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Facts
The assessee purchased land for Rs.75 Crores. During a search, documents suggested on-money was paid. The AO referred the matter to the DVO for Fair Market Value (FMV) determination, which was higher than the purchase price. The AO added the difference under Section 69B.
Held
The Tribunal held that the DVO's FMV estimation was not reliable as it compared flat sale instances with bare land value and ignored comparable land sale instances. The addition made by the AO was based on an estimation without evidence of actual expenditure.
Key Issues
Whether the addition made by the AO based on DVO's estimated FMV, without concrete evidence of actual expenditure, is sustainable under Section 69B.
Sections Cited
69B, 147, 148, 143(3)
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
(�नधा�रण वष� / Assessment Year : 2021-22) Deputy Commissioner of Vs. Deep Infraprojects LLP 10th Floor, President House, Income Tax Central Circle-1(4), Nr. Ambawadi Circle, Ahmedabad Ambawadi, Ahmedabad- 380006 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAQFD3530J (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Vartik Choksi, Shri Dhrunal Bhatt & Shri Gulab Thakor, A.Rs. ��यथ� क� ओर से/Respondent by : Shri Arvind Kumar, CIT. DR 22/01/2025 Date of Hearing Date of Pronouncement 29/01/2025 O R D E R
PER SHRI NARENDRA PRASAD SINHA, AM:
This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)- 11, Ahmedabad (in short ‘the CIT(A)’), dated 05.07.2024 for the Assessment Year 2021-22.
The brief facts of the case are that the assessee had purchased a land situated at Ambli Road, Ahmedabad during the year for a consideration of Rs.75 Crore, as per the executed sale deed. In the course of search conducted at the residential premises of one Shri Divyang Vyas, certain documents were found, as per which it transpired that certain on-money was paid in the purchase transaction of this land. In the course of [DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 2 – assessment proceeding, the assessee was confronted with the documents seized from the premises of the 3rd party. The assessee had disputed the veracity of the entries in the seized documents and contended that Shri Divyang Vyas, from whose premises the documents were seized, was not involved in that transaction and no brokerage was paid to him. Further that no evidence for payment of any on-money was recorded in the seized documents. The assessee had also filed a copy of Registered Valuer’s Report, as per which the value of land was determined at Rs.73.32 Crores, whereas the land was purchased by the assessee for a consideration of Rs.75 Crores. Thereafter, the AO had referred the matter to the DVO to determine the Fair Market Value (‘FMV’) of the property which was determined at Rs.100.78 Crores by the DVO. On the basis of the DVO’s report, the AO had made an addition of difference amount of Rs.25.78 Crores u/s.69B of the Income Tax Act, 1961 (in short ‘the Act’) on account of unexplained investment in the property.
Aggrieved with the order of the AO, the assessee had filed an appeal before the Ld. CIT(A), which was decided vide the impugned order and the addition as made by the AO was deleted.
Now, the Revenue is in second appeal before us. The following grounds have been taken by the Revenue in this appeal:
“1) "In the facts and on the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.25,78,00,000/- as per provision of Section 69B of the Income Tax Act on account of unexplained investment for purchase of land without appreciating the seized documents and report of DVO wherein DVO arrived at the value of land after considering all the factor affecting value of the land"
[DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 3 – 2) "The Revenue craves leave to add/alter/armed and/or substitute any or all of the grounds of appeal."
5. Shri Arvind Kumar, Ld. CIT. DR submitted that the genesis of addition in this case was seized documents from the premises of Shri Divyang Vyas which indicated cash payments in this land transaction. He had drawn our attention to the seized documents which is also reproduced in the assessment order. Considering the involvement of cash transaction in this land dealing, the AO had referred the matter to the DVO to work out the FMV of the property. The Ld. CIT.DR submitted that the FMV determined by the DVO was Rs.100.78 Crores and, therefore, the AO had rightly made the addition for difference of Rs.25.78 Crores on account of unexplained investment in the property. The Ld. CIT.DR submitted that the Ld. CIT(A) was not correct in deleting the addition as made by the AO and he strongly supported the order of the AO.
6. Per contra, Shri Vartik Choksi, Ld. AR of the assessee submitted that Shri Divyang Vyas, from whom the documents were seized, was neither a party to the agreement nor he was a broker in this land dealing and no brokerage was paid to him. His limited role in the transaction was initial introduction of the two parties and, thereafter, these transactions were carried out directly by the buyer and the seller. The Ld. AR submitted that the loose papers found in the course of search was a dumb document which did not contain signature of the buyer or seller and no reference of payment of any on-money on any particular date was appearing therein. The Ld. AR submitted that the AO himself did not rely on the seized documents and no addition was [DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 4 – made on the basis of the entries as appearing in the documents seized from the premises of Shri Divyang Vyas. According to Ld. AR, the land was purchased by the assessee at a rate five times of jantri value of the land and, therefore, there was no question of payment of any on-money. He further submitted that the FMV as worked out by the DVO was not correct, which was rightly rejected by the Ld. CIT(A). The Ld. AR submitted that the Ld. CIT(A) had meticulously examined the facts of the case and given a categorical finding in his order as to why no addition could have been made in this case. He, therefore, strongly supported the order of the Ld. CIT(A).
7. We have carefully considered the rival submissions. In the assessment order, the AO had initially referred to the documents seized from the premises of Shri Divyang Vyas. However, no addition was made in the assessment order on the basis of the seized documents. Since, the AO himself did not rely upon the seized documents to make the addition, we do not find it necessary to examine the nature of the entries as appearing in the seized documents. The seized documents were only considered as a basis to make the reference to the DVO and the addition was made by the AO on the basis of DVO’s report only. Therefore, we will have to examine the correctness of FMV as determined by the DVO.
8. There is no dispute to the fact that the property was purchased by the assessee for a consideration of Rs.75 Crores @ Rs.49,606/- per sq.mtr., which was 5.5 times of the jantri rate. The AO made addition on the basis of DVO report, a copy of [DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 5 – which has been brought on record in the paper book filed by the assessee. In the present case, the property purchased by the assessee was land situated at Survey No.330+328/A, F. P. No.60/3/1 of T.P.S.52 at Village Ambli, Ahmedabad. For working out the FMV of this property, the DVO had considered sale instances of 3 flats located in Ambli area. On the basis of the sale consideration of those 3 flats, the DVO had worked out the estimated built-up area rate, by taking into account the factors which affect the land rate, viz. location, size, access road, amenities, commercial FSI etc. It is, thus, found that the DVO did not adopt a comparable sale instance of land to work out the FMV of the property. One cannot compare the purchase price of bare land with the built-up area of land involved in sale of flats. The built-up area of land included in the sale of flat had many additional factors including allocation of cost of common area of the project, which is missing in the sale consideration of normal land and, therefore, the two can’t be compared at all. Thus, the built-up area of land included in the sale of flat will always be higher than the cost of bare land. For this reason, the comparable sale instances adopted by the DVO were not at all comparable and, therefore, the valuation as worked out by the DVO could not have been relied upon. Further, the FMV worked out by the DVO was only an estimation and no addition could have been made on that basis alone.
9. It is found that the Ld. CIT(A) had carefully examined all the aspects involved in this land transactions and had given a detailed reason as to why the addition as made by the AO cannot [DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 6 – be sustained. The relevant finding of the Ld. CIT(A) is reproduced below:
“5.15 On the basis of the facts of the case, submission made by the appellant and the observation made above, the Important aspects of the case are summarised as under (i) The loose papers have been found from the premises of Mr Divyang Vyas, third party who is not final party to land deal between buyer and sellers. Such fact has been admitted by him in his statement recording during search proceeding in his case as well as before AO in assessment order He has never admitted that any cash deal has been made for impugned land transactions. (ii) The AO of appellant and Mr Divyang Vyas was same and while passing assessment order in case of Divyang Vyas, no addition of alleged brokerage payment by either of party is made which also support the contention of appellant that he was not involved in such land transactions. (iii) The loose paper found during the course of search, no where contains signature of buyers or sellers of the property. No evidences were found which contain date wise cash payment by buyer to sellers. No concrete evidence was brought on record to prove that there is any exchange of on money payment between purchaser and seller. (iv) It is observed that Authorized officer has not recorded any statement of buyer or seller in post search proceedings in the case of Divyang Vyas. There is no subsequent search or survey proceedings in case of either parties. During the course of assessment proceedings, statement of Mr Divyang Vyas and partner of appellant LLP was recorded wherein they have completely denied any on money payment for alleged land deal. (v) During the course of assessment proceedings, appellant had submitted valuation report in support of its claim that purchase value is at prevailing market value. The Valuer in his report has given comparable sale instances of open land in same TP area which was already on record of AO and same has not been found to incorrect by AO in assessment order. However, he proceeded to refer matter to DVO. and adopted the value determined by such valuer and made addition of unaccounted payment of land being difference between purchase value and value determined by DVO. (vi) On perusal of DVO's report, it is found that he has arrived at value of land after reducing estimated construction cost, marketing expenses, Architect Fees, Developer's profit from salable FSI value of project constructed by appellant developer [DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 7 – based upon sale instances of Flat in other schemes 15 kms away from the project developed by appellant He has adopted average of three instances, as mentioned in his report. He has adopted FSI value of commercial units based upon presumption. These facts clearly prove that DVO has arrived at such value on adhoc basis. There are various schemes developed in nearby vicinity where commercial/residential rate of unit sold by various builders/developers are substantially lower than value adopted by DVD and had DVO not adopted such high value, valuation of land would be nearer to value of land purchased by appellant (vii) While arriving at fair market value of land, he has completely ignored comparable sale instances of land in nearby vicinity in same TP area which was already referred in valuer's report submitted by appellant. The guidelines for valuation of immovable properties issued by Income tax department for valuation of land clearly shows that best methodology for adopting the value of fair market value of open land in appellant's case would have been actual sale instances of such open land in the same TP Scheme as considered by the registered valuer. (ix) DVO has estimated period of 2 years for the completion of the whole project and has accordingly calculated the present value of the land whereas the project of such size would usually take 4 to 5 years to complete. Further, appellant submitted that till now out of total 435 units, only 190 units are booked and 245 units are un-booked, ie 56.32% units are un-booked. Considering this fact, it is observed that assumption made by DVO is incorrect more particularly when he himself stated in Sr. no 21 that since it is 22 story structure, 4 years period is assumed (x) It is relevant to mention that documented value of present land was of Rs. 9000 per sq. mtrs. As against appellant has paid Rs. 49,606/- per sq. mtrs which is almost 5.5 times higher than Jantrin rate. 5.16 Considering facts of the case, as discussed in preceding paras, addition made by AO under section 69B of Rs.25,78,00,000/- does not survive. Accordingly, addition made by AO is deleted. Thus, the grounds of appeal no. 2 to 4 are allowed.”
10. The Revenue has been unable to controvert the findings as recorded by the Ld. CIT(A). It is also found that the addition as made by the AO was not in accordance with the provision of law. Section 69B of the Act stipulates that that the addition in respect of unexplained investment can be made only where the AO finds that the amount expended in acquiring the asset exceeded the [DCIT vs. Deep Infraprojects LLP] A.Y. 2021-22 - 8 – amount recorded in the books of accounts. In the present case, no evidence was found that the assessee had spent the sum of Rs.25.78 Crores as added by the AO for acquiring the property. This figure was only an estimation of FMV of the property as made by the DVO and no evidence was found that this amount was actually expended by the assessee for acquiring the property. In the absence of any such evidence, no addition could have been made u/s.69B of the Act. Therefore, the addition made by the Revenue u/s.69B of the Act is liable to be rejected for this reason as well.
11. In view of the above facts and the detailed findings as recorded by the Ld. CIT(A), we do not find any merit in the case. The Ld. CIT(A) had rightly deleted the addition of Rs.25.78 Crores, which was only a wrong estimation made by the DVO. Accordingly, the order of the Ld. CIT(A) is upheld.
In the result, the appeal filed by the Revenue is dismissed.
This Order pronounced on 29/01/2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 29/01/2025 S. K. SINHA True Copy आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. संबं�धत आयकर आयु�त / Concerned CIT 3. 4. आयकर आयु�त(अपील) / The CIT(A)- �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,