2017 (12) TMI 355 - AT - Income Tax

Unaccounted investment u/s 69B - fair market price/value of the property for the purpose of section 69B - Held that - Since it is an issue of determination of the fair market value of the plots of land in question and it is apparent from the facts and chain of events as discovered from the search and seizure action and emerged from the documents disclosing the earlier agreements to sell of these plots of land that difference between the sale consideration agreed upon between the parties in the agreement dated 28.03.2013 and the sale consider for which the assessee purchase the property vide sale deed dated 07.05.2014 is ₹ 4.66 crores which is more than the twice of the sale consideration paid by the assessee. The assessee has not brought on record any facts or circumstances to show that the value of the property has depreciated during the period from 28.03.2013 to 07.05.2014 and further the fair market price of this property is less than the prevailing price due to certain disadvantages attached to this property. Therefore so far as the action of the AO to invoke the provisions of section 69B is concerned, it is proper on the part of the AO to invoke these provisions if the AO is satisfied that the investment made by the assessee is much more than it has shown in the books of accounts. Thus this matter requires a proper verification and examination at the level of the AO for determining the fair market price/value of the plot of land in question. Since the valuation of the property is a subject matter of the experts in the field, therefore, Assessing Officer ought to have got the valuation from the expert/DVO.

Summary

Issues:
- Addition of undisclosed investment under section 69B of the Income Tax Act, 1961.

Analysis:
1. The Revenue challenged the deletion of an addition of ?4,66,00,000 made by the Assessing Officer (AO) under section 69B of the Income Tax Act, 1961, by the Commissioner of Income Tax (Appeals) (CIT(A)) for the Assessment Year 2015-16. The AO noted a chain of events related to the sale of two plots of land, indicating discrepancies in the sale consideration. The AO issued a show cause notice to the assessee regarding the differential amount between the original agreements and the actual sale deed consideration. The CIT(A) deleted the addition, leading to the Revenue's appeal.

2. The Departmental Representative (DR) argued that the incriminating documents found during a search revealed a chain of events from the original agreements to the final transfer of the property to the assessee. The DR contended that the sale consideration was understated by the assessee, leading to the addition under section 69B. The DR relied on the AO's findings and highlighted the multi-layered transactions involved.

3. On the other hand, the Authorized Representative (AR) of the assessee contended that the addition under section 69B was unwarranted as no on-money transactions were admitted by any party involved. The AR argued that the AO's presumption of market value based on cancelled agreements was flawed. The AR also stated that section 50D could not be invoked in the present case, as it applies to capital gain computation for sellers, not purchasers. The AR cited relevant case laws to support the assessee's position.

4. The Tribunal examined the facts and chain of events related to the sale of the plots of land. It noted discrepancies in the sale consideration between the original agreements and the actual sale deed. The Tribunal observed that the AO did not conduct an enquiry to determine the fair market value of the property, as required under section 69B. The Tribunal emphasized that the earlier agreements involving different parties could not be used to determine fair market value. It directed a fresh adjudication by the AO, suggesting the involvement of experts for property valuation.

5. Consequently, the Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the matter for the AO's reevaluation. The Tribunal emphasized the need for proper verification and examination to determine the fair market value of the property in question, providing both the AO and the assessee an opportunity for a hearing.

In conclusion, the judgment addressed the issues related to undisclosed investment under section 69B of the Income Tax Act, emphasizing the importance of proper valuation and expert examination in such cases.