2021 (4) TMI 94 - AT - Income Tax

Income Tax Appeal Outcome: Section 50C deletion, Section 68 verification ordered; household expenses adjustment.

Govindbhai G. Bharwad Versus D.C.I.T., Circle-6, Ahmedabad.

The Tribunal partly allowed the appeal, directing the deletion of additions under Section 50C of the Income Tax Act due to retrospective application of ... Capital gain computation - Addition u/s 50C - whether the relaxation provided vide 3rd proviso to section 50C of the Act which comes into force vide Finance Act 2018 w.e.f. 01-04-2019 can be given a retrospective effect? - difference between the stamp value and sales consideration of land is of 0.78% only which is less than 5%.The actual sale consideration declared by the assessee should be taken for the purpose of computing the income under the head capital gain - HELD THAT:- Where consideration on sale or transfer of property being land or building falls below the value on which stamp duty is paid to State Government under relevant Act then such value should be taken as consideration for purpose of computing capital gain on such transfer. This deeming fiction was creating hardship to the assessee where there were marginal variation between stamp value and actual consideration due to genuine reason. Therefore the legislator inserted new proviso to section 50C(1) of the Act which provided exemption from the levy of this section when difference between actual consideration and stamp value is less than 5%. Therefore in our considered whenever an amendment brought in statute by the legislature with view to erase the hardship caused to the assessee then such amendment should be given a retrospective effect without going into the fact whether the same is written specifically or not. In holding so we find support and guidance from the judgment of coordinate bench of this case Dharamshibhai Sonani [2016 (9) TMI 1259 - ITAT AHMEDABAD] where the issue was that whether the amendment brought in section 50C of the Act with regard to the point of time for taking stamp value vide Finance Act 2016 is retrospective in nature or not. The above amendment or proviso was inserted by the legislature with view to minimize the hardship caused to assessee due to deeming fiction.the amendment brought in section 50C by Finance Act 2018 is in retrospective in nature. Accordingly, the variation in the amount of consideration shown by the assessee is within permissible limit of the stamp value consideration. Therefore, no addition is required for the amount showing the difference between the actual consideration and stamp value. Accordingly we direct the AO to delete the addition by him. Hence the ground of appeal of the assessee is allowed. Addition u/s 68 - unexplained Cash deposit in bank account - HELD THAT:- As explained by the assessee that he has received a sum of ₹72,000, from the party to whom he has sold his car against the payment of the EMIs. Originally the assessee acquired car on the loan which was sold to the party but the ownership was not transferred. In other words the loan was continuing in the name of the assessee only. Thus the other party was paying the AMI to the assessee which was subsequently paid to the bank. In this regard, conversely, we find that contention of the assessee was not based on any documentary evidence. In the absence of necessary documents, we do not find any merit submission of the assessee. Accordingly we confirmed the addition for the sum of ₹72,000 to the total income of the assessee. Regarding the balance amount, it was explained by the assessee that money was deposited out of the cash withdrawal from the bank. The assessee to this effect has filed the cash book which is placed on pages 27-28 of the paper book. We find force in the argument of the learned AR for the assessee. If the amount has been deposited in cash by the assessee out of the cash withdrawal from the bank, then no addition, to our mind is warranted particularly in a situation where there is no finding of the authorities below suggesting that the amount withdrawn from the bank was utilized by the assessee for any other purpose. In the absence of such finding, an inference can be drawn that the amount withdrawn by the assessee from the bank was utilized for the purpose of subsequent deposit in the bank. However, we are inclined to direct the AO to verify whether the withdrawal from the bank was deposited in the bank subsequently. If that be so the addition is not warranted. Addition on account of low withdrawal of household expenses - HELD THAT:- There cannot be addition on the basis of estimation. Facts of the case on hand are different insofar the expenses incurred by the assessee towards the children education fee. The AO has given very clearcut finding that the assessee has been incurring children education fee of ₹10,350.00 for each child aggregating to ₹ 31,050.00. Furthermore, it has also been pointed out that the family of the assessee consist of 5 members in totality. Thus in such circumstances the drawings shown by the assessee to the tune of ₹36,000 does not appear to be reasonable. We also find that the assessee has not produced any documentary evidence in support of his contention that there was the income in the hands of his wife and mother. Accordingly, in the absence of the necessary documents, it can be inferred that there was no income in the hands of his wife and mother as claimed by the assessee. Accordingly, it seems that the drawings shown by the assessee should certainly be more than the sum of ₹ 36,000 as shown by the assessee. Estimate the drawings the assessee - HELD THAT:- There is no standard jacket formula to work out the drawings of the assessee based on the documentary evidence in the given facts and circumstances.Some element of guesswork is required to work out drawings of the assessee. Accordingly, we hold that the drawings to the tune of ₹15,000 per month for the household expenses are sufficient and reasonable in the light of the above stated facts and discussion. Thus, the total drawings works out at ₹1,80,000 and the assessee has already shown a sum of ₹36,000 towards the drawings in the income tax return. Accordingly, the balance amount of ₹1,44,000 is added to the total income of the assessee. Hence the ground of appeal of the assessee is partly allowed. Issues Involved:1. Addition under Section 50C of the Income Tax Act.2. Addition under Section 68 of the Income Tax Act for unexplained cash credit.3. Addition for low withdrawal of household expenses.Issue-wise Detailed Analysis:1. Addition under Section 50C of the Income Tax Act:The first issue concerns the addition of Rs. 1,07,142/- under Section 50C of the Income Tax Act. The assessee sold a piece of land for Rs. 2,75,00,000/-, but the stamp value was Rs. 2,77,14,285/-. The AO invoked Section 50C and added the difference of Rs. 2,14,285/- (50% share of the assessee being Rs. 1,07,142/-) to the total income. The CIT(A) confirmed this addition, stating that the valuation adopted by the stamp duty authorities should be considered for capital gains computation. The assessee argued that the difference between the stamp value and sales consideration was only 0.78%, less than the 5% threshold introduced by the Finance Act 2018, effective from 01-04-2019. The Tribunal held that amendments to minimize hardship should be applied retrospectively, thus allowing the appeal and directing the AO to delete the addition.2. Addition under Section 68 of the Income Tax Act for Unexplained Cash Credit:The second issue involves the addition of Rs. 5,72,000/- under Section 68 for unexplained cash deposits in the assessee's ICICI and SBI bank accounts. The AO added this amount due to the assessee's failure to explain the sources. The CIT(A) confirmed the addition, noting the lack of documentary evidence. The assessee contended that Rs. 72,000/- was received from a car sale, and the remaining amount was withdrawn from the bank. The Tribunal found no merit in the assessee's submission regarding the Rs. 72,000/- due to the absence of documentary evidence and confirmed this part of the addition. However, for the remaining amount, the Tribunal directed the AO to verify if the cash deposits were from bank withdrawals and delete the addition if verified.3. Addition for Low Withdrawal of Household Expenses:The third issue pertains to the addition of Rs. 1,50,000/- for low withdrawal of household expenses. The AO estimated the annual household expenses at Rs. 3,60,000/- based on the assessee's family size and locality, adding Rs. 3,00,000/- to the total income. The CIT(A) provided partial relief, reducing the addition to Rs. 1,50,000/-. The assessee argued that household expenses were shared with his wife and mother. The Tribunal found the claimed household expenses of Rs. 36,000/- unreasonable given the family size and school fees. In the absence of evidence of income for the wife and mother, the Tribunal estimated reasonable household expenses at Rs. 1,80,000/-, adding Rs. 1,44,000/- to the total income, thus partly allowing the appeal.Conclusion:The appeal was partly allowed, with the Tribunal directing deletions and verifications for some additions while confirming others. The order was pronounced on 02/03/2021 at Ahmedabad.