Case Law Details
Bhausaheb Sopanrao Bhoir Vs DCIT (ITAT Pune)
ITAT Pune held that as enhanced cost of acquisition not substantiated with cogent evidence, the same is not allowable as cost of acquisition of transferred assets.
Facts- The sole and substantive ground is directed against the determination of cost of acquisition of asset where excess payment is made over and above the agreed price consideration in acquiring it.
In a scrutiny assessment u/s 143(3) of the Act, the Ld. Dy. CIT, Circle-9, Pune [‘AO’] vide his order dt. 12/03/2013 assessed the total income at ₹99,28,610/- on account of three additions including the impugned addition of ₹48,70,000/- arising on account of slicing down the cost of acquisition of assets charged to tax on its transfer.
Conclusion- We are of the considered view that, the excess payment (if any) made by the appellant to the parties from whom the pieces of land were acquired does not ispo-facto sufficient it to attribute towards the cost of acquisition of transferred assets. This is so because, there is a complete absence of lawful contractual obligation or a document creating any additional liability upon the appellant purchaser or acquirer for any payment in addition to or over & above the agreed consideration of ₹26,30,000/- in relation to execution of registered POA. Therefore we do not find any infirmity with the orders of both the tax authorities below in disallowing the excess cost while computing the profits in the hands of appellant. For the reason we find the grounds of appeal meritless.
FULL TEXT OF THE ORDER OF ITAT PUNE
Aggrieved by the first appellate order of National Faceless Appeal Centre, Delhi [for short ‘NFAC’] dt. 06/12/2022 passed u/s 250 of the Income-tax Act, 1961 [for short ‘the Act’], the assessee instituted the present appeal for assessment year [for short ‘AY’] 2010-11 with the following grounds of appeal;
“1. The learned CIT (A) erred in confirming the addition of Rs. 48,70,000/- made by the ld AO on account of understatement of profit on sale of land merely on presumption and surmises without considering the true nature of the transaction and without appreciating the submissions made by the appellant.
2. The ld CIT(A) while confirming the additions of Rs.48,70,000/- made by the ld AO failed to consider the concept of substance over form for the transaction under consideration, and in support of the purchase price paid of Rs.75.00 lakhs further failed to consider the evidences submitted and not appreciating the important facts that:
i) The copy of Memorandum of Understanding is a valid document for giving effect to transactions that is valid in the eyes of law.
ii) The copy of confirmation letters of Sanjay Jain and Santosh Lunkad are the documents from which it is evident that the amount is paid for the purchase of land confirming the facts of the transaction.
iii) The entire transaction towards purchase of land is executed though account payee cheques.
iv) The parties Sanjay Jain and Santosh Lunkad are assessed to tax.
3. The learned CIT(A) and AO has erred in charging interest under section 234B on Assessed Income without considering the provisions of law that interest u/s 234B was leviable on the tax on the total income as declared in the Returned Income.
4. The appellant may kindly be permitted to add to or alter any of grounds of appeal, if deemed necessary.”
2. It shall suffice to state the sole and substantive ground is directed against the determination of cost of acquisition of asset where excess payment is made over and above the agreed price consideration in acquiring it.
3. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of “ITAT Rules”, perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to parties present.
4. On the perusal of case records we find the following undisputed facts are emerged for our consideration;
4.1 The appellant assessee is an individual who had filed his return of income [for short ‘ITR’] originally u/s 139(1) of the Act declaring total income of ₹17,58,490/- which later was revised to ₹42,58,610/-u/s 139(5) of the Act.
4.2 In a scrutiny assessment u/s 143(3) of the Act, the Ld. Dy. CIT, Circle-9, Pune [for short ‘AO’] vide his order dt. 12/03/2013 assessed the total income at ₹99,28,610/- on account of three additions including the impugned addition of ₹48,70,000/- arising on account of slicing down the cost of acquisition of assets charged to tax on its transfer.
4.3 In an appeal, the Ld. NFAC after considering detailed submission and analysing the facts in the light of juridical precedents, has upheld the action of Ld. AO vide para 9.4-9.5 placed at page 21-22 of impugned order as;
“9.4 I have perused the arguments of the AO in the assessment order as well as the detailed submission of the appellant on the issue. The AO has discussed the issue in detail in para 6.1 to 6.6 of the assessment order. In view of the discussion y AO I am inclined to agree with the AO that the land sold by the appellant to be 26,30,000/- in place of 75,00,000/-. Thus, there is difference of Rs. 48,70,000/- which is an excess cost shown with a view to reduce profit made by the appellant. Therefore, the amount of Rs. 48,70,000/- was concealed by the appellant and added to the income of the appellant by the Ao.
9.5 In view of the above discussion, it is held that AO was justified in making addition of Rs. 48,70,000/- of the IT Act. Accordingly, addition made by AO is confirmed and the ground of appeal is dismissed.‟
(Emphasis supplied.)
5. We note that, the appellant had acquired certain pieces of land (and rights there into) under a registered irrevocable power of attorney [in short ‘POA’] from Mr Sanjay Jain and Mr Santosh Lunkad on 20/02/2010 for a total consideration of ₹26,30,000/-. The said pieces of land were then sold separately to i.e. Sangeeta Ramsagar Prasad and Ramsagar Vasant Prasad for a total sale consideration of ₹1,00,00,126/-. The appellant however on the basis of payment of ₹75,00,000/- made to Mr Sanjay Jain & Mr Santosh Lunkad has computed the profits out of aforesaid transactions at ₹25,00,126/-in place of ₹73,70,126/- and offered to tax in the revised ITR filed on 30/01/2012. Upon the failure of appellant to substantiate the substituted of enhanced cost of acquisition with cogent evidence, the Ld. AO assessed the total income u/s 143(3) of the Act after disallowing excess cost of acquisition of ₹48,70,000/-, which was echoed by the Ld. NFAC.
6. After a thoughtful consideration we are of the considered view that, the excess payment (if any) made by the appellant to the parties from whom the pieces of land were acquired does not ispo-facto sufficient it to attribute towards the cost of acquisition of transferred assets. This is so because, there is a complete absence of lawful contractual obligation or a document creating any additional liability upon the appellant purchaser or acquirer for any payment in addition to or over & above the agreed consideration of ₹26,30,000/- in relation to execution of registered POA. Therefore we do not find any infirmity with the orders of both the tax authorities below in disallowing the excess cost while computing the profits in the hands of appellant. For the reason we find the grounds of appeal meritless.
7. In result, the assessee’s appeal is DISMISSED.
In terms of rule 34 of ITAT Rules, 1963 the order is pronounced in the open court on this Tuesday 27thday of March, 2023.
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