Commissioner of Income Tax vs K.K. Enterprises

Kishan Swaroop Chaudhari, J.—Appellant has filed this appeal against the order of learned ITAT dated 01.06.2005, by which the appeal of respondent was allowed and appeal of appellant was dismissed.

Brief facts of the case are that assesseerespondent submitted Return of Income for the Assessment Year 1997-98, and on scrutiny, Assessing Authority found that assessee sold land as per sale-deeds at a low price aggregated at Rs. 18.66 per sq.ft whereas rate was atleast Rs. 40 per sq.ft. and thus he added Rs. 17,14,418 in assessee''s income on this count. Further, he disallowed depreciation of Rs. 5,86,344 on three tankers on the ground that these tankers were not given on lease and they were not put in use for that assessment year. On appeal, CIT (A) vide his order dated 15.09.2000 partly accepted appeal of the assessee, and assumed that land was sold at the rate of Rs. 22 per sq.ft. instead of Rs. 20 and thus deleted Rs. 14,99,345 as income from sale proceeds of land and further allowed full depreciation on tankers as claimed by the assessee. Assessee as well as revenue filed appeals against the order of CIT(A), and ITAT by its impugned order allowed appeals of assessee respondent and deleted addition of income on account of sale of land and dismissed the appeal of revenue-appellant.

Appeal was admitted and following questions were framed:

Whether the finding reached by the Tribunal that apparent consideration shown by the assessee in transacting plots of land was not substantially less than market value, as noted in relevant material on record and based on conjectures and surmises vitiating conclusion?

Whether in the facts and circumstances of the case, there was any material before the Tribunal to reach the conclusion that the 3 Tankers purchased by the Assessee on 30th March 97 added before closing year were at all put to use before the closing of the Financial Year 1996-97?

Heard learned Counsel for the parties and perused record.

Learned Counsel for the appellant submitted that learned Tribunal as well as CIT (A) committed error in deleting additions made on account of sale of land as apparently assessee had sold his land at a higher price than shown in sale-deeds and further submitted that without any reliable evidence on record regarding lease and use of tankers, CIT(A) as well as learned Tribunal committed error in allowing depreciation on 3 tankers, whereas learned Counsel for the respondent submitted that learned ITAT has come to correct conclusion after elaborate discussion and has rightly allowed appeals of the assessee, hence appeal is liable to be dismissed.

So far as question No. 1 is concerned, Assessee sold his plots at an average rate of Rs. 18.66 per sq.ft. The Assessing Officer mainly relied on the statement of Shri S.L. Dak and the rates taken by the Sub Registrar, and adopted value of the plots at Rs. 40 per sq.ft. Learned ITAT has mentioned in its order that one of the purchasers of two plots, viz. Shri B.S. Bomb, was also examined by Assessing Officer, who had purchased two plots worth Rs. 36,000 each, and on same consideration sale-deeds were registered. Assessing Officer has not discussed the statement of Mr. Bomb. Apparently, there was no other reliable material on record before the Assessing Authority to assume sale of plots at Rs. 40 per sq.ft. Learned Counsel for the appellant relied on 226 ITR 344 (Smt. Amar Kumari Surana v. Commissioner of Income Tax), in which on account of sufficient material on record and in absence of explanation by the assessee, an inference was drawn that property was sold for more amount than shown in the sale deeds. This case does not help to the revenue as in the case in hand, apparently, there was no material before the Assessing Officer to come to a conclusion that property was sold at the rate of Rs. 40 per sq.ft. Learned Counsel for the respondent placed reliance on K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, in which it was held that assessee must be shown to have received more than what is declared or disclosed by him as consideration. Difference in market value and consideration declared in sale-deed is not sufficient for assumption of higher consideration. He also placed reliance on Commissioner of Income Tax, Madras Vs. Shivakami Co. Pvt. Ltd., in which it was held that unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains. It was further held that capital gains tax is intended to tax the gains of the assessee, not what an assessee might have gained, and what is not gained cannot be computed as gained. He also placed reliance on two judgments of this Court. In the case reported in (2008) 3 DTR (Raj) 115 (CIT v. Bhanwarlal Murwatiya), it was held that the question whether any higher consideration than the one mentioned in the sale deed did pass from the assessee to the seller is a pure question of fact and the department having failed to show that any relevant material has been ignored or misread by the CIT(A) or the Tribunal while deleting the addition made by AO, such questions, in any case, are required to be answered against the Revenue and in favour of the assessee. In other case reported in (2008) 3 DTR 142 (CIT v. Kishan Kumar and Ors.), it was held that while computing undisclosed income u/s 158BB, the rates of property fixed by Stamp Valuation Authority for the purposes of registration of sale deeds, cannot be taken to be the price for which the property was purchased.

Aforesaid citations make it clear that in absence of evidence on record, higher price for sale of land cannot be presumed from the consideration shown in registered sale deeds and rates of property fixed by Stamp Valuation Authority for registration purposes cannot be taken to be the price for which property might have been sold. Thus, there was no justification for the Assessing Officer to estimate selling price of land at Rs. 40 per sq.ft. instead of Rs. 20 per sq.ft. and for CIT(A) to presume selling price at Rs. 22 per sq.ft. and thus learned ITAT has not committed any error in allowing the appeal of the respondent assessee and hence question No. 1 is answered against Revenue. As far question No. 2 is concerned, assessee is engaged in transport business. During the year under consideration, assessee had given 12 tanker on lease to M/s. Shree Carriers and has shown income of Rs. 6,13,850 received as lease rent, this income for these tankers including other tankers has been assessed to tax. Assessee purchased 3 tankers on 21.03.1997. All these tankers were fabricated, erected with M/s. Shiv Shakti Engineers, as per bill dated 28.03.1997 and these vehicles were got registered on 29.03.1997. Insurance of these vehicles were effective from 31st March 1997. Assessee claimed depreciation on these tankers, which was disallowed by assessing authority on the ground that assessee did not file any evidence to show the use of these vehicles during the year. CIT(A), while accepting appeal of the assessee, on this count, observed that these vehicles were handed over to M/s. Shree Carriers on 30th March 1997 and diesel was purchased vide bill dated 30th March 1997. Bill was produced before the assessing authority. In such circumstances, there was no basis before the assessing authority to base his finding that the vehicles were neither given on lease nor put to use during the year. It was further observed by CIT(A) that whether Shree Carriers put tankers in use or not during the year, is not relevant for claiming depreciation by the assessee and this finding has been affirmed by the learned ITAT. Learned Counsel for the revenue could not convince that when tankers were duly registered, insured and given on lease and diesel was filled, how assessing authority was right in holding that tankers were neither given on lease nor put in use in the relevant assessment year. On the contrary, the assessee has received huge amount of lease rent, being Rs. 6,13,850, and the same has been assessed to tax. We find no infirmity in the order passed by ITAT and thus question No. 2 is also answered against revenue.

Accordingly, questions are decided against revenue and appeal is dismissed.