M/s Splendor Infotech (P) Ltd., Meerut V. ITO, New Delhi

ITA 5374/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3908 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 18-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 03-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Unexplained investment; Valuation report; Deemed dividend
• Section: 27

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.:- 5374/DEL /2013 ASSESSMENT YEAR: 2006-07 SPLENDER INFOTECH (P) LTD. C/O M/S. MALIK & CO. 305, THAPAR NAGAR, MEERUT PAN AAJCS0817P VS. ITO WARD 9 (2) NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 22.8.2013, PASSED BY LD. CIT(A PPEALS) XII, NEW DELHI IN RELATION TO THE PENALTY PROCEEDINGS U/S 271(1 )(C) FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE IS MAINLY AGGR IEVED BY LEVY OF PENALTY OF RS. 3,09,040/- ON ACCOUNT OF FOLLOWING AD DITIONS:- ASSESSEE BY: SHRI SANJAY MALIK, ADVOCATE DEPARTMENT BY : SHRI S.S. RANA, CIT DR DATE OF HEARING 15/01/2018 DATE OF PRONOUNCEMENT 19/01/2018 ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 2 I) DEEMED DIVIDEND: RS. 5,27,429/- II) UNEXPLAINED INVESTMENT U/S 69B: RS. 3,90 ,696/- 2. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT, THE TRIBUNAL VIDE ORDER DATED 6.9.2013 IN ITA NO. 4280/D EL/2010 IN THE QUANTUM PROCEEDINGS HAS DELETED THE ADDITION ON ACCOU NT OF DEEMED DIVIDEND AND THEREFORE, THE PENALTY ON THIS ADDITION S HOULD BE DELETED. 3. ON THE ISSUE OF ADDITION OF RS. 3,98,696/- MAD E U/S 69B, LD. COUNSEL SUBMITTED THAT THE SAME HAS BEEN MADE ON ACCOUNT OF DIFFERENCE OF VALUE AS SHOWN IN THE REGISTERED SALE DEED AND THE ESTIMATE MADE BY THE VALUATION OFFICER OF THE DEPARTMENT FOR DETERMINING THE VALUE OF THE PLOT PURCHASED BY THE ASSE SSEE. THE ASSESSEE HAS PURCHASED TWO PLOTS FROM M/S. NALINI SA REES, THE DETAILS OF WHICH ARE AS UNDER:- SL. NO. ADDRESS OF THE PROPERTY PURCHAS ED FROM DATE OF PURCHASE CONSIDERATION PAID (RS.) VALUE AS PER CIRCLE RATES PREVAILING AT THAT TIME SIZE OF PLOT 1. D-101, SECTOR-2, NOIDA, UP NALINI SAREES 21/10/2005 38,50,000/- 42,40,960/- 731.20 SQ. MTS. 2. D-102, SECTOR-2, NOIDA, UP NALINI SAREES 21/10/2005 42,50,000/- 42,40,960/- 731.20 SQ. MTS THE AO HAS MADE THE ADDITION ON THE GROUND THAT, SIN CE THESE WERE TWO ADJACENT PLOTS PURCHASED ON THE SAME DATE WITH SA ME PARTY AND ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 3 IDENTICAL SIZE AND THEN ALSO THERE WAS A DIFFERENCE I N THE CONSIDERATION PAID. ACCORDINGLY, HE REFERRED THE DETERMINATION OF V ALUATION TO THE VALUATION OFFICER IN TERMS OF SECTION 142A, WHO VIDE HIS REPORT HAS COMPUTED THE VALUE AT RS. 42,40,960/- AS AGAINST THE DE CLARED VALUE OF RS. 38,50,000/-. THE DIFFERENCE OF RS. 3,90,960/ - WAS ADDED. 4. LD. COUNSEL FURTHER POINTED OUT THAT THIS ADDITION STANDS CONFIRMED BY THE TRIBUNAL ALSO. HOWEVER HE SUBMITTED THAT, EVEN THOUGH THE ADDITION MAY HAVE BEEN CONFIRMED, BUT NO PEN ALTY U/S 271(1)(C) CAN BE LEVIED EITHER FOR FURNISHING OF INA CCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME, BECAUSE THE PURC HASE VALUE IS FLOWING FROM THE SALE DEED AND THERE IS NO OTHER MATE RIAL ON RECORD TO SHOW THAT ASSESSEE HAS PAID ANY SUM OVER AND ABOVE THE VALUE SHOWN IN THE REGISTERED DOCUMENT. MERELY BECAUSE THERE WAS A DIFFERENCE OF CIRCLE RATE AND ESTIMATE BY THE DVO, THERE CANNOT BE THE GROUND FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). HE FURTHER S UBMITTED THAT AO WHILE INITIATING THE PENALTY PROCEEDINGS HAD NOT SPECI FIED THE CHARGE AS TO UNDER WHICH LIMB OF THE PROVISION OF SECTION 27 1(1)(C) HE IS INITIATING THE PENALTY. THIS HE POINTED OUT IS EVIDEN T FROM THE ASSESSMENT ORDER, WHEREIN HE HAS TRIED TO LEVY THE PENA LTY FOR BOTH THE CHARGES, I.E., CONCEALMENT OF INCOME AND FURNISHI NG OF INACCURATE PARTICULARS OF INCOME. WITHOUT SPECIFYING THE CHARGE S UCH PENALTY ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 4 CANNOT BE LEVIED AS HELD BY VARIOUS JUDICIAL PRONOUN CEMENT FOR WHICH HE FILED SEPARATE SYNOPSIS OF SUCH JUDGEMENTS. 5. ON THE OTHER HAND CIT DR, SUBMITTED THAT THE A SSESSEE COULD NOT EXPLAIN AS TO WHY TWO SIMILAR ADJACENT PLOTS WITH SAME SIZE WAS PURCHASED AT TWO DIFFERENT VALUE AND ALL THE CONTENTIO NS RAISED BY THE ASSESSEE TO BRING OUT THE DIFFERENCE HAS BEEN NEGATED BY THE VALUATION OFFICER WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL ALS O. THUS, NOT ONLY THE ADDITION HAS BEEN RIGHTLY CONFIRMED BUT ALSO THE P ENALTY DESERVES TO BE UPHELD. HE ALSO FILED SEPARATE SYNOPSIS OF VAR IOUS CASE LAWS AND SPECIALLY RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. VS. CIT (2013) 358 ITR 593 (SC) ; CIT VS. ZOOM COMMUNICATION (P) LTD. (2010) 327 ITR 510 (DELHI ) ; CIT VS. ESCORTS FINANCE LTD. (2010) 328 ITR 44 (DELHI). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL REFERRED TO BEFORE US. ADMITTEDLY SO FAR THE ADDITION OF RS. 5,27,429/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) IS CONCERNED, SAME STANDS DELETED BY THE TRIBUNAL AND TH EREFORE, PENALTY ON SAID ADDITION CANNOT BE SUSTAINED. ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED. AS REGARDS THE LEVY OF PENAL TY ON ACCOUNT OF ADDITION OF RS. 3,98,696/-, THE SAME HAS BEEN MADE O N ACCOUNT OF DIFFERENCE IN THE PURCHASE VALUE OF THE PLOT AS SHOWN IN THE REGISTERED ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 5 SALE DEED AND THE ESTIMATE MADE BY THE VALUATION OFFIC ER TO WHOM REFERENCE WAS MADE BY THE AO IN TERMS OF SECTION 142A. THE ASSESSEE HAD PURCHASED TWO PROPERTIES ON 21.10.2005, THE DESCR IPTION OF WHICH HAS ALREADY BEEN INCORPORATED ABOVE. THE LOCATION OF THE PLOTS WAS ADJACENT AND SIZE WAS ALSO THE SAME. SINCE THERE WAS A DIFFERENCE IN THE VALUE OF BOTH THE PLOTS, THE MATTER WAS REFERRED TO THE VALUATION OFFICER BY THE AO WHO HAD ESTIMATED THE VALUE AT RS. 42 ,40,960/-. THE ASSESSEES CONTENTION BEFORE THE AUTHORITIES BELOW WAS THAT THE AGREEMENT TO SELL FOR BOTH THE PROPERTIES WAS ENTERED AT DIFFERENT TIMES AND THE LOCATIONAL ADVANTAGE FOR BOTH THE PLOTS WERE E NTIRELY DIFFERENT AND THIS WAS DEMONSTRATED VIDE LETTER DATED 5.1.2008 B EFORE THE AO. THE VALUATION REPORT WAS REBUTTED BY THE ASSESSEE IN TH E FOLLOWING MANNER:- ORIGINALLY THE AMOUNT OF RS. 38,50,000/- PAID TO T HE SELLER BY M/S. KOHINOOR AGENCIES AMOUNTING RS. 26,00,000/- ON 16/09/2004 AND BY SMT. SUMAN JAIN RS. 12,50,000/- O N 24/11/2004. THE DEAL WAS NOT MATURED AS THERE WAS SUBSTANTIAL FALL IN THE MARKET RATES AT NCR INCLUDI NG NOIDA. FINALLY M/S. SPLENDOR INFOTECH PVT. LTD. HAD COME I N BETWEEN AND AGREED TO GET THE REGISTRY DONE IN ITS OWN NAME AND FURTHER AGREED TO RETURN THE AMOUNT ADVANCE BY KOHINOOR AGENCIES PVT. LTD. AND SMT. SUMAN JAIN IN DUE COURSE. SINCE THE LOCATION OF THE PLOT IS NOT GOOD AS IS CLEAR FROM THE GOVT. VALUERS REPORT AND MARKET RAT ES ARE MUCH LOWER THAN THE CIRCLE RATES, IT IS REQUESTED THAT THE VALUATION REPORT (CIRCLE RATE) SHOULD NOT BE CONSIDERED AND NO ADDITION BE MADE. RS. 38,50,000/- WAS THE ACTUAL CONSIDERATION PAID FOR THE SAID PLOT AND DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE CO MPANY, HENCE IT IS OUTSIDE THE PURVIEW OF THE UNEXPLAINED INVESTMENTS. ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 6 THE AO HOWEVER HAS REJECTED THE ASSESSEES EXPLANATIO N AND ADDED THE DIFFERENCE AMOUNT OF RS. 3,90,696/-. THE TRIBUNAL TOO HAS CONFIRMED THIS ADDITION. HOWEVER WHILE CONFIRMING THE SAID ADD ITION, THE TRIBUNAL HAD OBSERVED THAT THE ASSESSEE HAD NO EXPLANATION TO OFF ER FOR DIFFERENCE EXCEPT THE FACT THAT LOCATION OF PLOT NO. D-102 WAS BETTER THAN D-101. NOWHERE IN THE IMPUGNED ORDERS OR IN THE Q UANTUM PROCEEDINGS THERE IS ANY REFERENCE TO ANY MATERIAL OR EVIDENCE SO AS TO SUGGEST THAT ASSESSEE HAS MADE ANY KIND OF EXTRA PAYMEN T FOR THE PURCHASE OF THE PLOTS. THE ADDITION HAS BEEN MADE PURE LY ON THE BASIS OF THE ESTIMATE GIVEN BY THE VALUATION OFFICER AND THE VALUE OF THE TRANSACTION SHOWN IN THE REGISTERED SALE DOCUMENT. IF NO MATERIAL HAS BEEN BROUGHT EITHER BY WAY OF INQUIRY BY THE AO OR SOM E TANGIBLE INFORMATION HAS INTO HIS KNOWLEDGE THAT THE PURCHASE CO NSIDERATION OF RS. 38,50,000/- FOR THE PLOT NO. D-101 IS LESS OR ASS ESSEE HAS PAID EXTRA THAN WHAT HAS BEEN MENTIONED IN THE REGISTERED SAL E DOCUMENT, THEN NO PENALTY FOR EITHER CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS CAN BE LEVIED. THOUGH SECTION 6 9B IS A DEEMING FICTION BUT IN THE MATTER OF PENALTY PROCEEDINGS, SUCH DEEMING FICTION CANNOT BE EXTENDED SO AS TO HOLD ASSESSEE GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS WHEN TH E ADDITION ON ACCOUNT OF DEEMING FICTION IS BASED ON SOME KIND OF ESTIMATE GIVEN BY A GOVT. VALUER. IF NOTHING INCRIMINATING IS FOUND AG AINST THE ASSESSEE, ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 7 THEN SUCH A VALUATION REPORT ALONE CANNOT BE THE BASIS F OR LEVY OF PENALTY. APART FROM THAT THE ASSESSEES EXPLANATION THA T THE PLOT NO. D-101 WAS ADVERSELY LOCATED IN COMPARISON TO PLOT NO. D-102 HAS NOT BEEN REBUTTED AND IT IS QUITE POSSIBLE THAT TWO SIMILAR ADJACENT PLOTS MAY HAVE DIFFERENT MARKET VALUE, BECAUSE OF DIFFERENT LOCATION IN TERMS OF DIRECTION, FACING OF THE PLOT, GEOMETRICAL SHAPE, VA STU FACTORS, ETC. ALL THESE FACTORS IN INDIA DO HAVE IMPACT ON THE VALUE OF THE PROPERTY. SUCH A PROBABLE FACTORS CANNOT BE IGNORED AND EVEN U NDER EXPLANATION 1, THE ASSESSEES EXPLANATION DOES CONSTITUTE PROBABLE EXPLANATION WHICH HAS NOT BEEN FOUND TO BE INCORRECT BY WAY OF ANY MATERIAL ON RECORD. THUS, WE DELETE THE PENALTY ON A DDITION OF RS. 3,98,696/- ALSO. ACCORDINGLY APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018. SD/- SD/- ( N.K. SAINI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19.1.2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ITA NO. 5374/DEL/2013 SPLENDOR INFOTECH (P) LTD. VS. ITO 8 ASSISTANT REGISTRAR ITAT, NEW DELHI