2.Section 69B has been in the statute book to take care of involvement of black money in case of purchase, but this section can be invoked when there is a positive finding by the assessing officer (AO) to prove that the amount actually paid for purchase of property is more than the amount recorded in the purchase deed. Only then the AO can assess the excess portion as ‘income from undisclosed sources’. Section 69B does not empower the AO to assess the income merely on the basis of suspicion about the involvement of black money.
3.The AOs quite often refer the matter (of purchase) to the valuation officer to ascertain the true market value of the property on the date of purchase by the assessee. In case the valuation given by the department’s valuer is higher than the cost of purchase stated in the purchase deed, the AO draws an inference that the assessee might have paid the excess portion as black money. After drawing such inference, AO invariably invokes section 69B and assesses the excess portion as ‘income from undisclosed sources’. This is done without satisfying the parameters laid down in section 69B.
4.Let us see the scope of both the sections i.e. section 50C and section 69B:
For sellersSection 50C| For buyersSection 69B|
· where the consideration received or accruing| * where in any financial year the assessee| · as a result of transfer by an assessee of a capital asset being land or bldg or both valuable article, and| * has made investments or is found to be the owner of any bullion, jewellery or other| · is less| * the AO finds that the amount expended on making such investments| · than the value adopted by stamp authority| * exceeds the amount recorded in the books of accounts, and| · then| * the assessee offers no explanation or the explanation is unsatisfactory| · the value so adopted be deemed to be the full value of consideration| * the excess amount may be deemed to be the income of the assessee for such financial year.|
5.At the outset, it is clarified that section 50C cannot be applied by the AO for the simple reason that the consideration is not received or accrued and the transfer of capital asset is not by the assessee while purchasing the property.
6.For invoking section 69B, AO has to first find out as to how much amount is actually paid by the assessee. This finding must be supported by documentary evidence and not merely based on suspicion. Even if stamp duty is paid on higher amount or the valuer has given higher valuation, this fact by itself cannot establish that the assessee has paid higher amount. There may be various reasons for paying lessor amount by the assessee such as – market slack, distress sale by the seller, poor condition of the property, future life of the property, probable expenses on renovation, surrounding area /atmosphere, school location, availability of transport and so on and so forth. Therefore, in these situations, on preliminary issue itself, the AO’s treatment of ‘undisclosed sources’ is not correct.
7.Even in the hypothetical situations like assessee’s own confession during the course of any proceeding or broker’s confession or seller’s confession about receipt of excess money from the buyer or in survey/ search action any diary /paper is found recording the actual amount paid by the buyer etc, the AO can not blindly invoke section 69B but he has to go one step ahead and has to seek assessee’s explanation. It is only if the assessee offers no explanation or his explanation is found to be unsatisfactory that the AO may proceed to assess the excess portion as ‘income from undisclosed sources’ u/s 69B.
8. Let us have a closer look at section 6B.
Section 69B: Where in any...