2020 (8) TMI 597 - AT - Income Tax

Tribunal Upholds Order, Rejects Retrospective Application of Section 56(2)(vii)(b)

Asst. Commissioner of Income Tax, Circle-4 (1) Visakhapatnam Versus Sri Anala Anjibabu And (Vice-Versa)

Asst. Commissioner of Income Tax, Circle-4 (1) Visakhapatnam Versus Sri Anala Anjibabu And (Vice-Versa) - TMI Issues Involved:1. Delay in filing the appeal by the department.2. Applicability of Section 56(2)(vii)(b) of the Income Tax Act, 1961.3. Relevance of the case law under Section 50C for deciding issues under Section 56(2)(vii)(b).4. Adoption of fair market value as certified by the registered valuer.Detailed Analysis:1. Delay in Filing the Appeal:The department filed the appeal with a delay of 6 days. The Assessing Officer (AO) submitted an affidavit explaining the reasons for the delay and requested condonation. After hearing both parties, the delay was condoned.2. Applicability of Section 56(2)(vii)(b):During the assessment, the AO found that the assessee purchased an immovable property for Rs. 5 crores, while the Sub Registrar Office (SRO) value was Rs. 12,67,82,500/-. The AO invoked Section 56(2)(vii)(b) and taxed the difference of Rs. 4,55,11,750/-.The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal, citing the Tribunal's decision in M.Siva Parvathi & Ors., which was in the context of Section 50C. The CIT(A) noted that the agreement for sale was entered into in August 2012, prior to the insertion of Section 56(2)(vii)(b) in the Finance Act, 2013, effective from A.Y. 2014-15. Thus, Section 56(2)(vii)(b) was deemed inapplicable, and the addition made by the AO was deleted.The revenue appealed, arguing that Section 50C and Section 56(2)(vii)(b) are independent provisions. The revenue contended that the property was registered in F.Y. 2013-14, relevant to A.Y. 2014-15, when Section 56(2)(vii)(b) was in force. The assessee argued that the agreement was made in August 2012, before the provision's introduction, and the delay in registration was due to issues with obtaining original title deeds from the bank.The Tribunal upheld the CIT(A)'s decision, noting that the agreement was entered into before the provision's introduction and that the delay in registration was genuine. The Tribunal referenced the Supreme Court's decision in K.P.Varghese, which emphasized that the law applicable at the time of the transaction's initiation should prevail.3. Relevance of Case Law under Section 50C:The CIT(A) relied on the Tribunal's decision in M.Siva Parvathi & Ors., which dealt with Section 50C. The Tribunal found that Section 56(2)(vii)(b) is an extension of Section 50C, applicable to the buyer instead of the vendor. The Tribunal concluded that provisions not in existence at the time of the agreement could not be applied later.4. Adoption of Fair Market Value:The revenue's grounds related to adopting the fair market value as certified by the registered valuer for Section 56(2)(vii)(b). Since the Tribunal decided in favor of the assessee on the primary issue, it found it unnecessary to adjudicate these grounds, though the assessee argued that their case was covered by the Tribunal's decision in Venkateswara Vara Prasad Rao Karipineni.Conclusion:The Tribunal dismissed both the revenue's appeal and the assessee's cross objections, upholding the CIT(A)'s order. The decision emphasized that the provisions of Section 56(2)(vii)(b) could not be applied retrospectively to an agreement made before the provision's introduction. The order was pronounced in the open court on 17th August 2020.