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  • Vikramajit Sen
  • Rajiv Shakdher, JJ.
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  • Vikramajit Sen
  • Rajiv Shakdher, JJ.
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Smart Summary

Factual and Procedural Background

The appeal arises from three deletions made by the Income-tax Appellate Tribunal (ITAT) which were challenged by the Revenue. The issues concern additions made by the Assessing Officer (AO) and deleted by the ITAT: (1) an addition of Rs. 1,79,435 alleged to be unexplained deposits relating to the sale of a plot of land for Rs. 1,80,000 (cheque) with Rs. 1,79,435 credited to the assessee after bank commission; the assessee declared the transaction in Form No. 2B and the ITAT accepted the transaction as through banking channels; (2) an addition of Rs. 4,56,450 based on a difference between the AO's valuation and the assessee's valuation of certain properties discovered in a search; the ITAT accepted the assessee's valuation after considering documentary evidence and the absence of material showing higher consideration; and (3) an addition of Rs. 2,00,000 alleged as unexplained deposits in the assessee's bank account, which the assessee had shown in the return for assessment year 1996–97 (prior to notice under section 158BC); the ITAT deleted this addition after noting banking-channel transactions, the assessee's return showing a gain of Rs. 5,000, and that purchaser particulars were furnished but the AO made no inquiries. The court considered these three questions and concluded no substantial question of law arises, dismissing the appeal.

Legal Issues Presented

  1. Whether the ITAT was justified in deleting the addition of Rs. 1,79,435 alleged to be unexplained deposits arising from the sale of a plot (transaction effected by cheque and declared in Form No. 2B).
  2. Whether the ITAT was justified in deleting the addition of Rs. 4,56,450 by accepting the assessee's valuation of properties found in the course of a search rather than the AO's valuation.
  3. Whether the ITAT was justified in deleting the addition of Rs. 2,00,000 alleged as unexplained deposits, where the amount was shown in the return for assessment year 1996–97 and transactions were through banking channels.

Arguments of the Parties

Appellant (Revenue) — Arguments

  • In the first instance, the Revenue argued that documents of conveyance were not found in order, implying the addition of Rs. 1,79,435 was justified.
  • In the second instance, the Revenue relied on the Assessing Officer's valuation which differed from the assessee's valuation and led to an addition of Rs. 4,56,450.
  • In the third instance, the Revenue contended it was inconceivable that a property purchased in December 1991 for Rs. 1,95,000 would be sold in the same year for Rs. 2,00,000, challenging the genuineness of the declared transaction and supporting the addition of Rs. 2,00,000.

Respondent (Assessee) — Arguments

  • For the first issue, the assessee stated the sale of the plot was effected by cheque for Rs. 1,80,000, the net amount Rs. 1,79,435 was credited to her account after bank commission, and the transaction was declared in Form No. 2B as a capital receipt.
  • For the second issue, the assessee maintained the valuations shown by her, supported by documentary evidence; the ITAT accepted those valuations after finding no material to show higher consideration changed hands.
  • For the third issue, the assessee's position was that the relevant amount was shown in the return for AY 1996–97 (before issuance of notice under section 158BC), the transactions were through banking channels, the gain of Rs. 5,000 was declared in the return, purchaser particulars were furnished, and no inquiries were made by the AO.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
K. Ravindranathan Nair v. Commissioner Of Income Tax, Ernakulam, [2001] 247 ITR 178 : (2001) 1 SCC 135 The court should not interfere with findings of fact by the ITAT unless those findings are perverse in nature. The court invoked this principle to decline interference with ITAT's factual conclusions, finding no perversity in the ITAT's findings.
K.P. Varghese v. ITO, [1981] 131 ITR 597 (SC) Places the burden on the Revenue to establish that the assessee received consideration over and above what was declared. The ITAT applied this dictum in evaluating the valuation issue and the court approved that approach.
Commissioner Of Income Tax, Bombay v. M/S Godavari Corpn. Ltd., [1993] 200 ITR 567 Recognized as following and applying the Varghese principle. The court noted that the Supreme Court in this case followed Varghese, supporting the allocation of burden on the Revenue.
Commissioner Of Income-Tax v. Ashok Khetrapal, [2007] 294 ITR 143 Permitted reference to a Valuation Officer's report in the absence of incriminating documents found in search. The court noted the Division Bench's approach of referring to a Valuation Officer report when no incriminating documents were found, consistent with the ITAT's inquiry into valuation evidence.
Commissioner Of Income-Tax v. Manoj Jain, [2006] 287 ITR 285 (Delhi) Held to be to the same effect as the authorities placing burden on the Revenue / requiring evidence to show undisclosed consideration. The court cited this decision as support for the ITAT's approach in requiring the Revenue to discharge the burden of proof.
CIT v. Shivakami Co. P. Ltd., [1986] 159 ITR 71 (SC) Reiterated that the onus rests on the Revenue to prove that the assessee received consideration over and above that stated in transfer documents; without discharge of that burden, inferences against the assessee are impermissible. The court relied on this reiteration to support the conclusion that the Revenue had not discharged its burden and that inferences adverse to the assessee were not permissible.

Court's Reasoning and Analysis

The court treated each of the three questions as essentially questions of fact which had been considered and decided by the ITAT. The court applied the established principle that appellate courts should not interfere with findings of fact by the ITAT unless those findings are shown to be perverse. On the first issue, the ITAT relied on the transaction being effected through banking channels and the assessee's declaration in Form No. 2B; the court found no perversity in the ITAT's rejection of the addition despite the Revenue's note about conveyance documents not being in order.

On the second issue, concerning valuation differences, the ITAT examined valuations for each property, accepted the assessee's valuations, and noted the Department's failure to collect material showing any additional consideration beyond the declared sale consideration. The ITAT applied the dictum in K.P. Varghese placing the burden on the Revenue to prove undisclosed consideration. The court found no error in this factual determination and approved the ITAT's approach.

On the third issue, the court noted that the Rs. 2,00,000 was shown in the return for AY 1996–97 (prior to the notice under section 158BC). The ITAT accepted the assessee's account — transactions through banking channels, the declared gain of Rs. 5,000, and the furnishing of purchaser particulars — and observed that the AO made no inquiries. As with the other issues, the court treated this as a factual controversy and found no error in the ITAT's deletion of the addition.

Throughout, the court relied on precedent emphasizing the Revenue's burden to prove undisclosed receipts (Varghese and subsequent authorities) and the limited scope for appellate interference in factual findings (K. Ravindranathan Nair).

Holding and Implications

DISMISSED.

Holding: The court dismissed the Revenue's appeal and upheld the ITAT's deletions of the three additions (Rs. 1,79,435; Rs. 4,56,450; and Rs. 2,00,000), concluding that no substantial question of law arises.

Implications: The direct effect is that the ITAT's orders deleting those additions stand and the Revenue's challenges fail. The opinion applies and reiterates existing principles (notably the burden on the Revenue to prove undisclosed consideration and the limited grounds for interfering with factual findings) but does not announce or establish any new legal precedent.

Show full summary ...

    Commissioner Of Income-Tax v. Shakuntala Devi

    1. Three questions have been canvassed before us by learned counsel for the Revenue. The first is with regard to the deletion by the Income-tax Appellate Tribunal of an addition of Rs. 1,79,435, allegedly being unexplained deposits in the accounts of the assessee/respondent. According to the assessee, she had purchased two plots of land, one of which was sold in the year 1989 and the second in January, 1991. It is the second plot with which we are concerned; the sale consideration of Rs. 1,80,000 was received by cheque and after deduction of bank commission the aforementioned sum of Rs. 1,79,435 was credited to the assessee's account. The Income-tax Appellate Tribunal has noted that declaration for the purpose of capital account, in Form No. 2B, has been made by the assessee on this transaction. The Income-tax Appellate Tribunal was satisfied since the transaction was through banking channels. There was no justification for the said addition. Learned counsel for the Revenue has laboured upon the fact that the documents of conveyance were not found in order.

    2. This court ought not to interfere in the findings of fact arrived at by the Income-tax Appellate Tribunal unless these are perverse in nature. (See K. Ravindranathan Nair v. Commissioner Of Income Tax, Ernakulam., [2001] 247 ITR 178 : (2001) 1 SCC 135. We find no perversity in the conclusion.

    3. The second question pertains to the valuation of certain properties, of which the relevant documents were found in the course of a search. The Assessing Officer made an addition of Rs. 4,56,450 by treating the difference between the valuation of the assessee and that carried out at his behest. The Income-tax Appellate Tribunal has discussed the valuation in respect of each of the properties and has accepted the assessee's valuation.

    4. It has noted that the Department has failed to collect any information or material to show that any consideration above and beyond the stated sale consideration had changed hands. It applied the dictum in K.P Varghese v. ITO, [1981] 131 ITR 597 (SC) which lays the burden to establish the factum of the assessee having received more than what is declared or disclosed by him as a consideration on the Revenue. The Income-tax Appellate Tribunal has opined that the investments shown by the assessee stand fully corroborated by the documentary evidence. We find no error in the approach of the Income-tax Appellate Tribunal. This is also essentially a determination of facts which we must abjure from entering upon.

    5. Thirdly, learned counsel for the Revenue has assailed the deletion by the Income-tax Appellate Tribunal of an addition of Rs. 2,00,000 also, being alleged as unexplained deposits in the bank account of the assessee. It is uncontrovertible that this amount had been shown in the return for the assessment year 1996–97, that is, prior to the issuance of notice under section 158BC. The version of the assessee is that the plot was purchased on December 16, 1991, for Rs. 1,95,000. According to learned counsel for the Revenue, it is inconceivable that this property would have been sold on the very same year for a consideration of Rs. 2,00,000. All these monies have been transacted through banking channels. The gain of Rs. 5,000 has been shown in the return for the assessment year 1996–97. Moreover, the Income-tax Appellate Tribunal took note of the fact that the address and particulars of the purchaser had been furnished by the assessee but the Assessing Officer made no inquiries. As in the other two cases the controversy centres around the questions of fact. We find no error in the order of the Income-tax Appellate Tribunal on the third ground also.

    6. It may be relevant to note that a Division Bench of this court, comprising Dr. Arijit Pasayat and D.K Jain, JJ., as their Lordships then were, reiterated that there must be a finding of the Revenue that the assessee had received amounts over and above the consideration stated in the sale deeds, following Varghese, [1981] 131 ITR 597 (SC). Varghese, [1981] 131 ITR 597 (SC) had also been followed and applied by the Supreme Court in Commissioner Of Income Tax, Bombay v. M/S Godavari Corpn. Ltd.., [1993] 200 ITR 567, The Division Bench of this court in Commissioner Of Income-Tax v. Ashok Khetrapal, [2007] 294 ITR 143 referred to the report of a Valuation Officer in the absence of any incriminating documents found in the course of a search. The decision in Commissioner Of Income-Tax v. Manoj Jain, [2006] 287 ITR 285 (Delhi) is also to the same effect. In CIT v. Shivakami Co. P. Ltd., [1986] 159 ITR 71 (SC) their Lordships have once again reiterated that the onus whether the assessee had received more consideration than what was stated in the documents of transfer rested on the Revenue and in the absence of that burden being discharged it would be legally impermissible to make any inferences against the assessee.

    7. No substantial question of law arises for our consideration. Dismissed.

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    Comments

    Commissioner Of Income-Tax v. Shakuntala Devi
    (Mar 2, 2009)