2020 (2) TMI 1281 - AT - Income Tax

Unexplained investment u/s 69 - assessee has purchased old tenanted properties situated in slum areas filed copies of sale deeds of properties in the similar vicinity - HELD THAT - AO in the instant case has conducted independent enquiry by recording the statement of the seller of both the properties wherein he has categorically admitted by stating the reasons for selling the property at price below the prevalent circle rates. Further nothing has been brought on record to prove that the assessee has paid anything extra over and above the value of agreement in any other form of consideration. Nothing has been brought on record that money has emanated from the assesee s coffers. The sole reliance in the instant case is the basis of estimates made by the DVO in the valuation report. It has been held in various decisions that additions cannot be made on the basis of surmises and conjectures in the absence of any tangible material on record. Since in the instant case assessee has purchased old tenanted properties situated in slum areas filed copies of sale deeds of properties in the similar vicinity at about the same time which were sold at price below the circle rate also filed valuation report of registered valuer and the seller of the properties has appeared before the AO and has confirmed to have sold the property at the price mentioned in the sale deed only and there is no material available before the revenue authorities that assessee has paid anything more than what is mentioned in the sale deed therefore we are of the considered opinion that no addition is warranted in the instant case by invoking the provisions of section 69. We therefore set aside the order of the CIT(A) and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.

Summary

Issues Involved:
1. Applicability of Section 50C of the Income Tax Act.
2. Applicability of Section 56(2)(vii)(b) of the Income Tax Act.
3. Applicability of Section 69 of the Income Tax Act.
4. Validity of the valuation report by the District Valuation Officer (DVO).
5. Consideration of additional evidence and sale deeds in similar vicinity.
6. Rebate granted by the CIT(A).

Issue-wise Detailed Analysis:

1. Applicability of Section 50C of the Income Tax Act:
The Tribunal noted that the provisions of Section 50C are not applicable in the present case as the assessee is the buyer of the property and not the seller. Section 50C applies only to the seller of the land or building or both. This was supported by the decision of the Mumbai Bench of the Tribunal in the case of ITO Vs. Sh. Sunil Ghanshyamdas Verliani.

2. Applicability of Section 56(2)(vii)(b) of the Income Tax Act:
The Tribunal observed that the provisions of Section 56(2)(vii)(b) are also not applicable to the assessee since these provisions were introduced by the Finance Bill 2013 with effect from 01.04.2014, whereas the assessment year involved is 2011-12. Therefore, the amendment regarding the taxation of the difference between the stamp duty value and inadequate consideration does not apply to the present case.

3. Applicability of Section 69 of the Income Tax Act:
The Tribunal found that the addition under Section 69 of the Act was not justified. The AO had conducted an independent enquiry by recording the statement of the seller, who confirmed selling the properties at the price mentioned in the sale deed. There was no evidence to suggest that the assessee had paid any amount over and above the sale consideration mentioned in the sale deed. The Tribunal held that additions cannot be made based on surmises and conjectures without tangible material evidence.

4. Validity of the Valuation Report by the DVO:
The Tribunal considered the objections raised by the assessee regarding the valuation report by the DVO. The CIT(A) had noted that the DVO is a specialized officer with the technical competence to undertake the valuation of immovable property. However, the Tribunal found that the valuation report alone, without any corroborative evidence, could not be the sole basis for making the addition.

5. Consideration of Additional Evidence and Sale Deeds in Similar Vicinity:
The Tribunal acknowledged that the assessee had filed additional evidence in the form of sale deeds of properties in the similar vicinity at about the same time, which were sold at a price below the circle rates. The CIT(A) had forwarded the application for additional evidence under Rule 46A and called for a remand report from the AO. The Tribunal found merit in the contention that these additional evidences were relevant for deciding the appeal and should have been given due consideration.

6. Rebate Granted by the CIT(A):
The CIT(A) had directed the AO to give a 15% rebate on the valuation determined by the DVO, considering the properties were tenanted and situated in a slum area. The Tribunal, however, found that the entire addition should be deleted as there was no material evidence to suggest that the assessee had paid any extra amount over and above what was stated in the sale deed.

Conclusion:
The Tribunal concluded that no addition was warranted under Section 69 of the Income Tax Act. The order of the CIT(A) was set aside, and the AO was directed to delete the addition. The appeal filed by the assessee was allowed, and the grounds raised by the assessee were accepted. The judgment emphasized the importance of tangible evidence over mere estimates and upheld the principle that additions cannot be made based on conjectures.