ACIT CENT. CIR 5(4), MUMBAI vs. SHRI SUNIL B.DALAL, MUMBAI

This appeal is filed by the Asst. Commissioner of Income Tax, Central Circle-5(4), Mumbai [ The Ld AO ] for A.Y. 2018-19 against order [ Appellate Order ] passed by The Commissioner of Income Tax (A) – 53 , Mumbai [ The Ld CIT (A) ] on 31/8/2021. By this order The Ld CIT (A) allowed the appeal of the Assessee against the order [ Assessment Order ] passed u/s 143 (3) of The Income Tax Act , 1961 [ the Act] passed on 9/3/2021 by The Deputy Commissioner of Income tax , central Circle -5 (3), Mumbai was partly allowed.

Brief fact of the case shows that assessee is an individual and derives income from salaries, house property, and other sources. For the purpose of business, assessee engages himself in providing commercial loans and the consultancy as well as investment in real estate.

Assessee filed his return of income on 19 September 2018 at Rs. 101,20,82,020/-. The case was selected for scrutiny and assessment order under Section 143(3) of the Income-tax Act, 1961 (the Act) was passed by the i. Addition on account of benefit arising from business under Section 28(iv) of the Act amounting to Rs. 42,45,000/- by writing back unsecured loan from Singhi Associates.

Assessee preferred an appeal before the learned CIT(A), who passed appellate order, wherein

Assessee on appeal before the learned CIT(A) reiterated the submissions made before the learned Assessing Officer and relied upon the decision of Hon'ble Bombay High Court in case Mahindra & Mahindra Ltd. Vs. CIT [2003] 261 ITR 501 (Bombay), which is affirmed by the Hon'ble Supreme Court. Assessee further relied on several decisions of co- ordinate Benches. Assessee also contested that the decision of Hon'ble Bombay High Court in case of Solid Containers (supra) does not apply to the facts. Learned CIT(A) held that there is waiver of unsecured loan, which is received in money, and waiver of unsecured loan is not a benefit for perquisite received in kind. The learned CIT(A) further followed the decision of Hon'ble Supreme Court in CIT Vs. Mahindra and Mahindra 404 ITR 1 (Supreme Court).The learned CIT(A) held that Hon'ble Supreme Court in Mahindra and Mahindra (supra) held

The learned Departmental Representative agitating the ground no. 1 submitted that the decision of the Hon'ble Bombay High Court in case of Solid Containers Limited 308 ITR 417 squarely covered the issue as loan taken for business purposes is written back. Thus, the learned CIT(A) has wrongly deleted the above addition.

The learned Authorized Representative submitted that the issue is squarely covered by the decision of Hon'ble Supreme Court. He submitted that the Provision of Section 28(iv) of the Act are applicable only when income is arising from business or profession and the benefit is received in some other form other than in the shape of money. He submitted that the benefit is firstly not arising from business as the same received from M/s Singhi and Associates is not used for business purposes, it was not carrying on any interest, further loan was not during the course of business . he further submitted that ld AO is incorrect in holding that it is a business loan. He submitted that this money was taken by assessee for augmenting capital and purchasing assets . It has no connection with business of the assessee as this money was not used for advancing further. Further, write back is of the money

We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused plethora of judicial precedents relied up on by the ld AR in his written submission containing 26 pages as well as in case law paper book containing 132 pages. Facts are undisputedly admitted as narrated above.

In view of this, we do not find any reason to disturb the appellate order of The LD CIT (A) on this issue. We confirm his findings that the write back of loan is not chargeable as business income u/s 28 (iv) of The Act. Accordingly, Ground No 1 of the appeal is dismissed.

The second ground of appeal raised by the learned Assessing Officer is with respect to the deletion of addition of Rs. 1,51,53,000/- under Section 56(2)(x) of the Act. The brief fact shows that during the year assessee has purchased several immovable properties in a project. The learned Assessing Officer noted that these immovable properties have been purchased during the year at a value less than stamp duty value and therefore, the difference is chargeable as income under Section 56(2)(x) of the Act.

The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. He submitted that 10% tolerance band limit adopted by the learned CIT (A) is applicable from A.Y. 2021-22 and not from A.Y. 2018-19. He submitted that the increase in tolerance band does not apply retrospectively. It was further stated that all the judicial precedent relied upon by

The learned Authorized Representative supported the order of the learned CIT (A). He relied on the decision of the co-ordinate Bench in case of Maria Fernandes Cheryl (supra), wherein it is held that the prescribed tolerance band of 10% applies retrospectively. He further referred to the several judicial precedent relied upon before the learned CIT (A) as well as the decision of the co-ordinate Benches in case of Joseph Mudaliar Vs. DCIT in dated 14th September, 2020, John Flower (India) Pvt. Ltd. vs. DCIT in ITA No.7545/Mum/2014 and Pankaj Anilkumar Pitale Vs. ACIT ITA No. 6813/Mum/2017 dated 19th March, 2019. Accordingly, he submitted that there is no infirmity in the order of the learned CIT (A) in deleting the addition applying 10% tolerance band limit for this assessment year.

We have carefully considered the rival contentions and perused the orders of the lower authorities. Referred facts shows that Assessee has purchased 7 properties. Sale consideration in all the properties is 28,78,28,500/- and stamp duty value is Rs 26,96,75,300/- . Thus difference of Rs 1,81,53,200/- was made by the LD AO u/s 56 92) (x) of The Act. The LD CIT found that out of 7 properties in case of 6 properties the difference between the agreed consideration and stamp duty value is approximately 6

Coordinate bench in case of Maria Fernandes Cheryl { supra} has already held that the amendment made by Introducing proviso [ Introduction of tolerance band of 5 % and later on 10 % ] applies with effect from 1/4/2003 when the provision of section 50 C were introduced.

Further introduction of tolerance band is for removing the hardship in the section. once 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 as held by Hon Supreme Court in Alom Enterprises (319 ITR 306) (SC).

In the result, Appeal of The ld AO is dismissed.