ACIT, New Delhi V. Smt Devika Bhagat, New Delhi

ITA 300/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53428 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKARDR
• Assessee Lawyers: PRAKASH NARAIN
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Business income; Fair market value; Capital receipt
• Section: 50C; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI B BENCH BEFORE SHRI A.D.JAIN, JM & SHRI A.N. PAHUJA, AM ITA NO. 300 /D/201 1 ASSESSMENT YEAR:2007-08 ACIT,CIRCLE 32 (1), ROOM NO. 376A,CR BUILDING,IP ESTATE, NEW DELHI. V/S . SMT. DEVIKA BHAGAT, C-136,DEFENCE COLONY, NEW DELHI . [PAN: AAEPB 6996M] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI PRAKASH NARAIN, AR REVENUE BY MS. Y .KAKKAR,DR DATE OF HEARING 15-12-2011 DATE OF PRONOUNCEMENT 15-12-2011 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 18 JANUARY, 2011 BY THE REVENUE AGAINST AN ORDER DATED 27 TH OCTOBER, 2010 OF THE LEARNED CIT(A)-XXVI, NEW DELHI, RAISES THE FOLLOWING GROUNDS:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT (A) HAD ERRED IN DELETING THE ADDITION OF ` 12,55,444/- MADE BY THE A.O. BEING THE UNEXPLAINED INVESTMENT IN THE PROPERTY AS PER T HE PROVISIONS OF SECTION 69B OF THE INCOME-TAX ACT, 1961. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE RETU RN DECLARING INCOME OF ` 25,46,173/- FILED ON 30.7.2007 BY THE ASSESSEE ,AFT ER BEING PROCESSED ON 20.2.2008 U/S 143(1) OF THE INCOME-TAX ACT,1961[HER EINAFTER REFERRED TO AS THE ACT] WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT I.T.A. NO.300/D/2011 2 ON 20.2.2008.DURING THE COURSE OF ASSESSMENT PROCEE DINGS,THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE ALON G WITH HER SISTER MS BHAWNA BHAGAT JOINTLY PURCHASED FLATS NOS.1103, 1104, 1203 AND 1204 IN SKY PAN CHS, OBEROI COMPLEX, OFF NEW LINK ROAD, ANDHERI (WEST), MUMBAI, FOR A CONSIDERATION OF ` ` 1,20,00,000/-. ON EXAMINATION OF THE PURCHASE AGRE EMENT, THE AO OBSERVED THAT THE ASSESSEE PAID STAMP DUTY P AID OF ` ` 7,72,540/- AND THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY F OR THE PURPOSE OF REGISTRATION OF PROPERTY WAS ` ` 1,45,10,888/-. THE AO INVOKED THE PROVISIONS OF S ECTION 50C OF THE ACT AND AND MADE AN ADDITION OF ` ` 12,55,444/- (HALF SHARE ) AS UNDISCLOSED INVESTMENT IN THE PROPERTY U/S 69-B OF THE ACT. 3. ON APPEAL, THE LD.CIT (A) DELETED THE ADDITION F OLLOWING THE DECISIONS IN CIT VS. CHANDNI BHOCHAR (2010) 323 ITR 510 (P & H),ITO VS. FITWELL LOGIC SYSTEM PVT. LTD. 1 ITR (TRIB) 286 (DEL) AND KAUSHIK SURESH BHAI VS. ITO IN ITA NOS.3374-3380/AHMEDABAD/2009, DECISION DATED 23 RD APRIL, 2010. IN ALL THESE DECISIONS, IT WAS HELD THAT SIMPLY ON ACCOUNT OF TH E FACT THAT STAMP DUTY VALUATION OF PROPERTY WAS ON HIGHER AMOUNT, NO ADDITION CAN B E MADE IN THE HANDS OF THE PURCHASER IN THE ABSENCE OF ANY OTHER EVIDENCE. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED ON DECISION DATED 21.10.2011 IN THE CASE OF CO-OWNER MS. BHAWNA BHAGAT IN ITA NO.299/DEL./2011, WHEREIN IT W AS HELD AS UNDER: 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMI SSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. NO MATERIAL HAS BEEN BR OUGHT ON RECORD BY THE ASSESSING OFFICER TO SUGGEST THAT THE ASSESSEE IN F ACT HAD PAID ANY EXTRA AMOUNT THAN THE TOTAL CONSIDERATION DESCRIBED IN THE SALE DEED COPY OF WHICH HAS BEEN PLACED ON RECORD WHICH IS DATED 25 TH AUGUST, 2006. IN THE ABSENCE OF ANY SUCH MATERIAL, ACCORDING TO THE AFOREMENTIONED JUDICIAL PRONOUNCEMENTS, WE FIND NO INFIRMITY IN THE ORDER OF CIT (A) VIDE WHICH THE IM PUGNED ADDITION HAS BEEN DELETED. WE DECLINE TO INTERFERE AND THE DEPARTMEN TAL APPEAL IS DISMISSED. I.T.A. NO.300/D/2011 3 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. WE FIND THAT THE AO MADE THE ADDITION ONL Y ON THE BASIS OF VALUATION OF THE PROPERTY MADE BY THE STAMP DUTY V ALUATION AUTHORITIES WITHOUT BRINGING ANY MATERIAL ON RECOR D THAT THE VALUE DETERMINED FOR THE PURPOSES OF STAMP DUTY WAS THE ACTUAL CONSIDERATION PASSED BETWEEN THE PARTIES TO THE SALE. WE FIND THAT A CO-ORDINATE BENCH OF THE ITAT IN A DECISION DATED 29.08.2008 IN THE CASE OF BHARATKUMAR N PATEL VS ACIT, CIRCLE- .3, SURAT IN ITA NO.1749/AHD/2008 WHILE ADJUDICATING A SIMILAR ISS UE HELD IN THE FOLLOWING TERMS: 10. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMIS SIONS, FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF LAW AS WEL L AS DECISION(S) OF HONBLE SUPREME COURT AND VARIOUS BENCHES RELIED UPON BY THE PARTIES, WE ARE OF THE OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION BY DRAWING THE ANALOGICAL P ROVISIONS OF SECTION 50-C OF THE ACT. THE CIT(APPEALS) CONFIRME D THE ADDITION BY OBSERVING THAT IF THIS PROPOSITION TO BE ACCEPTED, THEN THE DEEMING PROVISIONS OF SECTION 50-C OF THE ACT WILL BECOME I NOPERABLE. HE, FURTHER HELD THAT SECTION 50-C OF THE ACT IS APPLIC ABLE TO THE SELLER AND PROVIDES THAT THE VALUATION MADE BY THE STAMP V ALUATION AUTHORITY IS TO BE DEEMED AS THE CONSIDERATION RECE IVED BY THE SELLER. HAVING SAID SO, THE CIT (APPEALS) FURTHER HELD THAT THE CONVERSE WILL ALSO HAVE TO BE ACCEPTED AS TRUE, I.E . THE VALUATION OF STAMP VALUATION AUTHORITY WILL HAVE TO BE DEEMED AS THE CONSIDERATION PAID BY THE PURCHASER OF THE PROPERTY AS WELL. 10.1 WE ARE UNABLE TO AGREE WITH THE AFORESAID ANAL OGY DRAWN BY THE CIT(APPEALS) BECAUSE HAD THE LEGISLATURE INTEND ED SO, IT COULD HAVE EASILY SPECIFIED SUCH A PROPOSITION IN THE PRO VISION ITSELF. 11. IN VIEW OF THE SETTLED PROPOSITION OF LAW THAT THE APPELLATE AUTHORITY HAS NO RIGHT EITHER TO ADD OR TO DELETE A NY WORD FROM THE PROVISIONS OF LAW UNLESS AND UNTIL THE SAME ARE FOU ND TO BE HAVING SOME AMBIGUITY, WE ARE UNABLE TO SUSTAIN THE STAND OF THE CIT(APPEALS), THERE BEING NO AMBIGUITY IN THE SECTI ON 50-C OF THE ACT, WE ARE OF THE OPINION THAT THESE PROVISIONS AR E NOT APPLICABLE TO BE PURCHASER. 5.1 ANOTHER CO-ORDINATE BENCH OF THE ITAT IN T HEIR DECISION DATED 24.7.2009 IN THE CASE OF JALARAM AND CO. IN ITA I.T.A. NO.300/D/2011 4 NO.3964/AHD/2008 WHILE ADJUDICATING A SIMILAR ISSUE , CONCLUDED AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ONLY ISSUE INVOLVED IS WHE THER DIFFERENCE BETWEEN APPARENT CONSIDERATION RECORDED IN THE TRAN SFER DEED AND VALUATION DONE BY THE STAMP VALUATION AUTHORITIES F OR LEVYING STAMP DUTY CAN BE TREATED AS UNDISCLOSED INVESTMENT TO BE TAXED U/S 69. IN OUR CONSIDERED VIEW, THIS PRESUMPTION RAISED BY THE ASSESSING OFFICER AND CIT(A) CANNOT BE LEGALLY SUSTAINED. SEC TION 50C CREATES A LEGAL FICTION THEREBY APPARENT CONSIDERATION IS S UBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITI ES AND CAPITAL GAINS ARE CALCULATED ACCORDINGLY. LEGAL FICTION CAN NOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITED TO THE AREA FOR W HICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN ADDL. CIT V. D URGAMMA P. (1987) 167 1TR 776 (AP) HELD THAT IT IS NOT POSSIBL E TO EXTEND THE FICTION BEYOND THE FIELD LEGITIMATELY INTENDED BY T HE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PROVISIONS OF SEC. 171(1) OF THE I.T.ACT IN THE CONTEXT OF WHICH IT WAS HELD THAT JO INT FAMILY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSE SSING CASES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSSIBLE TO EXTEND THAT FICTION TO OTHER CASES. SIM ILAR VIEW WAS TAKEN BY THE HON'BLE KERLA HIGH COURT IN CIT V. KAR VALVE S LTD. (1987) 168 ITR 416 (KER.) WHEREIN IT IS HELD THAT LEGAL FI CTION IS LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND COULD NO T BE EXTENDED BEYOND THAT LEGITIMATE FRAME, HON'BLE KERALA HIGH C OURT WAS DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANT AGE OF SEC.41(2) BY SUBMITTING THAT IF LIABILITIES ARE NOT LIQUIDATED AND OUTSTANDINGS ARE NOT COLLECTED, THEN BU SINESS COULD BE DEEMED TO CONTINUE. HON'BLE ALLAHABAD HIGH COURT IN CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (19 88) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION T HE COURT SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREATED AND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT T O THE FICTION. HON'BLE SUPREME COURT IN CIT V. MOTHER INDIA REFRIG ERATION PVT. LTD. (1985) 155 ITR 711 (SC) HELD THAT LEGAL FICTIONS A RE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO T HAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CIT V, BHARANI PICTURES (1981) 129 ITR 244 (MAD,) IT IS HE LD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. STATUTORY FICTION INTRODUCED IN ONE ENACTMENT CANNOT BE INCORPORATED IN OTHER ACT. THE POINT THAT LEGAL FICTION CANNOT BE EXTENDED TO A NEW FIELD WAS HIGHLIGHTED B Y HON'BLE MADRAS HIGH COURT IN CIT V. RAJAM T.S, (1988) 125 ITR 207(MAD,) WHEREIN IT IS HELD THAT SECTION 41(2) CRE ATES A LEGAL I.T.A. NO.300/D/2011 5 FICTION UNDER WHICH THE BALANCING CHARGE IS TR EATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WHEN THIS AMOUNT IS DISTRIBUTED TO SHAREHOLDERS THEN IT WOULD NOT BECOME DEEMED DIVIDE ND AND IT WOULD BE ONLY A CAPITAL RECEIPT AND NOT DISTRIBUTIO N OF ACCUMULATED PROFITS. THUS, A LEGAL FICTION WAS INVOKED IN THE H ANDS OF THE ASSESSEE COMPANY AND WAS NOT EXTENDED IN THE HANDS OF THE SHAREHOLDERS. 7. IN THE PRESENT CASE, SECTION 50C CREATES A LEGAL FICTION FOR TAXING CAPITAL GAINS IN THE HANDS OF THE SELLER AND IT CANNOT BE EXTENDED FOR TAXING THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES A S UNDISCLOSED INVESTMENT U/S 69. IN FACT, SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS INCOME IF IT IS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICT ION FROM ELSEWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF SECTION 69. IT IS FOR THE LEGISLATURE TO INTRODUCE LEGAL FICTION TO O VERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR EXPENDITURE WHICH OTHERW ISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVA SION BY UNDERSTATING APPARENT SALE CONSIDERATION AS COMPARE D TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES FOR T HE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SALE CONSIDER ATION BY VALUATION DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION C ANNOT BE EXTENDED ANY FURTHER AND, THEREFORE, CANNOT BE INVO KED BY ASSESSING OFFICER TO TAX THE DIFFERENCE IN THE HAND S OF THE PURCHASER. 8. HON'BLE MADRAS HIGH COURT IN CGT V, R. DAM ODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHORITIES HAVE THEIR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE FOR THE PURPOSE OF STAMP DUTY, PROPERTY IS VALUED AT HIGHER COST, I T CANNOT BE SAID THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT I S STATED IN THE SALE DEED. HON'BLE ALLAHABAD HIGH COURT IN DINESH KURNAR MITTAL V. ITO (1992) 193 ITR 770 (ALL.) QUASHED THE ORDER OF AUTHORITIES BELOW, WHEREIN HALF OF THE DIF FERENCE BETWEEN THE AMOUNT PAID AND THE VALUE FOR PURPOSES OF STAMP DUT Y WAS ADDED AS INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALU E DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUAL CO NSIDERATION PASSED BETWEEN THE PARTIES TO THE SALE, I,TAT, SMC AHMEDABAD IN ITA NO. 4120/AHD/2003 IN NISNABEN AMINBHAI MITH ANI DELETED THE ADDITION MADE U/S 69 ON ACCOUNT OF DIFFERENCE B ETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AFTER FOLLOWING VARIOUS AUTHORITIES AS REFERRED TO AS ABOVE. I.T.A. NO.300/D/2011 6 AS A RESULT, WE DELETE THE ADDITION AND ALLOW THE A PPEAL OF THE ASSESSEE. 5.2 SIMILAR VIEW WAS TAKEN IN THEIR DECISIONS IN RICHA NARESH JAIN VS. ITO,ITA NO.3997/ AHD./ 2008 AS ALSO IN THE DECISION DATED 11.12.2009 IN THE CASE OF ITO VS. SMT. KUSUM GILAN I IN ITA NO. 1576/DEL./2008 AND ITO VS. OPTEC DISC MANUFACTURIN G, 11 DTR (CHD)(TRIB) 264. MOREOVER, HON'BLE RAJASTHAN HIGH C OURT IN THEIR DECISION IN THE CASE OF CIT VS. KRISHAN KUMAR & OTH ERS, 315 ITR 204(RAJ), HELD THAT IT BECOMES A PURE QUESTION OF FACT, AS TO WHETHER THE CONSIDERATION SHOWN IN THE DOCUMENT OF CONVEYANCE, IS THE ACTUAL AMOUNT PAID BY WAY OF CONSIDERATION, TO BE TAKEN TO BE UNDISCLOSED INCOME OF THE ASSESSEE, OR IT IS A DEFL ATED FIGURE, AND THEREFORE, ADDITION IS REQUIRED TO BE MADE. IF IT I S TAKEN TO BE DEFLATED FIGURE, THEN IT IS FOR THE DEPARTMENT TO L EAD POSITIVE EVIDENCE, ABOUT THE FAIR MARKET VALUE OF THE PROPER TY, AND FURTHER TO SHOW, THAT THE PROPERTY WAS UNDERVALUED IN THE DOCU MENT OF SALE, BEFORE MAKING ANY ADDITION IN THE INCOME, ON THAT COUNT. 5.3 AS OBSERVED BY THE HONBLE APEX COURT IN CIT V S. MOTHER INDIA REFRIGERATION INDUSTRIES PVT. LTD. ,155 ITR 711(SC) WHILE REFERRING TO THEIR DECISION IN BENGAL IMMUNITY COMPANY LIMITED V . STATE OF BIHAR [1955] 2 SCR 603, 606 ; 6 STC 446, IT IS WELL SETTL ED THAT THE LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THESE MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTEND ED BEYOND THAT LEGITIMATE FIELD. PROVISIONS OF SEC. 50C FALLING UN DER THE CHAPTER CAPITAL GAINS WERE ENACTED WITH A SPECIFIC PURPO SE OF DETERMINING THE FULL VALUE OF CONSIDERATION IN CASE OF TRANSFER OF IMMOVABLE PROPERTY FOR THE PURPOSE OF SEC. 48 OF THE ACT. IN THE ABSENCE OF ANY EVIDENCE THAT THE ASSESSEE PAID CONSIDERATION HIG HER THAN STATED IN THE PURCHASE DEED , PROVISIONS OF SEC. 50C CAN NOT BE EXTENDED WHILE MAKING ADDITIONS U/S 69B OF THE ACT. I.T.A. NO.300/D/2011 7 5.4 ADMITTEDLY, IN THE PRESENT CASE, APART FROM RELYING UPON THE RATES ADOPTED BY STAMP VALUATION AUTHORITY, THERE I S NO OTHER MATERIAL TO SUPPORT THE ADDITION. IN OUR OPINION, R ATES ADOPTED BY STAMP VALUATION AUTHORITY CANNOT BE TAKEN, BY ITSEL F, AS THE PRICE, FOR WHICH THE PROPERTY WAS PURCHASED. IN VIEW THER EOF AND IN THE LIGHT OF AFORESAID DECISIONS OF THE ITAT AND OF THE HONBLE RAJASTHAN HIGH COURT, WE HAVE NO ALTERNATIVE BUT TO UPHOLD TH E FINDINGS OF THE LD. CIT(APPEALS) . THEREFORE, GROUND RAISED IN TH E APPEAL OF THE REVENUE IS DISMISSED. 6.. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (A.D.JAIN) (A.N. PAHUJA ) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO :- 1. SMT. DEVIKA BHAGAT,C-136,DEFENCE COLONY,NEW DELH I . 2. ACIT,CIRCLE 32 (1), ROOM NO. 376A,CR BUILDING,IP ESTATE,NEW DELHI.. 3. CIT (APPEALS)-XXVI, NEW DELHI 4. THE CIT CONCERNED. 5. THE DR, ITAT,B BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI