TaxTMI 
TaxTMI 
2026 (3) TMI 880
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....ing few document having impact on financials. 3. 50C Deemed Sale Consideration: The learned AO erred in considering the sale value arrived by applying the deeming provision s of section 50C, ignoring the peculiarity of the case and true nature of asset. and made an addition of Rs. 97,76,424/-. 4. 56(2)(vii) (b) Deemed income - The learned AO erred in making an addition of Rs. 2,03,87,170/- by considering the fair mark et value of business asset forming part of stock in trade by applying the deeming provisions of section 56(2) (vii) (b) and also ignoring the circumstances involved at the time of purchase where seller had malafide intentions. 5. For these and other ground which may be raised during or before the appeal is heard. It is prayed that the relief be granted." 3. The additional ground raised by the assessee read as under : "1. The learned CIT(A)/A.O. erred in making an addition of Rs. 2,03,87,170/- by applying the provisions of Section 50C when the property was referred to the Valuation Cell and the report was not received till the completion of the assessment proceedings." 4. The brief facts of the case are that, the assessee is an....
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....t details. The A.O. referred the valuation of the property to the District Valuation Officer (DVO) and the DVO determined the valuation of the property at Rs. 1,47,93,000/- without considering the relevant objections filed by the assessee and also the valuation report obtained by the assessee from the registered valuer. The assessee had also contended that, he has purchased property and paid entire sale consideration before 31.03.2013 and the amended provisions of Section 56(2)(vii)(b) of the Act, came into statute by the Finance Act, 2013 w.e.f. 2014-15 and thus, the provisions of Section 56(2)(vii)(b) of the Act, cannot be applied. The assessee further claimed that, he is into the business of real estate and the property purchased by the assessee has been treated as stock-in-trade and the provisions of Section 56(2)(vii)(b) of the Act, does not apply to stock-in-trade, because it only applies to immovable property being 'capital asset'. 6. The Ld. CIT(A) after considering relevant submissions of the assessee and also taking note of reason given by the A.O. to make addition towards difference between capital account balance of the proprietor, sustained additions made by the A.O....
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....is wife, Ms. Saleha Shaheen. Further, the assessee has invested rental income received by himself and his wife, Ms. Saleha Shaheen and credited to the joint bank account for purchase of the property, however, while preparing the balance sheet by an inadvertent error, the amount received from wife of assessee in respect of rental income credited to the joint bank account has not been considered in the books of accounts. The above discrepancy has been noticed while reconciling the difference and found that, a difference of Rs. 2,37,92,244/- has been adjusted in the closing balance of capital account. This has been explained to the A.O. and Ld. CIT(A). The assessee has also furnished relevant details, including the joint bank account held by the assessee and his wife and the ITR filed by his wife to prove the receipt of rental income. The A.O. without considering the relevant reconciliation, made addition towards difference in capital account as unexplained investment. 9. The learned counsel for the assessee, Shri Palivela Santosh Kranthi, C.A., referring to corrected balance sheet filed before the A.O., submitted that, the assessee has reconciled the difference in capital account ....
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....ifference and claimed that, the rental income from a joint property held by the assessee and his wife, Ms. Saleha Shaheen has been credited to a joint bank account and the said bank account has been considered in the books of accounts of the assessee. However, while considering the rental income, the assessee has claimed 50% of rental income which was at Rs. 1,85,73,044/- and remaining 50% was considered in the hands of assessee's wife, Ms. Saleha Shaheen, but the entire rental income including his wife's share has been credited to a joint bank account which has been considered in the books of accounts of the assessee. Since the assessee has considered only 50% of rental income in the capital account and considered the entire credit of rental income, including the remaining 50% of assessee's wife, there is a difference of Rs. 2,37,92,244/- in the liability side of the balance sheet and the same has been adjusted in the capital account, which is evident from relevant capital account filed by the assessee, where the total credits of the assessee from the bank account comes to Rs. 21,63,19,285/-, but the accountant, by inadvertent mistake, arrived at a total of Rs. 24,01,11,529/-, whi....
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....e A.O. has adopted the stamp duty value and worked out capital gain at Rs. 97,76,424/- as against the capital gain declared by the assessee. The assessee has also justified the value by obtaining an independent valuation report from registered valuer and as per which, the registered valuer has determined the value of the property at Rs. 42,30,000/- on rental income method plus land and building method and by averaging both the values arrived at fair market value of the property at Rs. 42,30,000/-. Although these evidences have been furnished before the A.O. and Ld. CIT(A), but both the authorities have ignored the valuation and determined the value as per DVO report and made addition. Therefore, he submitted that, the addition made by the A.O. should be deleted. 14. The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that, there is no dispute with regard to the fact that, there is a difference between the fair market value of the property as determined by the DVO, which was at Rs. 1,41,93,000/-, and the sale consideration as per the registered sale deed, which was at Rs. 25,00,000/-. The arguments of the assessee that the....
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....on does not have any value as determined by the stamp duty authorities. If we consider the valuation report submitted by the DVO and the valuation report of the registered valuer, we find that, the DVO has considered the cost of land as per stamp duty authorities and cost of building as per CPWD rate without considering the location of the property, dispute in title and unauthorized construction of the building without any sanctioned plan. However, the registered valuer of the Income Tax Department had considered all these points, including the dispute in title, location of the property and unauthorized construction of the building and claimed that, the valuation officer has not taken the actual land area, but gone by the plot area, as per sale deed and the purchaser will give the value as per actual land area and not as per sale deed. If actual plot area, as per the sale deed is less, the purchaser will give the value as per actual land area and not as per the sale deed. Since the actual land area is less than the sale deed area, this point, the DVO should have considered. The registered valuer further observed that, the DVO has not given source of land rate taken at Rs. 22,000/- ....
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....ide sale agreement dated 06.01.2012 and also paid an advance of Rs. 50,00,000/-. Further, the assessee has also paid full consideration of Rs. 5,03,12,830/- on or before 31.03.2013 and also requested the seller for execution of sale deed. However, the seller of the property has disputed the sale transaction and the assessee has filed a petition before the Court of law for part performance of the contract and finally the sale deed has been executed on 21.12.2013 during the assessment year 2014-15. Since the assessee has paid entire consideration of Rs. 5,03,12,830/- before 31.03.2013, the A.O. ought not to have applied provisions of Section 56(2)(vii)(b) which came into statute with effect from 01.04.2013 and from A.Y. 2014-15. 20. The learned counsel for the assessee further submitted that, the provisions of Section 56(2)(vii)(b) of the Act, cannot be applied for the present case, because the assessee has purchased the property in the course of business and has treated the property as stock-in-trade. The assessee has also converted the property into plotted lands and sold certain plots during the year under consideration and also declared the income from business. Since the prop....
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....and also paid advance of Rs. 50,00,000/- on the date of agreement. The assessee has also entered into a supplementary agreement dated 21.01.2012 and paid further consideration of Rs. 50,00,000/- and agreed to pay balance consideration of Rs. 4,00,00,000/- to clear the bank debt. The assessee has paid entire sale consideration of Rs. 5,03,12,830/- as per the agreement on or before 31.03.2013, which is evident from the relevant sale deed copy, which is available in the paper book filed by the assessee. In fact, there is no dispute on these facts, and the A.O. and Ld. CIT(A) accepted the fact that, the assessee has paid entire sale consideration before 31.03.2013 and registered the property on 21.12.2013. Further, it is also an admitted fact that, the assessee treated the property as stock-in-trade in the business of real estate, which is evident from relevant financial statements filed by the assessee along with the return of income. Therefore, it is necessary for us to examine the reasons given by the A.O. to make addition of Rs. 2,03,87,170/- under Section 56(2)(vii)(b) of the Act, in light of various arguments of the counsel for the assessee. 23. The first and foremost argument....
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....process, there was a delay. Otherwise, the assessee would have registered the property on or before 31.03.2013. In the present case, going by the evidences available on record, the provisions of Section 56(2)(vii)(b) of the Act, is not applicable for two reasons i.e. (i) the assessee has paid the entire sale consideration before the provisions came into statute and (ii) the delay in registration of the property is due to dispute between the seller and the assessee. Thus, in our considered view, the A.O. ought not to have applied the provisions of Section 56(2)(vii)(b) of the Act, in the case of the assessee. This view is supported by the decision of the Coordinate Bench of the Tribunal, Surat Bench, in the case of Parinda Bhaveshkumar Borda Vs. ITO (supra) and ITAT, Mumbai Bench in the case of Kiran R. Sawlani Vs. ITO (supra), wherein it has been clearly held that, where the assessee entered into agreement with the seller and paid substantial consideration and obtained possession, the provisions under Section 56(2)(vii)(b) of the Act, was not on the statute book as on the date of agreement for purchase of the property, the A.O. was not entitled to make addition under Section 56(2)(....