In respect of valuation of land and building, DVO's report may be a useful tool in hands of Assessing Officer, nevertheless it is an estimation and without there being anything more, it cannot form basis for addition under section 69B
APRIL 25, 2013
[2013] 35 taxmann.com 296 (Gujarat )
HIGH COURT OF GUJARAT
Commissioner of Income-tax - I
v.
AKIL KURESHI AND MS. SONIA GOKANI, JJ.
TAX APPEAL NO. 340 OF 2013†
Section 69B, read with section 142A of the Income-tax Act, 1961 - Undisclosed investments [Investment in land and buildings] - Assessment year 2006-07 - During relevant year, assessee made some investment in land and building - Assessing Officer referred matter to DVO who valued land and building at a higher amount - In view of difference between disclosed investment of assessee in purchase of property and DVO's estimation of its fair market value, Assessing Officer added certain amount to taxable income of assessee under section 69B - Commissioner (Appeals) deleted addition holding that valuation report of DVO could not be a conclusive evidence and there had to be some clinching evidence in form of proof to show that additional consideration had passed between buyer and seller - Tribunal confirmed order of Commissioner (Appeals) - Whether DVO's report may be a useful tool in hands of Assessing Officer, nevertheless it is an estimation and without there being anything more, cannot form basis for addition under section 69B - Held, yes - Whether, therefore, in absence of any other material on record, impugned addition was correctly deleted - Held, yes [Para 9] [In favour of assessee]
CASES REFERRED TO
K.M. Parikh for the Appellant.
ORDER
Akil Kureshi, J - Revenue is in appeal against the judgment of the Tax Appellate Tribunal ("the Tribunal" for short) dated 31-8-2012 raising following question for our consideration:-
"Whether, on the facts and circumstances of the case, the Tribunal was right in deleting the addition of Rs.40,24,460/-made under Section 69B of the Act on the ground that no addition under Section 69B can be made on the basis of valuation report acquired under Section 142A?"
2. Issue pertains to addition of a sum of Rs.40.24 lakhs (rounded off) made by the Assessing Officer under Section 69B of the Income-tax Act ( " the Act" for short).
3. For the assessment year 2006-07 the assessee filed return of income, which was taken in scrutiny. It was found that during the previous year relevant to the assessment year under consideration, the assessee had purchased land admeasuring 7300 sq.meters along with factory building thereon. The assessee had shown investment of Rs. 18.25 lakhs towards the land and Rs. 52.59 lakhs (rounded off) for the building in its books of account. The assessee had paid a stamp duty of Rs. 7.31 lakhs (rounded off) on such disclosed value of the property. The assessee, however, subsequently paid additional stamp duty of Rs.3,09,000/-, which was computed on the basis of fair market value determined by the Stamp Duty Authority.
4. On the basis of such facts the Assessing Officer called for valuation report from Departmental Valuation Officer ("DVO" for short) under Section 142A of the Act The valuer valued the land at Rs. 29.20 lakhs and the building at Rs. 81.89 lakhs (rounded off). In view of such difference between the disclosed investment of the assessee in purchase of such property and the DVO's estimation of its fair market value, the Assessing Officer added the sum of Rs. 40.24 lakhs in the income of the assessee under Section 69B of the Act.
5. The assessee carried the matter in appeal. In such appeal the assessee raised three main contentions. It was contended that the Assessing Officer had not rejected book results. It was, therefore, not open to call for DVO's report and rely on the same. It was next contended that there were major errors in the parameters adopted by the DVO in estimating the market value. It was lastly contended that in any case DVO's report cannot form the sole basis for making additions under Section 69B of the Act.
6. CIT(Appeals) allowed the assessee's appeal relying on the decision of the Supreme Court in the case of K.P. Varghese v. ITO [1981]131 ITR 597/7 Taxman 13. He was of the opinion that the valuation report of DVO cannot be a conclusive evidence. There has to be some clinching evidence in the form of proof to show that additional consideration had passed between buyer and seller.
7. Revenue carried the matter in appeal. CIT(Appeals) dismissed the Revenue's appeal in following terms:-
"6. After hearing the parties and perusing the record we find that there is no dispute about the fact that in this case addition has been made by the A.O. on the basis of DVO report obtained by him during the assessment proceedings. Ld. CIT(A) has given relief to the assessee by placing reliance on the decision of the Hon'ble Apex Court in the case of K.P. Verghese v. ITO reported in 131 ITR 597 wherein it was held that income must accrue or should be received by the assessee over and above declared by the assessee and the same should not be deemed to accrue or to be received which in fact never accrue or was never received. In the instant case, the A.O. has not brought on record any material to show that assessee paid higher consideration towards his investment in land and building then shown by him in his books of account. In absence of such material no addition can be made. Ld. CIT(A), therefore, has rightly deleted this addition of Rs.40,24,460/- based on the report of DVO and the order passed by him is hereby upheld.
In the result, Revenue's appeal is dismissed."
8. Before us counsel for the Revenue vehemently contended that there was considerable gap between the valuation disclosed in the sale deed, which was also adopted for the purpose of assessee's books and what was estimated by the Stamp Duty Authority for the purpose of collecting stamp duty. He submitted that the Assessing Officer, on the basis of DVO's report, found that the investment was much greater than what was reflected in the books made by the assessee in purchase of such property. Counsel placed heavy reliance under Section 142A of the Act in support of his contention.
9. We are of the opinion that CIT(Appeals) as well as the Tribunal committed no error in deleting the additions made by the Assessing Officer. It is undisputed that the sole basis for making the addition was the DVO's report. DVO's report may be a useful tool in the hands of the Assessing Officer, nevertheless it is an estimation and without there being anything more, cannot form basis for additions under Section 69B of the Act. In absence of any other material on record, addition was correctly deleted. Tax Appeal is, therefore, dismissed.
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