The ITO, Ward-1, Navsari V. M/s. Om Sai Metals, Navsari

ITA 1271/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94791 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Income from undisclosed sources
• Section: 143(3); 50C; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER) ITA NO: 1271/AHD/2012 (ASSESSMENT YEAR: 2009-10) INCOME-TAX OFFICER, WARD- 1, NAVSARI V/S M/S. OM SAI METALS, VANSADA ROAD, ALIPORE, TAL. CHIKHLI, DIST. NAVSARI (APPELLANT) (RESPONDENT) PAN: AABFO7092H APPELLANT BY : SHRI V.K. SINGH, SR. D.R RESPONDENT BY : SHRI TUSHAR HEMANI, A.R ( )/ ORDER DATE OF HEARING : 26-11-2015 DATE OF PRONOUNCEMENT : 30-11-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-V, VALSAD DATED 31.03.2012 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. ITA NO 1271/ AHD/2012 . A.Y. 2009-10 2 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF EXCAVATION OF STONE FROM QUARRY. ASSESSEE ELECTRONI CALLY FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 05.12.2009 DECLARING TOT AL INCOME OF RS. 3,90,220/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 28 .12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS. 93,82,605/-. AGGRIEVE D BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO V IDE ORDER DATED 31.03.2012 GRANTED SUBSTANTIAL RELIEF TO THE ASSESS EE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN AP PEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 89,92,385/- M ADE U/S.69B OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ADDITION AND THE ORDER OF THE ASSES SING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT R ESTORED THE ORDER PASSED BY THE A.O. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAS PURCHASED COMMERCIAL NON AGRICULTURAL LAND ADMEAS URING 11,533 SQ. MTRS. LOCATED AT ALIPORE, TAL. CHIKHLI FROM VARSHABEN VIN ODBHAI PATEL &OTHERS, THE SALE DEED OF WHICH REGISTERED ON 27.01.2009 AND THE VALUE DISCLOSED IN THE BOOKS OF ACCOUNTS AND PURCHASE DEED WAS RS. 7,5 3,000/-. A.O WAS OF THE VIEW THAT THE VALUE OF COMMERCIAL LAND SHOWN BY THE ASSESSEE WAS TOO LOW CONSIDERING THE LOCALITY AND THE USE OF LAND AND TH E RATE WHICH ASSESSEE HAS CLAIMED TO HAVE PURCHASED THE LAND WAS FAR LESS THA N THE VALUE OF LAND PURCHASED BY OTHER PARTIES. HE FURTHER, ON COMPARIN G THE PRICE PAID BY THE ASSESSEE FOR THE LAND WITH THE TRANSACTION ENTERED BY ONE M/S. PARTH METAL WORKS, NOTED THAT THE RATE PER SQ. MTR. SHOWN IN TH E PURCHASE DEED BY THE ASSESSEE WAS RS. 65.29 PER SQ. MTRS WHEREAS PARTH M ETAL WORKS HAD PAID RS. 845 PER SQ.MTR. HE THEREFORE, CONSIDERING THE C OST OF LAND AT RS. 845 PER ITA NO 1271/ AHD/2012 . A.Y. 2009-10 3 SQ. MTR. AS AGAINST WHICH THE ASSESSEE HAD CONSIDER ED 69.25 PAISE PER SQ. MTR., WORKED OUT THE UNDERSTATED VALUE OF LAND AT R S. 89,92,385/- AND MADE ADDITION RS. 89,92,385/- U/S. 69B OF THE ACT. AGGRI EVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO D ELETED THE ADDITION BY HOLDING AS UNDER:- 6.3DECISION :- I HAVE CAREFULLY CONSIDERED THE FACTS AND THE C IRCUMSTANCES OF THE CASE. I HAVE PAID DUE ATTENTION TO THE FINDING OF THE AO AND THE SUBMISSIONS MADE BY THE AR. THE AO DOUBTED THE VALUE OF LAND SHOWN BY THE APPEL LANT AND HE REFERRED TO SALE INSTANCES OF LAND SITUATED IN ADJOINING AREA. THE A O OBSERVED THAT STAMP DUTY AUTHORITIES HAVE RECOVERED STAMP DUTY ON VALUATION OF RS.97,45, 385/- AS AGAINST RS.7,53,000/- SHOWN BY THE APPELLANT IN SALE 'DEED. THE AO ADOPTED THE LAND VALUE DETERMINED BY THE STAMP DUTY AUTHORITIES AND THE DIFFERENCE AMOUNT OF RS.89 ,92,385/- HAS BEEN ADDED AS UNEXPLAINED INVESTMENT OF THE APPELLANT FIRM (PURCH ASER) BY INVOKING SEC.69B OF THE ACT. THE AO HAS HEAVILY RELIED ON COMPARATIVE RATES IN T HAT LOCALITY FROM WHERE THE APPELLANT HAD PURCHASED THE LAND. THE AO IN THE ASSESSMENT OR DER HAS ALSO CITED THE VALUE OF RS.97,45,385/- ASSESSED BY THE STAMP DUTY VALUATION AUTHORITY. IN THE DEFENSE OF THE APPELLANT, THE AR MADE THE EXHAUSTIVE SUBMISSIONS A S MENTIONED IN THE EARLIER PARAGRAPHS. IN THIS BACKGROUND IT IS PERTINENT TO D ISCUSS THE CORE ISSUES REFERRED EARLIER IN THIS ORDER :- I) AT THE OUTSET, THE AO CANNOT APPLY SEC.50C FOR THE SIMPLE REASON THAT THE CONSIDERATION WAS NOT RECEIVED OR ACCRUED AND THE T RANSFER OF CAPITAL ASSET WAS NOT BY THE APPELLANT WHILE PURCHASING THE PROPERTY. IN OTHER WORDS, SEC. 50C CAN NOT BE APPLIED IN CASE OF A PURCHASES OF THE CAPITA L ASSETS. IT APPLIED TO THE SELLER OF A CAPITAL ASSET FOR THE PURPOSE OF COMPUTING INC OME / CAPITAL GAIN U/S. 48 OF THE ACT. II) THAT LEADS TO THE SECOND ISSUE WHAT SHOULD BE THE VALUE / CONSIDERATION OF THE LAND FOR INCOME TAX PURPOSES AT THE HAND OF THE APPELLAN T? THE AO REFERRED THE VALUATION DETERMINED FOR STAMP DUTY PURPOSE WHICH W AS HIGHER THAN THE COST OF PURCHASE STATED IN THE PURCHASE DEEDS. THE AO DREW AN INFERENCE THAT THE APPELLANT MIGHT HAVE PAID THE EXCESS PORTION IN BLA CK MONEY SO HE INVOKED ITA NO 1271/ AHD/2012 . A.Y. 2009-10 4 SEO.69B OF THE ACT. SEC.142A EMPOWERS THE AO TO REF ER MATTER TO THE VALUATION OFFICER FOR ESTIMATING THE VALUE OF INVESTMENT REFE RRED TO IN SEC.69, 69B ETC. IT IS IMPORTANT TO NOTE HERE THAT THIS SECTION ONLY REFER TO 'ESTIMATING THE VALUE'. IN THE INSTANT CASE THE AO HAS NOT MADE ANY REFERENCE TO V ALUATION CELL. EVEN SEC. 69, 69A, 69B ALSO DO NOT USE THE WORDS 'FAIR MARKET VAL UE'. FOR INVOKING SEC.69B, AO HAS TO FIRST FIND OUT HOW MUCH AMOUNT WAS ACTUAL LY PAID BY THE APPELLANT. THE FINDING MUST BE SUPPORTED BY DOCUMENTARY EVIDENCES AND NOT MERELY BASED ON SUSPICION. EVEN IF STAMP DUTY WAS PAID ON HIGHER AM OUNT OR THE VALUER HAS GIVEN HIGHER VALUATION, THE FACTS BY ITSELF CANNOT ESTABL ISH THAT THE APPELLANT HAD PAID HIGHER AMOUNT. THERE MAY BE VARIOUS REASONS FOR PAY ING LESSER AMOUNT BY THE APPELLANT SUCH AS MARKET SLACK, DISTRESS SALE BY TH E SELLERS, POOR CONDITIONS OF THE PROPERTY, FUTURE LIFE OF THE PROPERTY, SURROUNDED A REAS / ATMOSPHERES, EXPENSES ON REPAIR / DEVELOPMENT, AVAILABILITY OF TRANSPORT, RO ADS AND SO ON THE SO FORTH. THEREFORE, IN THESE SITUATION ADOPTING STAMP DUTY V ALUATION VALUE FOR ATTRACTING PROVISION U/S. 69B MAY NOT STAND THE JUDICIAL SCRUT INY. IN THIS CASE THE AO SHOULD HAVE EXAMINED THE SELLERS OF THE PROPERTY U/S. 131 OF THE ACT. IN THE AFFIDAVITS SWORN THE SELLERS DENIED HAVING ANY MONEY / CONSIDE RATION OTHER THAN THE AMOUNT SHOWN IN THE SALE DEEDS. IN THIS CIRCUMSTANCES I HO LD THAT THE VALUE SHOWN IN THE SALE DEEDS IS THE CONSIDERATION FOR THE LAND PURCHA SED BY THE APPELLANT. III) WHETHER ADDITION OF RS.89,92,385/- MADE BY TH E AO BY INVOKING OF SEC. 69B OF THE IT ACT BY THE AO IS TENABLE? FOR INVOKING SEC. 69B, IT REQUIRED THE AO TO SEEK APPELLANT'S EXPLANATION. IT IS ONLY IF THE APPELLAN T OFFERS NO EXPLANATION OR HIS EXPLANATION IS FOUND TO BE UNSATISFACTORY THAT THE AO MAY PROCEED TO ASSESS THE EXCESS PORTION AS INCOME FROM UNDISCLOSED SOURCES U /S. 69B. THAT MEANS, THREE FINDINGS ARE CUMULATIVE I.E. A) THE APPELLANT MUST HAVE MADE INVESTMENT B) IT IS FOUND THE AO THAT THE AMOUNT EXPENDED ON MAKING SUC H INVESTMENT EXCEEDED THE AMOUNT RECORDED IN THE BOOKS OF A/C. THE FINDING OF AO MUST BE ON CLEAR AND COGENT MATERIALS IN RESPECT OF THE AMOUNT EXPENDED, C) EITHER THE APPELLANT OFFERS NO EXPLANATION OR THE EXPLANATION OFFERED IS UNSATI SFACTORY IN THE OPINION OF THE AO. THE ONUS IS ON THE REVENUE TO SHOW THAT THE APP ELLANT HAS EXPENDED EXTRA AMOUNT. MERELY BECAUSE THERE EXISTS SOME COMPARABLE CASES SHOWING HIGHER ITA NO 1271/ AHD/2012 . A.Y. 2009-10 5 PRICES IN RESPECT OF SIMILAR TRANSACTIONS, IT COULD NOT BE STATED THAT THE APPELLANT HAS EXPENDED EXTRA AMOUNT. THUS, IN MY CONSIDERED O PINION THE ADDITION MADE BY THE AO BY INVOKING SEC.69B IS LEGALLY NOT SUSTAINAB LE IN THE ABSENCE OF CLEAR FINDING THAT THE APPELLANT HAD EXPENDED EXCESS MONE Y APART FROM WHAT IS SHOWN IN THE SALE DEEDS. THEREFORE, BASED ON THE FACTUAL AND LEGAL MATRIX AND AFTER HAVING CONSIDERED THE PROVISIONS OF SEC.69B, I DIRE CT THE AO TO DELETE THE ADDITION OF RS.89,92,385/- IN THIS GROUND OF APPEAL. ACCORDI NGLY THE APPELLANT'S GROUND NO. 2 & 3 ARE ALLOWED. 5. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT DEEMING FICTION CREATED BY SECTION 5 0C, WHICH SUBSTITUTES CONSIDERATION RECEIVED ON SALE OF A CAPITAL ASSET B Y STAMP DUTY VALUATION, IS APPLICABLE ONLY IN CASE OF A SELLER AND NOT THE BUY ER OF THE PROPERTY AND IS THEREFORE NOT APPLICABLE IN THE PRESENT CASE BECAUS E ASSESSEE IS NOT A SELLER BUT A BUYER. HE ALSO PLACED RELIANCE ON THE DECISI ONS IN THE CASE OF CIT VS. SARJAN REALITIES LTD. REPORTED IN (2013) 40 TAXMANN .COM 398 (GUJARAT), DCIT VS. VIRJIBHAI KALYANBHAI KUKADIA REPORTED IN ( 2012) 26 TAXMANN.COM 13 (AHD.) AND DCIT VS. VALLABHBHAI REPORTED IN (201 2) 27 TAXMANN.COM 306 (AHD). HE THUS SUPPORTED THE ORDER OF LD. CIT(A ). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ADDITI ON MADE U/S. 69B OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS PURCHASE D LAND AND IT IS NOT A CASE WHERE ASSESSEE HAS SOLD THE LAND. WE FIND THAT LD. CIT(A) AFTER CONSIDERING ITA NO 1271/ AHD/2012 . A.Y. 2009-10 6 THE SUBMISSIONS OF THE ASSESSEE HAS GIVEN A FINDING THAT PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE TO THE PR ESENT CASE IN VIEW OF THE FACT THAT ASSESSEE IS PURCHASER OF THE LAND AND NOT THE SELLER OF THE LAND. WE FURTHER FIND THAT WHILE DELETING THE ADDITION LD. C IT(A) HAS ALSO NOTED THAT THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT ASSE SSEE HAS PAID A PRICE HIGHER THAN WHAT IS RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND FURTHER THAT THE SELLERS OF THE LAND, IN THEIR AFFI DAVITS, HAVE DENIED TO HAVE PAID ANY MONEY/CONSIDERATION OVER AND ABOVE THE AMO UNT SHOWN IN THE SALE DEED. BEFORE US, NOTHING HAS BEEN PLACED ON RECORD BY THE REVENUE TO DEMONSTRATE ANY FALLACY IN THE FINDINGS OF LD. CIT( A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF LD CIT(A) AND THUS THE GROUNDS RAISED BY THE REVENUE ARE DISM ISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 11 - 2015. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDA BAD