AILA INFRASTRUCTURE PRIVATE LIMITED,MAHARASHTRA vs. INCOME TAX OFFICER, MUMBAI

9) The Assessing Officer / Commissioner of Income Tax (Appeals) erred in levying interest under section 234B amounting to Rs. 10, 23,228/-.

The Appellant craves leave to add to, amend, alter, modify or withdraw any or all the Grounds of Appeal before or at the time of hearing of the Appeal, as they may be advised From time to time.”

The case of the assessee was selected for scrutiny under CASS. The assessee company is engaged in the business of infrastructure and building construction; however, there was no business during the year under consideration. The assessment of the assessee was completed u/s. 143(3) of the Act after making an addition of Rs. 7, 35,000/- under the head Income from House Property and Rs. 8614400/- u/s. 69 of the Act under the Head Income from Other Sources. The Assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A), who in turn partly allowed the appeal of the assessee for statistical purposes. The assessee is further aggrieved with this order of Ld. CIT (A), preferred the present appeal before us.

F.—Income from other sources Income from other sources.

(i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher; (aa) "specified fund" means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulated under the[Inter-national Financial Services Centre Authority (Fund Management) Regulations, 2022 made under the] International Financial Services Centres Authority Act, 2019 (50 of 2019)]; (ab) "trust" means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any other law for the time being in force;] (b) "Venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of [Explanation] to clause (23FB) of section 10;] (a) such sum is forfeited; and (b) the negotiations do not result in a transfer of such capital asset;] (x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April 2017, — (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property, — (A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely: — (i) the amount of fifty thousand rupees; and (ii) the amount equal to ten per cent of the consideration:] Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause:

Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, on or before the date of agreement for transfer of such immovable property: Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub- section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections: Provided also that in case of property being referred to in the second proviso to sub-section (1) of section 43CA, the provisions of sub-item (ii) of item (B) shall have effect as if for the words "ten per cent", the words "twenty per cent" had been substituted;]

[2023] 153 taxmann.com 111 (Surat-Trib.) Kiran Kastur Chand Shah v.PCIT

[2023] 153 taxmann.com 112 (Mumbai - Trib.) Benudhar Gokul Anand Biswal v. NEAC “The assessee has purchased the flat vide agreement dated 13-7-2009 and section 56(2)(x) was not in the statute book, and also it is a well-settled principle of law that a charging section cannot be pressed into service retrospectively unless it is specifically provided for by the legislature. The provisions of section 56(2)(x) are incorporated in the Finance Act, 2017 with the prospective applicability from assessment year 2017-18 and the transactions entered into prior to 1-4-2017 would not suffer any implications of the section. Whereas, in the present case, the transaction of purchase of flat is vide agreement dated 13-7-2009 and it was registered on 14-7-2017 in the financial year 2018-19. Further, merely because the first payment of Rs. 2 lakhs were made on 8-10-2009 subsequently after the date of the agreement, the revenue cannot rely on the second proviso to section 56(2)(x) and tax the

difference in stamp duty value of flat as per SRO and purchase consideration as per agreement. Since section 56(2)(x) does not apply to the assessee, as the agreement was entered before 1-4-2017, hence the second proviso cannot be made applicable and the assessee cannot fasten the liability in the light of the second proviso to section 56(2)(x). Thus, considering the facts, circumstances, submissions, and ratio of the judicial decisions, the order of the Commissioner (Appeals) is set aside and the Assessing Officer is directed to delete the addition and allow the grounds of appeal in favour of the assessee. [Para 7]” 5. Section - 69, Income-tax Act, 1961 Unexplained investments. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. This section speaks about the non-recording of transactions in the books of accounts and not dealing with the insufficiency of the amount recorded. Here in this case, as the assessee claimed that out of the family settlement, it received the property discussed (supra) at a lesser amount as compared to the value as prescribed in section 50C of the Act and that value duly reflected in the balance sheet of the assessee. Under section 69 of the Act, the AO has to give a finding that a particular investment is not recorded in the books of account (the deeming fiction in this section then permit the AO to treat the 'Value' of such an investment as assessee’s income). Under section 69Aof the Act, the AO has to give a finding that the assessee is the owner of any money, bullion, jewellery or other valuable article in the relevant current year. The assessee may be the owner of any of these items for several years and by this fact, he may be found to be the owner of any of these items in the current year but the burden to prove that these items were not acquired in the current year is on the assessee. (The deeming fiction then permits the AO to treat the 'Value' of such money, bullion, jewellery or other valuable article as the assessee's income). Thus, two findings

are required to be given by the AO before invoking deeming fiction under these two sections. One is that the assessee is found to have invested or to be the owner of money, bullion, jewellery or other valuable article in the current financial year and the other is that they are not at all recorded in the books of account maintained by the assessee. Section - 69B, Income-tax Act, 1961 Amount of investments, etc., not fully disclosed in books of account. 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.] This section speaks about the amount expended by the assessee, if exceeds the value recorded in the books of account then only this section comes into the picture. The matter before us does not fulfill the condition of this section. Because, here there is no allegation on the assessee that the assessee expended anything out of books. The case of the revenue is based on the application of section 50C of the Act. The applicability of Section 50C of the Act and provisions of Sections69 and 69B of the Act are absolutely in contrast. Section 50C of the Act creates a deeming fiction, whereas sections 69 and 69B are evidence-based. There is no room for an addition u/s. 69/69B applying the provisions of section 50C of the Act. There was no evidence of payment of any money on the purchase of the flat other than what the assessee company disclosed in the Balance Sheet. Therefore, the lower authorities had erred in confirming the addition of Rs. 86, 14,400/- on account of unexplained investment.

money irretrievably. Thus, expending would indicate the actual outflow of money for acquiring goods services or assets. As section 69B of the Act requires the deeming of excess amount as income of the assessee, the AO has to prove that such excess amount was the one which was spent and it was not hypothetically spent. This section cannot be invoked on notional or deemed spending. In fact, by the use of the word "expended" the Legislature has prohibited the AO from creating a deeming fiction about spending within the deeming fiction of treating the excess of spending as income of the assessee. The only deeming fiction provided in the section is that the excess amount spent will be deemed as the assessee's income for the financial year. The AO cannot further deem as to what is that excess amount. Such excess amount (on investment or acquisition, over and above what is recorded in the books) has to be proved. There has always been a temptation on the part of the AO to deem what would be the total amount spent without actually proving that such a total amount has been spent. The finding about the actual amount spent on investment or acquisition has to be based on cogent evidence on record. It cannot be a matter of guesswork or estimate or an opinion. Once search and seizure or survey operations are carried out by the Department against an assessee, and investment or acquisitions are found recorded in the books but no evidence as to the actual amount spent thereon or of the amount spent more than what is recorded in the books are found, then the AO does not get jurisdiction to estimate as to how much is the actual amount spent on that investment or acquisition. In brief, the burden is on the Department to show that the assessee has spent more than what is declared by him in the books of account.

between the shareholders of the assessee company, we deem it fit to analyse the charging section available in the statute for the transactions entered into by the assessee, assuming department’s perception about “family arrangement” is correct. It is observed there is no provision in the statute to deal with the situation under consideration. In the Result, the addition made by the AO u/s. 69 of the Act and further changed by the Ld. CIT (A) to section 69B of the Act is not sustainable and directed to be deleted. We further analysed the provisions of section 56(2) (x) of the Act, which applies to the facts of the assessee but the same is applicable w.e.f. A.Y. 2018-19 onwards. Based on the above, Grounds No. 1 to 6 raised by the assessee is allowed.

Copy of the Order forwarded to: अपील र्थी/The Appellant , 1. प्रदिव िी/ The Respondent. 2. आयकर आयुक्त CIT 3. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 4. ग र्ड फ इल/Guard file. 5. BY ORDER, //True Copy// (Asstt. Registrar) ITAT, Mumbai