Shri Sanjay B. Chovatia, Surat V. Income Tax Officer, Ward-3(3)(4), Surat

ITA 780/SRT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2402 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-02-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 23-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Fair market value
• Section: 56(2)(vii)(b); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 780/SRT/2018 (AY: 2014-15) (Virtual hearing in Virtual Court) Shri Sanjay B. Chovatia, A-1001, Eiffil Tower, L H Road, Varachha, Near Darbar Faliya, Surat-395003. PAN : ABKPC02225C Vs. The Income Tax Officer, Ward-3(3)(4), Surat. APPELLANT RESPONDEDNT Appellant by Shri Rasesh Shah, CA Respondent by Shri Sita Ram Meena, Sr. DR Date of hearing 14/02/2022 Date of pronouncement 22/03/2022 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of learned Commissioner (Appeals)-3 Surat, 27 th September 2019 for assessment year (AY) 2014- 15. The assessee has raised the following grounds of appeal. (1) On the facts and circumstances of the case as well as on the subject, the learning Commissioner appeals has confirming the action of assessing officer making addition of Rs. 24,98,040/-on account of unexplained investment under section 56(2)(vii)(b) of the Act. 2. Brief facts of the case are that during the scrutiny assessment the assessing officer noted that assessee along with other two co-owner have purchased immovable property/ land at Survey No. 247, Limodara Village Surat for a total consideration of ₹ 45,51,000/-. ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 2 The jantri value of said property was determined by Stamp valuation authority at ₹ 87,14,000/-. Thus, there was a difference of ₹ 41,63,400/- in the purchase consideration shown by assessee and in value determined by Stamp valuation Authority. The assessing officer invoked the provision of section 56(2)(vii)(b) and took his view that the difference amount is required to be treated as unexplained investment as income from ‘other sources’. The assessee was having 60% of share in the property, the difference amount of assessee’s share was worked out at Rs. 24,98,040/-. On the basis of the above observation, the assessing officer issued show cause notice to the assessee as to why the above difference of Rs. 24,89,404/- should not be added to the income of assessee under the head income from other sources vide show cause notice dated 13 th October 2016. The assessee filed its reply dated 24 th October 2016. The relevant part of reply is extracted by assessing officer in para-4.1 of his order. In reply the assessee stated that the land purchased by the assessee is agricultural land, in fact, it is barren land. The location of same is also very poor and the present market value is very low as against the stamp duty valuation. This stamp evaluation is applied for all properties in a particular area on the general market situation and does not consider the specific problem with any particular property. The assessee has purchased the land as per the present market ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 3 value. The assessee prayed to accept the value of land and as per actual transaction. The assessee requested to inspect or valued by registered valuer. The reply of assessee was considered by assessing officer, and the assessing officer made reference to the valuation officer. The valuation officer vide his report dated 28 th December 2016, valued the said property at Rs.89,43,000/-. The assessing officer recorded that as per the assessee request the case was referred to the valuation officer of department and the valuation officer estimated fair market value of the property at ₹ 89,43,000/-, and the jantry value estimated by stamp valuation of ₹ 87,14,400/-. The assessing officer further recorded that as per section 50C(3), wherein the value ascertained by the valuation officer exceeds the value adopted by stamp valuation authority, the value so adopted or assessed by such stamp authority shall be taken as the full value of consideration received. Accordingly, the assessing officer adopted the value determined by stamp duty valuation authority as full value of consideration, and the difference of ₹ 24,98,040/-as per share of assessee was added to the income under the head income from ‘other sources’. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before learned Commissioner (Appeals). Before learned Commissioner (Appeals) the assessee retreated the similar ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 4 submission as submitted before assessing officer. The learned Commissioner (Appeal) after considering the submission of the assessee dismissed the appeal of assessee by taking view that there is no merit in the appeal of assessee. It was held by ld Commissioner (Appeals) that the assessing officer acted as per the provisions of section 56(2)(vii)(b)of the Act. Further aggrieved, the assessee has filed present appeal before this Tribunal. 4. We have heard the submissions of learned authorised representative (AR) of the assessee and the learned Senior departmental representative (DR) of the revenue. The ld AR for the assessee submits that the assessee purchased agricultural land, which is beyond 8 kilometer from the municipal limit of Surat Municipal Corporation (SMC). The land is not covered by the definition of capital asset under section 2(14) of the income tax Act. The agricultural land is also not covered by section 56(2)(vii)(b) of the Act and accordingly no addition can be made on account of such difference as made by assessing officer. The ld AR the assessee further submitted that he is placing on record the location plan of the Surat Municipal Corporation, which id downloaded from google map. The land is far away from the municipal boundary. The Ld. AR for the assessee further submits once it is held that the land is not a capital asset as defined in the Act, no addition is liable to be sustained. Even ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 5 otherwise on merit the grounds of appeal raised by assessee are covered by the decision of Pune Tribunal in Mubarak Gafur Korabu Vs ITO (ITA No. 752/PUN/2018 dated 5 th April 2019. The decision of Pune Bench was followed by Surat Bench in recent decision in Vithalhbai Kadvabhai Korat Vs ITO (ITA No. 339/SRT/2018 dated 27.11.2020, copy of both the decisions are placed on record. 5. On the other hand the learned senior DR for the revenue supported the order of the lower authorities. The Ld. Sr. DR further submits that the location plant of SMC showing the distance of land from Municipal limit was not filed before the lower authorities. Therefore, the matter may be restored to the file of Assessing Officer to verify the nature of land. 6. In the rejoinder submissions, the Ld. AR for the assessee submits that he has taken the printout of location plan from google map which is available in the public domain, only to show the land purchased by the assessee is agriculture land. No new fact is brought on record. The land is agriculture land is duly recorded in the sale deed dated 18.05.2013. Further, the village Limodara is not part of Surat Municipality. 7. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. It is an admitted fact that assessee purchased land on 18.05.2013 along with ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 6 two other co-owners during the relevant financial year. The said land is agricultural land be part of old block no.315, Revenue Survey No.247 of Moje-Limbodara, sub-district Mangrol, Dist. Surat. The village Limodara is not part of Surat Municipality. On perusal of sale deed, we find that the nature of land is agriculture land which is clearly mentioned at page no.23 document. The Assessing Officer made addition solely on the basis of difference between the value declared in the sale deed dated 18.05.2013 and value determined by staff valuation authority. The ld. CIT(A) confirmed the action of Assessing Officer by taking view that Assessing Officer acted as per the Provision of Section 56(2)(vii)(b). 8. We find that lower authority has not examined the nature of land and solely made addition on the basis of difference between the value determined by staff valuation authority for the purpose of calculation of stamp duty. Before us, the Ld. AR of the assessee vehemently argued that the agricultural land purchased by assessee is not a capital asset being rural agriculture land. We find that Co-ordinate Bench of Pune Tribunal in the case of Mubarak Gafur Korabu while considering the similar submission that agricultural land is not a capital asset and does not fall within the definition of property defined as Clause D of Section 56(2)(vii) passed the following order: ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 7 “8. We have heard the rival contentions and perused the record. Section 56(2)(vii) of the Act talks about where an individual or HUF received in any previous year from any person or persons on or after first day of October, 2009 but before first day of April, 2017, under clause (a) any sum of money without consideration exceeding ₹ 50,000/-, then the whole of such sum is chargeable to tax under ‘Income from other sources’. Under clause (b), any immovable property i.e. (i) without consideration, the stamp duty value of which exceeds ₹50,000/-, then stamp duty value of such property is to be added; and (ii) for consideration which is less than stamp duty value of the property by an amount exceeding ₹ 50,000/-, then stamp duty value of such property as exceeds such consideration is to be added in the hands of person as ‘Income from other sources’. Clause (c) talks of any property other than immovable property and sub-clause (i) talks of without consideration the aggregate fair market value which exceeds ₹ 50,000/-; and sub-clause (ii) talks of consideration which is less than aggregate market value of the property by an amount exceeding ₹ 50,000/-. Explanation under the said section defines certain terms and clause (d) talks of property to mean capital assets of the assessee and then refers to the list of assets. 9. The case of assessee before us is that it has purchased agricultural asset which was held as ‘Current Asset’ by the assessee and when the same was sold in 2016, business income was declared on the said transaction. The assessee also stressed that agricultural land purchased by assessee was not capital asset, for which reliance was placed on the definition of ‘capital asset’ under section 2(14) of the Act. As per terms used under the Act, an immovable property is defined to be the land or building or both as per clause (d) of Explanation under the said section. Hence, clauses (a) and (b) of section 56(2)(vii) of the Act are not attracted. Clause (c) talks of any property other than immovable property. Section 2(14) of the Act defines ‘capital asset’ to mean property of any kind held by assessee whether or not connected with his business or profession and any securities held by foreign institutional investor but it does not include any (i) stock in trade, consumable stores or raw materials held for the purpose of business; (ii) personal effects i.e. movable property held for personal use and (iii) agricultural land in India. In the first instance, where the assessee had purchased agricultural land which was its stock in trade and on its sale the receipts were recognized and accepted as business income, then there is no question of attracting the provisions of section 56(2)(vii)(b) of the Act against assessee. Even otherwise, the land held by ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 8 assessee was agricultural land which is not capital asset as clearly defined under section 2(14) of the Act, which excludes agricultural land out of definition of ‘capital asset’. The asset owned by assessee is not capital asset, hence clause (b) is not attracted and provisions of clause (c) i.e. property other than immovable property is also not attracted, in view of definition of property as per clause (d) under Explanation i.e. property means the following capital assets of the assessee:- (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; [or] (ix) bullion. 10. In the totality of above definitions, we hold that agricultural land purchased by assessee is not governed by the provisions of section 56(2)(vii)(b) of the Act being not capital asset and also because of the fact that the assessee was holding it as stock in trade. Hence, it is outside the purview of said section and no addition has to be made in the hands of assessee. 11. Now, coming to the decision of Jaipur Bench of Tribunal in ITO Vs. Trilok Chand Sain (supra), wherein provisions of clause (b) of section 56(2)(vii) of the Act were considered. However, they have failed to take into cognizance the provisions of clause (c) of said section, which talks of property other than immovable property. The Tribunal in para 6 refers only to the definition of ‘immovable property’ and hold that it is not circumscribed or limited to any particular nature of property. However, clause (c) very clearly talks of property other than immovable property and the word ‘property’ has further been defined under clause (d) of Explanation thereunder. In the totality of the above said facts and circumstances, there is no merit in reliance placed upon by the learned Departmental Representative for the Revenue on the ratio laid down by Jaipur Bench of Tribunal in ITO Vs. Trilok Chand Sain (supra). In view of clear cut provisions of the Act, we find no merit in the orders of authorities below in making the aforesaid addition in the hands of assessee. The ground of appeal No.1 raised by assessee is thus, allowed.” ITA.780/SRT/2018/AY.2014-15 Sanjay B. Chovatia 9 9. By following the said decision, the Surat Bench in the case of Vithalbhai Kadvabhai Korat (supra) also granted relief on similar submission by holding that agricultural land purchased by assessee is not covered by the Provision of Section 56(2)(vii)(b). 10. In view of the aforesaid factual and legal discussion and respectfully following the decision of Pune Bench in the case of Mubarak Gafur Korabu (supra), the grounds of appeal raised by assessee is allowed. 11. In the result, the appeal of the assessee is allowed. Order pronounced on 22/03/2022, in open Court and result was also placed on the notice board. Sd/- Sd/- (Dr. A. L. SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 22/03/2022 SAMANTA Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order // TRUE COPY // Asstt. Registrar/Sr. PS/PS ITAT, Surat