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TMI Blog2014 (7) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to have fallen into error in valuing the property at Rs. 1.25 crores and consequently bringing the amount of Rs. 74 lakhs to tax. 3. Brief facts of the case are that upon the assessee filing the return for AY 2007-08, pursuant to search and seizure under Section 132 of the Income Tax Act, 1961 in respect of the Gopal Zarda Group including the assessee on 15.01.2009, proceedings under Section 153A of the Act were initiated. The case of the assessee was centralized by an order and notice was issued under Section 153A of the Act on 30.07.2009 requiring her to file her return. The assessee responded to this and filed a return declaring income of Rs. 12,76,890/-. The original return in this case was filed on 05.11.2008 declaring income of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O's order could not be faulted under the circumstances because he adopted an reasonable method for arriving at the value of the property. Explaining this, learned counsel submitted that the return of Rs. 3,10,114/- per month as rent was disproportionate and excessive having regard to the declared cost of acquisition of the property and therefore the adoption of the return on capital method in these circumstances was reasonable. The learned counsel submitted that the AO had no choice because the assessee did not cooperate. It was also submitted that DVO's report subsequently furnished clearly shows that the assessee did not cooperate and care to respond to notices which compelled him to state that he could not complete the valuation exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which according to him had not been disclosed by the assessee. The task of the DVO in the circumstances became crucial; he could not have indulged an arm chair exercise by merely issuing notices to the assessee. He could have possibly visited the premises as the address was known and gathered information of the market value at the time of the inspection or even at the time of the acquisition of the property not only by the assessee but by other contemporaneous transactions in properties situated in the vicinity; he could have gathered information about the prevailing circle rate as on the date of acquisition as well as other relevant materials. The DVO's lack of information or inputs only compounded the error in the present case. 8. In Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red of him to prove the precise extent of understatement and he could adopt the difference between the stated consideration and the fair market value of the property as the understatement. The sub-section was held to provide for a "statutory best judgment" once actual understatement was proved; it obviated the need to prove the exact amount of understatement. Additional reasons for the result were (a) that the marginal note to the section referred to "cases of understatement"; (b) the speech of the Finance Minister while introducing the provision; and (c) the absurd or irrational results that would flow from a literal interpretation of the sub-section, which could not have been intended by the legislature. 12. While the omitted section 52( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst to ascertain what was according to him the true cost of the property. Not having done so, that error could not have been compounded by adopting a completely different methodology without any positive finding as to the cost of acquisition. The following conclusions of the CIT (A) extracted below, therefore, could not be faulted with: "On a consideration of the above facts and the legal position as emerging from the decisions relied upon by the appellant it is seen that the addition made for Rs. 74 lacs is purely based on estimate and conjecture and there is no substance in the estimate made by the AO, who in any case is not authorized to make any estimate under the provisions of section 142(2A) of the Income-tax Act. Moreover, section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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