The legal principle established in the judgment emphasizes the importance of proving inflated sale consideration and the relevance of circumstances in determining the value of the property for income tax purposes.

K.RAVIRAJA PANDIAN,J

At the instance of the Revenue, the Income Tax Appellate Tribunal set out a case and referred the following question of law for the opinion of this Court.

" Whether , on the facts and in the circumstances of the case, the Tribunal was right in law and had valid materials to disregard the sale price of the property as recorded in the agreement dated 21.2.1983 which was seized under Section 132 and holding that the market value was only Rs.76,000/- and restricting the addition to the total income of the assessee to Rs.36,000/- as against the addition of Rs.1,67,000/- made by the assessing authority ?"

2. The assessee, an individual entered into an agreement of sale on 21.2.1983 with one Arumugam for purchase of land in an extent of 0.75 acres with an uncompleted structure of Cinema Theatre for a total consideration of Rs.2,07,000/-. The said agreement was seized by the Revenue in the course of search conducted. The sale deed was registered on 2.3.1983 for a consideration of Rs.40,000/-. The assessee claimed that the expenditure laid out was only Rs.47,000/-,which includes the sale consideration of Rs.40,000 and other expenses towards registration and stamp duty in a sum of Rs.7000/-. The assessing officer made an addition of Rs.1,67,000 representing the difference in the value between the sale agreement dated 21.2.1983 and the sale deed dated 2.3.1983. On appeal, the Commissioner of Income Tax (Appeal) deleted the addition made by the assessing officer.

3. The Tribunal on further appeal at the instance of the Revenue refixed the addition to Rs.36,000 on the ground that the assessee agreed before Commissioner of Income Tax (Appeals) of the valuation arrived at by the Inspector in a sum of Rs.76,000. The Revenue being not satisfied with the finding of the Tribunal moved for reference and hence the above reference.

4. Mr. T.Ravi Kumar, Learned counsel appearing for the Revenue submitted that the Tribunal erred in accepting the valuation arrived at by the Inspector, which has no legal base. He further submitted that the reason adopted by the Tribunal to disregard the agreed value in the agreement dated 21.2.1983 is unsustainable in law. He further contended that the explanation offered by the assessee for inflation of the value of the property in the agreement was not substantiated by the assessee. He further submitted that when the vendor himself admitted that he purchased the property for Rs.6000/- and expended more than Rs.50,000 in putting up construction, by no stretch of imagination, it could be accepted or it could be considered as true that the property was sold by him for a sum of Rs.40,000/-. He further highlighted that as per the agreement, the assessee has paid a sum of Rs.45,000/- as advance, which is more than the total consideration as stated in the sale deed. Hence he submitted that the value stated in the sale deed is not reflecting the correct value of the property purchased. He further contended that when there are two prices, one as per the sale agreement and the other as per the sale deed are available, the Tribunal could have accepted either of the price by adducing proper reasoning for the same. But, strangely in this case accepted a value in between the two prices on the ground that the value has been arrived at by the Inspector of the Department and the same has been accepted by the assessee before the Commissioner of Income Tax (Appeals), which is unsustainable in law.

5. On the other hand Mr.V.Ramachandran, learned Senior Counsel appearing for the assessee submitted that there is no wrong in accepting the value arrived at by the Inspector , who is also a departmental official. Though the assessee is not legally bound by the valuation arrived at by the Inspector, in order to give quietus to the issue, the assessee has accepted the valuation and this is the only reason for the assessee for not moving for a reference against the order of the Tribunal fixing the value at Rs.76,000/-