Commissioner of Income Tax vs P.V. Kalyanasundaram

P.P.S. Janarthana Raja J.

The present appeal is filed u/s 260A of the Income Tax Act, 1961 by the Revenue against the order passed in IT (SS). A. No. 118/Mds/2001, by the Income Tax Appellate Tribunal, Madras, "D" Bench, raising the following substantial questions of law :

(A) Whether or not when the returns and the statements of the seller admit higher sale consideration actually received, the Revenue is justified in fixing the sale consideration at the higher amount than what has been declared ?

(B) When the assessee did not give any explanation to the notings found and at the same time the Revenue is able to corroborate the same with the statement of the seller for the purpose of determination of actual sale value, would the lower authority be justified in interfering with the same ?

(C) When consistent sworn statements were taken into consideration along with evidences found at the time of search, would they all be liable to be rejected on the basis of one statement in between contradicting the earlier ones which was also explained away as a result of intimidation ?

The facts leading to the above questions of law are as under :

The assessment was made u/s 158BC of the Income Tax Act. The relevant block period was April 1, 1988 to December 8, 1998. The assessee had purchased land at Brindavan Road, Fairlands, Salem, on October 26, 1998. The land was registered for Rs. 4.10 lakhs. During the course of the search in the office premises of Polimer Net Work, certain notings were found in the seized material RK/S/B&D/25. In the statement recorded on December 8, 1998, the assessee stated that he did not remember for what purpose he had made notings, which was confirmed by the assessee in a subsequent statement recorded on December 11, 1998. The land was purchased from one Shri Rajarathinam. His statement was also recorded on the date of search, i.e., December 8, 1998 and also on December 11, 1998. In the sworn statement dated December 8, 1998, in question No. 3, Shri Rajarathinam admitted that he had received Rs. 4.10 lakhs as sale consideration but in question No. 4, he admitted that he had received Rs. 34.35 lakhs. Again in the statement recorded on December 11, 1998, Shri Rajarathinam, the seller admitted that a total consideration of Rs. 34.85 lakhs was received from the assessee out of which Rs. 4.10 lakhs was received in demand draft and the balance in cash. In the affidavit given on January 8, 1999, by Shri Rajarathinam, it was mentioned that the sale consideration received by him from Sri P.V. Kalyanasundaram, i.e., the assessee, was only Rs. 4.10 lakhs and the earlier statements given before the Income Tax authorities were not true. On August 10, 2000, the seller, Sri Rajarathinam, submitted a letter before the Assessing Officer withdrawing the affidavit given on January 8, 1999. In the subsequent sworn statement recorded before the Assessing Officer on November 20, 2000, Sri Rajarathinam had mentioned that the sale consideration which was received by him from the purchase consideration was actually Rs. 34.85 lakhs, as against Rs. 4.10 lakhs stated in the registered deed for purchase of land. In the cash flow statement for the assessment year 1999-2000, i.e., block period April 1, 1988 to December 8, 1998, the Assessing Officer adopted the sum in the cash flow relating to purchase of land at Rs. 35.45 lakhs as against Rs. 4,69,995 disclosed by the assessee in his cash flow statement. This had resulted in an addition of Rs. 30,75,005 as undisclosed income for the block period April 1, 1988 to December 8, 1998.

Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), noted that due to the conflicting nature of the statements given by the seller, his statement could not be relied upon and hence he deleted the addition made by the Assessing Officer. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue filed an appeal before the Income Tax Appellate Tribunal. The Tribunal dismissed the Revenue''s appeal and confirmed the order of the Commissioner of Income Tax (Appeals). Learned counsel for the Revenue submitted that the value declared by the assessee for the purchase of the plot was Rs. 100 per sq.ft. even when the guideline value was Rs. 400 per sq.ft. and hence the order of the Tribunal was perverse, wrong and without basis.

We heard counsel. The seller had initially given conflicting statement about the sale consideration he received. When confronted by the Revenue on December 11,1998, the seller admitted that he had deposited Rs. 4.10 lakhs received through draft in the bank and the rest amount was held by him in cash. The Revenue authorities could well have seized the cash invoking Section 132 of the Act, but for obvious reasons this was not done. Had the cash been seized from the seller, the matter would have been concluded in favour of the Revenue. In a subsequent submission, the seller claimed on November 20, 2000 that he had paid Rs. 15 lakhs out of the sale proceeds to settle old family debts, Rs, 4.80 lakhs for construction of house in Pullkasi Village and the balance was advanced to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house for family expenses and educational expenses of his daughter, respectively. It was also noted that the revised return was filed by the seller wherein he had shown approximately Rs. 2.5 lakhs being available with him in cash. Even after giving the retraction and admitting that he had sold the property for a sale consideration of Rs. 4.10 lakhs, the seller filed his Income Tax return on January 28, 2000, wherein he did not admit the cash on money consideration for the sale transaction. Subsequently he revised the Income Tax return wherein he admitted the sale consideration and showing Rs. 4.80 lakhs out of the above as utilised for construction of residential house property and consequently claiming exemption u/s 54, the seller filed the computation of income paying Rs. 1,83,576 as tax, which was quite evident from the conflicting statements given by the seller and the conflicting Income Tax returns filed by him that his action of admitting sale consideration and paying tax was nothing but an obvious effort to save from further harassment from the Revenue and escape from the exigibility of tax on undisclosed income of the cash consideration u/s 158BD of the Act, which in magnitude would far exceed the tax paid by him. The burden of proving actual consideration in such transaction was that of the Revenue. The Tribunal had given factual finding and held as follows :

We find that it is the uniform view of the courts and also held by the apex court as reported in K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, the burden of proving actual consideration in such transaction is that of the Revenue. Considering the entire gamut of the case, we find that the Revenue has failed to discharge its duties and as held by the learned Commissioner of Income Tax (Appeals) instead made up a case on surmises and conjectures which cannot be allowed. Under the circumstances, we do not find any infirmity in the order of the learned Commissioner of Income Tax (Appeals) and we uphold the appellate order in this regard.

We also found that the Assessing Officer did not conduct any independent enquiry relating to the value of the property purchased. He merely relied on the statement given by the seller. If he would have taken independent enquiry by referring the matter with the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one.

In view of the foregoing conclusions, we find no error in the order of the Income Tax Appellate Tribunal and requires no interference. Hence no substantial questions of law arises for consideration of this court. Accordingly, the above tax case is dismissed. No costs.