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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 118/JP/2019
PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 14th December, 2018 of ld. CIT (A) for the assessment year 2015-16. The assessee has raised the following grounds of appeal :-
“ 1. In the facts and circumstances of the case and in law, the ld. CIT (A) has erred in confirming the action of the ld. AO, in making addition of Rs. 53,50,000/- u/s 56(2)(vii) of the Income Tax Act, 1961. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 53,50,000/-. 2. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing.”
The only issue arises in this appeal of the assessee is regarding addition made by the AO under section 56(2)(vii) on account of lesser purchase consideration paid by the assessee for acquiring the immovable property. The AO noted that the assessee purchased two offices bearing no. 716 & 717 at 7th Floor, Sun N Moon Tower, S-4, Fateh Singh Ki Dharamshala, Jaipur. These offices were purchased from M/s. Radha Swami Buildcon Pvt. Ltd. through registered sale deed dated 16.10.2014 which were executed by Shri Shyam Sunder Bajaj, the father of the assessee in the capacity of Director of M/s. Radha Swami Buildcon Pvt. Ltd. As per the sale deed, the total consideration of 2 offices was shown at Rs. 54,50,000/-. However, the assessee paid only Rs. 1 lac at the time of sale deed and the balance amount was not paid by the assessee though the cheque numbers were mentioned in the sale deed. Accordingly, the AO held that the assessee has made the payment of Rs. 50,000/- for each office and the balance amount was not paid by the assessee.
Hence the AO has made the addition of balance amount of Rs. 53,50,000/- under section 56(2)(vii)(b) of the IT Act. The assessee challenged the action of the AO before the ld. CIT (A) but could not succeed.
Before us, the ld. A/R of the assessee has submitted that as per the sale deed dated 16.10.2014 the purchase consideration through cheque has been mentioned.
However, the seller has not presented these cheques for encashment and subsequently the assessee has issued another cheque for payment of the purchase consideration through correction deed executed between the parties on 15th May, 2017. The AO has also referred to the Profit & Loss account and Balance Sheet of M/s. Radha Swami Buildcon Pvt. Ltd and submitted that the said company has shown the sales of these two offices for the year under consideration and also shown the assessee as debtor in respect of the balance amount of Rs. 53,50,000/-.
Once the said company has shown the assessee as debtor and the amount is still payable by the assessee, then it cannot be a case of lesser purchase consideration for invoking provisions of section 56(2)(vii)(b) of the Act. Even otherwise, subsequently the assessee has paid the entire amount by issuing the fresh cheque as per the corrected deed dated 29th April, 2017. Hence the ld. A/R has submitted that the addition made by the AO in view of the subsequent payment made by the assessee is not sustainable.
On the other hand, the ld. D/R has submitted that there is no dispute that at the time of purchase of these office premises no. 716 and 717 at 7th Floor, Sun N Moon Tower, S-4, Fateh Singh Ki Dharamshala, Jaipur the assessee has made payment of Rs. 50,000/- for each office total amounting to Rs. 1 lac as against the total consideration of Rs. 54,50,000/-. Only when the AO proposed to make the addition under section 56(2)(vii)(b), the assessee after the gap of more than 2 ½ years come up with the plea that now the assessee has made the balance payment.
Therefore, the subsequent payment as claimed by the assessee is not a voluntary payment but just to avoid the addition made by the AO. The ld. CIT (A) has considered all these contentions and fact and then sustained the addition by noting the fact that the subsequent payment cannot be considered as payment made for acquisition of the properties in question which were already acquired by the assessee and possession was handed over to the assessee. He has relied upon the orders of the authorities below.
We have considered the rival submissions as well as the relevant material on record. It is not disputed that as per the sale deed dated 16th October, 2014 the Tower, S-4, Fateh Singh Ki Dharamshala, Jaipur from M/s. Radha Swami Buildcon Pvt. Ltd. The said company appears to be the assessee’s family owned company as the father of the assessee was Director at that point of time. We further note that the sale deeds were executed by the father of the assessee on behalf of M/s. Radha Swami Buildcon Pvt. Ltd. Though in the sale deed parties have given the details of payment through cheque numbers, however, except Rs. 50,000/- for each office, the other payments were not actually made. The details of the cheques as given in the sale deed are as under :-
S.No. Ch./DD No. Bank Name Amount (Rs.) 1. 187498 SBBJ, M.I. Road, Jaiur 50,000/- 2. 358858 SBBJ, C-Scheme, Jaipur 10,00,000/- 3. 358859 SBBJ, C-Scheme, Jaipur 10,00,000/- 4. 358866 SBBJ, C-Scheme, Jaipur 7,50,000/- Total : 28,00,000/- S.No. Ch./DD No. Bank Name Amount (Rs.) 1. 187498 SBBJ, M.I. Road, Jaiur 50,000/- 2. 358863 SBBJ, C-Scheme, Jaipur 10,00,000/- 3. 358864 SBBJ, C-Scheme, Jaipur 10,00,000/- 4. 358867 SBBJ, C-Scheme, Jaipur 6,00,000/- Total : 26,50,000/- There is no dispute that except the first cheque, the other cheques were never presented for encashment. It is also not clear whether the other cheques were actually handed over by the assessee to the said company. Subsequently, when there was a change in the management of the said company they initiated the recovery proceedings against the assessee. The AO proposed to make the addition of the balance amount of Rs. 53,50,000/- as the assessee never paid the said amount till the assessment proceedings were initiated by the Assessing Officer. The assessee has not disputed the fact that the balance amount was finally paid through the cheques dated 11th April, 2017. Thus the said payment was made after the expiry of about 2 ½ years from the date of purchase of these two offices. It is apparent that though for the purpose of registration of sale deed the payment was shown through cheques, however, it was neither the intention of the assessee to pay the amount nor it was intention of the seller through the father of the assessee to recover the said sale consideration from the assessee. Only when there was a change in the Management, the said seller company initiated the recovery and finally the assessee paid the balance amount by issuing the cheques on 11th April, 2017.
From these undisputed facts it is clear that the assessee has finally paid the purchase consideration to the extent of Rs. 53,50,000/- after a gap of more than 2 ½ years and, therefore, the assessee has enjoyed the money for such a long time as well as the properties in question. The value of the purchase consideration paid subsequently has to be determined by applying the interest factor for the said period of delay in making the payment. Since the payment was finally made by the assessee and this fact was brought to the notice of the AO, therefore, the addition of the entire amount is not sustainable but only to the extent of the differential value of the purchase consideration as on the date of purchase needs to be determined factoring the element of interest for such delayed payment and hence the addition under section 56(2)(vii)(b) would be made only to the extent of that differential value the assessee has paid lesser than the actual amount of consideration due to 6 M/s. Joy Bajaj, Jaipur. the delay of payment without any interest. The AO is directed to compute the amount which was to be determined the real value of the purchase consideration by considering the actual payment date and the date of purchase. The balance addition made by the AO shall stand deleted. 4. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 22/03/2019.
Sd/- Sd/- ¼ fot; iky jkWo ½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 22/03/2019. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-M/s. Joy Bajaj, Jaipur. 2. izR;FkhZ@ The Respondent-The ACIT Ward 4(2), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No.118/JP/2019} vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत