REKHA AJAYKUMAR AGRAWAL,SURAT vs. ASSISTANT COMMISSIONER O INCOME TAX, CIR.1(2), SURAT

सुनवाई की तारीख/ Date of Hearing : 23/01/2023 घोषणा की तारीख/Date of Pronouncement : 30/01/2023 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2015- 16, is directed against the order passed by the Learned National Faceless Appeal Centre (‘NFAC’ for short”/Ld. CIT(A) dated 14.10.2022, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”] dated 29.12.2017.

“1. The Hon'ble CIT(Appeals) has erred in applying section 56(2)(vii)(b), though the transaction was commenced at a time when the such provision was not in the statute.

2. The Hon'ble CIT(Appeals) was not justified in confirming in addition of Rs.1,89,000/- made u/s 23(4) of the Act on account of Deemed Rental Income.

3.First we take assessee’s Ground No.2 which relates to addition of Rs.1,89,000/- made u/s 23(4) of the Act on account of deemed rental income. Brief facts qua the issue are that during the assessment proceedings, the Assessing Officer observed that assessee has two residential properties other than the one shown in the computation of income. The assessee is having residential flats at Sangam and Prayag (1/2 share). As such, the assessee is required to show the rental income on these residential flats. But assessee has not offered any income in this regard. To ascertain the actual rent in the vicinity of the properties, the Inspector was deputed by Assessing Officer, who after conducting enquiry submitted that a monthly rent at Sangam is Rs.15000/- and at Prayag is also of Rs.15,000/- In this regard, Assessing Officer issued show cause notice dated 15.12.2017, wherein the assessee was requested to show cause, as to why the annual let out value of the properties should not be estimated at Rs.2,70,000/- (15000*12 = 180,000 and 15000 x 12 = 180000/2 = 90,000) under the head “income from house property”. In this regard, the assessee has not submitted any reply regarding show cause notice. Therefore, the rent income has been estimated by Assessing Officer after taking into the report of the Inspector who was deputed for this task. Therefore the annual let out value of the property is estimated at Rs.2,70,000/- (15000*12 = 180000 and 15000 x 12 = 180000/2 = 90000). The estimated let out income of Rs.2,70,000/- is subjected to deduction u/s 24(a) of the Act. Therefore, the net annual let-out value of the property comes to Rs.1,89,000/- (270000 – 81000 being 30% of 270000). Therefore, the net annual let out value of the property is determined at Rs.1,89,000/- and was added to the total income of assessee under the head “income from house property.

4. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in further appeal before us.

7. We have heard both the parties and perused the materials available on record. We note that as per par- 3 of the assessment order, the Assessing Officer noticed that assessee has two residential properties at Sangam and Prayag (wherein assessee share is half with regard to Prayag) other than the one shown in the computation of income. As the assessee has not offered any income in this regard, the Inspector was deputed to ascertain the actual rent of such properties in the vicinity. On the basis of the Inspector’s report, the monthly rent of flat at Sangam and at Prayag is taken at Rs.15,000/- each. After issuing show cause notice to the assessee which was not replied by the assessee, rental income from the said properties was estimated by Assessing Officer at Rs.2,70,000/- [15,000*12 = 1,80,000) and (15,000*12 = 1,80,000//2 = 90,000/-) = 2,70,000/-]. We note that assessee was unable to find any tenant to rent the said properties during the year relevant to the assessment year under consideration and for that ld Counsel submitted that assessee was ready to submit the confirmation from the Page | 3 brokers who were trying to search customers to give property on rent basis. We note that assessee could not fetch customer during the year but she used to rent the properties in past whenever she got customer. Therefore, we are of the view that no addition should be made based on deeming provisions, hence the addition so made by the Assessing Officer is directed to be deleted. This ground No.2 raised by the assessee is allowed.

(c) If the contention of the assessee is accepted also, the value of the property at the time of agreement was to be consider as per section 56(2)(vii)(b) of the Act, states that …… Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date 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 the agreement may be taken for the purposes of this sub-clause;

(d) The Sub-Registrar, Surat City-1,Athwa, Surat further submitted that there is no change in jantri rates from 18.04.2011 and the stamp duty is being calculated from 18.04.2011 on these jantri rates only.

(e) Therefore, the jantri rates at the time of agreement were same as the jantri rate at the time of registration of the said property. As there is difference in sale consideration amount of Rs.70,00,000/- and the value adopted by the stamp Duty Authorities of Rs.89,07,000/- and from the clarification given by the Sub-Registrar, City-1, Athwa, Surat, the difference amount of Rs.19,07,000/- was to be treated as income from other sources u/s 56(2)(vii)(b) of the Act. Therefore, Assessing Officer held that the amount treated as income from other sources as the assessee is having 50% share in the said property was added to the total income of assessee.

owner, and on his death, second agreement to sale/ supplementary agreement to sale was executed by legal heirs of owner and the purchaser [Assessee’s Group]. The lower authorities have not investigated with the legal heirs about the validity or execution of agreement to sale. It is also a matter of fact that in the conveyance deed, the legal heirs of original owner accepted the payment of Rs.1.00 lakhs in cash at the time of execution of initial agreement on 23.01.2008, Rs. 1,17,98,000/- on 25.03.2013, Rs.10,00,000/-on 02.09.2013, Rs.10,00,000/- on 04.09.2013 and Rs.9,02,000/- on 06.09.2013. We find that Rs. 1,17,98,000/- was paid by assessee and his group by way of cheque in the office of Collector Tenancy. As per the agreement with the original owner, which was ratified by his legal heirs, the amount Rs. 1,17,98,000/- was paid as a part of consideration. The AO has not brought any evidence on record that the amount paid on account of conversions charges was not part of sale consideration, except presuming the fact that it was not executed in proper way. Further, neither the AO nor ld CIT(A) investigated about the validity of the agreement from the legal heir of the original owner of the land. Moreover, the legal heirs of the original owner acknowledged the act of their predecessor in interest before the Sub Registrar. So, the lower authorities is not entitled to raise questions on the first and the second agreement in question. Now, in our considered view, the short question which is left for our adjudication is whether the amended provision of section 56(2)(vii)(b)(ii) are applicable on the transaction or not or that the assessee is eligible for the benefit of the second proviso of 56(2)(vii)(b)(ii). The ld.AR of the assessee vehemently submitted that more than 80% of sale consideration was paid by assessee and his group before the amendment in section came into effect and that the assessee is eligible of benefit of second proviso of section 56(2)(vii)(b)(ii), and that the grounds of appeal raised by assessee are covered by the decision of Tribunal in case of Moole Rami Reddy vs. ITO (supra) and Lahiri Promoters vs. ACIT (supra), which was followed by this Bench in Parinda Bhaveshkumar vs. ITO (supra). We find that more than 80% of the sale consideration was paid by the assessee and the assessee is eligible of benefit of second proviso of section 56(2)(vii)(b)(ii). The revenue has not disputed the quantum of sale consideration nor bring on record that the assessee and his group paid any other amount except the sale consideration shown in the final sale deed. On careful comparison of facts, we find that facts of the present case are similar as in Parinda Bhaveshkumar vs. ITO (supra). This Bench in case of Parinda Bhaveshkumar vs. ITO(supra) by following the earlier decision of coordinate Bench in Moole Rami Reddy vs. ITO (supra) and Lahiri Promoters vs. ACIT (supra) passed the following order:

6. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. We have also seen the various document placed on record, which consist of written submissions before ld CIT(A), reply to the show cause notice before AO, copy of registered sale deed dated 10.09.2013, copy of the agreement to sale dated 28.03.2013, copies of the bank statement of purchaser showing the payments through cheques. We have also deliberated on the various case laws relied by the ld. AR for the assessee. During the assessment the AO made addition of Rs.10,35,918/- by taking view that the assessee along with her co-owners have shown sale consideration at Rs.1.16 Crore, however, the SVA at the time of registration of sale deed valued the property at Rs. 2.9 Crore. The assessee is having 1/10 share in the said property, thereby the difference thereof (to the extent of assessee’s share) was added under section 56(2)(vii)(ii) of the Income-tax Act. As recorded above the assessee filed detailed written submissions before ld CIT(A). We find that the ld CIT(A) concurred with the finding of the AO by holding that that Finance Bill, 2013 was introduced in February, 2013 and the same was amended to include cases of inadequate consideration. The amendment was widely known in February, 2013 itself. It was also held that the contention of the assessee that agreement executed prior to March 2013 will not be covered under section 56(2)(vii)(b)(ii), the agreement appears made in March, 2013 is not registered, the date cannot be independently verified and probably the agreement composition being anti date too. We find that neither the AO nor the ld CIT(A) investigated about the non-genuineness of the agreement. No notice to the seller was issued by ld CIT(A) before taking view that ‘probably the agreement composition being anti date too’. The ld CIT(A) took his view only on his presumption and assumption. The AO invoked the provision of section 56(2)(vii)(b)(ii), without having any evidence of excess consideration over and above the sale deed, in addition to the sale consideration. We further find that the assessee entered into agreement with the seller on 28.03.2013. The substantial part of the sale consideration was also paid to the seller, which is about 80% of the total sale consideration. Though, ultimately the sale deed was registered on 10.09.2013. The details of sale consideration is also mentioned in the registered sale deed, which strengthen the claim of the assessee that substantial part of consideration was paid on the day of execution of the initial agreement. The assessee claimed that the possession of the land was also obtained by them at the time of agreement. This fact is not disputed by the AO.

consideration if the consideration paid is less than the stamp duty value. The AO is not permitted to invoke the provisions of section 56(2)(vii)(b)(ii) in the absence of sub clause (ii) in the Act as on the date of agreement.” 8. Thus, in view of the aforesaid factual and legal discussions, we find that in absence of sub-clause (ii) in the statue book as on the date of agreement to sale of the property, the AO was not entitle to invoke the said provision. Hence, the ground of appeal raised by the assessee is allowed. The AO is directed to delete the entire addition under section 56(2)(vii)(b)(ii).

9. In the result, the appeal of the assessee is allowed. 16.In view of the aforesaid factual and legal discussions, we find that the ratio of the aforesaid decision is squarely applicable on the facts of the present case and the assessee is eligible of benefit of second proviso of section 56(2)(vii)(b)(ii) . Hence, the sole ground of appeal raised by the assessee is allowed.

17. In the result, the appeal filed by the assessee is allowed.”