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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI C.M. GARG & SHRI BHAGIRATH MAL BIYANI
ORDER PER C.M. GARG, JM:
This appeal filed by the Revenue is directed against the order dated 27.06.2018 of the CIT(A)-3, Bhopal, relating to Assessment Year 2013-14.
The grounds raised by the Revenue read as under:-
“1. On the facts and in the circumstances of the case the Ld. CIT (Appeals) has erred in deleting the additions of Rs.7,49,28,000/- made by the Assessing officer without appreciating the facts and evidences brought on record by the Assessing officer.
2. On the facts and in the circumstances of the case the Ld. CIT (Appeals) erred in not appreciating the fact that the assessee firm purchased land much below the guideline value but stamp duty was paid on guideline value.
3. On the facts and in the circumstances of the case the Ld. CIT (Appeals) erred in not appreciating that corroborative and cogent evidences were found during the course of search which clearly establish that the partners of the assessee firm suppressed purchase price of the land purchased by them considering the fact that the land so purchased is situated in the vicinity of Indore City where the rate of land is too high.”
The ld. CIT-DR, supporting the assessment order, submitted that the assessee partnership firm came into existence on 02.05.2012 during FY 2012-13 relevant o AY 2013-14 and the partners of the firm were Shri Mukesh Jhaveri and his family members, each having 25% who have contributed towards capital of the assessee firm. The ld. CIT-DR submitted that from the record of the assessee firm, I was revealed that the assessee firm had purchased 10.198 hectares of land in village Kailod Kirtal, Indore for Rs.1,46,56,000/-, the value of which was as per the guidelines and the value of the stamp duty was Rs.8,95,84,000/-. The ld. CIT-DR further explained that the AO made addition of differential amount of Rs.7,49,28,000/- after allowing opportunity of being heard to the assessee by way of show cause notice dated 04.12.2015. The ld. CIT-DR further pointed out that the AO, after considering the explanation of the assessee rightly held that 10.198 hectares of land was purchased from five different persons which cannot be termed as distress sale and, therefore, it was rightly presumed that the assessee has suppressed its purchase price of land and has made payment out of undisclosed sources. The ld.CIT-DR submitted that the ld.CIT(A) has granted relief to the assessee without any justified reason and basis and, therefore, the first appellate order may kindly be set aside and the appeal may be restored to the file of the AO.
Replying to the above, the ld. Assessee’s Representative (ld. AR), drew our attention to the written submissions filed on 03.06.2022 and the paper book spread over 100 pages. The ld. AR submitted that the AO before making addition in the hands of the assessee merely made some sweeping remarks that Jhaveri group led by Shri Mukesh Jhaveri indulged in suppression of purchase price with regard to other land purchased by them. However, such remarks were generic in nature without having any basis and cannot be held as a valid basis for making additions in the hands of the assessee imposing tax liability. The ld. AR also submitted that the AO has also made a comment that the prevailing rate in Indore was much higher than that shown by the assessee, and no prudent person will sell the land at throw away prices. But, this bald statement was without having any corroborative material or evidence on record to show that the assessee has made over and above payment other than the amount shown in the books of account. The ld. AR also took us through the relevant part of the first appellate order and submitted that the ld.CIT(A) has rightly appreciated the facts and circumstances of the case and held that the purchasers have been made liable to pay tax on differential amount as per stamp valuation vis-à- vis shown in the purchase deed w.e.f. 01.04.2014 for AY 2014-15 by making necessary amendments in section 43CA of the Act and section 56(2)(vii)(b) of the Act because the said transaction had taken place before 01.04.2010. The assessee’s case is not hit by the said provisions. The ld. AR also pointed out that the provisions of section 43CA and 50C are applicable in the case of seller and the provisions of section 56(2)(vii)(b) of the Act is applicable to purchaser/individual HUF. He further submitted that the assessee is a partnership firm, being a purchaser of the land is not liable for any addition u/s 56(2)(vii)(b) as this provisions is applicable w.e.f. AY 2014- 15 only. Therefore, the AO was not right in making addition in the hands of the assessee. The ld. AR further submitted that so far as applicability of provisions of section 69 of the Act is concerned, there was not even a shadow of evidence to establish that the investment was not fully recorded in the books of account and, therefore, the AO was not justified in making addition merely on presumptive basis.
Placing reliance on the order of the ITAT, Chandigarh Bench in the case of ITO vs. Mrs. Inderjit Kaur (2012) 50 SOT 377 (Chd), the ld. AR submitted that the deeming fiction created u/s 50C regarding full value of consideration received or accrued to seller, cannot be extended to the provisions of section 69, in the case of purchasers.
The ld. AR finally submitted that the AO was not correct and justified in adopting the value determined by the Stamp Valuation Authority as actual consideration paid as purchase cost without bringing out any tangible or positive material on record.
Therefore, the addition based on pure guess work, conjectures and surmises was rightly deleted by the ld. CIT(A).
On careful consideration of the rival submissions, first of all, we note that the assessee is a partnership firm created during the FY 2012-13 related to AY 2013-14 by Shri Mukesh Jhaveri and his family members. As per the AO, the assessee has shown purchase of 10.198 hectares of land for a consideration of Rs.1,46,56,000/-, the value of which, as per the guidelines/value on the basis of stamp duty was Rs.8,95,84,000/- and the differential of Rs.7,49,28,000/- was added by the AO by observing that the assessee has suppressed its purchase price of land and has made payments out of its undisclosed source. However, the assessee has not mentioned any provision of the Act under which he intended to make addition in the hands of the assessee, but, the observations in para 4 shows that the AO wanted to make addition in the hands of the assessee u/s 69B of the Act. Thus, the assessee is a purchaser of land and if the taxing officer finds that the assessee has paid lesser amount than the stamp value, he ought to have invoked the provisions contained in sub-clause (b) of clause (vii) of sub-section (2) of section 56 of the Act in the hands of the purchaser. It is also pertinent to mention here that in a case where the AO by way of cogent and positive evidence or material establishes that the assessee has made over and above payment from the amount shown in the registered sale deed, then, he can very well proceed to make addition in the hands of the assessee on the allegation of undisclosed investment u/s 69B of the Act. The provisions of section 50C of the Act can be invoked in the case of the seller assessee from AY 2014-15 onwards and the same cannot be applied to the present case of the assessee as the assessee is no a seller of land, but, the purchaser of land and the case pertains to AY 2013-14.
6. Now, we proceed to adjudicate the sole issue agitated by the Revenue in this appeal. From the first appellate order, we observe that the ld.CIT(A) has granted relief to the assessee with the following observations and findings:-
“Discussion and appellate decision:-
All the details / material brought on record have been duly considered inter olio submission filed by the appellant. Due consideration has been given, to the findings arrived at in the assessment order. Ground # 1 & 2 of the appeal are intrinsically linked and common to each other and relating to addition made on account of suppression of purchase price of land to the tune of Rs. 7,49,28,000/-. During the year, the assessee purchased land admeasuring 10.198 hectare for a total consideration of Rs. 1,46,56,000 @ Rs.14,37,144/- per hectare reflected in the purchase deed (copy filed). However, it was noticed by the Id. AO that guideline value/market value for the said land at Kailod Kartal, Indore was determined by Stamp Duty Authority at Rs. 8,95,84,000/- @ Rs. 87,84,467/-per hectare. Thus, there was a huge difference of Rs. 73.5 lacs per hectare. Ld. AO worked out the purchase cost accordingly and presumed that assessee must have paid Rs. 7,49,28,000/- out of undisclosed sources and added the difference to the total income. Ld. AO has also observed in Para 4 of assessment order that Mr. Mukesh Jhaveri & Group are engaged in real estate business and they have been found indulged in suppression of purchase price of lands purchased by them. 5
This is an admitted fact that neither the sellers have admitted that them. This is an admitted fact that neither the sellers have admitted that impunged land was sold over and above the amount disclosed in purchase deed nor any evidence was found & seized during the sear to corroborate the allegation of ld AO that for purchase of impugned land, the assessee has paid consideration to the tune of Rs. 8,95,84,000/-. Except the difference in price as per Stamp Valuation vis-a-vis shown in the registered deed, there is no other evidence to corroborate the allegation that assessee actually paid any amount over and above the consideration shown in the registered deed. Ld. AO have also made some sweeping remarks that Jhaveri Group led by Shri Mukesh Jhaveri indulged in suppression of purchase price with regard to other lands purchased by them. However, he neither cited any instance nor such generic remarks can be made basis of making huge addition as done in this case. Ld. AO has also made a passing reference that prevailing rate in Indore was much higher than shown by the assessee and no prudent person will sale his land on throwaway prices. This is a bald statement without having brought any corroborative material on record, therefore such statements do not have any evidentiary value. This is pertinent to mention that purchasers have been made liable to pay tax on differential amount i.e. as per stamp valuation vis-a-vis shown in purchase deed w.e.f. 01.04.2014 i.e. A.Y. 2014-15 by making necessary amendments in section 43CA and 56(2) (vii) (b) of the Act. Obviously because the said transaction had taken place before 01.04.2010, assessee’s case is not hit by the said provisions. Section 43CA and 50C are applicable in the case of the seller of an immovable property whereas section 56(2) (vii) (b) is applicable to purchasers - individual/ HUF. This is important to note that the assessee being firm, the said provision is not even applicable in instant case and even otherwise provision of section 56(2) (vii) (b) is applicable w.e.f. A.Y. 2014-15 only. Ld. AR of the assessee has strongly opposed to the applicability of provision of section 69 of the Act because there was not even a shred of evidence to establish that investment was not fully recorded in the books of account, I agree with the contention of the appellant that ld A.O. is not justified in making the addition simply on assumption and presumption basis. It would be pertinent to refer to the decision of Hon’ble Apex Court in the case of Umacharan Saha & Bros Co. v/s CIT 37 ITR 21 (SC) wherein it was held that suspicion, however, strong cannot take place of proof. It would be most pertinent to refer to the decision of Hon’ble Supreme court in the case of K P Varghese v/s ITO (1981) 131 ITR 597(SC) wherein it was held that assessee must be shown to have received more than what is disclosed by him as consideration. Burden of proof is on the department. Here the ratio of the above cited case is squarely applicable to the facts of this case, the AO is required to bring some tangible and positive material on record to prove that assessee has paid more consideration than disclosed by it in the books. Hon’ble ITAT, Chandigarh Bench in the case of ITO v/s Mrs. Inderjit Kour (2012) 50 SOT 377 (Chd) has held that deeming fiction created u/s 50C regarding full value of consideration received or accrued to seller, cannot 6 be extended to the provisions of section 69, in the case of purchasers. Such statutory legal fiction cannot be extended, to rope in the purchasers, in the context of undisclosed investment u/s 69B. It has been held that legal fictions created for a definite purpose should be limited for that purpose and cannot be extended beyond their legislative needs. It is well- settled that deeming provision creating legal fictions, specially in taxing' statute have to be strictly construed. Certain other case laws which also support this propositions are:-
- CIT v/s K K Enterprises 13 DTR (Raj) 289 - ITO vs Satyanarayan Aggarwal 112 TTJ (jd) 717 - Kamal Kishore Chandok vs ITO 103 TTJ (Jd) 843 - ITO vs. Harley Street Pharmaceuticals Ltd. (2010) 38 SOT 486 (Ahd)
In view of above discussion and case laws discussed above, ld. AO was not at all justified in adopting the value determined by Stamp Valuation Authority as actual consideration paid as purchase cost without brining any tangible or positive material on record, action of A.O. is held not to be sustainable on facts and in law. Hence, addition of Rs. 7,49,28,000/-made purely on guess work, conjunctures & surmises u/s 69 of the Act is hereby ordered to be deleted. Group of appeal # 1 & 2 are allowed.”
In view of the above, first of all, we note that it is not the case of the AO that the assessee has made excess or over and above payment as shown in the registered sale deed to the seller of the property out of his undisclosed source. From para 4, it is the case of the AO that the assessee has suppressed its purchase price of land and has made the payment out of its undisclosed source. But, we are unable to see any findings or observations of the AO with corroborative evidence that the assessee has suppressed its purchase price of land and has made payment out of his undisclosed source. We are in agreement with the contention of the ld. AR that the sale consideration as well as stamp duty valuation has been shown in the registered sale deed and nothing has been concealed by the assessee. In absence of any positive evidence, no addition can be made in the hands of the assessee u/s 69B of the Act on the allegation of unexplained investment and suppression of purchase price of land and making payments to the seller out of income from undisclosed sources. From para 4, we observe that the main allegation of the AO is that the assessee has purchased land at lesser price from guideline value or stamp duty valuation which can be relevant for invoking the provisions of section 56(2)(vii)(b) of the Act, but, neither it is the case of the AO nor the said provisions can be applied for AY 2013-14 as the same is applicable from AY 2014-15 onwards. Therefore, we are inclined to hold that the AO made addition in the hands of the assessee without making reference to any deeming or any other provisions of the Act and the ld.CIT(A) rightly appreciated the factual matrix of the case and granted relief to the assessee. Our conclusion also gets support from the order of the ITAT Chandigarh Bench in the case of ITO vs. Mrs. Inderjit Kaur (supra). Accordingly, the grounds of the Revenue being devoid of merits are dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced u/r 34(4) of the Income-tax (Appellate Tribunal) Rules,
1963 on 27.12.2022.