Shri Vishnubhai Harjivandas Patel, Kadi V. The Income Tax Officer, Mehsana Ward-5, Mehsana

ITA 1618/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6194 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 16-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAHESH G JIWADE
• Assessee Lawyers: RUPESH R SHAH
• Keywords: Sale consideration of property below Jantri Value; Retrospective amendment; Notional interest
• Section: 143(3); 50C

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JM AND SHRI PRADIP KUMAR KEDIA, AM ./ITA.NO.2983/AHD/2015 & ITA NO. 1618/AHD/2016 ( / ASSTT YEAR :2011-12 & 2012-13) SHRI VISHNUBHAI HARJIVANDAS PATEL,42 LAXMI NARAYAN SOCIETY, NR. SHEFALI CINEMA KADI PAN: ACAPP2488H VS. (1) THE INCOME TAX OFFICER, PATAN WARD-4, MEHSANA. (2) THE INCOME TAX OFFICER, MEHSANA WARD-5, KADI (APPELLANT) (RESPONDENT) / APPELLANT BY: SHRI RUPESH R. SHAH, A.R. / RESPONDENT BY: SHRI MAHESH G. JIWADE, SR. D.R / DATE OF HEARING 18/01/2018 /DATE OF PRONOUNCEMENT 25/01/2018 / O R D E R PER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER THE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSE SSEE AGAINST THE RESPECTIVE ORDERS OF THE LD. CIT(A) ARISING IN THE ASSESSMENT ORDER PASSED U/S. 143(3) RELEVANT TO A.Y. 2011-12 & 2012- 13. 2. THE ISSUE BEING INTERCONNECTED, BOTH THE APPEALS HAVE BEEN HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. ITA.NO. 2983/AHD/2015 & 1618/AHD/16 ASSESSMENT YEAR 2011-12 & 12-13 - 2 3. WE SHALL FIRST TAKE APPEAL IN ITA NO. 2983/AHD/2 015 RELEVANT TO A.Y. 2011-12 FOR ADJUDICATION PURPOSES. 4. THE ASSESSEE IN THE AFORESAID APPEAL HAS CHALLEN GED THE ACTION OF THE CIT(A) IN CONFIRMING DISALLOWANCE OF INTEREST E XPENSES OF RS. 9,18,388/- CLAIMED U/S. 36(1)(III) OF THE INCOME-TA X ACT. 5. WHEN THE MATTER WAS CALLED FOR HEARING THE LD. A .R. FOR THE ASSESSEE POINTED OUT THAT DURING THE A.Y. 2011-12, THE ASSESSEE HAS CLAIMED INTEREST RECEIVED FROM THE DEPOSITOR AMOUNT ING TO RS. 7,67,437/- AND ALSO INCURRED INTEREST EXPENSES AMOUNTING TO RS . 16,54,754/- TOWARDS INTEREST PAYMENT. BOTH THE AFOREMENTIONED ITEMS OF INCOME AND EXPENDITURE WERE SHOWN UNDER THE HEAD INCOME FROM O THER SOURCES. THE LD. A.R. REFERRED TO THE WRITTEN SUBMISSIONS PLACED ON RECORD AND POINTED OUT THAT THE DIFFERENCE BETWEEN THE ITEMS O F INCOME AND EXPENDITURE IS ONLY 7,17,239/- WHEREAS THE CIT(A) H AS CONFIRMED DISALLOWANCE OF RS. 9,18,388/- AND THEREFORE DIFFER ENCE OF RS. 2,01,149/- TANTAMOUNT TO TAXABILITY OF NOTIONAL INTEREST. THE LD. A.R. SUBMITTED THAT NO DISALLOWANCE IS CALLED FOR AS THE PAYMENT HAS BE EN MADE ON ACCOUNT OF BUSINESS EXIGENCY AS SUBMITTED BEFORE THE LOWER AUTHORITIES. HE ACCORDINGLY REQUESTED FOR SUITABLE RELIEF. 6. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND POINTED OUT THAT NO BUSINESS EXIGENCY OF INCURRING INTEREST EXPENSES HAVE BEEN DEMONSTRATED AS CLEARLY RECORDED BY THE FIRST APPEL LATE AUTHORITY AND THEREFORE THE DISALLOWANCE HAS BEEN RIGHTLY MADE. ITA.NO. 2983/AHD/2015 & 1618/AHD/16 ASSESSMENT YEAR 2011-12 & 12-13 - 3 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE DISALLOWANCE OF INTEREST EXPENSES IS IN CONTROVERSY . WE STRAIGHTAWAY AGREE WITH THE FIRST CONTENTION OF THE ASSESSEE THA T EXCESS DISALLOWANCE OF RS. 2,01,149/- IS NOT PERMISSIBLE AS IT WOULD AMOUN T TO CHARGING NOTIONAL INCOME NOT EARNED. THEREFORE, THE A.O. IS DIRECTED TO GRANT RELIEF OF RS. 2,01,149/- OUT OF INTEREST DISALLOWANCES MADE. AS R EGARDS THE BALANCE AMOUNT IN APPEAL, IN THE ABSENCE OF ANY DEMONSTRATE ABLE EVIDENCE TO CORROBORATE THE AVERMENTS TOWARDS BUSINESS EXPEDIEN CY, WE ARE UNABLE TO FIND MERIT. THEREFORE WE DECLINE TO INTERFERE AS REGARDS DISALLOWANCE OF BALANCE OF AMOUNT IN APPEAL. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 9. WE SHALL NOW TURN TO ITA NO. 1618/AHD/2016 CONCE RNING ASSESSEES APPEAL RELEVANT TO A.Y. 2012-13. FIRST G ROUND RELATES TO DISALLOWANCE OF INTEREST EXPENSES OF RS. 4,79,704/- CLAIMED U/S. 57 OF THE ACT. 10. IN THIS REGARD, WITH THE ASSISTANCE OF THE LD. A.R. FOR THE ASSESSEE AND LD. D.R. FOR THE REVENUE, WE FIND THAT ASSESSEE HAS DECLARED INTEREST INCOME OF RS. 15,56,849/- RECEIVED FROM VARIOUS PAR TIES TOWARDS ADVANCES LAND. SIMILARLY THE ASSESSEE HAS CLAIMED D EDUCTION OF INTEREST AMOUNTING TO RS. 20,36,553/-. THE A.O. HAS DISALLOW ED THE RESULTANT LOSS OF RS. 4,79,704/- WHICH WAS CONFIRMED BY THE LD. CI T(A). HAVING REGARD TO THE DISPUTED FACT THAT BORROWED FUNDS HAV E BEEN UTILISED FOR EARNING INTEREST INCOME, WE ARE OF THE VIEW THAT TH E ASSESSEE IS ENTITLED TO SOME ALLOWANCE ON ACCOUNT OF VARIATION IN POSSIBLE INTEREST RATE OWING TO ITA.NO. 2983/AHD/2015 & 1618/AHD/16 ASSESSMENT YEAR 2011-12 & 12-13 - 4 VARIETY OF FACTORS INCLUDING TIME GAP FOR POSITIONI NG THE BORROWED FUNDS FOR ADVANCES AND HOST OF UNFORESEEN FACTORS. 11. THEREFORE, WE CONSIDER IT EXPEDIENT TO GRANT LU MP SUM RELIEF OF RS. 1,00,000/- OUT OF INTEREST DISALLOWANCES AND THE DE CLINE TO INTERFERE WITH THE BALANCE AMOUNT CONFIRMED BY THE REVENUE AUTHORI TY. 12. IN THE RESULT GROUND NO. 1 IS PARTLY ALLOWED. 13. GROUND 2 CONCERNS ADDITION OF RS. 2,30,567/- BY INVOKING SECTION 50C OF THE ACT. 14. WITH THE ASSISTANCE OF THE LD. A.R. FOR THE ASS ESSEE AND LD. D.R. FOR THE REVENUE, WE NOTE THAT THE ASSESSEE HAS SOLD CERTAIN NON- AGRICULTURAL LAND AT VILLAGE NIKOL FOR A SALE CONSI DERATION OF RS. 73.20 LAKH VIDE SALE DEED DATED 02.04.2011. THE ASSESSEE HOLD 8.5% SHARES IN THE AFORESAID SALE CONSIDERATION. IT IS THE CASE OF THE ASSESSEE THAT ENTIRE PAYMENT AGAINST THE SALE CONSIDERATION OF THE PROPE RTY SOLD WAS RECEIVED BY MARCH 2011 ITSELF. THE STAMP DUTY WAS ALSO PAID ON 28.03.2011. THE SALE DEED WAS ALSO PREPARED ON 28.03.2011 WHICH WAS EVENTUALLY REGISTERED IN THE NEXT FINANCIAL YEAR ON 02.04.2011 . THE CIRCLE RATE FOR THE PURPOSES OF REGISTRATION WAS IN THE INTERGUMM REVI SED WITH EFFECT FROM 01.04.2011 WHICH WAS NOTIFIED ON 18.04.2011. THUS A T THE TIME OF REGISTRATION ALSO, THE OLD RATES WERE APPLICABLE ON AD-HOC BASIS. IT IS THE CASE OF THE ASSESSEE THAT THE SALE CONSIDERATION IS CONFORMITY WITH THE OLD JANTRI RATE (CIRCLE RATE) AND THE DIFFERENCE HAS AR ISEN IN THE DEEMED SALE CONSIDERATION U/S. 50C ONLY ON ACCOUNT OF REVISION OF THE JANTRI RATE WITH EFFECT FROM THE BEGINNING OF THE NEW FINANCIAL YEAR . IT IS THE CASE OF THE ITA.NO. 2983/AHD/2015 & 1618/AHD/16 ASSESSMENT YEAR 2011-12 & 12-13 - 5 ASSESSEE THAT THE INTENTION TO SALE THE PROPERTY I N QUESTION CAME TO LIFE IN THE PREVIOUS FINANCIAL YEAR ITSELF AND IT IS THUS O F THE CASE OF THE ASSESSEE THAT THE DEEMING PROVISION OF SECTION 50C CANNOT AP PLY IN THE FACTS OF THE CASE WHERE THE SALE CONSIDERATION WAS RECEIVED IN T HE EARLIER FINANCIAL YEAR AND ALSO THE STAMP DUTY WAS ALSO PAID IN THE E ARLIER FINANCIAL YEAR. THE AGREEMENT WAS EVENTUALLY REGISTERED ON THE SECO ND DAY OF THE NEW FINANCIAL YEAR WHERE THE CIRCLE/JANTRI RATES HAVE B EEN REVISED BY THE STATE. IT IS FURTHER CASE OF THE ASSESSEE THAT NO EXTRA SA LE CONSIDERATION OUTSIDE THE AGREEMENT HAS BEEN RECEIVED. 15. IT IS THE CASE OF THE REVENUE, ON THE OTHER HAN D, THAT IN VIEW OF THE STATUTORY PRESUMPTION U/S. 50C, THE SUBSTITUTED SAL E CONSIDERATION REQUIRED TO BE APPLIED AND THUS ACTION OF REVENUE C ANNOT BE FAULTED. WE FIND CONSIDERABLE FORCE IN THE CASE OF THE ASSESSEE HAVING REGARD TO THE PECULIAR CIRCUMSTANCES OF THE CASE. A PERUSAL OF TH E RECORD CLEARLY SHOWS THAT THE SALE CONSIDERATION OF RS. 73.20 LAKH HAS B EEN ACTUALLY RECEIVED IN THE PREVIOUS FINANCIAL YEAR ITSELF. NOT ONLY THIS, THE STAMP DUTY ON THE SALE CONSIDERATION WAS ALSO PAID ON 28.03.2011 I.E. IN THE PREVIOUS FINANCIAL YEAR. THEREFORE THE SALE CONSIDERATION WH EN COMPARED WITH THE CIRCLE RATE OF THE PREVIOUS FINANCIAL YEAR IN WHICH SUCH EVENTS HAVE OCCURRED, THERE IS NO BREACH SECTION 50C OF THE ACT . THE AGREEMENT WAS FINALLY REGISTERED ON THE SECOND DAY OF THE NEXT FI NANCIAL YEAR ON WHICH DATE ALSO OLD CIRCLE RATE FOR THE PURPOSES OF REGIS TRATION WHERE IN FORCE. IT IS ONLY AT THE LATER DATE ON 18.04.2011 THAT THE GO VERNMENT HAS REVISED THE CIRCLE RATE WITH RETROSPECTIVE EFFECT FROM 01.0 4.2011 LEADING TO THE INCREASE IN THE DEEMED SALE CONSIDERATION. UNDER TH ESE CIRCUMSTANCES, THE FICTION EMBODIED IN SECTION 50C CANNOT OPERATE AGAINST THE ASSESSEE. THEREFORE, WE FIND FORCE IN THE PLEA OF THE ASSESSE E FOR CANCELLATION OF ITA.NO. 2983/AHD/2015 & 1618/AHD/16 ASSESSMENT YEAR 2011-12 & 12-13 - 6 ADDITION OF RS. 2,30,597/- MADE U/S. 50C OF THE ACT . GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 16. RESULTANTLY, GROUND NO. 2 OF THE ASSESSEE IS A LLOWED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 1618/AHD/2016 IS PARTLY ALLOWED. 18. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25 /01/ 2018 AT AHMEDABAD. SD/- SD/- (S.S. GODARA) JUDICIAL MEMBER MUKUL (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER DATED, 25/01/2018 ! '!/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &$% / THE RESPONDENT. 3. '(( ) * / CONCERNED CIT 4. ) * ( ) / THE CIT(A)- 5. !-. , , /DR,ITAT, AHMEDABAD. 6. .0 12 / GUARD FILE. ) ' / BY ORDER, ' (3 (ASSTT.REGISTRAR) ITAT, AHMEDABAD