RAJESHBHAI P . MANGUKIYA,SURAT vs. PCIT-1, SURAT, SURAT

The assessee filed his reply on 15.02.2023, 21.02.2023 & 23.02.23 respectively. The contents of various replies of assessee is extracted by Ld. PCIT in para-4.2 from pages 3 to 7 of his impugned order. The assessee in reply, regarding said show cause notice, submitted that assessee along with 9 other persons had purchased agricultural land ad measuring 16646 square meters at District Surat, Taluka Adajan Village, Moje Palanpor, vide sale deed dated 07.03.2018. As purchase was made on the basis of agreement dated 30.08.2010 and agricultural land was purchased by all the co-owners who are family members and relative, out of which some of the co-owners. Though all the family members were not the party in the agreement to sale in the year 2010, entered for purchase of agricultural land and sale deed was executed in financial year 2017-18. The assessee submitted that during assessment proceedings, assessee explained & 341/SRT/2023 (A.Y. 18-19) Nayan D Mangukiya & Rajeshbhai P Mangukiya such fact that when land was purchased by said nine co-owners, out of the purchased value of agricultural land cannot be one amount for some co-owners and other amount for some other co-owners. The assessee also explained the share of all the co-owners including four persons who were paid part of sale consideration by way of cheque at the time of entering into agreement to sale in the year 2010. The assessee further submitted that entire facts were examined by Assessing Officer at the time of assessment proceedings. The assessee also explained. Thus complete facts were examined by Assessing Officer and he chose not to make any addition to the returned income filed by the assessee. The assessment order was passed by Assessing Officer after examining the application of Section 56(2)(x) of the Act. The assessing officer, on verifying the details and understanding the fact that appreciated that there cannot be a difference, two value of one plot of agricultural land for two different set of co-owners. The Assessing Officer accepted returned income and chose not to make further any addition. The assessee vide reply dated 23.02.2023 submitted that 1st and 2nd proviso to Section 56(2)(x) of the Act is to ensure that if the transaction value of agricultural land is fixed by the buyer and the seller at any point of time before final sale deed and the same is partly transacted in any mode other than in cash than the benefit of stamp duty value as the date of earlier agreement should be given to buyer party in the transaction. The intention is to see that no & 341/SRT/2023 (A.Y. 18-19) Nayan D Mangukiya & Rajeshbhai P Mangukiya hardship is faced by either seller or the buyer when transaction was already made by way of account payee cheque. The assessee also stated that even if a single person amongst all co-owners has paid part purchase consideration by account payee cheque on or before the date of sale, then stamp duty value at that time will be applicable and not at the time of execution of final sale deed.

The reply of assessee was not accepted by Ld.PCIT. The Ld. PCIT held that he has raised a specific query in his show cause notice that assessee was not a party in the original agreement to sale which was executed in the year 2010. Thus, the explanation of assessee was not acceptable on the basis of facts of the case has not made any payment on or before 30.08.2010 by way of account payee cheque or transferred of said immovable property. Thus, benefit of 1st and 2nd proviso to Section 56(2)(x)(b) cannot be provided to the assessee. The Stamp Duty Valuation Authority valued the property at Rs.10.48 crores and deeming provision of Section 56(2)(x)(b) of the Act was attracted in the present case. The assessee’s share of 7% of the property so proportionate addition of difference in the sale value and the value determined by stamp valuation authority, is to be made. The contention of assessee was that purchase cost of property cannot be different for four co-owners, who are a part of agreement and for remaining six co-owners who are not a party were without any merit. The person, who were part of agreement on 03.08.2010 are eligible for benefit of first and second proviso to section & 341/SRT/2023 (A.Y. 18-19) Nayan D Mangukiya & Rajeshbhai P Mangukiya 56(2(x)(b) but the owners who are not the part of said agreement cannot get any benefit and the different in sale consideration to determine by Stamp Valuation Authority vis-à-vis declared in the sale deed is to be added in the taxable income under the head “other source in their case”. On such observation, the Ld.PCIT directed the Assessing Officer to pass fresh assessment order after taking into account the issue has already been considered together with the issue discussed by him by giving opportunity of being heard to assessee. Aggrieved by the order of Ld. PCIT passed on 13.03.2023 the assessee filed present appeal before the Tribunal.

We have heard the submission of Ld. Authorized Representative (Ld.AR) for the assessee and Ld. Commissioner of Income Tax Departmental-Representative (Ld. CIT-DR) for the Revenue. The Ld. AR for the assessee submits that assessee along with nine other co- owners who are closed family members and relative purchased agricultural land ad measuring 16646 on 07.03.2018 for a total sale consideration of Rs.7.63 crores. The assessee is having 7% share in the said sale deed out of ten co-owners, four co-owners namely, Umeshbhai P Patel, Parshottambhai C Patel, Sanjaybhai Tulshibhai Mangukiya and Karamshibhai Khimjibhai Mangukiya who are jointly paid of aggregate amount of Rs.35 lakhs to the seller at the time of execution of agreement by way of account payee cheque. Such fact is not disputed by Ld. PCIT. The Ld.PCIT revised the assessment order only by taking view that since the assessee was not the party to the & 341/SRT/2023 (A.Y. 18-19) Nayan D Mangukiya & Rajeshbhai P Mangukiya original agreement and no payment / part payment at the time of execution of agreement was given therefore assessee is not eligible for the benefit of first and second proviso to Section 56(2)(x)(b) of the Act.

The Ld. AR for the assessee submits that this issue was examined deeply by Assessing Officer during the scrutiny assessment and assessee furnished complete details and explained that initially four of the group / owners paid payment of consideration in co-owners in ten at the time of agreement to sale copy of agreement and all other required details including the copy of statement of bank account, and other details were furnished. The Ld. AR for the assessee submits that assessee has filed a very detailed and exhaustive written submission before Assessing Officer vide reply dated 22.07.2010 copy of which filed at pages 75 and 76 of the paper book. The questionnery raised by Assessing Officer on the particular issue specifically on the applicability of Section 56(2)(x) was raised in Question No.4 of Annexure attached with show cause dated 13.02.2020 under section 142(1). The Assessing Officer on his satisfaction accepted the returned income without making any variation in the returned income. Thus, the assessment order passed after due consideration and application of mind which cannot be branded as erroneous and prejudicial to the interest of Revenue. The assessing officer while passing assessment order took reasonable and legally sustainable view.

On the other hand, the Ld. CIT-DR for the Revenue supported the order of Ld. PCIT. The Ld. CIT-DR for the Revenue submits that while revising the assessment order clearly held that assessee was not a party to the agreement and no part of sale consideration was made by assessee prior to execute of sale deed. Therefore, assessee is not eligible for the benefit of first and second d proviso of Section 56(2)(x)(b) of the Act. The Ld. CIT-DR for the Revenue submits that Assessing Officer has not recorded anything in his assessment order and simply he recorded income of assessee that assessment of income is as per the computation sheet and there is no narration of examination of issue or application of mind that such issue in & 341/SRT/2023 (A.Y. 18-19) Nayan D Mangukiya & Rajeshbhai P Mangukiya assessment order is erroneous and in so far as prejudicial to the interest of Revenue.

We have considered the rival submission of both the parties and perused the records carefully. We have also deliberated on various case law relied by Ld. AR for the assessee. We find that there is a limited controversy in the present appeal, that if a person who was not a party to the agreement to sale and has not paid any consideration or part consideration by way of cheque other than cash at the time of execution of such agreement can still be eligible for the benefit of first and second proviso of Section 56(2)(x)(b) of the Act.

Before coming to the impugned order passed by Ld. PCIT, we may refer that during assessment, Assessing Officer examined the issue by issuing very detailed show cause notice to the assessee vide notice dated 13.02.2020 requiring detailed information with regard to purchase such property valuation thereof with documentary evidence and the applicability of Section 56(2)(x) of the Act as per Question Nos.4, 5, 10, 12 & 13 of Annexures attached with said notices, the assessee while his reply dated 22.07.2020 filed a very detailed reply explaining all facts as explained before us, so no doubt the Assessing Officer has not narrated such fact in the assessment order while accepting the returned income.

Now adverting to the objection of Ld. PCIT that when the assessee was not a party to the original agreement to sale assessee cannot & 341/SRT/2023 (A.Y. 18-19) Nayan D Mangukiya & Rajeshbhai P Mangukiya avail the benefit of first and second proviso of Section 56(2)(x)(b) thereby the assessment order is erroneous and in so far as prejudicial to the interest of Revenue. We find that Co-ordinate Benches of Mumbai Tribunal in the case of Sulochana Saijan Modi (supra) while considering almost similar set of facts, wherein part payment of transaction was made by son of the assessee, who was joint holder of the property, the Tribunal accepted the submission for granting benefit of first and second proviso to Section 56(2)(x)(b) of the Act. We further find that in the present case, the part sale consideration was paid by Shri Umeshbhai P Patel, Sanjaybhai Tulshibhai Mangukiya and Karamshibhai Khimjibhai Mangukiya. We find that one of the assessee in these appeal that is Rajesh Bhai is the son of Parshottambhai C Patel. And Nayan Bhai is the cousin of Rajesh Bhai. Admittedly part consideration of the transaction was either paid by family members or by close relatives. Therefore, respectfully following the decision of Co-ordinate Benches of Mumbai Tribunal in the case Sulochana Saijan Modi (supra), we are also of the considered view that while accepting returned income considered by Assessing Officer has not committed any error. Therefore, the assessment order cannot be branded as erroneous. Thus, twine condition, for invoking Section 263 of the Act are not met out in the present case. This ground of assessee’s appeal is allowed.

In the result, assessee’s appeal No.333/SRT/2023 is allowed.