Asstt. CIT v. P. Srinivas Reddy

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The Tax Publishers2013 TaxPub(DT) 2084 (Hyd-Trib) : (2013) 053 (II) ITCL 0219 Income Tax Act, 1961 --Income from undisclosed sources--Addition assessment year 69Unexplained investment in immovable property--Assessee purchased a semi finished building showing purchase value of property at Rs.3 crores. Assessing officer adopted valuation of stamp valuation authority at Rs. 5,53,40,000 while fair market value (FMV) on basis of registered valuer's report, obtained by seller for availing bank loan. FMV for wealth-tax rule was Rs. 8 crores whereas market value of similar building in area was Rs. 12,73,50,000. Assessing officer adopted Rs. 8 crores as value of property on basis of registered valuer's report and added Rs. 5 crores in assessee's hands. Commissioner (Appeals) allowed assessee's appeal. *Held:* Not justified. As there was a huge difference between consideration stated as purchase value and amount representing value of similar property in area, there was a case of understatement of investment and as long time had expired, it would not be useful to refer matter to DVO. Assessing officer is directed to adopt value of property as per rules of rule 3 of Schedule III of the Wealth Tax Act, 1957. Though the value of the property was registered for stamp value purposes at Rs. 5,53,40,000, the assessing officer based his conclusion on the basis of registered valuer's report. The Commissioner (Appeals) has not given any credence to the report of the registered valuer on the basis that it was motivated and obtained for the purpose of availing bank loan. To that extent, the Commissioner (Appeals) is correct in brushing aside the report of the registered valuer but at the same time, he observed that the assessing officer had not collected any corroborative circumstantial evidence in support of the report of the registered valuer. However, he has not considered the comparable case brought on record by the assessing officer with reference to the construction undertaken in the immediately adjacent site of the impugned property and the space is sold at Rs. 2,830 per sq. ft. evidenced by seized material. Being so, the Commissioner (Appeals) is not correct in totally brushing aside the contemporaneous evidence. [Para 16] Under section 142A, the assessing officer is empowered to refer any case to the valuation cell for the purpose of making an assessment or re-assessment 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 articles referred to in section 69A or section 69B. Thus, provisions of section 142A are applicable where the value of investment is to be determined. Provisions of section 142A are not applicable for the purpose of determination of full value of consideration. The assessing officer had to adopt the value for the purpose of stamp valuation as on the date of transfer. For the purpose of determining the sale consideration in the case of computation of capital gain. Now, coming to the determination of investment made by the assessee, the assessing officer can make use of the provisions of section 142A which are brought into the statute book by Finance (No. 2) Act, 2004 with effect from 15-11-1972. There is also one more amendment with effect from 1-7-2010 wherein property referred in sub-section (2) of section 56 also brought into this provision. Thus, section 69 deals with the unexplained investment not recorded in books of account if not maintained by the assessee for any source of income. One is concerned with only provisions of section 69 in this case. Being so, the assessing officer to estimate the value of such investment in assets may refer the matter to the valuation officer and consider the value on the basis of valuation report. On the other hand, the assessing officer also can adopt rent capitalisation method, which is one of the methods recognised by law prescribed in WT Act. It is also applicable for valuation of a property covered by sections 69/69A/69B. During the course of hearing ,the Authorised Representative has not denied the applicability of capitalisation method of valuation of property. [Para 17] As there was a huge difference in the amount shown to have expended by the assessee on purchase of the impugned immovable property and the amount representing the similar property in the area and the difference is not small. Considering the facts of the case as the assessee did not disclose proper value of investment made by the assessee in its books of account and there was under statement of investment, the provisions of section 69 are clearly attracted and there was a time lapse of more than 6 years and there is no useful purpose will be served now referring the matter to the DVO. The value shown by the assessee which is very low as compared to the prevailing market conditions as brought on record by the assessing officer in his order that the director Sri S. constructed another building in the immediate vicinity by name SSR Chambers and the space is sold for Rs. 2,830 per sq. ft. This is reflected in the seized material found during the course of search. Though it is relating to other person the property is very much situated very next to the assessee's building and closing eyes really leads to miscarriage of justice. Being so, considering the facts and circumstances of the present case, the Commissioner (Appeals) is not justified in deleting the entire edition. Accordingly the assessing officer is directed to adopt value of the property as per rule 3 of Schedule III of the WT Act, 1957 and determine the income of the assessee accordingly. [Para 18] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2084 (Hyd-Trib) : (2013) 053 (II) ITCL 0219

Income Tax Act, 1961

--Income from undisclosed sources--Addition assessment year 69Unexplained investment in immovable property--Assessee purchased a semi finished building showing purchase value of property at Rs.3 crores. Assessing officer adopted valuation of stamp valuation authority at Rs. 5,53,40,000 while fair market value (FMV) on basis of registered valuer's report, obtained by seller for availing bank loan. FMV for wealth-tax rule was Rs. 8 crores whereas market value of similar building in area was Rs. 12,73,50,000. Assessing officer adopted Rs. 8 crores as value of property on basis of registered valuer's report and added Rs. 5 crores in assessee's hands. Commissioner (Appeals) allowed assessee's appeal. Held: Not justified. As there was a huge difference between consideration stated as purchase value and amount representing value of similar property in area, there was a case of understatement of investment and as long time had expired, it would not be useful to refer matter to DVO. Assessing officer is directed to adopt value of property as per rules of rule 3 of Schedule III of the Wealth Tax Act, 1957.

Though the value of the property was registered for stamp value purposes at Rs. 5,53,40,000, the assessing officer based his conclusion on the basis of registered valuer's report. The Commissioner (Appeals) has not given any credence to the report of the registered valuer on the basis that it was motivated and obtained for the purpose of availing bank loan. To that extent, the Commissioner (Appeals) is correct in brushing aside the report of the registered valuer but at the same time, he observed that the assessing officer had not collected any corroborative circumstantial evidence in support of the report of the registered valuer. However, he has not considered the comparable case brought on record by the assessing officer with reference to the construction undertaken in the immediately adjacent site of the impugned property and the space is sold at Rs. 2,830 per sq. ft. evidenced by seized material. Being so, the Commissioner (Appeals) is not correct in totally brushing aside the contemporaneous evidence. [Para 16] Under section 142A, the assessing officer is empowered to refer any case to the valuation cell for the purpose of making an assessment or re-assessment 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 articles referred to in section 69A or section 69B. Thus, provisions of section 142A are applicable where the value of investment is to be determined. Provisions of section 142A are not applicable for the purpose of determination of full value of consideration. The assessing officer had to adopt the value for the purpose of stamp valuation as on the date of transfer. For the purpose of determining the sale consideration in the case of computation of capital gain. Now, coming to the determination of investment made by the assessee, the assessing officer can make use of the provisions of section 142A which are brought into the statute book by Finance (No. 2) Act, 2004 with effect from 15-11-1972. There is also one more amendment with effect from 1-7-2010 wherein property referred in sub-section (2) of section 56 also brought into this provision. Thus, section 69 deals with the unexplained investment not recorded in books of account if not maintained by the assessee for any source of income. One is concerned with only provisions of section 69 in this case. Being so, the assessing officer to estimate the value of such investment in assets may refer the matter to the valuation officer and consider the value on the basis of valuation report. On the other hand, the assessing officer also can adopt rent capitalisation method, which is one of the methods recognised by law prescribed in WT Act. It is also applicable for valuation of a property covered by sections 69/69A/69B. During the course of hearing ,the Authorised Representative has not denied the applicability of capitalisation method of valuation of property. [Para 17] As there was a huge difference in the amount shown to have expended by the assessee on purchase of the impugned immovable property and the amount representing the similar property in the area and the difference is not small. Considering the facts of the case as the assessee did not disclose proper value of investment made by the assessee in its books of account and there was under statement of investment, the provisions of section 69 are clearly attracted and there was a time lapse of more than 6 years and there is no useful purpose will be served now referring the matter to the DVO. The value shown by the assessee which is very low as compared to the prevailing market conditions as brought on record by the assessing officer in his order that the director Sri S. constructed another building in the immediate vicinity by name SSR Chambers and the space is sold for Rs. 2,830 per sq. ft. This is reflected in the seized material found during the course of search. Though it is relating to other person the property is very much situated very next to the assessee's building and closing eyes really leads to miscarriage of justice. Being so, considering the facts and circumstances of the present case, the Commissioner (Appeals) is not justified in deleting the entire edition. Accordingly the assessing officer is directed to adopt value of the property as per rule 3 of Schedule III of the WT Act, 1957 and determine the income of the assessee accordingly. [Para 18]