Shri Amar Arvindkumar Rawal, Surat V. The Income tax Officer,Ward-3(2), Surat

ITA 1947/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5585 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: NIMISH VAYAWALA
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Corroborative evidences; Capital Gains
• Section: 50C; 69B; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 21 07/2010 DRAFTED ON: 21/ 07/2010 ITA NO.1947/AHD/2008 ASSESSMENT YEAR : 2005-06 AMAR ARVINDKUMAR RAWAL 308, CHAPRIYA STREET ADAJAN GAM, SURAT VS. THE INCOME TAX OFFICER WARD-3 (2) SURAT PAN/GIR NO. : AATPR 2732 D (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI NIMISH VAYAWALA, A.R. RESPONDENT BY: SHRI RAJEEV AGARWAL, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II DATED 29/ 03/2008 PASSED FOR ASSESSMENT YEAR 2005-06. 2. THERE ARE THREE GROUNDS REVOLVING AROUND A SINGL E ISSUE OF AN ADDITION MADE BY INVOKING THE PROVISIONS OF SECTIO N 69 OF THE I.T. ACT, 1961. HOWEVER, FOR THE SAKE OF CLARITY, ALL THE TH REE GROUNDS ARE REPRODUCED BELOW:- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS.21,87,041 U/S.69. ITA NO. 1947/AHD/2008 AMAR ARVINDKUMAR RAWAL VS. ITO ASST.YEAR 2005-06 - 2 - 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT I N VIEW OF VARIOUS JUDICIAL PRONOUNCE MAKES ADDITION U/S.69 CA NNOT BE CONFIRMED SIMPLY ON THE BASIS OF VALUE DETERMINED F OR STAMP DUTY PURPOSED. HE ALSO OUGHT TO HAVE APPRECIATED THAT L EGAL FICTION CREATED BY SEC.50C IS ONLY FOR THE PURPOSE OF CAPIT AL GAINS & NOT FOR THE PURPOSE OF SEC.69. THE ADDITION OUGHT TO BE DELETED. 3. THE LEARNED CIT(A) OUGHT TO HAVE GIVEN A SPECIFIC O PPORTUNITY TO THE ASSESSEE BEFORE SUSTAINING THE ADDITION IN VIEW OF SEC.50C & OUGHT TO HAVE DECIDED THE MATTER AFTER HEARING THE ASSESSEE ON THAT ASPECT OF THE MATTER. 2. BRIEFLY STATED FACTS OF THE CASE AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 28/12/2007 WERE THAT THE ASSESSEE HAS PURCHASED AN AGRICULTURAL LAND FOR A CONSIDERATION OF RS.11,47,859/-. ON VERIFIC ATION OF THE DOCUMENTS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE S TAMP DUTY AUTHORITIES HAVE ASSESSED THE VALUE AT RS.33,34,90 0/-. THE OBJECTION OF THE ASSESSING OFFICER WAS THAT THE DIFFERENCE OF T HE TWO WAS NOTHING BUT AN UNEXPLAINED INVESTMENT OF THE ASSESSEE. IN COM PLIANCE OF SHOW- CAUSE NOTICE, THE ASSESSEE HAS FURNISHED THE FOLLOW ING REPLY: THE UNDERSIGNED PURCHASED AGRICULTURAL LAND AT RS. 11,47,859/-. THE DOCUMENTS EVIDENCING THE PAYMENT OF CONSIDERATI ON IS ALREADY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE STAMP DUTY AUTHORITIES HAVE CONSIDERED THE JANTRI VALUE FOR TH E PURPOSE OF LEVYING THE STAMP DUTY. IT MAY BE NOTED THAT SECT ION 69/69A/69C ETC., OF THE I.T. ACT, 1961 ARE ACTUAL CONSIDERATIO N PAID FOR ACQUIRING THE ASSET. ONLY IF THERE IS UNDER HAND C ONSIDERATION WHICH IS NOT RECORDED, THAN ONLY SECTION 69/69B COM ES INTO PLAY. MARK TH4E WORDS IN SECTION 69/69A/69C, ETC., OF THE INCOME-TAX ACT, 1961. A.O. FINDS THAT THE AMOUNT EXPENSES ON MAKING SUCH INVESTMENTS EXCESS THE AMOUNT RECORDED IN THE BO OKS. THEREFORE, THE A.O. HAS TO SHOW ITA NO. 1947/AHD/2008 AMAR ARVINDKUMAR RAWAL VS. ITO ASST.YEAR 2005-06 - 3 - THAT THE ASSESSEE ACTUALLY PAID MORE THAN THE AMOU NT RECORDED IN BOOKS AND IS UNABLE TO EXPLAIN THE SAME. THIS IS NOT THE CASE HERE. FURTHER AS FAR AS THE STAMP ACT IS CONCERNED, THE S TAMP DUTY IS PAID ON THE MARKET VALUE UNLIKE SECTION 50 C FOR CAPITAL GAINS THERE IS NO SUCH PROVISION TO CONSIDER MARKET VALUE FOR 69/69B ETC. WE HAVE ALREADY PROVIDED THE NAMES AND ADDRESSES OF THE SELLER THROUGH VARIOUS DOCUMENTS SUBMITTED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. UNLESS ANY INQUIRY IS MAD E WITH HIM FOR ARRIVING AT TRUE CONSIDERATION, THE ACTUAL CONSIDER ATION, PAID BY THE UNDERSIGNED SHOULD NOT BE DOUBTED. IN VIEW OF THE ABOVE, NO ADDITION SHOULD BE MADE UN DER SECTION 69/69B ETC., BECAUSE THERE IS NO SUCH DEEMING PROVI SION TO TAKE JANTRY VALUE FOR THE PURPOSE OF 69/69B. 2.1. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINC ED AND HELD THAT THE JANTRI RATES ARE BEING FIXED ON CERTAIN FACTO RS, SUCH AS, ROAD FACILITIES, DEVELOPMENT OF THE AREA, AMENITIES AVAI LABLE, ETC. ACCORDING TO HIM, THOSE FACTORS DETERMINE THE MARKET RATES OF TH AT AREA. THEREFORE, TREATING THE DIFFERENCE AS AN UNEXPLAINED INVESTMEN T U/S.69 OF THE I.T. ACT, 1961 AN ADDITION OF RS.21,87,041/- WAS MADE. THE SAID ADDITION WAS CHALLENGED. 3. THE LEARNED CIT(APPEALS) WAS OF THE VIEW THAT IN SUCH A SITUATION, THE PROVISIONS OF SECTION 50C OF THE I.T. ACT, 1961 WERE APPLICABLE. REJECTING ALL THE PLEAS OF THE ASSESSEE THAT THE PR OVISIONS OF SECTION 50C OF THE I.T. ACT, 1961 WERE APPLICABLE IN RESPECT OF THE SELLER OF THE PROPERTY, HOWEVER, THE ASSESSEE HAPPENED TO BE A PU RCHASER, THEREFORE, ITA NO. 1947/AHD/2008 AMAR ARVINDKUMAR RAWAL VS. ITO ASST.YEAR 2005-06 - 4 - COULD NOT BE APPLIED ON THE FACTS OF THE CASE, THE LEARNED CIT(APPEALS) HAS AFFIRMED THE ACTION OF THE ASSESSING OFFICER. 4. WITH THIS BACKGROUND, WE HAVE HEARD BOTH THE SID ES. IT IS PERTINENT TO MENTION THAT APART FROM THE JANTRI RA TES THERE WAS NOTHING IN THE POSSESSION OF THE ASSESSING OFFICER TO DEMON STRATE THAT THE ASSESSEE HAD MADE INVESTMENT TOWARDS PURCHASE OF TH E IMPUGNED AGRICULTURAL LAND MORE THAN THE CONSIDERATION AS RE FLECTED IN THE DOCUMENTS. THE ASSESSING OFFICER HAS BUILT UP THE CASE ONLY ON THE BASIS OF THE JANTRI RATES DETERMINED BY THE REGISTRATI ON AUTHORITIES FOR THE PURPOSES OF COLLECTION OF STAMP DUTY. THE PROVISI ONS OF I.T.ACT WHICH COVER THE UNEXPLAINED INVESTMENT OR UNEXPLAINED EXP ENDITURE HAVE SAID THAT IF THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED OR IN ANY FINANCIAL YEAR HE HAS FOUND THAT AN EXPENDITURE HAS BEEN INCURRED BY AN ASSESSEE, THEN SUCH AN AMOUNT IF NOT DISCLOSED BE H ELD AS AN UNEXPLAINED MONEY INVESTED OR EXPENDED BY THE ASSESSEE. CONTR ARY TO THIS, IN THE PRESENT CASE, THERE IS NO SUPPORTING EVIDENCE OR COGENT MATERIAL IN POSSESSION OF THE REVENUE TO DEMONSTRATE THAT THIS ASSESSEE HAS ACTUALLY EXPENDED THE AMOUNT TOWARDS PURCHASE OF AG RICULTURAL LAND MORE THAN WHAT WAS DOCUMENTED. THE NEXT ISSUE IS, AS RAISED BY THE LEARNED CIT(APPEALS), THAT THE PROVISIONS OF SECTIO N 50C OF THE I.T. ACT, 1961 COULD HAVE BEEN APPLIED BY THE ASSESSING OFFIC ER BECAUSE OF THE SAID SPECIAL PROVISION NOW INSERTED IN THE STATUTE . EVEN THIS APPROACH OF LEARNED CIT(APPEALS) CANNOT BE APPROVED BECAUSE THESE SPECIAL PROVISIONS AS PRESCRIBED U/S.50C OF THE I.T. ACT, 1 961 ARE IN RESPECT OF TRANSFER BY AN ASSESSEE WHERE CONSIDERATION RECEIVE D WAS FOUND LESS THAN THE VALUE ASSESSED BY ANY AUTHORITY OF A STATE GOVE RNMENT, VIZ. STAMP ITA NO. 1947/AHD/2008 AMAR ARVINDKUMAR RAWAL VS. ITO ASST.YEAR 2005-06 - 5 - VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF S TAMP DUTY. THE FIRST APPELLATE AUTHORITY HAS NOT MARKED THIS DISTINCTION THAT THE ASSESSEE IN QUESTION IS NOT THE SELLER OF THE PROPERTY AND HE H AS NOT RECEIVED ANY CONSIDERATION BUT CONTRARY TO THIS, HE WAS A PURCHA SER OF THE PROPERTY AND PAID THE CONSIDERATION. THIS DISTINCTION HAS ELABO RATELY BEEN MADE IN THE CASE OF CIT VS. FITWELL LOGIC SYSTEM (P) LTD. REP ORTED AS (2010) 01 ITR (TRIB) 286 (DEL) AND THEREIN IT WAS MENTIONED AS UNDER:- C. APART FROM THE ABOVEMENTIONED JUDGMENTS, I ALS O REPLY UPON THE FOLLOWING PRONOUNCEMENTS WHICH HAVE HELD THAT A DDITIONS FOR UNEXPLAINED INVESTMENT CANNOT BE SUSTAINED MERELY O N THE BASIS OF VALUATIONS, UNLESS THERE IS INDEPENDENT EVIDENCES T HAT THE ACTUAL CONSIDERATION WAS MORE THAN WHAT WAS REPORTED BY TH E PURCHASER OF THE PROPERTY. ASHOK SONI VS. ITO (2006) 102 TTJ (DEL) 964; NAVNEET KUMAR THAKKAR VS. ITO (2007) 112 TTJ (JD) 76: ((2008) 298 ITR 42 (JD)(AT); CIT VS. KISHAN KUMAR (2008) 215 CTR (RAJ) 181: (2008) 3 DTR (RAJ) 142 : (2009) 315 ITR 204 (RAJ.) THE FACTS OF THE PRESENT CASE AS ELABORATED BY THE AO ONLY INDICATE THAT THERE WAS A DIFFERENCE IN THE EVALUAT ION OF THE STAMP DUTY AUTHORITY AND THE AMOUNT SHOWN BY THE PURCHASE R IN THE PURCHASE DEED. APART FROM THIS DIFFERENCE, NO OTHE R EVIDENCE WAS AVAILABLE TO ESTABLISH THAT THE ACTUAL CONSIDERATIO N PAID BY THE PURCHASER WAS HIGHER THAN WHAT WAS DECLARED. IN VI EW OF THE CIRCUMSTANCES, THE APPELLANT IS THE PURCHASER OF TH E PROPERTY AND IS NOT ATTRACTED BY S. 50C OF THE ACT. FURTHER, TH ERE IS NO EVIDENCE FOR APPLYING S. 69B WHICH HAS BEEN DONE BY THE AO. ALSO RELYING UPON THE PLETHORA OF JUDGMENTS DISCUSSED ABOVE, I A M OF THE OPINION THAT THERE IS NO JUSTIFICATION TO SUSTAIN T HE ADDITION MADE BY THE AO ON THIS ACCOUNT. AS A RESULT, THE GROUN D OF APPEAL IS ALLOWED. ITA NO. 1947/AHD/2008 AMAR ARVINDKUMAR RAWAL VS. ITO ASST.YEAR 2005-06 - 6 - 4.1. THIS QUESTION HAS AGAIN BEEN ANSWERED IN AN UN REPORTED DECISION OF ITAT AHMEDABAD SMC-A BENCH IN THE CASE OF M/ S.JALARAM & CO. VS. ITO NAVSARI BEARING ITA NO.3964/AHD/2008 FOR AS SESSMENT YEAR 2005-06, DATED 24/07/2009, WHEREIN VIDE PARAGRAPH N O.7 IT WAS HELD AS UNDER:- IN THE PRESENT CASE, SECTION 50C CREATES A LEGAL F ICTION FOR TAXING CAPITAL GAINS IN THE HANDS OF THE SELLER AND IT CAN NOT BE EXTENDED FOR TAXING THE DIFFERENCE BETWEEN APPARENT CONSIDER ATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AS UN DISCLOSED INVESTMENT U/S.69. IN FACT, SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS INCO ME IF IT IS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. NO FUR THER LEGAL FICTION FROM ELSEWHERE IN THE STATUE CAN BE BORROWED TO EXT END THE FIELD OF SECTION 69. IT IS FOR THE LEGISLATURE TO INTRODUC E LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR E XPENDITURE WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICU LT TO PREVENT TAX EVASION BY UNDERSTATING APPARENT SALE CONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIE S FOR THE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SA LE CONSIDERATION BY VALUATION DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, THEREFORE, CANN OT BE INVOKED BY ASSESSING OFFICER TO TAX THE DIFFERENCE IN THE H ANDS OF THE PURCHASER. ITA NO. 1947/AHD/2008 AMAR ARVINDKUMAR RAWAL VS. ITO ASST.YEAR 2005-06 - 7 - 5. FOLLOWING THESE DECISIONS AS WELL AS THE PROVISI ONS OF THE LAW, WE FIND NO JUSTIFICATION IN LEARNED CIT(APPEALS)S VIE W OF CONFIRMING THE ADDITION ON BOTH THE COUNTS. THEREFORE, WE HEREBY REVERSE THOSE FINDINGS OF THE LEARNED CIT(APPEALS) AND ALLOW THE GROUNDS O F THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 23/ 07 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23 / 07 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD