Commissioner of Income-tax Central Circle v. D. Kanta

1. This appeal is filed by the Revenue being aggrieved by the order passed by the Income Tax Appellate Tribunal, Bangalore, in ITA No. 115(Bang.)/2002 for the assessment year 1997-98 dated 06.01.2006 wherein the appeal filed by the Revenue has been dismissed.

2. The material facts leading up to this appeal are as follows:

The assessee is the Proprietor of M/s. Kiran Granite & Exports. The return filed by the assessee was processed under Section 143(1)(a) of the Income-tax Act, 1961 (herein after called as the 'Act'). The Assessee and his wife purchased 4 acres and 10 guntas of land as per the registered sale deed dated 15.12.1996 for consideration of Rs. 8,50,000/-. A search was conducted on 04.08.1998 in the case of Sri V. Sadananda S/o. Sri Venkatagiriyappa, from whom the assessee and his wife purchased land in question. At the time of search Sri Venkatagiriyappa was dead. His son Sri. V. Sadananda, in his statement made before the search party said to have admitted that they have received a consideration of Rs.75 lakhs. On the basis of the aforesaid information, the assessment of the assessee was re-opened and the assessee tried to explain stating that he purchased the land at the price whatever mentioned in the sale deed i.e. Rs. 8,50,000/-. The statement given by Sri V. Sadananda, son of Sri Venkatagiriyappa cannot be relied upon for making addition, and it has no legal effect. However, with a view to buy peace, the assessee had declared additional income of Rs. 14 lakhs before the Deputy Director, Income-Tax(Inv.). The Assessing Officer in his order held that for the purpose of stamp duty and fees the assessee had paid additional stamp duty of Rs. 7,57,580/- and after ascertaining the market price of the land was Rs. 25 lakhs per acre from the revenue authorities in the year 1996, the actual consideration of the land was taken at Rs. 75.00 lakhs. By reducing the price declared by the assessee and thereafter the assessment order was passed deleting the addition and that the property was sold at Rs.75.00 lakhs, as per the statement given by Sri. V. Sadananda son of vendor of assessee under registered sale deed referred to above. The assessee has preferred I.T.A.NO. 19/R-8/CIT (A) IV 02-03 before the Commissioner of Income Tax (Appeals) III, Bangalore dated 16.05.2002 and the Commissioner of Income Tax held that Assessing Officer has not confronted the appellant statement on which he has relied and not given any opportunity for cross-examination of persons who have made the statements and in view of the decision of Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713 /4 Taxman 29, the Assessing officer was not justified in making the aforementioned addition. Accordingly the appeal was allowed.

3. Being aggrieved by the same, the revenue preferred an appeal in ITA No.1115(Bang.)/2002, Bangalore and cross objections in C.O. No. 109(Bang.)/2005 was filed by the assessee in the said appeal. The Tribunal, by order, dated 06.01.2006 dismissed the appeal and the cross objection.

4. Being aggrieved by the said order, this appeal is filed by the revenue which was admitted on 23.10.2007 for considering the following substantial questions of law framed in the appeal, which reads as follows :

(1) Whether the addition of Rs. 52,50,000/- as on money treated as having been paid by the assessee to Venkatagiriyappa for purchase of land at Pattangere Village by the Assessing Officer based on the statements of the children's of Venkatagiriyappa that the transaction took place for Rs. 75 lakhs, the sum of Rs. 7,57,580/- paid towards undervaluation and independent market value adduced by the revenue official quoting Rs. 25 lakhs per acre would not be sufficient to bring the on money to tax as held by the Appellate Authorities.

(2) Whether on the facts and circumstances of the case and the law the Income Tax Appellate Tribunal was right in deleting the addition of Rs. 52,50,000/- on the ground that no independent evidence was brought on record by the Assessing Officer in support of in the face of the fact that the addition is based on the statement of Sri. V. Sadananda, S/o Venkatagiriyappa and others and the assessee 'himself disclosed additional income of Rs. 14 lakhs for assessment years 1996-97 and 1997 98 in respect of on money paid for purchase of lands.

(3) Whether on the facts and circumstances of the case and in law the Income Tax Appellate Tribunal was right in deleting the addition of Rs. 52,50,000/- on the ground that the statement of third person could not have been used to make addition without cross examination of the witnesses when the records show that the assessee was confronted with the relevant statements and no opportunity for cross-examination was sought by the assessee.

5. Heard the learned counsel appearing for the appellant, and learned counsel appearing for the respondent on the aforesaid substantial questions of law.

6. Learned counsel for the respondent submits Sri V. Sadananda, son of Venkatagiriyappa, vendor of the assessee has given a statement that they have received consideration of Rs. 75.00 lakhs whereas the sale deed has been registered at Rs. 8,50,000/- and the Assessing Officer collected the material regarding market value notified from the revenue and an order of assessment has been passed. The Appellate Authority and the Tribunal was not justified in setting aside the order of assessment and ought to have confirmed the order of Assessment. Further, submitted that the assessee himself has disclosed the additional income of Rs. 14.00 lakhs which would clearly show the real sale consideration has not been shown in the sale deed. He further submitted that, if there is there is no proof, the matter would be remanded to the Assessing Officer for passing fresh orders.

7. Learned counsel for the respondent submitted that the order of assessment passed by Assessing Officer is not based on material found during search. The vendor of the assessee is dead and statement of his son would not be of any consequence, especially, no opportunity of cross-examination of Sri V. Sadananda was given to the assessee. Therefore when the order of assessment is based only upon the statement given by Sri V. Sadananda, the said statement cannot be the basis of passing the assessment order and therefore, entire proceeding is without jurisdiction and the substantial questions of law framed is answered against the revenue and the order passed by Appellate Authority is justified.

8. We have given careful consideration to the contention of the learned counsel appearing for the parties and the materials on record.

9. The materials on record clearly show the fact that registered sale deed has been executed by-Sri Venkatagiriyappa in favour of the assessee and is bought for a consideration of Rs. 8,50,000/- is not in dispute. It is also not in dispute that on the basis of search, assessment has been re-opened and the order of the assessment in this case is passed only upon the statement of Sri V. Sadananda, son of vendor, who sold the property to the assessee. As stated, the vendor has already died, by that time the search was conducted and the statement of his son Sri V. Sadananda is recorded. The said witness was not cross-examined, which is not in dispute. Further materials on record would also show that additional income of Rs. 14.00 lakhs was offered and the same has been accepted for the assessment year 1997-98 and the finding that actual sale consideration of Rs. 75.00 lakhs and not Rs. 8,50,000/-, is not at all based upon the material found during search and is based / upon the statement of Sri V. Sadananda, which could not have been relied upon by the Assessing Officer. Therefore, the order passed by the Appellate Authority is justified and accordingly answered and the question of valuation of the property, the question of fact and findings of the Appellate Authority is based upon the materials on records, cannot be said arbitrary or perverse.

9. Accordingly, we answer the substantial questions of law against the Revenue in favour of assessee and pass the following order :

The appeal is dismissed.