Benudhar Gokulanand Biswal Vs National E assessment Centre (ITAT Mumbai)
ITAT Mumbai held that the provisions of Sec. 56(2)(x) of the Act are incorporated in the Finance Act 2017 with the prospective applicability from A.Y.2017-18 and the transactions entered into prior to 1.04.2017 would not suffer any implications of the section.
Facts-The Assessing Officer (AO) has received the information that the assessee has purchased property on 14.07.2017 for a consideration of Rs.32,97,500/-, whereas the stamp valuation of the property is Rs. 52,74,186/-, therefore the AO invoked the provisions of Sec. 56(2)(x) of the Act as the assessee has failed to disclose fully material facts to the extent of Rs.19,76,686/-.
CIT(A) partly allowed the appeal. Being aggrieved, assessee preferred the present appeal.
Conclusion-The provisions of Sec. 56(2)(x) of the Act are incorporated in the Finance Act 2017 with the prospective applicability from A.Y.2017-18 and the transactions entered into prior to 1.04.2017 would not suffer any implications of the section. Whereas in the present case, the transaction of purchase of flat is vide agreement dated 13.07.2009 and it was registered on 14-7-2017 in the F.Y.2018-19. Further, merely because the first payment of Rs.2 lakhs was made on 8-10-2009 subsequently after date of agreement, the revenue cannot rely on the second proviso to section 56(2)(x) of the Act and tax the difference in stamp duty value of flat as per SRO and purchase consideration as per agreement. Since the section56(2)(x) of the Act is not applicable to the assessee, as the agreement was entered prior to 1¬04-2017, hence the second proviso cannot be made applicable and the assessee cannot be fastened the liability in the light of second proviso to section 56(2)(x) of the Act. We considering the facts, circumstances, submissions, ratio of the judicial decisions set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi/CIT(A) passed U/sec 250 of the Act. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and as per the law, the National Faceless Appeal Centre/Commissioner of Income Tax (Appeals) [“the learned Commissioner (Appeals)]despite concluding that the agreement for sale was entered into on 13.07.2009 (i.e. prior to 01.04.2017), failed to appreciate that the provisions of Section 56(2)(x) of the Act which was inserted vide Finance Act, 2017 and made expressly applicable from 01.04.2017 are not applicable to the facts under consideration. The addition of Rs. 9,88,343/(50% of Rs. 19,76,686/-) as confirmed by the Learned Commissioner (Appeals) under Section 56(2)(x) of the Act is bad in law and may be deleted.
2. Without prejudice to the above and on the facts and in the circumstances of the case and as per the law, the Appellant mentions that the date of agreement was inadvertently stated as 13.07.2009 instead of 08.10.2009 before the learned assessing officer and the learned Commissioner (Appeals). Since the payment of Rs. 2,00,000/- and the date of agreement (i.e. 08.10.2009) is the same, the benefit of the second proviso to Section 56(2)(x) of the Act is available and the addition of Rs. 9,88,343/(50% of Rs. 19,76,686/) under Section 56(2)(x) of the Act is not tenableThus, the said addition may be deleted.
3. Without prejudice to the above and on the facts and in the circumstances of the case and as per the law, the learned Commissioner (Appeals) erred in confirming the addition of Rs. 9,88,343/(50% of Rs. 19,76,686/) under Section 56(2)(x) of the Act on the observation that since the first payment of Rs. 2,00,000/by way of cheque was made on 08.10.2009 which was subsequent to the date of agreement i.c. 13.07.2009the benefit of the second proviso to Section 56(2)(x) of the Act is not available. Thus, the addition of Rs. 9,88,343/- (50% of Rs. 19,76,686/) as confirmed by the Learned Commissioner (Appeals) under Section 56(2)(x) of the Act is bad in law and may be deleted.
4. Without prejudice to the above, the learned commissioner (Appeals) failed to appreciate that the section 56(2)(x) of the Act including its second proviso was incorporated on 01.04.2017 and the transaction was entered into on 13.07.2009 on which there was neither deeming fiction of Section 56(2)(x) of the Act nor was the benefit as carved out under the second proviso available. The Appellant cannot be fastened with a tax liability by invoking the proviso which was not available on the statute book on the date of execution of the agreement. Thus, the addition of Rs. 9,88,343/ – (50% of Rs. 19,76,686/-) as confirmed by the Learned Commissioner (Appeals) under Section 56(2)(x) of the Act is bad in law and may be deleted.
5. Without prejudice to the above, for the sake of presumption without any admission, it is considered that the provisions of Section 56(2)(x) of the Act were applicable to the present case, in such a scenario, the second proviso to the section would be read down to achieve its purpose when there was no observation by the Revenue that the Appellant had paid over and above the sale consideration and the addition of Rs. 9,88,343/(50% of Rs. 19,76,686/-) as confirmed by the Learned Commissioner (Appeals) under Section 56(2)(x) of the Act may be deleted.
6. The Appellant craves leave to add, alter, rescind, or amend any of the above grounds of appeal
2. The brief facts of the case are that, the assessee is engaged in the business of manufacturing of transformers and electrical intermediate items. The assessee has filed the return of income for the A.Y 2018-19 on 28.10.2018 disclosing a total income of Rs. 9,50,340/- and the return of income was processed u/s 143(1) of the Act. Subsequently the Assessing Officer (AO) has received the information that the assessee has purchased property on 14.07.2017 for a consideration of Rs.32,97,500/-, whereas the stamp valuation of the property is Rs. 52,74,186/-, therefore the AO invoked the provisions of Sec. 56(2)(x) of the Act as the assessee has failed to disclose fully material facts to the extent of Rs.19,76,686/-. Subsequently, the AO has issued notice u/s 143(2) and 142(1) of the Ac along with the questionnaire. In compliance to the notice, the Ld. AR of the assessee has filed the details on 12.02.2021 and furnished copy of purchase deed and some copies of payment proofs and the assessee has not filed other details as per the questioner.
3. Further, the AO has issued a show cause notice and it was duly complied by the assessee. The AO on perusal of details and purchase agreement found that the assessee has purchased a property from HDIL at an agreed price of Rs.32,97,500/- and got registered in the year 2017 at market value of Rs. 52,74,186/-and the stamp valuation and registration fee of Rs. 2,94,000/- was paid. Further the AO has observed that the assessee has not furnished bank account details including the foreign bank account highlighting the payments relating to purchase of property and also the initial agreement with the seller was not produced. Finally the AO has made an addition u/s 56(2)(x) of the Act being the difference in value of property which worked out to Rs.19,76,686/- and assessed the total income of Rs. 29,27,030/- and passed order u/s 143(3) r.w.s 143(3A)&143(3B) of the Act dated 18.03.2021.
4. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) has considered the grounds of appeal, findings of the A.O and the assessee submissions which could not be filed in the assesseement proceedings referred at page 7 to 9 of the order and CIT(A) has granted partial relief to the assessee and observed at Para 7 of the order read as under:
1The purchase agreement is clearly stating that the assessee is the part owner of the property. But the officer has included entire additional income and interest in the assessee income In fact, assessee owns only 50% of the property. Copy of agreement is attached.
2All the documents pertaining to co-owner Brajakishore Madan Panigrahi that were asked by the officer at the time of assessment which consists of Income Tax Return, Computation Sheet and Balance Sheet, Profit and Loss were submitted on February 23, 2021 We are attaching again for your ready reference.
3The original purchase agreement date was 13th July, 2009 which is mentioned on the agreement but for the purpose of registration the M/s Housing Development and Infrastructure Limited (HDIL) (seller) had changed the year of purchase manually from 2009 to 2017. HDIL is currently under investigation in Mumbai for various frauds with Banks and other legal agencies. Copy of purchase agreement is attached.
4The M/s HDIL (seller) had changed the agreement date to 2017 from 2009on the top page of the agreement However, on page 18 at clause 10 of the purchase agreement, it is mentioned that all the payment for the property has to be done till 30.06.2011. Hence, it is proved that the property is purchased in 2009Also, major payments for the property were made starting from 2009 and copies of receipts were submitted to the learned assessing officer on February 12, 2021. Copies of receipts are attached for ready reference. 5The assessee and his co-owner had made payments for the said property as mentioned below
