- (1.) THE assessee filed an application under Section 256(2) of the Income-tax Act, 1961 (hereinafter to be referred as "the Act"), and prayed that the Tribunal be directed to refer the following questions for our consideration : " 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in computing the undisclosed investment of the assessee on the basis of the fair market value of the property in question as determined under Section 55A of the Act ?
(2.) WHETHER, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in holding that the sum of Rs. 23,400 could be considered as unexplained investment of the assessee and that the same represented the income of the assessee from undisclosed sources during the relevant accounting year ?" 2. The application filed under Section 256(2) was allowed on July 30, 1980, and the Tribunal was directed to refer the aforesaid questions. In pursuance of that the Tribunal has prepared the statement of case under Section 256(2) of the Act and referred the aforesaid questions for our opinion. The assessee is assessed to income-tax in the status of an individual. She derives income from interest on her investments. In the previous year relevant to the assessment year 1972-73, the assessee purchased a plot of land measuring 1,799.99 sq. yards on June 25, 1971, for a sum of Rs. 45,000 from Vinaychand Pravinchand, Jaipur. The sale deed was registered on July 17, 1971. The Income-tax Officer in the course of assessment proceedings in the case of Vinaychand Pravinchand obtained the valuer's report in respect of the said plot and other plots. The Income-tax Officer on the basis of that report gave a notice to the assessee to show cause as to why the value of the property may not be taken as Rs. 81,000 as against Rs. 45,000 shown by the assessee. The Income-tax Officer also informed the assessee that the value of the property was understated by a sum of Rs. 36,000 in the purchase deed and the same represents her investment in the said property outside the account books in addition to Rs. 45,000 shown in the books. The Income-tax Officer issued show cause notice as to why the sum of Rs. 36,000 should not be taken as the concealed income from some undisclosed sources in the assessment year 1972-73. After receipt of the notice, the assessee replied that the land was purchased through a registered sale deed and the actual cost has been shown in the sale deed. The Income-tax Officer has considered the valuation report and also the material on record and the fact that the assessee has not shown any reason as to why the value shown in the valuation report should not be taken as actual investment of the assessee for the purchase of the aforesaid plot of land in C-scheme, Jaipur. No reason was shown by the assessee or any reason has been shown why the consideration for the plot should not be taken as Rs. 81,000 as the value of the plot has been taken by the valuer. Secondly, the Income-tax Officer has made addition of Rs. 36,000 under Section 69B of the Income-tax Act, 1961. Being aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner also found that the actual sale consideration has not been shown by the assessee in the sale deed and the account books, but he reduced the value of the land estimated by the Income-tax Officer and estimated the investment in the plot at Rs. 68,400. Thus the addition under Section 69B of the Income-tax Act, 1961, has been reduced from Rs. 36,000 to Rs. 23,400. In second appeal, the Tribunal, after considering the material on record, gave a finding of fact that the correct value of the plot of land and sale consideration has not been shown by the assessee in her account books and in any case the investment cannot be less than Rs. 68,400. Therefore, the Tribunal upheld the addition sustained by the Appellate Assistant Commissioner under Section 69B of the Income-tax Act, 1961. The aforesaid questions have been referred to in the statement of case under Section 256(2) of the Income-tax Act, 1961, by the Tribunal. Learned counsel for the assessee has not disputed the fact that the petitioner has shown Rs. 45,000 as the cost of the plot purchased by her in C-scheme and that has been shown in the sale deed also. As the valuation report and comparable cases referred to in the valuation report were considered, no explanation has been given by the assessee or her husband before the Income-tax Officer as to why the plot has been sold roughly at half the rate, prevalent in the area to the assessee by Vinaychand Praveen-chand, Jaipur.
(3.) MR. Ranka submits that no addition can be made under Section 69B of the Act, 1961, only on the basis of the fair market value of the asset, The burden is on the Department to prove that value of the asset has been shown at less than the fair market value and also to prove that the real consideration is exceeding the consideration shown in the account book by the assessee, Mr. Ranka has placed reliance on the decisions of their Lordships in the cases of New Excelsior Theatre Pvt. Ltd. v. M.B. Naik, ITO, 1990 185 ITR 158; Dinesh Kumar Mittal v. ITO, 1992 193 ITR 770; CIT v. Raja Narendra, 1994 210 ITR 250; CIT v. Smt. Prem Kumari Surana, 1994 206 ITR 715; CIT v. Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar, 1993 200 ITR 788; CIT v. Godavari Corporation Ltd., 1993 200 ITR 567 (SC); CIT v. H.H. Maharao Bhim Singhji, 1988 173 ITR 79 ; Abdul Qayume v. CIT, 1990 184 ITR 404 ; M.D. Jewellers v. CIT, 1994 208 ITR 196; CIT v. Daulat Ram Rawatmull, 1973 87 ITR 349 (SC) ; CJT v. Pradyuman Kumar Kachhawa, 1985 156 ITR 105 and K.P. Varghese v. ITO, 1981 131 ITR 597 (SC). In the abovereferred cases, mainly the question was involved under Section 52(2) or reopening the case under Section 147(a)/147(b) and the decision in the case of K.P. Varghese, [1981] 131 ITR 597 (SC) is a leading case. The principles laid down in the case of K.P. Varghese v. ITO, 1981 131 ITR 597 (SC), have been followed in the subsequent cases. The main emphasis of Mr. Ranka is on the decision of their Lordships in the case of K.P. Varghese v. ITO, 1981 131 ITR 597 (SC), which is the leading authority on the issue, whether on the basis of the fair market value any addition can be made in the hands of the purchaser/ seller, invoking the provisions of Sub-section (2) of Section 52 of the Act, 1961. ;