2025 (2) TMI 696 - AT - Income Tax

ITAT allows appeal on capital gains computation, orders DVO referral under Section 50C when circle rate disputed

Shri Hemant Vasisht Versus DCIT, Circle-2, Gurgaon

ITAT Delhi allowed assessee's appeal for statistical purposes regarding capital gains computation under Section 50C. Court held that when assessee ... Capital gain computation - Addition u/s.50C - accepting higher circle rate/stamp duty value as against the actual sales consideration on sale of flats - AO observed that the sale consideration reported by the assessee was less than the circle rate determined in terms of Section 50C - HELD THAT:- CIT(A) ought to have referred the matter to the file of DVO for determination of fair market value of the property in terms of Section 50C(2) of the Act which was not done in the instant case. In fact even if the assessee does not request for referring the matter to DVO, still the ld CIT(A) or the ld AO ought to have referred the matter to the DVO once the adoption of circle rate has been disputed by the assessee. Admittedly, the adoption of circle rate has indeed been objected by the assessee which is evident from various points addressed by the assessee before the ld CIT(A) which are already mentioned herein above as to why the circle rate should not be adopted. See Sunil Kumar Agarwal [2014 (6) TMI 13 - CALCUTTA HIGH COURT] wherein, it was held that when the agreed consideration as per conveyance deed and circle rates are different and assessee objects to the adoption of such circle rate, then the ld AO should refer the matter to valuation officer as contemplated in Section 50C(2) - direct the ld AO to refer the matter to ld DVO and determine/ recompute the capital gains in accordance with the provision of Section 50C(2) - Ground raised by the assessee is allowed for statistical purposes. Unexplained cash receipt - HELD THAT:- There is absolutely no evidence brought on record by the AO or by CIT(A) to prove the fact that the assessee had indeed received a sum in cash on account of alleged excess sale consideration. No cross verification whatsoever was made by the lower authorities with the buyer of the property i.e. Shri Krishan Kumar. Hence, there is no scope for making any addition on the ground of suspicion that assessee had received in cash on sale of property. Sale deed was ultimately registered by the assessee only on 05.04.2011, which falls in AY 2012-13. Hence, in any event, the alleged differential sale consideration figure cannot be brought to tax in the hands of the assessee for the year under consideration. Accordingly, ground Nos. 2 and 3 raised by the assessee are allowed. Addition of cash paid towards construction cost - AO observed that the assessee failed to explain the source of payment - HELD THAT:- The assessee placed on record the cash flow statement also giving the daily cash balance available with him. This cash flow statement cannot be ignored to be of general in nature. We find that this cash flow statement requires factual examination of the ld AO to ascertain on a holistic basis as to whether the said statement would provide sufficient cash source to the assessee to explain the payment of Rs. 40 lakhs on 23.02.2011. To the extent of available cash source, the assessee certainly is entitled for relief. With these directions, we restore ground No. 4 to the file of the ld AO and allow for statistical purposes. Unexplained cash credit and unaccounted expenditure - loose slip found - HELD THAT:- On perusal of the impounded documents, crucially we find that no date or year is mentioned. Hence, there is no cogent material brought on record by the revenue to justify the fact as to whether the said loose slip even pertains to the year under consideration. The said loose slip nowhere states that Rs. 10 lakhs was either received by the assessee or paid by the assessee. Hence, it could be safely concluded that the said loose slip is nothing but a mere dumb document based on which no addition could be made in the hands of the assessee. AO relates this loose slip and interest payment for May and June to be relating to May and June 2009. If that be so , then it only pertains to AY 2010-11 and hence, no addition could be made for the year under consideration. The addition deserves to be deleted even on this count. Addition u/s 68 - impounded document during the survey which consists of Kacha Khata of Vipin Sharma to whom the assessee had given loan - HELD THAT:- Before us, the assessee who was present in person confirmed the fact that he had sold old generator to his cousin Vipin Sharma and since the cheque given by Vipin got bounced, the assessee received in cash towards sale of old generator. We find only the date and figure and name of Vipin are mentioned in the said loose sheet. The nature of payment or receipt is not even mentioned thereon. Hence, the explanation given by the assessee could be considered as a plausible explanation in the facts and circumstances of the case. However, this matter, in our considered opinion, requires factual verification. Hence, we deem it fit and appropriate in the interest of justice and fairplay, to restore this issue to the file of ld AO for de novo adjudication in accordance with law and also in the light of explanation given by the assessee before us. Accordingly, ground No. 6 raised by the assessee is allowed for statistical purposes. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the addition of Rs. 1,79,50,000/- under Section 50C of the Income-tax Act, 1961, based on higher circle rate/stamp duty value, was justified.Whether the addition of Rs. 43,20,000/- as unexplained cash receipt related to the sale of flats was appropriate.Whether the addition of Rs. 40,00,000/- paid to M/s. Ring India Infotech Pvt. Ltd. was justified despite the submission of a cash flow statement by the assessee.Whether the addition of Rs. 10,00,000/- under Section 68 and Rs. 40,000/- under Section 69A, based on a loose sheet impounded during the survey, was valid.Whether the addition of Rs. 1,70,000/- under Section 68, based on a Kacha Khata, was appropriate.ISSUE-WISE DETAILED ANALYSIS1. Addition under Section 50C of the ActRelevant Legal Framework and Precedents: Section 50C of the Income-tax Act mandates the adoption of the stamp duty value as the deemed sale consideration for capital gains if it exceeds the actual consideration. The precedent from the Calcutta High Court in Sunil Kumar Agarwal Vs. CIT supports the referral to a Department Valuation Officer (DVO) if the circle rate is disputed.Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not refer the matter to the DVO despite the assessee's objection to the circle rate. The Tribunal emphasized that even without a request from the assessee, the authorities should refer the matter to the DVO when the circle rate adoption is contested.Conclusion: The Tribunal directed the Assessing Officer to refer the matter to the DVO for determining the fair market value, allowing the ground for statistical purposes.2. Addition of Rs. 43,20,000/- as Unexplained Cash ReceiptKey Evidence and Findings: The addition was based on an agreement to sell, which allegedly mentioned a higher sale consideration than the registered sale deed. However, the Tribunal found no evidence supporting the receipt of Rs. 43,20,000/- in cash.Court's Interpretation and Reasoning: The Tribunal noted the absence of corroborative evidence and cross-verification with the buyer. Additionally, the sale deed was registered in a subsequent assessment year, making the addition inappropriate for the year under consideration.Conclusion: The Tribunal allowed the grounds, deleting the addition.3. Addition of Rs. 40,00,000/- Paid to M/s. Ring India Infotech Pvt. Ltd.Key Evidence and Findings: The assessee submitted a cash flow statement to justify the payment. The CIT(A) deemed the statement general and upheld the addition for the amount paid within the assessment year.Court's Interpretation and Reasoning: The Tribunal found the cash flow statement warranted factual examination to determine the cash source's adequacy.Conclusion: The Tribunal remanded the issue to the Assessing Officer for verification, allowing the ground for statistical purposes.4. Addition of Rs. 10,00,000/- under Section 68 and Rs. 40,000/- under Section 69AKey Evidence and Findings: The addition was based on an unsigned loose sheet, which the assessee claimed was unrelated to any actual transaction.Court's Interpretation and Reasoning: The Tribunal found no corroborative evidence or verification of the entities mentioned in the document. The document was deemed a 'dumb document' with no date or year, making it unreliable for the addition.Conclusion: The Tribunal deleted the addition, allowing the ground.5. Addition of Rs. 1,70,000/- under Section 68Key Evidence and Findings: The addition was based on a Kacha Khata, which the assessee explained as a sale of an old generator.Court's Interpretation and Reasoning: The Tribunal found the explanation plausible but required factual verification.Conclusion: The Tribunal remanded the issue to the Assessing Officer for de novo adjudication, allowing the ground for statistical purposes.SIGNIFICANT HOLDINGSPreservation of Verbatim Quotes: The Tribunal emphasized the necessity of referring disputed circle rates to the DVO, citing the Calcutta High Court's decision in Sunil Kumar Agarwal Vs. CIT.Core Principles Established: The judgment underscores the importance of corroborative evidence and factual verification in tax assessments, particularly when relying on documents like loose sheets and Kacha Khata.Final Determinations: The Tribunal allowed several grounds for statistical purposes, remanding issues for further examination, and deleted certain additions due to lack of evidence.