revenue must provide independent material or primary evidence to show unexplained income. The appellant's counsel contended that merely opting for additional stamp duty based on the District Registrar's valuation cannot be grounds for treating the difference as unexplained income. The revenue's counsel argued that the valuation accepted for stamp duty purposes could be a basis for invoking Section 69, indicating an indirect admission by the appellant.

3. Case Laws and Legal Precedents:
The court referred to the High Court of Delhi's decisions in *Commissioner of Income Tax vs Puneet Sabharwal* and *Commissioner of Income Tax vs Sadhna Gupta*, which established that the primary burden of proof for understatement or concealment of income lies with the revenue. The valuation report of the District Valuation Officer (DVO) alone cannot be the basis for assessment without corroborative evidence. The court emphasized that unless there is evidence indicating extra consideration in the property transaction, the DVO's report cannot form the basis for addition.

4. Lack of Independent Material Evidence:
In the present case, there was no independent or corroborative material indicating that the appellant paid or received consideration beyond what was stated in the sale deed. The additional stamp duty payment based on the stamp authority's valuation could not be a valid ground for initiating proceedings under Section 69. The absence of independent material meant that the valuer's report alone could not justify the addition.

Conclusion:
The court concluded that the addition made by the Assessing Officer, modified by the CIT (Appeals), and upheld by the Tribunal could not be sustained. The question was answered in favor of the appellant, setting aside the addition on the premise of unexplained investment in the land and building. The appeal was allowed accordingly.