TaxTMI 
TaxTMI 
2010 (10) TMI 529
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....nificantly lower than the minimum circle rate for the property fixed by the State Govt. and the Asstt. Valuation Officer (Patiala) had in his report dated 24.11.08 confirmed that the fair value of the property was Rs. 22,22,500/-. 4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing." 2. The assessee company is incorporated on 3.6.05 and is engaged in the business of manufacturing and trading of cosmetics, ayurvedic and health care products. It had purchased two bighas (2,000 sq. yd) of land in Himachal Pradesh at Mouza Ogli, Tasil Nahan, Distt. Sirmour. From property registration document it was observed by the AO that the land was valued at Rs. 22.22 lakhs as per circle rate fixed by the State Govt. for the area in which the land was purchased. As purchase consideration of Rs. 7 lakh was much less than the value fixed by the Government, the AO referred the valuation of land to the valuation officer vide letter dated 9th September, 2008 who furnished the report vide letter dated 24.11.08, wherein the property valued at Rs 22,22,500/-. The assessee was served with a show cause notice to explain as to why the difference ....
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....at the property was agreed to be purchased vide agreement dated 8.6.05 is ignored by the AO and, therefore, valuation report could not be relied upon in view of the agreement entered into by the assessee on 8.6.05. It was submitted that according to well established principle of law the rate/consideration for the property is settled on the date of agreement to sell or purchase and in the case of assessee the difference is more than six months and thus, there is inherent defect in the valuation report for which the assessment should be held to be null and void. Reference was made to the decision in the case of CIT Vs. Meerut Cement Company Ltd. 202 CTR 506 to contend that where report of DVO suffers from material defects the addition could not be made u/s 69B of the Act. Reference was made to the provisions of sec. 69B and it was submitted that for applicability of the same, there should exist three findings; 1) assessee should have made investment; 2) the AO should find that the amount expanded by the assessee exceeds amount recorded in the books and 3) the assessee does not offer explanation or satisfactory explanation. It was submitted that this proposition of law is ....
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....title deed). It is the submission of the assessee that 50C has no application as the same could not be applied in the hands of the purchaser and assessee being purchaser, sec. 50C has no application. It is submitted that AO vide his order dated 9th September, 2008 has requested the DVO to determine the value of land as on 28.12.05 and DVO vide his report dated has stated the price as circle rate as on 28.12.05. It is submitted that AO has completely ignored the fact that the agreement to purchase the said property was executed on 8.6.05 the copy of which was duly submitted during the course of assessment proceedings. This objection was also filed with the AO vide letter dated 23.12.08 and AO has wrongly ignored the same. It is submitted that assessee being non-himachali cannot buy the land in Himachal Pradesh and the land can be purchased only for industrial purposes that too with specific permission from various department and the file has to go to the Chief Minister also. All such clearances were obtained. According to well-established principle the rate/consideration for a property is settled on the date of agreement and there was a difference of six months in the purchase....
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.... Bhuchar 119 Taxman 142 where the order of the Tribunal has been confirmed in absence of any legally acceptable evidence and it was held that valuation done for the purpose of sec. 50C would not represent actual consideration passed on to a seller hence no addition could be made in the hands of the purchaser. Thus, it has been submitted that the DVO's report on the basis of which AO has made the addition is defective and no addition whatsoever could be made to the income of assessee on account of that DVO's report. 12. On the other hand, it was submitted by ld. DR that AO is well within his power to invoke sec. 69B and for ascertaining the amount assessable u/s 69B the AO has rightly exercised the power given by the statute u/s 142A to refer the determination of fair market value to ascertain the addition to be made u/s 69B and this power was validly exercised by the AO. He submitted that there is a huge difference in the circle rate and the amount shown to be paid by the assessee and the huge difference itself is indicative of the fact that assessee did not disclose proper value of investment made by it in the books of account. Therefore, the AO was right in invoking provisions....
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....half in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such exces amount or the explanation offered by him is not, in the opinion of the AO, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year." 15. Here according to the facts of the present case, as already observed, there is a huge difference in the amount shown to have expanded by the assessee on the purchase of land and the amount representing the average rate of similar property in the area and the difference is almost three fold. Thus, there were circumstances according to which it can be said that provisions of sec. 69B could be invoked. 16. Sec. 142A has been inserted in the statute by the Finance (No. 2) Act, 2004 with retrospective effect from 15.11.1972 and it read 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 sec. 69 or sec. 69B or the value of any bullion, jewellery or other valuable article referred to in sec. 69A or sec. 69B [or fair market value of any property referred to i....
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....e stage or the other. Sub-section (1) of the new section provides that where an estimate of the value of any investment referred to in sec. 69 or sec. 69B or the value of any bullion, jewellery or other valuable article referred to in sec. 69A or sec. 69B is required to be made for the purposes of making any assessment or reassessment, the AO may require the Valuation Officer to make an estimate of the same and report to the AO. Sub-section (2) of the new section provides that the Valuation Officer to whom such a reference is made under sub-section (1) shall, for the purpose of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957. Sub-section (3) of the new section provides that on receipt of the report from the Valuation Officer, the AO may after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment. It has been provided in the proviso to the new section that the provisions of the same shall not apply in respect of an assessment made on or before the 30th day of September, 2004 and where such assessment has become final and conclusive on or before tha....