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2008 DIGILAW 356 (RAJ)

Commissioner of Income v. Kishan Kumar

2008-02-05

DEO NARAYAN THANVI, N.P.GUPTA

body2008
JUDGMENT 1. This is an appeal by the Revenue, seeking to challenge the order of the learned Tribunal dated March 30, 2001, affirming the order of the learned Commissioner of Income-tax (Appeals) dated October 28, 1999, whereby the addition of Rs. 10,84,835, made by the Assessing Officer, in the assessment order dated January 29, 1999, was deleted. 2. For the present purposes, it would suffice to say that search operation was undertaken on the residential premises of the assessee on March 4, 1997. Then in response to the notice issued under section 158BC, the assessee filed return of income for the block period, declaring undisclosed income of Rs. 17,96,620. The present controversy, however, relates only to the additions made by the Assessing Officer on account of undisclosed investment in the agricultural lands and plots. The Assessing Officer held the assessee to have purchased the agricultural lands and plots during the block period. Copies of agreements/registered deeds were seized and from scrutiny thereof, it was observed that the investment accounted for regarding purchase of these properties is less than the market value taken by the registering authorities for these properties and the difference was worked out to Rs. 10,84,835. A tabulation in this regard has been given showing the consideration amount accounted for, the market value adopted by the Sub-Registrar and the difference considered unaccounted for. These transactions relate to the period June 12, 1991, to December 27, 1996, and the additions made include additions of Rs. 15,500, Rs. 17,335, Rs. 18,000, Rs. 25,000, and so on, totalling to Rs. 10,84,835. The Assessing Officer also considered the explanation of the assessee and made the addition only on the basis of the valuation put by the registering authorities on the basis of the price index fixed by the State Valuation Authorities (District Level Committees rates) and the difference between the consideration amount and the value adopted by the Sub-Registrar has been added as above. 3. In appeal, the learned Commissioner of Income-tax (Appeals) found the contention of the assessee to be more convincing and considered that there was some time lag between execution of the agreement and execution of the sale deed, during which time possibility of the increase in the stamp duty is not ruled out. Then it was also noticed that for certain amounts the assessee had himself made a disclosure. Then it was also noticed that for certain amounts the assessee had himself made a disclosure. Then regarding the rates, it was also held, that the Assessing Officer had not brought on record any other evidence/materials about the more payment having actually been made, in support of the findings, and has relied exclusively on the value taken by the Sub-Registrar, which cannot be considered sufficient rather independent evidence particularly for sustaining the addition in a block assessment was required. It was also found that the stamp duty rates are fixed by the DLC, according to the norms of the particular area, with the sole object to charge stamp duty and it does not necessarily reflect actual market rate of the property. Thus, the value determined for the purpose of stamp duty alone, without any other evidence/document or paper cannot form as unexplained investment. Thus, the addition was deleted. 4. The Revenue went in appeal and in this regard, the learned Tribunal relying upon a judgment of the Hon'ble Supreme Court in K.P. Varghese v. ITO reported in (1981) 131 ITR 597 , so also on a judgment of the Allahabad High Court in Dinesh Kumar Mittal v. ITO (1992) 193 ITR 770 , found that there is no rule of law to the effect that the value determined for the purpose of stamp duty is actual consideration passing between the parties to sale, it might be more or less. What is actual consideration that passes between the parties is the question of fact to be determined in each case having regard to facts and circumstances of that case and that, in the case in hand, there is no material on record, in respect of various properties to establish that the actual consideration passing between the parties was more than that declared by the assessee and that in such a situation the value adopted by the Registrar for the purpose of charging the stamp duty cannot justifiably form the basis for holding the same to be the actual consideration to have passed between the parties and in turn for making the addition of the difference between this value and the value declared by the assessee. Thus, the order of the learned Commissioner of Income-tax (Appeals) was affirmed. 5. Thus, the order of the learned Commissioner of Income-tax (Appeals) was affirmed. 5. This appeal was admitted, vide order dated September 27, 2001, by framing the following substantial question of law : " Whether, on the facts and in the circumstances of this case, the Income-tax Appellate Tribunal was justified in law in confirming the deletion of addition of Rs. 10,84,835 holding that there could not be any addition on account of difference of price debited in the accounts of books of the assessee and the value adopted by the registering authority for stamp duty purposes, while the actual price paid for purchase of the land is more, as is clearly borne out from the sale agreement and other incriminating documents seized during the course of search and seizure operation ?" 6. Arguing the appeal, learned counsel for the Revenue reiterated the stand, that the value determined by the authorities (DLC rates) do represent the fair market value and since, in the present case, the value shown in the document was a deflated figure and, therefore, the learned Assessing Officer was right in making addition of Rs. 10,84,835. 7. On the other hand, learned counsel for the assessee supported the impugned judgment, and placed very strong reliance on the judgment of the Hon'ble the Supreme Court in K. P. Varghese (1981) 131 ITR 597 , and also relied upon another judgment of this court in CIT v. Emerald Construction P. Ltd. (2007) 291 ITR 59 (Raj). 8. We have considered the submissions and have gone through the orders of the learned authorities below and the relevant provisions of the law so also the judgments cited at the Bar. 9. 8. We have considered the submissions and have gone through the orders of the learned authorities below and the relevant provisions of the law so also the judgments cited at the Bar. 9. At the outset, we may refer to the provisions of section 158BC, which provide that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, sections 144 and 145 shall, so far as may be applied, and a look at section 158BB shows that thereunder undisclosed income of the block period is to be the aggregate of the total income of the previous years falling within the block period, computed in accordance with the provisions of the Act, on the basis of the evidence found as a result of search or requisition of books of account, or other documents, and such other materials or information as are available with the Assessing Officer and relatable to such evidence as reduced by the aggregate of the total income or, as the case may be, as increased by the aggregate of the losses for such previous years determined in accordance with the further sub-clauses. Thus, the computation of the income is to be made on the basis of the evidence found as a result of search, or requisition of books of account, or other documents, and such other material or information, as are available with the Assessing Officer, and relatable to such evidence. This provision does not include any fictional or presumptive income to be liable to or capable of being included in the aggregate of the undisclosed income. Obviously, therefore, the determination of value of the assets acquired, i.e., the fair market price at the time of purchase cannot be dependent on the norms/rates (DLC rates) as may be fixed by the concerned committees. There may be cases, where the assets may have been purchased at the price higher than the DLC rates and rather there may be cases where the assets may be acquired at a price lesser than the DLC rates. The reasons for either of the situations are innumerable and cannot be put into any strait jacket. 10. There may be cases, where the assets may have been purchased at the price higher than the DLC rates and rather there may be cases where the assets may be acquired at a price lesser than the DLC rates. The reasons for either of the situations are innumerable and cannot be put into any strait jacket. 10. One more aspect of the matter in this regard is that the settled legal position, as laid down by the Hon'ble Supreme Court, in CIT v. Shoorji Vallabhdas and Co. reported in (1962) 46 ITR 144 , E.D. Sassoon and Co. Ltd. v. CIT reported in (1954) 26 ITR 27 (SC) and Kedarnath Jute Mfg. Co. Ltd. v. CIT reported in (1971) 82 ITR 363 (SC) that the income to be taxed is to be the actual income received and not any supposed income or presumed income. reported in (1962) 46 ITR 144 , E.D. Sassoon and Co. Ltd. v. CIT reported in (1954) 26 ITR 27 (SC) and Kedarnath Jute Mfg. Co. Ltd. v. CIT reported in (1971) 82 ITR 363 (SC) that the income to be taxed is to be the actual income received and not any supposed income or presumed income. The interpretation sought to be placed by the learned counsel for the Revenue, if were to be accepted, it obviously would have a necessary consequence of attracting the liability of capital gains tax in the hands of the seller, assuming the asset to have been sold at DLC rates, while a look at the provisions of section 50C, appearing in chapter relating to capital gains shows that, according to this provision, where the consideration received or accruing as a result of transfer by an assessee of a capital asset, being land or building, is less than the value adopted or assessed by the authorities of the State Government, being the Stamp Valuation Authorities for the purpose of payment of stamp duty in respect of such transfer, the value so adopted is deemed to be the full value of consideration received or accruing as a result of such transfer for the purpose of section 48 but then sub-section (2) specifically provides that without prejudice to the provisions of sub-section (1), where the assessee claims before the Assessing Officer that the value adopted or assessed by the Stamp Valuation Authority exceeds the market value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and the relevant provisions of the Wealth-tax Act, with necessary modifications have been provided to apply, subject further to the exception that where the Valuation Officer values the assets at a price higher than the value adopted by the Stamp Valuation Authority, such higher value shall be taken to be the consideration received or accrued as a result of the transfer. But then, in our view, this provision also does show that the valuation put by the Stamp Valuation Authority is not required to be adopted as the valuation of the property, as a rule of thumb. But then, in our view, this provision also does show that the valuation put by the Stamp Valuation Authority is not required to be adopted as the valuation of the property, as a rule of thumb. Since this provision was inserted with effect from April 1, 2003, the fact does remain that at the relevant time, there was no provision under the Act to provide for a presumption about the valuation of the asset to be the one as determined by the Stamp Valuation Authorities irrespective of the actual consideration for which it was conveyed. 11. The obvious result is that it becomes a pure question of fact, as to whether the consideration shown in the document of conveyance, is the actual amount paid by way of consideration to be taken to be undisclosed income of the assessee, or it is a deflated figure and, therefore, addition is required to be made. If it is taken to be deflated figure then it is for the Department to lead positive evidence about the fair market value of the property and further to show that the property was undervalued in the document of sale before authorising the Assessing Officer to make any addition in the income on that count. 12. The Hon'ble Supreme Court in K.P. Varghese (1981) 131 ITR 597 was dealing with the provisions of section 52(2) as it then existed, which also related to computation of the capital gain and it was held as under (page 615) : " It is a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guesswork and despite the utmost bona fides, the estimate of the fair market value is bound to vary from individual to individual." 13. Then it was further held that section 52(2) does not create any fictional receipt, it does not deem as receipt something, which in fact is not received. It was also held that it is not enough to attract the applicability of sub-section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15 per cent. It was also held that it is not enough to attract the applicability of sub-section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15 per cent. of the value so declared but it is further more necessary that the full value of the consideration in respect of the transfer is understated or, in other words, shown at a lesser figure than the actually received by the assessee. Thus, even according to this judgment, it is to be shown by the Department that the purchase price shown in the documents is not the real price but something more has been paid and for that purpose, it may prove the fair market value of the property. 14. Admittedly, in the present case, apart from relying upon the Stamp Valuation Authority's rates there is no other material and in our view, the Stamp Valuation Authority's rates cannot be taken, by itself, as the price, for which the property was purchased by the seller for the purpose of making assessment under section 158BC read with section 158BB of the Act. 15. The net result of the aforesaid discussion is that the question as framed is answered against the Revenue and in favour of the assessee, and the appeal is, therefore, dismissed. *******