MR. SHRIPAD A. SHELAR,MUMBAI vs. DY CIT - CIR_34(3), MUMBAI

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ITA 2023/MUM/2020Status: DisposedITAT Mumbai12 January 20224 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the ITAT has the power to admit grounds not originally claimed in the return, remitting the Section 54 issue to the AO for fresh consideration. The addition under Section 56(2)(vii) was deleted as the relevant provision was not applicable for the assessment year in question.

What were the facts?

The assessee claimed exemption under Section 54 for capital gains, which was denied by the AO as it was not originally claimed in the return. The AO also made an addition under Section 56(2)(vii) for the difference between the consideration paid for a flat and its stamp duty value.

What were the issues?

Whether the assessee can claim exemption under Section 54 if not originally claimed in the return, and whether Section 56(2)(vii) was correctly invoked for the assessment year.

Which sections of the Income-tax Act were involved?

Section 54,Section 56(2)(vii)

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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

Before: Shri Shamim Yahya

For Appellant: Shri Devendra Jain
For Respondent: Shri Ahsish Phophare
Hearing: 17.11.2021Pronounced: 12.01.2022

This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-46 dated 27.02.2020 and pertains to assessment year 2013-14.

2.

Grounds of appeal

read as under:-

1. In the facts and circumstance and in Law, the Ld. CIT(A) has erred in confirming the addition of Rs. 16,38,000 as capital gain denying the exemption u/s 54. He ought not to have confirmed the addition of capital gain but have allowed the exemption u/s 54.

2. In the facts and circumstance and in Law, the Ld. CIT(A) has erred in confirming the addition of Rs. 2,65,437 u/s 56(2)(vii).

3. In the facts and circumstance and in Law, the Ld. CIT(A) ought to have directed the AO to follow the mandate of para 4, of Instructions No. 20 / 2015 (F. No. 225/269/2015-ITA-II) dated 29-12-2015.

3.

Brief facts of the case are as under:- The return of income for AY 2013-14 was filed on 06.08.2013 declaring total income at Rs. 23,29,140/-. The return filed was processed u/s. 143(1) of the Income Tax Act 1961. Thereafter, the case was selected for scrutiny under CASS and notice u/s. 142(1) was issued to the assessee. In the course of assessment proceedings, the AO observed that during the year the assessee had shown LTCG to be at Nil. However, the AO after considering the facts of the case, worked out the LTCG to Rs 16,38,000/- . Further, the AO observed that the assessee had purchased a flat at Malad on 14.02.2013 at a consideration of Rs 62.5 lacs and the value of this said property has been determined by the Stamp Duty Authorities at Rs 65,15,437/-. Therefore, in view of the provisions of Section 56(2)(vii), the AO added the differential amount of Rs 2,65,437/- to the income of the assessee. Aggrieved by the same, the appellant has filed the present appeal.

4.

Brief facts on the first issue is that assessees claim of deduction u/s. 54 of the Act was denied on the ground that it was not originally claimed on the touchstone of decision of Hon’ble Supreme court in the case of Goetze (India) Limited 284 ITR 323. The brief facts in this regard and the order of authorities below reads as under:-

In this case, the appellant has sold his flat for a consideration of Rs 55,00,000/- which was purchased by him at Rs 7,61,0007-. The market value of the said flat as per the Stamp Duty Authorities was at Rs 71,38,000/-. After this fact was brought into the notice of the appellant by the AO, the appellant furnished a revised working of the LTCG and claimed LTCG at Rs 55,41,025/- and also claimed the entire LTCG as exemption u/s 54. However, since the claim was not made by the assessee while filing the return of income, the AO relying upon the decision of Goetze India Ltd (2006) 284 ITR 323 restricted the exemption claimed u/s 54 at Rs 39,03,025/- and added the balance amount of Rs 16,38,000/- as LTCG. The action of the AO is fair and reasonable and well within the law and therefore no interference is called for.

5.

Against the above order, assessee is in appeal before ITAT.

6.

I have heard both the parties and perused the records. I note that in the case of Goetze (India) (supra), the Hon’ble Supreme Court has expounded that their decision in that case will not impinge upon the powers of ITAT to admit grounds otherwise than by revised return. Accordingly, I remit the issue to the AO consider the assesees claim and decide as per law.

7.

As regards, the second ground, the addition was made by the AO invoking the provision of section 56(2)(vii), it was confirmed by the Ld.CIT(A) by holding as under:-

Ground Nos 5 & 6 of the appeal relate to the addition made by the AO of Rs 2,65,437/- u/s 56(2)(vii). In the appellate proceedings, the appellant submitted that the AO was not liable to make this addition u/s 56(2)(vii). The contentions of the appellant have been duly considered. It is very evident that, the assessee had purchased a flat at Malad on 14.02.2013 at a consideration of Rs 62.5 lacs and the value of this said property has been determined by the Stamp Duty Authorities at Rs 65,15,437/-. Therefore, in view of the provisions of Section 56(2)(vii). the AO added the differential amount of Rs 2,65,437/- to the income of the assessee No interference is called for in the action of the AO and accordingly grounds No 5 & 6 of the appeal are dismissed.

8.

Against the above order, assessee is in appeal before ITAT.

9.

I have heard both the parties and perused the records. Ld. Counsel of the assessee submitted that the said section 56(2)(viii) is not applicable for the present assessment year.

10.

The submission of the AO in this regard reads as under:-

The provisions of section 56(2)(vii) as applicable for A Y 2013-14, did not provide any such presumption for addition on this count However, the learned Assessing Officer, has made an addition of Rs 2,65,437/- relying on the provisions of section 56(2)(vii) of 'he Act The addition is patently illegal and invalid Your honour may be pleased to delete the addition. ii) In fact, section 56(2)(vu)(b)(ii) for the first time provided for such a presumption for addition which was introduced by the Finance Act, 2013, w e f A Y 2014-15 This provision is not applicable for the A Y 2013-14, the relevant year Thus the Addition is clearly illegal and invalid. Your honour may be pleased to delete the addition.

11.

Upon careful consideration, I find cogency in the assessees submission. Hence, holding that AO has wrongly invoked the section, the addition stands deleted.

12.

In the result, assessee appeal is partly allowed for statistical purpose.

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