ACIT, MUZAFFARNAGAR vs. SH. TEJ PAL SINGH, MUZAFFARNAGAR

The first issue raised by the Revenue in its appeal is against the deletion of addition of Rs.1,82,34,261/- made by the AO by invoking the provisions of section 50C of the Act.

Briefly stated, the facts of the case are that that the assessee showed capital gain of Rs.43,44,810/- on the sale of 83 plots measuring 6095 sq. yards, after taking the fair market value as on 1.4.1981 @ 200/- & 293/D/2014 CO No.402/Del/2011 per sq. yard. It was observed by the AO that the assessee sold total land of 10198.01 sq. mtrs. and the value for the purposes of section 50C was shown at Rs.2,21,23,000/-, giving the average rate at Rs.2169 per sq. mtr. The assessee also filed a copy of sale deed dated 27.04.2007 of 130 sq. mtrs. land in which circle rate was taken at Rs.2,000/- per sq. mtr. In the said sale deed, the property was shown to be located at ‘Choudhary Charan Singh Colony, Kasaba Shamli.’ The assessee argued not to have developed any colony called ‘Choudhary Charan Singh Colony.’ The Income-tax Inspector was deputed to investigate the facts, who reported that the land sold by the assessee was known as ‘Charan Singh Vihar’ and not ‘Charan Singh Colony.’ The main entry of the colony was from Majra road. The ITI further reported that the market value of the plots situated in the colony ranged between Rs.8,500/- to Rs.9,000/- per sq. mtr. A list of prevailing circle rates fixed by the ADM (Finance) on different dates was also obtained which revealed the Circle rate from 2.7.2006 to 17.09.2007 in the above location at Rs.5,700/- per sq. metre while from 18.09.2007 to 31.08.2008, at Rs.6,000/- per sq. metre. The & 293/D/2014 CO No.402/Del/2011 AO, relying upon the investigation report of the Income-tax Inspector and such circle rates fixed by ADM (Finance), determined the sale consideration under section 50C of the Act, as under:-

That is how total sale consideration of the property was computed at Rs.5,93,87,736/-. The assessee’s share of capital gain was, thus, computed as under:-

This led to the making of the addition of Rs.1,82,34,261/-. The ld. CIT(A) deleted the addition, against which the Revenue has come up in appeal before us. & 293/D/2014 CO No.402/Del/2011 6. We have heard the ld. DR and perused the relevant material on record. There is no appearance by the assessee despite notice. The written submissions filed on behalf of the assessee have been taken into consideration. We are, therefore, proceeding to dispose of this appeal on merits by considering the written submissions filed on behalf of the assessee.

The addition of Rs.1,82,34,261/- was made by the AO by taking full value of consideration as per section 50C @ Rs.5,700/- per sq. metre (for 6001.08 sq. mtrs. of land) and Rs.6,000/- per sq. metre (for 4196.93 sq. mtrs. of land). The ld. CIT(A) admitted certain additional evidence filed on behalf of the assessee in the shape of copies of circle rates, lease agreement, etc. under Rule 46A. The AO’s remand report was also called for in which the AO reiterated his stand. The ld. CIT(A), however, deleted the addition by observing that the property sold by the assessee was adjacent to Choudhary Charan Singh Colony and that is why the circle rate as applicable to Choudhary Charan Singh Colony should have been applied for stamp duty purposes. This appears to be in & 293/D/2014 CO No.402/Del/2011 contrast to what the assessee contended before the AO that he did not develop any colony by the name of ‘Choudhary Charan Singh Colony.’ It is seen that the ld. CIT(A) admitted additional evidence and, on that basis, came to hold that the assessee’s version was correct. We find that there are certain conflicting areas in the view canvassed by the AO vis- à-vis the ld. CIT(A). The first and the foremost thing which is required to be settled is the locality in which the plots were actually sold and the circle rates of such plots. The AO has proceeded in taking circle rate of certain plots at Rs.5,700/- per sq. metre while for others Rs.6,000/- per sq. metre. On the contrary, the ld. CIT(A) has accepted the assessee’s stand. In our opinion, there cannot be any difficulty in ascertaining the circle rates of the plots sold which can be traced from the stamp value for the respective sale deeds. Since both the authorities have proceeded in different ways and the assessee has also not come clean, in our considered opinion, the ends of justice would meet adequately if the impugned order on this score is set aside and the matter is restored to the file of AO. We order accordingly and direct him to find out the precise & 293/D/2014 CO No.402/Del/2011 circle rate of all the plots sold by the assessee from the respective sale deeds and, then, compute capital gain, as per law, after allowing a reasonable opportunity of being heard to the assessee.

The second ground of the Revenue’s appeal is against the deletion of addition of Rs.29,18,500/- towards investment in property in Noida.

In so far as the deletion of addition of Rs.29,18,500/- towards investment in property in Noida is concerned, we find that the AO has taken the assessee’s share from the sale consideration of plots at & 293/D/2014 CO No.402/Del/2011 Rs.28,93,500/-. As against that, the assessee filed cash flow statement before the AO, which has been reproduced in the impugned order as under:-

As per this cash flow statement, the assessee claimed to have received a sum of Rs.1,02,01,000/- from sale of land. The AO did not adversely comment on this receipt of Rs.1.02 crore. We are unable to accept the AO’s stand in taking the assessee’s share from sale consideration of plots at Rs.28.93 lac, by considering the cut-off date of 19.7.2007 for the plot sold. It is quite possible that the assessee might have received a part of the sale consideration of the plots before the 9 & 293/D/2014 CO No.402/Del/2011 execution of sale deeds taking place after the cut-off date. Going by the availability of funds as per the funds flow statement, which has not been controverted by the AO, we are convinced that the assessee successfully proved the availability of funds for the purposes of making investment in the commercial space. The addition of Rs.29,18,500/-, in our considered opinion, has been rightly deleted.

The third ground of the Revenue’s appeal is against the deletion of addition of Rs.3 lac made by the AO u/s 68 of the Act. This is in respect of a loan of Rs.3 lac claimed to have been received by the assessee from Shri Tara Singh, whose genuineness was not accepted by the AO. We find from the assessment order itself that statement of Shri Tara Singh was recorded who admitted to have gave interest free loan of Rs.3 lac to the assessee. The AO has simply brushed aside the statement on trivial issues. In our considered view, the ld. CIT(A) was right in accepting the genuineness of the transaction of Rs.3 lac, being the amount of loan received from Shri Tara Singh on the basis of totality of facts prevailing on this score. & 293/D/2014 CO No.402/Del/2011 12. First ground of the assessee’s cross objection is against the confirmation of addition u/s 68 to the extent of Rs.2 lac. The assessee stated before the AO that a sum of Rs.2 lac was received by him from Smt. Virna Rani Singh. However, subsequently, during the course of assessment proceedings, it was stated that the name of the creditor was inadvertently mentioned as Smt. Virna Rani Singh, whereas the correct name was Shri Samar Singh. During the course of first appellate proceedings, it was submitted by the assessee that the loan was actually taken from Shri Vir Narain Singh, who is father-in-law of the assessee and not from Shri Samar Singh, his brother-in-law. The ld. CIT(A) confirmed the addition.

On going through the written submissions and the relevant material on record, it is noticed that the loan of Rs.2 lac was received by means of a bank draft which was issued from the joint account of Shri Vir Narain Singh (father-in-law of the assessee) and Shri Samar Singh (brother-in-law of the assessee). Shri Vir Narain Singh owned 100k bighas of agricultural land. At the time of purchase of draft from the & 293/D/2014 CO No.402/Del/2011 joint account of father and son, there was a balance of Rs.2,22,124/- and most of the balance was from earlier transactions. When there is a joint bank account, there can be no reason to doubt the receipt of loan from the either party who are otherwise close relatives inter se and that of the assessee. When a loan of Rs.2 lac was given from a joint bank account operated by Shri Vir Narain Singh and Shri Samar Singh, the authorities ought to have accepted the genuineness of the transaction on the question of the payer of the loan. Except this, no other reason has been assigned to disprove the genuineness of the transaction. In our considered opinion and taking into consideration the entirety of facts and circumstances of the instant case, we are convinced that the ld. CIT(A) was not justified in sustaining this addition. The same is hereby deleted.

The AO imposed penalty u/s 271(1)(c) of the Act in respect of the two additions, namely, unsecured loan of Rs.2 lac and addition u/s 24(a) amounting to Rs.14,443/-. The penalty totaling to Rs.73,000/- came to & 293/D/2014 CO No.402/Del/2011 be upheld in the first appeal. The assessee is aggrieved against the sustenance of penalty.

After considering the arguments of the ld. DR and the relevant material on record, we find that the addition u/s 24(a) is in respect of rental income earned by the assessee from Reliance Infocom Ltd. against which statutory deduction u/s 24(a) at the rate of 30% was claimed. It is altogether a different matter that the assessee gave up his claim at the assessment stage in respect of such deduction. The mere fact that the assessee did not pursue this issue further cannot, in our considered opinion, be a reason to impose and confirm penalty u/s 271(1)(c). When the assessee genuinely received rental from Reliance Infocom Ltd., and claimed deduction u/s 24(a) of the Act thereon, the fact that the deduction was not permissible or was not allowed could not be considered as concealment of income or furnishing of inaccurate particulars of income so as to attract penalty u/s 271(1)(c) of the Act.

In the result, the quantum appeal of the Revenue is partly allowed for statistical purposes, the C.O. of the assessee to the extent it is against the confirmation of addition, is allowed, and penalty appeal is allowed.