2006 (2) TMI 79 - HC - Income Tax

(A) Whether or not when the returns and the statements of the seller admit higher sale consideration actually received, the Revenue is justified in fixing the sale consideration at the higher amount than what has been declared? (B) When the assessee did not give any explanation to the notings found and at the same time the Revenue is able to corroborate the same with the statement of the seller for the purpose of determination of actual sale value, would the lower authority be justified in interfering with the same? (C) When consistent sworn statements were taken into consideration along with evidences found at the time of search, would they all be liable to be rejected on the basis of one statement in between contradicting the earlier ones which was also explained away as a result of intimidation? - AO did not conduct any independent enquiry relating to the value of the property purchased. He merely relied on the statement given by the seller. If he would have taken independent enquiry by referring the matter with the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one. In view of the foregoing conclusions, we find no error in the order of the Income-tax Appellate Tribunal and requires no interference

Summary

Issues:
1. Determination of sale consideration higher than declared by the assessee.
2. Justification for interfering with consistent sworn statements and evidences.
3. Burden of proving actual consideration in a transaction.

Analysis:

Issue 1: Determination of sale consideration higher than declared by the assessee
The case involved a dispute regarding the sale consideration of a property purchased by the assessee. The Revenue contended that the actual sale consideration was higher than what was declared by the assessee. The seller initially provided conflicting statements regarding the amount received, but later admitted to receiving a higher sum. The Assessing Officer made an addition of undisclosed income based on this discrepancy. The Commissioner of Income-tax (Appeals) noted the conflicting nature of the seller's statements and deleted the addition. The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals), emphasizing the Revenue's failure to discharge its duty of proving the actual consideration. The burden of proof in such transactions lies with the Revenue, as established in legal precedents. The Tribunal found no error in the decision and dismissed the appeal, stating that no substantial questions of law arose for consideration.

Issue 2: Justification for interfering with consistent sworn statements and evidences
The case also raised the question of whether lower authorities were justified in interfering with consistent sworn statements and evidences. The seller's statements varied regarding the sale consideration received, leading to conflicting information. The seller's revised income-tax returns and claims of utilizing the sale proceeds for various purposes further complicated the matter. The Tribunal observed that the Assessing Officer did not conduct an independent inquiry into the property's value, solely relying on the seller's statements. The failure to refer the matter to a Valuation Officer was deemed a fatal error. The Tribunal upheld the decision of the lower authorities, emphasizing the lack of evidence presented by the Revenue to support the higher sale consideration determined.

Issue 3: Burden of proving actual consideration in a transaction
The judgment highlighted the burden of proving the actual consideration in a transaction, placing this responsibility on the Revenue. The courts have consistently held this view, emphasizing the importance of the Revenue fulfilling its duty to establish the true value of transactions. In this case, the Tribunal found that the Revenue failed to discharge its duties and instead relied on conjectures and surmises. The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) and dismissed the appeal, noting that no substantial questions of law warranted further consideration by the court.