CIT vs. DINESH JAIN HUF
No AI summary yet for this case.
ITA 610/2012 Page 1 of 8
$~3 * IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 19.10.2012 + ITA 610/2012
CIT
..... Appellant Through: Mr. Abhishek Maratha, Sr.
Standing Counsel with Ms. Anshul Sharma,
Advocate.
versus
DINESH JAIN HUF
..... Respondent
Through: None. CORAM: MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
R.V. EASWAR,J: (OPEN COURT)
This is an appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 (“Act”, for short) and the following substantial questions of law are sought to be raised for our consideration. “A. Whether the ITAT was correct in the eyes of law in deleting the addition of `3,72,86,412/- made by the assessing officer on account of the unexplained investment in the immoveable properties? B. Whether ITAT was correct in the eyes of law in quashing the order passed by the assessing officer adopting the Fair Market Value as the sale consideration of the property when he had brought on record sufficient reasons to show cause that there was under statements of sale consideration by the assessee? C. Whether the impugned order passed by the ITAT is perverse both in facts and law?”
2012:DHC:6581-DB
ITA 610/2012 Page 2 of 8
The assessee, who is the respondent in this appeal, is a Hindu Undivided Family. There was a search under Section 132 of the Act on 9.12.2003 in the residential/business premises and the related persons/concerns of Begum Gutka group of cases and on the basis of the material seized during the search, a notice under Section 153A of the Act was issued to the assessee calling upon it to file the return of income. The assessee submitted that the original return filed may be taken as the return filed in response to the notice. In the course of the assessment proceedings, the assessing officer noticed that the assessee had acquired immoveable properties for prices which according to him were very low considering the rental income yielded by those properties. He accordingly applied the rent capitalization method as provided in rule 3 of Part B of Schedule III to the Wealth Tax Act and estimated the value of the properties at higher figures and treated the difference between the prices shown by the assessee and the value estimated by him as undisclosed investment of the assessee, invoking Section 69B of the Act. The following are the details : Description of the property Prices shown by the assessee (`) Value estimated by the assessing officer Difference added as undisclosed investment Flat No.3 & 9, Palm Court, Sukharali Chowk, Gurgaon 38,49,000/- 1,84,36,910/- 1,45,87,912 Flat No.303 & 309, Palm Court, Sukharali Chowk, Gurgaon 35,10,000/- 1,65,83,500/- 1,30,73,500/- M-64, G.K.-II, New Delhi 10,00,000/- 1,06,25,000/- 96,25,000/-
Total 3,72,86,412/-
2012:DHC:6581-DB
ITA 610/2012 Page 3 of 8
On the above basis and the reasoning the assessing officer made an addition of `3,72,86,412/- under the head “income from other sources” as the unexplained investment made in rent-yielding properties.
The assessee preferred an appeal to the CIT(Appeals) and contended that there was no evidence to show that it had in fact paid anything more than the price declared by it for the properties, that the conclusion of the assessing officer to the contrary was based purely on surmises and conjectures and not on any cogent material, that even the search did not yield any material or evidence to show any undisclosed investment by the assessee. It was argued that at any rate the value based on rent capitalization method as prescribed in the Schedule III to the Wealth Tax Act was only a notional figure of fair market value of the property which was different from the price paid for the property and that in these circumstances the addition made by the Assessing Officer based upon the provisions of Section 69B of the Act was arbitrary and had absolutely no basis. It was also submitted on the basis of certain specific instances that even on comparing the market rates for the properties, there was no understatement of the consideration.
The CIT(Appeals) examined the contentions of the assessee in detail and held that so far as the flat Nos.3 and 9, Palm Court are concerned, the facts are substantially similar to the facts of the case of P C Jain (HUF), Smt. Lata Jain and Dinesh Jain (individual) which cases had already been adjudicated by him by orders dated 13.3.2008, 13.7.2008 and 18.8.2008 respectively. Following his orders in those cases, which according to him were equally applicable to the present case, he directed the assessing officer to rework the addition. In those earlier cases the CIT(Appeals) had held that the amount declared by the assessee as purchase price was not sacrosanct and that the assessing officer can 2012:DHC:6581-DB
ITA 610/2012 Page 4 of 8
go behind the prices declared to find the correct and fair valuation of the immoveable properties since no direct evidence (of understatement) in such transactions can be gathered. Adopting a similar line of reasoning the addition made under Section 69B was directed to be reworked.
In respect of flat No.303 and 309, Palm Court also a similar line of reasoning was adopted.
The result was that in respect of flat Nos.3 and 9, Palm Court, the CIT(Appeals) sustained an addition of `52,90,000/- and in respect of flat Nos.303 and 309, Palm Court he sustained an addition of `42,90,000/-.
So far as the property bearing No.M-64, G.K.-II is concerned, the CIT(Appeals) was of the view that the price of `498.57 per sq.ft declared by the assessee was abnormally low and could not by any standards be considered as reasonable compared to the market value of the property. He noted that the property was located in a commercial places and commanded a substantial value in the open market and “merely on the ground that no evidences found during search as regards the real value of investment, could not make the value declared by the assessee is true and correct”. He estimated the value of the property at `4,000 per sq.ft. by taking into account the locality and the rental income as was done in the case of Dinesh Jain (individual) for the assessment year 2001-02. Applying this rate the value of the property came to `80,20,000/- as against `10,00,000/- declared by the assessee and `1,06,25,000/- adopted by the assessing officer. The addition sustained was thus reduced to `70,20,000/- in respect of this property.
Both the assessee as well as the revenue preferred cross-appeals before the Income Tax Appellate Tribunal (“Tribunal”). The Tribunal found that the 2012:DHC:6581-DB
ITA 610/2012 Page 5 of 8
facts of the present case were similar to the facts in the cases of Dinesh Jain (individual) and Smt. Lata Jain. It noted that in those cases the matter had already reached the Tribunal and the Tribunal had deleted the entire addition made under Section 69B on the ground that there was no evidence to show any understatement or suppression of the sale consideration/purchase consideration and therefore, no addition can be made on the basis of the estimated market value of the properties. The Tribunal held as follows :
“21. We have heard both the parties and gone through the material available on record. In the instant appeals the AO has estimated the value of investments in the impugned properties by applying provisions of Schedule 3 of Wealth-tax Act. The ld. CIT(A), however, following his decision in the case of Shri Dinesh Jain and in the case of Smt. Lata Jain had estimated the value of the property. The AO had not brought on record any material to suggest that the value shown in the conveyance deeds was lower than the amount passed on by the assessee to the sellers. ITAT, Delhi Bench “B” in the case of Shri Dinesh Jain and Smt. Lata Jain in consolidated order dated 30th September, 2009 in ITA No.3422 (Del) of 2008 etc. has deleted the similar additions by observing, as under :- “5. We have considered the rival contentions and carefully gone through the orders of the authorities below. From the record, we found that on the basis of sale deed found during the course of search in respect of purchase of various properties, the AO found that assessee was in receipt of rental Income in respect of these properties. As per AO, the disproportionate yield of income from these properties indicates that the amount invested has been suppressed. Accordingly, he applied provision of Rule 3 Part (b) of the 3rd Schedule to the Wealth Tax Rules for the purpose of determining the fair market value of these properties. The assessing officer also make a reference to the DVO, as the reference was made one day prior to the framing of assessment, he was not in receipt of any DVO’s report. It is undisputed fact 2012:DHC:6581-DB
ITA 610/2012 Page 6 of 8
that department has not referred any incriminating material having been found during the course of search and investigation made thereafter which indicate that assessee had paid anything more than what has been stated in the sale deeds. It was also not the allegation of the Department that there was any difference in the value of the property as accepted by the Sub
