TaxTMI 
TaxTMI 
2019 (5) TMI 1327
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....)/2014 for the assessment year 2009-10, claiming following substantial questions of law:- "i) Whether the Hon'ble ITAT has erred both in law and on facts in upholding the decision of CIT(A) where the learned CIT(A) has deleted the addition of Rs. 2,27,00,000/- made on account of unaccounted and undisclosed investment under Section 69B of the Act, ignoring the fact that as per seized documents (copy of agreement) seized from the residence of Shri Vinay Kumar, Accountant of M/s PISCO, the company from which the assessee has also purchased the land in the same area and in the same period reveals that the rate of sale price was actually Rs. 11.05 crores based on an agreement dated 10.5.2007 entered into between Shri Ravneet Takhar son of Shri Ravinder Singh, MD of M/s PISCO as a first party and Shri Mohinder Singh son of Sri Gopal Singh and Shri Joginder Singh son of Shri Labh Singh as second party? ii) Whether the Hon'ble ITAT has erred both in law and on facts in upholding the order of learned CIT(A) where the learned CIT(A) has restricted the addition of Rs. 14,00,000/- made on account of disallowance of interest under section 36(1)(iii) of the Act to Rs. 10,95,795....
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....he assessee filed appeal before the Commissioner of Income tax (Appeals) [CIT(A)]. Vide order dated 14.8.2014, Annexure A.II, the CIT(A) restricted the addition of Rs. 14 lacs relating to the interest disallowance to Rs. 10,95,795/-. The addition of Rs. 2,27,00,000/- made by the Assessing Officer under section 69B of the Act on account of undisclosed investment in the purchase of the land was deleted by the CIT(A) on the ground that action on the basis of such an agreement even though being a photo copy, could be made in the hands of the parties to the agreement, as the evidence in the case of the income tax proceedings did not have to be in the nature of evidence under Section 65 of the Evidence Act, 1872. Aggrieved thereby, the revenue filed appeal before the Tribunal. Vide order dated 1.8.2016, Annexure A.III, the Tribunal upheld the order passed by the CIT(A) and dismissed the appeal. Hence the instant appeals by the appellant-revenue. 4. We have heard learned counsel for the parties. 5. We proceed to examine question No.(i) claimed in these appeals. Before adjudicating the controversy involved in these appeals on this issue, it would be apposite to reproduce the relevant....
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....ent were found showing the rate of the land at Rs. 11,05,00,000/- per acre. Since the land purchased by the assessee was part of the same land, the Assessing officer concluded that the assessee had understated the investment in the purchase of the land. Addition of Rs. 2,27,00,000/- was made under Section 69B of the Act on account of undisclosed investment in the purchase of the land. Further, addition of Rs. 14 lacs was made by the Assessing Officer on account of disallowance of interest expenditure under Section 36(1)(iii) of the Act as the assessee had made interest free advances to his relatives. On appeal by the assessee, the CIT(A) restricted the addition of Rs. 14 lacs to Rs. 10,95,795/-. The addition of Rs. 2,27,00,000/- under Section 69B of the Act was deleted by the CIT(A). It has been categorically recorded by the CIT(A) that the issue of alleged understatement of sale consideration in the registration deed has to be proved by the revenue and the same can be done by leading positive evidence either in the form of some documents found during the course of search or otherwise which could prove that consideration over and above the registration deed had passed on from buyer....
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.... of section 132 of the IT Act 1961 but no such evidence could be found to be existing. This means that the presumption of the Assessing Officer eventually remains a presumption and therefore cannot be substituted in place of evidence i.e. essential requirement to unsettle the sale consideration as recorded in the registered documents. It is also important to appreciate that the said registration between the appellant and seller has been at a price which is at least as per circle rate approved by the revenue authorities and hence cannot be said to be below fair market price. The Hon'ble Apex Court in the case of KP Varghese vs. ITO 131 ITR 597 (SC) had given judgment in the context of applicability of section 52(2) of Income Tax Act, 1961 which dealt with the possible under statement of sale consideration. The said section has been omitted by Finance Act 1987 w.e.f 1.4.1988 and the only presumption as of now is in terms of applicability of section 50C in the case of computation of capital gain in the case of the seller. The understatement that could be presumed in such eventuality in the hands of the buyer cannot lead to an addition under section 69 which clearly shows that it is th....
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....s. 11.05 crore per acre, as mentioned in the agreement seized. xv) Action on the basis of the agreement seized was warranted in the cases of the parties thereto, due to the presumption under section 132(4A) of the Act, which presumption noticeably is rebuttable. xvi) No such action can be taken in the case of a party whose transaction was with regard to land contiguous or similarly situated to the land mentioned in the agreement seized. xvii) No action is called for in a case of transaction consequential to the transaction mentioned in the agreement seized. xviii) There is no evidence of unaccounted investment by the assessee. xix) The Assessing Officer himself clarified to the assessee that the sale consideration in the agreement seized was taken for the purpose of comparative rate only. xx) The land purchased by the assessee was different from that mentioned in the agreement seized. xxi) It is the burden of the department to prove understatement of sale consideration. xxii) This burden has not been discharged. xxiii) There is no positive evidence against the assessee. xxiv) Thus, the AO's pr....
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....y the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, assesee succeeds. Civil Appeal is allowed. No order as to costs." 6. Further the Supreme Court in its order dated 16th February, 2010 in Civil Appeal No. 9468/2003 has held as under:- "Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). Opinion of the DVO per se is not an information for the purposes of reopening assessment under Section 147 of the Income Tax Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the Civil Appeal. The Department was not entitled to reopen the assessment. Civil appeal is, accordingly, dismissed. No order as to costs." Similar was the position in K.P.Varghese....
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....urpose of business especially in the face of interest free loans to friends/sister concerns. No explanation was given by the assessee. The Assessing Officer thus proceeded to disallow 12% on the entire amount of advances leading to disallowance of Rs. 14 lacs. The CIT(A) recorded that the entire set of circumstances showed that the assessee had avoided to give data from the books of account to show the business use of interest bearing funds. Thus, the view of the Assessing Officer that the interest bearing funds had been diverted to advance interest free loans, could not be said to be arbitrary. Consequently, the CIT(A) restricted the disallowance to Rs. 10,95,795/-. The Tribunal rightly upheld the findings recorded by the CIT(A) on this point. The relevant findings recorded by the Tribunal in this regard read thus:- "11. As regards Ground No.2, the Department has contended that the learned CIT(A) has erred in deleting the addition of Rs. 14,00,000/- on account of disallowance of interest under section 36(1)(iii) of the IT Act. 12. The learned DR relied on the order of the Assessing Officer. 13. The learned counsel for the assessee, on the other hand, str....