Anil Kumar Paik Vs DCIT (ITAT Kolkata)
Conclusion: Advances received against booking of flats were not an unexplained investment under section 69 as there was no mechanism under the Act to make the addition for the excess of fair market value over the purchase consideration paid for purchase of immovable property before 01/04/2017 and assessee had duly disclosed the transactions as consideration had been paid through banking channel thus, no addition to be made.
Held: Assessee-individual was carrying out various types of business including property development, liquor shop, medicine shop and rental income. The return was selected for scrutiny by issuance of notice u/s 143(2) and 142(1). AO noticed as per the ITS details, assessee had purchased a flat for a consideration of Rs. 44,24,850/-but in the reply filed by assessee on 28/09/2015, it was submitted that during Financial Year 2013-14 no new property had been purchased. Thus, AO made an addition for unexplained investment of Rs.48,00,000/-. It was held that assessee during the course of assessment proceedings stated to have not made any new investment in purchase of immovable property during the year as no such investment was appearing in any balance sheet of the sole proprietorship concern owned by him. However, details of the investment in the said property had been filed and the purchase consideration had been paid out of the bank account duly disclosed in the income tax return. However, as per the stamp valuation authority, the value of the said property for the purpose of stamp valuation was adopted at Rs.44,12,850/-. On the other hand, purchase consideration paid by assessee was Rs.7,00,000/- and the same was duly appearing in the purchase deed. Firstly the said transaction was not an undisclosed transaction as it had been carried out through a disclosed bank account. Further, the provisions for making the addition on the basis of difference of stamp duty valuation/fair market value of such property which exceeds the actual consideration paid had been brought into the statute in Section 56(2)(x)(b) by the Finance Act No. 2017, effective from 01/04/2017. Since the instant appeal pertained to Assessment Year 2014-15, there was no mechanism under the Act to make the addition for the excess of fair market value over the purchase consideration paid for purchase of immovable property. Thus, since the assessee had duly disclosed the transactions as consideration had been paid through banking channel, no addition was called for on account of unexplained investment u/s 69 at Rs.44,12,850/-.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter the “ld. CIT(A)”) dt. 03/03/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2014-15.
2. The assessee has raised the following grounds of appeal:-
“1. FOR THAT none of the conditions precedent existed and/or have been complied with and/or fulfilled by the Ld. the Ld. Commissioner of Income Tax (Appeals)-N.FAC in passing the impugned order ex-parte in contravention to the prescription contained in the provisions of s. 250(6) of the Income Tax Act, 1961 and the alleged appellate order dated 03-03-2023 passed thereunder is therefore ah initio void, ultra vires and null in law.
2. FOR THAT on a true and proper interpretation of the scope and ambit of the provisions of s. 68 of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-N.FAC. was absolutely in error in impliedly upholding the action of the Ld. Deputy Commissioner of Income Tax, Circle 8(1), Kolkata without proving any infringement thereof and the purported conclusion reached on that behalf is entirely baseless, unlawful, and invalid.
3. FOR THAT the spurious action of the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. in upholding the addition of Rs. 53,29,150/- resorted to by the Ld. Deputy Commissioner of Income Tax, Circle 8(1). Kolkata without any proper application of mind on the rejoinder of the appellant is absolutely arbitrary, unreasonable, and perverse.
4. FOR THAT the specious approach of the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. of misreading evidence, considering improper facts, failing to consider proper position in law and thus coming to an erroneous finding in impliedly sustaining the addition of Rs. 53.29,150/- made by the Ld. Deputy Commissioner of Income Tax. Circle 8(1). Kolkata on the manifestly wrong appreciation of facts based on considerations not relevant to the issue i wholly illegal, illegitimate, and infirm in law.
5. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-N.FA.C acted unlawfully in impliedly sustaining the purported addition of R 44,12,850/-made the Ld. Deputy Commissioner of Income Tax, Circle 8(1), Kolkata by invoking the mischief u/s. 69 of the Income Tax Act, 1961 without satisfying the parameters thereof and the adverse conclusion reached on that behalf in violation of the statutory prescription is completely unfounded, unjustified, and untenable in law.”
3. Brief fact of the case are that the assessee is an individual and is carrying out various types of business including property development, liquor shop, medicine shop and rental income. Income of Rs. 1,09,65,940/- declared in the e-return filed for Assessment Year 2014-15 on 28/03/2016. The return was selected for scrutiny through CASS followed by issuance of notice u/s 143(2) and 142(1) of the Act. Various details were called for by the Assessing Officer and the same also contained details regarding advance received against booking of flats, examination of sales turnover as per the income tax returns vis-à-vis individual transaction statement available on income-tax portal.
3.1. The ld. Assessing Officer noticed that in the financial statement, sundry creditors as on 31/03/2014 included advance of Rs. 5,95,04,920/- received by S. Paik & Co., which is a sole proprietorship concern of the assessee against the sale of flats. The ld. Assessing Officer picked up certain names from the details of parties from which advances were received and issued notice u/s 133(6) of the Act but except one, the remaining three parties did not reply and in absence of satisfaction regarding the genuineness of the transactions, the advance of Rs.48,00,000/- from three parties added to the income of the assessee.
3.2. Further the ld. Assessing Officer also observed that as per the individual transaction statement, assessee has sold various immovable properties each valuing at Rs.30,00,000/- or more. The total of such transactions amount to Rs.4,61,10,613/- and reference has been made to nine of such transactions in the assessment order and sale deeds with these parties were registered during the year under consideration. When the assessee was asked to explain the differential amount of sales, it was submitted that the transaction with all these parties are regarding sale of immovable property and the amount appearing in the Individual Transaction Statement (ITS) is the value adopted by the stamp valuation authority but the actual transactions took place in the preceding years and the sale consideration has been received in parts which has been duly offered to tax in the year of receipt as sales turnover. The assessee filed complete details about agreement to sale with each of the parties along with the figure of actual sale consideration and the year in which such sales consideration has been disclosed as sales. However, the ld. Assessing Officer was not satisfied as he found that the information given by the assessee suffers from certain flaws and after discussing in detail finally made the addition for suppressed sales at Rs. 53,29,150/-.
3.3. The ld. Assessing Officer also noticed that as per the ITS details, the assessee has purchased a flat for a consideration of Rs. 44,24,850/-but in the reply filed by the assessee on 28/09/2015, it is submitted that during Financial Year 2013-14 no new property has been purchased. Thus, the ld. Assessing Officer made an addition for unexplained investment of Rs.48,00,000/-. Accordingly after making total addition of Rs. 1,45,42,000/- income assessed at Rs.2,55,07,936/-.
4. Aggrieved, the assessee preferred appeal before the ld. CIT(A) challenging the additions made by the Assessing Officer but failed to appear on most of the dates of hearing which fall during the Covid-19 restrictions period and accordingly, ld. CIT(A) dismissed the assessee’s appeal for non-appearance.
5. Aggrieved, now the assessee is in appeal before this Tribunal.
6. The ld. Counsel for the assessee has filed written submissions at page 1 to 8 of the paper book and along with these submissions, details have also been filed regarding the conveyance deed executed by those parties which did not reply to the notice u/s 133(6) of the Act. Reference also made to receipt summary and sale deed of various customers to whom assessee sold the immovable property in the past but the sale deed were registered during the year under consideration. Assessee also filed financial statements of the sole proprietorship concern and replies filed against various notice u/s 142(1) of the Act and same are available in the paper book filed on 10/08/2021.
6.1. The crux of the arguments of the ld. Counsel for the assessee are that firstly, with regard to the addition of Rs.48,00,000/- for unexplained advance received from booking of flats, he submitted that though the parties, namely, Amalendu Barik, Debanjan Chakraborty and Indumati Panchali, did not reply to the notice u/s 133(6) of the Act but conveyance deed was executed with these parties which is duly registered with the Registering Authority alleged sum received in preceding final year(s) and the same is a genuine transactions for sale of flats and, therefore, no addition is was called for. Secondly, as regards mismatch in sales turnover as per return vis-à-vis ITS details, he submitted that all the transaction amounts appearing in the ITS statement are the value adopted by stamp valuation authority but the actual transactions of sale took place in the preceding financial years and the consideration has been received in parts which have been offered to tax in the year of receiving such advance. He was fair in admitting that the assessee was not maintaining the books of accounts in the past strictly on the mercantile system of accounting and, therefore, even when the total sale consideration was not received, the advance received were treated as sale but at a later stage, assessee has started maintaining books strictly as per mercantile system of accounting and now only when the sale transactions materializes and consideration is received then sale is booked. He also submitted that complete details of the bank transaction with each of the parties referred by the ld. Assessing Officer in para 3 of the assessment order has been filed along with the ledger account showing the details of payments received. He also submitted that Section 50C of the Act is not applicable as alleged transactions are business transactions. Lastly, as regards the unexplained investments, it is submitted that the said investment was made by the assessee through its disclosed bank account and was appearing in the personal balance sheet. Since in the sole proprietorship concern, this investment was not appearing inadvertently, it was submitted that no purchase of immovable property has been made. He stated that assessee made an investment in purchase of property for a consideration of Rs.7,00,000/- but the value adopted by the stamp valuation authority is Rs.48,12,850/-. However, since Section 56(2)(x)(b) of the Act has come into effect from 01/04/2017, there is no provision under the Act to make addition of difference in purchase consideration calculated on the basis of fair market value (FMV)/Stamp Value adopted by the Stamp Valuation Authority. The ld. Counsel for the assessee referred and relied upon various decisions which are mentioned in the written submissions placed on record.
7. The ld. D/R, on the other hand, apart from supporting the order of the Assessing Officer stated that the assessee failed to appear before the ld. CIT(A) and the ld. Assessing Officer has made detailed finding dealing with each of the issues and submissions filed by the assessee will not support its grounds. He thus prayed that the addition made by the Assessing Officer may be confirmed.
8. We have heard rival contentions, perused the records placed before us and carefully gone through the judgments referred and relied upon by the ld. Counsel for the assessee in the written submission. We observe that the assessee is carrying out various types of business activities which includes property development, liquor shop, medicine shop, pathology lab, rental income etc. and assessee has made multiple sole proprietorship concern and prepares financial statements of each of the sole proprietorship concern. So far as the year under appeal is concerned, three additions are in challenge of which two relates to the business of property development and one relates to investment in immovable property. First we will take up the addition of Rs.48,00,000/- made for unexplained advance received against booking of flats from following three parties:-
