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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of CIT (A)-25, Mumbai in appeal No. CIT(A)-25/IT-146/14(1)(2)/2012-13 dated 03-03-2014. The Assessment was framed by ITO Ward-14(1)(2), Mumbai for the A.Y. 2010- 11 vide order dated 31-01-2013 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by the AO of unrecorded/undisclosed income u/s 69B of the Act being unexplained investment in purchase of house property. For this Revenue has raised following three grounds: - “1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.1,48,40,000/- as unrecorded investments made u/s 59B, on the basis of DVO's report, after having accepting the finding of the A.O. in principle that the property was acquired in the year 2009 and not in the year 2004 as claimed by the assessee. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the assessee has not paid any amount unrecorded in the books as the assessee has shown payment as per the Stamp Duty Value arising for the year 2014 and not as per 2009 which is not real Further, the payment of Rs.7,00,000I- claimed to be made in 2004 has not been reflected anywhere in the agreement dated 30.12.2009.
The Id. CIT(A) erred in law as well as on fact by ignoring the fact that the present case is squarely covered by the provision of section 56(2)(vii)(b) of the IT Act.” 3. Briefly stated facts are that the AO has received AIR information that the assessee has purchased a commercial unit No.401, situated at Turner Road, Bandra (West), Mumbai from the developer named M/s Kamla Landmarc Infra at a total consideration of Rs.95,00,000/-. The AO during the course of assessment proceedings noted that at per index No. 2 annexed to the purchase agreement, market value of the said property has determined by the stamp duty valuation office as per circle rate is Rs.2,03,75,400/- and amounting to Rs.10,18775/- has been paid towards stamp duty charges of this property. As assessee could not explained the difference of purchase price between the amount of consideration paid and the market value determined by stamp duty valuation office, he referred the matter to the District Valuation Officer (DVO) u/s 142A of the Act on 25-09- 2012. The DVO, Mumbai furnished his valuation report dated 31-12-2012 and valued the property i.e. the cost of investment for purchase of this property at Rs.2,43,40,000/-. Accordingly, the AO relying on DVO’s record taken the real market value at Rs.2,43,40,000/- as purchase consideration and added unrecorded investment at Rs.1,48,40,000/-. Aggrieved, assessee preferred the appeal before CIT(A), who deleted the addition by observing in para 4.5,4.6,4.7 & 4.8 as under: - “4.5 I have perused the assessment order, submissions of appellant, remand report, facts and circumstances of the case carefully. The appellant has contended that the impugned commercial premises was acquired from developer at a very discounted rate consequent upon negotiation between them wherein the appellant surrendered an unauthorized shed admeasuring 100 sq. feet approx. on said land, and a reference of the same is also made in the Agreement dated 30.12.2009 for purchase of said commercial unit. The appellant claims that the said property was booked in year 2004, at which time the stamp duty value was near to the final consideration paid of Rs.95,00,000/- The appellant has vehemently denied having paid any consideration over and above the agreed consideration. On the other hand, the AO did not accept the existence of the alleged unauthorized shed of appellant, and contended that the appellant had made undisclosed investment to the extent of difference between value determined by DVO at Rs.2,43,40,000/- and the Agreement Value of Rs.95,00,000/- Further, the AO contended that even assuming without conceding that the assessee owned such a shed, the surrender in itself was a separate transaction and gains thereon are liable to be taxed and therefore the purchase consideration of said commercial premises to the extent of value pf shed so surrendered was not accounted in the books of assessee and therefore this difference was squarely covered u/s 69B of the Act. Subsequently, in Remand, Report in para 6. 1, the AO seems to have accepted that the difference in agreement value of Rs.95,00,000/- and stamp duty value of Rs.2,03,75,400/- is on account of negotiation between the assessee and developer for surrender of the100 sq.ft. carpet area and contended that the same is taxable in hands of assessee u/s 69B. The AO further provided evidence to show that the property was acquired in year 2009 and not in year 2004 as claimed by the appellant. Finally, the AO in para 16 of remand report, has not ruled out the possibility of restricting the addition made to Rs.1,08,75,400/- (i.e. Stamp Duty Value minus Agreement Value), as against the addition made of Rs. 1,48,40,000/- (i.e. Value of Investment estimated by DVO minus Agreement Value). 4.6.1 find that the rival arguments revolve around the existence or not of the alleged unauthorized shed. Hence, it would be appropriate to analyze the facts of present case under both such situations one by one: (i). Assuming the alleged unauthorized structure did not exist at all: In such case, the appellant has bought the property for consideration less than the stamp duty value. The differential value cannot be taxed u/s 56(2)(vii)(b), since as on the relevant date of agreement i.e. 30.12.2009, as per amended provisions w. e. f. 1-10-2009, only the immovable property received "without consideration" is to be taxed, and hence the appellant's case of inadequate consideration does not fall within preview of said section. I also find that the said section has subsequently been amended by Finance Act 2013 to cover the cases of inadequate consideration also, but the same is effective from 1-4- 2014, hence not applicable to A.Y. 2010-11 under consideration. The provisions of Sec. 50C cannot be invoked in hands of buyer. As regards to the applicability of Sec.6913, the appellant has contended that the said section can be applied when assessee expend amount on asset and not record the same in books of account, however he has not paid any amount over and above Rs.95,00,000/- to the developer and further he has disclosed all the payment made to the developer. I find that even assuming that the said unauthorized structure did not exist, there is no concrete evidence to prove that any additional amount was paid to the developer except the apparent difference in purchase value and stamp duty/market value of property, in which case it is difficult to sustain addition even u/s 69B. (ii). Assuming the alleged unauthorized structure existed and was surrendered by appellant: In such case, the provisions of Sec. 56(2)(vii)(b) & 50C cannot be invoked for reasons same as stated above. Now the question remains as to the applicability of Sec. 69B. I understand that Sec. 69B covers investments not fully disclosed in books of accounts, and in present situation since the investment in commercial unit to the extent of surrender value of unauthorized structure would be explained, it would not fall within the preview of said section. The appellant has not received any separate sale consideration in respect of surrender of unauthorized construction, and negotiated to reduce the cost of acquisition of commercial property. Whenever the appellant would sell the said commercial property, he would be entitled to claim the reduced cost and indexation benefit thereon while calculating the capital gain. In my opinion, in absence of express provisions of statute to bring the alleged sale consideration of unauthorized structure adjusted against the purchase value of commercial property, it may not be justified to tax the same in current assessment year. 4.7 In view of the aforesaid, since the taxability in present assessment year is not attracted under any of the above situations, the year of acquisition whether year 2004 or year 2009 is not a deciding factor for adjudication of present appeal. However, I consider that the year of acquisition of said commercial unit should be considered in F.Y. 2009-10, as the entire consideration pursuant to agreement dated 3 0.12.2009 has been paid in the said year and there is no reference made in the agreement of the alleged booking amount paid in year 2004. 4.8 Accordingly, the entire addition made in assessment order of Rs.1,48,40,000/- is deleted and the grounds of appeal
are allowed.” Aggrieved, Revenue is in second appeal before Tribunal.
4. We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly the facts of the case are that the assessee has purchased commercial unit No.401, situated at Turner Road, Bandra (West), Mumbai from the developer named M/s Kamla Landmarc Infra and recorded consideration of Rs.95,00,000/- as per purchase agreement. However, as per purchase agreement the valuation of the property as per Stamp Duty Valuation Authority is Rs.2,03,75,400/-. The AO referred the matter /property, to know the exact cost of investment to the purchaser of the said property, to the District Valuation Officer, Mumbai, who valued the cost of investment at Rs.2,43,40,000/-. The assessee has also made a claim that assessee booked this office premises in December 2004 and paid earnest deposit of amount Rs.7,00,000/- to Kamla Landmarc Infra. This position of assessee was rejected by CIT(A) treated this transaction pursuant to agreement dated 13-12-2009, hence falling in F.Y. 2009-10 relevant to A.Y.2010-11. The findings of CIT(A) on this issue is not challenged by assessee in his appeal and hence, the same has become final.
5. Now, the issue is whether the provisions of Section 69 B of the Act as well as Section 56(2) (Vii)(b) r. w. s. 50C of the Act will apply or not? First of all, it is to be seen that what document or evidence is in the possession of the AO to prove that the assessee has paid the difference of value of agreement and stamp duty value in any other form of consideration to the extent of Rs.1,08,75,400/- for making addition u/s 69 B of the Act. We find from the facts of the case as well as the records of the case and else also the arguments of learned Sr. DR that there is no evidence in the possession of Revenue which proves that the assessee has paid over and above the value of agreement in any other form of consideration. Hon’ble Gujarat High Court in the case of Berry Plastics (P) Ltd. (2013) 35 Taxman.com 296 (Guj) has held that the DVO’s report may be useful tool in the hands of the AO, nevertheless it is an estimation and without there being anything more cannot form basis for addition u/s 69 B of the Act. The burden to prove under statement is on the Revenue and in the absence of any evidence addition cannot be made. This view has been held by Hon’ble Supreme Court in the case of KP Varghese Vs. ITO (1981) 131 ITR 579 (SC). Secondly, a new provision as introduced by the finance bill 2013 w. e. f. 01-04-2014 of provisions of Section 56 (2) (vii) (b), wherein immovable property purchased/received for inadequate consideration, which is less than stamp value by 50,000 or more, than the difference between the stamp duty value and inadequate consideration shall be taxable in the hands of the individual or HUF as income from other sources. This amendment applies in relation to A.Y. 2014-15 and subsequent assessment years and up to 31-03-2013, addition cannot be made in the hands of the buyer as explained by the explanatory note to finance bill, 2013. There is no dispute as regards to the amount and date of registration that the property was registered only on 19-01-2010, which is much before the amendment in Section 56(2) of the Act. Even the provision of Section 50C r. w. s. 69 and 69B of the Act, i.e. the special provision for full value of consideration in certain cases creates a legal friction for taxing capital gains in the hands of seller and it cannot be extended for taxing difference between apparent consideration and valuation done by stamp valuation authorities as undisclosed investment. This view of ours is supported by the decision of co-ordinate Bench of ITAT of Ahmedabad Bench in the case of ITO Vs. Harley Street Pharmaceuticals Ltd. (2010) 38 SOT 486 (Ahd). In view of CIT(A) and this issue of Revenue’s appeal is dismissed.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 28-11-2016.