Shri Kartik Amratlal Makwana, Surat V. The Income tax Officer,Ward-3(2), Surat

ITA 3703/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8806 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: J P SHAH
• Keywords: Reopening of assessment; Unexplained investment; Sale consideration of property below Jantri Value; Business income; Difference of opinion; Capital receipt; Reason to believe; Change of opinion; Capital Gains
• Section: 143(3); 50C; 41(2); 264; 69; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A, AHMEDABAD BEFORE SHRI BHAVNESH SAINI,JM & SHRI A.N. PAHUJA, A M ITA NO.3703/AHD/2007 (ASSESSMENT YEAR 2004-05) SHRI KARTIK AMRATLAL MAKWANA VS ITO, WARD.-3(2) 11, RIVERA ROW HOUSE AAYAKAR BHAVAN OPP SARITA SAGAR SANKUL MAJURA GATE,SURAT NEAR SARDAR BRIDGE ADAJAN, SURAT [PAN : ABTPM4210G] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JP SHAH, AR REVENUE BY : SHRI GOVIND SINGHAL, DR O R D E R A.N. PAHUJA : THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 13-07-2007 OF THE LD.CIT(A)-II, SURAT ,RAISES FOLLOWING GROUND S: 1. THE REASSESSMENT IS BAD IN LAW BECAUSE 147 NOTI CE DATED 25.1.2006 WAS GIVEN WHEN SECTION 139 RETURN DATED 10.12.2004 WAS PENDING AND ASSESSMENT COULD HAVE BE EN DONE UPTO 31.3.2006. THEREFORE, 147 RETURN AND THE ASSESSMENT ARE BOTH BAD IN LAW. ALL THE FOLLOWING GROUNDS ARE WITHOUT PREJUDICE TO ABOVE GROUND. 2(I) THE CIT(A) ERRED IN UPHOLDING THE ALLOWANCE OF ONLY 30% OF THE ACTUAL EXPENDITURE OF RS. 3,78,164/- AND THUS D ISALLOWING RS.2,42,194/- FROM THE SAME AS MADE BY THE AO. 2(II) THE CIT(A) FAILED TO APPRECIATE THAT BECAUSE OF THE FLOODS IN SURAT IN AUGUST, 2006, SOME OF THE BILLS AND VOUCHE RS CAME TO BE DESTROYED AND THE BOOKS LYING IN OFFICE OF TH E INCOME- TAX ADVISER SURVIVED AND THIS AS THE ONLY REASON WH Y THE ASSESSEE COULD NOT PRODUCE ALL THE BILLS AND VOUCHE RS. 2(III) THE CIT(A) FAILED TO APPRECIATE THAT IN PREC EDING YEARS AS ALSO IN SUCCEEDING YEARS, THE ACTUAL EXPENDITURE WA S FAR MUCH MORE THAN 30% AND, THEREFORE, THIS YEAR WAS NO T AS EXCEPTIONAL YEAR. ITA NO.3703/AHD/2007 2 3(I) THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.2,13,900/- AS UNEXPLAINED INVESTMENT IN THE PURCHASE OF ROW-HO USE IN RIVIERA PARK BY APPLYING SECTION 50C. 3(II) THE CIT(A) FAILED TO APPRECIATE THAT SECTION 50C WAS APPLICABLE TO THE TRANSFEROR AND NOT TO THE TRANSFE REE AND THE ASSESSEE DID NOT GET ANY CHANCE TO REBUT THE STAMP DUTY VALUATION AND, THEREFORE, THE SAME IS NOT BINDING O N THE ASSESSEE. 3(III) THE CIT(A) FAILED TO APPRECIATE THAT THIS WA S AN OLD ROW- HOUSE BUILT IN OR AROUND 1992 AND WAS IN A HIGHLY D ILAPIDATED CONDITION WHEN PURCHASED AND, THEREFORE, THERE IS N O JUSTIFICATION FOR PUTTING SUCH A HIGH VALUE LIKE RS .4,15,900/-. 2. FACTS, IN BRIEF, AS PER RELEVANT YEARS ARE THAT RETURN DECLARING INCOME OF RS.1,92,600/- WAS FILED IN THIS CASE ON 10-12-2004. SUBSEQUENTLY A NOTICE U/S 148 OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT] WAS ISSUED ON 25-01-2006. IN RESPONSE, THE ASSESSEE FILED ANOTHE R RETURN ON 01-03-2006 DECLARING THE SAME INCOME OF RS.1,92,600/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOT ICED THAT THE ASSESSEE, A DEVELOPMENT OFFICER OF LIC OF INDIA RECEIVED INCENT IVE BONUS OF RS. 4,53,231/-. TO A QUERY BY THE AO AS TO WHY THE DEDUCTION ON ACC OUNT OF REIMBURSEMENT OF ACTUAL EXPENSES INCURRED OUT OF INCENTIVE BONUS BE NOT RESTRICTED TO THE EXTENT OF 30% OF THE INCENTIVE BONUS IN TERMS OF DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS KIRANBHAI H SHELAT 235 ITR 635 (GUJ), THE ASSESSEE APPEARS TO HAVE NOT FILED ANY REPLY. ACCORDINGLY, IN THE LIGHT OF AFORESAID DECISION, THE AO RESTRICTED THE DEDUCTION OF ACTUAL EXPENDITURE INCURRED TO 30% OF THE INCENTIVE BONUS, RESULTING IN DISALLOWANCE OF R S.2,42,195/-. 3. ON APPEAL, THE ASSESSEE DID NOT RAISE ANY GR OUND RELATING TO REOPENING OF ASSESSMENT U/S 148 OF THE ACT BEFORE THE LD.CIT(A) . CONSEQUENTLY, THERE ARE NO FINDINGS IN RESPECT OF REOPENING OF ASSESSMENT IN T HE IMPUGNED ORDER. IF THERE IS NO DECISION OF THE FIRST APPELLATE AUTHORITY AND NO GROUND IS IN APPEAL FILED BEFORE HIM ON A PARTICULAR PORTION OF THE ASSESSMENT, IT C AN NOT BE SAID THAT THE ASSESSEE IS STILL AGGRIEVED BY THE DECISION OF THE FIRST APPELLATE AUTHORITY IN NOT ITA NO.3703/AHD/2007 3 GRANTING SUCH RELIEF TO HIM. IN THE INSTANT CASE, T HE ASSESSEE DID NOT QUESTION THE REOPENING OF THE ASSESSMENT BEFORE THE LD. CIT(A). APPARENTLY, THERE IS NO DECISION OF THE LD. CIT(A) ON THIS ISSUE NOR RELEVA NT FACTS AND CIRCUMSTANCES OR EVEN REASONS RECORDED BY THE AO FOR SUCH REOPENING ARE REFLECTED IN THE IMPUGNED ORDER NOR HAVE BEEN THESE BROUGHT TO OUR N OTICE. IN THESE CIRCUMSTANCES , THE QUESTION OF REOPENING CAN NOT B E ALLOWED TO BE AGITATED AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN C IT VS. KARAMCHAND PREMCHAND PRIVATE LTD.,74 ITR 254(GUJ) & SMT. ARUDHANTI BALKR ISHNA VS. ITO,103 ITR 763(GUJ) AS ALSO IN THE CASE OF CIT VS. LATE BEGUM NOOR BANU ALLADIN,204 ITR 166(AP). EVEN OTHER WISE ASSESSMENT HAVING BEEN RE OPENED AFTER FILING OF THE RETURN AND THERE BEING NO ASSESSMENT U/S 143(3) OF THE ACT, SUCH REOPENING OF ASSESSMENT IS IN ACCORDANCE WITH THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS P LTD., 291 ITR 500 (SC), AND THEREFORE,THERE IS NO ILLEGALITY IN REOPENING THE S AID ASSESSMENT. HONBLE SUPREME COURT IN THE SAID CASE OF RAJESH JHAVERI ST OCK BROKERS LTD (SUPRA) UPHELD THE REOPENING OF ASSESSMENT IN SIMILAR CIRC UMSTANCES IN THE FOLLOWING TERMS: UNDER S.147, AS SUBSTITUTED W.E.F. 1 ST APRIL, 1989, IF THE AO, FOR WHATEVER REASON, HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO REOPEN THE A SSESSMENT WHERE THE CASE IS NOT COVERED BY PROVISO TO S.143; INTIMA TION UNDER S. 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSES SMENT AND THERE BEING NO ASSESSMENT UNDER S. 143(1)(A), THE QUESTIO N OF CHANGE OF OPINION DOES NOT ARISE. 3.1 IN VIEW OF THE FOREGOING, ESPECIALLY WHE N NO SUBMISSIONS HAVE BEEN MADE BEFORE US BY THE LD. AR ON BEHALF OF THE ASSES SEE ON THIS ISSUE, GROUND NO. 1 IS DISMISSED. 4. ADVERTING NOW TO GROUND NOS. 2(I),(II) & (III ) OF THE APPEAL RELATING TO DISALLOWANCE OF RS.2,42,195/- OUT OF INCENTIVE BONU S , WE FIND THAT THE ASSESSEE MERELY CONTENDED BEFORE THE LD. CIT(A) THAT THE EXP ENSES WERE GENUINE. IN THE ITA NO.3703/AHD/2007 4 LIGHT OF THESE SUBMISSIONS, LD CIT(A) WHILE RELYING UPON THE AFORESAID DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF KIRANBHAI H SHELAT (SUPRA) UPHELD THE DISALLOWANCE IN FOLLOWING TERMS: 6. I HAVE CAREFULLY CONSIDERED THE FINDINGS AND CO NCLUSIONS OF THE AO AS ALSO THE BRIEF SUBMISSION OF THE AR. IT IS SEEN THAT THE ASSESSEE FILED THE RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S 148, ON 1/3/2006. SUBSEQUENTLY, A NOTICE U/S 142(1 ) AND A QUESTIONNAIRE DATED 23.6.2006 HAD BEEN SERVED ON TH E ASSESSEE. THIS WAS APPROXIMATELY A MONTH AND HALF PRIOR TO TH E FLOOD IN SURAT ON 7/8.8.2006. THE REQUISITE EVIDENCE REGARDING EX PENSES CLAIMED COULD HAVE BEEN FURNISHED BEFORE THE AO IN COURSE O F THE HEARING ON 4.7.2006. THIS WAS NOT DONE AND INSTEAD, THE AS SESSEE HAS NOW CLAIMED THAT THE BOOKS OF ACCOUNT AND THE RELEV ANT DOCUMENTS IN SUPPORT OF THE EXPENSES CLAIMED, HAD BEEN DESTRO YED IN THE FLOOD. NO SUCH CLAIM HAD BEEN MADE BEFORE THE AO. I HAVE GONE THROUGH THE COPIES OF LETTERS ADDRESSED BY THE ASSE SSEE TO THE AO WHICH HAVE BEEN FURNISHED ALONG WITH THE APPEAL MEM O. THE ASSESSEE HAS FURNISHED A CERTIFICATE FROM THE SMC S AYING THAT THE AREA IN WHICH THE ASSESSEE LIVES HAD BEEN SUBMERGED IN THE FLOOD. ALONG WITH THE WRITTEN SUBMISSION THE ASSESSEE HAS FURNISHED SOME VOUCHERS, WHICH HOWEVER ARE NOT RELATABLE TO A NY ACCOUNT, NOR HAVE THEY BEEN LISTED OR TOTALED. THEREFORE, T HESE ARE OF NO RELEVANCE. ON THE OTHER HAND, THE AR HAS NOT BEEN ABLE TO REBUT THE FINDINGS AND OBSERVATIONS OF THE AO ESPECIALLY THE RELIANCE PLACED BY THE AO, ON THE DECISION OF THE HONBLE GU JARAT HIGH CURT (SUPRA). THUS, TAKING INTO ACCOUNT THE OVER ALL FA CTS AND CIRCUMSTANCES OF THE CASE I HAVE COME TO THE CONCLU SION THAT THE AO WAS FULLY JUSTIFIED IN PLACING RELIANCE ON THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SHRI KIRA NBHAI H. SHELAT (SUPRA), ESPECIALLY SINCE, NEITHER ANY BOOKS OF ACC OUNT NOR ANY DETAILS OF EXPENSES CLAIMED AGAINST THE INCENTIVE B ONUS EARNED BY THE ASSESSEE, HAD BEEN FURNISHED BEFORE HIM. THE A DDITION OF THE SUM OF RS.2,42,195 IS THEREFORE, CONFIRMED. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF LD.CIT(A). AT THE OUTSET,BOTH THE PARTIES AGREED THAT ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE AFORESAID DECISION OF T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF KIRANBHAI H SHELAT (SUPRA) FOL LOWED BY THE LD. CIT(A),WHEREIN IT WAS HELD THAT THE DEDUCTION OUT OF INCENTIVE BONUS IS ALLOWABLE ON ACCOUNT OF REIMBURSEMENT OF EXPENSES ACTUALLY IN CURRED TO THE EXTENT OF 30% ITA NO.3703/AHD/2007 5 OF THE INCENTIVE BONUS EARNED BY THE ASSESSEE. IN V IEW THEREOF, THERE IS NO MERIT IN THE GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, GROUND NOS. 2(I), (II) & (III) ARE DISMISSED. 6. ADVERTING NOW TO GROUND NOS. 3(I) TO 3(III) OF T HE APPEAL RELATING TO UNEXPLAINED INVESTMENT IN PURCHASE OF ROW HOUSE, TH E AO NOTICED THAT THE ASSESSEE HAD PURCHASED RIVERA RAW HOUSE NO.11,CONS TRUCTED ON A LAND ADMEASURING 113.80 SQ.MTRS FOR A CONSIDERATION OF R S.2 LAKHS FROM SMT. SHANTABEN THAKORBHAI RAVAL AND 6 OTHERS. TO A QUER Y BY THE AO, THE ASSESSEE EXPLAINED THAT THEY HAD PAID ADDITIONAL STAMP DUTY OF RS.23,860/- AS UNDER: DOCUMENT NO. & YEAR 4945/2.7.03 CONSIDERATION SHOWN IN THE DOCUMENT RS.2,00,000 CORRECT CONSIDERATION DETERMINED RS.4,13,900 ADDITIONAL STAMP DUTY RS. 23,860/- SINCE THE ASSESSEE HAD PAID ADDITIONAL STAMP DUTY O N THE VALUE OF RS.4,13,900, THE AO ADDED AN AMOUNT OF RS.2,13,900 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE AFORESAID HOUSE. 7. ON APPEAL, THE LD.CIT(A) UPHELD THE ADDITION I N THE FOLLOWING TERMS: 10. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS . IN THIS CASE, THE PROVISIONS OF SEC.50-C OF THE IT ACT ARE CLEARL Y APPLICABLE. THE STAMP DUTY AUTHORITY DETERMINED THE VALUE OF THE PR OPERTY AT RS.4,13,900 AND CHARGED THE ASSESSEE WITH THE ADDIT IONAL STAMP DUTY OF RS.23,860. THIS CLEARLY SHOWED THAT THE AS SESSEE HAD UNDERSTATED THE PURCHASE CONSIDERATION BY THE SUM O F RS.2,13,900. THE ASSESSEE MERELY DISMISSED SUCH VALUATION BY CLA IMING IT TO BE BOGUS. THE ASSESSEES CLAIM THAT THE CONSTRUCTION OF THE PROPERTY WAS DONE EARLIER THAN THE APPLICATION OF THE JANTRI AND THAT, THE STAMP DUTY AUTHORITY HAD NOT CONSIDERED THE DEPRECI ATED VALUE, AND ALSO THE FACT THAT THE AREA WAS PRONE TO FLOODS , WAS WITHOUT ANY MERIT. WHILE DETERMINING THE JANTRI PRICE, THE CON CERNED AUTHORITY WOULD HAVE TAKEN INTO CONSIDERATION SUCH FACTORS, A ND THEREFORE, ITA NO.3703/AHD/2007 6 THE ASSESSEE WAS SIMPLY NOT JUSTIFIED IN CHALLENGIN G THE VALUATION OF THE STAMP DUTY AUTHORITY AS BEING BOGUS. AS REGARD S THE ARS CLAIM THAT THE PROPERTY WAS IN SUCH A DILAPIDATED C ONDITION THAT A FURTHER SUM OF RS.4,40,000 HAD TO BE INCURRED ON RE NOVATION, THE SAME IS ALSO NOT RELEVANT TO THE ISSUE SINCE, THE V ALUE THAT WAS DETERMINED BY THE STAMP DUTY AUTHORITY WAS ON THE D ATE OF PURCHASE, AND THEREFORE, THE RENOVATION OR THE ADDI TIONS MADE TO THE PROPERTY WAS OF NO CONSEQUENCE. IN FACT THE SU M OF RS.4,40,000 CLAIMED TO HAVE BEEN SPENT ON RENOVATIO N WAS APPARENTLY NOT DISCLOSED BEFORE THE AO. SUCH A CLA IM WOULD HAVE CALLED FOR FURTHER INVESTIGATION INTO THE SOURCE OF THE FUNDS UTILIZED ON RENOVATION. IN ANY CASE, THE FACT THAT THE ASSE SSEE HAD SUPPRESSED THE PURCHASE CONSIDERATION, WHICH MEANT THAT THE SUM OF RS.2,13,900 HAD BEEN INCURRED FROM OUT OF THE AS SESSEES UNDISCLOSED INCOME, WAS CLEARLY BROUGHT OUT AND EST ABLISHED BY THE AO. THE ADDITION OF THE SUM OF RS.2,13,900 IS THER EFORE, CONFIRMED. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD.AR ON BEHALF OF THE ASSESSEE WHILE RELYING ON DECISION DATED 11 TH DECEMBER,2009 IN THE CASE OF ITO VS. SMT. KUSUM GILANI(DELHI) IN ITA NO. 1576/DEL./2008 AND ITO VS. OPTEC DISC MANU FACTURING,11 DTR(CHD)(TRIB) 264 CONTENDED THAT PROVISIONS OF SEC TION 50C WERE NOT ATTRACTED IN THE CASE OF PURCHASER OF THE HOUSE. O N THE OTHER HAND, THE LD. DR DID NOT OPPOSE THIS CONTENTION OF THE ASSESSEE. 9. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED TH E FACTS OF THE CASE AS ALSO THE AFORECITED DECISIONS. WE FIND THAT THE AH MEDABAD BENCH IN A DECISION DATED 20.02.2008 IN THE CASE OF BHARATKUMAR N PATEL VS ACIT, CIRCLE-.3, SURAT IN ITA NO.1749/AHD/2008 WHILE ADJUDICATING A SIMILAR ISSUE HELD THAT: 10. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMI SSIONS, 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 ACCEPTE D, THEN THE DEEMING PROVISIONS OF SECTION 50-C OF THE ACT WILL BECOME INOPERABLE. HE, FURTHER HELD THAT SECTION 50-C OF THE ACT IS APPLICABLE TO THE SELLER AND PROVIDES THAT THE VALU ATION MADE BY THE ITA NO.3703/AHD/2007 7 STAMP VALUATION AUTHORITY IS TO BE DEEMED AS THE CO NSIDERATION RECEIVED BY THE SELLER. HAVING SAID SO, THE CIT (A PPEALS) FURTHER HELD THAT THE CONVERSE WILL ALSO HAVE TO BE ACCEPT ED AS TRUE, I.E. THE VALUATION OF STAMP VALUATION AUTHORITY WILL HAV E TO BE DEEMED AS THE CONSIDERATION PAID BY THE PURCHASER OF THE P ROPERTY 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. 9.1 WHILE ADJUDICATING A SIMILAR ISSUE ,A CO-OR DINATE BENCH OF THE ITAT IN THEIR ANOTHER DECISION DATED 24.7.2009 IN THE CASE OF JAL ARAM AND CO. IN ITA NO.3964/AHD/2008 CONCLUDED AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ONLY ISSUE INVOLVED IS WHETHER DIFFEREN CE BETWEEN APPARENT CONSIDERATION RECORDED IN THE TRANSFER DEED AND VAL UATION DONE BY THE STAMP VALUATION AUTHORITIES FOR 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. SECTION 50C CREATES A LEGAL FICTION THER EBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED ACCORD INGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITE D TO THE AREA FOR WHICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HELD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEGITIMATELY IN TENDED BY THE 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 JOINT FAMI LY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CASE S OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSS IBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY T HE HON'BLE KERLA HIGH COURT IN CIT V. KAR VALVES LTD. (1987) 168 ITR 41 6 (KER.) WHEREIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE F OR WHICH THEY ARE CREATED AND COULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FR AME, HON'BLE KERALA HIGH COURT WAS DEALING WITH THE CASE WHERE ASSESSE E SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABIL ITIES ARE NOT LIQUIDATED AND OUTSTANDINGS ARE NOT COLLECTED, THEN BUSINESS COULD BE ITA NO.3703/AHD/2007 8 DEEMED TO CONTINUE. HON'BLE ALLAHABAD HIGH COURT IN CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 56 1 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION THE COURT SHOULD ASC ERTAIN THE PURPOSE FOR WHICH IT WAS CREATED AND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT TO THE FICTION. HON'BLE SUPREME COUR T IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITR 711 (SC) H ELD THAT LEGAL 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 V, BHARANI PICTURES (1981) 129 ITR 244 (MAD,) IT IS HELD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYO ND ITS LEGITIMATE FIELD. STATUTORY FICTION INTRODUCED IN ONE ENACTMEN T CANNOT BE INCORPORATED IN OTHER ACT. THE POINT THAT LEGAL FICTION CANNOT B E EXTENDED TO A NEW FIELD WAS HIGHLIGHTED BY HON'BLE MADRAS HIGH COURT I N CIT V. RAJAM T.S, (1988) 125 ITR 207(MAD,) WHEREIN IT IS HELD THAT SE CTION 41(2) CREATES A LEGAL FICTION UNDER WHICH THE BALANCING CHARGE IS TREATED 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 DISTRIBUTION OF ACCU MULATED PROFITS. THUS, A LEGAL FICTION WAS INVOKED IN THE HANDS OF THE ASSES SEE 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 CAN NOT BE EXTENDED FOR TAXING THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND V ALUATION DONE BY STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTME NT U/S 69. IN FACT, SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVEST MENT INTO AN ASSET IS TREATED AS INCOME IF IT IS NOT DISCLOSED IN THE REG ULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICTION FROM ELSEWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF SECTION 69. IT IS FOR THE LEGIS LATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RE CEIPTS OR EXPENDITURE WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PR EVENT TAX EVASION BY UNDERSTATING APPARENT SALE CONSIDERATION AS COMPARE D TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES FOR THE PURPOSE S OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SEC TION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATI ON DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION CANNOT BE EXTEN DED ANY FURTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER T O TAX THE DIFFERENCE IN THE HANDS OF THE PURCHASER. 8. HON'BLE MADRAS HIGH COURT IN CGT V, R. DAM ODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHORISES HAVE THEIR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE FOR THE PUR POSE OF STAMP DUTY, PROPERTY IS VALUED AT HIGHER COST, IT CANNOT BE SAI D THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS STATED IN THE SALE DEED. HON'BLE ITA NO.3703/AHD/2007 9 ALLAHABAD HIGH COURT IN DINESH KURNAR MITTAL V. ITO (1992) 193 ITR 770 (ALL.) QUASHED THE ORDER OF AUTHORITIES BELOW, WHEREIN HALF OF THE DIFFERENCE BETWEEN THE AMOUNT PAID AND THE VALU E FOR PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY T HE ASSESSING OFFICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALUE DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUAL CONSIDERATION PASSED BETWEEN THE PARTIES TO THE SALE, I,TAT, SMC AHMEDABAD IN ITA NO. 4120/AHD/2003 IN NISNA BEN AMINBHAI MITHANI DELETED THE ADDITION MADE U/S 69 ON ACCOUNT OF DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE B Y STAMP VALUATION AUTHORITIES AFTER FOLLOWING VARIOUS AUTHORITIES AS REFERRED TO AS ABOVE. AS A RESULT, WE DELETE THE ADDITION AND ALLOW THE A PPEAL OF THE ASSESSEE. 9.2 SIMILAR VIEW WAS TAKEN IN THE OTHER DECISION O F THE ITAT IN RICHA NARESH JAIN VS. ITO,ITA NO.3997/ AHD./ 2008 AS ALSO IN THE AFORESAID DECISIONS IN THE CASE OF SMT. KUSUM GILANI(SUPRA) AND OPTEC DISC MAN UFACTURING(SUPRA). MOREOVER, HON'BLE RAJASTHAN HIGH COURT IN THEIR DEC ISION IN THE CASE OF CIT VS. KRISHAN KUMAR & OTHERS, 315 ITR 204(RAJ), HELD THA T IT BECOMES A PURE QUESTION OF FACT, AS TO WHETHER THE CONSIDERATION S HOWN IN THE DOCUMENT OF CONVEYANCE, IS THE ACTUAL AMOUNT PAID BY WAY OF CON SIDERATION, 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 IS TAKEN TO BE DEFLATED FIGURE, THEN IT IS FOR THE DEPARTMENT TO LEAD POSITIVE EVIDENCE, ABOUT THE FAI R MARKET VALUE OF THE PROPERTY, AND FURTHER TO SHOW, THAT THE PROPERTY WAS UNDERVAL UED IN THE DOCUMENT OF SALE, BEFORE MAKING ANY ADDITION IN THE INCOME, ON THAT COUNT. 9.3 ADMITTEDLY, IN THE PRESENT CASE, APART FROM RELYING UPON THE RATES ADOPTED BY STAMP VALUATION AUTHORITY, THERE IS NO OTHER MAT ERIAL TO SUPPORT THE ADDITION. IN OUR OPINION, RATES ADOPTED BY STAMP VALUATION AU THORITY CANNOT BE TAKEN, BY ITSELF, AS THE PRICE, FOR WHICH THE PROPERTY WAS PU RCHASED. IN VIEW THEREOF AND IN THE LIGHT OF AFORESAID DECISIONS OF THE ITAT AND OF THE HONBLE RAJASTHAN HIGH COURT, THE FINDINGS OF THE LD. COMMISSIONER OF IN COME TAX (APPEALS) ARE REVERSED AND THE AO IS DIRECTED TO DELETE THE ADDIT ION . THEREFORE, GROUND NOS. 3(I) TO 3(III) OF THE APPEAL ARE ALLOWED. ITA NO.3703/AHD/2007 10 10 IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS 19TH D AY OF MARCH, 2010. SD/- SD/- (BHAVNESH SAINI) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 19TH MARCH, 2010 COPY TO: 1. THE ASSESSEE 2. ITO, WARD.-3(2),SURAT 3. CIT(A)-II, SURAT 4. CIT-CONCERNED, SURAT BY ORDER 5. DR, A BENCH DEPUTY REGISTRAR, ITAT, AHMEDABAD