ACIT CORPORATE CIRCLE 6(2), CHENNAI vs. SUGUNAKARA REDDY, CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER :

Aggrieved, the firm filed appeal before the CIT(A). The Ld. CIT(A) deleted the additions in the hands of the firm but directed the AO to assess the difference between the fair market value and the sale price u/s. 56(1)(vii)(b) under the head “income from other sources” in the hands of the buyers of villas. Consequently, the AO reopened the assessee’s case and assessed the difference between the fair market value and the sale price u/s. 56(1)(vii)(b) in the assessee’s hands for assessment year 2012-13. Aggrieved against that order, the assessee filed an appeal before the ld. CIT(A). Before the Ld. CIT(A), based on this tribunal decision in the case of M/s. AR Foundations in assessment year 2012-13 vide dated 10.08.2017, the assessee pleaded that directions of the Ld. CIT(A) has been set aside by the Hon’ble ITAT on both merits and jurisdiction. The Ld. CIT(A) after going through the tribunal decision held that the directions issued by the Ld. CIT(A) in the firm’s case has been set aside both on merits and jurisdiction and in favour of the assessee. Respectfully following such decision, the Ld. CIT(A) directed the AO to delete the addition and thus allowed the appeal.

“1. The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case.

2. The Ld. CIT(A) erred in deleting the addition made by the Assessing Officer u/s 56(1)(vii). 2.1. The Ld.CIT(A) relied upon the decision of the Hon’ble ITAT’s order in 2015 dt: 10.08.2017 for the AY 2012-13 in the case of M/s. A.R. Foundations observing that sale of villas at a lower price to partners/ directors cannot be construed as gift to relatives and the same has not reached finality. 2.2 The CIT(A) ought to have appreciated the fact that clause (vii)(b) of sub sec.(1) of Sec.56 seeks to tax the difference in consideration and FMV during transfer of any immovable property to an Individual / HUF from any person/persons. 3.1 The CIT(A) ought to have appreciated that the clause (vii)(b) of sub sec.(1) of Sec.56 is applicable to every person with the exception of a relative. 3.2 The CIT(A) ought to have appreciated that the transfer of immovable property is from a separate legal entity whose Director is the son of the transferee. 4 For these and other grounds that may be adduced at the time of hearing, it is prayed that the Order of the Commissioner of Income Tax (Appeals) be set aside and that of the Assessing Officer be restored.”

The Ld. DR presented the case on the lines of the grounds of appeal.

Per contra, the Ld. AR supported the order of the Ld. CIT(A), relying on the decision of this tribunal in dated 10.08.2017, supra.

“5. We have heard the rival submissions of either side and also perused the material available on record. It is not in dispute that the assessee is a partnership firm, engaged in the business of civil construction. The assessee-firm constructed “Amara Samudra” project in the land belongs to the Managing Partner, Mr.P.Amaranatha Reddy. The assessee constructed seven villas, four villas were sold at a cost ranging `3.5 crores to `8.40 crores, two villas were sold to Managing Partner’s sister and father @ `2 crroes per villa. The assessee valued the unsold the villa at `3.50 crores. The Assessing Officer found that the villas sold to Managing Partner’s sister and father was lesser than the cost price. So, the books of account do not reflect the correct picture. Accordingly, Assessing Officer rejected the same. On appeal by the assessee, the Ld.CIT(A) found that the AO rejected the books of account without making any proper enquiry. Therefore, the rate adopted in books of account needs to be applied to the villas sold to the relative also. The Ld.CIT(A) found that the sale consideration received from the close relative of the Managing Partner was inadequate. The Ld.CIT(A) further found that proviso to section 40A(2)(b) of the Act were not enforceable, since the excess expenditure was not paid to the persons referred to in sec.40A(2)(b) of the Act. However, the difference of amount as worked out to the extent of `2,58,22,504/- has to be treated as gift to the Managing Partner’s sister and father. Accordingly, the Ld.CIT(A) directed the Assessing Officer of Smt.Anuradha Reddy and Shri Suganakara Reddy to re-open their assessment for assessment year 2012-13 and assess the difference under the head income from other sources. The question arise for our consideration is whether the Ld.CIT(A) can direct the Assessing Officers of other assessee, who are not before him to reopen the assessment. This Tribunal is of the considered opinion that the Ld.CIT(A) being the Appellate Authority has to confine himself to the assessment year under consideration before him and also the parties to the litigation before him. Without hearing the assessee, or the Assessing Officer of the third parties, the Ld.CIT(A) cannot give any direction. As held by the Jurisdictional High Court in the case of CIT Vs. T.A.Krishnaswamy (supra), the Appellate Authority cannot exceed their powers while exercising their jurisdiction vested under the statute. In this case, the Ld.CIT(A) has exceeded his jurisdiction in directing the Assessing Officer, who is not before him and also to assess the income in the hands of Shri Suganakara Reddy and Smt.Anuradha Reddy. Both of them are not a party before the Ld.CIT(A). Therefore, the direction of the Ld.CIT(A) is a clear violation of principle of natural justice and exceeded his jurisdiction.

In view of the above, we do not find any reason to interfere with the order of the Ld. CIT(A), when he followed the jurisdictional ITAT decision, wherein, the directions issued by the Ld. CIT(A) has been set aside by this Hon’ble ITAT both on merits and jurisdiction, supra.

Hence, the Revenue’s appeal is dismissed.

Order pronounced in the open court on 28th November, 2018 at Chennai.