ACIT Vs Vicky Bahal (ITAT Lucknow)
The ITAT Lucknow upheld deletion of a protective addition of ₹2.29 crore made under Section 69 in the hands of the assessee for alleged unexplained investment in property. The addition was originally made on a protective basis, as the same investment had already been taxed substantively in the hands of another person (beneficial owner) under benami proceedings.
The Tribunal noted that the Income Tax Settlement Commission had already finalized taxation in the hands of the actual beneficial owner, including valuation adjustments. Once the income had been assessed and tax paid in the hands of the real owner, the same amount could not be taxed again—even on a protective basis—in another person’s hands.
It was reiterated that the Income-tax Act does not permit double taxation of the same income, whether in the same or different assessee’s hands.
Accordingly, the ITAT found no infirmity in the CIT(A)’s order deleting the addition and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
This appeal vide I.T.A. No.107/Lkw/2024 has been filed by Revenue for Assessment Year 2017-18, against impugned order dated 14/12/2023 (DIN & Order No. ITBA/APL/S/250/2023-24/1058772860(1) of Commissioner of Income Tax (Appeal), Lucknow
(B) In this case, assessment order dated 31.12.2018 was passed under Section 143(3) of the Income Tax Act, 1961 (in short the ‘Act’), whereby the assessee’s total income was assessed at Rs.2,42,62,720/-as against returned income of Rs.13,49,360/-. In the aforesaid assessment order, an addition of Rs.2,29,13,360/- was made under Section 69 of the Act on account of investment in property. The aforesaid addition was made on protective basis, whereas the addition of identical amount of Rs.2,29,13,360/- was made on substantive basis in the case of Mr. Virendra Kumar Gupta who was also held to be the beneficiary owner of the property, by the adjudicating authority for benami property. The relevant portion of the assessment order is reproduced below:
“8. The fact of the matter remains that he himself has admitted that that he is benamidar of this property whereas Shri Virendra Kumar Gupta is the beneficial owner. In this background the proceedings under Prohibition of Benami Property Transactions Act, 1988 are separately under progress. In view of this the sources of investment are required to be looked into the case of Shri Virendra Kumar Gupta. However as the purchase deed has been made in the case of Shri Vicky Bahal the addition of the unexplained investment is also to be made in the case of Shri Vicky Bahal u/s 69 of I.T.Act although on protective basis. In view of this an addition of Rs.2,15,64,000/-which is the cash payment for the said property, is being made u/s 69 of I.T.Act in the case of Shri Vicky Bahal on protective basis as during the course of present assessment proceedings, it has been stated that he has acquired this property from secured loan of Rs.84,36,000/- taken from Shri Virendra Kumar Gupta to whom he had earlier stated to Circle-2 Leal beneficial owner Since the assessee has himself admitted that this property is purchased by him from loan taken from Shri Virendra Kumar Gupta. It will be in the fitness of things if it is assumed that the entire consideration of Rs 3,00,00,000/-. including cash amount of Rs.84.36,000- is paid by the Shri Vicky Bahal,.
9. Accordingly amount of Rs.2,15,64,000/-(Rs.3,00,00,000-Rs.84,36,000/-) is held to be his unexplained investment of the assessee and is chargeable to tax u/s 69 of the LT. Act. 1961. However, this addition is made in the hands of Shri Vicky Bahal, protective basis as Shri Virendra Kumar Gupta, has been held to be beneficial owner of this property by the adjudicating authority for Benami Property. This will result in addition of Rs.2,29,13,360/- on protective basis.”
(C) The assessee filed appeal before learned CIT(A). Vide impugned appellate order dated 14.12.2023, the learned CIT(A) deleted the aforesaid addition of Rs.2,29,13,360/-; observing that the addition on account of purchase of the aforesaid property in the hands of the aforesaid Mr. Virendra Kumar Gupta had attained finality, as a result of order of Income Tax Settlement Commission. The learned CIT(A) further observed that Mr. Virendra Kumar Gupta having already paid tax on account of acquisition of the aforesaid property, there was no provision to ‘double tax’ amount in the hands of either the same or a different assesees. The relevant portion of the order of the learned CIT(A) is reproduced below:
“6.2 During the appellate proceeding, it has been submitted by the appellant that-“during the course of assessment proceedings assessee has provided complete facts about of the transactions of purchase of property situated at house at 385, (part) Moti Nagar, Lucknow on 28.10.2016 from Shri Raj Singh for a consideration of Rs. 84,36,000/-against value of stamp duty Rs. 84,35,812.50 and stamp duty expenses were of Rs. 5,90,700/- Rs. 84,36,000/- was available to assessee by way of unsecured loan from ShriVirendra Gupta who make payment directly on behalf of assessee to the vendor after deducting due tax. Further, part of such loan was also repaid by assessee to ShriVirendra Gupta, the Assessing Officer without understanding the peculiar facts of the case has made addition of Rs. 2,15,64,000/- (Rs. 3,00,00,000/- Rs. 84,36,000/-) on protective basis in the hands of the assessee, Considering proceeding of Shri Virendra Gupta was under progress before Hon’ble ITSC. During the enquiry proceedings of ShriVirendra Gupta as per direction of Hon’ble ITSC, the valuation of above said property was referred to Valuation Cell of Income Tax Department. The Valuation Cell valued the fair market value of such property at rs. 1,02,72,500/- against actual sale consideration of Rs. 84,36,000/- and difference was computed at Rs. 17,64,000/- was added in the hands of Shri Virendra Gupta as per order of Hon’ble ITSC. Hence, after order of Hon’ble ITSC in case of ShriVirendra Kumar Gupta issue has got finality. therefore, once tax has been paid on particular head/income same cannot be remain open as protective in hands of other assessee. In Income Tax Act there is no provision to charge double tax (02 times) on Tax Income in hands of either same or different assessee. Therefore, it is requested appeal of assessee may kindly be allowed considering peculiar facts of the case and related law.”
5.3 I have carefully considered submission of the appellant and facts of the case. A reference had been made to the Valuation Cell of the departments per direction of Hon’ble ITSC in the case of Shri Virendra Kumar Gupta to ascertain the Fair Market Value of the house at 385, Moti Nagar, Lucknow. The Valuation Officer, Lucknow estimated the Fair Market Value the Benami Property at Rs. 1,02,72,500/- as against the actual sale consideration of Rs.84,36,000/-. Therefore, the difference of Rs. 17,64,000 was added in the hands of Shri Virendra Gupta vide Hon’ble ITSC order dated 23.12.2020. Meanwhile the order of appellate tribunal under SAFEEMA dated 31.03.2023 has been received vide which the benaami proceedings initiated by the order of adjudicating authority are set-aside. In view of these facts and after order of Hon’ble a ITSC in case of Shri Virendra Kumar Gupta issue has got finality therefore, once tax has been paid on particular head/income same cannot be remain open as protective in hands of the appellant. Therefore, these grounds of appeal are allowed”.
(D) At the time of hearing, the Learned D.R. was heard, who relied on the assessment order. The dispute was subject matter of Income Tax Settlement Commission. A reference was made to valuation Cell of the Income Tax Department, as per direction of the Income Tax Settlement Commission in the case of aforesaid Mr. Virendra Kumar Gupta to ascertain the Fair Market Value (‘FMV’, for short) of the property. The property was taxed in the hand of aforesaid Mr. Virendra Kumar Gupta vide order of Income Tax Settlement Commission dated 23.12.2020. Since the taxation of the property in the hands of Mr. Virendra Kumar Gupta has attained finality as a result of order of Income Tax Settlement Commission; and further as aforesaid Mr. Virendra Kumar Gupta has already been subjected to tax on account of the aforesaid property, there remains no basis for protective addition in the case of assessee. The matter regarding taxation on account of acquisition of the property in the case of Mr. Virendra Kumar Gupta having attained finality as a result order of Income Tax Settlement Commission, the property cannot be again taxed in the hands of the assessee. Therefore, the order of learned CIT(A) the deleting the aforesaid addition of Rs.2,29,13,360/- in the case of the assessee on protective basis, is just and fair in having regard to facts and circumstances of the case and applicable law. No interference is required in the order of learned CIT(A). Therefore grounds of appeal filed by the Revenue are dismissed.
