Case Law Details
Kamaluddin Popatlal Surani Vs PCIT (ITAT Surat)
In the matter abovementioned ITAT Surat have held that PCIT rightly invoked jurisdiction u/s 263 as he observed that assessee failed to explain the nature and source of investment with necessary supporting evidence.
Assessee carried on retail business of onion and potatoes who filed his return for AY 2017-18 at Rs.3,45,749/-. The case was re-opened for the reason that assessee had purchased immovable properties for Rs.33,18,000/- whose value was Rs.48,11,989/- as per the Stamp Valuation Authority (SVA). After noticing the difference of Rs.14,93,939/- between the actual sale consideration and Stamp Duty Value, addition of Rs.48,11,989/- u/s 56(2)(x) was made. Subsequently, PCIT observed that AO had added FMV (Fair Market Value) of the property amounting to Rs.44,11,939/- to the income of the assessee u/s 56(2)(x) instead of Rs.14,93,939/- u/s 56(2)(x) and actual purchase consideration of Rs.33,18,000/- as unexplained investment u/s 69A. Hence, PCIT found that the order was erroneous or prejudicial to the interests of revenue. Reply was submitted in response to the notice u/s 263 where assessee submitted that he had already filed appeal before CIT (A) against order u/s u/s 144 r.w.s. 147 r.w.s. 144B. So, notice issued u/s 263 was bad in law. PCIT rejected the submissions of the assessee and set-aside the assessment order.
Before ITAT it was submitted that first appeal before the CIT(A) is pending, in which the issue of revision is also included. First payment was made in year 2011 and no payment was made in AY 2017-18 and hence order passed u/s 147 by the AO is not sustainable in absence of any payment made for purchase of the flat during the year under consideration. Payment of the purchase of the flat was made between 09.11.2011 and 15.09.2020 and all the payments were made by cheques which were duly reflected in the bank statement. On the other hand, revenue supported order of PCIT. He submitted that payment details are not available in the Articles of Agreement.
After considering the submissions from both parties, ITAT observed that PCIT has bifurcated the sum into two parts and observed that the difference between the value as per the registered deed and that as per SVA amounting to Rs.14,93,393/- should have been added u/s 56(2)(x) and the amount as per the sale deed of Rs.33,18,000/- should have been added u/s 69 because assessee failed to explain the nature and source of investment with necessary supporting evidence. Hence, PCIT rightly invoked jurisdiction u/s 263. Clause (x) of Section 56(2) expands the scope of income from other sources w.e.f. AY.2017-18 and subsequent year to provide that any receipt by any person without consideration or for inadequate consideration in excess of Rs.50,000/- shall be chargeable to tax in the hands of recipient under the head “Income from other sources”. Hence, AO should have taxed Rs.14,93,393/- and not the entire Stamp Duty Value (SVA) u/s 56(2)(x). ITAT further observed that all investments were not made in the current AY so addition of the total amount cannot be made in the subject AY. Therefore, ITAT restored the issue of determination of addition u/s 69 to the file of PCIT to consider afresh to make further inquiry with respect to the year of purchase, purchase cost and date-wise payments.
Appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 263 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 15.03.2024 by the Principal Commissioner of Income Tax, Valsad [in short, ‘PCIT’] for the assessment year (AY) 2018-19. The subject re-assessment order u/s 144 r.w.s. 147 r.w.s. 144B of the Act had been passed by the Assessing Officer (in short, ‘AO’) on 25.03.2022 by making addition of Rs.48,11,989/- u/s 56(2)(x) of the Act.
2. The grounds of appeal raised by the assessee are as under:
“1. On the facts and circumstances of the case, Ld. Pr. CIT, Valsad has erred in law and on fact to revise appellant’s assessment u/s 263 of the IT Act, ignoring the fact and law that even AO’s reopening of assessment for AY.2018-19is contrary to the provisions of the law.
2. On facts and circumstances of the case, Ld. Pr. CIT, Valsad has erred in law and on fact to revie appellant’s assessment u/s 263 of the IT Act, ignoring the fact and law that even AO’s reopening of assessment for AY.2018-19 is contrary to the provisions of the law.
3. The appeal filed by the assessee is barred by limitation by 27 days in terms of provisions of section 253(3) of the Act. The assessee has filed an affidavit giving reasons for delay in filing the appeal before the Tribunal. In the affidavit, the assessee stated that revision order of PCIT, Valsad dated 15.03.2024 has been served electronically through Income-tax Portal. Appeal was filed with the Registry, ITAT, Surat on 10.06.2024, which is late by 26 days. The assessee submitted that his tax matter was looked after by Shri Kunal Pitalia, who has filled his original return of income for AY.2018-19 u/s 148 of the Act. He submitted that his income tax matter was jointly follow-up by his earlier tax consultant and Shri Rajesh M. Upadhyay. The order u/s 263 of the Act came to the knowledge of Shri Kunal Pitalia on 06.06.2024, when the appellant inquired about the result of revision proceedings by the PCIT for which reply was filed in March,2024. When he visited ITBA portal, it was found that the revision order was passed by the PCIT on 15.03.2024. Thereafter, he immediately informed Shri Rajesh M. Upadhyay, who took immediate action and filed appeal before ITAT, Surat on 10.06.2024. The appellant submitted that delay of 26 days in filing the appeal is neither wilful nor deliberate. Therefore, he requested to condone the delay in the interest of justice.
4. On the other hand, learned Commissioner of Income-tax – Departmental Representative (ld. CIT-DR) for the revenue submitted that assessee has failed to explain sufficient cause for the delay; hence, delay should not be condoned.
5. We have heard both the parties on this preliminary issue and note that there is short delay of 27 days. We note that assessee was not negligent but due to lack of advice of the earlier tax consultant, the delay has occurred in filing the present appeal before the Tribunal. The reasons given in the affidavit would constitute sufficient cause for delay in filing this appeal. We, therefore, condone the delay and admit the appeal for hearing.
6. Brief facts of the case are that assessee filed his return of income for AY.2017-18 on 31.07.2018, declaring total income at Rs.3,45,749/-. The appellant was carrying on retail business of onion and potatoes under the name and style of M/s Altaf Traders. The case was re-opened for the reason that assessee had purchased immovable properties for Rs.33,18,000/- on 24.07.2017, whose value was Rs.48,11,989/- as per the Stamp Valuation Authority (SVA). Accordingly, there was difference of Rs.14,93,939/- between the actual sale consideration and Stamp Duty Value. After issuing various notices and show cause notice, the Assessing Officer (in short, ‘AO’) added Rs.48,11,989/- u/s 56(2)(x) of the Act. He also initiated penalty u/s 271AAC(1) of the Act and 272A(1)(b) of the Act separately.
7. The PCIT called for the assessment records and examined the same. He observed that AO had added the Fair Market Value (FMV) of the property amounting to Rs.44,11,939/- to the total income of the assessee u/s 56(2)(x) of the Act. The PCIT observed that the AO should have added Rs.14,93,939/- u/s 56(2)(x) of the Act and actual purchase consideration of Rs.33,18,000/- as unexplained investment u/s 69A of the Act. Therefore, the order was erroneous or prejudicial to the interests of revenue. Accordingly, show cause notice was issued on 07.02.2024 to the assessee to explain as to why the order passed u/s 144 r.w.s. 147 r.w.s. 144B of the Act should not be set aside by invoking provisions of section 263 of the Act. The show cause notice is at pages 3 and 4 of the order of the PCIT. In reply, the assessee stated that the issue had already been considered during the assessment proceedings and AO had taxed the entire value of SVA of Rs.48,11,939/- u/s 56(2)(x) of the Act. The appellant submitted that neither the provisions of section 56(2)(x) nor section 69 can be applied because the impugned property was booked with Rose Developers Private Limited on 09.11.2011 by paying Rs.1,00,000/- as earnest money / part payment through cheque No.191231 of Bank of India, Vapi. Therefore, value of the flat was fixed in the year 2011-12 (AY.2012-13) but registration was made on 30.03.2017. Therefore, there is a difference in the SVA value and value mentioned in the registration deed. The first payment of purchase of the flat was on 09.11.2011 and thereafter, all payments were made through cheques in instalments. No payment was made in AY.2017-18. It was also submitted that the issue was examined by the AO during reassessment proceedings and AO has made addition of the whole value of SVA of Rs.48,11,389/-. The appellant has filed appeal before CIT(A) on 22.04.2022 which is pending till date. Since the CIT(A) is having concurrent jurisdiction and is also having power of enhancement in case there is mistake in the order of AO, the issue cannot be examined by PCIT within the meaning of section 263 of the Act.
8. The PCIT was not satisfied with the explanation of the assessee. He observed that it is settled law that the order passed by the AO without conducting proper enquiry is deemed to be erroneous and prejudicial to the interests of revenue. In the present case, AO failed to treat the investment made in the property of Rs.33,18,000/- u/s 69A of the Act. The difference of Rs.14,93,939/- (Rs.48,11,939 – Rs.33,18,000) only was required to be added u/s 56(2)(x) of the Act. Such omission on part of AO has resulted into an erroneous order which was also prejudicial to the interests of revenue and revenue has lost tax of Rs.21,18,125/- which was lawfully due to it. He has relied on various decision which are at para 12 of the order. Accordingly, the order passed u/s 144 r.w.s. 147 r.w.s. 144B of the Act dated 25.03.2022 was set aside u/s 263 of the Act with a direction to the AO to make fresh assessment order as discussed by the PCIT. The AO was directed to make proper and meaningful inquiry on the issues discussed in the order u/s 263 of the Act. He also directed to AO to grant reasonable and sufficient opportunity of being heard.
9. Aggrieved by the order of PCIT, the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee has filed a paper book and relied on various decisions to contend that provisions of section 263 cannot be invoked in the present case because the first appeal before the CIT(A) is pending, in which the issue of revision is also included. The ld. AR further submitted that the order passed u/s 147 by the AO is not sustainable in absence of any payment made for purchase of the flat during the year under consideration. He has referred to pages 5 to 7 and 75 to 93 of the paper book to support his argument that payment of the purchase of the flat was made between 09.11.2011 and 15.09.2020. All the payments were made by cheques. These payments are appearing in the bank statement of Bank of India which is at pages 79 to 90 of the paper book. The ld. AR relied upon the decisions in cases of Smt. Renuka Philip vs. ITO, 409 ITR 567 (Madras) and Pinki Chetan Shah vs. ITO, ITA No.3629/Mum/2023, dated 27.02.2024.
10. On the other hand, learned Commissioner of Income-tax – Departmental Representative (ld. CIT-DR) of the revenue supported the order of PCIT. He submitted that payment details are not available in the Articles of Agreement dated 30.03.2017, submitted by the appellant in pages 27 to 75 of the paper book. From the ledger account of M/s N. Rose Developers Pvt. Ltd., it is not coming out that payments for purchase of the flat was received by the said developers. In the payment slips also, flat number is different, and not the same as is mentioned in the sale deed.
11. We have heard both parties and perused the materials available on We have also deliberated upon the decisions relied upon by both sides.
In the re-assessment order u/s 144 of the Act, the AO has called for various details from the assessee and made addition of the entire amount of Rs.48,11,393/-, being the value as per SVA due to non-compliance of assessee in the re-assessment proceedings. In the revision proceedings, the PCIT has bifurcated the said sum into two parts and observed that the difference between the value as per the registered deed and that as per SVA amounting to Rs.14,93,393/- should have been added u/s 56(2)(x) of the Act and the amount as per the sale deed of Rs.33,18,000/- should have been added u/s 69 of the Act. This is so because assessee failed to explain the nature and source of investment with necessary supporting evidences. We find that the action of the PCIT is in accordance with clear statutory provisions of the Act. Clause (x) of Section 56(2) expands the scope of income from other sources w.e.f. AY.2017-18 and subsequent year to provide that receipt of the sum of money or property by any person without consideration or for inadequate consideration in excess of Rs.50,000/- shall be chargeable to tax in the hands of recipient under the head “Income from other sources”. Hence, AO should have taxed Rs.14,93,393/- and not the entire Stamp Duty Value (SVA) u/s 56(2)(x) of the Act. Moreover, AO should have added Rs.33,18,000/- u/s 69 because assessee did not offer explanation about the nature and source of the investment which was not recorded in his books of account. As held by Hon’ble Supreme Court in case of Malabar Industries Co. vs. CIT, 243 ITR 83 (SC), an incorrect application of law will satisfy the requirement of the order being erroneous. Hence, the PCIT has rightly involved provisions of section 263 of the Act.
11.1 Having held that the order was amenable to provisions of section 263 of the Act, let us examine whether directions of PCIT in the order u/s 263 of the Act are in order. We find that there is confirmation and ledger account from the builder, M/s N. Rose Developers Pvt. Ltd., who has accepted payments from the appellant and also signed the documents. The said documents are the basis for the re-opening the assessment u/s 147 of the Act as well as revision proceedings u/s 263 of the Act. It is also a fact that in the payment receipts, different flats numbers are mentioned. It is also submitted that payments for purchase of flat were made from 09.11.2011 to 15.02.2020. Hence, all investments were not made in the current assessment year. Therefore, the addition of the total amount cannot be made in the subject assessment year. We also find that the facts as stated in different stages are contrary to each other, which require further clarification and verification to come to a correct conclusion. Therefore, in the interest of justice and fair play, the matter is set aside to the file of PCIT to make further inquiry with respect to the year of purchase, purchase cost and date-wise payments etc. for Flat No. 503, 5th Floor, ‘A’ Wing, Heaven Plaza, Mumbai from M/s N. Rose Developers Pvt. Ltd. to determine the amount of investment u/s 69 of the Act. The PCIT should provide adequate opportunity of hearing to the appellant and pass the order thereafter in accordance with law. The appellant is directed to file all necessary details and explanation as required by the PCIT by not taking adjournment without any valid reasons. For statistical purpose, the appeal of the assessee is partly allowed.
12. In the result, the appeal of the assessee is partly allowed.
Order is pronounced in the open court on 02/01/2025.
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