TaxTMI 
TaxTMI 
2003 (11) TMI 301
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....e outset, relevant facts may be briefly indicated. For assessment year 1995-96, the assessee filed the return of income on 30-6-1995 showing total income of Rs. 1,00,200 including, inter alia, commission income of Rs. 18,370 and income from share trading Rs. 52,250. This income from commission and share trading aggregating to Rs. 70,260 has been shown under the head income from other sources. Assessing Officer selected the case under random sampling for scrutiny and issue statutory notices under section 143(2) and 143(2)(1). With regard to sale purchase of shares as well as commission income, Assessing Officer while making the assessment estimated the income at Rs. 90,000 as against Rs. 70,620 shown by the assessee. Further the Assessing Officer made addition on account of understatement of purchase consideration in respect of two properties, situated at Jagriti Enclave and Patparganj Industrial Area aggregating to Rs. 11,86,897. These two properties were purchased by the assessee jointly with other co-owners as under : (i) Plot No. 225, Jagriti Enclave measuring 320 sq. yds. purchased for Rs. 5,60,000 along with three other co-owners, namely, S/Shri Ajay Chawla, Rajiv Cha....
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....contention that the consideration recorded in the sale deeds of the two properties, namely, Jagriti Enclave and Patparganj Industrial Area were fair and reasonable; and (ii) Relying upon the decisions of the Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 5971 and CIT v. Shivakami Co. (P.) Ltd. [1986] 159 ITR 712, it was argued that onus of proving understatement of sale consideration is on the revenue and such onus is not discharged merely on the basis of the valuation reports based on subjective opinion of the valuer. CIT(A) observed that the addition has been made without proper verification of the facts by the Assessing Officer. The matter of the addition on account of unexplained investment was accordingly restored to the Assessing Officer for further verification and allowing opportunity to the assessee. Similarly, with regard to estimation of income from commission as well as share trading, CIT(A) restored the issue to the Assessing Officer for allowing further opportunity. With regard to the plea of the assessee against making scrutiny assessment in violation of Board's instructions, CIT(A) directed that the matter would be considered by the Ass....
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....ive of aforesaid Board's Circular, is bad in law. 6. Ld. Counsel filed a detailed compilation of papers including, inter alia, Board's Instruction No. 1939 dated 17-5-1996 in respect of guidelines for selection of cases for scrutiny during the financial year 1996-97 appearing at pages 12 and 13. Vide this said instructions, the CBDT has divided the Income-tax cases into three broad classes, A, B & C. Class A comprises categories of cases for compulsory scrutiny like search cases, survey cases, set aside cases, etc. Class B relates to sample scrutiny cases and the procedure for selection of cases on random sampling basis has been laid down in the Board's instruction. The relevant portion of the instruction under class B of cases read as under : "After selection of cases for compulsory scrutiny under class A and after excluding exceptions provided below, the officer will select cases for sample scrutiny out of the remaining cases in the following manner: i. 50% of the returns with income or loss of Rs. 10 lakhs and above; ii. 33% of the returns with income or loss of Rs. 2 lakhs and above but below Rs. 10 lakhs (in case of company returns 'Rs. 2 lakhs' m....
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....that the case has been selected on random sampling basis on scrutiny in accordance with the guidelines issued by the CBDT from time to time and there is no violation of instructions or circular by the Assessing Officer. Ld. DR furnished during the hearing bunch of instructions issued by the Chief Commissioner, Delhi, Chairman-CBDT, on the subject and stated that as per these instructions, the Assessing Officer is entitled to select 3% of the cases on random sampling basis where the return of income filed shows income less than Rs. 2 lakhs. Ld. DR further submitted that in the case of the assessee income from commission as well as profit from share trading disclosed in the return clearly partakes of the character of business income and, therefore, there was absolutely no restriction in any of the instructions or circular issued by the Departmental authorities for excluding such cases from the random sample basket. Ld. DR further raised an alternative argument to the effect that even if there is any perceived deviation from the guidelines issued by the CBDT, this would not be a ground for holding that notice under section 143(2) issued by the Assessing Officer in legitimate and prope....
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....ging the legality of the impugned assessment so assiduously built up on the basis of a document which is not relevant, crumbles to the ground. 12. Apart from the above, we find, that the case of the assessee is clearly covered under the guidelines laid down in the circular for selection of scrutiny case on random sampling basis from Class B of cases. The income of the assessee is below Rs. 2 lakhs and, therefore, it falls under Class B and 3% of such cases are liable to be selected on random sampling basis for scrutiny. The action of the Assessing Officer, therefore, for selecting the case for scrutiny cannot possibly be faulted with. Regarding the contention of the ld. counsel that the assessee's case falls in the excluded category since income returned is below Rs. 1.20 lakhs which does not include business income. We are not inclined to accept the submission. A bare perusal of the return of income filed by the assessee would indicate that the assessee has shown income from commission as well as share trading aggregating to Rs. 70,260. This income is clearly of the character of business income. The mere fact that the assessee claims this income as non-business income would not....
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....osphetic Fertilizer [1988] 174 ITR 269/ 40 Taxman 280 (FB) that statutes should be construed not as theorems of Euclid but with imagination of purpose behind them. This interpretative shift towards purposive approach arises from the concern and anxiety of the judicial authorities that the purpose of the law is not defeated because the entire legislative process is influenced by consideration of justice and reason which constitute general legislative intent in every piece of legislation. If legislative intention is the primary guiding factor of interpretation of statutes, this would be all the more so when we are considering the instruction issued by the executive authority. Even if such instructions are to be construed as falling under the ambit of section 119 of the Income-tax Act, such instructions would necessarily be construed so as to harmonise with the spirit and letter of the law as well as the object and purpose for which the instruction has been issued by the CBDT. For these reasons, we have no hesitation in holding that the Assessing Officer has selected the case for sample scrutiny in conformity with the guidelines issued by the CBDT and proceed to frame the scrutiny ass....
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.... involved in the present appeal is the same as in the earlier appeal being the unexplained investment in the two immovable properties made by the assessee amounted to Rs. 11,86,897. 19. Regarding the purchase of the two properties, we have already referred to the same while considering assessee's appeal in ITA No. 1392/99. The case of the revenue is that the purchase consideration paid by the assessee with regard to purchase of the two properties, namely, Jagriti Enclave and Patparganj Industrial Estate are more than the consideration stated in the respective conveyance deeds in respect of such transfer. The revenue had place reliance on the valuation report of the Valuation Officer in support of the conclusion of understatement of purchase consideration. Ld. DR filed a paper book containing the valuation report of the Jagriti Enclave property dated 24-2-1998 as prepared by the Assistant Valuation Officer, Income-tax Department. In this report, the market value of the Plot No. 225, Jagriti Enclave, Delhi purchased by the assessee on 1-2-1995 has been determined at Rs. 25,49,300. In support of the valuation, the Valuation Officer has placed reliance on two sales instances in Sawa....
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....Delhi Area 320 Sq. yds. 360 Sq. yds. 282.986 Sq. yds. 208.33 Sq. yds. Consideration Rs. 5,60,000 Rs. 3,55,000 Rs. 3,50,000 Rs. 3,50,000 Rate per Sqm. Rs. 1,750 Rs. 986 Rs. 1,296 Rs. 2,160 Regarding the second property cited in Patparganj Industrial Estate, the assessee has cited the following comparable instances: Sh. Sanjay Chawla Instances cited by Assesses Date of Purchase 21-3-1995 8-8-1991 25-2-1992 Property Address Indl. Plot No. 201 Block No. 3 Functional Indl. Estate, Patparganj, Delhi Indl. Plot No. 119 Block No. 2 Functional Indl. Estate, Patparganj, Delhi Indl. Plot No. 359 Functional Indl. Estate, Patparganj, Delhi Area 450 Sqm. 450 Sqm. 450 Sqm. Consideration Rs. 2,80,000 Rs. 3,00,000 Rs. 2,70,000 Rate per Sqm. Rs. 622 Rs. 666 Rs. 600 22. In the impugned assessment order, the Assessing Officer has rejected these sales instances cited by the assessee with the observations. "The 'Valuation Cell' while arriving at the valuation of these two properties took all issues and other related issues into consideration. I feel no need to change the valuati....
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....e. On these facts, ld. Counsel submitted that the basis adopted by the DVO for working out the market value of the plots purchased by the assessee in Jagriti Enclave and Patparganj Industrial Estate are totally ill-conceived and erroneous. Reliance is placed on the decision of Supreme Court decision in the case of Administrator General of West Bengal v. Collector, 1988 AIR 943 ld. Counsel referred to the principle enunciated by the Apex Court observing that, 'Determination of market value of a piece of land with potentialities for urban use is an intricate exercise which calls for collection and collation of diverse economic criteria. The market value of a piece of property, for purposes of section 23 of the Act, is stated to be the price at which the property changes hands from a willing seller to a willing buyer, but not too anxious a buyer, dealing at arms length. The determination of market value, as one author put it, is the prediction of an economic event, viz., the price outcome of a hypothetical sale, expressed in terms of probabilities. Prices fetched for similar lands with similar advantages and potentialities under bona fide transactions of sale at or about the time of t....
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....value of the land in order to determine the fair rent and the compensation respectively, the parties concerned to the sale deed are to be examined by the parties who rely upon those sale deeds for determination of the value of the land. Without examining such persons, who are concerned with the document, the same cannot be relied upon or cannot be taken into consideration. 5. D.R. Chawla, WTO v. Ram Das Kilachand SLP (Civil) No. 5663 of 1980 have held that departmental valuation report cannot be considered as an information for the purpose of the reassessment. Special leave petition filed by department against the judgment of Bombay High Court dated 10-1-1980 in C.A. No. 447 of 1979, whereby the High Court dismissed in limine the Department's appeal against the judgment of a Single Judge allowing the assessee's writ petition on the point whether, the WTO having completed the assessment on the basis of the departmental valuer's report and whether the departmental valuer's valuation report constitutes 'information' within the meaning of section 17(1)(b) of the W.T. Act, 1957. 6. Baldev Krishnan Kapoor v. ACIT ITAT 68 ITD 37 (Chd.)(TM). In this case it has been held ....
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....falls for consideration before us is whether consideration actually paid by the assessee for the purchase of two properties was more than what was disclosed or declared before the Income-tax authorities. It has been held by the Hon'ble Supreme Court in K.P. Varghese case (supra) that the onus was on the revenue to prove that there was understatement of consideration in the sale document. K.P. Varghese case (supra) is landmark judgment which has considerably enriched tax jurisprudence. This decision rendered in the context of section 52(2) of the Act, 1961 enunciated the proposition that mere difference between market value and consideration declared by the assessee in the sale document was not sufficient and assessee must be shown by the revenue by adducing evidence on record to have received more than what was declared or disclosed by him as sale consideration. Regarding the market value, Supreme Court observed at page 615 of the report, "it is a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guess work and despite the utmost bona fides, the estimate of the f....
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....o adduce any material on record to establish understatement of consideration in the sale docu- ment of the two properties. Valuation reports of the DVO heavily relied upon by the revenue did not in any manner support the charge of under-statement of consideration in the sale documents of the properties. In respect of the immovable properties, there is no fixed market such as market for shares, bonds, debentures or other commodities like sugar, cloth, steel, etc. In order to arrive at a valuation in respect of the property, there must necessarily be certain amount of guess work involved. In the instant case, the method adopted by the Valuation Officer is the comparable sales instances method. However, we find that the sales instances relied upon by the DVO in his reports are in respect of property situated in far off localities which do not provide a reasonable guideline for determining the market value of the properties in question. In respect of property in Patparganj Industrial Estate, the Valuation Officer has cited the sales instances of Jhilmil Colony and Kirti Nagar which are not comparable. Even the dates of such transactions have not been indicated by the Valuation Officer.....
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....een made by the Assessing Officer to appraise and evaluate the facts and evidence cited by the assessee in support of correctness of the consideration declared in the sale documents. The Assessing Officer has merely proceeded on the basis of the valuation reports without carrying out critical analysis and scrutiny of the relevant facts and material on record. The conveyance deeds of the two properties purchased by the assessee have been filed by the assessee before the revenue authorities and these are placed in the paper book filed before us. A duly executed conveyance deed or agreement for sale indicating the sale consideration paid by the assessee obviously constitute the direct evidence which cannot be ignored. The assessee has further filed the sale documents in respect of comparable transactions cited before the revenue authorities and these transactions support and substantiate the reasonableness of the consideration declared in the sale documents for the properties purchased by the assessee. As against these evidences relied upon by the assessee, the revenue has based its case on the valuation reports of the DVO. For the reasons discussed hereinbefore, we feel that the reve....