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[2009]177 TAXMAN 89 (MAG)
search & seizure

[Vol. 177

Decision of Supreme
Court in P.V.
KalyanaSundaram s
case - An Analysis

Moksh Mahajan* *
The author is a Chief Commissioner of Income-tax (Retd.)
his article contains a
comprehensive analysis
of the decision of the
Supreme Court in CIT v. P.V. Kalyanasundaram [2007] 294 ITR 49/164 Taxman 78.
1. In a recent judgment in the case of CIT v. P.V. Kalyanasundaram [2007] 294 IT
R 49/164 Taxman 78, their Lordships of the Supreme Court have dismissed the rev
ision appeal on the grounds that actual sale price of property, the implication
of contradictory statements and reliance to be placed on loose sheets recovered
in the course of searches are all questions of facts. Obviously, there could hav
e been no comment on the merits of the case.

The High Court in its turn upheld the order of the Appellate Tribunal relying ma
inly on the reasons given by the authorities below.
Facts of the case
2. The facts in brief are that the assessee purchased certain land at Vrindavan
Road, Fir land, Salem for the alleged sum of Rs. 4.10 lakhs on October 26, 1998.
During the search conducted in the office and residential premises of polimer
network of the assessee, certain notes on loose sheets allegedly in the hands of
the assessee were found and examined by the department. In the statement record
ed, the assessee stated that he could not remember as to why the notings had bee
n made. The vendor, on the other hand, admitted that he had received a total con
sideration of Rs. 34.85 lakhs and that a sum of Rs. 4.10 lakhs shown in the sale
deed had been received by him by way of a demand draft and the balance in cash.
This statement was, however, retracted on January 8, 1999 and an affidavit was
filed that the sale price was only Rs. 4.10 lakhs. Subsequently, he again revert
ed to his earlier stand and deposed that the sale price was Rs. 34.85 lakhs. Th
e Assessing Officer took the sale consideration at Rs. 34.85 lakhs and made an a
ddition of Rs. 30,75,005. The Commissioner (Appeals) held that the statement
of the ven-

dor could not be relied upon as the floor price fixed by the authorities for suc
h property was much lower than the one shown in the sale deed. He, accordingly,
deleted the additions.
The Tribunal in its order held that the aforesaid notings on the basis of which
the initial suspicion with regard to undervaluation had been raised were vague a
nd could not be relied upon as it appeared that the total area with respect to t
he sale deed and that reflected in the loose sheets was discrepant. It was furth
er held that tax of approximately Rs. 1.84 lakhs determined on the basis of addi
tion would not show that the assessee had acquiesced in the addition made by dep
artment or it was conclusive evidence of the sale price as the assessee tried to
save himself from further harassment from the revenue and to escape much higher
liability of the payment of tax of undisclosed income. The Tribunal, therefore,
dismissed the appeal and the matter went to the High Court.
Decision of High Court
3. The High Court heavily relying on the orders of the Commissioner and the Trib
unal, held that no substantial question of law had been raised and, accordingly,
dismissed the appeal.
An analysis
4. What weighed with the High Court was the discrepancy between the area of land
and the price mentioned in the loose sheets vis-a-vis floor rate, the change in
the stand of the vendor and the fact that the floor rate of land could not have
been so high as reflected in the loose sheets.
In this context, it may be stated that the initiation of search proceedings by t
he department was with the intention to unearth the black money which is still r
ampant in the economy. While earlier people used to keep money at home or invest
the same in gold and jewellery, in the present era, the same is either spent on
lavish living or invested in immovable property, gadgets including art facts. A
s valuation of both the building and the art facts is difficult to be made, more
often than not the addition made on the ground is deleted. The assessee would n
ormally leave no clue in regard to any transaction which involves black money. O
n the other hand, the floor area is only a reflection of the amount mentioned in
the sale deeds. Normally, no assessee would scribble certain figures and that t
oo in odd figures unless there is any basis for the same.
Undisputedly, as held by the High Court, there was no conclusive proof for unexp
lained investments. What was lost sight of the admission of the vendor and the j
ottings in the assessee s hands.
In the above circumstances, the provision of searches and seizure is to be given
a second look inasmuch as the material in the form of loose papers and diaries
need to be proved with the independent evidence before any addition can be made.
The onus would clearly shift on to the department to prove the entries as no as
sessee would depict the correct picture.