IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `F' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SHRI T.S.KAPOOR, ACCOUNTANT MEMBER
I.T.A .No.-2908/Del/2011
(ASSESSMENT YEAR-2007-08)
DCIT, vs Ritu Arora,
Central Circle-14, Room No.-320, F/A-45, Shivaji Enclave,
E-2, ARA centre, Jhandewalan, Rajouri Garden, New Delhi
New Delhi PAN-AAEPA9285B
(APPELLANT) (RESPONDENT)
Appellant by: Sh. M.B.Reddy, CIT DR
Respondent by: Sh.Ved Jain, CA
ORDER
PER DIVA SINGH, JM
This is an appeal filed by the assessee against the order dated 18.03.2013 of
CIT(A)-X, New Delhi pertaining to 2008-09 assessment year on the following
grounds:-
1. "On the facts and in the circumstances of the case, the CIT(A) has
erred in law and on facts in deleting the addition of Rs.3,44,45,000/-
made by the Assessing Officer u/s 69 of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case the CIT(A has erred
in law and on facts in deleting the addition ignoring the valuation
report prepared by the registered valuer on the behest of the assessee?
3. The order of the Ld. CIT(A) is erroneous and is not tenable on facts
and in law.
4. 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 as are evident from the assessment order are
that the Search & Seizure operation u/s 132 of the Income Tax Act, 1961 was
carried out on various premises of "Arora Group" on 18.01.2008. The group is
described as stock broker for equity and commodities wherein some of the group
2 I.T.A .No.-2908/Del/2011
companies are doing trading of timber and the group is stated to be managed by
Sh. Gaurav Arora and Sh. Ganesh Arora who are the brothers however they do
their business independently. As a result of this search notice u/s 153A was issued
to the assessee wherein return declaring an income of Rs.2,58,000/- was filed. The
present assessment year is one of the six assessment years preceding the
assessment year relevant to the year in which search was conducted. The assessee
derived income from salary, loss from business long term capital gain and income
from other sources. Reverting to the subject matter of the issue under appeal the
record shows that the assessee was asked by notice u/s 142(1) dated 02.07.2009 to
furnish the details of immovable properties purchased and sold during the year. In
response to it the assessee is found to have stated that the following property was
purchased/sold by her:-
Name of Property Date of Date of sale Cost of purchase/sale
purchase
C-7/3, Vasant Vihar, New Delhi 14.09.2006 - Rs.2,12,00,000 (2 cr-12
Basement & GF lac cost of stamp duty)
3. The AO observed that it is an integrated property built on a 420 Sq. Yards
plots wherein basement and ground floor had been purchased by the assessee who
is the wife of Mr. Ganesh Arora and first and second floor had been purchased by
Mr. Ganesh Arora. The AO on account of the following reasons required the
assessee to explain why fair market value of the property may not be considered in
this regard:-
5.3. "One agreement dated 01.06.2006 (seized annexure-A-17/pages-
21.22.Seized from residential premises C-7/3, Vasant Vihar, New Delhi. Copy
of this agreement enclosed as annexure-1/Pages-1 to 2 of this assessment
order). This agreement with the sellers SH.G.C.Mitra and his wife Mrs. Mitali
Dutta for sale of ground floor for Rs.1 cr. Though, there are no seized
agreements for other floors but eventually all the floors were purchased on a
consideration which as per the registered documents are Rs.1 cr per floor. In
pursuance of this agreement, the property was finally registered on 28.09.2006
and 01.12.2006 (the complete details of payment for purchase of property are
enclosed as annexure-1/pages-3)
3 I.T.A .No.-2908/Del/2011
5.4. In the search, valuation report prepared by registered valuer at the behest
of the assessee dated 2.6.2006 by M/s. S.K.Ahuja & Associates, East Patel
Nagar, New Delhi submitted to the Bank of India, Mayapuri Branch, New
Delhi have been seized. As per these reports, valuation has been worked out
as under:-
Date of valuation Floor Value (fair market value) Value (Force value)
15.11.2006 Basement Rs.2,66,00,000/- Rs.2,40,00,000/-
02.06.2006 G.F Rs.3,38,00,000/- Rs.3.04.45,000/-
02.06.2006 F.F. Rs.3,38,00,000/- Rs.3,04,45,000/-
02.06.2006 S.F. Rs.4,29,10,370/- Rs.3,70,24,533/-
Copy of these calculation reports are enclosed as Annexure-1/pages-4 to
35 (w.r.t Page No-78 to 84 of Annexure-1, Page No.-4 to 15 of Annexure A-
10, Page N0-51 to 57 of Annexure A-1 seized from residence of assessee).
5.5. As there is wide discrepancy in the valuation as shown in the reports
and as shown in the reports and as shown in the registered value,
Rs.6,04,00,000/- (Rs.2,66,00,000/- + Rs.3,38,00,000/-) as compare to
disclose purchase amount of 20,00,000/- (Rs.1,00,00,000/- each) for both
floors of this building, the assessee was asked notice dated 4.12.2009 and
vide order sheet entry dated 14.12.2009 to give the details. The Assessee
was asked to clarify these points vide notice dated 6.8.2009, 4.12.2009 and
order sheet entry dated 14.12.2009 and show cause fair market value of
property may not be considered in this regard."
3.1. The explanation of the assessee that this was valuation done by
Sh.S.K.Ahuja Associates, a certified valuer for the purpose of granting loan and
keeping this property as collateral and as such the value of the property
accordingly was on a higher side than what was the actual fair market value was
not accepted and the addition of Rs.3 crore 44 lakh odd was made observing as
under:-
"However, it is not tenable on the facts and circumstances of the case as
assessee herself prepared a valuation report to submit it in the bank for
mortgage for securing bank load/limit. It is not expected that assessee would
be misleading the bank. Moreover, banks are having expertise to have the
realistic value of the properties assessed because they have to protect the
interest of their money advance to the customers. It is pertinent to mention
here as admitted by the assessee that the payment has been made from 1st 14th
September, 2006 for both floors purchased by the assessee. This date is very
close to the valuation report prepared by the assessee. As per valuation
report, fiar market value of basement and ground floor works out to
6,04,00,000/- (Rs.2,66,00,000/- + Rs.3,38,00,000/-). Forced market value
comes to 5,44,45,000/- and value shown by assessee as per submissions dated
14.12.2009 at Rs.2,00,00,000/- (as per value shown in registered deed). Thus,
4 I.T.A .No.-2908/Del/2011
the difference between purchase value and even force sale value comes to
3,44,34,000/-. On these facts that assessee has shown under valuation of these
properties to that extent, it is reasonable to consider the investment in house
property as unexplained investment u/s 69 of the Income Tax Act, 1961 and
accordingly an amount of Rs.3,44,45,000/- is added to the total income of the
assessee. For furnishing inaccurate particular and concealing his income,
penalty u/s 271(1)(c) of the Income Tax Act, 1961 is being initiated."
4. Aggrieved by this the assessee went in appeal before the First Appellate
Authority who relying upon the explanation offered by the assessee deleted the
addition made for the reasons set out at pages 12, 13 & 14 in para 8 of his order.
Aggrieved by this the Revenue is in appeal before the Tribunal.
5. The Ld. CIT DR places reliance upon the assessment order.
6. The Ld. AR on the other hand relying upon the synopsis filed contended that
similar additions were made in the hands of the husband of the assessee, Mr.
Ganesh Arora and against similar relief granted by the CIT(A) the Revenue had
filed an appeal before the ITAT in the case of the husband of the assessee, Mr.
Ganesh Arora which stands disposed by the ITAT vide its order dated 24.01.2013
in ITA No.-2907/Del/2011 who is the owner of the first floor and second floor of
the property. Accordingly it was contended that the issue qua valuation decided by
the ITAT in the case of the husband covers the impugned order. In the
circumstances it was his prayer that the department's appeal deserves to be
dismissed.
6.1. Reliance was placed on CIT vs Shakuntala Devi 316 ITR 46 (Del); for
the proposition that primary onus is on the Revenue and only when it is discharged
it would be permissible to rely on the valuation report. Reliance was also placed
upon ACIT vs Dhariya Construction Co. 328 ITR 515 (SC). Specific attention was
invited to CIT vs Mahesh Kumar 196 Taxman 415 (Del) for the proposition that in
the absence of evidence or incriminating evidence found as a result of search to
suggest that the assessee has made any payment over and above the consideration
5 I.T.A .No.-2908/Del/2011
mentioned in the Registered Deed no addition can be made. Reliance was further
placed on the following synopsis :-
(i) K.P.Verghese vs ITO 131 ITR 597 (SC);
(ii) CIT vs George Henderson & Co. 66 ITR 622 (SC);
(iii) CIT vs I.P.Choudhary (2010) 328 ITR 7 (Del); and
(iv) CIT vs Late Gulshan Kumar through LR (2002) 257 ITR 703
(Del.)
7. We have heard the rival submission and perused the material available on
record. Admittedly the specific property whose first and second floor are owned
by the assessee's husband has been a subject matter for consideration on the very
same facts, circumstances and reasoning as are considered in assessee's case. No
distinguishing fact, circumstance or legal position is relied upon by the Revenue in
order to canvass a contrary view. It is seen that the CIT(A) decided the issue in
assessee's favour on the following reasoning:-
8. "I have considered the facts stated by the Assessing Officer and also
the submission made before me by the appellant. On going through the
same, I noticed that the Assessing Officer has made an addition merely
on the basis that as per the valuation report submitted to the bank, the
value of the property purchased by the appellant is stated at a value
higher than at which it was purchased from the seller. As per the
Assessing Officer, the assessee has purchased this property on 14th
September, 2006 for a consideration of Rs.2 crores whereas as per the
valuation report, the fair market value comes to Rs.6,04,00,000/- and
the force market value comes to Rs.,5,44,45,000/- by adopting the force
market value and the real value. The Assessing Officer has assumed
that the assessee has made an investment outside the books of account
to the extent of Rs.3,44,45,000/-. In my view, the action of the
Assessing Officer is untenable as the Assessing Officer has failed to
bring any material or evidence on record to substantiate the allegation
that the amount paid by the assessee to the seller for the purchase of
the property was higher than what has been stated in the sale deed. As
per the provision of Section 69(b) of the Act, an addition can be made
in respect of the investment if the amount expanded on making such
investment exceeds the amount recorded in this behalf in the books of
account. As such, the first requirement is to determine the amount
expanded. In this case, the assessee has categorically stated that the
amount expanded is Rs.2 crore only. This fact is evidenced by the sale
deed which has been registered before the statutory authorities.
Moreover, in the present case, an agreement to sell was also found as
6 I.T.A .No.-2908/Del/2011
has been stated by the Assessing Officer which is a part of the seized
record which also confirms that the sale consideration is the same as
stated in this document found during the course of the search. No other
material or the evidence was found during the course of the search
which could suggest that the amount expanded by the assessee was
more than the amount stated in the sale deed. The Assessing Officer
has merely, on the basis of valuation report, assumed that the amount
expanded by the assessee is more than the amount stated in the sale
deed. It is to be noted that valuation report does not provide evidence
that the actual payment made was what it stated in the valuation report.
The assessee before the Assessing Officer has given an explanation that
this valuation report was prepared for the purpose of getting loan and
keeping this property as collateral and the value of the said property
was taken for this purpose on a very high side as compared to the
actual fair market value. This explanation given by the assessee was
one of the plausible explanations and the Assessing Officer was not
justified in rejecting the same arbitrarily. In case he was not satisfied
with is explanation, he could have made further inquiry or he could
have even questioned the seller. In the absence of any material or
evidence to corroborate his findings, it will be difficult to sustain the
addition made by the Assessing Officer on this account. The valuation
report on a particular date in no way evidences that the purchaser had
made the actual payment of such amount and as such valuation report
per se can not be a basis for making addition. The fact that sale deed is
registered before the Sub-Registrar being government authority who
has accepted the sale consideration stated therein cannot be ignored
lightly. Further, in the sale deed, the seller has also confirmed that he
has only received the consideration stated in the sale deed and in the
absence of any corroboration or examination of the seller, it cannot be
assumed that he has received more than what has been stated. These
are vital evidences and cannot be ignored lightly merely on the basis of
assumptions and doubts. Moreover, it is also evident that no evidence
was found during the course of search which indicate that there was
some amount paid by the assessee outside the books of accounts.
Accordingly, I hold that the Assessing Officer was not justified in
ignoring the value stated in the sale deed in respect of the amount spent
for purchasing this property and substituting the same with the
valuation report. Accordingly, I, therefore, direct the Assessing Officer
to delete this addition of Rs.3,44,45,000/-. This ground of appeal is
allowed."
7.1. From a perusal of the order of the Co-ordinate Bench rendered in the case of
the husband, similar reasons and finding of the CIT(A) has been affirmed by the
Bench. The same is reproduced hereunder for ready-reference:-
5. "Having gone through the orders of the authorities below it is found
that the addition in question was made u/s 69 of the Act on account of
7 I.T.A .No.-2908/Del/2011
investment in the house property on the basis of the agreement to sale
and valuation furnished by the assessee to the bank seized during the
course of search. Admittedly there is no difference in the amount
shown as sale consideration in the agreement to sale seized during the
course of search and as shown in the registered sale deed. But there is
difference between the value shown in the agreement to sale and that
furnished by the assessee to the bank for mortgage to sale and that
furnished by the assessee to the bank for mortgage for securing
loan/limit. In the valuation furnished to the bank the fair market value
of first floor and second floor was worked out to Rs.7,77,10,370/- (Rs.
3,38,00,000/- + Rs. 4,39,10,370/-). Forced market value worked out to
Rs.6,74,69,333/-. The difference of Rs.4,74,69,333/- was worked out
between the forced market value and the value of Rs.2,00,00,000/-
shown in the registered deed i.e. Rs.6,74,69,333/- -Rs.2,00,00,000/-.
This amount in difference has been deed by the AO u/s 69 of the Act to
the income of the assessee on account of unexplained investment in the
house property. The Hon'ble Delhi High Court in the case of CIT vs
Mahesh Kumar (supra) has been pleased to hold that primary burden
of proof to prove understatement or concealment of income is on the
revenue and it is only when such burden is discharged that it would be
permissible to rely upon the valuation given by the VDO. In that case
the Hon'ble High Court observed that there was no evidence much less
incriminating evidence found as a result of the search to suggest that
the assessee has made any payment over and above the consideration
mentioned in the registered sale deeds. The Delhi Bench of the
Tribunal in the case of Shri Davinder Kumar vs DCIT (supra) has held
that no addition can be made on account of unexplained investment on
the basis of valuation report. IN the case of CIT vs Khan & Sirohi
Steel Rolling Mills (supra) the Hon'ble High Court of Allahabad has
been pleased to hold that Tribunal was justified in accepting the
explanation of the assessee that in view of the prevailing practice, the
value of stock hypothecated to bank was inflated to avail more
overdraft facilities and in deleting the addition on account of difference
between stock shown to bank and the stock shown in the books of the
assessee. Under the above facts of the present case we fully concur
with the finding of the Ld. CIT(A) that the action of the AO is untenable
and the AO has failed to bring any material or evidence on record to
substantial the allegation that the amount paid by the assessee to the
seller for the purchase of the property was higher that what has been
stated in the sale deed. The valuation report furnished to the bank does
not provide evidence that the actual payment made was what stated in
the valuation report. The assessee before the AO had given the
explanation that the valuation shown in the report was prepared for the
purpose of getting loan and getting the property as collateral and the
value of the said property was taken for this purpose on a very high
side as compared to the actual fair market value. In absence of any
material or evidence to corroborate the payment of the amount shown
in the valuation report, it was difficult for the AO to sustain the
8 I.T.A .No.-2908/Del/2011
addition made by him on the basis of the value shown in the valuation
report. We thus do no find infirmity in the first appellate order on the
issue. The same is upheld. Ground Nos. 1 and 2 are accordingly
rejected."
7.2. In the afore-mentioned peculiar fact and circumstances respectfully
following the order of the Tribunal, we hold that the department's appeal has no
merit. Being satisfied by the reasoning and finding arrived at in the impugned
order which is supported by the order of the Tribunal in regard to the very same
property in the case of the husband, the appeal is dismissed.
8. In the result the appeal of the department is dismissed.
The order is pronounced in the open court on 11th of July 2014.
Sd/- Sd/-
(T.S.KAPOOR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:- 11/07/2014
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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