IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "B", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
I.T.A.No. 505 and 506/DEL/2012
A.Y. 2004-05 & A.Y. 2005-06
ACIT, C.C. 22 Express Earth Movers & Equipment
New Delhi Vs. Pvt.Ltd.
2A, Avenue Cassia
Westend Greens, Rajokari
New Delhi 110 038
PAN: AAACE 9926 C
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Salil Kapoor, Adv.
Department by : Sh. Sanjay Prasad, CIT, DR
ORDER
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
These are appeals filed by the Revenue directed against two
separate orders of the Ld.CIT(A)-III, Delhi dated 04.11.2011 pertaining to
the Assessment Year (AY) 2004-05 and dated 2.11.2011 pertaining to the
A.Y. 2005-06. Both are heard together and disposed of by this consolidated
order.
2. Facts in brief:- The facts of the case are brought out at para 2 of the
Ld.CIT(A)'s order at para 1, for the A.Y. 2004-05, which is extracted for
ready reference.
"The assessee is a company and a search and seizure action u/s 132 of the
Act was initiated on the assessee group on 6.11.2008 and a search warrant
was also issued and executed in the name of the assessee. The original
return of income u/s 139 of the Act was filed by the assessee on 27.10.2004.
Thereafter, the case was centralised in CC 22, New Delhi and notice u/s
ITA Nos. 505 & 506/Del/2012
AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
153A of the Act was issued on 8.7.2009 and the assessee filed the return of
income u/s 153A of the Act on 4.8.2009 at the original income. During the
year under appeal, the assessee company is engaged in the business of
providing heavy earth movers equipments and construction machinery, plants,
equipments, accessories etc. On hire/lease. Return u/s 153A declaring
income of Rs.24,020/- was filed on 4.8.2009 and the income of the assessee
was assessed at Rs.1,89,00,030/-.
For the A.Y. 2005-06, the assessee filed a return of income u/s 153A
declaring `Nil' income and the A.O. assessed the total income at
Rs.2,87,00,000/-.
2.1. The First Appellate Authority allowed the appeal of the assessee.
2.2. Aggrieved the Revenue is in appeal before us on the following grounds.
ITA 505/Del/12 for the AY 2004-05:
"1. On facts and in the circumstances of the case the Ld.CIT(A) erred in
deleting the addition of Rs.1,87,99,500/- made by the AO on account of
unexplained investment in property.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in
law and on facts in brushing aside the evidentiary value of the Valuation
Report of the DVO, which was based on scientific method approved by the
government without rebutting the facts mentioned therein.
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, amend or vary the above grounds
of appeal at or before the time of hearing."
ITA 506/Del/12 for the AY 2005-06:
1. On the facts and in the circumstances of the case, the CIT(A) has erred in
law and on facts in addition of Rs.2,87,00,000/- made by the AO on account
of unexplained investment in property.
2. The order of the Ld.CIT(A) is erroneous and is not tenable on facts and in
law.
3. The appellant craves leave to add, alter, amend or vary the above grounds
of appeal at or before the time of hearing."
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ITA Nos. 505 & 506/Del/2012
AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
2.3. The assessee invoked Rule 27 of ITAT Rules but during the course of
hearing, he did not press the same. Thus this is dismissed as `not pressed'.
3. Heard Shri Salil Kapoor, the Ld.Counsel for the assessee and Shri
Sanjay Prasad, Ld.CIT, D.R. on behalf of the Revenue.
4. ITA 505/Del/2012 (AY: 2004-05):- The only addition that is disputed
before us for the A.Y. 2004-05, is addition made u/s 68 of the Income Tax
Act, 1961 (the Act). The findings of the AO are recorded at para 19, 20 and
21 of the assessment order which is extracted for ready reference.
"19. Perusal of the details furnished by the assessee company shows that
the assessee has shown to have sold the above build up property at a price
which is less than the fair market rate. As discussed above, the value as per
the market rate for registration of the property is much lesser than the rate at
which the property has been shown to have been transacted. The transaction
has been between two unrelated parties acting at arm's length. The
transaction is a normal commercial transaction not influenced by any non
commercial factor such as love or affection etc. The assessee could not
demonstrate any reason as to why the property would not be transacted at
the market value. The only inference which can be drawn out of these facts it
that the property has been transacted at market value but much lower
consideration was shown in the registered documents. The difference of Rs.
1,87,99,500/- must have been received by the assessee company in cash in
an unaccounted mode.
20. In view of above, the unaccounted receipts on sale price as determined by
the Valuation Cell of the I.T. and that of taken by the Assistant Valuation
Officer of Rs. 1,87,99,500/- is treated as unaccounted income of the assessee
company.
Hence, the same is added to the total income of the assessee company.
21. Reliance in this regard is placed on the Hon'ble Supreme Court's decision
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AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
in the case of Sumati Dayal Vs. CIT 214 ITR 801 and Durga Prasad More
1971 82 ITR 540 (SC).
(Addition of Rs. 1,87,99,500/-)
5. The First Appellate Authority at page 20 considered the submissions
of the assessee and held as follows.
"On a consideration and analysis of the submissions of the appellant it is
noted that the valuation report in this case have been obtained u/s 142A of
the Act, which bears the marginal note "Estimate by Valuation Officer in
certain cases". As per section 142A (I) of the Act in order to estimate the value
of any investment referred to in section 69/69 A or 69B of the Act, the AO
may require the Valuation Officer to make an estimate of the value of such
investment and report the same to the AO. That on the receipt of such report of
the VO the AO may after giving the assessee an opportunity of being heard,
take into account such report for making assessment or reassessment. That
valuation made u/s 142A of the Act is only for the purpose of estimating the
cost of investment u/s 69/69A & 69B of the Act and therefore, the scope of
this section cannot be extended for determining the sale consideration of an
asset. In the facts of the case it is not the value of the investment which is to
be estimated in this case. That during the present assessment year the
property has been sold by the assessee and therefore it is capital gain or
unaccounted income earned out of such sale which is to be computed.
Therefore for such purpose the reference to the DVO should have been legally
made u/s 55A which has been in enacted with a view to ascertaining the fair
market value of a capital asset for the purposes of chapter IV of the Act Under
these circumstances there has been legal infirmity in making of reference by
the AO.
It is further noted from the copy of sale deed dated 26.06.2003 in appellant's
case that the same has been registered by registration authorities at Delhi
and there is no reference in this sale deed as to higher stamp duty having
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ITA Nos. 505 & 506/Del/2012
AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
been charged as compared to the stamp duty as mentioned on the declared
sale consideration by the appellant. From this it can necessarily be inferred
that the case of the appellant does not attract Section 50-C which is a special
provision for full value of consideration in certain cases and which being a
"deeming provision" has to be strictly construed. Additionally, the appellant
has contended that no circle rates for stamp valuation purpose were
applicable during the time of date of transfer in case of the appellant and that
the same was introduced vide notification dated 18.7.2007. That accordingly
in absence of any circle rate no addition can be made u/s 50C of the Act for
which it was required that the process as ingrained in section 50C should
have been followed and the reference to DVO should have been made u/s
55A of the Act and not u/s 142A.
It is also noted that the sale instance taken by the Valuation Officer that
prima facie it is not a comparable one for the reason that the sale instance
property was at a better location and was subjected to auction, which may
fetch a better price than fair market value on account of competitive bidding.
Secondly the unit rate sale consideration of the appellant is better than the
other sale instances of adjacent property relied upon by the appellant during
the appellate proceedings. The appellant's arguments regarding the
comparable sale instance taken in valuation is acceptable and therefore, there
is no case for making any addition to income as unaccounted receipt of cash
on account of higher sale consideration than the registered sale price by the
appellant during the year. In view of the above discussion in totality the
addition of Rs. 1,87,99,500/- is directed to be deleted."
5. The Ld.D.R. could not controvert these factual findings of the First
Appellate Authority.
6. Rival contentions heard. On a careful consideration of the facts and
circumstances of the case, on perusal of material on record, orders of the
authorities below, case laws cited, we hold as follows.
7. The entire addition is based on the presumption that the assessee
must have received an amount of Rs.18,79,500/- being the difference
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AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
between the value of the property estimated by the D.V.O. and the amount
declared as consideration in the sale deed of the property, which as per the
AO is unaccounted receipt of cash for sale of property. There is not even an
iota of evidence with the AO to come to a conclusion that the assessee has
actually received cash, over and above the amount declared by it for the sale
of this property. This is not a case where Sec.50C has been invoked. It is
an addition made u/s 68. It is not a case of computation of capital gains.
The factual finding of the Ld.CIT(A) could not be controverted by the
Revenue. Thus both legally and factually the order of the First Appellate
Authority is to be upheld.
8. In view of the above discussion we uphold the findings of the First
Appellate Authority and dismiss the appeal of the Revenue for the A.Y.
2004-05.
9. ITA 506/Del/2012 (AY: 2005-06):-
For the A.Y. 2005-06 an addition u/s 68 amounts to Rs.2,87,00,000/- has
been made based on property valuation done by a Bank empanelled valuer,
of property which was purchased by the assessee, in Plot no.217, Block C,
Rewari Line Industrial Area, Phase II, New Delhi 110 064. The sale deed of
the transaction discloses that the property was purchased for Rs.45 lakhs
on 31.8.2004. The property was valued by an approved Panel Valuer of
Punjab National Bank on 1.9.2006 i.e. two years after the transaction of
purchase, for Rs.4,86,00,000/- and the net realisable value was fixed at
Rs.4,15,00,000/-. The A.O. reduced 20% from the said value of
Rs.4,15,00,000/- @ 10% per year and arrived at net realisable value as on
31.8.2004 at Rs.3,32,00,000/- and considered this figure as the purchase
consideration paid.
9.1. As the assessee had purchased the said property for the total
consideration of Rs.45 lakhs, the difference between Rs.3,32,00,000 and
Rs.45,00,000/- is taxed as unaccounted income u/s 68 of the Act during
the year. The amount so taxed is Rs.2,87,00,000/-.
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ITA Nos. 505 & 506/Del/2012
AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
9.2. The First Appellate Authority deleted the addition on the ground that:
(a) no incriminating documents or material was found to prove that the
assessee has made unaccounted investment in the purchase of the property
at Plot no.217, Block C, Rewari Line Industrial Area, Phase II, New Delhi
110 064. (b) On reference to the D.V.O. u/s 142A of the Act by the
Assessing Officer, the value of such property was determined at
Rs.46,96,000 and whereas the assessee has paid purchase consideration of
only Rs.45 lakhs. (c ) There is nothing irregular or illegal on the part of the
AO for making reference to the DVO for valuation of the property. (d) The
valuation report given by the valuer of Punjab National Bank, at a much
later point of time, cannot be taken as the cost of investment by the
assessee. (e) The A.O. is not correct in completely ignoring the DVO's
valuation report. The burden is on the Revenue to prove that the income
sought to be taxed is within the taxing provisions. (f) The addition made
u/s 68 of the Act, based on an estimate, in the proceedings u/s 153A,
otherwise than through the mechanism provided u/s 142A, is bad in law.
He deleted the addition.
9.3. Aggrieved the Revenue is before us.
10. After hearing rival contentions we are of the considered opinion that
the order of the First Appellate Authority has to be upheld for the reason
that S.68 cannot be invoked under the facts and circumstances of the case.
A hypothetical and imaginary addition has been made by the A.O.
The departmental Valuation Officer has on reference made u/s 142A of the
Act valued the property at Rs.46.96 lakhs, which is marginally higher than
the purchase consideration of Rs.45 lakhs disclosed by the assessee. The
difference is negligible. Taking evaluation report value, arrived at 2 years
after the date of transaction and then arbitrarily modified the value and
thereafter treating this amount as sale.
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AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
Under the circumstances no addition can be sustained on the ground that
banker's valuer, after two years after the date of transaction, valued the
property at a particular amount when no material is found in support of the
AO's conclusion that the assessee had made unaccounted investments in
purchase price. The AO can not ignore the DVO's report. The addition has
been made on conjectures and surmises and without any basis. Hence the
First Appellate Authority has rightly deleted the said addition.
In coming to this conclusion we draw strength from the following
judgements of the Jurisdictional High Court.
(1) CIT vs. Aerens Infrastructure & Technology Ltd. (2011) reported in 16
Taxmann.com 400 (Delhi) where it is held as follows.
"Section 142A of the Income Tax Act, 1961 Assessment Estimate by
Valuation Officer. Assessee purchased a property for certain
consideration. Since valuation was found to be on lower side, A.O.
made reference to DVO u/s 142A and made addition of amount of
difference between valuation made by DVO and value declared by
assessee. On appeal, CIT(A) gave partial relief to assessee. On second
appeal, Tribunal deleted addition made by AO holding that reference
made by AO invoking provisions of S.142A was without jurisdiction
inasmuch as AO had not first recorded that there was an excess
expenditure incurred by assessee in acquiring articles. Whether, on the
facts, finding recorded by Tribunal was correct. Held, Yes."
(2) CIT vs. Anil Arora (ITA 340/2015) judgement dt. 22.5.2015 (Del)
wherein it is held as follows.
"Having heard the Ld.Counsel for the Revenue, we find the contentions
argued in the appeal to be wholly misplaced. It is fairly conceded (at
bar) by the Counsel for the Revenue that the reference to DVO for
estimation of the market value of the property in Punjabi Bagh was not
based on any material discovered or seized during the search
operations. The Counsel, however, referred to the case of another
property in District Baddi (Himachal Pradesh), in respect of which
documentary evidence indicated unaccounted consideration paid by the
assessee, referred to by the A.O. in para 4.3 of his order. At the same
time, Ld.Counsel also conceded that no addition to the tax liability of
the assessee on account of the said other property has been made.
There is no nexus between the property in Baddi (Himachal Pradesh)
and the property in Punjabi Bagh (West). There is undoubtedly no
material available to even remotely reflect that consideration over and
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ITA Nos. 505 & 506/Del/2012
AY: 2004-05 and 2005-06
Express Earth Movers & Equipment Pvt.Ltd.
above what was shown to be paid in the registered sale deed of the
West Punjabi Bagh property was made over to the seller. In these
circumstances, it was not fair in the first place to refer the said
property for estimation of its market value by DVO."
11. In the result Revenue's appeal for the A.Y. 2005-06 is dismissed.
12. In the result Revenue's appeals for both the A.Ys are dismissed.
Order pronounced in the Open Court on 29th June, 2015.
Sd/- Sd/-
[H.S. SIDHU] [J. SUDHAKAR REDDY]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dt. the 29th June, 2015
· Manga
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
9
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