Brief of the Case
ITAT Mumbai held In the case of The ACIT vs. M/s Sandeep Shrivastava that AO is not authorized to make any addition merely on account of presumption. In this case because the assessee is Share holder and Director of the company, which sold the property, the assessing officer has presumed that the assessee has derived benefit from the transaction of purchase of property for the reason that there was a difference between the sale consideration and the value determined for stamp duty purposes. Also, the AO was not sure as to the section under which the said difference is assessable.
Facts of the Case
The assessee is a director and share holder in a private limited company named M/s Champion India Industries Pvt. Ltd. The AO noticed that the assessee has purchased a property from the said company on 17.7.2008 for an agreed consideration of Rs.40.00 lakhs. The AO noticed that the Stamp Duty Authorities had valued this property at Rs.1,36,26,528/-. Hence the AO took the view that the difference between the stamp duty valuation and sale consideration amounting to Rs.96,26,528/- constitutes income in the hands of the assessee and accordingly assessed the same as income of the assessee u/s 17(2)(iii) /28(iv).
Contention of the Assessee
The ld counsel of the assessee submitted that the assessee is not an employee of the company and hence the provisions of sec. 17(2) (iii), which is applicable for computation of Salary income, cannot be applied.
He further submitted that the provisions of sec. 28(iv), relating to the value of any benefit or perquisite arising from business or the exercise of profession is also not applicable to the facts of the instant case, since it was a case of purchase of property. He further submitted that the assessee has purchased the said property at the price agreed between the buyer and seller. He further submitted that the value determined by the Stamp duty authorities cannot be considered in the instant case, since the said authorities determine the value of property on the basis of ready reckoner rates prescribed by the State Government. Accordingly he submitted that the value determined by the Stamp authorities is only an estimate and the same could not have been adopted by the AO.
Contention of the Revenue
The ld counsel of the revenue strongly placed reliance on the order passed by the assessing officer.
Held by CIT (A)
CIT (A) held that the AO cannot assess amount of Rs.96.26 lakhs as taxable perquisite u/s 17(2) (iii), in the absence of employer-employee relationship. CIT (A) noticed that the assessee was not an employee of the above said company and hence he was not receiving any salary form it. Hence there was no employer-employee relationship between the above said company and the assessee. He also relied upon the decision rendered by Hon’ble Supreme Court in the case of Emel Webber Vs. CIT (1993)(200 ITR 483), wherein the Hon’ble Apex Court has held that the existence of employer-employee relationship is prerequisite for application of sec. 15 to 17 , which relates to the computation of income from Salary.
The CIT (A) further noticed that the provisions of sec. 28(iv) are applicable to the value of any benefit or perquisite arising from business or exercise of profession. Hence it was held that the provisions of sec. 28(iv) also cannot also be invoked, since there was no benefit that arose from business or exercise of profession.
Held by ITAT
We notice that it is not the case of the AO that the assessee has paid any money over and above the consideration stated in the Sale agreement. Since the assessee happened to be the Share holder and Director of the company, which sold the property, the assessing officer has presumed that the assessee has derived benefit from the transaction of purchase of property for the reason that there was a difference between the sale consideration and the value determined for stamp duty purposes. Accordingly, the AO proceeded to assess the difference amount of Rs.96.26 lakhs as income of the assessee. However, the AO was not sure as to the section under which the said difference is assessable. Hence he has quoted both sec. 17(2)(iii) and sec. 28(iv) of the Act.
We have noticed that the CIT (A) has given proper reasoning that the above said difference cannot be assessed as income of the assessee under both the sections. During the course of hearing, the ld counsel of the revenue also could not controvert the reasoning given by CIT (A).
We further notice that the provisions of sec. 56(2)(vii), which provide for assessing difference between the Stamp duty valuation and the sale consideration in the hands of the buyer, has been inserted by the Finance Act, 2010 we.f. from 1.10.2009. In the instant case, the impugned transaction has taken place on 17-7-2008 and hence the deeming provisions of sec. 56(2) (vii) are also not applicable to it. Under these set of facts, we are of the view that the assessing officer has made the impugned addition only on surmises. Accordingly, we are of the view that the CIT (A) was justified in deleting the addition and accordingly uphold his order.
Accordingly, appeal of the revenue dismissed.