Ravi Saraff, Hyderabad V. Income Tax Officer, Hyderabad

ITA 1413/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6452 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value
• Section: 50C; 37; 69; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1413/HYD/2013 ASSESSMENT YEAR 2009-10 SRI RAVI SARAFF HYDERABAD PAN: ALQPS9471E VS. THE INCOME TAX OFFICER WARD-8(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI S. RAMA RAO RESPONDENT BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 3 0.0 6 .2014 DATE OF PRONOUNCEMENT: 16 .07.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-III, HYDERABAD DATED 10 TH SEPTEMBER, 2013 FOR ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A PROPRIETOR OF VASUDHA SAREES. HE HAD FILED HIS RETURN OF INCOME FOR A.Y. 2009-10 ON 17.11.2009 RETURNING TOTAL INCOME OF RS. 1,79,002. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143 (3) OF INCOME-TAX ACT, 1961 DETERMINING THE TOTAL INCOME A T RS. 47,40,860, BY MAKING THE FOLLOWING ADDITIONS: (A) ADDITION TOWARDS DEPOSITS - RS. 9,25,860 (B) ADDITION U/S. 69 - RS. 1,36,000 (C) ADDITION U/S. 68 - RS. 35,00,080 2 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== 3. ON APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED THE ADDITION OF RS. 9,25,860 ON ACCOUNT OF UNEXPLAINED DEPOSITS IN BANK ACCOUNT. 4. WITH RESPECT TO THE ADDITION OF RS. 1,36,000 MADE BY THE AO ON THE GROUND THAT THE AMOUNT REPRESENTED DIFFERENCE IN THE SALE PRICE AND THE VALUE SHOWN AS PER THE RECORDS OF THE SUB-REGISTRAR, THE FACTS ARE THAT TH E ASSESSEE SOLD A FLAT MEASURING 680 SQUARE FEET (SFT ) FOR A CONSIDERATION OF RS. 5 LAKHS AND AS PER THE SUB-REG ISTRAR RECORDS THE RATE WAS RS. 5,44,000. FURTHER ANOTHER PROPERTY WAS SOLD FOR A CONSIDERATION OF RS. 4 LAKH S AND AS PER THE SUB-REGISTRAR RECORDS THE VALUE WAS RS. 4,92,000. ANOTHER PROPERTY WAS ALSO SOLD FOR WHICH THE VALUE DETERMINED BY THE SUB-REGISTRAR WAS RS. 6,10, 000. THE ASSESSING OFFICER APPLIED THE RATE ADOPTED BY T HE SUB-REGISTRAR FOR ALL THE THREE PROPERTIES AND MADE THE ADDITION OF RS. 1,36,000 BY GIVING THE FOLLOWING RE ASONS: '4. AS THE ASSESSEE HAS EXPLAINED THAT REGISTERING AUTHORITY HAS ADOPTED THE CORRECT RATE SIMILARLY THE DIFFERENCE OF AMOUNT OF RS. 1.36.000 IS TREATED AS UNACCOUNTED AND ADDED TO THE INCOME OF THE ASSESSEE. IN THIS CASE, THE ASSESSEE EXPLAINED THAT THE LESSER VALUE ADOPTED BY THE SUB-REGISTRAR IS CORRECT BUT IN TWO OTHER CASES NOT CORRECT. AS PER THIS THE ASSESSEE HAS EXPLAINED AND SHOWN THE CONSIDERATION AS PER HIS CONVENIENCE AND THE ASSESSEE HAS NOT PRODUCED THE PURCHASES BEFORE THE UNDERSIGNED. THE ASSESSEE HAS NOT VOLUNTARILY ADMITTED THE DIFFERENCE. AS PER THE PROVISIONS OF 50C, THE RATE ADOPTED BY THE SUB REGISTRAR AUTHORITY IS THE CRITERIA. HENCE THE SAME IS ADOPTED AND THE DIFFERENCE OF RS. 1.36.000 IS TREATED AS UNACCOUNTED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS NOT FURNISHED REAL FACTS SUCH AS HOW MANY PROPERTIES HAVE BEEN SOLD AND NO LINK DOCUMENTS WERE FURNISHED AND NOT AT ALL CO- 3 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== OPERATIVE WITH THE DEPARTMENT. UNLESS ISSUE SHOW CAUSE NOTICE THE ASSESSEE DOESN'T WANT TO APPEAR AND FURNISH REQUIRED INFORMATION. ADDITION OF RS. 1,36,000' 5. ON FURTHER APPEAL BEFORE THE CIT(A), THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT SECTION 50C OF THE ACT IS A DEEMING PROVISION AND CANNOT BE APPLICABLE TO SECTION 69 OF THE ACT. THE LEARNED COUNSEL ALSO PL ACED RELIANCE ON THE ORDER OF THE ITAT HYDERABAD IN THE CASE OF DCIT VS. COMPAGE COMPUTERS PVT. LTD. IN ITA NO. 1734/HYD/ 2013 WHEREIN IT HAD BEEN HELD THAT PROVIS IONS OF SECTION 50C ARE APPLICABLE IN THE HANDS OF THE S ELLER AND NOT IN THE HANDS OF THE PURCHASER AND, THEREFOR E, NO ADDITION CAN BE MADE IN THE HANDS OF THE PURCHASER. 6. THE CIT(A) HELD THAT THE ASSESSEE HAS PRODUCED THE SALE DEED ACCORDING TO WHICH SRI RAVI SARAFF, THE A SSESSEE HEREIN, IS THE SELLER. FURTHER THE CIT(A) HELD THA T THE ASSESSEE HAS AGREED AND ADMITTED TO THE FACT OF DIF FERENCE IN THE SALE PRICE VIS-A-VIS RATE OF THE ASST. REGIS TRAR. THE CIT(A), THEREFORE, SUSTAINED THE ADDITION MADE BY T HE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS . 1,36,000 SINCE THE ASSESSING OFFICER HAS NOT CONSID ERED THE PROVISIONS OF SECTION 50C IN ITS ENTIRETY. 8. WE HAVE HEARD BOTH THE PARTIES. SECTION 50C(2) READS AS UNDER: 4 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== '50C. (1) ... (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB- SECTION (1), WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED [OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED [OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTIONS (2), (3), (4), (5) AND (6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. [EXPLANATION 1].FOR THE PURPOSES OF THIS SECTION, 'VALUATION OFFICER' SHALL HAVE THE SAME MEANING AS IN CLAUSE (R) OF SECTION 2 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957). [EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, THE EXPRESSION 'ASSESSABLE' MEANS THE PRICE WHICH THE STAMP VALUATION AUTHORITY WOULD HAVE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE, ADOPTED OR ASSESSED, IF IT WERE REFERRED TO SUCH AUTHORITY FOR THE PURPOSES OF THE PAYMENT OF STAMP DUTY.] 5 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== 9. ACCORDING TO THE SECTION 50C(2), THE AO MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION O FFICER. THE CO-ORDINATE BENCH IN THE CASE OF DCIT, CIR. 7(1 ), HYDERABAD VS. KHAJA KUTUBUDDIN KHAN IN ITA NO. 1451 & 1452/HYD/2008 DATED 29 TH JANUARY, 2010 HELD AS FOLLOWS: 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SETTLED LAW THAT WHEN THE ASSESSING OFFICER NOT ADOPTING THE SALE CONSIDERATION MENTIONED IN THE SALES DEEDS IN RESPECT OF TRANSFER OF CAPITAL ASSETS AND THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY IS MORE THAN THE SALE CONSIDERATION MENTIONED IN THE SALE DEEDS, THEN THE ASSESSING OFFICER IS DUTY BOUND TO REFER THE MATTER TO THE VALUATION OFFICER IN CASE THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE SO ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER. IT IS CLEAR FROM THE RECORD THAT THE ASSESSEE PRIMA-FACIE OBJECTED TO THE PROPOSALS MADE IN THE SHOW CAUSE NOTICE TO ADOPT THE RATES FIXED BY THE SRO AS DEEMED SALE CONSIDERATION IN RESPECT OF THE PROPERTIES SOLD DURING THE YEARS UNDER CONSIDERATION. HAVING INVOKED THE PROVISIONS OF SECTION 50C OF THE INCOME-TAX ACT, THE ASSESSING OFFICER SHOULD HAVE FOLLOWED THE PROVISIONS COMPLETELY. THE ASSESSING OFFICER FOLLOWED ONLY SUB-SECTION (1) O F THE SECTION 50C OF THE ACT AND NOT FOLLOWED THE SUBSEQUENT SUB-SECTION (2) OF THE ACT. AS SUCH, THE ACTION OF THE ASSESSING OFFICER IS FOUND TO BE NOT IN ACCORDANCE W I TH THE PROVISIONS OF THE ACT. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER SHOULD NOT HAVE INVOKED THE PROVISIONS OF SECTION SOC OF THE ACT WITHOUT REFERRING THE MATTER TO THE VALUATION CELL. IT IS ALSO CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER DID NOT CONSIDER ANY OF THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE ADOPTING THE SRO RATES AS DEEMED SALE 6 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== CONSIDERATION. HENCE, THE ACTION OF THE ASSESSING OFFICER CANNOT BE SUSTAINED. EVEN ON MERITS, WE AGREE WITH THE OBSERVATIONS MADE BY THE CIT CA) WITH REGARD TO THE JUSTIFICATION FOR THE SALE CONSIDERATION BEING LESS THAN THE RATES FIXED BY THE SRO. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE SRO RATES ADOPTED BY THE ASSESSING OFFICER AS DEEMED SALE CONSIDERATION ARE NOT APPROPRIATE AND THE SAME CANNOT BE SUSTAINED. HENCE, WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE CIT CA) ON THIS ISSUE. ACCORDINGLY, WE CONFIRM THE SAME. THE GROUNDS RAISED BY THE REVENUE FOR TWO YEARS UNDER CONSIDERATION STAND REJECTED. 10. THE CO-ORDINATE BENCH, IN WHICH ONE OF US ARE A PARTY, IN THE CASE OF ITO VS. SHRI HARINATH CHOUDAR Y, IN ITA NO. 1356/HYD/2012 & ORS DATED 04.04.2014 HAS HELD THAT PROCEDURE AS PER SEC. 50C IS TO BE ADHERE D IN ITS TOTALITY WHICH MANDATED THAT IN THE EVENT OF DISPUT E BY THE ASSESSEE AS TO THE ADOPTION OF VALUE AS PER SRO , A REFERENCE TO BE MADE BY THE AO TO THE VALUATION CEL L. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE ARE OF THE OPINION THAT THE AO SHOULD HAVE REFERRED THE ISSUE OF VALUATION TO THE VALUATION OFFICER AS PER THE PROVI SIONS OF SECTION 50C(2). THEREFORE, WE DIRECT THE AO TO REF ER THE MATTER TO THE VALUATION OFFICER AND AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE, DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 11. THE NEXT GROUND IS WITH REGARD TO CONFIRMATION OF ADDITION OF RS. 20 LAKHS OUT OF THE TOTAL ADDITION OF RS. 35 LAKHS MADE BY THE ASSESSING OFFICER. 12. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE HAD ACCEPTED THAT THE AMOUNT WAS RECEI VED 7 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== FROM SRI NARENDRANATH SANGHI AND THE ASSESSEE ALSO PRODUCED THE CONFIRMATION OF THE ACCOUNT BEFORE THE ASSESSING OFFICER. THE CIT(A), HOWEVER, WAS NOT CONVINCED WITH THE CONTENTION OF THE ASSESSEE AND H ELD THAT THE ASSESSEE HAD NOT PRODUCED ANY DETAILS BEFO RE THE ASSESSING OFFICER. THE CIT(A) NOTED THAT AT THAT P OINT OF TIME THE CREDITOR WAS ALIVE AND THE ASSESSEE DID NO T PRODUCE ANY DETAILS GIVING THE FULL ADDRESS OF THE CREDITOR. THE CIT(A) OBSERVED THAT THE CREDITWORTHINESS OF TH AT PERSON AND THE GENUINENESS OF THE TRANSACTION WERE NOT AT ALL PROVEN AND AT THAT POINT EVEN THE FULL IDENTITY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THEREFORE, TH E CIT(A) OBSERVED THAT THE BASIC ONUS WAS NOT DISCHARGED. T HE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY WHE THER THE AMOUNT OF RS. 15 LAKHS REPRESENTS THE CARRY FORWARD FROM EARLIER YEARS AND IF THIS CONTENTION IS FOUND TO BE CORRECT, THEN THAT AMOUNT WILL HAVE TO BE DELETED FROM THE A DDITION MADE AND THE ASSESSEE WILL GET RELIEF ACCORDINGLY. THE BALANCE AMOUNT OF RS. 20 LAKHS WAS CONFIRMED BY HIM . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 13. THE LEARNED COUNSEL FOR THE ASSESSEE, SRI S. RAMA RAO POINTED OUT TO THE EXTRACT ACCOUNTS. THE COUNS EL ALSO STATED THAT SRI NARENDRANATH SANGHI THE CREDITOR HE REIN HAD PASSED AWAY ON 18.7.2011 AND PRODUCED THE DEATH CERTIFICATE AT PAGE 22 OF THE PAPER BOOK AND EXPLAI NED THAT THE ASSESSEE WAS UNABLE TO PRODUCE SRI NARENDRANATH SANGHI DUE TO THIS REASON BEFORE THE L OWER AUTHORITIES. THE COUNSEL SUBMITTED THAT THE AMOUNT OF RS. 20 LAKHS WAS RECEIVED THROUGH CHEQUE AND THE CREDITOR IS AN ASSESSEE OF INCOME-TAX WHO HAS GIVEN THE LETTER OF CONFIRMATION AND HENCE NO ADDITION IS CAL LED FOR. 8 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== 14. WE FIND FROM THE EXTRACT OF ACCOUNTS THAT THERE IS OPENING BALANCE OF RS. 15 LAKHS AS ON 1.4.2008 AND CHEQUE FOR RS. 20 LAKHS WAS RECEIVED ON 3.4.2008. THE TOTAL AMOUNT OF RS. 35 LAKHS WAS ACCOUNTED IN THE B OOKS OF ACCOUNT. SINCE THE AMOUNT OF RS. 20 LAKHS WAS RECEIVED BY CHEQUE AND THE CREDITOR HAS CONFIRMED B Y A LETTER OF CONFIRMATION THAT HE HAS GIVEN THAT AMOUN T AND SINCE THE CREDITOR IS ALSO AN ASSESSEE OF INCOME-TA X, PAN HAVE BEEN GIVEN TO THE ASSESSING OFFICER BY THE ASS ESSEE HEREIN, THE ASSESSING OFFICER IS NOT JUSTIFIED IN M AKING THE ADDITION OF RS. 20 LAKHS AS CASH CREDIT. FURTHER, IN OUR OPINION, CONSIDERING THE EXPLANATION GIVEN BY THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE PERSON WHO HAD GI VEN THE CREDIT HAS PASSED AWAY ON 28.7.2011 AND COULD N OT BE PRODUCED BEFORE THE AO AND THE CIT(A) THE ASSESS ING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION AND THE CIT(A) ALSO ERRED IN CONFIRMING THE ADDITION OF RS. 20 LAKHS. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 16 TH JULY, 2014 TPRAO 9 ITA NO. 1413/HYD/2013 SRI RAVI SARAFF ================== COPY TO: 1. SRI RAVI SARAFF, C/O. SRI S. RAMA RAO, ADVOCATE, F LAT NO. 102, SHRIYA'S ELEGANCE, H. NO. 3-6-643, ST. NO. 9, HIMAYATHNAGAR, HYDERABAD-500 029. 2. THE INCOME TAX OFFICER, WARD - 8(2), HYDERABAD. 3. THE CIT(A) - II I, HYDERABAD. 4. THE CIT - II , HYDERABAD. 5. THE DR, B - BENCH, ITAT, HYDERABAD.