2010 (8) TMI 217 - HC - Income Tax

Undisclosed payment and DVO valuation in property purchases: burden on Revenue to prove concealment; appeal dismissed.

Undisclosed payment allegations arising from property investments were assessed with reference to a DVO valuation; the legal basis required the Revenue to ... Undisclosed payment - Additions on the basis of DVO report - burden of proof - assessee had made investment in properties - Held that:- It is settled law that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO. No evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed. A reading of the Assessing Officer's order does not disclose that the respondent-assessee had made any admission in her alleged statement u/s 132(4) of the Act, 1961. In fact, no such statement has been produced before us. It is also pertinent to mention that no adjustment on account of sale consideration has been made by the Revenue in the case of the seller. Consequently, we find that no substantial question of law arises in the present appeal which, being bereft of merit, is dismissed. Issues: Whether the addition made by the Assessing Officer on account of undisclosed investment in immovable property, based principally on the report of the Departmental Valuation Officer (DVO) and without independent corroborative material or rejection of books of account, is sustainable; and whether valuation should have taken into account that the property was tenanted.Analysis: The primary burden to prove understatement or concealment of income rests on the Revenue; only after discharge of that burden may reliance be placed on the DVO's valuation. The DVO's opinion alone does not constitute 'information' permitting reopening under section 147, nor is it a substitute for rejecting the assessee's books of account. In the present facts, no incriminating material was recovered during search, no corroborative evidence exists to support payment over the registered consideration, and the Assessing Officer/DVO failed to consider the material fact of tenancy diminishing market value. Further, no corresponding adjustment was made in the hands of the vendor; the books were not shown to have been rejected; and the tribunal's finding that additions lacked corroboration and proper reasons was supported by authority holding that a DVO report cannot be the sole basis for addition or reopening.Conclusion: The addition based solely on the DVO report, without corroborative evidence or rejection of books and without accounting for tenancy, is unsustainable; decision is in favour of the assessee and the additions are deleted.