PR. COMMISSIONER OF INCOME TAX (CENTRAL), GURUGRAM vs. VATIKA LIMITED

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ITA/33/2024HC DelhiDLHC01058527202312 January 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV3 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that no substantial question of law arose from the order of the Income Tax Appellate Tribunal (ITAT). The High Court found no ground to interfere with the ITAT's view, considering the evident failure on the part of the appellant (revenue) to provide any cogent evidence or material that could have validated the addition. The ITAT had reasoned that the initial burden was on the revenue to establish that the assessee had made an investment of the sum alleged to have been invested (Rs. 18,22,50,000/-), and no such evidence was brought on record. The ITAT found that the assessee had successfully demonstrated the purchase for Rs. 9,47,18,750/-. Crucially, the ITAT noted that the seller's assessment order accepted the sale consideration at Rs. 9.47 crores, and the revenue had failed to prove that the actual transaction was of Rs. 18.22 crores. Consequently, the ITAT directed the Assessing Officer to delete the impugned addition of Rs. 8,75,31,250/-. The High Court dismissed the appeal.

What were the facts?

The appeal concerns a dispute over additions made to the income of Vatika Limited (the assessee) by the revenue. The core of the dispute lies in the valuation of a land transaction. A Memorandum of Understanding (MoU) indicated a transaction value of Rs. 18,22,50,000/-, while the subsequently executed sale deed showed the value at Rs. 9,47,18,750/-. The Commissioner of Income Tax (Appeals) [CIT(A)] noted that the assessee did not challenge the MoU's veracity and that the assessee's Managing Director could not satisfactorily explain the significant price reduction within a short period. The CIT(A) also found the explanation regarding payments to DTCP Haryana and other encumbrances unconvincing. The Income Tax Appellate Tribunal (ITAT) however, found that the revenue failed to establish the assessee's investment of Rs. 18,22,50,000/- and that the assessee had demonstrated the purchase for Rs. 9,47,18,750/-. The ITAT also noted that the seller's assessment order accepted the sale consideration at Rs. 9.47 crores.

What were the issues?

1. Whether the Income Tax Appellate Tribunal (ITAT) erred in deleting the addition of Rs. 8,75,31,250/- made by the Assessing Officer on account of the difference between the Memorandum of Understanding (MoU) value and the sale deed value of a land transaction, thereby holding that the revenue failed to discharge its burden of proof. Assessee's Contentions: The assessee argued that the revenue failed to bring on record any evidence to establish that the assessee had made an investment of Rs. 18,22,50,000/-. The assessee successfully demonstrated that the land was purchased for Rs. 9,47,18,750/-. Furthermore, the seller's assessment order clearly showed that the sale consideration was accepted at Rs. 9.47 crores, placing the burden squarely on the revenue to prove otherwise, which it failed to do. Revenue's Contentions: The revenue, through its counsel, argued that the ITAT's decision was incorrect. The revenue relied on the findings of the CIT(A), which highlighted the assessee's failure to challenge the MoU's veracity and the unsatisfactory explanation provided by the assessee's Managing Director regarding the significant price reduction. The revenue contended that the CIT(A) had adequately considered the material on record and the explanations provided.

Which sections of the Income-tax Act were involved?

Section 132(4)

AI-generated summary — verify with the full judgment below

$~48 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 33/2024 PR. COMMISSIONER OF INCOME TAX (CENTRAL), GURUGRAM ..... Appellant Through: Mr. Puneet Rai, Sr. SC versus VATIKA LIMITED ..... Respondent Through: Counsel (appearance not given) CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R % 12.01.2024 CM APPL 2019/2024 (Exemption) 1. Allowed, subject to all just exceptions. 2. The application stands disposed of. CM APPL 2020/2024 (delay in filing) 3. This is an application filed by the appellant seeking condonation of 238 days delay in filing the present appeal. For the reasons stated in the application, the delay of 238 days in filing the appeal is condoned. 4. Application is disposed of. ITA 33/2024 5. Having heard Mr. Rai, learned counsel for the appellant and on perusal of the record, we find that the dispute essentially emanated from certain additions which were made in the hands of the assessee and which in turn rested upon a Memorandum of Understanding [‘MoU’] which disclosed the value of the transactions to be This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/05/2024 at 12:26:54

Rs.18,22,50,000/-. Undisputedly, however, the instrument which came to be executed showed the transaction value at Rs.9,47,18,750/-. 6. Mr. Rai has taken us through the order of the Commissioner of Income Tax (Appeals) [‘CIT(A)’] and more particularly to the following findings which came to be returned:- “6.5.2 The sale deed executed on 24.12.2015 which mentions sale price of Rs.9,47,18,750/- is duly signed by Sh. Digvijay Kapuria, managing director of M/s.Boss Gears Limited and Sh. Sukhpal, employee of M /s. Vatika Limited. The witnesses are Sh. Yuvraj Kapuria from M/s. Boss Gears Limited and Sh. Ashok Kumar Sharma Advocate. 6.5.3 Thus, the difference between MOU and sale deed is only three months and 22 days. The assessee was given adequate opportunity to furnish explanation regarding the reduction of price of Rs.8,75,31,250/- (Rs.18,22,50,000 -9,47,18,750) during this period of about three months. 6.5.4 Firstly, the assessee has not challenged veracity of the MOU seized and hence, contents thereof are admitted to be true by the assessee. 6.5.5 Secondly, in statement on oath of Sh. Gautam Bhalla, Managing Director of the assessee, recorded u/s 132(4) on date of search, he could not furnish satisfactory reply regarding fall in price by nearly 50% within a period of three months. He stated that the fall in price was due to amount seller had to pay to DTCP Haryana. However, from perusal of details filed, the amount payable to DTCP Haryana was only Rs. 6,28,702/-. Hence it could not possibly be the reason for fall in price by Rs. 8.75 crores. In his statement, Sh. Gautam Bhalla stated that fall in price was due to various encumbrances. However, neither in assessment proceedings nor appeal proceedings, any other encumbrances were pointed out with supporting evidence.” 7. However, on a consideration of the material which existed on the record and the CIT(A)’s order, the Income Tax Appellate Tribunal [‘ITAT’] has returned the following findings:- “17. However, we find that though the statement of Shri Yuvraj was recorded but no statement of Shri Digvijay was recorded who also happens to be one of the signatory to the MOU. In our This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/05/2024 at 12:26:54

considered opinion, the initial burden is on the revenue to establish that the assessee had made investment of the sum alleged to have been invested and no such evidence has been brought on record by the revenue to establish that the assessee has made investment of Rs. 18,22,50,000/- and on the contrary, the assessee has successfully demonstrated that the said land has been purchased for Rs. 9,47,18,750/-. xxxx xxxx xxxx 23. It is also an undeniable fact that the seller has admitted to have received Rs. 9.47 crores as against Rs. 18.22crores alleged by the Assessing Officer. Therefore, the burden is squarely upon the revenue to prove that the actual transaction was of Rs. 18.22 crores, which it has grossly failed to establish, and most importantly, assessment order of the seller M/s Boss Gears Ltd., mentioned elsewhere, and exhibited at page 609 of the Paper Book clearly demonstrates that the sale consideration in the case of the seller has been accepted at Rs. 9.47 crores and by any stretch of imagination it cannot be accepted that the Assessing Officer of M/s Boss Gears Ltd. was unaware of the fact that survey operation was conducted at its premises during the financial year relevant to the Assessment year considered by him while framing the said assessment order. We, therefore direct the Assessing Officer to delete the impugned addition of Rs. 8,75,31,250/-. The grounds argued before us are allowed”. 8. Bearing in mind the aforesaid and an evident failure on the part of the appellant to provide any cogent evidence or material which may have validated the addition, we find no ground to interfere with the view as taken by the ITAT. 9. Consequently, no substantial question of law arises in the instant appeal. The appeal fails and shall stand dismissed on the aforesaid terms. YASHWANT VARMA, J. PURUSHAINDRA KUMAR KAURAV, J. JANUARY 12, 2024 p’ma This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/05/2024 at 12:26:54

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