Asst. Commissioner of Income Tax, Circle-1(1)(1), Surat V. Bhikhabhai Keshubhai Dhameliya, Surat

ITA 196/SRT/2022

AI Insights

The case revolves around an appeal by the Revenue against the decision of the CIT(A) which had deleted an addition made by the Assessing Officer under section 56(2)(vii)(b) of the Income Tax Act, 1961. The addition pertained to the difference between the purchase consideration of a property and its stamp duty value as assessed by the Stamp Valuation Authority. The Assessing Officer had treated the difference as income from other sources, alleging that the assessee had purchased the property for a lower consideration than its market value. The CIT(A) found that the Assessing Officer had not considered the premium paid for converting agricultural land to non-agricultural land and the area deduction due to the Town Planning Scheme, which reduced the effective stamp duty value of the property. The Tribunal upheld the CIT(A)'s decision, agreeing that the assessee had not undervalued the property.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301804 (ITAT-SURAT)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-05-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 20-06-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Earning of tax free income; Source of fund; Cost of acquisition; Fair market value; Set aside
• Section: 56(2)(vii)(b); 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.196/SRT/2022 Ǔनधा[रण वष[/Assessment Year: (2016-17) (Physical Hearing) The ACIT, Circle-1(1)(1), Surat. Vs. Bhikhabhai Keshubhai Dhameliya, Jay Gangeshwar Society, Varachha, Dist – Surat, 395010. (Appellant) (Respondent) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAUPD7552N Appellant by Shri Vinod Kumar, Sr. DR Respondent by Shri Sapnesh Sheth, CA Date of Hearing 31/05/2023 Date of Pronouncement 16/06/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2016-17, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (In short ‘NFAC’), Delhi, dated 28.04.2022, 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 24.12.2018. 2. The grounds of appeal raised by the Revenue are as follows: “(i) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs.1,48,61,956/- made u/s 56(2)(vii)(b) of the Act without appreciating the fact that, the assessing officer has made addition since the assessee declared less purchase value than the value adopted by the Stamp Valuation authority. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in allowing to club with the purchase cost with the premium paid by the assessee in the subsequent year for converting agricultural land to Page | 2 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya non-agricultural land in the subsequent year without considering the fact that, the original purchase deed was executed in the F.Y 2015-16 and the Stamp Valuation authority has adopted the value for the same financial year. (iii) It is therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of assessing officer may be restored to the above extent. (v) The assessee craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 3. Brief facts as discernable from the orders of lower authorities are that assessee before us is an Individual and filed his return of income (ROI) on 18.03.2017, declaring total income at Rs.13,64,330/- and exempt income at Rs.1,06,01,910/-. The assessee`s case was selected under CASS for Complete scrutiny assessment. The reason for selection was “Claim of Large Exempt Income (Schedule El of ITR)”. Accordingly, a notice u/s 143 (2) of the Income Tax Act was issued on 18.09.2017 and was duly served upon the assessee. Subsequently, notice u/s 142(1) along with questionnaire was issued on 13.08.2018 and was duly served upon the assessee. In response to the notice u/s 143(2)/ u/s 142(1) of the Act, the assessee submitted E-submission on 28.08.2018, 13.12.2018, 17.12.2018, 20.12.2018 and 21.12.2018. During the year under consideration, the assessee was a partner in partnership firm “M/s Keshav Diamond & M/s Somnath Enterprise” and income from other source. During the course of assessment proceedings, the assessee was requested to submit the copy of purchase deed of the properties purchased during the year under consideration. The assessee has purchased an immovable property at Block No.36/A, TP scheme No.45 (Navagam Vav), open plot No.16 and final plot No.16 for consideration of Rs.3,15,97,475/- through registered deed No.1787/2015 dated 17.10.2015. The market value ascertained by the Stamp Valuation Authority of the above mentioned property is Rs.5,37,79,500/- against Page | 3 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya the actual purchase consideration of Rs.3,15,97,475/-. Therefore, there is a difference of Rs.2,21,82,025/- (Rs.5,37,79,500 less Rs.3,15,97,475/-), on which provision of section 56(2)(vii)(b) of the I.T. Act clearly attracts. Therefore, a show cause notice dated 18.12.2018 was issued to the assessee. The relevant portion of the show cause notice is reproduced as under: “Please refer to the ongoing assessment proceedings with this office for A.Y.2016-17. 2. As per information available with this office it is seen that you had purchased an immovable property bearing Moje Navagam, Block No.36/A and original plot No.16, Khata No.584 T.P.S.No.45, Surat for consideration of Rs.3,15,97,475/- through registered deed No.17871/2015 dated 17.10.2015. 3. On perusal of information available on record and collected by this office it is noticed that the market value ascertained by the Stamp Valuation Authority of the above mentioned property is Rs.5,37,79,500/- against the actual purchase consideration of Rs. 3,15,97,475/- Therefore, there is a difference of Rs.2,21,82,025/- (Rs.5,37,79,500/- less Rs. 3,15,97,475/-) between the purchase consideration shown and market value adopted/assessed by Stamp Valuation Authority for the purpose of payment of stamp duty in respect of such transfer. As per the provisions of section 56(2)(vii)(b) of the I.T. act, an assessee, being Individual or HUF receives(buy) any immovable property for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs. 50,000/- then the difference between the stamp duty value and the purchase "Consideration will be treated as income under the head Other Sources. The difference of the property comes to Rs.2,21,82,025/-. It is crystal clear that the said investment has been made out of her unaccounted & undisclosed sources of income for the year under consideration. You are required to show cause as to why Rs.2,21,82,025/- should not be treated as unexplained investment as per Act and added back to your total income for the year under consideration. 4. In view of above, you are requested to furnish the above said details on or before 20/12/2018 by 11.00 A.M. In case if you failed to furnish your reply on the specified date, it will be presumed that you have nothing to say in this matter. The assessment proceedings will be finalized based on the material fact as available on record without any further opportunity from this office." Page | 4 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya 4. In response to the above show cause notice, the assessee submitted his reply, vide letter dated 21.12.2018. The reply of the assessee is reproduced as under: “With reference to above, our submissions are as under. 1. I, jointly with my brother Shri Sharad K. Dhameliya has purchased new sarat agriculture land at Block no.36/A, TP scheme no.45 (Navagam Vav) open plot no.16 and Final plot no.16 with obligation of payment of premium to at block no.36/A are as per details given below: Sr. No. Particulars Amount Rs. 1 Sales consideration paid to sellers of new sarat agriculture land at block no. 36/A, Navagam, Kamrej, Dist. Surat 31597475 2 Payment of premium of land paid to State Government 17927500 Total 49524975 The fact about, obligation for payment of premium on land for converting new sarat land by purchaser are already specified at page no. 26 and 28 of the enclosed purchase deed of land at block no. 36/A, Navagam , Kamrej, Dist. Surat. From the above, it is clear that new sarat land at block no. 36/A, Navagam , Kamrej, Dist. Surat, was purchased with a condition of payment obligation of premium to the state Government by the purchaser and hence we have made less payment of the seller of land to the extent of premium payable by us to the State Government. Thus, total amount incurred by us against purchase of said land at block no. 36/A, Navagam, Kamrej, Dist. Surat is Rs. 49524975 and not Rs. 31597475 as specified by you in your show cause notice dated 18/12/18. We further state that status of land at block no. 36/A, Navagam, Kamrej, Dist. Surat at the purchase of land was the Town Planning Scheme No. 45 (Navagam Vav) was already surrender of land area @ 40% for common TP Scheme development and final plot area comes to 7171 Sq. Meter. Thus, on the date of purchase of land at block no. 36/A as per document no. 17871 dated 27/10/15, total area of land we can develop and use comes to 7171 Sq. Meter and balance area of land of 4780 Sq. Meter is to be taken away by the local Urban authority for common infrastructure development of TP scheme no. 45. Market and jantry value of final plot no. 16 having area of 7171 Sq. Meter is Rs. 44818750 (7171*6250). This Surat Development Authority documents regarding TP scheme no. 45 is part of document of purchase deed no. 17871 dated 27/10/15 having page no. 55 and 56. The above noted fact has already been noted by collector order dated 24/04/17 for payment of premium of Rs.17927500. The Premium of Rs. 17927500 has been determined by collector considering final plot land area of 7171 Sq. Meter and not 11951 Sq. Meter. From this, it is clear that fair market value/jantry value of land at block no.36A is Rs.44818750 and not Rs.53779500 as per your show cause notice dated 18.12.2018. agasint this, we have already shown total amount of Rs.49524975 which is more than jantry value of Rs.44848750 for Final Plot no.16. We have paid stamp duty Page | 5 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya on total area of 11951 for certain technical reason. If we have paid stamp duty per revenue records of 7/12 and 8A which actually goes to Surat Urban Development Authority for reasons, we have paid more stamp duty and this does not mean that purchase consideration paid by us Rs.53779500. In fact, the jantry value of N.A land at Block no.36A is Rs.6250 and total area of F.P. No.16 is 7171 which comes to Rs.44818750. We further draw your attention that there is no any change in jantry value since 01.04.2011. I further state that my share in above referred joint land at Block no.36a is 67%. From the above noted facts and circumstances of the case, it is clear that fair market value of land Block no.36a is Rs.44818750 against this we have already accounted an amount of Rs.49524975. We have enclosed here with following supporting documents in support of our above noted submission. 1. Copy of purchase deed document No.17871 dated 27/10/15. 2. Copy of Collector order for payment of premium of Rs.17927500. 3. Copy of challan for payment of premium of Rs.17927500. 4. Copy of Surat Urban Development Authority T.P. Scheme 45, F. P. No.16, layout plan and form no. F specifying final plot area of 7171 Sq. Meter. This document of Surat Urban Development Authority are part of purchase deed no. 17871 dated 27/10/15 having page no. 55 and 56. We hope, our above noted information , explanation and supporting documents will satisfy your query regarding jantry value for purchase deed no. 17871 dated 27/10/15.” 5. The assessing officer has gone through the reply of the assessee and stated that assessee`s contention is rejected for the following reasons: “i) The Stamp Duty Collector has determined the value of Rs.5,37,79,500/-, which is determined on the sale consideration value amounting to Rs.3,15,97,475/- bearing sale deedNo.17871/2015 dated 17.10.2015. ii) The assessee has applied to convert the alleged land into N.A. Land to the Collector of Surat on 13. 01. 2016. iii) The assessee has paid premium on 21.11.2016, which pertain to F.Y.2016-17. This case pertains to F.Y.2015-16 only. Therefore, the plea of the assessee not acceptable that the value of land is Rs.4,95,24,975/-.” 6. Therefore, assessing officer held that assessee has purchased agriculture land at Rs. 3,15,97,475/- as against the fair market value, as determined by the Stamp Value Authority worth Rs.5,37,79,500/-, hence there is a difference of Rs.2,21,82,025/-( Rs.5,37,79,500- Rs. 3,15,97,475). Here in the case the assessee purchased immovable Page | 6 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya property for consideration which is less than the value of the property determined by Stamp Valuation Authority by Rs.2,21,82,025/-, the same is required to be treated as income from other sources. In view of the above, as per share of assessee i.e. 67% of total difference of Rs.2,21,82,025/- an addition of Rs.1,48,61,956/- ( 67% of Rs.2,21,82,025) was made to the total income of the assessee on account of income from other sources u/s 56(2)(vii)(b) of the Act. 7. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us. 8. Learned Departmental Representative (Ld. DR) for the Revenue has argued a lot, however, basically he has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 9. Shri Sapnesh Sheth, Learned Counsel for the assessee submitted that ld CIT(A), after going through the detailed reasoning and explanation given by assessee, observed that above addition was incorrectly made by the assessing officer. The ld Counsel explained that out of the total plot land area of 11951 sq. meter mentioned in the Sale Deed, the actual plot area comes to 7171 sq. meter, since 40% had to be deducted on account of implementation of TP Scheme as per the Surat Urban Development Authority orders. Furthermore, the assessee had also paid an amount of Rs.1,79,27,500/- as a premium to the State Government for the said property. Both these issues were specifically mentioned in the Sale Deed. Taking these factors into account, the actual Page | 7 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya stamp duty value of the property comes to Rs.4,48,18,750/- only and not Rs.5,37,79,500/- as assumed by the assessing officer. Against this, the assessee had made total payment of Rs.3,15,97,475/- plus Rs.1,79,27,500/- amounting to Rs.4,95,24,975/-. The assessee has therefore contended that there was no under valuation. All relevant details had already been filed before the assessing officer as is evident from the assessment order. Therefore, ld Counsel contended that order passed by the ld CIT(A) is just and proper and the same should be upheld. 10. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that during the assessment proceedings, assessing officer observed that assessee had purchased immovable property at Block No. 36/A, TP Scheme No.45 (NavaGam Vav), open plot No. 16 and final plot no. 16 for consideration of Rs.3,15,97,475/- through registered deed no. 17871/2015 dated 17.10.2015. The market value ascertained by the stamp valuation authority of the above mentioned property is Rs.5,37,79,500/-. Therefore, there is a difference of Rs.2,21,82,025/-. As per provisions of section 56(2)(vii)(b) of the I.T. Act for which Assessing officer issued a show cause notice and in response to the same, assessee submitted his reply time to time and the said reply is reproduced in para 3, 4.1 of the assessment order. However, assessing officer failed to properly consider the reply of assessee and as per his observations in para 4.2 to 4.4 of his order, proceeded to make addition of Rs.1,48,61,957/- ( 67% of Rs.2,21,82,025) u/s 56(2)(vii)(b) of the Act. The ld Counsel submitted that during the course of assessment proceedings it was clearly explained that assessee purchased said property along with his brother Shri Sharad K. Dhameliya (assessee's Page | 8 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya share being 67%) with an obligation to pay premium to State Government for converting Navi Sarat land into Juni Sarat (refer page no 28 of the purchase deed). Accordingly, sale consideration was mentioned at Rs.3,15,97,475/- and assessee has made payment of premium to State Government of Rs.1,79,27,500/-. Consequently, the total cost of above land comes to Rs.4,95,24,975/- ( Rs.3,15,97,475 + Rs.1,79,27,500). in support of the same assessee had furnished copy of purchase deed, collector order for payment and challan for payment of the same for Rs.1,79,27,500/- and Surat Urban Development Authority T.P. Scheme 45, P.P. No.16, Layout plan form part of purchase deed. The assessee had also gave detailed explanation during the assessment stage, which is reproduced in para 4.1 of the assessment order. 11. We note that as per Surat Urban Development authority (SUDA document of TP Scheme 45 dated 09.10.2015 and Form no. F (both forming part of registered purchase deed page no. 55 & 56), the open plot land area is 11951 Sq. Meter as per the land revenue record, viz. 7/12, 8A and there will be deduction of land area @ 40% on account of implementation of TP Scheme and the final plot area therefore comes to 7171 Sq. Meter only. This area of 7171 sq meter is specifically mentioned in form F and thus, it is crystal clear that total area of land that can be developed comes to 7171 sq. meters only. Also in registered purchase deed dated 27.10.2015, area of land is clearly mentioned as 7171 sq. meters (see page 32 of purchase deed). As explained in letter dated 20.12.2018 filed in assessment proceedings, the jantri rate which has remained unchanged is Rs.6,250/- per sq. meter. Hence, Market value and Jantri Value of the plot come to Rs.4,48,18,750/- (i.e. 7171 Sq. Mtr * Rs.6,250) due to such deduction of area. The collector had also considered 7171 Sq. Meter only for the purpose of payment of Page | 9 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya premium. In fact, specific observation relating to 7171 sq. meter area and stamp duty i.e. iantri value of Rs.4,48,18,750/- is made at page 2 and 3 of the collectors order dated 24.04.2017.Therefore, based on the above cited evidences, it is abundantly clear that stamp duty value of property is only Rs.4,48,18,750/- and not Rs.5,37,79,500/-. 12. Therefore, we note that the assessee along with his brother has purchased an immovable property for a consideration of Rs.3,15,97,475/-. However, the market value ascertained by the Stamp Valuation Authority of the said property was Rs.5,37,79,500/-. Thus, there was a difference of Rs.2,21,82,025/-. The AO has added 67% (being assessee's share) of the above difference of Rs.2,21,82,025/- amounting to Rs. 1,48,61,957/- to the assessee's income u/s 56(2)(vii)(b) of the Act. The ld CIT(A), after going through the detailed reasoning and explanation given by assessee, observed that above addition was incorrectly made by the assessing officer. The ld CIT(A) observed that out of the total plot land area of 11951 sq. mtr. mentioned in the Sale Deed, the actual plot area comes to 7171 sq. meter, since 40% had to be deducted on account of implementation of TP Scheme as per the Surat Urban Development Authority orders. Furthermore, the assessee had also paid an amount of Rs.1,79,27,500/- as a premium to the State Government for the said property. Both these issues were specifically mentioned in the Sale Deed. All relevant details had already been filed before the assessing officer as is evident from the assessment order.Taking these factors into account, the actual stamp duty value of the property comes to Rs.4,48,18,750/- only and not Rs.5,37,79,500/- as assumed by the assessing officer. Against this, the assessee had made total payment of Rs.3,15,97,475/- plus Rs.1,79,27,500/- amounting to Rs.4,95,24,975/-. Hence, ld CIT(A) noted that there was no under Page | 10 ITA No.196/SRT/2022 Bhikhabhai K. Dhameliya valuation, therefore after careful consideration, the assessee's contentions the ld CIT(A) deleted the addition of Rs.1,48,61,957/-. We have gone through the findings of ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A). That being so, we decline to interfere with the order of ld. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 13. In the result, appeal filed by the Revenue is dismissed. Order pronounced on 16/06/2023 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 16/06/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat