TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 435
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.... confirming the action of Ld. AO in making addition of Rs. 74,55,500/- u/s 56(2)(vii)(b), is bad in law and against the facts and circumstances of the case and by not considering the submissions placed on record by the assessee. Further placing reliance on the order of ITAT, Jaipur Benches in the case of CIT vs. Shri Ashok Agarwal HUF, ITA No.71/JP/2020 dated 30.07.2020, the Learned Counsel submitted that when the properties in question are undisputedly shown in the books of account of the assessee as stock-in- trade and part of the closing stock, then the same would not fall in the ambit of the property as defined in explanation to section 56(2)(vii) of the Act and consequently the said provisions will not be applicable in the case of the assessee. 3. The Learned Counsel further drawing our attention towards Memo of Understanding (MOU) dated 10.12.2013 to submit that the assessee and his brother Shri Safder Hussain Khan jointly purchased the property in question and entered into a Memorandum of Understanding (MOU) that the land will be utilized for development of commercial/residential Multistory Project at Khurja, Distt. Bulandshahr and also decided to sale the land in small pie....
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....tended that due to said reason the propose of purchase of land could not be achieved but the MOU shows that the intention of assessee and his brother was only to develop a project and they rightly treated the purchased the land as stock-in-trade. 6. On careful consideration of above submissions from the assessment order, we note that assessing officer made addition under section 56(2)(vii) of the Act with following observations and findings: "3. During the period relevant to A.Y. 2014-15. The assessee has purchased land at Murari Nagar, Khurja, for an amount of Rs. 99,60,000/- along with his brother in the 50-50 share ratio. Thus the total investment in the purchase of land made by the assessee amounts to Rs. 49,80,000/-. The value of the total land for stamp purpose/circle rate was at Rs. 2,48,71,000/- and the value of assessee's share worked out to Rs. 1,24,35,500/-. The assessee was asked to explain as to why the provision of section 56(2)(vii)(b) be not applied to his case and the difference of Rs. 75,55,500/-, between the purchase consideration and the circle rate value value for stamp purchase may not be taxed. The assessee in his explanation has argued that he has purchas....
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....ted well within the municipal limit. No signs of agricultural operations having been carried on there earlier were visible from the inspection of the land. The assessee has simply got constructed a boundry wall along the sides of the plot with some land filling work which is not sufficient enough to prove the nature of the land as trading asset/stock in trade. This so called multi storey project at Khurja has not been approved by Development Authority i.e. Khurja Development Authority, Khurja. The assessee with the sole intention to save itself from the mischief of section 56(2)(vii)(b) is trying to treat the property under consideration as stock in trade. Accordingly an addition of Rs. 74,55,500/- being the difference of the purchase value and the market value is made to the returned income of the assessee treating the same as income from other sources. (Addition of Rs. 74,55,500/-)" 7. From the first appellate order, we further note that the Learned CIT(A) has upheld the addition with following observations and findings : "All these grounds relate to the addition of Rs. 74,55,500/- made by the AO us 56 (2) (viia) (b). It is an undisputed fact that the value of the appellant&#....
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...., the provisions of section 56(2) (viia) (b) are clearly applicable in this case. Hence, the AO was fully justified in applying the provisions of section 56(2)(viia)(b) and adding a sum of Rs. 74,55,500/- to the total income. In view of the above, the addition of Rs. 74,55,000/- is confirmed and these grounds of appeal are being dismissed." 8. On careful consideration of above rival submissions, basis taken by the AO for invoking provision of section 56(2)(vii) of the Act and findings recorded by the Learned CIT(A) while confirming the addition. First of all, we note that it is a fact on record that the assessee prior to purchase of land, on 10.12.2013 entered into MOU with his co-owner brother Shri Safdar Hussain Khan, which speaks of only future planning of the assessee and the co-owner but the same was not sufficient to protect the assessee from the applicability of section 56(2)(vii) of the Act. As subsequent to the purchase of land, there was no action by the assessee and his brother showing their intention to use the land for development of project as a business venture. The copies of Medical Certificates available at pages 48-53 shows that these medical documentary eviden....