2015 (8) TMI 310 - AT - Income Tax

Tribunal decision: Income Tax Act appeal partly allowed. Sections 56(2)(vi) & property valuation revised.

The Tribunal partly allowed the assessee's appeal. The addition of Rs. 25 lakh under section 56(2)(vi) of the Income Tax Act was in favor of the assessee, ... Income from other sources - addition of ₹ 25 lakh taking recourse to section 56(2)(vi) - assessee was given a sum of ₹ 25 lakh by Ustad Zakir Hussain (an eminent Tabla Artist) in pursuance of a general Power of Attorney dated 01st March, 2002, for the purpose of making investment with HSBC Bank, portfolio management scheme on his behalf - Held that:- If the provisions of the Act, the decision from Hon’ble High Court Punjab & Haryana in Saran Pal Singh (HUF)(2010 (10) TMI 795 - Punjab and Haryana High Court) are analyzed, there is no doubt about the genuineness of the transaction. The assessee never became the beneficiary of the impugned amount i.e. ₹ 25 lakh, thus there is no question of making the addition u/s 56(2)(vi) of the Act. Even otherwise, the amount after liquidating the mutual fund was returned back (Rs.15,58,368/- on 19/10/210 and ₹ 10,37,263/- on 22/03/2011) meaning thereby, the amount was returned back along with profit, consequently, the provision of section 56(2)(vi) is not applicable. Decided in favour of assessee. Addition on estimated ALV of the vacant property - Held that:- As find that the assessee was having two properties one at Baroda and other at Pune in her name. The assessee claimed Baroda property as SOP and has shown the property situated at Pune at ₹ 8,45,226/- in her balance sheet 31/03/2003. The stand of the Revenue is that, keeping in view, the inflation and steep rise in the property prices, the fair market value of the said property should be much higher. The Assessing Officer on conservative basis took the rateable value at 8% per annum of the investment and thus computed the property income at ₹ 45,513/- and taxed the same as ‘income from house property’. The assessee has disputed this valuation. Admitted position is that the assessee did not file any municipal valuation of the said property. The assessee has not explained how the valuation is towards higher side. The formula devised by the Revenue is also based upon personal perception, therefore, to put an end to the litigation, as agreed from both sides, the value is reduced to ₹ 30,000/- against valuation of ₹ 45,513/- done by the Assessing Officer and confirmed by the ld. Commissioner of Income tax (Appeals). - Decided in favour of assessee in part. Issues involved:1. Addition of Rs. 25 lakh under section 56(2)(vi) of the Income Tax Act, 1961.2. Addition of Rs. 45,513 as the estimated ALV of a vacant property.Analysis:Issue 1: Addition of Rs. 25 lakh under section 56(2)(vi) of the Income Tax Act, 1961:The assessee challenged the addition of Rs. 25 lakh under section 56(2)(vi) of the Act, arguing that the impugned addition was made without considering the evidence and statutory provisions. The assessee received the amount from Ustad Zakir Hussain for investment purposes based on a Power of Attorney. The Tribunal noted that the provision intends to tax money received without consideration. The Power of Attorney authorized the assessee to make investments on behalf of Zakir Hussain. The Tribunal found no evidence that the investment was made from Zakir Hussain's funds. Citing a similar case from the Punjab & Haryana High Court, it was emphasized that the loan received, which was repaid, could not be treated as income under section 56(2)(v) of the Act. The Tribunal concluded that the assessee did not benefit from the amount, as it was returned with profits, thus the provision of section 56(2)(vi) did not apply. The ground was allowed.Issue 2: Addition of Rs. 45,513 as the estimated ALV of a vacant property:The second issue pertained to the addition of Rs. 45,513 as the estimated ALV of a vacant property. The Revenue argued that the fair market value should be higher due to inflation and property price rise. The Assessing Officer computed the property income based on a conservative rate, which was disputed by the assessee. As the assessee did not provide municipal valuation or explain the higher valuation, a compromise was reached to reduce the value to Rs. 30,000 from the initial valuation of Rs. 45,513. Consequently, this ground of the assessee was partly allowed.In conclusion, the appeal of the assessee was partly allowed by the Tribunal, with the first issue regarding the addition under section 56(2)(vi) being in favor of the assessee, and the second issue relating to the estimated ALV of the vacant property being partly allowed.