SHRI GOVINDBHAI G. BHARWAD,,AHMEDABAD vs. THE DY.CIT, CIRCLE-6,, AHMEDABAD

आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

On the facts and in the circumstances of the case and in law, the Commissioner of Income- Tax(Appeals), where an appeal is filed before the tribunal against the order of Commissioner of Income Tax(Appeals), where an appeals is filed before the tribunal against the order of Commissioner of Income Tax(Appeals) erred in total addition of Rs.829142/- as per the ground stated below:

2. The learned CIT (A) has erred in law in confirming the addition of Rs.572000/- made in respect of unexplained cash credit u/s.68 of the Income Tax Act. 3. The learned CIT(A) has erred in law in confirming the addition of Rs.150000/- out of Rs.300000/- made in respect of low withdrawal of household expenses. 4. The appellant craves leave to add, amend, alter, delete, change or modify any or all grounds before or at the time of the hearing.

4.1 The assessee carried the matter to the appellate authority i.e. learned CIT (A).

4.2 The assessee before the learned CIT(A) submitted that at the time of agreement to sale the ‘Jantari Value’ of the land was at Rs. 2,43,93,600/- @ Rs. 8800/- per sq mtr. which is much lower than the actual consideration.

9.1 The first issue for our adjudication is 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. Before adjudicating the issue it is pertinent to take note of the provision of section 50C of the Act as applicable to the year under consideration as well as amendment brought in by the Finance Act 2018. The provision before amendment as applicable to the relevant assessment year under consideration reads as under: 50C. (1) Where the consideration received 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 91 [or assessable] by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed 91 [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

9.2 The above provision creates a deeming fiction that in case 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.

9.3 However 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%. The proviso and memorandum explaining the provision reads as under: Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. Memorandum At present, while taxing income from capital gains (section 50C), business profits (section 43CA) and other sources (section 56) arising out of transactions in immovable property, the sale consideration or stamp duty value, whichever is higher is adopted. The difference is taxed as income both in the hands of the purchaser and the seller. It has been pointed out that this variation can occur in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. In order to minimize hardship in case of genuine transactions in the real estate sector, it is proposed to provide that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 9.4 From the perusal of above proviso and memorandum explaining it, it becomes clear that the above amendment or proviso was inserted by the legislature with view to minimize the hardship caused to assessee due to deeming fiction. 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 ITAT in ITA No- 1237/Ahd/2013 of Dharamshibhai Sonani vs. ACIT reported in 161 ITD 627 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 coordinate bench held as under:

“So far as section 50C is concerned, the Finance Act, 2016, with effect from 1-4-2017, inserted the provisos to section 50C. [Para 5] There cannot be any dispute that this amendment in the scheme of section 50C has been made to remove an incongruity, resulting in undue hardship to the assessee. Once it is not in dispute that a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on which the law, containing such an undue hardship or incongruity, was introduced. [Para 7] The present amendment, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. Quite clearly therefore, even when the statute does not specifically state so, such amendments, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the proviso to section 50C should also be treated as curative in nature and with retrospective effect from 1-4-2003, i.e. the date effective from which section 50C was introduced. [Para 8] “

9.5 We also find support and guidance from the judgment of Hon’ble Agra ITAT Rajiv Kumar Agarwal v. ACIT [IT Appeal No. 337 (Agra) of 2013] which was followed by the Hon’ble Delhi High court in case of CIT vs. Ansal Land Mark Township (P) Ltd. reported in 377 ITR 635 where the Hon’ble bench of ITAT Agra held as under:

'On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just and equitable" interpretation of law— as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an "intended consequence" to disallow the expenditure, due to non-deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an "intended consequence" to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004.'

9.6 Now coming to case of the assessee, the learned AR for the assessee before us contended that the variation between the sales consideration and stamp value was only of 0.78% which is within the limit of relaxation provided vide 3rd proviso to section 50C of the Act though inserted by Finance Act 2018. This contention of the assessee not in dispute. Thus considering the above discussion, we hold that 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

10. The next issued raised by the assessee is that the learned CIT (A) erred in confirming the addition for Rs. 5,72,000/- under section 68 of the Act.

11. The assessee during the year under consideration has deposited cash in his bank namely ICICI and SBI Bank amounting to Rs. 72,000/- and Rs. 7,13,750/- respectively. But the assessee failed to explain the sources of such cash deposits. However, the AO found that the assessee has shown agriculture and commission income of Rs. 2,34,000/- and Rs 15,000/- in cash respectively. Similarly the assessee claimed to have incurred cash expenses of Rs. 25,000/- on account of stamp duty and Rs. 36,000/- on account of household expenses. Accordingly the AO worked out the unexplained cash deposits to the tune of Rs. 5,72,000/- and added the same to total income of the assessee.

12. The assessee preferred an appeal before learned CIT (A).

12.1 The assessee before the ld. CIT-A, regarding the deposit of cash in ICICI Bank for Rs. 72,000/- submitted that during the year he has sold one of his old car on which EMI was pending with the understanding with the buyer that the purchaser shall pay the pending EMIs. However, the car loan was in his name (the assessee) therefore the purchaser of car used to deposit cash for Rs. 9000/- every moth in his (the assessee) bank account.

12.2 Likewise, regard the cash deposit of Rs. 7,13,750/- in SBI bank, the assessee submitted that the cash for Rs. 3,18,750/- was deposited out of receipt against sale of property bearing survey no- 687 which was duly disclosed in return of income. The assessee also submitted that during the year he has withdrawn cash on various occasion. Thus the household expenses of Rs. 36,000/- was met out from such withdrawal. The assessee further submitted that an amount of Rs. 3,75,000/- was withdrawn from SBI bank dated 16/06/2010 which was used for the payment of purchase consideration of Rs. 3,50,000/- and stamp duty of Rs. 15,000/- along with other expenses against purchase of land.

12.3 The assessee further claimed that the above facts can be substantiated from the bank statement, books of accounts and sale and purchase agreement of property which were filed before the AO during the assessment proceedings.

17.1 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. Hence, the ground of appeal of the assessee is allowed.

18. The last issue raised by the assessee is that the learned CIT (A) erred in confirming the partial addition for Rs. 1,50,000/- on account of low withdrawal of household expenses.

19. The AO during the assessment proceeding required the assessee to furnish the detail of family members and household expenses. From the detail submitted the AO observed that the assessee family comprise of 5 members including 3 school going children. The AO further found that annual school fee of one children comes at Rs. 10,350/- only, aggregating to Rs. 31,050.00 for all the children. However the assessee claimed annual household expenses at Rs. 36,000/- only. Accordingly the AO considering the family and locality of the assessee’s residence estimated the annual household expenses at Rs. 3,60,000/- and made a lump sum addition of Rs. 3,00,000 to the total income of the assessee.

20. On appeal the learned CIT (A) provided partial relief to the assessee by observing as under: I have carefully considered the facts of the case in the light of the submissions made by the appellant and the finding of the Assessing Officer recorded in the assessment order. I am inclined to agree with the A O that the amount of Rs. 36,000/- a year as household expenses | which works out to Rs. 3,000/- p m in very low since the appellant has five family members and ' also maintains a car. All his children are school going and it is seen from the assessment order that annual fee of one of the children is Rs. 10,350/-. During appellate proceedings, however, the appellant submitted that his wife was also an earning member and was filing her return of income. It was submitted that she also contributed to the household expenses of the family. However no details of withdrawals made by her have been produced. Nonetheless, considering that the appellant's wife might also be contributing towards household expenses, ! am restricting the addition on this account to Rs. 1,50,000/- instead of Rs.- 3,00,000/-. The appellant thus gets relief of Rs.1,50,0007-.

24.1 Moving further, 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 Rs. 36,000 as shown by the assessee.

24.2 The next question arises how to estimate the drawings the assessee. Indeed, 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. Thus, we are of the view that 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.

Order pronounced in the Court on 02/03/2021 at Ahmedabad.