ITO, NEW DELHI vs. SMT. MURTI AGGARWAL, NEW DELHI

This is an appeal by the department against the order dated 30.01.2014 of CIT(A)-XXIV, New Delhi for A.Y. 2009-10 on the following grounds of appeal: 1. “On the facts and circumstances of the case and in law CIT(A) has erred in deleting the addition of Rs. 55,30,000/- made by the Assessing Officer on account of unexplained investment u/s 69 of the I.T. Act.

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2. Brief facts of the case are as under: The appellant filed return of income for the relevant A.Y. 2009-10, on 31.03.2010, declaring income of Rs. 6,36,980/-. The case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 18.08.2010 which was duly served upon the appellant. As per the AIR information, the assessee had purchased a land for the value of Rs. 55,30,000/-, at Road No. 1A, Jaidev Park, Punjabi Bagh, Delhi, measuring 300 sq. yds. During the course of assessment, the assessee was asked to explain the aforesaid transaction. In reply, the assessee submitted before the Assessing Officer that the said property was purchased by her in pursuance to an agreement to sell dated 23.10.2001 for Rs. 2,80,000/- and the said agreement was registered during the relevant assessment year on 27.10.2008 and at the time of registration of the aforesaid property, stamp duty of Rs. 2,21,200/- was paid on the basis of value of property as per prevailing circle rate. However, no payment of Rs. 55,30,000/- was made to any person and the value of the property was taken at Rs. 55,30,000/- for the purposes of stamp duty only. The Assessing Officer was not satisfied with the explanation of the assessee, and added the amount of Rs. 55,30,000/-, as the income of the assessee u/s.69 of the Act. 2.1 Aggrieved by the aforesaid addition, the present appeal has been filed. Before the Ld.CIT(A), the assessee submitted certain documents in respect of the property which were also filed before the Ld.AO. The documents relied upon by the assessee before the authorities below are as for as: a) Agreement to sell dated 23.10.2001, b) Power of Attorney dated 23.10.2001, c) Receipt of Payment dated 23.10.2001, d) Possession letter dated 23.10.2001 & e) Sale deed dated 29.10.2008 2.2. Besides these, the assessee submitted copies of sale deeds of properties with the same specifications, under the same Khesra in the same area which were registered by the sub- registrar for Rs. 3,15,000/- in the F.Y. 2005-06 i.e. much after the year in which the assessee executed the transaction. Before the Ld.CIT(A), it was submitted that the stamp duty was paid by the assessee on the circle rates and the sale consideration was paid as per the agreement to sale & G.P.A. dated 23.10.2001. The assessee submitted that the agreement to sell dated 23. 10.2001 was registered on 27.10.2008. 2.3. Before the Ld.CIT(A), it was submitted that the contention of the Ld.AO, regarding the sale price of the property is totally based on the doubts and suspicion, without any corroborative evidence on record. 2.3 Before the Ld.CIT(A), the assessee submitted that the similar properties were registered by the sub-registrar for Rs. 3,15,000/- in the FY 2005- 06. 2.5 the Ld.CIT(A) observed as under: “I have carefully considered the submission made by the AR of the assessee and have gone through the assessment order. It is observed that the assessee had purchased a property i.e. property No. 19, Road No. 1A, Jaidev Park, Punjabi Bagh, Delhi from Sh. Ashok Kr. Aggarwal, S/o Sh. Sitaram Aggarwal, the GPA holder. An agreement to sell in this regard was entered into between the vendor and the vendee on 23.10.2001 for Rs. 2,80,000/-. However, the property was registered during the year under consideration on 27.10.2008 for the consideration of Rs. 2,80,000/- only, but for the stamp duty purposes, the value of the property was taken at Rs. 55,30,000/- and the stamp duty was computed on this value at Rs. 2,21,2001-. It is further observed that the Assessing Officer has added the amount of Rs. 55,30,000/- as income of the assessee for the relevant assessment year u/s 69 of the Income Tax Act, after considering the value of the property at Rs. 55,30,0001- instead of the declared value of the property at Rs. 2,80,000/-. It is the contention of the assessee that she did not pay anything more than that stated in the purchase/sale deed. It is observed that indeed there is no evidence to the effect that the assessee has paid more than what was stated in the deed of conveyance. The Assessing Officer has not brought any material on record to show that the assessee had paid more than what is recorded in the books of account. It is also observed that the A.O. has made the addition u/s 69 of the Act, 1961 without conducting any enquiry with the parties to these transactions. These facts only manifests that the addition made by the A.O. u/s 69 of the Act, 1961 merely on the basis of suspicion and not on the basis of facts and evidence of the case. Admittedly, the assessee paid extra stamp duty as determined by the Registration Officials. But that alone is not conclusive or reasonable proof that there was any excess investment. Section 69 is the weapon in the armoury of the Assessing Officer to detect the tax evasion In respect of clandestine Investments made by the assessee & naturally which are not recorded in the books of accounts, if any, maintained by him. Section 69 also gives power to AO to treat the value of investments as the income of the assessee, if the assessee does not offer any explanation or the explanation offered by him is not satisfactory. Section 69 does not provide any guideline about the extent and length of the discretionary power given to AO in the matter of treating the investment as income which is unexplained or unsatisfactorily explained by the investor-assessee. Therefore, Assessing Officer is expected to appreciate the reasonable explanation offered to him, the evidences produced before him about the nature and source of investment and he cannot make the addition merely on surmises, conjectures as well as without any supporting evidences. For, sake of convenience, Section 69 has been reproduced below:- "Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, AND the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory , the value of the investments may be deemed to be the income of the asseessee of such financial year." The above section indicates that in order to be an income, there must be fulfillment of two conditions since the word "and" has been used in the section. The investments made in the current year must not be recorded in the books of accounts AND the explanation not offered or not satisfactorily offered. In addition to the same, it may be noted that this is a deeming provision which means that even though the assessee has no real income it may be deemed to be his income. The provision which is deeming is always rebuttable. The use of the words 'if any' in the section indicates that it is not compulsory that the assessee must have maintained the books of accounts. He can prove the genuineness of the investments by some other evidence which proves investment out of disclosed source. The word 'explanation' indicates that the opportunity of being heard must be given to the assessee to prove the nature and source of investments. The use of word 'may' and absence of the word 'shall' in the section indicates that the Assessing Officer has discretion to treat the particular investment as the income of the investor-assessee depending of the facts and circumstances of each case at a particular situation of time. It may be noted that the AO is under obligation to give reasons for not accepting the explanations offered by the assessee. In the present case there is no supporting evidence or cogent material in possession of the Assessing Officer to demonstrate that the assessee has actually expended the amount towards purchase of land more than what was documented. Hence, in my opinion, the impugned addition cannot be sustained. Reliance in this regard is placed on the decision of Hon'ble IT AT, Ahmedabad in the case of Amar Arvindkumar Rawal, Surat vs Assessee [ITA NO.1947/AHD/2008 dated 23 July, 2010]. The Hon'ble Madras High Court in CGT v. R. Damodaran [2001] 247 ITR 698 held that the stamp valuation authorities have their own method of evaluating property. Merely because for the purpose of stamp duty, property is valued at a higher cost, it cannot be said that the assessee has made more payment than what is stated in the sale deed. The Hon'ble Allahabad High Court in Dinesh Kumar Mittal v. ITO [1992] 193 ITR 770 quashed the order of authorities below, wherein half of the difference between the amount paid and the value for purposes of stamp duty was added as income of the assessee by the Assessing Officer. It is held that there is no rule of law to the effect that the value determined for the purposes of stamp duty is the actual consideration passed between the parties to the sale. It is worthwhile to mention here that section 69 is a legal fiction whereby investment in an asset is treated as income if it is not disclosed in the regular books .of account. No further legal fiction from elsewhere in the statute can be borrowed to extend the field of section 69. This fiction cannot be extended any further and, therefore, cannot be invoked by the Assessing Officer to tax the difference in the hands of the purchaser. The Hon'ble Andhra Pradesh High Court in the case of Addl. CIT v. P. Durgamma [1987] 166 ITR 776 held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. Similar view was taken by the Hon'ble Kerala High Court in CIT v. Kar Valves Ltd. [1987] 168 ITR 416, wherein it is held that a legal fiction is limited to the purpose for which it is created and could not be extended beyond that legitimate frame. The Hon'ble Allahabad High Court in the case of Controller of Estate Duty v. Krishna Kumari Devi [1988] 173 ITR 561 held that in interpreting the legal fiction the court should ascertain the purpose for which it was created and after doing so assume all facts which are logical to give effect to the fiction. The Hon'ble Supreme Court in CIT v. Mother India Refrigeration Industries P. Ltd. [1985] 155 lTR 711 held that legal fictions are created only for some definite purpose and they must be limited to that purpose and should not be extended beyond that legitimate field. In the present case, it appears the Assessing Officer has applied this provision of section 50C for the computation of unexplained investment under section 69 of the Act and which is not permissible under the Act. However, even if it is presumed that the Assessing Officer has made the addition in view of section 50C of the Income Tax Act, the same cannot be sustained as section 50C is inapplicable in the case of purchaser of a property. Apart from the stamp duty valuation, there is nothing on record which suggests that the AO has proved that the assessee has paid over and above, what has been recorded as purchase consideration of the land in the instrument, i.e., the sale deed. Accordingly, I hold that the addition made by the Assessing Officer is purely on notional basis, not supported by either facts or a legal basis but only on presumption. In that view of the matter, the addition made under section 69 is directed to be deleted.”

3. Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before us now. 3.1. The Ld.DR submitted that the property in question is located in a prime ADR of Delhi and by no thought of imagination the value of the property even in 2001 could have been Rs.2,80,000/-. The Ld.DR submitted that the entire consideration has been paid in cash to avoid the transaction from being disclosed to any authority and to keep it out of the banking channels so that it would not come to anybody’s notice. The Ld.DR supported the order passed by the Ld. AO.