ACIT, CENTRAL CIRCLE-5(4), MUMBAI vs. M/S. SHREM TRADING LLP, MUMBAI

The Revenue is aggrieved by the decision of the learned CIT(A) in deleing the addition of Rs. 1.48 crores made by the Assessing Officer under section 69B of the I.T. Act.

The facts relating the issue are stated in brief. The return of income was filed by the assessee for the year under consideration on 4.8.2017 declaring Nil income. Subsequently, the Assessing Officer reopened the assessment of the year under consideration by issuing notice under section 148 of the Act on 30.3.2021. In the reassessment proceedings, the Assessing Officer noticed that the assessee has purchased a property on 26.10.2016 for 2 M/s. Shrem Trading LLP a consideration of Rs. 40 lakhs, while stamp duty value of the said property was Rs.1,88,27,550/-. Hence the Assessing Officer asked the assessee as to why the difference amount of Rs.1.48 crores should not be treated as income of the assessee. In response thereto, the assessee submitted that the property was having certain deficiencies, viz., it was not having proper approach and further in that area power supply was erratic. Hence, the seller of the property had to sell the property at a lower rate than the stamp duty value. The assessee also submitted that the statutory provision to assess the difference between purchase consideration and stamp duty valuation in the hands of purchaser was introduced in section 56(2)(x)(b) only in respect of purchases made on or after the first day of April, 2017. Since the present transaction has taken place prior to the date of introduction of provisions of section 56(2)(x)(b) of the Act, it was contended that the difference amount pointed out by the AO is not liable to tax.

The Assessing Officer, however, did not accept the explanations of the assessee. He took the view that the above said difference of Rs.1.48 crores is assessable as unexplained investment under section 69B of the Act. Accordingly, the Assessing Officer made the addition of Rs.1.48 crores under section 69B of the Act. In the appeal filed by the assessee, the learned CIT(A) deleted the addition and hence the Revenue has filed this appeal before us.

The Learned DR submitted that the actual purchase consideration shown in the conveyance deed is far less than the stamp duty valuation and hence it clearly shows that the assessee has paid on-money in purchasing the property. Accordingly he submitted that the Assessing Officer was justified in making addition.

On the contrary, the learned AR submitted that the assessee has purchased the property at cheaper price on account of deficiencies attached to the property. He further submitted that the Assessing Officer did not have 3 M/s. Shrem Trading LLP any material to show that the assessee has paid any money over and above purchase consideration shown in the sale deed. Since the transaction has taken place prior to 1st April 2017, the provisions of section 56(2)(x)(b) of the Act which was introduced for purchases made on or after 1.4.2017 is also not applicable in the instant case, since the impugned property was purchased by the assessee on 2.10.2016, i.e., prior to 1.4.2017.

The Ld A.R further submitted that the addition u/s 69B of the Act can be made, only on the basis of any credible material found by the AO. In the absence of any material to show that the assessee has paid any money over and above consideration shown in the conveyance deed, the addition made by the Assessing Officer under section 69B of the Act was rightly deleted by the learned CIT(A).

We have heard the rival contention and perused the record. We notice that the learned CIT(A) has deleted the addition by placing reliance on the decision rendered by Hon'ble Gujarat High Court in the case of Dharmaja Infrastructure 107 taxman.com 281 and Global Mercantiles (P) Ltd. 67 taxman.com 166 (Kolkata Tribunal). For the sake of convenience, we extract below the decision rendered by the learned CIT(A) on this issues :-

At this juncture, we may refer to the provisions of section 69B of the Act and the same read as under : “69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or 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.”

In the instant case, the fact remains that the Assessing Officer did not bring any material on record to give his finding that the assessee has given money over and above the purchase consideration of Rs.40.00 lakhs declared by the assessee. We notice that the AO has made the addition merely for the reason that the stamp duty valuation is more that the value of purchase consideration shown in the sale deed. Hence, we are of the view that the 6 M/s. Shrem Trading LLP learned CIT(A) was justified in deleting the addition made by the Assessing Officer under section 69B of the Act. Accordingly, we confirm the order passed by the learned CIT(A) on this issue.