ACIT, New Delhi V. M/s. Concept Clothing, New Delhi

ITA 2785/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0858 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 08-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: RAJESHWAR T YAGI
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Business income; Additional evidence; Permanent establishment; Non-deduction of tax; Deemed dividend
• Section: 50C; 69; 12

Judgement Text

ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.2785/DEL/2015 ASSESSMENT YEAR: 2011-12 ACIT, CIRCLE 31(1), ROOM NO. 1302, 13 TH FLOOR, E-2, PRATYKSHYA KAR BHAWAN, S.P. MUKHERJEE CIVIC CENTRE, J.L. N. MARG, MINTO ROAD, NEW DELHI-110002 VS CONCEPT CLOTHING, W-7/3, WESTERN AVENUE, SAINIK FARMS, NEW DELHI-110062 (PAN: AAFFC0116J) APPELLANT RESPONDENT DEPARTMENT BY: MS ASHIMA NEB , SR. DR ASSESSEE BY : SHRI RAJESHWAR T YAGI, ADV. DATE OF HEARING : 13.06.2018 DATE OF PRONOUNCEMENT : 11.09.2018 O R D E R PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 11.6.2014 PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS)-11, NEW DELHI FOR ASSESSMENT YEAR 2011-12 AND TWO ISSUES IN DISPUTE BEFORE US ARE THE DELETION OF ADD ITION OF RS. 1,81,48,266/- MADE BY THE ASSESSING OFFICER FOR ALL EGED VIOLATION OF PROVISIONS OF SECTION 9(1)(VII) R/W SECTION 195( 1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') AND FU RTHER DELETION OF ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 2 ADDITION OF RS. 1,02,48,572/- MADE BY THE ASSESSING OFFICER U/S 50C R/W SECTION 69A OF THE ACT. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN DECLARING INCOME OF RS.61,72,830/- WHICH WAS PROCES SED U/S 143(1) OF THE ACT AND WAS LATER ON SELECTED FOR SCR UTINY. ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF MANUFACTURING A ND EXPORT OF READYMADE GARMENTS. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER ( AO) THAT THE ASSESSEE HAD DEBITED A SUM OF RS.78,74,229/- IN THE PROFIT & LOSS ACCOUNT AS COMMISSION ON EXPORT CONSIGNMENTS A ND RS. 1,02,74,037/- AS COMMISSION ON EXPORT TURNOVER APAR T FROM DISCOUNT AND REBATE OF RS.76,86,139/- BOOKED UNDER THE HEAD SELLING AND DISTRIBUTION EXPENSES. THE AO ASKED T HE ASSESSEE TO FURNISH COPIES OF AGREEMENTS, DETAILS AND EVIDENCE OF SERVICES RENDERED BY THE CONCERNED PARTIES TO EARN THE COMMI SSION AND EVIDENCE OF TDS WHILE MAKING COMMISSION PAYMENT. IN RESPONSE, THE ASSESSEE FILED LETTER DATED 14.08.2013 FILING G ENERAL PARTICULARS OF COMMISSION EXPENSES WITHOUT FURNISHI NG SPECIFIC PARTY WISE DETAILS AND WITHOUT ANY SUPPORTING DOCUM ENTARY EVIDENCES. THE AO REQUIRED THE ASSESSEE TO FURNISH COMPLETE DETAILS OF COMMISSION EXPENSE WITH EVIDENCES OF IDE NTIFICATION OF ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 3 PARTIES TO WHOM COMMISSION WAS PAID AND FURTHER REQ UIRED THE ASSESSEE TO FILE COPIES OF AGREEMENT ENTERED INTO W ITH THEM, DETAILS OF SERVICES RENDERED AND DETAILS OF BUSINES S PROVIDED BY THEM ALONG WITH THE COPIES OF RELATED DOCUMENTS/COR RESPONDENCE TO ESTABLISH THE GENUINENESS OF COMMISSION EXPENSES AND ALSO REQUIRED THE ASSESSEE TO JUSTIFY THE CLAIM OF COMMI SSION EXPENSE ON WHICH NO TDS WAS DEDUCTED. 2.1 IN RESPONSE, THE ASSESSEE SUBMITTED DETAILS OF COMMISSION EXPENSES PAID TO TWO CONCERNS NAMELY ANCARE TRADE CONSULTANTS, 8671, NW, TH, STREET MIAMI, USA AMOUNT ING TO RS.78,74,229/- AND M/S WHYNOT BUYING HOUSE SERVICES & OTHERS AMOUNTING TO RS.1,02,74,037/- TOTALING TO S UM OF RS.1,81,48,266/-. IT WAS EXPLAINED BY THE ASSESSEE THAT OUT OF THE TOTAL COMMISSION PAID AS EXPORT TURNOVER ONLY R S.9,81,561/- WAS PAID IN INDIA ON WHICH TDS WAS DULY DEDUCTED BU T NO TDS WAS MADE RS.78,74,229/- ON EXPORT CONSIGNMENT AND O THER COMMISSION ON EXPORT TURNOVER AMOUNTING TO RS.92,92 ,476/-. IT WAS FURTHER EXPLAINED THAT COMMISSION ON EXPORT CON SIGNMENT AMOUNTING TO RS.78.74 LAC WAS PAID TO M/S ANCARE TR ADING AND CONSULTANTS, A PARTY SITUATED AT USA. BUT NEITHER C OPY OF ANY WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE COMM ISSION ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 4 AGENT WAS FILED TO SUBSTANTIATE THE CLAIM OF COMMIS SION PAYMENT AND GENUINENESS OF THE TRANSACTION. WHEN REQUIRED B Y THE AO TO FURNISH THE ABOVE DETAIL, THE ASSESSEE FILED LETTER DATED 14.02.2014 WHEREIN IT WAS CONTENDED THAT SINCE OUT OF THE TOTAL COMMISSION OF RS. 1,02,74,037/-, TDS WAS DEDUCTED O NLY IN RESPECT OF AMOUNT OF RS.9,81,561/- WHICH WAS PAID I N INDIA, AND REMAINING BALANCE AMOUNT OF RS.92,92,476/- WAS CLAI MED AS EXPENSES BEING SALE PROCEEDS REALIZED AFTER DEDUCTI NG AN AMOUNT EQUAL TO 3% OF THE INVOICE VALUE, NO TAX WAS DEDUCT IBLE AT SOURCE THEREON. 2.2 THE AO CONSIDERED THE REPLY OF THE ASSESSEE BUT FOUND THE SAME WITHOUT MERITS AS THE ASSESSEE HAD FAILED TO F URNISH ANY DOCUMENTARY EVIDENCE/S TO SUBSTANTIATE THE GENUINEN ESS OF COMMISSION EXPENSES. ULTIMATELY, IT WAS HELD BY THE AO THAT NEITHER THE GENUINENESS OF THE COMMISSION EXPENSE W AS ESTABLISHED NOR WAS THERE ANY JUSTIFICATION FOR ALL OWANCE OF COMMISSION EXPENSE WITHOUT TDS AS PER THE PROVISION S OF SECTION 195 OF THE ACT. IT WAS HELD BY THE AO THAT COMMISSION EXPENSES OF RS. 1,81,48,266/- IN RESPECT OF EXPORT SALE WERE NOT ALLOWABLE. ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 5 2.2 FURTHER, DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF INV ESTMENT MADE IN PROPERTIES IN RESPONSE TO WHICH HE FILED A LETTE R DATED 30.12.2013 ALONG WITH A COPY OF SALE DEED IN RESPEC T OF PURCHASE OF INDUSTRIAL PREMISES NO. 666 MEASURING 1000 SQ.MT S SITUATED AT SECTION -37- II (PACE CITY), GURGAON, TEHSIL AND DISTRICT GURGAON, HARYANA FOR A SUM OF RS.3,91,00,000/-. THE AO NOTICED THAT ON THE COPY OF THE SALE DEED, THE STAM P VALUE COMPUTATION OF THE PROPERTY IN QUESTION FOR STAMP D UTY PURPOSE WAS RS.4,93,48,950/- AS AGAINST THE SALE CONSIDERAT ION OF RS.3.91 CRORE. CONSIDERING THE SAME, THE AO ASKED T HE ASSESSEE TO SHOW CAUSE AS TO WHY THE VALUE OF THE PROPERTY B E NOT TAKEN AS ADOPTED BY THE SUB-REGISTRAR OF PROPERTIES FOR S TAMP DUTY PURPOSE AT RS.4,93,48,950/-. IN RESPONSE, THE ASSES SEE CONTENDED THAT THE VALUE AT WHICH THE IMMOVABLE PRO PERTY WAS ACQUIRED WAS THE ACTUAL TRANSACTION VALUE OF THE PR OPERTY WHICH WAS RS.3.91 CRORE. THE AO FOUND THE ASSESSEES CONT ENTION WITHOUT MERIT IN VIEW OF THE PROVISIONS OF SECTION 50C ALONG WITH PROVISIONS OF SECTION 69A OF THE I.T. ACT. IT WAS H ELD BY THE AO THAT SINCE THE PURCHASE CONSIDERATION OF THE PROPER TY WAS SHOWN LESS BY THE ASSESSEE AS COMPARED TO THE VALUE DETERMINED ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 6 BY THE SUB-REGISTRAR FOR THE PURPOSE OF STAMP DUTY, AS PER PROVISIONS OF SECTION 50C OF THE ACT IT WAS MANDATO RY TO ADOPT THE SALE CONSIDERATION AS WORKED OUT ON THE BASIS O F CIRCLE RATE OF THE PROPERTY FOR THE PURPOSE OF COMPUTATION OF L ONG TERM CAPITAL GAIN. IT WAS HELD BY THE AO THAT THE DIFFER ENCE OF RS. 1,02,48,572/- IN THE VALUE SHOWN BY THE ASSESSEE AN D VALUE AS PER STAMP DUTY PURPOSE WAS NOTHING BUT UNEXPLAINED INVESTMENT OF THE ASSESSEE. THEREFORE, THIS DIFFERE NCE WAS ADDED BACK TO THE RETURNED INCOME OF THE ASSESSEE AS UNDI SCLOSED INVESTMENT U/S 69 OF THE ACT. 2.3 APART FROM THIS, THE ASSESSING OFFICER ALSO MAD E ADDITION/DISALLOWANCES PERTAINING TO CAR RUNNING AN D MAINTENANCE EXPENSES, FOREIGN TRAVEL EXPENSES, STAF F WELFARE EXPENSES AND TELEPHONE EXPENSES. THE ASSESSMENT WA S COMPLETED AT AN INCOME OF RS. 3,57,25,600/- AS AGAI NST THE RETURNED INCOME OF RS. 61,72,830/-. 2.4 THE ASSESSEES APPEAL BEFORE THE LD. COMMISSION ER OF INCOME TAX (A) WAS PARTLY ALLOWED BY THE LD. COMMISS IONER OF INCOME TAX (A) BY DELETING THE ADDITION OF RS. 1,81 ,48,266/- MADE WITH RESPECT TO THE ALLEGED VIOLATION OF PROVI SIONS OF SECTION 9 AND SECTION 195 OF THE ACT. THE LD. COMM ISSIONER OF ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 7 INCOME TAX (A) ALSO DELETED THE ADDITION OF RS. 1,0 2,48,572/- WITH RESPECT TO ADDITION MADE U/S 50C R/W 69A OF TH E ACT. NOW, THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS CHALL ENGED THE DELETION OF ADDITIONS BY RAISING THE FOLLOWING GROU NDS OF APPEAL:- '1. WHETHER THE LD. CIT(A), ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, HAS ERRED IN DELETING TH E ADDITION OF RS. 1.81 CR. MADE BY THE AO IN VIEW OF PROVISION S OF SECTION 9(L)(VII) AND SECTION 195(1) AND CIRCULAR N O. 7/2009 DT. 22-10-2009 OF CBDT'. '2. WHETHER THE LD. CIT(A), ON LAW, HAS ERRED IN D ELETING THE ADDITION OF RS. 1.81 CR. MADE BY THE AO IN VIEW OF PROVISIONS OF SECTION 9(L)(VII) AND SECTION 195(1) AND CIRCULA R NO. 7/2009 DT. 22-10-2009 OF CBDT'. 3. WHETHER THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, HAS ERRED IN DELETING TH E ADDITION OF RS. 1,02,48,572/- MADE BY THE AO IN VIEW OF PROV ISIONS OF SECTION 50-C AND SECTION 69A OF THE INCOME TAX ACT, 1961'. 4. WHETHER THE LD. CIT(A), ON LAW, HAS ERRED IN DE LETING THE ADDITION OF RS. 1, 02, 48, 572/- MADE BY THE AO IN VIEW OF PROVISIONS OF SECTION 50-C AND SECTION 69A OF THE I NCOME TAX ACT, 1961'. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY OF THE GROUND(S) OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL'. 3.0 THE LD. SR. DR SUBMITTED THAT GROUND NOS. 1 AND 2 CHALLENGE THE DELETION MADE BY THE LD. COMMISSIONER OF INCOME TAX (A) WITH RESPECT TO NON-DEDUCTION OF TAX AT SOU RCE ON COMMISSION PAID TO TWO FOREIGN ENTITIES NAMELY ANCA RE TRADE ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 8 CONSULTANTS AND M/S WHYNOT BUYING HOUSE SERVICES & OTHERS. IT WAS SUBMITTED THAT AS PER THE ASSESSEE ITSELF, N O TAX WAS DEDUCTED AT SOURCE IN RESPECT OF PAYMENT OF COMMISS ION OF RS. 78,74,229/- TO M/S ANCARE TRADE CONSULTANTS ON EXPO RT CONSIGNMENTS. SIMILARLY, NO TAX WAS DEDUCTED AT SO URCE ON ACCOUNT OF COMMISSION OF RS. 1,02,74,037/- PAID TO M/S WHYNOT BUYING HOUSE SERVICES & OTHERS. THE LD. SR. DR DRE W OUR ATTENTION TO THE OBSERVATIONS OF THE ASSESSING OFFI CER IN THIS REGARD AND SUBMITTED THAT THE ASSESSEE WAS NOT ABLE TO FURNISH ANY EVIDENCE/S IN RESPECT OF GENUINENESS OF COMMISS ION EXPENSES AS NO AGREEMENT/S OR DOCUMENT/S HAD BEEN F ILED CONTAINING TERMS AND CONDITIONS OF THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE TWO PARTIES. THE LD. SR. DR ALSO MADE REFERENCE TO SECTION 195(2) OF THE ACT AND SUBMITTE D THAT THE ASSESSEE HAD NOT MOVED ANY APPLICATION FOR NON-DEDU CTION OF TAX AT SOURCE IN THE CASE OF THESE TWO PARTIES. IT WAS ALSO SUBMITTED BY THE LD. SR. DR THAT THE FINAL DESTINAT ION OF THE REMITTANCES WAS NOT KNOWN. THE LD. SR. DR ALSO SUB MITTED THAT THE AGREEMENTS WERE LATER ADMITTED BY THE LD. COMMI SSIONER OF INCOME TAX (A) AS ADDITIONAL EVIDENCE WITHOUT OBTAI NING REMAND REPORT FROM THE ASSESSING OFFICER. RELIANCE WAS AL SO PLACED ON ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 9 CIRCULAR NO. 7 OF 2009 FOR THE PROPOSITION THAT COM MISSION WAS NOT DEDUCTIBLE IF REMITTANCES HAD BEEN MADE WITHOUT DEDUCTION OF TAX AT SOURCE. 3.1 WITH RESPECT TO DEPARTMENTS GROUND NOS. 3 AND 4 WHICH CHALLENGE THE DELETION OF ADDITION OF RS. 1,02,48,5 72/- U/S 50C R/W SECTION 69A OF THE ACT, THE LD. SR. DR PLACED R ELIANCE ON THE FINDINGS AND OBSERVATIONS AS CONTAINED IN THE ASSES SMENT ORDER AND VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER HA D RIGHTLY INVOKED PROVISIONS OF SECTION 69A. 4.0 IN RESPONSE, THE LD. AR SUBMITTED THAT THE PAYM ENT MADE TO M/S WHYNOT BUYING HOUSE SERVICES & OTHERS WAS IN THE NATURE OF DISCOUNT AND NOT COMMISSION. IT WAS SUBM ITTED THAT THE PAYMENT TO M/S WHYNOT BUYING HOUSE SERVICES & O THERS WAS NOT A PAYMENT OF COMMISSION BUT A DEDUCTION ON ACCOUNT OF DISCOUNT. SIMILARLY, WITH RESPECT TO THE OTHER PAR TY I.E. M/S ANCARE TRADE CONSULTANTS, IT WAS SUBMITTED THAT THI S PAYMENT WAS ALSO IN THE NATURE OF DISCOUNT AND NOT COMMISSI ON. THE LD. AR ALSO SUBMITTED THAT THE LEGAL COLOUR OF THE TRAN SACTION HAS TO BE SEEN AND NOT THE NOMENCLATURE. IN THIS REGARD, RELIANCE WAS PLACED ON JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 10 KEDARRNATH JUTE MFG. CO. LTD. VS. CIT (CENTRAL), CA LCUTTA REPORTED IN (1971) 82 ITR 363 (SC) WHEREIN IT HAS B EEN HELD THAT WHAT IS IMPORTANT IS THE TRUE NATURE OF THE TRANSAC TION AND NOT THE NOMENCLATURE UNDER WHICH THE TRANSACTION MAY BE CLASSIFIED. THE LD. AR SUBMITTED THAT ALTHOUGH THE NATURE OF PAYMENT WAS IN THE NATURE OF DISCOUNT, THE SAME HAD INCORRECTLY BEEN MENTIONED AS COMMISSION IN THE BOOKS OF ACCOUN TS. THE LD. AR ALSO PLACED ON RECORD COPY OF THE FIRC AND T O DEMONSTRATE THAT THE DEDUCTION WITH RESPECT TO THE DISCOUNT HAD ALREADY BEEN MADE ABROAD AND ONLY THE NET AMOUNT HA D BEEN REMITTED TO THE ASSESSEE COMPANY AND, THUS, IT WAS NOT A CASE OF PAYMENT BY THE ASSESSEE TO THE TWO PARTIES ON ACCOU NT OF COMMISSION BUT WAS A RECEIPT IN RESPECT OF PAYMENT FROM THE TWO PARTIES AFTER DEDUCTION OF DISCOUNT BY THE TWO PARTIES. 4.1 IN RESPECT TO THE OTHER ISSUE IN CHALLENGE BEFO RE US REGARDING DELETION OF ADDITION U/S 53 R/W 69A, LD. AR PLACED RELIANCE ON THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A) AND VEHEMENTLY SUPPORTED HIS ORDER AND ARGUE D THAT THE DELETION HAD BEEN RIGHTLY MADE. ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 11 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE FIRST I SSUE I.E. DELETION OF ADDITION MADE U/S 195 OF THE ACT IS CONCERNED, I T IS SEEN THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAS STATED I N THE IMPUGNED ORDER THAT THE ASSESSEE HAS BROUGHT ON REC ORD DETAILS PERTAINING TO THE COMMISSION PAID, REBATE AND DISCO UNT, COPY OF BILLS, FIRCS ISSUED BY THE BANKS, AGREEMENT WITH TH E FOREIGN AGENT AS EVIDENCE IN SUPPORT OF SUBMISSIONS ETC. T HE LD. COMMISSIONER OF INCOME TAX (A) HAS DELETED THE ADDI TION IN THIS RESPECT BY OBSERVING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE COMMISSION EXPENSES BY HOLDING T HE EXPENSES AS NOT GENUINE. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ALSO OBSERVED THAT TAX IS NOT LIABLE TO BE DEDUCTED WITH RESPECT TO PAYMENTS WHICH IS PAID TO NON-RESIDENTS PARTICUL ARLY WHEN THE SERVICES WERE RENDERED OUTSIDE INDIA, USED OUTS IDE INDIA AND THE PAYMENTS WERE MADE OUTSIDE INDIA IN THE ABSENCE OF A PERMANENT ESTABLISHMENT IN INDIA. THE LD. COMMISSI ONER OF INCOME TAX (A) WENT ON TO HOLD THAT SINCE THE IMPUG NED INCOME IN THE HANDS OF THE NON-RESIDENT DID NOT ACCRUE OR ARISE DIRECTLY OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECT ION IN INDIA OR THROUGH THE TRANSFER OF CAPITAL ASSET SITUATED I N INDIA, THE ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 12 PROVISIONS OF SECTION 9(1) WERE NOT APPLICABLE ON T HE FACTS OF THE CASE. HOWEVER, A PERUSAL OF THE IMPUGNED ORDER AS WELL ASSESSMENT ORDER SHOWS THAT ALTHOUGH THE RELEVANT D ETAILS IN RESPECT OF THE IMPUGNED ADDITION WERE NOT FILED BEF ORE THE ASSESSING OFFICER, THE LD. COMMISSIONER OF INCOME T AX (A) HAS ADMITTED THE DETAILS SUBMITTED BEFORE HIM IN TERMS OF THE COPY OF BILLS, FIRCS ISSUED BY THE BANK, AGREEMENT WITH THE FOREIGN AGENTS ETC. ALTHOUGH IT HAS NOT BEEN SPECIFICALLY MENTIONED IN THE IMPUGNED ORDER THAT THE SAME WERE BEING ADMITTE D AS ADDITIONAL EVIDENCE BY THE LD. COMMISSIONER OF INCO ME TAX (A), IT IS APPARENT THAT THESE DOCUMENTS/DETAILS WERE NO T FIELD BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE LD. C OMMISSIONER OF INCOME TAX (A) ADMITTED THESE EVIDENCES DURING T HE COURSE OF FIRST APPELLATE PROCEEDINGS BEFORE HIM WITHOUT CALL ING FOR A REMAND REPORT FROM THE ASSESSING OFFICER IN THIS RE GARD. THEREFORE, WITHOUT GOING INTO THE MERITS OF THE DEL ETION OF ADDITION BY THE LD. COMMISSIONER OF INCOME TAX (A), ON THE BASIS OF FACTUAL MATRIX AS APPEARING FROM THE ORDER S OF BOTH THE LOWER AUTHORITIES, IT IS APPARENT THAT THE LD. COMM ISSIONER OF INCOME TAX (A) DID NOT RESORT TO THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 1962 WHILE ADMITTING THESE ADDITI ONAL ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 13 EVIDENCES WHICH WERE PLACED FOR THE FIRST TIME BEFO RE HIM AND WE ARE IN AGREEMENT WITH THE LD. SR. DR TO THIS EXTENT THAT THE ASSESSING OFFICER SHOULD HAVE BEEN GIVEN AN OPPORTU NITY TO EXAMINE THE DOCUMENTS WHICH WERE SUBMITTED AT THE F IRST APPELLATE STAGE. FURTHER, DURING THE COURSE OF ARGU MENTS BEFORE US, IT HAS BEEN ARGUED BY THE LD. AR THAT THE NATUR E OF IMPUGNED PAYMENT/S WAS NOT COMMISSION BUT WAS DISCO UNT AND THIS PLEA HAS BEEN ADVANCED BEFORE US FOR THE F IRST TIME. THE LOWER AUTHORITIES DID NOT HAVE ANY OCCASION TO CONSIDER THIS PLEA OF THE ASSESSEE. THEREFORE, IT IS OUR CONSIDE RED OPINION THAT IN THE INTEREST OF JUSTICE, THIS ISSUE SHOULD BE RE STORED TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (A) WITH THE DIRECTION TO ADJUDICATE THE ISSUE DE NOVO AFTER PROPERLY FOLLOWING THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 196 2 AND ALSO AFTER GIVING A PROPER OPPORTUNITY TO THE ASSESSEE T O PRESENT ITS CASE ON THE ISSUE. IT IS SO DIRECTED ACCORDINGLY. ACCORDINGLY, GROUND NOS. 1 AND 2 STAND ALLOWED FOR STATISTICAL P URPOSES. 5.1 AS FAR AS THE SECOND ISSUE BEING CHALLENGED BEF ORE US I.E. DELETION OF ADDITION ON ACCOUNT OF DIFFERENCE IN VA LUATION OF PROPERTY U/S 50C OF THE ACT IS CONCERNED, IT IS SEE N THAT THE ASSESSEE IS THE PURCHASER OF INDUSTRIAL PREMISES AT 666, SECTOR ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 14 37-II-(PACE CITY), GURGAON, FOR A CONSIDERATION OF RS. 3,91,00,000/-. THE STAMP DUTY WAS PURCHASED ON A VA LUE OF RS. 4,93,48,950/- WHICH WAS THE VALUE DETERMINED FOR TH E PURPOSE OF STAMP DUTY ON THE BASIS OF CIRCLE RATES PREVAILI NG AT THE TIME OF EXECUTION OF THE SALE DEED. THE ASSESSING OFFIC ER HAS INVOKED PROVISIONS OF SECTION 50C OF THE ACT AND HAS PROCEE DED TO TAX THE DIFFERENCE BETWEEN THE SALE PRICE PAID AND THE VALUE FOR THE PURPOSE OF STAMP DUTY AS UNDISCLOSED INVESTMENT U/S 69A OF THE ACT. THE MEMORANDUM EXPLAINING THE PROVISIONS OF SECTION 50C IN THE FINANCE BILL, 2002 CLEARLY STATES THAT W HERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING A S A RESULT OF TRANSFER OF LAND OR BUILDING OR BOTH IS LESS THAN T HE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOV ERNMENT FOR THE PURPOSES OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAI NS SHALL BE COMPUTED ACCORDINGLY. HOWEVER, IT IS A SETTLED LAW THAT SECTION 50C APPLIES TO CASES WHERE A PROPERTY HAS BEEN SOLD . IN CASE OF ACQUISITION OF IMMOVEABLE PROPERTY AT A VALUE LESS THAN THE VALUE ADOPTED FOR THE PURPOSE OF STAMP DUTY, THE DI FFERENCE BETWEEN STAMP DUTY VALUE AND THE TRANSACTION VALUE CAN AT BEST ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 15 BE TAXED UNDER PROVISIONS OF SECTION 56(2)(VII) OF THE ACT WHICH, ANY WAY IS NOT ATTRACTED IN THE CASE OF THE ASSESSE E AS THE ASSESSEE IS A PARTNERSHIP FIRM. SECTION 50C CREATE S A LEGAL FICTION WHEREBY APPARENT CONSIDERATION IS SUBSTITUT ED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND C APITAL GAINS ARE CALCULATED ACCORDINGLY. BUT LEGAL FICTION CANN OT BE EXTENDED ANY FURTHER SO AS TO TAKE WITHIN ITS AMBIT THE CASE OF A PURCHASER WHERE IT IS ALLEGED THAT THE PURCHASER HA D PAID A PRICE LESS THAN THE VALUE AS ADOPTED FOR THE STAMP DUTY PURPOSES. A PERUSAL OF THE ASSESSMENT ORDER ALSO S HOWS THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE PRICE PA ID BY THE ASSESSEE AND HAS NOT MADE ANY OBSERVATIONS THAT THE CONSIDERATION AS REFLECTED IN THE BOOKS OF ACCOUNTS WAS LESS THAN WHAT WAS ACTUALLY PAID BY THE ASSESSEE OR WHAT WAS RECORDED IN THE SALE DEED. ITAT AHMEDABAD BENCH HA D AN OCCASION TO CONSIDER AN IDENTICAL ISSUE IN THE CASE OF ITO VS. HARLEY STREET PHARMACEUTICALS LTD. REPORTED IN (201 0) 38 SOT 0486. THE RELEVANT OBSERVATIONS OF THE ITAT AHMEDA BAD BENCH ARE REPRODUCED HEREUNDER FOR A READY REFERENCE:- WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF S. 50C IN THE FINANCE BILL, D02, W HICH CLEARLY STATES THAT WHERE THE CONSIDERATION DECLARE D TO BE ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 16 RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAN D OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURP OSES OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS SHALL BE COMPUTED, ACCORDINGLY, UNDER S. 48 OF THE ACT. IN C ASE THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES I S REVISED IN ANY APPEAL, REVISION OR REFERENCE, THE ASSESSMENT MADE SHALL BE AMENDED TO RECOMPUTE THE CAPITAL GAINS BY TAKING THE REVISED VALUE AS THE FU LL VALUE OF CONSIDERATION. ACCORDINGLY, WE ARE OF THE VIEW T HAT THE PROVISIONS OF S. 50C ARE APPLICABLE ONLY FOR THE COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANSAC TION IN RESPECT TO SELLER ONLY AND NOT FOR THE PURCHASER. W E FIND FROM S. 50C OF THE ACT THAT IT CREATES A LEGAL FICT ION THEREBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED, ACCORDINGLY. LEGAL FICTION CANNOT BE EX TENDED ANY FURTHER AND HAS TO BE LIMITED TO THE AREA FOR W HICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN THE C ASE OF ADDL CIT VS. P. DURGAMMA (1987) 64 CTR (AP) 304 : ( 1987) 166 ITR 776 (AP) HELD THAT IT IS NOT POSSIBLE TO EX TEND THE FICTION BEYOND THE FIELD LEGITIMATELY INTENDED BY T HE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PRO VISIONS OF S. 171(1) OF THE IT ACT IN THE CONTEXT OF WHICH IT WAS HELD THAT JOINT FAMILY SHALL BE DEEMED TO CONTINUE FOR T HE LIMITED PURPOSE OF ASSESSING CASES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSSIBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY THE HON'BLE KERALA HIGH COURT IN CIT VS. KAR VALVES LTD . (1987) 66 CTR (KER) 7 : (1987) 168 ITR 416 (KER), W HEREIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PUR POSE FOR WHICH THEY ARE CREATED AND COULD NOT BE EXTENDED BE YOND THAT LEGITIMATE FRAME, HON'BLE KERALA HIGH COURT WA S DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF S. 41(2) BY SUBMITTING THAT IF LIABILI TIES ARE NOT LIQUIDATED AND OUTSTANDING ARE NOT COLLECTED, T HEN BUSINESS COULD BE DEEMED TO CONTINUE. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CED VS. KRISHNA KUMARI DEVI (1987) 66 CTR (ALL) 80 : (1988) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION T HE COURT ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 17 SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREAT ED AND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL T O GIVE EFFECT TO THE FICTION, HON'BLE SUPREME COURT IN CIT VS. MOTHER INDIA REFRIGERATION INDUSTRIES (P) LTD. (198 5) 48 CTR (SC) 176 : (1985) 155 ITR 711 (SC) HELD THAT LE GAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CIT VS. B HARANI PICTURES (1981) 129 ITR 244 : (MAD), IT IS HELD THA T LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT B E EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATUTORY FICTION INTRODUCED IN ONE ENACTMENT CANNOT BE INCORPORATED IN ANOTHER ENACTMENT. THE POINT THAT LEGAL FICTION CAN NOT BE EXTENDED TO A NEW FIELD WAS HIGHLIGHTED BY HON'BLE MADRAS HIGH COURT IN CIT VS. T.S. RAJAM (1980) 125 ITR 207 (MAD) WHEREIN IT IS HELD THAT S. 41(2) CREATES A LEGAL FICTION UNDER WHICH THE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WHEN THIS AMO UNT IS DISTRIBUTED TO SHAREHOLDERS THEN IT WOULD NOT BE COME DEEMED DIVIDEND AND IT WOULD BE ONLY A CAPITAL RECE IPT AND NOT DISTRIBUTION OF ACCUMULATED PROFITS. THUS, A LEGAL FICTION WAS INVOKED IN THE HANDS OF THE ASSESSEE CO MPANY AND WAS NOT EXTENDED IN THE HANDS OF THE SHAREHOLDE RS. IN THE PRESENT CASE, S. 50C CREATES A LEGAL FICTION FO R TAXING CAPITAL GAINS IN THE HANDS OF THE SELLER AND IT CAN NOT BE EXTENDED FOR TAXING THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTMENT U'DER S. 69. IN FACT, S. 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS NCOME IF IT IS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICTION FROM ELSEWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF S. 69. IT IS FOR THE LEGISLATURE TO OTRODU CE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS O R EXPENDITURE WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPO SE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UNDERSTATING APPARENT SALE CONSIDERATION AS COMPARE D TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES F OR THE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE S. 50C FOR SUBSTITUTING APPA RENT ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 18 SALE CONSIDERATION BY VALUATION DONE BY STAMP VALUA TION AUTHORITIES. THIS FICTION CANNOT BE EXTENDED ANY FU RTHER AND, THEREFORE, CANNOT BE INVOKED BY AO TO TAX THE DIFFERENCE IN THE HANDS OF THE PURCHASER. HON'BLE M ADRAS HIGH COURT IN CGT VS. R. DAMODARAN (2001) 247 ITR 6 98 (MAD) HELD THAT STAMP VALUATION AUTHORITIES HAVE TH EIR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAU SE FOR THE PURPOSE OF STAMP DUTY, PROPERTY IS VALUED AT HI GHER COST, IT CANNOT BE SAID THAT ASSESSEE HAS MADE MORE PAYMENT THAN WHAT IS STATED IN THE SALE DEED. THE H ON'BLE ALLAHABAD HIGH COURT IN DINESH KUMAR MITTAL VS. ITO & ORS. (1992) 193 ITR 770 (ALL) QUASHED THE ORDER OF AUTHORITIES BELOW, WHEREIN HALF OF THE DIFFERENCE B ETWEEN THE AMOUNT PAID AND THE VALUE FOR PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY THE AO. IT I S HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALUE DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE AC TUAL CONSIDERATION PASSED BETWEEN THE PARTIES TO THE SAL E. IN THE PRESENT CASE, THE AO HAS APPLIED THIS PROVISION OF S. 50C FOR THE COMPUTATION OF UNEXPLAINED INVESTMENT U NDER S. 69B OF THE ACT AND WHICH IS NOT PERMISSIBLE UNDE R THE ACT. APART FROM THE STAMP DUTY VALUATION, THERE IS NOTHING ON RECORD WHICH SUGGESTS THAT THE REVENUE HAS PROVE D THAT THE ASSESSEE HAS ACCEPTED OVER AND ABOVE, WHAT HAS BEEN RECORDED AS PURCHASE CONSIDERATION OF THE LAND IN THE INSTRUMENT, I.E., THE SALE DEED. WE ARE IN FULL AGR EEMENT WITH THE ARGUMENTS OF THE ASSESSEE THAT S. 50C IS N OT APPLICABLE IN THE CASE OF PURCHASER AND THIS PROVIS ION BEING A DEEMING PROVISION WILL APPLY FOR DETERMININ G THE FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER OF CAPITAL ASSETS FOR THE PURPOSES OF COMPUTATION OF CAPITAL G AINS UNDER S. 48 OF THE ACT. WE FURTHER FIND THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CONSIDERATION O VER AND ABOVE, WHAT HAS BEEN RECORDED IN THE SALE DEED, HAS BEEN MADE BY THE ASSESSEE AND IN THE ABSENCE OF THE SAME , NO ADDITION OF UNDISCLOSED INVESTMENT CAN BE MADE BY INVOKING THE PROVISION OF S. 69B OF THE ACT. ACCORD INGLY, WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION A ND THIS ISSUE OF THE REVENUE'S APPEAL IS DISMISSED. ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 19 5.2 THE LD. CIT (A) HAS ALSO PLACED RELIANCE ON THE ORDER OF THE ITAT AHMEDABAD BENCH WHILE ALLOWING THE ASSESSEES APPEAL. THE LD. SR. DR COULD NOT POINT OUT ANY JUDICIAL PRE CEDENT CONTRARY TO WHAT HAS BEEN LAID DOWN BY THE AHMEDABA D BENCH OF THE ITAT. THEREFORE, WE FIND NO REASON TO INTER FERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND WE DISMI SS GROUND NOS. 3 AND 4 RAISED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2018. SD/- SD/- (N.K.BILLAIYA) (SUDHANSHU SRIVAS TAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH SEPTEMBER, 2018 GS COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASSTT. REGISTRAR ITA NO. 2785/DEL/2015 ASSESSMENT YEAR 2011-12 20 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER