2017 (9) TMI 179 - AT - Income Tax

Addition u/s 69 - unexplained investment - Difference between the value of the property as per the Stamp Duty Act and the value of the property as per the purchase deed - application of section 50C - CIT-A deleted the addition as there was no merit- Held that - There was no provision in the Act which could have helped the AO to reach a conclusion that the difference between the value of the property as per the Stamp Duty Act and the value of the property as per the purchase deed can be straight away construed to have been paid by the assessee in excess of what has been declared in the purchase deed. The Ld. CIT (Appeals) has noted that in absence of any specific incriminating evidence brought on record by the AO, the legally declared consideration has to be accepted. The substantial difference between the value as worked out by the registration authorities and the value of purchase as declared by the assessee can at best be a starting point for any further inquiry/investigation but cannot be the sole basis for any addition and as the AO has not proved any underhand dealing and, therefore, the addition was not tenable in the hands of the assessee purchaser. Thus in absence of any positive evidence that the assessee had actually paid more than the consideration shown in the respective sale deeds for the purchase of plots, addition under section 69 could not be made simply on the basis of higher valuation of the plots either by the DVO or the values adopted by the sub-registrar or the Revenue Board for the purpose of stamp duty. - Decided against revenue

Summary

Issues:
- Appeal against deletion of addition under section 69B of the Income Tax Act, 1961.
- Interpretation of provisions of section 69B regarding undisclosed investment in property.
- Evaluation of evidence and legal considerations for making additions to total income.
- Application of section 50C in cases of property transactions.
- Admissibility of evidence obtained by the assessing officer without notice to the assessee.

Analysis:
1. The appeal before the ITAT concerned the deletion of an addition under section 69B of the Income Tax Act, 1961, by the Ld. CIT (Appeals) in relation to an undisclosed investment in a property. The assessing officer had proposed an addition based on information received regarding the purchase of property by the assessee, where the value declared in the sale deed was lower than the market value. The AO made inquiries and added an amount to the total income of the assessee, which was subsequently deleted by the Ld. CIT (Appeals).

2. The key contention revolved around the application of section 69B, which allows additions to be made if the AO finds that the assessee has spent an amount exceeding the recorded consideration for property acquisition. The Ld. authorised representative argued that the AO lacked concrete material to support the addition and that the market value used for stamp duty purposes should not be the sole basis for determining undisclosed investment. It was emphasized that clear evidence is required to establish additional expenditure beyond recorded amounts.

3. The ITAT upheld the decision of the Ld. CIT (Appeals) by emphasizing that without specific incriminating evidence, the declared consideration must be accepted. The tribunal noted that the AO failed to provide evidence of underhand dealings or additional payments by the assessee. Reference was made to section 50C for cases involving property sellers and the need for proper application of relevant provisions. The ITAT cited a precedent from the ITAT Jaipur Bench to support the requirement of positive evidence before making additions under section 69.

4. Ultimately, the ITAT dismissed the Department's appeal, affirming the deletion of the addition under section 69B. The judgment highlighted the importance of substantiated findings and adherence to legal provisions when assessing undisclosed investments in property transactions. The decision underscored the necessity for concrete evidence to support any additions to an assessee's total income, especially in cases involving valuation variances between declared consideration and market rates.

5. The judgment concluded by pronouncing the dismissal of the Department's appeal in open court on 30th August 2017, thereby settling the dispute regarding the undisclosed investment and the subsequent addition to the assessee's total income for the relevant assessment year.