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2019 (9) TMI 777
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....etween the stamp duty valuation and the actual purchase price is undisclosed investment in the hands of assessee purchaser, and therefore, the order of Assessing Officer not taxing the differences in hands of purchaser assessee is erroneous and prejudicial to the revenue?" 3 The case of the appellant, in his own words as pleaded in the memorandum of the Tax Appeal, is as under: "1.1 During the course of scrutiny assessment u/s. 143(3) for Asst. Year 2011-12, the Assessing Officer raised various queries, which were replied by the appellant. To one such query, in regard to investment in land of Rs. 1,17,93,542/- as on 31.03.2011 by a notice dated 18.10.2013 u/s. 142(1), the Chartered Accountant of the appellant by a letter dated 19.11.2013 gave a detailed reply pointing out that the possession of the land was taken on 31.03.2008 and the appellant is already assessed in Asst. Year 2008-09 and annexed the assessment order for Asst. Year 2008-09 along with that reply. The Assessing Officer passed an order u/s. 143(3) dated 28.11.2013. Thereafter, the Principal Commissioner of Income Tax1, Vadodara issued a notice u/s. 263 dated 12.01.2016 pointing out that the above assessme....
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....cost of land and also the purchase was made in the preceding years except for mere registration of the document in the current year." ( i.e. Asst. Year 2011-12)........ "The purchase transaction culminated and stood consummated during the year under review. Therefore, the cause of action did exist in relation to the assessment order in question. " and in the penultimate paragraph of the order, the Tribunal noted; "the assessment order is merely cancelled and set aside to the file of the AO for making relevant inquiries as specified for which objective material is available at the threshold. " 2. Being aggrieved and dissatisfied with the order dated 26.02.2019, received by the appellant on 09.04.2019, passed by "C" Bench of the Tribunal in I.T.A. No.825/Ahd/2016 for Assessment Year 2010-11, the Appellant begs to prefer this appeal before this Hon'ble Court on the following amongst other grounds: (A) Both Principal CIT and the Tribunal failed to appreciate that their order is wrong because there is no presumption in law that the difference between the actual sale price and the stamp duty value is unaccounted investment by the purchaser assessee, an....
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....dded that if there is prior agreement to sell, the stamp duty value on the date of the agreement is to be considered." 4 Thus, it appears from the aforesaid pleadings that the appellant purchased a parcel of land during the financial year 2007-08 from one Jignesh Shivabhai Patel. Initially, an agreement of sale was executed by the original owner in favour of the appellant. The agreement of sale was registered on 31st August 2007. The total sale consideration was fixed at Rs. 45,61,000/-. On 31st August 2007 i.e. on the date of the execution of the agreement of sale, an amount of Rs. 10,25,000/- was paid towards earnest money and the possession of the land was also taken over. On 31st March 2008, the appellant, by way of cheques, paid the amount of Rs. 35,36,000/-. Thereafter, the balance amount of Rs. 99,000/was paid to the original owner on 26th February 2011. The appellant - assessee tried to explain to the Assessing Officer that he had taken over the possession of the land in the financial year 2007-08 and in view of the definition of the term "transfer" as defined under Section 2(47) of the Act, the land could be said to have been transferred in favour of the assessee in the....
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....lem on consideration or market value as per Jantri Rate. Accordingly, the value of the alleged property comes to Rs. 4,57,40,816/- ( 22,90,300*100/4.90) as against Rs. 45,61,000/- declared/ shown, it may therefore be presumed that Rs. 4,21,79,800/- ( 4,67,80045,61,000) is undisclosed investment. 2 In view of above, you are being granted an opportunity of being heard and to show cause as to why the aforesaid assessment made by the assessing officer for A.Y. 2011-12 should not be enhanced with a direction to make fresh assessment in accordance with the provisions of law in this regard. For this purpose, you may appear before the undersigned in person or through your authorized representative or file written submission on 29.01.2015 at 11:00 A.M. / P.M. in case of non compliance, the matter will be decided on merits. Yours faithfully, sd/- (R.K. Jain) The Principal Commissioner of Income Tax 1" 7 The appellant - assessee gave a detailed reply to the aforesaid show cause notice. The reply is at page : 26 of the paper book at Anneuxre : 'I'. 8 The Principal Commissioner was not convinced with the reply of the appellant - assesse....
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....idering the totality of facts, I am of the view that the A.O. Has failed to make proper enquiries, examine the records and appreciate the facts and the law while deciding the issue. Failure on the part of the A.O. With regard to examination / verification of the vital issue, as discussed in Para 4.1 to 4.13 herein above has rendered the assessment erroneous, in so far as, it is prejudicial to the interest of revenue. Therefore in exercise of the powers conferred by the Section 263 of the Incometax Act, 1961, the assessment is setaside with the directions that the assessment should be framed afresh by A.O. After proper & discreet enquiries / verification on the aforementioned issue, examining the accounts and records of the assessee, gathering all the supporting evidences as encapsulated by Section 69B of the IT Act and after allowing reasonable opportunity of bearing heard to the assessee." 9 The appellant - assessee, being dissatisfied with the aforesaid order passed by the Principal Commissioner went in appeal before Income Tax Appellant Tribunal, 'C' Bench, Ahmedabad. While dismissing the appeal, the Appellate Tribunal observed as under: "6 The learned AR for....
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.... by the AO without considering a glaring and obvious payment of stamp duty totally disproportionate qua the cost of purchase of land as declared by the assessee. It was submitted that the AO has not made any inquiry into claim of the assessee towards bonafides of cost of purchase declared and assessment order has been passed in a cryptic & nondescript manner. The agreement has been registered and therefore the Stamp duty was paid during the year. Therefore, it was thus contended that the cause of action against the assessee did arise in the FY 2010-11 to the concerning AY 2011-12. The learned CITDR referred to the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) to contend that the Pr.CIT was entitled to cancel the order of the AO where the Revenue is loosing its lawful share of taxes owing to an apparently erroneous order passed by the AO. The learned DR contended that owing to lack of inquiry on the vital aspect of cost of purchase declared visàvis notified jantri rate (as revealed from the stamp duty paid by the assessee) without demur, the assessment order suffered from error which was prejudicial to interest....
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....3 of the Act which is of wide amplitude. The circumstances clearly exist which demands inquiry which was not done by the AO while discharging of statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. While holding so, we are alive to the plea on behalf of the assessee that reasonable inquiry was made into˙ various aspects concerning cost of land and also the purchase was made in the preceding years except for mere registration of the document in the current year. We are not impressed by such line of arguments when tested on the touch stone of Section 263 of the Act. The purchase transaction culminated and stood consummated during the year under review. Therefore, the cause of action did exist in relation to the assessment order in question. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is selfrevealing from the stamp duty payment itself. 9. The judicial precedents relied upon on behalf of the assessee are not found to be of any assistance. The decisions referr....
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....appellant - assessee and against the Revenue. 13 On the other hand, this appeal has been vehemently opposed by Mr. Varun Patel, the learned standing counsel appearing for the respondents. Mr. Patel submitted that no error, not to to speak of any error of law could be said to have been committed by the Appellate Tribunal in passing the impugned order. Mr. Varun Patel laid much stress on the fact that there is no explanation worth the name at the end of the appellant as to why he had to pay stamp duty of Rs. 22,90,300/-on the total sale consideration of Rs. 45,61,000/-. According to Mr. Patel, this fact is sufficient for the purpose of raising a presumption under Section 69B of the Act that the sale consideration of more than Rs. 44,61,000/must have been paid by the appellant to the original owner. According to Mr. Patel, the stamp duty of Rs. 22,90,300/would be liable to be paid if the sale consideration is of more than Rs. 4 Crore. 14 Mr. Patel, in support of his submissions, has placed reliance on the following four decisions: [1] Commissioner of Incometax, Mumbai vs. Amitabh Bachchan [384 ITR 200] [2] Malabar Industrial Co. Ltd vs. Commissioner of Incometa....
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....ation Authorities as full value of consideration and he shall not adopt the valuation done by the Valuation Officer as full value consideration; (4) The insertion of Section 50C is made effective from 142003 and, accordingly, would be applicable for the assessment year 200304 and the subsequent years. Earlier there used to be a provision in Section 52 of the Incometax Act, 1961 which enabled the Assessing Officer to refer the property under transfer to the Valuation Officer for determining the market value. However, in K.P. Varghese vs. ITO reported in (1981) 131 ITR 597 (Supreme Court), it was held that Section 52(2) cannot be applied to genuine transaction unless there are evidences to show that the consideration declared in the sale deed is understated. In other words unless the revenue was able to show that something over and above the sale consideration had passed hands between the transferee and the transferor, Section 52(2) could not be invoked. It became almost a herculean task for the Assessing Officer to collect evidence to show the exchange of additional money for consideration was other than the apparent sale consideration. Accordingly, it was considered to ....
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....able by the stamp valuation authority under subsection (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under subsection (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of subsections (2), (3), (4), (5) and (6) of section 16A, clause (i) of subsection (1) and subsections (6) and (7) of section 23A, subsection (5) of section 24, section 34AA, section 35 and section 37 of the Wealthtax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under subsection (1) of section 16A of that Act. Explanation 1.-For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth Tax Act, 1957(27 of 1957). Explanation 2.-For the purposes of this section, the expre....
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.... ix) On receipt of valuation report from the Valuation Officer, the Assessing Officer has to compare the fair market value as determined by the Valuation Officer with the valuation done by the Stamp Valuation Authorities under the Stamp Duty Act and with the apparent sale consideration shown by the assessee in the sale deed; x) Where valuation done by the Valuation Officer is more than the valuation done by the Stamp Valuation Authorities (SVA) then valuation done by the SVA would be taken as full value of consideration and capital gains will be calculated accordingly; xi) If valuation done by the Valuation Officer is less than the valuation done by the SVA then valuation done by the Valuation Officer would be adopted as full value of consideration as against the apparent consideration shown by the assessee or the valuation done by the SVA and capital gains be calculated accordingly; xii) If valuation done by the Valuation Officer is less than the valuation done by the SVA as well as sale consideration shown by the assessee in the sale deed then apparent consideration shown in the sale deed would alone be accepted as full value of consideration a....
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....N : Since Section 50C is a legal fiction its area and scope are confined to what is stated in the provision. Therefore, this provision can be invoked only when there is a transfer of land or building or both. Its operation cannot be extended to the other assessees or to other properties or to other circumstances than what is stated therein. It has also been held that Section 50C can be invoked if development rights are transferred along with the transfer of the land. What is to be seen is that there is a registered transfer deed. The additional rights given would not make any difference. So long as condition laid down under Section 50C. i.e. instrument of transfer is registered in respect of the immovable property other events or additional transfer or rights or liabilities would be in consequential (Arif Akhatar Hussain vs. ITO (2011) 45 SOY 257/9 Taxmann. com. 90(Mum) SECTION 50C CANNOT BE APPLIED TO OTHER ASSETS OR FOR OTHER PURPOSES - Where a property is treated as stockintrade or business asset it would not be a capital asset and, therefore, provisions of Section 50C cannot be invoked (CIT vs. Thiruvengadam Investments (P)Ltd. (2010) 320 ITR 345 (Mad.), Thiruvengadam ....
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....tion 50C (Gouli Mahadevappa v. ITO (2011) 128 ITD 503/(2010) 8 taxmann.com 15 (Bang). 18 This Court in Anand Banwarilal Adhukia (supra) had the occasion to consider Section 69B of the Act along with Section 50C of the Act. In the said case, the petitioner was the purchaser of the property. He purchased the same for an amount of Rs. 60 Lakh. He, thereafter, filed his return of income for the assessment year 200809 declaring the total income of Rs. 25,14,480/. During the course of the assessment proceedings, the petitioner received a notice under Section 142(1) of the Act calling upon him to show cause as to why an amount of Rs. 5 Lakh should not be added to the purchase price of the property which he had purchased as the he had obtained a loan of Rs. 55 Lakh from the bank. In the aforesaid factual background, this Court observed as under: "8. From the bare reading of aforesaid statutory provisions, it appears that Section 50C of the Act which has been introduced is applied to a seller and not to the purchaser and therefore, ascertaining an amount of capital gain, it will be the tax in the hands of seller on the basis of jantri price and making a reference and inquiring f....
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....s under Section 69, as the case may be, that he can, to estimate the value of such unexplained investment or expenditure in bullion, jewellery, etc. and can call for the report of the valuer and therefore, the Division Bench of this Court has observed that initial starting point for triggering a reference to the valuer, therefore, has to be invocation of Section 69 of the Act and therefore, unless and until such contingencies are reflecting on the record, reference under Section 142A of the Act cannot be resorted to. Relevant paragraphs of the said decision which have analyzed entire scheme of Section 142A of the Act are required to be reproduced hereinafter : 10. Power of the Assessing Officer for making a reference to the Valuation Officer seeking the estimate flows from subsection (1) of section 142A. It provides that for the purposes of making assessment or reassessment under the Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B or fair market value of any property referred to in subsection (2) of section 56 is required....
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....He simply gave no reasons in the order. No independent reasons, either flowing from the file or even in the form of an affidavit assuming the same would be permissible, are brought to our notice. Thus quite apart from the petitioners grievance that the Assessing Officer merely acted under the directives of the superior and did not, on his own application of mind, desire to call for the report, in absence of any valid reasons for making a reference, in our opinion, the order must fail. 11. Considering the aforesaid proposition of law laid down by this Court, it appears that here also, the Assessing Officer had no cogent material available nor to satisfy himself about the requirement of Section 69 of the Act and therefore, in the absence of it, the reference could not have been made under Section 142A of the Act. Simply because prior to 2 days the reference order came to be made, it cannot be said that the action of making reference during the period of assessment is justified. In fact, no purpose would be served to make such reference especially when the contingencies reflected hereinabove are not satisfied on the background of present facts. Therefore, considering this set....
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....or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of stamp duty in respect of such transfer, such value shall for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. 7 Clearly thus, section 50C of the Act by a deeming fiction substitutes the consideration received on sale of a capital asset by stamp duty valuation. Such deeming fiction, however, is applicable only in case of a seller for the purpose of section 48 of the Act." 20 This Court in the case of Principal commissioner of Income Tax 3 vs. Dharmaja Infrastructure [(2019) 107 taxmann.com 281 (Gujarat)] held as under: "2. The assessment year is 2011-12. The respondent assessee had purchased two properties for a consideration of Rs. 1,55,00,000/and Rs. 1,35,00,000/respectively. However, the value adopted by the stamp duty authority as per the market rate was Rs. 2,55,45,000/and Rs. 2,22,57,500/respectively. According to the Assessing Officer, the assessee could not....
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....vestment under section 69B of the Income Tax Act. This court in the above referred decision has held that section 50C of the Act by deeming fiction substitutes the consideration received on sale of a capital asset by stamp duty valuation. Such deeming fiction however, is applicable only in the case of a seller for the purpose of section 48 of the Act. In the facts of the present case, it is an admitted position that the respondent assessee is the purchaser and not the seller and hence, the valuation adopted by the Stamp authority could not have been made the basis from coming to the conclusion that there is unexplained investment. Moreover, as observed by the Commissioner (Appeals), no material was brought on record by the Assessing Officer to prove that the assessee had in fact made investments over and above that recorded in the books in the year under consideration." 21 This High Court in the case of Mohmed Haji Hasan vs. Commissioner of IncomeTax reported in (2001) 247 ITR 290 Guj had the occasion to examine the scheme of Sections 69, 69A, 69B and 69C of the Act, 1961. The few relevant observations are as under: "6 Under Section 4 of the Income-tax Act, incometax is....
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.... of Section69, 69A, 59B and 69C will riot apply, in which event, the provisions regarding deductions, etc., applicable to the relevant head of income under which such income falls will automatically be attracted. 8. The opening words of Section 14 "save as otherwise provided by this Act" clearly leave scope for "deemed income" of the nature covered under the scheme of Sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from "other sources" because the provisions of Sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head "Income from other sources". Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of....
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....in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year." 25 First, there is nothing on record to indicate as to what was the price of the land at the relevant time. Even otherwise, the same is a pure question of fact. Apart from the fact that the price of the land was different than the one, recited in the sale deed unless it is established on record by the department that as a matter of fact, the consideration as alleged by the department did pass to the seller from the purchaser, it cannot be said that the department had any right to make any additions. 26 Section 69B of the Act does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that....
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....air market value of the asset; after this date, it is not even estimation of the fair market value, but computation of the value of the asset on the basis of certain rules prescribed by the statute. If A dies leaving prime property in Connaught Place to his son B, B pays nothing for the property; the property may command a market price of several crores. If "A", because of his love and affection for "B", sells the property for Rupee One to "B"; in this case, the consideration paid is only Rupee One, though the property is worth several millions. If the Assessing Officer having jurisdiction over "B" has to make an addition under Section 69B, he can do so only if he "finds" that B has "expended" money which he has not fully recorded in this books of account; he cannot make any ITA No.1814/2010 & conn. Page 6 of 10 addition merely because the property could fetch several crore of rupees in the market. 11. Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very s....
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....ement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. We however clarify that this Court is not concluding that such yardstick is determinative; in view of the findings arrived at by us that the Assessing Officer did not gather foundational facts to point to undervaluation the adoption of the norms under the Wealth Tax Act is not commented upon by us. 13. The error committed by the incometax authorities in the present case is to jump the first step in the process of applying Section 69B that of proving understatement of the investment and apply the measure of understatement. If anything, the language employed in Section 69B is in stricter terms than the erstwhile Section 52(2). It does not even authorise the adoptio....
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....ations, without an iota of evidence in that behalf." This takes care of the argument of Mr. Sabharwal that judicial notice can be taken of the practice prevailing in the property market of not disclosing the full consideration for transfer of properties. 15. Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, we are unable to approve of the decision of the income-tax authorities. Section 69B was wrongly invoked. The order of the Tribunal is approved; the substantial question of law is answered in the negative, in favour of the assessee and against the CIT. " 28 The decision of the Delhi High Court in Dinesh Jain (supra) later cam be followed. The Delhi High Court in the case of the Commissioner of Income Tax vs. Shri Puneet Subharwal reported in (2011) 338 ITR 485] was called upon to answer the following two questions of law: "1. Whether the Assessing Officer was right in referring the question of fair market value of the property sold by the assessee, to the District Valuation Officer in terms of Section ....
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....ment or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to reply upon the valuation given by the DVO. It was also held that the opinion of the Valuation Officer, per se, was not an information and could not be relied upon without the books of accounts being rejected which had not been done in that case. 9. The aforesaid principle of law has been reaffirmed in CIT Vs. Naveen Gera, 328 ITR 516 stating that opinion of the District Valuation Officer per se was not sufficient and other corroborated evidence is required. Mr. Maratha, learned counsel appearing for the Revenue submitted that the judgment of the Supreme Court in K.P. Varghese (supra) has been explained by the Rajasthan High Court in the case of Smt. Amar Kumari Surana Vs. Commissioner of Income Tax, 226 ITR 344." 29 The Delhi High Court in the case of Commissioner of Income Tax vs. Shri Bajrang Lal Bansal reported in (2011) 335 ITR 572 held as under: "5. Ms. Rashmi Chopra, learned counsel for the revenue submitted that the Tribunal had erred in law in deleting the addition of 99,33,000/as undisclosed income of the respondent-assessee und....