The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of section 142A of the Income Tax Act, 1961 regarding the estimation of value of assets by a Valuation Officer is not applicable in cases where the assessee purchased a ready built house.
The assessee, Shri. Ananthakrishna Vasudev Aitha is an individual engaged in the business of outdoor catering. He is proprietor of “Amruta Caterers”. The assessee purchased land and building under sale deed dated 06.05.2013 for Rs.90 lakhs together with Smt. Sarojini Aithal. The Senior SubRegistrar, Hubballi, registered the property with valuation as equivent to sale consideration of Rs.90 lakhs and that valuation was as per the valuation for registration of documents as prescribed by the State Government. The declaration given by the assessee at the time of survey was a declaration that the assessee had invested over and above the sum of Rs.90 lakhs a sum of Rs.25,44,400/- in purchase of the aforesaid property.
The assessee contended that the Investment referred to in this Section pertains to the Investment made by the assessee in the construction of the property and not the investment made in the purchase of the property.
Shri N. V. Vasudevan, Vice President observed that “a careful perusal of the provision divulges that in order to invoke this provision, it is sine qua non that the assessee must have made investments which are not recorded in the books of account. The factum of the assesses having made investment should be first proved by the AO, only then the burden shifts on the assessee to prove the source of investment. Such invesment outside the books of account must be positively proved by the AO and not only inferred from the attending facts. If such an investment outside the books is not proved, the assessee cannot be called upon to prove the source of such a hypothetical investment. Adverting to the facts of the instant case, we find that apart from relying on the DVO’s report, the AO has not brought anything on record or any other material to indicate that the assessee did make investment in purchase of property over and above that declared in the books of account.”
Deleting the order of the NFAC, the ITAT held that “the provisions of section 142A of the Income Tax Act are applicable only when the assessee has made investment in construction. In the present case, the assessee purchased a ready built house and therefore the provisions of section 142A of the Income Tax Act are not attracted to the facts and circumstances of the present case. Hence, I am of the view that the reference to the DVO by the AO was not valid and consequently, the addition made by the AO on the report of the DVO cannot be sustained. The same is directed to be deleted and the appeal of the Assessee is allowed.”
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