ITO, Ward - 40(3), Kolkata , Kolkata V. Sri Jawed Iqbal, Kolkata

ITA 79/KOL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7307 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-09-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 12-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 56(2)(vii)(b); 43CA; 143(3); 201

Judgement Text

ITA NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 SHRI JAWED IQBAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ & HZ) AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A. NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 INCOME TAX OFFICER,................................ ...................................APPELLANT WARD-40(3), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 -VS.- SHRI JAWED IQBAL,.................................. ....................................RESPONDENT 96, RABINDRA SARANI, KOLATOLA, KOLKATA-700 073 [PAN: AAKPI3262L] APPEARANCES BY: SMT. RANU BISWAS, SR. D.R , FOR THE APPELLANT N O N E, FOR THE RESPONDEN T DATE OF CONCLUDING THE HEARING : SEPTEMBER 23, 201 9 DATE OF PRONOUNCING THE ORDER : OCTOBER 18, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA & HYD ERABAD ZONE) :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-12, KOLKATA DA TED 08.09.2017 AND THE SOLITARY ISSUE RAISED THEREIN RELATES TO THE DE LETION BY THE LD. CIT(APPEALS) OF THE ADDITION OF RS.1,54,27,827/- MA DE BY THE ASSESSING OFFICER UNDER SECTION 56(2)(VII)(B) OF THE INCOME T AX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSINESS OF PROVIDING CABLE TV & BROADBAND SERV ICES. HE IS ALSO A DIRECTOR IN M/S. SRD PROPERTIES PVT. LIMITED AND PA RTNER IN M/S. COSMOPOLITAN BUILDERS & DEVELOPERS. THE RETURN OF I NCOME FOR THE YEAR ITA NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 SHRI JAWED IQBAL 2 UNDER CONSIDERATION WAS FILED BY HIM ON 29.10.2014 DECLARING TOTAL INCOME OF RS.3,87,290/-. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT A LARGE I NVESTMENT WAS MADE IN THE PURCHASE OF PROPERTY AND ALTHOUGH THE SAID PROP ERTY WAS CLAIMED TO HAVE BEEN PURCHASED BY THE PARTNERSHIP FIRM OF M/S. COSMOPOLITAN BUILDERS & DEVELOPERS, THE NAME OF THE ASSESSEE WAS ALSO MENTIONED IN THE RELEVANT SALE DEED ALONG WITH TWO OTHER PARTNER S. ACCORDING TO THE ASSESSING OFFICER, THE PARTNERSHIP FIRM NEITHER BEI NG A LEGAL ENTITY NOR BEING A LIVING PERSON WAS NOT ENTITLED TO PURCHASE ANY IMMOVABLE PROPERTY. HE ALSO NOTED THAT THE TOTAL CONSIDERATIO N PAID FOR THE SAID PROPERTY AS PER THE AGREEMENT WAS RS.62,00,000/-, W HEREAS THE FAIR MARKET VALUE OF THE PROPERTY FOR THE PURPOSE OF STA MP DUTY WAS DETERMINED AT RS.2,16,27,827/-. THE ASSESSING OFFIC ER WAS OF THE VIEW THAT THIS DIFFERENCE AMOUNT OF RS.1,54,27,827/- WAS LIABLE TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF PROVIS IONS OF SECTION 56(2)(VII)(B) OF THE ACT AND THE ASSESSEE, THEREFOR E, WAS REQUIRED BY HIM TO OFFER HIS EXPLANATION IN THE MATTER. IN REPLY, I T WAS EXPLAINED BY THE ASSESSEE THAT THE PARTNERSHIP FIRM IS TREATED AS SE PARATE LEGAL ENTITY UNDER THE INCOME TAX ACT, 1961 AND IT IS LIABLE TO BE ASSESSED IN THE STATUS OF A PARTNERSHIP FIRM. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE FACT THAT THE RELEVANT DEED FOR PURCHASE OF PRO PERTY IN THE NAME OF THE PARTNERSHIP FIRM OF M/S. COSMOPOLITAN BUILDERS & DE VELOPERS WAS DULY REGISTERED BY THE REGISTERING AUTHORITY IS SUFFICIE NT TO SHOW THAT THE PARTNERSHIP FIRM WAS ENTITLED TO PURCHASE AN IMMOVA BLE PROPERTY. AS REGARDS THE DIFFERENCE IN THE AMOUNT OF CONSIDERATI ON SHOWN IN THE SALE AGREEMENT AND THE FAIR MARKET VALUE OF THE PROPERTY DETERMINED FOR THE PURPOSE OF STAMP DUTY, IT WAS EXPLAINED BY THE ASSE SSEE THAT THE PROPERTY WAS OCCUPIED BY TWELVE DIFFERENT TENANTS FOR A SMAL L RENT AND SINCE THEY WERE OCCUPYING THE PROPERTY FOR MORE THAN THIRTY YE ARS, IT COULD NOT BE SOLD AT A MARKET PRICE. THE ASSESSING OFFICER DID N OT FIND MERIT IN THE EXPLANATION OFFERED BY THE ASSESSEE. HE HELD THAT T HE PARTNERSHIP FIRM WAS NOT ENTITLED TO PURCHASE ANY IMMOVABLE PROPERTY IN ITS NAME AND THE ITA NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 SHRI JAWED IQBAL 3 DIFFERENCE OF RS.1,54,27,827/- BETWEEN THE FAIR MAR KET VALUE OF THE PROPERTY AS DETERMINED FOR THE PURPOSE OF STAMP DUT Y AND THE AMOUNT OF CONSIDERATION SHOWN IN THE RELEVANT AGREEMENT WAS L IABLE TO BE ADDED IN THE HANDS OF THE ASSESSEE AS AN INDIVIDUAL UNDER SE CTION 56(2)(VII)(B) OF THE ACT. HE ACCORDINGLY ADDED THE SAID AMOUNT TO TH E TOTAL INCOME OF THE ASSESESE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 22.12.2016. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND A DETAILED SUBMISSION WAS MADE BY THE ASSESSEE IN SUPPORT OF HIS CASE ON THE ISSUE, WHICH AS SUMMARIZ ED BY THE LD. CIT(APPEALS), WAS AS UNDER:- SINCE THE PROPERTY WAS PURCHASED BY THE PARTNERSHI P FIRM M/S COSMOPOLITAN BUILDERS & DEVELOPER, ADDITION, IF ANY , U/S 56(VII)(B)(II) IS TO BE MADE, IN THE HANDS OF THE P ARTNERSHIP FIRM ONLY AND NOT IN THE HANDS OF THE APPELLANT WHI CH IS BEREFT OF ANY LEGAL SANCTION. EVEN IN CASE OF PARTNERSHIP FIRM, DIFFERENCE IN VALUATION FOR PURCHASE OF IMMOVABLE A SSETS FOR SALE / DEVELOPMENT PURPOSE CANNOT BE MADE IN TERMS OF SECTION 43CA OF THE INCOME TAX ACT. FURTHER SECTION 56(VII) (B)(II) IS NOT APPLICABLE ON PARTNERSHIP FIRM. SINCE THE PROPERTY WAS AGREED TO HAVE BEEN PURCHASE D VIDE AGREEMENT OF PURCHASE DATED 24.12.2012 (COPY ENCLOS ED FOR YOUR KIND PERUSAL), RELEVANT TO THE ASSESSMENT YEAR 2013-14 WHICH IS PRIOR TO 01.04.2014, I.E. ASSESSMENT YEAR 2014-15 WHEN THE AMENDMENT CAME INTO FORCE W.EF 01.04.2014 TAXING THE DIFFERENCE BETWEEN THE DEED VALUE AND STAMP DUT Y VALUE, THERE IS NO LEGAL SANCTION TO TAX THE APPELLANT UND ER SECTION 56(2)(VII)(B)(II) OF THE INCOME TAX ACT IN RESPECT OF THE SAID PROPERTY. THE LD. AO'S CONTENTION THAT A PARTNERSHIP FIRM CAN NOT PURCHASE AN IMMOVABLE PROPERTY AS PER TRANSFER OF P ROPERTY ACT, IS WHOLLY AND LEGALLY INCORRECT FROM THE VERY FACT THAT REGISTRAR OF PROPERTIES HAD DULY REGISTERED THE PUR CHASE DEED IN FAVOUR OF THE PARTNERSHIP FIRM. AS PER TRANSFER OF PROPERTY ACT, THE PURCHASE DEED IN QUESTION IS A LEGALLY VAL ID DOCUMENT IN FAVOUR OF THE PARTNERSHIP FIRM DULY REGISTERED B Y THE REGISTRAR. MOREOVER, SECTION 5 OF THE TRANSFER OF P ROPERTY ACT DOES NOT PROHIBIT PURCHASE OF PROPERTY BY FIRM, AOP , BODY OF INDIVIDUALS. THE LD. A.O. MISUNDERSTOOD THE CONTENT S OF THE RELEVANT PROVISIONS OF TRANSFER OF PROPERTY ACT. ITA NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 SHRI JAWED IQBAL 4 IN VIEW OF THE ABOVE SUBMISSION, YOUR KIND HONOUR I S EARNESTLY REQUESTED TO DELETE THE ILLEGAL AND UNJUSTIFIED ADD ITION MADE BY THE LD. AO AMOUNTING TO RS.1,54,27,827/- VIDE LAST PARA OF THE ASSESSMENT ORDER. 4. THE LD. CIT(APPEALS) FIND MERIT IN THE SUBMISSIO N MADE BY THE ASSESSEE AND DELETED THE ADDITION MADE BY THE ASSES SING OFFICER UNDER SECTION 56(2)(VII)(B) FOR THE FOLLOWING REASONS GIV EN IN HIS IMPUGNED ORDER: I FIND FORCE IN THE APPELLANT'S SUBMISSIONS. THERE IS NO DOUBT THAT AS PER THE SALE DEED, THE NAME OF THE BUYER IS M/S. COSMOPOLITAN BUILDERS & DEVELOPERS. THE ADDITION, I F AT ALL ANY, UNDER ANY SECTION UNDER THE I.T. ACT, CANNOT B E MADE IN ANYONE ELSE'S NAME. THE SAID PROPERTY WAS PURCHASED VIDE AGREEMENT OF PURCHASE DATED 24.12.2012, WHICH IS RE LEVANT TO ASSESSMENT YEAR 2013-14. IT IS NOT UNDERSTOOD AS TO WHY THE AO CONCLUDED THAT A PARTNERSHIP FIRM CANNOT PUR CHASE AN IMMOVABLE PROPERTY AS PER TRANSFER OF PROPERTY ACT. THIS IS WHOLLY AND LEGALLY INCORRECT FROM THE VERY FACT THA T REGISTRAR OF PROPERTIES HAD DULY REGISTERED THE PUR CHASE DEED IN FAVOUR OF THE PARTNERSHIP FIRM. FOR REASONS DISCUSSED ABOVE, I DO NOT FIND ANY MERIT IN THE ADD ITION MADE BY THE AO AND IT IS DELETED. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) ERRED IN DELETING THE ENTIRE IMPUGNED ADDITION OF RS.1,54 ,27,827/- AS INCOME FROM OTHER SOURCE U/S. 56(2)(VII)(B) OF T HE I.T ACT, 1961 MADE ON ACCOUNT OF DIFFERENCE OF THE STAMP DUT Y VALUE AND THE PURCHASE CONSIDERATION OF ALLEGED PURCHASE OF PROPERTY BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN PRINCIPLE, CONSIDERING THE ALLEGED TRANSFER OF P ROPERTY IN FAVOUR OF THE ASSESSEE WAS UNDERTAKEN DURING THE AY . 2013-14 AS PER THE AGREEMENT OF PURCHASE, WHEREAS THE ASSES SEE FAILED TO PROVE DURING THE COURSE OF SCRUTINY PROCEEDINGS THAT THE TRANSFER OF THE ALLEGED PROPERTY WAS ACTUALLY UNDER TAKEN IN THE RELEVANT FY 2012-13 AS PER THE PROVISION OF 2(4 7) OF THE IT ACT, 1961. HOWEVER THE DEED OF CONVEYANCE AS FURNIS HED BY THE ASSESSEE CLEARLY DEPICTS THAT THE ALLEGED PROPE RTY WAS ACTUALLY TRANSFERRED DURING THE FY 2013-14 RELEVANT TO AY 2014-15. ITA NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 SHRI JAWED IQBAL 5 6. AT THE TIME OF HEARING BEFORE US, NONE HAS APPEA RED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE REVENUE IS, THEREFORE, BEING DISPOSED OF EX- PARTE QUA THE RESPONDENT-ASSESSEE AFTER HEARING THE ARGUMENTS OF LD. D.R. AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THE PROPERTY IN QUESTION WAS PURCHASED BY THE PARTN ERSHIP FIRM OF M/S. COSMOPOLITAN BUILDERS & DEVELOPERS VIDE AN AGREEMEN T TO SALE DATED 24.12.2012 AND THE FINAL SALE DEED OF THE SAME WAS EXECUTED AND REGISTERED ON 30.04.2013. ALTHOUGH THE ASSESSEE WAS A PARTNER IN THE SAID FIRM ALONG WITH TWO OTHER PARTNERS, THE PROPERTY WA S PURCHASED AND DULY REGISTERED IN THE NAME OF THE PARTNERSHIP FIRM OF M /S. COSMOPOLITAN BUILDERS & DEVELOPERS. EVEN THE ASSESSING OFFICER I N THE ASSESSMENT ORDER DID NOT DISPUTE THIS POSITION, BUT THE DIFFER ENCE OF RS.1,54,27,827/- BETWEEN THE FAIR MARKET VALUE DETERMINED FOR THE PU RPOSE OF STAMP DUTY AND THE AMOUNT OF CONSIDERATION SHOWN IN THE SALE D EED WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTI ON 56(2)(VII)(B) ON THE PRESUMPTION THAT THE PARTNERSHIP FIRM NOT BEING A L IVING PERSON OR A SEPARATE LEGAL ENTITY WAS NOT ENTITLED TO PURCHASE ANY IMMOVABLE PROPERTY. AS RIGHTLY HELD BY THE LD. CIT(APPEALS) I N HIS IMPUGNED ORDER, THIS PRESUMPTION OF THE ASSESSING OFFICER WAS NOT W ELL FOUNDED, INASMUCH AS, THE PARTNERSHIP FIRM OF M/S. COSMOPOLITAN BUILD ERS & DEVELOPERS WAS ENTITLED TO PURCHASE THE IMMOVABLE PROPERTY AS PER SECTION 5 OF THE TRANSFER OF PROPERTY ACT AND IT WAS CORROBORATED BY THE FACT THAT REGISTRAR OF PROPERTIES HAD DULY REGISTERED THE PUR CHASE DEED OF THE PROPERTY IN FAVOUR OF THE PARTNERSHIP FIRM. AT THE TIME OF HEARING BEFORE US, EVEN THE LD. D.R. HAS NOT BEEN ABLE TO DISPUTE THIS POSITION. HAVING REGARD TO ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ADDITION OF RS.1,54,27,827/- MADE BY THE A SSESSING OFFICER UNDER SECTION 56(2)(VII)(B) IN THE HANDS OF THE ASSESSEE AS AN INDIVIDUAL WHO HAD NOT PURCHASED THE PROPERTY IN QUESTION WAS NOT SUSTAINABLE AND THE LD. CIT(APPEALS) WAS FULLY JUSTIFIED IN DELETING TH E SAME. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER PASSED BY THE LD. CIT(APP EALS) AND DISMISS THIS APPEAL OF THE REVENUE. ITA NO. 79/KOL/2018 ASSESSMENT YEAR: 2014-2015 SHRI JAWED IQBAL 6 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 18, 2019. SD/- SD/- (SATBEER SINGH GODARA) (P.M. JAGT AP) JUDICIAL MEMBER V ICE-PRESIDENT (KZ & HZ) KOLKATA, THE 18 TH DAY OF OCTOBER, 2019 COPIES TO : (1) INCOME TAX OFFICER, WARD-40(3), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (2) SHRI JAWED IQBAL, 96, RABINDRA SARANI, KOLATOLA, KOLKATA-700 073 (3) COMMISSIONER OF INCOME TAX (APPEALS)-12, KOLK ATA, (4) COMMISSIONER OF INCOME TAX, KOLKATA- , KOLKATA; (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.