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TMI Blog2014 (4) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... d in law and on facts in brushing aside evidentiary value of the Valuation Report of DVO which was based on scientific method approved by the Govt. and without rebutting the facts mentioned therein. 4. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition made by the AO u/s 69 on the ground of absence of any actual evidence alleging or establishing that extra investment was made by the assessee, as it places an unfair burden on the department as availability of direct evidence is impossible in such type of cases as both parties gain by understating the real consideration of immovable property which is transferred. 5. The order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 6. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 2. The relevant facts of the case are that the Search & Seizure operation u/s 132 was conducted on 23.02.2006 and again on 10.05.2007 in M/s Flex/Uflex Group of cases. In response to notice u/s 153A return declaring an income of Rs.24,27,240/- was filed on08.02.2008. The record sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce property was approved by the Authority on 3.4.2002 whereas the assessee acquired the Chhatarpur property on 14.7.2002. v. That chapter-XX-C of the Act became inapplicable w.e.f 1.7.2002. vi. That the area of the instance property has seen much more residential and commercial development activities than the area in which property of assessee is located. vii. That the notified circle rate for agricultural land as per Government records was much lower than the rate at which the assessee has purchased the land. viii. The assessee has also furnished instances of two registered sale deeds in respect of property located at Chhatarpur in support of her contentions." 2.2. The record shows that the AO rejected these objections on account of the following reasoning:- "6. I have carefully considered the contentions put forth on behalf of the assessee. However, I do not agree with these contentions on the following grounds:- i. Payments made to vendors by way of pay orders at some point of time does not rule out the possibility of making additional separate payments either at that time or before or after such time towards purchase of the impugned land. ii. It is common knowledge tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s much more than the value shown by the assessee. The sellers are in no way related to the assessee so that they would have given away their land at throwaway price out of natural love and affection. These have been transactions between independent prudent persons doing it at arm's length. In such a situation, the only inference which is to be drawn out of the facts of the case is that the assessee has paid the balance amount at unaccounted cash payment in order to avoid stamp duty, and to avoid higher investment of Accounted capital. The difference has been paid out of undisclosed sources. Accordingly an addition of Rs.1,60,11,000/- is made to the total income declared by the assessee as unexplained investment u/s 69 of the Income Tax Act, 1961." 3. Aggrieved by this the assessee came in appeal before the CIT(A) raising the following grounds :- "2. The Ld. AO is wrong on facts as well as in law to add a sum of Rs.1,60,11,000/- on account of unexplained investment U/s 69 of the Income Tax Act, 1961 on the basis of Valuation Report of District Valuation Officer." 3. The addition made by Ld. AO in the Assessment U/s 153A is not qua search material, therefore, Ld. AO had no jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable properties by Central Government in certain cases of transfer. That this Chapter gives pre-emptive right to Central Government to purchase immovable properties in certain cases of transfer. Infact under this Chapter, if the consideration of transfer of properties between two parties are inadequate than Central Government has the preemptive power to purchase the property at an agreed price between the parties. Thus, the Order under this Chapter by an appropriate authority does not determine the fair market value but determined whether the value adopted between seller and buyer of the property is adequate or not. This price need not necessarily be a market price. Hence, adopting a price which in the opinion of appropriate authority is not inadequate cannot be called as a fair market rate. It was also submitted by the Appellant that during the course of assessment proceedings, the assessee had furnished to the AO copies of two sale deeds in respect of property located at Chhatarpur. These sale transactions were between independent parties (other than Assessee). These two sale deeds were executed on 11th February 2002. These two sale deeds at placed at pages 167 to 213 of the Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred for acquisition of the property. That in the case of the appellant, it can be seen that the DVO has mechanically relied on the value approved by the appropriate authority for a property located at Satbari Village, whereas the appellant's property is located at Village Chhatarpur. That the DVO has not, while valuing the impugned property, independently applied his mind to determine the fair market value of impugned land. The AO also had mechanically applied his mind to determine the fair market value and has totally abdicated his responsibility in giving concrete findings as required by Section 69 of the Act. It is trite law that the appellant cannot prove an inactive fact." 3.2. The assessee further assailed the application of section 69 on facts. Reliance was also placed upon the judgement of the Apex Court in the case of K.P.Varghese vs ITO 131 ITR 597 (SC) for the proposition that corroborative evidences needs to be brought on record to indicate that a larger amount has been spend on the acquisition of the property. It was submitted that although the said judgement was in the context of capital gains however it would apply in equal force to the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. The judgements cited in the orders and relied upon before us have also been considered. On a consideration of the entire factual and legal aspect of the case, we find ourselves unable to come to a contrary finding in the absence of any argument assailing the action of the CIT(A). It is seen that considering Ground No-2 before him the CIT(A) gave a detailed finding in para 4 of his order which has not been assailed on facts nor any contrary judgement has been brought to our notice so as to persuade as to upset the finding. It may not be out of place to reproduce Ground No-2 before the CIT(A) and his finding thereon for a proper appreciation of the view being taken :- "2. The Ld. AO is wrong on facts as well as in law to add a sum of Rs.1,60,11,000/- on account of unexplained investment U/s 69 of the Income Tax Act, 1961 on the basis of Valuation Report of District Valuation Officer." 4. Finding on Ground No.-2 I have carefully considered the observation of the AO, submissions made and judicial pronouncements relied upon by the Appellant. It is a fact on record that the appellant was subjected to two consecutive searches U/s 132 and the present assessment order passed U/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of K.P. Varghese vs. ITO in the context of Sec. 52(2) applicable to Capital Gains, clearly applies in the case of the appellant and accordingly, the onus is on the AO to show that not only the fair market value of the capital assets as on the date of transfer exceeds the full value of consideration declared by the assessee, but also that the consideration is understated and the assessee has actually paid more than what is declared by him. That these are the twin conditions, which have to be satisfied while invoking Sec. 142A and Sec. 69 of the Act. The AO except adopting the value estimated by DVO has done nothing more to discharge his onus in order to satisfy these two conditions. The reliance placed by the appellant on the judgments in the two cases of the jurisdictional High Court viz. CIT vs. Mukesh Kumar reported in 201O-TIOL- 606-HC-DEL-IT & CIT vs. Smt. Suraj Devi 2010-TIOL-596-DEL-IT have also been examined. In Mahesh Kumar's case, search operations were conducted u/s 132 of the Act, reference was made u/s 142A and Section 69 was applied for determining the income and the High Court after noticing the judgment in the case of K.P. Varghese vs. ITO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Jurisdictional High Court that apart from the valuation report, much more information, evidences and material was required to be brought on record by the AO to make an addition U/s 69 of the Act. Therefore, respectfully following the judgements of Hon'ble Delhi High Court in the above two cases, and in view of the above discussion the AO is directed to delete the addition of Rs.1,60,11,000/- and accordingly Ground of Appeal No.2 is allowed in favour of the assessee." 8. A perusal of the above finding shows that the impugned order has been passed on the reasoning that despite being subjected to two consecutive searches nothing has been found and the assessment u/s 153A read with section 143(3) the department even before us has failed to refer to any incriminating evidence found during the search indicating any unrecorded payment having been paid apart from the payment made in the disclosed sale deed. No such effort has been made before us. Similarly qua the two independent sales in the same vicinity wherein the price paid by the assessee is more than the consideration paid in the two instances cited by the assessee in Chhatarpur itself stands unrebutted on record. Qua th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the return of income has been processed u/s 143(1) or an assessment has been completed u/s 143(3) it cannot be said that the assessments are pending and in such cases if no incriminating material has been found during the search then additions based on items which were disclosed in the return of income already filed cannot be subjected to further scrutiny, leading to addition to income, in a proceeding under section 153A/153C of the Act. The appellant while relying on the above decisions has submitted that the issue on addition of Rs.1,60,11,000/- on account of unexplained investment u/s 698 of the IT Act based on the valuation of the land purchased during the relevant assessment year cannot be subjected to further adjudication and consequent addition in face of the fact that no incriminating document/material with reference to the said purchases have been found during the course of the two searches conducted on the appellant. 5.1. Finding on Ground No-3 I have carefully perused the decisions relied upon by the appellant which are squarely applicable to the facts of the appellant's case. Therefore, while on merits the addition has already been directed to be deleted in Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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