INCOME TAX ACT, 1961

--Income from undisclosed sources--Unexplained investmentsInvestment in residential house and flat--The assessee was found to have paid a sum of Rs. 27.00 lakhs towards purchase of residential flats (amount paid: Rs. 24.00 lakhs) and purchase of flats (amount paid: Rs. 3 lakhs) in the year under appeal. In addition, the assessing officer added Rs. 90,000 towards household expenses. Thus the assessee was found to have invested and incurred the expenses to the extent of Rs. 27,90,000. The aforesaid figures of investment were admitted by the assessee. It was stated by the assessee before assessing officer that he had sold agricultural land for a sum of Rs. 8.00 lakhs. He further stated that the value of the said land was assessed by the Stamp Valuation Authority at Rs. 38.00 lakhs for the purposes of payment of stamp duty, which was paid accordingly. According to him, the capital gain was also computed in terms of the provisions of section 50C and income-tax was also paid accordingly. He submitted that the said sum of Rs. 38.00 lakhs, being the value of land for the purpose of payment of stamp duty, should be taken as his income for all intent and purpose. He claimed that if the aforesaid sum of Rs. 38.00 lakhs is taken as his income then that money would be available for meeting entire investment/expenditure amounting to Rs. 27,90,000/- and consequently the nature and source thereof would stand automatically explained. The assessing officer considered the submissions of the assessee. He, however, treated a sum of Rs. 8.00 lakhs, being the amount actually received on sale of agricultural land, as available for the purpose of payment towards purchase of residential flats and plots and for meeting household expenses. According to him, a sum of Rs. 38.00 lakhs, being the value assessed by the Stamp Valuation Authority, was fictional value for computation of capital gain but the said amount was never paid by the buyer of the agricultural land to the assessee and therefore the said sum of Rs. 38 lakhs was never available with the assessee for making investments. In this view of the matter, he treated the difference between Rs. 27,90,000, being the payments towards purchase of residential flats/plots/household expenses, and Rs. 8.00 lakhs, being the amount actually available with the assessee on sale of agricultural land, as unexplained investment and consequentially taxed the same. Held: Sections 69, 69A and 69B of the Income Tax Act also create legal fiction by which unexplained investments, etc., are deemed to be the income of the assessee. They place the burden on the assessee to satisfactorily explain the nature and source of investments. Deemed income may be income for the purposes of assessment but that does not ipso-facto mean that the deemed consideration is actually and physically available for investments. Though section 50C creates legal fiction to the effect that the value adopted/assessed by the Stamp Valuation Authority for payment of stamp duty would be deemed to be the consideration received yet the said legal fiction cannot be extended to create another legal fiction to the effect that the consideration deemed to be so received would also be deemed to generate cash/funds for making the investments or meeting the expenses, or otherwise displace the legal fiction created by sections 69, 69A and 69B.