THIDUVIL BALAKRISHNAN, CHENNAI V. ITO, NONCORP, WARD 4(5), CHENNAI

ITA 963/CHNY/2022

AI Insights

The case involves Thiduvil Balakrishnan, the proprietor of 'Neethu Timber and Saw Mills', who appealed against the order of the Commissioner of Income Tax (Appeals)-19, Chennai, for the assessment year 2016-17. The primary contention was regarding the additions made to his income due to the difference between the guideline value and the actual consideration paid for a property purchase, along with disallowances under section 40(a)(ia) for non-deduction of TDS on certain payments. The Tribunal found merit in the assessee's argument regarding the tolerance band for the property valuation but upheld the disallowances under section 40(a)(ia).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135154 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-03-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 14-11-2022
• Other Referred Cases: Doraiswamy Suresh (HUF) vs ACIT, Maria Fernades Cheryl vs ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Reasonable cause; Valuation report; Condonation of delay; TDS
• Section: 143(3); 50C; 40(a)(ia); 194A

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI ᮰ी एबी टी. वक᳹, ᭠याियक सद᭭य एवं ᮰ी मंजुनाथ. जी, लेखा सद᭭य के समᭃ BEFORE SHRI ABY T. VARKERY, HON’BLE JUDICIAL MEMBER AND SHRI MANJUNATHA. G, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 963/Chny/2022 िनधाᭅरण वषᭅ / Assessment Year: 2016-17 Thiduvil Balakrishnan, Old No.3, New No. 4, 5 th Street, 4 th Cross, Seetharam Nagar, Chennai – 600 112. [PAN: AFMPB-5184-R] v. Deputy Commissioner of Income-tax, Central Circle -2(2), Chennai – 600 034. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri. T. Vasudevan, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. P. Sajit Kumar, JCIT सुनवाई की तारीख/Date of Hearing : 20.03.2023 घोषणा की तारीख/Date of Pronouncement : 24.03.2023 आदेश /O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-19, Chennai, dated 26.08.2022 and pertains to assessment year 2016-17. :-2-: ITA. No:963/Chny/2022 2. At the outset, learned AR for the assessee submitted that the appeal filed by the assessee is time barred by 11 days for which necessary petition for condonation of delay along with affidavit explaining the reasons for the delay has been filed. The AR further submitted that the assessee could not file appeal within the time allowed under the Act, because the assessee had went to hometown to attend religious function and due to unforeseen circumstances, returned only on 12.11.2022, and thereafter appeal was filed on 15.11.2022 which caused a delay of 11 days. The delay in filing appeal is neither intentional nor willful but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. 3. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee do not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay and hence, appeal filed by the assessee may be dismissed as not maintainable. :-3-: ITA. No:963/Chny/2022 4. Having heard both sides and considered the petition filed by the assessee for condonation of delay, we are of the considered view that reasons given by the assessee for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of appeal is condoned and appeal filed by the assessee is admitted for adjudication. 5. The assessee has raised the following grounds of appeal: “1. The order of the Commissioner of Income Tax(Appeals) confirming the additions to the extent of 10,79,630 is erroneous, contrary to law and Sustainable to the facts of the case. 2. The CIT(A) erred in confirming the addition of Rs.825000/- under sec.56(2)(vii) of the Act. 3. The CIT(A) failed to appreciate that there was no difference in the stated consideration in the sale deed and the guideline value of property and the stamp duty paid on this account was not disturbed by the registering authority and hence confirming the disallowance was unjustified on the facts of the case. 4. The CIT(A) further failed to appreciate that the additional stamp duty was paid on the 88-year old shed in the land, the value of which was estimated by the registering authority as against the value declared by assessee and hence this cannot lead to disallowance u/s.56(2)(vi) of the Act. 5. The CIT(A) was not justified in concluding that as the assessee had not contested the additional stamp duty paid, the :-4-: ITA. No:963/Chny/2022 disallowance u/s.56(2)(vi) is automatically attracted and rather ought to have considered that there was no dispute on the stamp duty paid for the immoveable property and hence ought to have deleted the addition. 6. The CIT(A) erred in confirming the disallowance of Rs.254300/- u/s.40(a)(ia) of the Act. 7. The CIT(A) failed to appreciate that the assessee had paid upfrot finance charges to financial institution for availing loan facility and the payment was prior to entering into contract and hence the same is not liable to TDS warranting the disallowance u/s.40(a) (ia). 8. The CIT(A) further failed to appreciate that the upfront finance charges not in the nature of interest payments and hence there is no liability to effect TDS on the payments made to financial institution and therefore the disallowance is untenable in law and facts of the case. 9. he CIT(A), in any event, ought to have considered the contentions of the assessee in the proper perspective and deleted the additions and allowed the appeal.” 6. The brief facts of the case are that, the assessee is an individual and proprietor of ‘Neethu Timber and Saw Mills’, filed his return of income for the assessment year 2016-17 on 07.09.2016, declaring total income of Rs. 8,76,610/-. The case has been selected for scrutiny and the assessment has been completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) dated 27.12.2018 and determined total income of Rs. 58,28,888/-, by making addition towards difference between consideration paid for :-5-: ITA. No:963/Chny/2022 purchase of property and guideline value u/s. 56(2)(vii)(c) of the Act, at Rs. 8,25,000/- and disallowance of various expenses u/s. 40(a)(ia) of the Act for non-deduction of TDS under respective provisions of the Act. The assessee carried the matter in appeal before the first appellant authority, but could not succeed. The Ld. CIT(A), for the reasons stated in their appellant order dated 28.01.2019, sustained additions made by the AO towards difference between guideline value and consideration paid for purchase of property and disallowance of expenditure u/s. 40(a)(ia) of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 7. The first issue that came up for our consideration from ground no. 2 to 5 of assesse’s appeal is addition of Rs. 8,25,000/- u/s. 56(2)(vii)(c) of the Act, towards difference between guideline value and consideration paid for purchase of property. The assessee has purchased a property for consideration of Rs. 3,40,00,000/- and paid additional stamp duty of Rs. 66,000/-. The assessee was confronted with additional stamp duty paid, for which the assessee stated that the building value has been estimated which resulted in :-6-: ITA. No:963/Chny/2022 payment of additional stamp duty. The AO, after considering submissions of the assessee made additions of Rs. 8,25,000/- being difference between guideline value and consideration paid for purchase of property. 8. The ld. Counsel for the assessee, submitted that the ld. CIT(A) erred in not appreciating the fact that there is no difference between guideline value and consideration paid for purchase of property as per registered document. Although, there is a difference between value of building but said difference is on account of estimation of building, which cannot be considered as difference in consideration paid for purchase of property and guideline value. The Ld. Counsel for the assessee, further made an alternate submission in light of the decision of ITAT, Chennai Benches in the case of Doraiswamy Suresh (HUF) vs ACIT in ITA No. 609/Chny/2020, that if difference between guideline value and consideration paid for purchase of property is within tolerance band as prescribed u/s. 50C of the Act, then there cannot be any addition u/s. 56(2)(vii)(c) of the Act, because said amendment has to be considered as retrospective in nature from the date provision was inserted in the statue. :-7-: ITA. No:963/Chny/2022 9. The Ld. DR, on the other hand supporting the order of the CIT(A) submitted that the assessee has admitted difference between guideline value and consideration paid for purchase of property and also offered to tax. Further, the assessee could not justify the value paid for purchase of property with any valuation report. Further, the assessee did not dispute the value determined for payment of stamp duty. Therefore, the AO has rightly made additions and their order should be upheld. 10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. As per the provisions of section 56(2)(vii)(c) of the Act, if difference between consideration paid for purchase of property and guideline value of said property, then said difference should be treated as income of the assessee for the relevant assessment year. In this case, there is no dispute with regard to the fact that there is a difference between guideline value of the property and consideration paid for purchase of said property, because the registration authority has levied an additional stamp duty of Rs. 66,000/- while :-8-: ITA. No:963/Chny/2022 registering the property. The AO has made addition of Rs. 8,25,000/- being difference between guideline value and consideration paid for purchase of property. Therefore, we are of the considered view that there is no error in the reasons given by the AO to make additions towards difference in value of property u/s. 56(2)(vii)(c) of the Act. 11. As regards alternate plea of the assessee that, the difference between guideline value and consideration paid for property is less than the tolerance band fixed by virtue of amendment to Section 50C by the Finance Act, 2020 and thus, no addition can be made u/s. 56(2)(vii)(c) of the Act, we find that, the amendment brought to Section 50C by the Finance Act, 2018 and further amendment by Finance Act, 2020 is held to be retrospective in nature, as held by ITAT, Mumbai in the case of Maria Fernades Cheryl vs ITO [2021] 187 ITD 738 (Mum). We, therefore of the considered view that by virtue of said amendment to section 50C of the Act, if difference between guideline value and consideration paid for purchase of property is less than the tolerance band, then said difference cannot be considered as deemed consideration in the hands of the seller and consequently the provisions of section :-9-: ITA. No:963/Chny/2022 56(2)(vii)(c) of the Act cannot be invoked in the hands of the buyer. Since, difference between guideline value and consideration paid for purchase of property in the present case is less than tolerance band, we are of the considered view that no addition can be made u/s. 56(2)(vii)(c) of the Act. Thus, we direct the AO to delete addition made towards difference in value of property u/s. 56(2)(vii)(c) of the Act. 12. The next issue that came up for our consideration from Ground No.6 to 9 of assessee’s appeal is disallowance of certain expenditure u/s. 40(a)(ia) of the Act for non deduction of TDS. The AO was disallowed 30% of interest on other payment to the tune of Rs. 8,47,867/- u/s. 40(a)(ia) of the Act. As per Form-3CD filed along with return of income for the assessment year where the tax auditor certified that TDS has not been deducted on certain payments. It was the argument of the assessee that the impugned interest in other payment includes processing charges (upfront fee) paid for taking loan from bank which is not in the nature of interest to deduct TDS u/s. 194 of the Act. :-10-: ITA. No:963/Chny/2022 13. Having heard both the sides and considered the material available on record, we find that the tax auditor has quantified interest on other payments which is subjected to TDS to the relevant facts in its tax auditor report issued in Form No.3CD for the impugned assessment year. Further, the assessee could not file any correctable evidence to justify his arguments that impugned payment does not comes under the preview of provisions of Section 194 of the Act. Although, the Ld. counsel for the assessee, tried to make out the case that part of said amount is processing charges paid to bank for availing loans. Since, the assessee could not justify the payments without deduction of tax with necessary evidence and also fails to obtain the certificate from the Auditor to the effect what was quantified under relevant Form No.3CD, includes processing fees paid to banks of which provisions of Section 194A of the Act has no application. We are of the considered view that, there is no merit in the reasons given by the Ld. CIT(A) to sustain addition made towards disallowance of expenditure u/s. 40(a)(ia) of the Act. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the assessee. :-11-: ITA. No:963/Chny/2022 14. In the result, appeal filed by the assessee is dismissed. Order pronounced in the court on 24 th March, 2023 at Chennai. Sd/- (एबी टी. वकŊ,) (ABY T VARKEY) Ɋाियकसद˟/Judicial Member Sd/- (मंजुनाथ. जी) (MANJUNATHA. G) लेखासद˟/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated: 24 th March, 2023 JPV आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/PCIT 4. आयकर आयुᲦ/CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF