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Before: Shri I.C. Sudhir & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the Revenue against the order of learned CIT(A)-XXIV, New Delhi dated 11.12.2013 for the assessment year 2009-10 on the following grounds :
“On the facts and circumstances of the case and in law CIT (A) has erred in:- 1. Deleting the addition of Rs.2,35,00,000/- being difference of valuation offered by the assessee and as worked out by the DVO on the ground that there was no reference whatsoever made by the AO to any material evidence on the basis of which the reference was made to the DVO whereas the situation is contrary in as much as material evidence in the ITA No. 1563/Del./2014 2 form of Survey Report of the Investigation Wing is available with the AO which had prima facie evidence of undervaluation of the above said property.
2. Observing that source of investment of Rs.46,80,000/- by the assessee in the property, mentioned supra, has been proved after admitting additional evidence but without affording any opportunity to the AO to contradict as assessee failed to file details of source of investment in the above mentioned property during the course of assessment proceedings.”
The brief facts of the case are that a survey was carried out by ADIT(Inv.), Unit-III at the premises of M/s. Vishal Gold and Precious Stones Pvt. Ltd., B-5, Near Durga Mandir, Moti Nagar, New Delhi on 06.10.2010, when a document was found for the purchase of a property valuing Rs.46,80,000/- in the name of Smt. Deepti Talla. The property was situated at H-53, Rajouri Garden, New Delhi. The said property was purchased on 04.08.2008. These documents were passed to the concerned jurisdictional Assessing Officer. Various notices were issued to the assessee. On 02.09.2011, copy of sale deed was filed before the Assessing Officer. The assessee did not explain the source of investment in properties nor was it made clear as to whether the same reflected as investments in this property while furnishing the return of income for the respective years or not. Accordingly,
ITA No. 1563/Del./2014 3 the Assessing Officer reopened the case by issuing notice u/s. 148 of the Income-tax Act, 1961. Thereafter statutory notices u/s. 143(2) and 142(1) were also issued. In response, the assessee submitted reply and submitted that all the payments for purchase of property has been made through Bank of India, Kirti Nagar Branch through cheques, but she was unable to explain the source of amount deposited in her bank account. Further, the case was referred to the Valuation Officer on 22.11.2012 for estimation of value of investment made in the property u/s. 142A of the Act. The Valuation Officer submitted his report on 20.03.2013 and valued the property at Rs.2,81,80,000/- against declared value of Rs.46,80,000/-. On the basis of above valuation report, the AO issued show cause notice on 21.03.2013 fixing the date of hearing on 22.03.2013, but none appeared on behalf of the assessee. The AO, therefore, observed that all these payments made for purchase of property were not open for verification and remained unverified, hence, an amount of Rs.2,81,80,000/- was treated as unexplained investment in property and the same was added to the income of the assessee. Aggrieved, the assessee carried the matter in appeal before the ITA No. 1563/Del./2014 4 ld. CIT(A), who after considering the written submissions of the assessee and the case laws cited, allowed the appeal of the assessee vide impugned order. The Revenue was not satisfied by the impugned order and hence, this appeal by the Revenue before the Tribunal.
The learned DR relying on the order of the AO submitted that the ld. CIT(A) was not justified in deleting the impugned addition without considering the fact that it was a clear case of undervaluation of property as is evident from the valuation officer’s report. It was submitted that the ld. CIT(A) wrongly accepted the explanation of the assessee regarding source of investment of Rs.46,80,000/- after admitting the additional evidences without affording any opportunity to the AO to rebut the same, as the assessee failed to file the details of source of investment in the said property in the assessment proceedings. He, therefore, urged for sustenance of assessment order.
ITA No. 1563/Del./2014 5
On the other hand, the ld. AR of the assessee relied on the impugned order and reiterated the contents and observations made by ld. CIT(A) for deleting the impugned addition.
We have considered the rival submissions and have gone through the entire material available on record. A perusal of the impugned order shows that the ld. CIT(A) has deleted the addition observing as under : “5.2 In the third grounds of appeal, the appellant has contested that the addition of Rs. 2, 81, 80,0007- on account of investment in property situated at H-53, Rajouri Garden, New Delhi. It is seen that during the course of assessment proceedings vide her submission dated 22.11.2012, the appellant explained the source of investment in the aforesaid property as follows:- Payment made for purchase of property Sr. Date Ch.No. Amount Name of the Particulars Bank No. Party 1 02-06-2008 366522 2,00,000 Rakesh Chandok H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi 2 03-06-2008 366524 2,00,000 Surinder Kapoor H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi 3 03-06-2008 366521 4,00,000 Parmod Bansal H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi 4 07-06-2008 366523 2,00,000 Paramjeet Singh H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi 5 31-07-2008 366529 7,00,000 Surinder Kapoor H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi
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6 31-07-2008 366528 7,00,000 Paramjeet Singh H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi 7 31-07-2008 366527 7,00,000 Rakesh Chandok H-53, Rajouri BOi, Kirti Garden, New Nagar Delhi 8 31-07-2008 366526 14,00,000 Parmod Bansal H-53, Rajouri BOI, Kirti Garden, New Nagar Delhi 9 04-08-2008 Paid by 1,80,000 Stamp Duty H-53, Rajouri BOI, Kirti Cash Garden, New Nagar Delhi 10 18-10-2008 366531 3,08,470 MCD H-53, Rajouri BOI, Kirti Commercial Tax Garden, New Nagar Delhi Total 49,88,470 Source of Payment (Receipts In Bank)
Sr. Date Ch No. Amount Name Relation Nature Bank Property No. 1 02-06-2008 296588 10,00,000 Vishal Repayment BOI, H-53, Gold & of Kirti Rajouri Precious unsecured Nagar Garden, Stones Pvt loan New Ltd Delhi 2 29-07-2008 296678 5,00,000 Vishal Repayment BOI, H-53, Gold & of Kirti Rajouri Precious unsecured Nagar Garden, Stones Pvt loan New Ltd Delhi 3 29-07-2008 365815 15,00,000 Vikram Husband Unsecured BOI, H-53, Talla Loan recd Kirti Rajouri Nagar Garden, New Delhi 4 29-07-2008 365801 12,00,000 Rajinder Father in Unsecured BOI, H-53, Kumar Law Loan recd Kirti Rajouri Talla Nagar Garden, New Delhi 5 29-07-2008 000001 2,20,000 Vansh Son Unsecured BOI, H-53, Talla- Loan recd Kirti Rajouri Minor Nagar Garden, (Vikram New Delhi Talla)
ITA No. 1563/Del./2014 7
6 29-07-2008 552931 2,20,000 Shivansh Nephew Unsecured BOI, H-53, Talla- Loan recd Kirti Rajouri Minor Nagar Garden, (Vishal New Delhi Talla) 7 29-07-2008 000001 2,20,000 AnshTalla Son Unsecured 801, H-53, -Minor Loan reed Kirti Rajouri {Vikram Nagar Garden, Talla} New Delhi 8 18-10-2008 365819 3,30,000 Vikram Husband Unsecured BOt, H-53, Talla Loan recd Kirti Rajouri Nagar Garden, New Delhi 9 04-08-2008 1,80,000 Stamp Cash BOI H-53, Duty Withdrawn Bank Rajouri from BOI Garden, A/c New Delhi Total 53,70,000 From the above explanation, it is observed that the appellant had made the investment in the aforesaid property through her bank account at Bank of India, Kirti Nagar branch, Delhi. The deposits in the account i.e. source of deposits were taken as loan or return of loan advances etc. from the family members of the appellant who are also assessed to tax. The confirmation of loan was submitted by the appellant before the Assessing Officer and their PAN No. was also found to be mentioned in their loan confirmations. It is noted that Sh. Rajender Talla, Sh. Vikram Talla and Sri Vishal Talla are assessed to tax with the same Assessing Officer. M/s Vishal Gold and Precious metal Pvt. Ltd. is a group concern of the appellant and assessed to tax. However, it seems that the Assessing Officer has ignored all the explanations given by the appellant during the course of assessment, which in my opinion is highly arbitrary. From the assessment order, it is also evident that the Assessing Officer has not controverted the explanation given by the appellant regarding the investments made in the aforementioned property. Further, no material has been brought on record by the Assessing Officer to show that the appellant has made any excess investments in the aforesaid property over and above the value recorded in the sale deed.
ITA No. 1563/Del./2014 8 lt is further observed that the AO without bringing any evidence on record of excess investment in the property at H- 53, Rajouri Garden, New Delhi over and above the value of investment shown in the sale deed at Rs46,88,000/- has referred the matter to the district Valuation officer for estimation of the value of the property. It is further observed that the appellant had submitted her books of accounts explaining the sources of investments in the aforesaid properties and the Assessing Officer has given no comment or even rejected the books of accounts before making a reference to the DVO for ascertaining the actual investment in the aforesaid property. The Assessing Officer has not even recorded any reason for referring the matter to the DVO for the estimation of the value of property. The relevant provision sub-section-1 of Sec.142A reads as under:- "142A (1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable Article referred to in section 69A or Section 69B is required to be made, the 'Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him." The words mentioned in the above mentioned section "where an estimate of the value of any investment referred to in Sec. 69 ..... is required to be made ....." means that a reference to the DVO can be made-only when a requirement is felt by the Assessing Officer for making such reference. Requirement would arise or could be felt only when there is some material with the AO to show that whatever amount the assessee has shown is not correct or not reliable. The use of the word "require" is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the AO is necessary which requires him to make a reference to DVO u/s 142A. In other words, it is only during the course of pendency of the assessment that the AO can frame his mind to refer the property to DVO. Such mind can be framed if there is a basis to think that the assessee may have ITA No. 1563/Del./2014 9 understated the cost of construction or whatever is declared by him in this regard is not believable. A perusal of the impugned assessment order, however, shows that there was no reference whatsoever made by the AO to any material/evidence/information on the basis of which it could be said that the investment shown by the appellant was understated and that anything above what was disclosed by the appellant. Thus, the condition precedent for making reference to the DVO by invoking the provisions of Sec. 142A was not satisfied in the present case. Moreover, on perusal of the assessment order, it is noted that nowhere the AO has mentioned that what are the mistakes and unreliability has been found out by the AO in the books of accounts of the appellant. Thus, the AO has not pointed out any defects in the books as far as related to the investments made by the appellant. In my humble opinion, the provisions of sec. 142A cannot be read in isolation to Sec.145. In other words, if books of Accounts are found to be correct and complete in all respect and no defect is pointed out therein and the investment is recorded therein, then the addition on account of difference in investment could not be made even if a report is obtained within the meaning of Sec.142A from the DVO. It is because the use of the report of the DVO obtained U/s. 142A is not mandatory but is discretionary as the word used is 'may’ therein. Accordingly, I am of the considered view that in the present case when AO has not rejected the books of account by pointing out any defects reference to the DVO will not be valid and, therefore, DVO's report could not be utilized for framing assessment even if such a report is considered to be obtained U/s.142A. Since reference to DVO being held as invalid, the assessment/reassessment framed thereafter would also be invalid.”
ITA No. 1563/Del./2014 10
The ld. CIT(A) has also supported its above findings regarding validity of reference to DVO by the following decisions: (i). Aerens Infrastructure & Technology Ltd. v. Deputy Commissioner of Income-tax [2010] 3 ITR (TRIB.) 344 (DELHI) which has been approved by Hon'ble Delhi HC In the case of Commissioner of Income-tax Delhi-l, New Delhi v. Aerens Infrastructure & Technology Ltd. [2011] 16 taxmann.com 400 (Delhi). (ii) Sargam Cinema v. Commissioner of Income-tax, [2011] 197 TAXMAN 203 (SC). (iii). ITO vs. Rajeshwar Nath Gupta dated 4.5.2008 in ITA no. 4295/Del./2005 (ITAT Delhi Bench) (iv). Commissioner of Income-tax vs. Ambience Developers and Infrastructure Ltd, [2012] 25 taxmann.com 210 (Delhi). (v). CIT vs Gulshan Kumar [2002] 257 ITR 703 (Delhi). (vi). CIT v. P .V. Kalyanasundaram [2007] 294 ITR 49 (SC). (vii). Subhash Chand Chopra v. Asst. CIT [2005] 92 TTJ (Delhi) 1087). (viii). K.P Varghese. v. ITO [1981] 131 ITR 597 (SC).
On the strength of above decisions, the ld. CIT(A) further observed as under : “Under these circumstances, in my opinion, the Assessing Officer has erred in referring the matter to the DVO and consequently the DVO's report on the value of investment in the property cannot replace the actual purchase value shown
ITA No. 1563/Del./2014 11 in the purchase deeds of the aforesaid property. Hence, the Assessing Officer has erred in adopting the value of the property at H-53, Rajouri Garden, New Delhi estimated by the DVO by replacing the value shown in the purchase deed and therefore the addition on this account of Rs. 2,81,80,000/-is liable to be deleted.”
The learned CIT(A) also observed that even after the receipt of the valuation report from the DVO, the Assessing Officer had given only one day time to the appellant to explain the difference in the value of the property as estimated by the DVO and the value shown by her in the purchase deed. This is against the principle of natural justice. In this regard it is seen that the AO had issued a show cause notice dated 21-03-2013 for submitting reply on 22-03-2013 i.e. immediately next date. Therefore, assessing officer has not given sufficient opportunity of being heard to the assessee. It cannot be said that by giving opportunity of being heard for hearing immediately one day assessing officer has discharged his obligation of giving opportunity of being heard. For this, he has relied on various decisions. It is further observed that the DVO has taken the rate of land adopted by the DDA at Model Town, Delhi which is quite far from the locality of Rajouri Garden and cannot be taken as a ITA No. 1563/Del./2014 12 comparable to the impugned property. He, accordingly deleted the addition of Rs.2,81,80,000/- made by the AO.
In our opinion, the crucial fact which was to be adjudicated first by the first appellate authority was whether the investment stated to have been made by the assessee in impugned property as per purchase deed of Rs.46,88,000/- was from declared and genuine sources or not. Most of the sources of investment shown by the assessee as per details given in the impugned order, are either through repayment of unsecured loans received or receipt of unsecured loans from various relations and concerns. These details appear to have been accepted by the ld. CIT(A) without making any verification thereof or without calling for any remand report from the Assessing Officer with respect thereto. The ld. CIT(A) has failed to refer any books of account or any cogent evidences through which the alleged unsecured loans or creditworthiness of lenders/creditors was found verifiable and proved. Therefore, in our opinion, it is against the principles of natural justice to accept the explanation of the assessee regarding source of investment without giving adequate
ITA No. 1563/Del./2014 13 opportunity to the AO for his rebuttal, especially when the AO has recorded a categorical finding in the assessment order that the payments made towards purchase of property are not open for verification and remained unverified. On the other hand, we also find that the AO was not justified in giving only one-day time to explain the source of investment, inasmuch as the show cause notice was given on 21.03.2013 fixing the date to respond on 22.03.2013. The time given by the AO to the assessee for explaining the source of investment or deposits in her bank account was quite inadequate, which is also against the principles of natural justice. A perusal of the impugned order nowhere reveals that the assessee had submitted the details of investments before the AO, as furnished before the ld. CIT(A). Unless the sources of investment as submitted before the first appellate authority in the form of table reproduced above, are properly verified with reference to the books of account of the assessee and the creditworthiness of the lenders/creditors, it is not justified to delete the addition made by the AO. The understatement of value of property in the purchase deed as observed by the AO is the subsequent event to be examined by ITA No. 1563/Del./2014 14 the concerned authority which too should be based on logical findings based on cogent material on record. However, it was incumbent upon the authorities below to first examine whether the investment declared in the purchase deed was from disclosed sources or not, which is lacking in the present case. In presence of these facts, we, therefore, think it appropriate in the interest of justice that the matter should be restored back to the Assessing Officer for making the assessment de novo after properly examining the explanations given by the assessee before the first appellate authority, as noted above. Needless to say, the assessee shall be given adequate opportunity of being heard and the assessee shall submit all the evidences and books of account in support of its claim. Accordingly, the appeal of the Revenue deserves to be allowed for statistical purposes.