ORDER
Joginder Pall, A.M.
1. These are cross-appeals, one of the assessee and another by the Revenue filed against the order of the CIT(A), Jammu with Hqrs. at Amritsar, for the asst. yr. 2002-03. Since the issues raised in both the appeals arise from the same order of the CIT(A), these were heard together and are being disposed of by this consolidated order for the sake of convenience.
2. At the outset, the learned Counsel for the assessee, Sh. Y.K. Sud, submitted that first ground of appeal relating to the jurisdiction of the AO is not pressed. Therefore, this ground is dismissed as not pressed.
3. In the appeal filed by the assessee, the following grounds are being pressed :
2. That the CIT(A) was not justified in upholding the action of AO in making assessment under s. 144. He failed to appreciate that AO had no power to call for the information of bank accounts in Canada.
3. That the CIT(A) was not justified in upholding the addition of Rs. 53,48,882 out of addition of Rs. 97,20,482 made by the AO in long-term capital gains.
4. That the CIT(A) has wrongly adopted the sale price of land @ Rs. 400 per sq. yd. against Rs. 112.50 declared by the assessee as per the actual registered sale deeds. Neither the CIT(A) nor AO were competent to estimate the sale proceeds by ignoring the registered sale deeds.
5. That at any rate the estimate made by the CIT(A) is on a higher side.
4. As against the same, the Revenue has raised the following three effective grounds :
1. That, on the facts and in the circumstances of the case, the learned CIT(A) has erred in estimating the sale consideration of the land sold by the assessee at Rs. 400 per sq. yd. instead of Rs. 500 per sq. yd. determined by the AO, in the assessment order, when he agreed with the reasons given by the AO for determining the sale consideration at Rs. 500 per sq. yd.
2. That, on the facts and in the circumstances of the case, the learned CIT(A) has erred, while calculating long-term capital gains at p. 23 of his order by mentioning the sale proceeds of Rs. 4.90 crores of land @ Rs. 400 per sq. yd. at Rs. 74,86,400, instead of Rs. 94,86,400 (4.90 x 4840 x 400).
3.That the order of the AO under Section 144 of the IT Act, 1961 dt. 31st March, 2004 be restored and that of the learned CIT(A) be vacated.
5. The first effective issue raised in assessee’s appeal is that the learned CIT(A) was not justified in upholding the action of the AO in completing the assessment under Section 144 of the IT Act, 1961 (in short the Act). The facts relevant to the ground are that in response to a notice issued under Section 142(1) of the Act, Dr. Santokh Singh, real brother and power of attorney holder of the assessee filed the return of income for the assessment year under reference declaring therein income from bank interest of Rs. 49,908 and capital gains of Rs. 13,15,452 on sale of agricultural land situated within municipal limits of Amritsar. The assessee was a non-resident Indian settled in Canada. During the course of assessment proceedings, the AO called upon the assessee to explain the sources of deposits and purpose of withdrawals in his savings bank account No. 14312817 with the Bank of Punjab, Golden Temple Branch, Amritsar, right from the date of opening the said bank account. However, the assessee explained deposits and withdrawals appearing in this account are during the period from 1st April, 2000 to 31st March, 2002 only. The assessee did not furnish information right from the date of opening the bank account. The AO also called upon the assessee to furnish a copy of his latest return of income filed before the IT authorities in Canada. The assessee did not furnish the same. The assessee was asked to furnish social security number allotted to the assessee by the Canada Government. Again this was not furnished. The AO also called upon the assessee to furnish copies of all the bank accounts in Canada operated by the assessee during the period from 1st April, 2001 to 31st March, 2003. This was also not furnished. The AO, therefore, completed the assessment for the assessment year under consideration under Section 144 on account of assessee’s failure to comply with all the terms of a notice issued under Sub-section (1) of Section 142 and Sub-section (2) of Section 143.
6. Being aggrieved, the assessee filed an appeal against the order of the AO where action of the AO for completion of assessment under Section 144 was inter alia challenged. It was argued that the information called for by the AO was not at all relevant for the purpose of completion of assessment for the assessment year under consideration and also the AO had no powers to call for such information. Therefore, it was argued that the AO was not justified in completing the assessment under Section 144 of the Act. However, these submissions did not find favour with the learned CIT(A), who observed that the information called for by the AO in the form of copies of IT returns filed with the tax authorities in Canada, social security number of the assessee in Canada and copies of bank account in Canada were quite relevant for completing the assessment particularly in the context of sale of agricultural land claimed by the assessee at the rates which were considered by the AO to be too low. However, the assessee failed to furnish the above information in spite of repeated reminders and such non-compliance on the part of the assessee justified completion of an assessment under Section 144 of the Act. Accordingly, the learned CIT(A) dismissed this ground of appeal. The assessee is aggrieved with the order of the CIT(A). Hence, this appeal before us.
7. The learned Counsel for the assessee, Sh. Y.K. Sud, drew our attention to p. 3 of the assessment order, where the AO had desired copies of the return filed by the assessee with the tax authorities in Canada, a copy of the bank account in Canada and social security number allotted by the Canadian Government. He submitted that the assessee was a non-resident and such information asked for by the AO had no relevance to the assessment for the assessment year under consideration. The assessee was not supposed to furnish this information. He submitted that all these submissions were made before the CIT(A) and it was emphatically argued that the AO was not competent to call for such information. The learned CIT(A) has just brushed aside this aspect and has not recorded any finding on this aspect. He submitted that information relating to bank deposits and withdrawals from the bank account of assessee at Amritsar relating to assessment years was duly furnished before the AO, Besides, whatever information was asked for by the AO relating to point at issue i.e. computation of capital gains relevant to assessment year under reference was also furnished. Thus, he contended that AO was not justified in completing the assessment under Section 144.
8. The learned Departmental Representative, Sh. P.S. Sachdev, on the other hand, heavily relied on the orders of the authorities below. He drew our attention to pp. 13 and 14 of the order of the CIT(A) where he has recorded a finding that failure to comply with the requirement of notices issued under Sections 142(1) and 143(2) results in completion of the assessment under Section 144, He further relied on the judgment of Hon’ble Supreme Court in the case of CIT v. Segu Buchiah Setty (1970) 77 ITE 539 (SC), where it was held that if the assessee made a default under Section 22(2) of the old IT Act by not filing the return pursuant to a notice thereunder, and he also did not comply with the notice under Section 22(4) of the old Act for production of accounts and the ITO made a best judgment assessment, the assessee must show sufficient reasons for non-compliance with both the provisions and he cannot get the best judgment assessment ‘order passed under Section 23(4) of the Act cancelled merely by showing sufficient cause only for one of the two defaults. He further relied on the judgment of Hon’ble Nagpur High Court in the case of Tejmal Bhojraj v. CIT (1952) 22 ITR 208 (Nag), where it was held that a best judgment assessment under Section 23(4) of the old Act would follow the failure to comply with the nature of the terms of notice issued under Section 22(4) or under Section 23(2) of the old Act and a partial default involved the same consequences as a total default. He submitted that in the present case, the assessee had declared ridiculous low sale consideration of land and, therefore, information asked for by the assessee in the form of copy of foreign bank account, a return filed before, the Tax authorities in Canada and social security number were relevant for completing the assessment. He submitted that since the assessee failed to furnish this information, the AO was justified in completing the assessment under Section 144 of the IT Act.
9. We have heard both the parties and carefully considered the rival submissions, gone through the facts, evidence and material placed on record. It is not in dispute that the assessee has been assessed in the status of nonresident and the only source of his income, which has been brought to tax, is interest on fixed deposits in India and capital gains on sale of land. The foreign income, if any, was not liable to tax in the hands of the assessee because his residential status was a ‘non-resident’. Therefore, the information asked for by the AO relating to assessee’s affairs in Canada, i.e., copy of tax return filed in Canada, social security number and copies of bank account were not relevant for the purpose of assessment. In any case, if the Department was keen on having such information, it could have obtained the same from Tax authorities in Canada, through the Foreign Tax Division of the CBDT, Default on the part of the assessee for non-compliance of notices under Section 142(1) is to be seen in the light of information being asked for by the AO and its relevance to the assessment. The AO is definitely within his right to call for such information relating to the assessment of the assessee, which has a bearing on assessment. In this case, the sole issue which resulted in making an addition related to capital gains for which the AO issued various show-cause notices and the assessee duly complied with the same. As regards, the information relating to bank account in India, the assessee complied with the requirement of a notice under Section 142(1) and furnished the same insofar it related to assessment year under reference and also to the subsequent assessment year. In any case, if the AO wanted further information, he could have easily obtained the same from the bank by exercise of powers vested with him under Section 131 of the IT Act. In any case, this issue is only of an academic interest because no addition in respect of unexplained deposits/withdrawals made in the bank account has been made. The only addition made is in respect of capital gains and the same has been” made after giving full opportunity to the assessee and after taking into account the information furnished by the assessee. In the light of these facts and circumstances of the case, we are of the considered opinion that the AO was not correct in completing the assessment under Section 144 of the Act. Accordingly, we set aside the order of the CIT(A) and treat the assessment under Section 143(3) of the Act. This ground of appeal is allowed.
10. The next grievance of the assessee is that the learned CIT(A) was not justified in upholding the addition of Rs. 53,48,882 out of the addition of Rs. 97,20,482 made by the AO in the long-term capital gains. Corresponding to this is the grievance of the Revenue for reducing the addition made by the AO in long-terra capital gains. The facts of the case are that the assessee was a NRI settled in Canada. He was having a savings bank account No. 14312817 with Bank of Punjab, Golden Temple Branch at Amritsar. The Investigation Wing of the IT Department at Amritsar made enquiry and found substantial deposits in the savings bank account with Bank of Punjab, Golden Temple, Amritsar. The assessee was not being assessed to tax. No permanent account number was also allotted to the assessee. This information was passed on to AO. The AO, therefore, issued a notice under Section 142(1) on 26th June, 2002 calling for the return of income, In response to such notice, the assessee filed the returns of income for the asst. yrs. 2001-02 and 2002-03 on 20th Nov., 2002. In the return of income filed for the assessment year under reference, the assessee had declared income of Rs. 49,908 for the asst. yr. 2002-03 being interest from bank. Besides, the assessee had also shown long-term capital gains of Rs. 13,15,485 on sale of agricultural land at village Heir, Amritsar measuring 4,25 acres for consideration of Rs. 19,03,000. Subsequently, the assessee stated vide his letter dt. 13th May, 2003 that he had inadvertently shown sale consideration of Rs. 19,03,000 in respect of six sale deeds and the 7th sale deed of Rs. 3,07,500 executed on 1st Feb., 2002 was left out. Accordingly, the assessee filed revised computation showing sale consideration of Rs. 22,10,500 in respect of sale of 4.90 acres of agricultural land at approximate amount of Rs. 4.50 lakhs per acre. The AO found cash deposits of Rs. 5 lakhs each aggregating to Rs. 10 lakhs in the savings bank account of the assessee on 9th June, 2001. When the assessee was called upon to explain the credit and debit entries in the bank account, the assessee stated vide his letter dt. 10th April, 2003 that he was in the process of striking deal for sale of agricultural land with S/Sh. Sukhbinder Singh and Gurwinder Singh resident of VIII. Gumtala, Distt. Amritsar. The deal was through the broker, namely, S. Pargat Singh. S/Sh. Sukhbinder Singh and Gurwinder Singh paid an amount of Rs. 10 lakhs through broker S. Pargat Singh and amount was deposited in the bank account on 9th June, 2001. But later on this deal was not finalized due to some reason and, therefore, the assessee returned the amount of Rs. 10 lakhs by two account payee cheques of Rs. 5 lakhs each issued in the names of S/Sh. Sukhbinder Singh and Gurwinder Singh. Brokerage of Rs. 10,000 was also paid to S. Pargat Singh, broker for deal with S/Sh. Sukhbinder Singh and Gurwinder Singh. The assessee struck another deal for sale of agricultural land with some other party through Sh. B.S. Chauhan and S, Kamaljit Singh, brokers. The prospective buyers paid earnest money of Rs. 15 lakhs on 30th June, 2001. This was deposited in assessee’s bank account.
10.1 Thereafter, the AO made further enquiry with S/Sh. Sukhbinder Singh and Gurwinder Singh who made first deal with the assessee and their statements were recorded under Section 131 of the Act on 19th Nov., 2003, wherein they stated that they had entered into deal with the assessee on telephone for purchase of 18 acres approximately. The agricultural land of the assessee located at village Heir, Amritsar was purchased at the rate of Rs. 22 lakhs per acre and they deposited cash of Rs. 10 lakhs in the bank account on 9th June, 2001 as earnest money ‘(Biana)’ as per instructions of the assessee. They further stated that the deal could not be materialized because the assessee got better offer from some other party. The relevant extracts of their statements have been reproduced on pp. 9 to 11 of the assessment order. S. Sukhbinder Singh also stated that he was being assessed to tax. He derived rental income from property Nos. 1 and 2 at Lawrence Road, Amritsar let out to two tenants, namely, M/s Burger King and M/s Trendy Shoes. He owned 17 acres of ancestral agricultural land at village Dhaul Kalan, Ram Tirath Road, Amritsar and further cultivated 20 acres of agricultural land situated in the same village on contract basis. He stated that the earnest money was paid after the deal was struck with the assessee on telephone and amount of Rs. 5 lakhs (sic-10 lakhs) deposited in the bank account represented earnest money for the same. Sh. Gurwinder Singh also stated that he was being assessed to tax and his sources of income were commission income and income from agricultural land. He owned 15 acres of agricultural land at village Dhaul Khurd, Ram Tirath Road, Amritsar and 50 Biswas of agricultural land at Raulsar in Rajasthan. He also stated that the deal for purchase of agricultural land was made with the assessee in June, 2001 on telephone at the rate of Rs. 22 lakhs per acre and earnest money was deposited in his bank account under his instruction and later the same was returned because the assessee got better offer from some other buyers.
10.2 Apart from the results of the above enquiry, the AO further observed that M/s K.R. Resorts (P) Ltd., Ajnala Road, Amritsar, i.e., Airport Road on which assessee’s land was also located had purchased agricultural land measuring 25 Kanals 10 Maria on 28th Oct., 1997 for Rs. 25 lakhs. This land was also located in village Heir, but about 1.5 kms. away from the assessee’s land on the Rajasansi Road. He also found that the assessee’s land was at a distance of 2 kms. from Amritsar. Thus, the land purchased by M/s K.R. Resorts (P) Ltd. in the year 1997 at Rs. 7.84 lakhs per acre (wrongly mentioned by AO at Rs. 5 lakhs per acre) apparently indicated that the assessee had understated sale consideration of his land in the sale deeds. He further found that assessee’s brother, Dr. Santokh Singh also owned agricultural land adjacent to assessee’s land. Dr. Santokh Singh developed PUDA approved colony adjacent to assessee’s land during the financial years 2001-02, 2002-03, 2003-04 and from 1st April, 2004 to 31st Dec., 2004 and sold the residential plots at rates varying from Rs. 800 to Rs. 1200 per sq. yd. during almost the same period when the assessee sold the land. As against the same, the assessee had only declared ‘sale consideration @ Rs. 112.50 per sq. yd. Taking into account the facts that in PUDA approved colony, the size of the plot was comparatively smaller and the expenses incurred for development by Shri Santokh Singh, the AO found that the minimum rate of assessee’s land should have been Rs. 500 per sq. yd. ,i.e., Rs. 24.20 lakhs per acre as against Rs. 112.50. per sq. yd. shown by the assessee. The AO further observed that the assessee’s brother had sold agricultural land measuring 1 Kanal 17 Marias for a consideration of Rs. 19 lakhs’, i.e., Rs. 2054 per sq. yd. on 30th Sept., 2003, I.e, @ Rs. 82.16 lakhs per acre. The AO further noted that Rajasansi Airport was declared international airport in May, 2000. As a result of these developments and boom in real estate prices, the District Revenue Authorities raised minimum rate of registry in village Heir at Rs. 30 lakhs per acre for agricultural land on the road side w.e.i. 1st April, 2003 and Rs. 18 lakhs at the back side. Taking into account these facts, the AO came to the view that the assessee had grossly understated sale consideration in the sale deeds with a view to understate the long-term capital gains. He, therefore, proposed to take the sale rate of land at Rs. 500 per sq. yd., i.e., Rs. 24.20 lakhs per acre and issued a. show cause notice to the assessee. Along with the show-cause notice, the AO forwarded copies of statements of S/Sh. Sukhbinder Singh and Gurvinder Singh, copies of purchase deeds of land belonging to M/s K.R. Resorts (P) Ltd., copy of land rate fixed by Registrar w.e.f. 1st April, 2003 at village Heir and also allowed the assessee an opportunity of cross-examination of S/Sh. Sukhbinder Singh and Gurvinder Singh.
10.3 The cross-examination of S/Sh. Sukhbinder Singh and Gurwinder Singh was allowed to the assessee’s counsel on 23rd Feb., 2004 wherein they maintained that they had entered into a deal with the assessee on telephone for purchase of 18 acres (approximately) land of the assessee at village Heir at the rate of Rs. 22 lakhs per acre for which they deposited earnest money of Rs. 5 lakhs each in the bank account of the assessee with Bank of Punjab, Amritsar under assessee’s instructions. They further stated that the earnest money was refunded to them by account payee cheques after assessee entered into another deal on better terms. The questions and answers asked, during the cross-examination have been extracted by the AO on pp. 14 to 17 of the assessment order.
10.4 Subsequently, the assessee stated vide letter dt. 23rd Feb., 2004 that S/Sh. Sukhbinder Singh and Gurwinder Singh had never entered into an agreement with the assessee to sell the land and they on their own deposited Rs. 10 lakhs into bank account of the assessee without his knowledge to negotiate the sale of land and the offer made by them was meager because of this reason, the assessee returned the amount of Rs. 10 lakhs, which they had on their own deposited in the assessee’s bank account. The assessee also stated that the comparison of assessee’s land with his brother was without any merit because the land belonging to his brother was of PUDA approved colony on which his brother had incurred huge expenses on development. Similarly, the assessee stated that for development of residential colony with the approval of the PUDA, is a time-consuming job which also required to incur heavy expenses on development like street lights, sewerage, construction of roads and further also to leave certain land for roads and basic amenities like parks, health center, recreational facilities like club, etc. The assessee also stated that the case of M/s K.R. Resorts (P) Ltd. at village Heir was not comparable because the said land was 2 to 3 kms. away from the land of the assessee and such land was sold in smaller parts by four different owners whereas the assessee’s land measured 18 acres and, therefore, would not, command that much higher price. It was also stated that the minimum rate fixed, by the Revenue authorities at Rs. 30 lakhs per acre was w.e.f. 1st April, 2003 whereas the assesses had sold the land in June, 2001. The assessee also furnished some other sale instances of land sold on 16th March, 1999 at Rs. 1.50 lakhs per acre, on 4th May, 2000 at Rs. 3.50 lakhs, on 12th Nov., 2001 at Rs. 4.38 lakhs, on 12th Nov., 2001 at Rs. 4.61 lakhs per acre. Thus, it was stated that the proposed action of the AO to adopt sale rate of land at Rs. 500 per sq. yd., i.e., Rs. 24.40 lakhs per acre for the purpose of computing the capital gains was without any basis and unjustified. However, the AO did not accept these submissions and by referring to the statements of S/Sh. Sukhbinder Singh and Gurvinder Singh, the land purchased by M/s K.R. Resorts (P) Ltd.. about 4-1/2 years before @ Rs. 7,84 lakhs per acre, the sale of land by assessee’s brother at much higher rate and finding contradiction in assessee’s stand in letter dt. 23rd Feb., 2004 that he had not struck deal with S/Sh. Sukhbinder Singh and Gurwinder Singh and they had deposited such amounts in the bank account on their own and initial stand in assessee’s letter dt. 10th April, 2003 that the assessee was in the process of striking a deal with these two parties from whom the assessee received a sum of Rs. 10 lakhs through Sh. Pargat Singh which was deposited in assessee’s bank account and later returned to them because the assessee entered into deal with some other parties on better terms, the AO held that the assessee had sold the land @ Rs. 500 per sq. yd., i.e., Rs. 24.20 lakhs per acre and thereby made an addition of Rs. 97,70,390 in long-term capital gains.
11. Being aggrieved, the assessee filed an appeal before the CIT(A). The assessee filed written submissions before the CIT(A), which have been extracted on pp. 6 to 12 of the impugned order. It was submitted before the CIT(A) that the AO had wrongly relied on the statements of S/Sh. Sukhbinder Singh and Gurwinder Singh. They did not have any documentary evidence of the deal. Both these persons were hostile to the assessee for the reason that the alleged deal with these persons had been cancelled. During the course of cross-examination, both were found to be giving vague answers and could not even produce proof of the income and acknowledgements of the returns filed by them. Looking to their financial status, both were unable to arrange Rs. 4 crores for purchase of the land at the rates quoted by them. It was also submitted that the AO was not correct in comparing the case of the assessee with M/s K,R, Resorts (P) Ltd. and the sale of plots by Dr. Santokh Singh, assessee’s brother, who developed agricultural land into PUDA approved colony. It was also argued that the minimum rate fixed by the District Revenue Authorities at Rs. 30 lakhs per acre was only w.e.f. 1st April, 2003 whereas the assessee had sold the land in June, 2001, when the rate fixed for registration of the sale for the purpose of stamp duty was Rs. 4,95,000 per acre. It was argued that the AO had no information or evidence with him, which could suggest that the assessee had received any additional amount over and above the sale deeds. It was also cited that there was no proof (sic-provision) in the Act, which gave powers to the AO to enhance the consideration of transfer in case of understatement. He was bound by the sale consideration shown in the sale deed for computation of capital gains. It, was also argued that earlier such power was vested with the AO under Section 52, which was omitted w.e.f. 1st, April, 1988. The assessee also relied on various judgments noted by the CIT(A) on p. 9 of the impugned order.
12. These written submissions were referred to the AO for his remand report. The AO submitted the remand report vide his letter dt. 6th Jan., 2005, It was stated that the status of international airport was granted to Amritsar airport in May, 2000 and 80 per cent of the work relating to this project has been completed by 24th Dec., 2004. The Sub-Registrar, Amritsar informed that the rates of land for the purpose of stamp duty in respect of agricultural land at village Heir were fixed at Rs. 30 lakhs per acre abutting road and Rs. 18 lakhs per acre behind the road and Rs. 750 per sq. yd. for residential plots w.e.f. 1st April, 2003. The AO also stated that the land purchased by M/s K.R. Resorts (P) Ltd. on 28th Oct., 1997 was further away from city from the assessee’s land and, therefore, was at disadvantageous place than the land owned by the assessee. Besides, the land purchased by M/s K.R. Resorts (P) Ltd. was about 4 to 5 years before than the land sold by the assessee. The assessee’s brother had sold the land @ Rs. 2,054 per sq. yd. on 30th Sept., 2003, i.e., after about two years from assessee’s sale. As against the same, the assessee had shown only a meager amount of Rs. 112.50 per sq. yd, It was also stated that the sale rates of Dr. Santokh Singh’s residential colony could not, be held to be sacrosanct, true or conclusive for the purpose of ascertaining the sale rate of agricultural land. However, these corroborated the version of S/Sh. Sukhbinder Singh and Gurwinder Singh. The AO also relied on two judgments of Hon’ble Punjab & Haryana High Court in. the case of Him Lal Ram Dayal v. CIT and Hira Lal Ram Dayal v. CIT and one judgment of Hon’ble Supreme Court in the case of Sumati Dayal v. CIT .
13. The learned CIT(A) considered the rival submissions and took note of the statements of S/Sh. Sukhbinder Singh and Gurwinder Singh recorded by the AO and cross-examination allowed to the assessee. He also took into account the land purchased by M/s K.R. Resorts (P) Ltd. at village Heir, which was at a distance of 1.5 kms. from assessee’s land and further away from city. He also referred to the sale of land by assessee’s brother Dr. Santokh Singh at a much higher rate, He also referred, to the fact that Amritsar airport was declared as an international airport in May, 2000 resulting in quantum jump for the real estate prices of the land located at Rajasansi Road, Amritsar. The learned CTT(A) also referred to the revision in the rates of land made by the District Revenue Authorities for enhancing the registration charges to Rs. 30 lakhs w.e.f. 1st April, 2003. He considered that this fact only showed that the price of land had been steadily increasing over the years and it is not in one day that prices went from Rs. 4.50 lakhs to Rs. 30 lakhs. He also took into account the submissions made by the assessee that S/Sh. Sukhbinder Singh Gurwinder Singh had not been able to produce any documentary evidence in support of the fact that the deal was struck with the assessee @ Rs. 22 lakhs per acre. He observed that the assesses has not been able to controvert the fact that the deposits of Rs. 10 lakhs made in the bank account of the assessee by S/Sh. Sukhbinder Singh and Gurwinder Singh were for the purchase of land and further the assessee also returned the said amount by account payee cheques issued in their names. He also noted that the understatement of consideration was evident by the fact that the property belonging to M/s K.R, Resorts (P) Ltd. was at disadvantageous place vis-a-vis assessee’s property because the same was located at a further distance of 1.5 kms. away from assessee’s land and the assessee’s land was located just about 2 kms. away from the city. The price paid by M/s K.R. Resorts ‘ at Rs. 25 lakhs for 25 Kanals 10 Marias @ Rs. 7.84 lakhs per acre showed that the consideration shown in the sale deed @ Rs. 112.50 per sq. yd. Was not correct. This fact also got reinforced from the sale instances of land belonging to assessee’s brother on 30th Sept., 2003 @ Rs. 2,054 per sq. yd. Even though such sale was made after about a period of two years from the date of assessee’s land. The revision in the rates for the purpose of stamp duty w.e.f. 1st April, 2003 to Rs. 30 lakhs also showed that the prices of the land in this area had been steadily increasing and had not gone up just in a overnight. Taking into account all these facts and surrounding circumstances, the AO observed that sale consideration shown by the assessee particularly after Amritsar airport was accorded an international status was not the real consideration, He also took into account the fact that despite specific requirement made by the AO to produce the copies of the bank account in Canada, the assessee failed to produce the same, which again reinforced conclusion that the sale consideration shown by the assessee was not correct. He also rejected assessee’s submissions that the statements of S/Sh. Sukhbinder Singh and Gurwinder Singh should be discarded because there was no written evidence or agreement, for the reason that even oral agreement was valid in the eyes of law. The evidence collected by the AO lent considerable support to the facts stated by S/Sh. Sukhbinder Singh and Gurwinder Singh in their statements recorded by the AO. Thus, he came to the conclusion that the AO was justified in rejecting the rates shown by the assessee for the sale of land @ Rs. 4.50 lakhs per acre. However, the learned CIT(A) observed that the rate adopted by the AO at Rs. 24.20 lakhs, i.e., Rs. 500 per sq. yd. did not appear to be reasonable and fair which was mainly on the basis of sale rate shown by Dr. Santokh Singh, i.e., assessee’s brother. However, he rejected assessee’s contention that as per provisions of the Act, the’ AO could not have rejected the sale consideration shown in the sale deeds. He observed that as per provisions of Section 48 of the IT Act, 1961, capital gains is to be computed by taking full value of consideration received or accruing as a result of the transfer of the capital asset. He relied on the two judgments of Hon’ble Punjab & Haryana High Court in the cases Him Lal Ram Dayal v. CIT (supra) and Hira Lal Ram Dayal v. CIT (supra), where it was held that the registered deed could not be considered as conclusive in the matter. He also took into account that the AO completed assessment under Section 144 on account of assessee’s failure to furnish copies of his bank account in Canada and tax returns filed before the tax authorities in Canada. Taking into account all these facts and the reason that M/s K.R. Resorts (P) Ltd. had purchased the land @ Rs. 196 per sq. yd. about 4-1/2 years before, sale instances of land and thereafter the rates of real estate in the area had been steadily rising and subsequent sale of land by the assessee’s brother, i.e., by Dr. Santokh Singh @ Rs. 2,054 per sq. yd., the learned CIT(A) held that it would be fair to adopt the sale consideration at Rs. 400 per sq. yd. instead of Rs. 500 per sq. yd. adopted by the AO. In this manner, the learned CIT(A) reduced the addition to Rs. 53,48,882 and allowed a relief of Rs. 43,71,600, Both the assessee and the Revenue are aggrieved with the order of the CIT(A). Hence, these cross-appeals before us.
14. The learned Counsel for the assessee, Sh. Y.K. Sud, reiterated the submissions, which were made before the authorities below. He also drew our attention to pp. 1 to 7 of the paper book, which is a copy of written submissions filed before the CIT(A). He further drew our attention to pp. 8 to 38 of the paper book, which are copies of the sale deeds executed by the assessee for sale of 4.90 acres of agricultural land for a total consideration of Rs. 22,10,500. He further drew our attention to pp. 37 and 38 of the paper book, which is a copy of rate fixed for stamp duty by the district authorities prior to 1st April, 2003 at Rs. 4.95 lakhs per acre for agricultural land (Irrigated)- and Rs. 3,30,440 for agricultural land (Gair Mumkin) per acre at village Heir. He submitted that these rates were revised w.e.f. 1st April, 2003. As per the revised rates, the rates for the agricultural land on the road side was fixed at Rs. 30 lakhs per acre and Rs. 18 lakhs for backside applicable to all agricultural land including Gair Mumkin and Rs. 750 per sq. yd. for residential and also Rs. 2,500 per sq. yd. for commercial property. He submitted that the assessee had sold the land prior to the date when these were revised. He submitted that if assessee had undervalued or understated the sale consideration, the Revenue officials would have not registered the sale deeds. He then referred to the statement of S. Sukhbinder Singh at p. 10 of the assessment order where he admitted that he did not have any documentary evidence of the deal and the said deal was made only on telephone with the assessee. He submitted that it clearly shows that Sh. Sukhbinder Singh was hostile to the assessee because the land was not sold to him. Similarly, he drew our attention to p. 11 of the assessment order where the AO has extracted the statement of Sh. Gurwinder Singh: He too denied having any documentary evidence. He further stated that during the course of cross-examination Sh. Sukhbinder Singh stated that he would furnish the acknowledgement of the return of income for the asst. yr. 2002-03 yet no such evidence has been filed till date. He submitted that in reply to question No, 8, he stated that the amount of Rs. 5 lakhs was deposited in assessee’s bank account by raising a loan of Rs. 4 lakhs from his father and Rs. 1 lakh from his friends. This fact shows that he did not have resources to buy the land measuring 18 acres from the assessee. In reply to question No. 13 asked during the course of cross-examination on p. 15 of the assessment order, Sh. Gurwinder Singh stated that about 1-1/2 acres of land was touching road and the remaining land was behind it. He further stated that in reply to show cause notices issued by the AO, the assessee had furnished copies of the sale deeds of other comparable cases where the rate shown’ was even lower than shown by the assessee. He drew our attention to pp. 45, 48, 53, 56, 62 and 63 of the paper book, He stated that all these sale instances were not considered by the AO while deciding the case. Similarly, the learned CIT(A) has also not considered these cases while reducing the addition made by the AO. He further stated that the statements of the purchasers of the land were also recorded. He particularly drew our attention to pp. 72 to 87 of the paper book which are copies of these statements where they have confirmed that they had purchased the land at the rate given in the sale deeds, He further stated that Department has not taken any action against the purchasers. He further referred to the statements of the broker, namely, Shri Veer Singh Chauhan at pp. 90 and 91 of the paper book and Kanwaljit Singh at pp. 92 and 93 of the paper book where they confirmed having sold the property at the rate mentioned in the deeds. Thus, he submitted, that the authorities below have failed to appreciate the relevant facts and material on record while sustaining the impugned additions. He also relied on the following judgments in support of the proposition that the onus is entirely on the Revenue to establish that the assessee had received consideration over and above the consideration shown in the sale deeds.
(i) K.P. Varghese v. ITO
(ii) CIT v. Sushtta Mittal and Ors.
(iii) CIT v. Suit. K.C. Agnes
(iv) Hansalaya Properties v. ITO (1983) 4 ITD 475 (Del)(SB)
(v) Sanjay Chawla v. ITO (2004) 82 TTJ (Del) 407 : (2004) 89 ITD 586 (Del)
(vi) Mamta Mahajan and Ors. v. ITO (2004) 86 TTJ (Del) 120.
Thus, he submitted that the addition sustained by the learned CIT(A) may be deleted.
15. The learned Departmental Representative, on the other hand, heavily relied on the orders of the authorities below. He submitted that both S/Sh, Sukhbinder Singh and Gurwinder Singh had clearly admitted in their statements recorded by the AO on 19th Nov., 2003 that they had entered into deal with the assessee to purchase the land measuring 18 acres @ Rs. 22 lakhs per acre. The fact that they had entered into deal is evident from an amount of Rs. 10 lakhs, i.e., Rs. 5 lakhs each, deposited in the bank account of the assessee on 9th June, 2001. This fact is also admitted by the assessee in his letter dt, 10th April, 2003 as reproduced on pp. 4 and 5 of the paper book. He submitted that it is not necessary that the agreement must be in writing even verbal agreement is valid in the eye of law. He submitted that during the course of cross-examination by the assessee, reproduced on pp. 14 to 17 of the assessment order, Sh. Sukhbinder Singh clearly replied that even earlier also the deal for property was finalized on telephone and. the price was paid and the deed, was executed later at Delhi. No written agreement to sell was made. Thus, he stated that the buyers had not entered into deal with the assessee for the first time on the basis of oral or verbal agreement. This was the categorical reply given by Sh. Sukhbinder Singh. He further stated that the hostility and the non-reliability of the person is to be seen in the light of overall picture emerging from the examination and cross-examination. He submitted that in spite of cross-examination allowed, both S/Sh. Sukhbinder Singh and Gurbinder Singh had consistently maintained that they entered into a deal with the assessee for purchase of land @ Rs. 22 lakhs per acre. He further submitted that there was absolutely no complaint made by S/Sh. Sukhbinder Singh and Gurwinder Singh with the AO, It is only when the AO made enquiries to find out the source of deposits of Rs. 10 lakhs in assessee’s bank account and subsequent return of the same by account payee cheques that statements of these parties were recorded. He submitted that it was not necessary that they must have filed a suit against the assessee for not honouring the deal to sell the land to them. He particularly drew our attention to p. 15 of the assessment order where he replied that there was a saying in Punjab that if person backed out from his word or mouth, then there was no remedy. Therefore, they did. not file any suit against the seller, He further stated that in May, 2000, Amritsar airport was declared as international airport. Thereafter, the prices of land on airport road where the assessee’s land was located at a distance of 2 kms. from the city showed quantum jump in the rates. He further stated that the land measuring 25 Kanals 10 Marias was purchased by M/s K.R. Resorts (P) Ltd. on 28th Oct., 1997 at the rate of Rs. 7.84 lakhs per acre. He submitted that the land purchased by M/s K.R. Resorts was further at a distance of 1.5 kms. away from assessee’s land towards airport and was at disadvantageous position as compared to the location of assessee’s land. He submitted that the assessee sold the land after a gap of 4-1/2 years from the date when M/s K.R. Resorts (P) Ltd. purchased the said land. How could the rate for property of the assessee located at village Heir sold after 4-1/2 years with better location could be lower than what it was in the year 1997, He further referred to the sale of land by assessee’s own brother, namely, Dr. Santokh Singh at much higher rate than the rate at which the assessee sold the land. He submitted that it was due to these developments and boom in the rates of land situated at village Heir that District Revenue Authorities revised the rates for registration for the purpose of stamp duty to Rs. 30 lakhs per acre w.e.f. 1st April, 2003. He referred to pp. 41-42 of the paper book to show a copy of revised rates fixed by the District Revenue Authorities. He stated that the prices of the land do not shoot up in a day. These increased over a period of time. It could not be said that price of land at which the assessee executed the sale deeds went up only after the sale by the assessee in June, 2001. Thus, he submitted that it is not only statements of S/Sh. Sukhbinder Singh and Gurwinder Singh but other detailed reasons given by the AO and specific sale instances referred to by the AO in the assessment order which lend considerable support to the fact that the assessee had indeed made a deal for sale of land at much higher price than reflected in the sale deeds. Therefore, the AO was justified in adopting the sale rate at Rs. 24.20 lakhs per acre because the assessee had himself admitted that since he got better offer from other parties, amount of Rs. 10 lakhs received from S/Sh. Sukhbinder Singh and Gurwinder Singh was returned. He further stated that the facts stated in the sale deeds are not conclusive to show that whatever is stated in the deeds is correct. One has to take into account the surrounding circumstances for arriving at the conclusion as to whether the sale consideration shown in the sale deeds was correct or undervalued. He relied on the following judgments of the below mentioned High Courts :
(i) Hira Lal Ram Dayal v. CIT (supra)
(ii) Mrs. Sunny Uppal v. Appropriate Authority
(iii) Swastic Sahkari Awas Samiti Ltd. and Anr. v. State of UP and Ors. .
He further stated that the Department is taking remedial action against the purchasers also and added that the mere fact that the action has not been taken against the buyers does not mean that the sale consideration shown by the assessee in the sale deeds was correct. He, therefore, concluded that the order of CIT(A) deserves to be set aside and that of AO restored.
16. We have heard both the parties in extenso and given our thoughtful consideration to the rival contentions. We have examined the facts, evidence and material placed on record and also gone through the orders of the authorities below. We have also referred to the relevant pages of the paper book to which our attention was drawn by the parties and also the judgments cited at the bar. Now the main issue that requires to be decided by this Bench is whether the AO was justified in coming to the conclusion that the sale consideration shown in the sale deeds was not correct and the land indeed was sold at the rate adopted by the AO or by the CIT(A). As per provisions of Section 48 of the IT Act, the capital gains is required to be computed by deducting from the full value of the consideration received or accrued as a result of transfer of the capital asset the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. The section does not show that only consideration shown in sale deed is to be regarded as the full value of the consideration received. There is nothing in the section, which precluded the AO from substituting the actual sale consideration for the sale consideration shown in the sale deeds, if there is evidence to show that the assessee had indeed received higher amount. The expression ‘full value of the consideration’ came to be considered by the Hon’ble Supreme Court in the case of CIT and Anr. v. George Henderson & Co. Ltd. , where the Supreme Court held that such expression cannot be construed as the market value, but the price bargained for by the parties to the sale. The Supreme Court further observed that the expression full value’ means the whole price without any deduction whatsoever and it cannot refer to the adequacy or inadequacy of the price bargained for. Similarly, in the case of CIT v. Gillanders Arbuthnot & Co. , the Hon’ble Supreme Court observed that in the case of sale, all that one has to see is what is the consideration bargained for. Thus, the contention of the learned Counsel for the assessee that the AO is not empowered to substitute the consideration for the sale consideration shown in the sale deeds is without any substance. If this was the case, there was no need for the legislature to confer powers on the AO under Section 55A for making a reference to Valuation Officer with a view to ascertain the fair market value of capital assets for the purpose of computation of income from capital gains provided under Chapter IV of the Act. If the AO cannot ascertain consideration and substitute the same with the one shown in the sale deed for the purpose of computation of capital gains, then the whole exercise of referring the property to valuation cell would have been futile. Now in the present case, what is required to be seen is whether price bargained/obtained for the sale of land in question was the one as shown in the sale deeds or as adopted by the authorities below.
16.1 From the facts discussed above, it is obvious that while deciding the case, the AO has relied on the statements of S/Sh. Sukhbinder Singh and Gurwinder Singh, who stated that they had entered into deal with the assessee for purchase of his agricultural land measuring 18 acres @ Rs. 22 lakhs per acre. They also stated that such deal was entered into on telephone in the first week of June, 2001 and they paid Biana/earnest money of Rs. 5 lakhs each by depositing the same in the bank account of the assessee at Amritsar. The fact that both S/Sh. Sukhbinder Singh and Gurwinder Singh had deposited cash of Rs. 10 lakhs in the bank account is not denied by the assessee and is duly supported by such deposits in the bank account on 9th June, 2001, It is further supported by the fact that subsequently after the assessee agreed to sell the land to some other parties and received earnest money of Rs. 15 lakhs in similar manner, by way of cash deposit in the bank account on 30th June, 2001, the assessee returned the amount of Rs. 5 lakhs each to S/Sh. Sukhbinder Singh and Gurwinder Singh by two account payee cheques and these also find debited to the bank account of the assessee on 23rd July, 2001. Not only this, the assessee also paid a brokerage of Rs. 10,000 to Sh. Pargat Singh through whom deal with S/Sh. Sukhbinder Singh and Gurwinder Singh was made on 19th July, 2001 and this finds mentioned on p. 6 of the assessment order. Now the Biana/earnest money is paid when the deal for sale is struck. Even the commission to broker is paid only on finalizing the deal. If the deal had not been struck, there was no requirement of paying any brokerage to S. Pargat Singh. Even the assessee admitted vide his letter dt. 10th April, 2003 that the assessee was in the process of striking a deal for sale of agricultural land with S/Sh. Sukhbinder Singh and Gurwinder Singh and amount of Rs. 10 lakhs was received through broker. In fact, the amount of Rs. 10 lakhs was deposited by the parties in the bank account of the assessee, Both S/Sh. Sukhbinder Singh and Gurwinder Singh could not have learnt about the bank account of the assessee until they were informed about the same and nobody would deposit cash of Rs. 10 lakhs without there being such deal to purchase the land. The allegation of the assessee that both S/Sh, Sukhbinder Singh and Gurwinder Singh were hostile to the assessee is not borne out from the evidence on record. No evidence in the form of some complaint having been lodged by the assessee against those persons is placed before the authorities below or even before us. As mentioned above, the statements of S/Sh. Sukhbinder Singh and Gurwinder Singh have been extracted on pp, 1 to 11 of the assessment order. They have consistently stated that the deal was struck with the assessee for purchase of land @ Rs. 22 lakhs per acre. Copies of these statements were duly supplied to the assessee and further opportunity of cross-examination was also allowed. The cross-examination of both the parties has been extracted on pp. 14 to 18 of the assessment order. The facts stated in their statements were confirmed and reconfirmed. The assessee has not been able to point out any contradiction in the statements of both the persons. In fact, in reply to question No. 10 asked during the course of cross-examination,’ Sh. Sukhbinder Singh clearly stated that earlier also deal of the property called Majitha House was also finalized on telephone and paid the price and executed the deed of the property at Delhi without making any agreement to sell. He also stated that in similar manner, he had purchased the property by making an agreement to sell and earnest money was paid. The claim of the assessee that S/Sh. Sukhbinder Singh and Gurwinder Singh have not been able’ to adduce any documentary evidence is without any substance. There is no bar in making an oral/verbal deal and these are also acted upon. Such verbal deals are valid in the eye of law. The deposit of Rs. 10 lakhs made in the bank account of the assessee further confirms the facts stated in their examination and cross-examination that deal was struck with the assessee and an amount of Rs. 10 lakhs was paid as earnest money- There was no written agreement because at the relevant time, the assessee was in Canada. In fact subsequent deal by which the assessee actually sold the land was also made in similar manner without making any written agreement to sell. Only cash of Rs. 15 lakhs was deposited in the bank account of the assessee. Even though there was no written agreement made by the assessee with the buyers, yet such oral agreement was acted upon and assessee indeed sold the land, to those parties. During the course of cross-examination, Sh. Sukhbinder Singh was specifically asked to explain the source from which purchase consideration of Rs. 4 crores, i.e., @ Rs. 22 lakhs per acre proposed to be made. Sh. Sukhbinder Singh replied that at the time of deal, it was agreed that the seller will get only 25 per cent of the total sale price and the balance will be paid to him and the conveyance deed will be executed within a period of one year and this was also agreed that the purchaser could sell the land to any person within that period of one year and receive earnest money/Biana. But conveyance deed could not be executed till the full amount was paid. Thus, it was stated that the deal of land being lucrative, the same was made after taking into account all these aspects.
Similar question was asked to Sh. Gurwinder Singh. He replied that both he and Sh. Sukhbinder Singh owned properties worth crores of rupees situated at prime locations at Amritsar. Had the deal matured, they would have sold their properties to make the payment to the assessee. He also confirmed that he was informed by his co-buyer who happened to be his cousin that total payment was to be made in a period of one year and they could sell the land during this period and receive earnest money from prospective buyers. The fact that both S/Sh. Sukhbinder Singh and Gurwinder Singh owned substantial agricultural land is not in doubt. Furth Sh. Sukhbinder Singh also owned commercial property at prime location at Lawrence Road, which was given on rent to M/s Burger King and M/s Trendy Shoes. In reply to question No. 14 asked during the cross-examination, Shri Sukhbinder Singh stated that he was prepared to purchase similar land @ Rs. 40 lakhs per acre. Thus, we do not find any force in the submissions of the assessee that S/Sh. Sukhbinder Singh and Gurwinder Singh did not have the financial capacity and means to buy such land. Moreover, the facts stated by them are further supported from subsequent sale made by the assessee. The entire land measuring 18 acres was not sold to one party by making a combined agreement. The land was sold during the period 2nd Jan., 2002 to 22nd May, 2002 by making 10 sale deeds over a period of 4 months for a total consideration of about Rs. 87.90 lakhs. Thus, we find that the submissions of both S/Sh, Sukhbinder Singh and Gurbinder Singh are consistent, credible, reliable and acceptable as there is nothing to suggest that they were hostile to the assessee. In any case, no evidence to this effect has been placed before us.
16.2 Further, from the facts discussed above, it is also clear that the AO has also taken into account other surrounding circumstances which lend support to the fact that the statements given by both S/Sh. Sukhbinder Singh and Gurwinder Singh confirming the deal for purchase of land at Rs. 22 lakhs per acre were correct. It is settled law that while deciding the matters, IT authorities can take into account the surrounding circumstances and also apply the test of human probability and preponderance of probability. In the case of CIT v. Durga Prasad More , the Hon’ble Supreme Court has held that though an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals. The taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. The Hon’ble Supreme Court observed that the Tribunal did not interpret the two deeds but merely found itself unable to accept the correctness of the recitals in those documents. The Supreme Court observed that to accept those recitals or not was within the province of the Tribunal and the High Court could not interfere with its conclusion unless it was perverse or not supported by evidence or was based on irrelevant evidence. In the case of Sumati Dayal v. CIT (supra), the Hon’ble Supreme Court observed that the IT authorities could consider the surrounding circumstances and apply the test of human probability while deciding the issues before them. In the case of Him Lal Ram Dayal (supra), the Hon’ble Punjab & Haryana High Court observed that if an assessee, even in the face of a registered sale deed, is able to prove by cogent evidence and satisfy the Tribunal that no sale took place, the Tribunal has to come to the conclusion that there was no capital gain. It was held that the registered sale deed executed by the assessee to sell property was not conclusive that sale had actually taken place. The High Court further observed that people, who want to avoid payment of tax, sell the property by getting the sale deeds executed at underestimated value. If it was held that the sale deed was final, the IT authorities would be debarred from finding out how much sale consideration passed under the transaction. The factum of sale and the sale proceeds are real questions to be determined by the IT authorities. Such findings would equally apply to the facts of the present case. Similar view was taken by the Hon’ble Punjab & Haryana High Court in the case of Him Lal Ram Dayal v. CIT (supra). Thus, the ratio of these judgments again support the view that the mere fact that the assessee had executed the sale deeds of land measuring 4.90 acres for an apparent consideration of Rs. 22,10,500 was not conclusive of the fact that the assessee had indeed received only sale consideration of Rs. 22,10,500. The other important reasons given by the AO for taking the sale consideration at Rs. 24.20 lakhs per acre also merit discussion in this order.
16.3 The AO has referred to purchase of agricultural land at village Heir measuring 25 Kanals 10 Marias by M/s K.R. Resorts (P) Ltd. on 28th Oct., 1997 for a consideration of Rs. 25 lakhs. One acre of land is equal to 8 Kanals and, therefore, the total area in terms of acre purchased was 3 acres 1 Kanal and 10 Marias. The sale consideration per acre for the purchase of the said land worked out to 7.84 lakhs (erroneously mentioned by the AO @ Rs. 5 lakhs per acre). The land purchased by M/s K.R. Resorts (P) Ltd. was at a distance of 1.5 kms. from the land of the assessee. The assessee’s land is located at a distance of 2 kms. from the city of Amritsar. Thus, the distance of the land purchased by M/s K.R. Resorts (P) Ltd. was at a distance of 3.5 kms. from the city. It is also a fact that at the time when M/s K.R. Resorts (P) Ltd. purchased the land, Amritsar airport was not declared as international airport. This happened only in May, 2000. If the Amritsar airport was declared international airport in the year 1997, obviously the land near to the airport which M/s K.R. Resorts (P) Ltd. had used for commercial purposes by building a hotel, the same would have commanded more price. It is common knowledge that the status of international airport accorded to a particular airport results in overall development of the area and even the prices of real estate in the surrounding areas increase considerably. The persons arriving from late night flights and also those who are leaving in the early hours of the morning would need accommodation near the airport. Besides, crew of the various airlines also need accommodation on late arrival of flights and departure in the early hours on the next day also. The other factor which also contribute to demand for accommodation near the airport is the cargo clearance at the international airport and access to imports and exports needed for industrial development. None of these factors existed at the time when M/s K.R, Resorts (P) Ltd. purchased the property in the year 1997. Thus, under these normal circumstances, the land, which was near to the city, would command more price because the same could be used not only for residential purposes but also for commercial use. Even if hotel is constructed near the city, the same would be used both by passengers arriving/boarding flights but also by the tourists visiting Amritsar. Thus, such land would command higher rate than the land located at a distance. Despite all these disadvantages M/s K.R. Resorts (P) Ltd. had purchased the property as on 28th Oct., 1997 at a rate of Rs. 7.84 lakhs per acre. As against the same, the assessee with all locational advantage had shown the sale consideration of Rs. 4.50 lakhs per acre despite the fact that the land in question was sold after 4 years from the date when M/s K.R. Resorts (P) Ltd. purchased the land and Amritsar airport was accorded the status of international airport in May, 2000.
16.4 The other important feature highlighted by the AO is the sale of land by assessee’s own brother, namely, Dr. Santokh Singh at a much higher rate. We have also noted that the land belonging to Dr. Santokh Singh was adjacent to assessee’s own land. However, Dr. Santokh Singh had got the approval of the PUDA and the land was developed over a period of 3 to 4 years. In fact, during the financial year 2001-02, Dr. Santokh Singh had incurred expenses of Rs. 37,43,767 on the development of land approved by PUDA. The land was sold by the assessee in the same financial year when his brother Dr. Santokh Singh had undertaken the development of PUDA approved colony. Now it is common knowledge that if the adjoining land is developed for residential purposes after obtaining the approval of PUDA, this results in development of roads, providing sewerage facilities, development of parks, recreational facilities, shopping complex, etc. and the rates of nearby properties also go up. It is so because the benefit of development does not remain confined only to the colony developed for this purpose but even to the adjoining areas. None of these developments had taken place when M/s K.R. Resorts (P) Ltd. purchased the land, but this existed at the time when the assessee sold the land. Even during the period when the assessee sold the land, the assessee’s brother Dr, Santokh Singh had sold the land at much higher rates varying from Rs. 800 to Rs. 1,137 per sq. yd. The AO further noted that Dr. Santokh Singh had sold one plot measuring 1 Kanal 17 Marias on 30th Sept., 2003 for Rs. 19 lakhs @ Rs. 2054 per sq. yd., i.e., more than Rs. 80 lakhs per acre. This deal was made after a period of two years from the sales made by the assessee. Considering the fact that the said plot was fully developed and was in the PUDA approved colony, still the price at which it was sold was considerably higher than shown by the assessee in the sale deeds more so when the land owned by assessee’s brother was being developed simultaneously, 16.5 The most important piece of evidence discussed by the authorities below is the rates revised by the District Revenue Authorities for registration of the land at village Heir w.e.f. 1st April, 2003. Prior to 1st April, 2003, the rates for agricultural land at village Heir for the purpose of stamp duty were fixed at Rs. 4.95 lakhs per acre for irrigated and Rs. 3,30,440 for ‘Gair Mumkin’ agricultural land. The rate for residential area was Rs. 220 per sq. yd. However, w.e.f. 1st April, 2003, the rates were revised to Rs. 30 lakhs on road side and Rs. 18 lakhs for agricultural land behind road. The rate for residential area was revised to Rs. 750 per sq. yd. The rate for commercial property was revised to Rs. 2,500 per sq. yd. It is common knowledge that such rates did not increase overnight. It is only the effect of various factors, which influenced the increase in the sale rates over a period of time. Considering the fact that assessee’s land measuring 1.5 acres/2 acres abutted the road and the remaining land was behind and subsequently the rates were revised by the Revenue Authorities to Rs. 30 lakhs and Rs. 18 lakhs respectively for sale of such land, it is reasonable to believe that the assessee had struck a deal for sale of land to S/Sh. Sukhbinder Singh and Gurwinder Singh at the rate of Rs. 22 lakhs per acre in June, 2001. Thus, viewed from this angle also, the facts stated by S/Sh. Sukhbinder Singh and Gurwinder Singh in their statements also lend support that the deal was made @ Rs. 22 lakhs per acre. If S/Sh. Sukhbinder Singh and Gurwinder Singh had agreed to purchase the land at Rs. 22 lakhs per acre, it is reasonable to infer that subsequent sale to other parties made in July, 2001 must be on better terms and conditions otherwise there was no valid reason for selling land at lower rate than what S/Sh. Sukhbinder Singh and Gurwinder Singh had agreed to purchase. We have also noted that it is not the claim of the assessee that the impugned sale was a distress sale or was actuated by some special consideration like, sale to close relations or due to some other compelling circumstances. Thus, in the light of these facts and circumstances of the case we are of the considered opinion that the authorities below were justified in relying on the testimony of S/Sh. Sukhbinder Singh and Gurwinder Singh, which was credible, reliable and acceptable and was also supposed by other independent evidence.
16.6 As regards various judgments relied upon by the learned Counsel for the same; the same are clearly distinguishable on facts. In none of the cases, there existed material in the form of statements of the earlier purchaser who stated that deal was struck at a particular rate adopted by the AO. But in this case, the direct evidence placed on record in the form of statements of S/Sh. Sukhbinder Singh and Gurwinder Singh and other relevant factors detailed above show that the assessee had entered into a deal for sale of land to those parties at the rate of Rs. 22 lakhs per acre. The judgment of Supreme Court in K.P. Varghese v. ITO (supra) relied upon by the learned CIT(A) was with reference to the provisions of Sub-section (2) of Section 52 of the IT Act and this section stood omitted from the Act w.e.f. 1st April, 1988, In this case the Supreme Court had observed that the object of Sub-section (2) of Section 52 was not to strike honest and bona fide transaction where the consideration for transfer was correctly disclosed by the assessee, but to bring within the net of taxation those transactions where the consideration in respect of transfer was shown at a lesser figure than that actually received by the assessee so that they do not escape the charge of tax on capital gains by understatement of the consideration. In this context, the Supreme Court had held that the burden was on the Revenue to prove such understatement. But in the case before the Supreme Court, the evidence of the nature referred to above did not exist and the Revenue had mainly relied on the market value of the property. Therefore, the ratio of the judgment of Supreme Court in the case of K.P. Varghese v. ITO is not applicable to the facts of the present case. In the case of Hansalaya Properties v. ITO (supra) Delhi, what was held was whether the addition on account of ‘on-money’ was warranted or not was a question of fact to be decided on the evidence on record. The Tribunal held that the evidence may be direct or indirect or circumstantial but while relying on such evidence one should not tread the path of conjectures, suspicion and surmises. Thus, it, was accepted by the Tribunal that the issue in each case has to be decided on its own facts. But these are not the facts of the present case. Similarly, in the case of Sanjay Chawla v. ITO (supra) relied upon by the learned Counsel, it was observed that apart from the report of the DVO there was no evidence on record to prove that the assessee. had paid consideration higher than that indicated in sale document and, therefore, the addition was not justified. In the present case, the AO has not made the addition by relying on the report of the DVO but on the basis of evidence and material on record. In this case the AO has not relied on the report of DVO but other evidence- Similarly, in the case of Mamta Mahajan and Ors. v. ITO (supra), relied upon by the learned Counsel, the Tribunal held that on the basis of DVO’s report alone, the fair market value could not be adopted as full value of consideration in the absence of any other evidence. But these are not the facts of the present case. Similarly, in other cases also, i.e., CTT v. Ms. Sushila Mittal and Ors. (supra) and CIT v. K.C. Agnes and Ors. (supra), relied upon by the learned Counsel, the additions were deleted on the ground that there was no evidence with the Department to show that the assessee had received the amount over and above the consideration shown in the sale deed. But these are not the facts of the present cases. Therefore, none of the judgments relied upon by the learned Counsel is applicable to the facts of the present case.
16.7 Moreover, when we speak about, the burden to be discharged by the Revenue, it is to be seen in the light of facts and circumstances of each case. It does not mean that there should be a direct evidence about the person in whose presence such money was received. It is common knowledge that most of such transactions take place in clandestine manner and money is not being exchanged in the presence of other. The issue whether the onus is discharged or not by the Revenue has to be seen in the light of facts and circumstances of each case. In this case, we feel that such onus stands discharged.
16.8 The learned Counsel further relied on the statements of the persons to whom the assessee had actually sold the land where they stated that the land was purchased at the rates mentioned in the sale deeds. It is an admitted fact that there are two parties to the same transaction. If the sale consideration was understated, those parties were equally liable to action as they too had understated the purchase consideration and the difference in the consideration shown in the purchase deed and actual consideration would be liable to addition in their hands under Section 69 as unexplained investment. Therefore, admittedly nobody would come forward and admit that they had paid over and above the price shown in the sale deeds because it benefits them. Same is the position with brokers through whom such sale was made. They equally benefit by not showing entire income from brokerage. Besides, if they have to stay in business they have to keep such secrets. Under these circumstances, we are of the opinion that no credence could be given to their statements.
16.9 Lastly, the learned Counsel has referred to certain sale instances. The rates of the property depend on the location, size, dimension, potential of its being used for commercial residential or non-residential purposes. Now if these plots of land sold were located at a distance and not touching the road, the rates would be lower. It is common knowledge that like can be compared with the like. Now if the land sold in the instances cited by the assessee was away from the land of the assessee, i.e., other side of the village not touching the road or where assessee’s brother was developing the land in PUDA approved colony, the rate would be different. In fact, one of the sale instances relates to the period when Amritsar airport was not accorded the international status. On the contrary, the AO has referred to the sale instances of an adjoining land and also the land on the same road where assessee’s land was located. Therefore, the same are more reliable when seen in the light of other direct evidence discussed above. 16.10 As regards the contention of the learned Counsel that, had there been undervaluation of sale consideration in the sale deeds, the Revenue Authorities of the State Government would not have registered the sale deeds, it is mentioned that sale rates fixed by the State Government are only indicative of the rates but are not decisive or conclusive of the market rates. It is not the case that if the rate for registration is fixed at ‘X’ amount, the property cannot be sold for higher amount. It is common knowledge that due to various reasons and also the procedural reguirement, the rates are not revised immediately as soon as these go up. For example the rates fixed by the Distt. Revenue Authorities for sale of agricultural land at village Heir upto 31st March, 2003 was Rs. 4,95,000. Still M/s K.R. Resorts purchased the land on 28th Oct., 1997 at Rs. 7.84 lakhs per acre, i.e., at much higher rate than fixed by the Government for stamp duty. Even as per rates revised w.e.f. 1st April, 2003, the rate fixed for sale of residential plot was fixed at Rs. 750 per sq. yd. But the information placed on p. 11 of the assessment order shows that assessee’s brother Dr, Santokh Singh had sold the residential plots at the. rate varying from Rs. 800 to Rs. 1,137 per sq. yd. during the period from 21st May, 2002 to 1st July, 2002. He also sold one plot measuring 1 Kanal 17 Marias on 30th Sept., 2003 at Rs. 2,054 per sq. yd. as against rate fixed by the Distt. Revenue Authorities at Rs. 750 per sq. yd. But it does not mean that Revenue Authorities revised the rates immediately on 30th Sept., 2003. In places like Bombay rates of commercial property located at Nariman point increase almost every month. But this does not mean that the State Revenue Authorities revise the rates for stamp duty every month. This only shows that the rates fixed by the State Revenue Authorities for the purpose of stamp duty are not conclusive about the market rates of the property. The same depends on several other factors as detailed in the preceding paragraphs. Therefore, this plea is also of no help to assessee.
16.11 Thus, in the light of detailed discussions in the preceding paragraphs and the legal position discussed above, we are of the considered opinion that the authorities below were justified in relying on the testimony of S/Sh. Sukhbinder Singh and Gurwinder Singh and other evidence for substituting the apparent consideration shown in the sale deeds. Therefore, we uphold the orders of the authorities below and reject the respective grounds of the assessee.
16.12 The next issue to be decided by this Bench is the reduction allowed by the CIT(A) from Rs. 97,20,482 to Rs. 53,48,882. Both S/Sh. Sukhbinder Singh and Gurwinder Singh had stated that their deal with the assessee was for purchase of the land @ Rs. 22 lakhs per acre. They also stated that since the assessee got better offer from the buyer, he did not honour the deal made with them. The AO took into account this fact and also the subsequent sales made by the assessee’s brother Dr. Santokh Singh at much higher rate for adopting a rate of Rs. 500 per sq. yd. But there is no direct evidence to show that the land sold to persons was at higher amount than Rs. 22 lakhs. This could be only a presumption drawn by S/Sh. Gurwinder Singh and Sukhbinder Singh that since the assessee did not honour the deal with them, he would have sold the land to others on better terms. But there is no evidence to support this as nobody has stated that the land was sold at rates higher than Rs. 22 lakhs per acre. We feel that even though the deal with subsequent buyers might have been, made at higher rates than Rs. 22 lakhs per acre with S/Sh. Sukhbinder Singh and Gurwinder Singh, still there is no evidence to support the case of the Revenue that the land was actually sold at Rs. 24.20 lakhs per acre. Therefore, we are of the opinion that AO was not correct in adopting higher rate of Rs. 500 per sq. yd. than stated by S/Sh. Sukhbinder Singh and Gurwinder Singh. We have already held that the testimony of S/Sh. Sukhbinder Singh and Gurwinder Singh is reliable and acceptable. Therefore, we are of the opinion that the sale consideration for land measuring 4.90 acres sold in the accounting year should be taken at Rs. 22 lakhs per acre, i.e., the price at which the deal was struck with these parties in June, 2001. The land was also sold to other parties only in the month of June, 2001. Therefore, the rate in our view should also be taken at Rs. 22 lakhs per acre. Since one acres consists of 4840 sq. yds, the rate per sq. yd. would work out to Rs. 454 as against the rate of Rs. 400 per sq. yd. adopted by the CIT(A). Accordingly, we set aside the order of the CIT(A) and direct, the” AO to compute the capital gains by taking rate of Rs. 22 lakhs per acre (i.e., Rs. 454 per sq. yd.). While the ground of appeal of the assessee is dismissed, the ground of appeal of the Revenue is partly allowed.
17. In the result, both the appeals of the assessee as well as the Revenue are partly allowed.