SINT. AMAR KUMARI SURANA VS COMMISSIONER OF INCOME-TAX
1999 P T D 1780
[226 I T R 344]
[Rajasthan High Court (India)]
Before Y.K. Meena and M.A.A. Khan, JJ
Sint. AMAR KUMARI SURANA
Versus
COMMISSIONER OF INCOME-TAX
D.B. I.T. Reference No. 46 of 1980, decided on 01/05/1996.
Income-tax
----Unexplained investment---Purchase of land---Valuation by Income-tax Department disclosing that amount allegedly paid by assessee was much less than its market value---Finding by Tribunal that correct value of property had not been shown in account books---Valuation not disputed by assessee and no explanation offered for low price---Addition of amount as unexplained investment was justified---Indian Income Tax Act 1961 S.69-B.
The burden is on the Revenue to prove that real investment exceeds the investment shown in the account books of the assessee. Merely on the basis of the fair market value no addition can be made under section 69-B of the income Tax Act, 1961, but on the basis of sufficient material on record some reasonable inference can be drawn that the assessee has invested more than the amount shown in the account books and an addition can be made under section 69-B.
The assessee derived income from interest on her investments. In the previous year relevant to the assessment year 1972-73, the assessee purchased a plot of land measuring 1,799.99 sq. yds. on June 25, 1971, for a sum of Rs. 45,000 from VP. The Income Tax Officer in the course of assessment proceedings of VP obtained the valuer's report in respect of the said plot and other plots. The Income Tax Officer on the basis of that report gave a notice to the assessee to show cause as to why the value of the property may not be taken as Rs.81,000 as against Rs.45,000 shown by the assessee. The Income Tax Officer considered the valuation report and also the material on record and the fact that the assessee had not shown any reason as to why the value shown in the valuation report should not be taken as actual investment of the assessee for the purchase of the aforesaid plot of land. The Appellate Assistant Commissioner sustained the order but reduced the addition to Rs.23,400. The Tribunal found that the correct value of the plot of land and sale consideration had not been shown by the assessee in her account books. It upheld the order of the Appellate Assistant Commissioner, On a reference:
Held, that the consistent finding of the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal was that the assessee had not shown the correct value of the property in her account books, and thereby, had concealed the investment made for purchase of the plot of land. Although merely on the basis of the valuation report and the fair market value no addition can be made, after obtaining the valuation report of the plot of land, notice had peen given to the assessee to show cause as to why the value of the plot of land in question should not be taken as per the valuation report and on the basis of comparable cases. The assessee had not given any reason as to why the property had been sold to the assessee for roughly half the prevalent market rate. In the absence of that, the only inference that could be drawn was that the assessee had, in fact, concealed the actual consideration paid to the seller. The addition made under section 69-B was justified.
Abdul Qayyum v. C.I.T. (1990) 184 ITR 404 (All.); C.I.T. v. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC); C.I.T. v. Godavari Corporation Ltd. (1993) 200 ITR 567 SC); C. I. T. v. H. H. Maharao Bhim Singhji (1988) 173 ITR 79 (Raj.); C.I.T. v. Pradyuman Kumar Kachhawa (1985) 156 ITR 105 (Raj.); C.I.T. v. Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar (1993) 200 ITR 788 (Raj.); C.I.T. v. Prem Kumari Surana (Smt.) (1994) 206 ITR 715 (Raj.); C.I.T. v. Raja Narendra (1994) 210 ITR 250 (Raj.); Dinesh Kumar Mittal v. I.T.O. (1992) 193 ITR 770 (All.); M. D. Jewellers v. C.I.T. (1994) 208 ITR 196 (Raj.); New Excelsior Theatre (Pvt.) Ltd. v. M.B. Naik, I.T.O. (1990) 185 ITR 158 (Bom.) and Varghese (K.P.) v. I.T.O. (1981) 131 ITR 597 (SC) ref.
N. M. Ranka for the Assessee.
K.S. Gupta for G.S. Bapna for the Commissioner.
JUDGMENT
The assessee filed an application under section 256(2) of the Income Tax Act, 1961 (hereinafter to be referred as "the Act"), and prayed that the Tribunal be directed to refer the following questions for our consideration.
"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in computing the undisclosed investment of the assessee 'on the basis of the fair market value of the property in question as determined under section 55-A of the Act?
(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in holding that the sum of Rs.23,400 could be considered as unexplained investment of the assessee and that the same represented the income of the assessee from undisclosed sources during the relevant accounting year?"
The application filed under section 256(2) was allowed on July 30, 1980, and the Tribunal was directed to refer the aforesaid questions. In pursuance of that the Tribunal has prepared the statement of case under section 256(2) of the Act and referred the aforesaid questions for our opinion.
The assessee is assessed to Income-tax in the status of an individual. She derives income from interest on her investments. In the previous year relevant to the assessment year 1972-73, the assessee purchased a plot of land measuring 1,799.99 sq. yards on June 25, 1971, for a sum of Rs.45,000 from Vinaychand Pravinchand, Jaipur. The sale-deed was registered on July 17, 1971. The Income-tax Officer in the course of assessment proceedings in the case of Vinaychand Pravinchand obtained the valuer's report in respect of the said plot and other plots. The Income-tax Officer on the basis of that report gave a notice to the assessee to show cause as to why the value of the property may not be taken as Rs.81,000 as against Rs.45,000 shown by the assessee. The Income-tax Officer also informed the assessee that the value of the property was understated by a sum of Rs.36,000 in the purchase deed and the same represents her investment in the said property outside the account books in addition to Rs.45,000 shown in the books. The Income-tax Officer issued show-cause notice as to why the sum of Rs.36,000 should not be taken as the concealed income from some undisclosed sources in the assessment year 1972-73. After receipt of the notice, the assessee replied that the land was purchased through a registered sale-deed and the actual costs has been shown in 'the sale-deed. The Income-tax Officer has considered the valuation report and also the material on record and the fact that the assessee has not shown any reason as to why the value shown in the valuation report should not be taken as actual investment of the assessee for the purchase of the aforesaid plot of land in C-Scheme, Jaipur, No reason was shown by the assessee or airy reason has been shown why the consideration for the plot should not be taken as Rs.81,000 as the value of the plot has been taken by the valuer. Secondly, the Income-tax Officer has made addition of Rs.36,000 under section 69-B of the Income Tax Act, 1961.
Being aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner also found that the actual sale consideration has not been shown by the assessee in the sale-deed and the account books, but he reduced the value of the land estimated by the Income?tax Officer and estimated the investment in the plot at Rs.68,400. Thus, the addition under section 69-B of the Income Tax Act, 1961, has been reduced from Rs.36,000 to Rs.23,400.
In second appeal, the Tribunal, after considering the material on record, gave a finding of fact that the correct value of the plot of land and sale consideration has not been shown by the assessee in her account books and in any case the investment cannot be less than Rs. 68,400. Therefore, the Tribunal upheld the addition sustained by the Appellate Assistant Commissioner under section 69-B of the Income Tax Act, 1961.
'The aforesaid questions have been referred to in the statement of case under section 256(2) of the Income Tax Act, 1961, by the Tribunal. Learned counsel for the assessee has not disputed the fact that the petitioner has shown Rs.45,000 as the cost of the plot purchased by her in -C-Scheme and that has been shown in the sale-deed also. As the valuation report and comparable cases referred to in the valuation report were considered, no explanation has been given by the assessee or her husband before the Income?tax Officer as to why the plot has been sold roughly at half the rate, prevalent in the area to the assessee by Vinaychand Praveenchand, Jaipur.
Mr. Ranka submits that no addition can be made under section 69-B of the Act, 1961, only on the basis of the fair market value of the asset. The burden is on the Department to prove that value of the asset has been shown at less than the fair market value and also to prove that the real consideration is exceeding the consideration shown in the account book by the assessee.
Mr. Ranka has placed reliance on the decisions of their Lordships in the cases of New Excelsior Theatre (Pvt.) Ltd. v. M. B. Naik, I.T.O. (1990) 185 ITR 158 (Bom.); Dinesh Kumar Mittal v. I.T.O. (1992) 193 ITR 770 (All.); C.I.T v. Raja Narendra (1994) 210 ITR 250 (Raj.); C.I.T. v. (Smt.) Prem Kumari Surana (1994) 206 ITR 715 (Raj.); C.I.T. v. Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar (1993) 200 ITR 788 (Raj.); C.I.T. v. Godavari Corporation Ltd. (1993) 200 ITR 567 (SC); C.I.T. v. H.H. Maharao Bhim Singhji (1988) 173 ITR 79 (Raj.); Abdul Qayyum v. C.I.T. (1990) 184 ITR 404 (All.); M.D. Jewellers v. C.I.T. (1994) 208 (Raj.); C.I.T. v. Daulat Ram Rawatmull (1973) 87 ITR 349, (SC); C.I.T. Pradyuman Kumar Kachhawa (1985) 156 ITR 105 (Raj) and K. P. Varghese v. I.T.O. (1981) 131 ITR 597 (SC). In the above referred cases, mainly the question was involved under section 52(2) or reopening the case under section 147(a)/147(b) and the decision in the case of K. P. Varghese (1981) 131 ITR 497 (SC) is a leading case. The principles laid down in the case of K. P. Varghese v. I. T.O. (1981) 131 ITR 597 (SC), have been followed in the subsequent cases.
The main emphasis of Mr. Ranka is on the decision of their Lordships in the case of K.P. Varghese v. I.T.O. (1891) 131 ITR 597 (SC), which is the leading authority on the issue, whether on the basis of the fair market value any addition can be made in the hands of the purchaser/seller, invoking the provisions of subsection (2) of section 52 of the Act, 1961.
Section 69-B of the Income Tax Act, 1961, reads as under:
"69-B. Amount of investments. etc., not fully disclosed in books of account.--Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. "
It is true that merely on the basis of the fair market value no addition can be made under section 69-B of the Act, 1961, but on the basis of sufficient material on record some reasonable inference can be drawn that the petitioner has invested more amount that shown in the account books, then only the addition under section 69-B can be made. The burden is on the Revenue to prove that the real investment exceeded the investment shown in the account books of the assessee.
Their Lordships of the Supreme Court in the case of K.P. Varghese (1981) 131 ITR 597 have observed as under (Page 618):
"The burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed that consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub?section (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the Revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs.16,500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the Income-tax Authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs.16,500. "
The consistent finding of the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal is that the petitioner has not shown the correct value of the property in her account books, and thereby, has concealed the investment made for purchase of the plot of land in C-Scheme, Jaipur. The Tribunal has considered the valuation report of the valuer in respect of the plot in question and also the fact that notice was given to the assessee as to why the value of the plot should not be taken as has been valued by the valuer. The assessee failed to give any reason as to why the value, valued by the valuer should not be accepted. The Tribunal has also considered the size of the plot, location and potential use of the plot of land. It is also noticed by the Tribunal that the assessee has failed to show that in the area of C-Scheme the value of plots is lesser than the rate which has been shown in the valuation report.
In the valuation report, the costs have also been given of the neighbouring plots which were sold during the relevant period in C-Scheme.
One plot was purchased by Sint. Prem Kumari in that area at the rate of Rs.75 per Sq. yd. Smt. Padam Kumari had purchased the plot of land in that area at the rate of Rs.60 per Sq. yd Sint. Shobha Kumari has purchased a plot of land at the rate of Rs.60 per Sq. yd. As such for the plot in question which was purchased by the assessee measuring 1,799.99 Sq. yds. the value has been estimated by the Tribunal at Rs.68,400. The cost of the land which has been shown by the assessee comes to Rs.36 per sq. yd. that is roughly half the rate prevalent in C-Scheme, Jaipur.
It is true that merely on the basis of the valuation report and the fair market value no addition can be made. But in the case in hand after obtaining the valuation report of the plot of land, notice has been given to the assessee to show cause as to why the value of the plot of land in question may not be taken as per the valuation report and on the basis of comparable cases.
Admittedly, in the account books of the assessee, the investment of Rs.45,000 has been shown to purchase the plot of land measuring 1,799.99 sq. yds. which comes roughly to Rs.36 per Sq. yd. Mr. Ranka has not seriously disputed the value of the plot of land as has been estimated by the Income-tax authorities, but his main emphasis is on the question that under section 69-B of the Act, 1961, the Department should establish the fact that more consideration has passed than the consideration shown in account books/sale-deed. Therefore, considering the report of the valuer and comparable cases cited above and also the fact that a sufficient opportunity was given to the assessee to show cause as to why the value of the plot of land should not be taken on basis of the rate prevalent in the area, we find no justification to interfere in the value finally estimated by the Income-tax Appellate Tribunal.
Now, it brings us to see whether the Revenue has established the fact that some more consideration has passed from the assessee to Vinaychand Praveenchand than shown in sale-deed?
There is no direct evidence that the assessee has paid more than Rs.45,000 to Vinaychand Praveenchand for purchase of the plot of land, but at the same time it cannot be ignored that no evidence has been adduced by the assessee before the Income-tax Officer as to why in the plot of land has been sold to the assessee for roughly half of the prevalent market rate.
In the case of K.P. Varghese (1981) 131 1 T R 597, their Lordships of the Supreme Court have observed that even if the market value is more than the value/consideration received in respect of the transfer, the difference would amount to a gift under the Gift Tax Act; 1958. The Income Tax Act, 1961, and the Gift Tax Act, 1958, are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains.
In the case of K.P. Varghese (1981) 13 ITR 597 (SC), the house property was sold to daughter-in-law and five of her children. Therefore, the case of K. P. Varghese [1981] 131 I T R 597 (SC) is covered under the provisions of section 4 of the Gift Tax Act, 1958, and the difference between market value and consideration paid would amount to gift under section 4(1)(a) of the Gift Tax Act, but that should be borne out by the record that the particular case is of deeming gift. In that case certainly no capital gains tax can be charged. But in the case in hand, there is no material on record, which shows that the property has been sold for less consideration and the difference between the market value of the property and the consideration shown in the account books can be a case of deemed gift under section 4(1)(a) of the Gift Tax Act, 1958. Neither the assessee is in relation of seller nor any reason has been advanced before the Income-tax officer as to why less consideration has been paid than the prevalent market rate. Not even a single reason has been given as to why the property has been sold to the assessee for roughly half of the prevalent market rate. In the absence of that the only inference that can be drawn is that the petitioner has, in fact, concealed the actual consideration paid to the seller.
It is true that the burden is on the Department to establish the fact that the property has been sold for a lesser consideration than the market value. It is also to be established that the actual consideration is more than the consideration shown in the account books/sale-deed. In the case of K.P. Varghese (1981) 131 I T R 597 (SC), their Lordships have observed that before invoking the powers under subsection (2) of section 52 of the Income Tax Act, 1961, the burden is on the Revenue to prove that the actual consideration was more than disclosed by the assessee. But their Lordships have further observed that this burden may be discharged by establishing the facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received or paid by him. As stated above in the locality of C-Scheme, Jaipur,' the adjoining plot were sold at the rate of Rs.60 or Rs.75 per sq. yd. and if we take the estimated rate taken by the Appellate Assistant Commissioner and the Tribunal the rate of plot in question comes to Rs.36 per sq. yd., that is, roughly half of the prevalent market rate in the area. Admittedly, no reason has been shown by the assessee as to why the plot of land has been sold to her for half of the market rate. Nor any other reason has been shown to the Income-tax Officer at the time of assessment. Even, in spite of specific query, the assessee failed to point out any mistake/lacuna in ascertaining the value of the plot of land by the valuer. In the circumstances, the only reasonable inference that can be drawn is that the assessee has shown less amount in the account books and sale-deed than the actual consideration paid. Considering the comparable cases and the facts of the case, we find no ground to interfere in the addition made under section 69-B of the Act, 1961.
In view of the above discussion, we find nothing wrong in the view taken by the Income-tax Appellate Tribunal. Therefore, we answer the questions in the affirmative that is in favour of the Revenue and against the assessee ???
M.B.A./1924/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered.