2012 (12) TMI 337 - AT - Income Tax

Undisclosed investment Assessee had purchased agricultural land AO argued that the purchase price was quite low as compared to the prevailing market rate of the land AO made addition considering jantri price and auction price of SUDA Held that - Following the decision in case of Virjibhai Kalyanbhai Kukadia (2012 (10) TMI 791 - ITAT AHMEDABAD) and Naresh Khattar (HUF) (2003 (1) TMI 77 - DELHI HIGH COURT) held that merely on the basis of fair market value no addition can be made u/s. 69B. Section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment u/s. 69. AO has failed to bring on record any material to support the rates estimated by him. In favour of assessee

Summary

Issues:
Applicability of provisions of section 69B in determining undisclosed investment in land acquisition.

Analysis:
The Revenue filed an appeal against the order of Ld. CIT(A)-V, Surat for the assessment year 2006-07 regarding the undisclosed investment in land acquisition by an Individual engaged in diamond manufacturing. The Assessing Officer (A.O.) observed discrepancies in the declared cost of urban land acquired by the assessee and estimated market rates. The A.O. referred the matter to the District Valuation Officer (DVO) for valuation but proceeded to estimate the land value at Rs. 510/- per sq. mtr. due to pending DVO report. This resulted in adding Rs. 83,27,600/- as undisclosed investment to the assessee's income. The CIT(A) deleted the addition, emphasizing that the A.O. failed to provide sufficient evidence or conduct an independent enquiry to justify the addition under section 69B.

The key contention revolved around the application of section 69B, which allows for deeming undisclosed investments as income if certain conditions are met. The A.O. relied on jantry rates and auction prices to estimate the undisclosed investment without substantial evidence. The CIT(A) highlighted that section 50C, dealing with stamp duty valuation, is not applicable to purchasers under section 69B. Legal precedents emphasized the Revenue's burden to prove actual investments exceeding recorded amounts. The Tribunal noted that the A.O.'s reliance on jantry rates lacked supporting material, aligning with previous court decisions and dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the lack of concrete evidence supporting the A.O.'s estimated land value and the inapplicability of section 50C to purchasers under section 69B. The judgment underscored the necessity for the Revenue to substantiate undisclosed investments exceeding recorded amounts, leading to the dismissal of the Revenue's appeal.