Case Law Details
Asad Fazlurrehman Kagdi Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that revisional power under section 263 of the Income Tax Act correctly invoked as AO failed to examine the issue of purchase of land in the light of provisions of section 56(2)(vii)(b) of the Income Tax Act.
Facts- In the present case, the revisionary power was exercised By the Ld. PC/T was pertaining to the non-invocation by AO of Section 56(2)(vii)(b) of the Act to the transaction of immovable property, being land, purchased by the assessee as a co-owner along with other two persons. It was contended that the property was purchased for a sum far below its stamp duty value and thus warranted the addition to be made to the income of the assessee of the amount short paid as compared to its stamp duty value, as per the provisions of Section 56(2)(vii)(b) of the Act. AO having not invoked the said section, the assessment order passed by him therefore was found to be erroneous and prejudicial to the interest of the Revenue by the Ld. PC/T.
Conclusion- The Assessing Officer had clearly not examined the applicability of section 56(2)(vii)(b)in the light of the above facts and therefore, it was a clear case of error in the order of the Assessing Officer. It is not the case of the assessee that the stamp duty value taken by the Ld. PCIT was incorrect. Therefore, based on the facts before him, the Ld. PCIT had rightly found the non-examination of the issue of purchase of land by the assessee in the light of provisions of Section 56(2)(vii)(b) of the Act was an error in the order of the Assessing Officer causing prejudice to the Revenue and accordingly had set aside the assessment order to the Assessing Officer to examine this aspect after giving due opportunity of hearing to the assessee and in accordance with law.
Held that there is no infirmity in the order of the Ld. PCIT passed under Section 263 of the Act and the appeal of the assessee is liable to be dismissed. In effect, the appeal of the assessee is dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal filed by the assessee is directed against the order passed by the learned Principal Commissioner of Income-Tax, Ahmedabad-1 [hereinafter referred to as “PC/T”] dated 10.03.2021, in exercise of his revisionary powers under Section 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year 2015-16.
2. The grounds of appeal raised by the assessee read as under:-
“1. That the Ld. Pr. CIT has erred in law in assuming jurisdiction under section 263 of the Income Tax Act on the ground that no inquiry has been conducted for the purchase of property by the assessing officer while passing order under section 143(3) of the Act
2. That the Ld. Pr. CIT has erred in law in assuming jurisdiction under section 263 of the Income Tax Act as the impugned assessment order is neither erroneous nor prejudicial to the interest of revenue.
3. That the Ld. Pr. CIT further erred in law and facts in not appreciating the detailed submission of the assessee dated 23rd December, 2019 in a right
4. That the Ld. Pr. CIT has also erred in law in setting aside the whole assessment order and directing the assessing officer to redo the assessment de
5. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds during the hearing of the appeal.”
3. At the outset itself, it was stated that the issue on which the revisionary power was exercised By the Ld. PC/T was pertaining to the non-invocation by the Assessing Officer of Section 56(2)(vii)(b) of the Act to the transaction of immovable property, being land, purchased by the assessee as a co-owner along with other two persons. The contention being that the property was purchased for a sum far below its stamp duty value and thus warranted the addition to be made to the income of the assessee of the amount short paid as compared to its stamp duty value, as per the provisions of Section 56(2)(vii)(b) of the Act. The Assessing Officer having not invoked the said section, the assessment order passed by him therefore was found to be erroneous and prejudicial to the interest of the Revenue by the Ld. PC/T.
4. Our attention was first drawn to the facts of the issue requiring invocation of Section 56(2)(vii)(b) of the Act by the Assessing Officer as per the Ld. PC/T, from paragraph Nos. 2 & 3 of the order passed by the Ld. PC/T under Section 263 of the Act as under:-
“2. On perusal of records, it is observed that the assessee along with two other co-owners namely Shri Aslam Fazlurrehman Kagdi & Shri Mohammed Fazlurrehman Kagdi (all three having equal share of 1/3rd each) had purchased an immovable property being land situated at Block / Survey Number 219, Ishanpur, Ahmedabad on 05.11.2014. The said property was purchased vide deed number 2173/2014 for a total consideration of Rs 59,01,000/- from S/Sri Manubhai Somabhai Patel & Dashrathbhai Somabhai Patel (sellers). Mohammed Aslam Abdul Kader Kureshi was the confirming party in this land transaction. Thus, having 1/3rdshare in the said property, the assessee, Shri Asad Fazlurrehman Kagdi had paid Rs. 19,67,000/- (being 1/3rd of Rs.59,01,000/-). It was further observed that assessee, along with two co-owners, had also paid stamp duty of Rs. 7,90,800/- in connection while making the said purchase. The Stamp Duty Rates applicable in Gujarat is as under‑
| Basic rate of Stamp Duty | 3.5% |
| Surcharge @40% on basic rate | 1.4% |
| Actual Stamp duty payable on the sale of immovable property | 4.9% |
Therefore, the Fair Market Value of theproperty in accordance with its Stamp Duty Value works out at Rs 1,61,38,775/- (7,90,800 x 100/4.9). Hence, the Fair Market Value of the entire property exceeded the claimed sales consideration by Rs. 1,02,37, 775/-(Rs. 1,61,38,775/- less Rs.59, 01,000/-.
3. Thus, in the case of the assessee, it appears that provisions of section 56(2)(vii)(b)(ii) of the Act should attract as the assessee had purchased the aforesaid immovable property for a consideration which is less than stamp duty valuation of the property. The difference of Rs.34,12,590/- (being 1/3rd of assessee’s share in total differential of Rs.1,02,3 7,775/-) was to be taxed in his hands. The aforesaid matter was not examined by the Assessing Officer while framing the assessment order.”
5. Referring to the above, learned Counsel for the assessee stated that the assessee had purchased an immovable property along with with two other coowners, being 1/3rd owner of the same, and was found by the Ld. PC/T to have paid price which was far less than its Stamp Duty Value. The assessee’s share of the purchase price paid being Rs.19,67,000/-noted by the Ld. PC/T, while his share of the Stamp Duty Value of the property being Rs.59,79,590/-. The difference of the two, i.e. Rs.34,12,590/-, being in excess of Rs.50,000/-, as per the Ld. PC/T was liable to be taxed in the hands of the assessee as per the provisions of Section 56(2)(vii)(b) of the Act and the Assessing Officer having not examined this issue and thus not invoked the provisions of Section 56(2)(vii)(b) of the Act while framing the assessment, the Ld. PC/T found the assessment order passed to be erroneous so as to cause prejudice to the Revenue and thus assumed jurisdiction under Section 263 of the Act.
6. Learned Counsel for the assessee contended that his arguments against the order framed under Section 263 of the Act were as under:-
i) that the issue of purchase of property by the assessee had been duly inquired during the assessment proceedings and, therefore, there was no error in the order of the Assessing Officer;
ii) that even on merits the provisions of Section 56(2)(vii)(b) of the Act warranted no addition to be made in the hands of the assessee;
iii) that the Ld. PC/T had set aside the entire assessment order when he should have directed the Assessing Officer to examine only this particular issue of invocation of Section 56(2)(vii)(b) of the Act on the land purchased by the assessee.
7. Taking the first contention of the learned Counsel for the assessee that the issue of purchase of property by the assessee was duly inquired by the Assessing Officer during assessment proceedings, he stated that due inquiry was made by the Ld. Assessing Officer during assessment proceedings and to which reply was also filed by the assessee. /n this regard, he drew our attention to paper-book page No.9 containing the notice issued under Section 142(1) of the Act dated 27.01.2017 to the assessee by the AO during assessment proceedings asking him to provide the registered deed of properties transferred by him during the year at point No.4 of the same as under:-
“4. On verification of the details it is observed that you have transferred one or more properties in the year under reference. Please provide registered deeds of the same.”
8. He thereafter drew our attention to the reply filed by the assessee at paper-book page No.10 dated 13.02.2017 submitting the copy of registered deeds of the properties. He pointed out that the assessee had submitted copies of both the purchase deed dated 05.11.2014 and the agreement for sale of the impugned property entered into on 29.02.2008.
9. The Ld. Counsel for the assessee, relied on the above facts to state that the AO had made due inquiries relating to the issue of purchase of property by the assessee during the year and therefore the Ld. PC/T could not have held the assessment order passed as erroneous on account of non-inquiry by the AO of the impugned issue.
10. We are not convinced with the contention of the learned Counsel for the assessee. The inquiry of the AO was only a cursory inquiry calling for facts relating to the purchase of immoveable property by the assessee during the year. The only query raised by the Assessing Officer was asking for details of properties transacted into by the assessee, to which the assessee had supplied the copies of the agreements or deeds entered into. No other question or query was raised by the Assessing Officer. No query relating to the invocation of Section 56(2)(vii)(b) of the Act was raised by the Assessing Officer in the present case. Therefore, in the facts of the present case, it cannot be said that the Assessing Officer had examined the issue of purchase of immoveable property and taken a plausible view by making no addition u/s 56(2)(vii)(b) of the Act when the issue was not even examined by the AO. Therefore this contention of the learned Counsel for the assessee is rejected.
11. Taking up the next contention of learned Counsel for the assessee that even on merits no addition was warranted as per Section 56(2)(vii)(b) of the Act, the argument of the learned Counsel for the assessee was that, the assessee had purchased this property through a confirming agent who in turn had entered into an agreement with the vendors of the property in 2008 and had made payment by cheque to the said parties and, therefore, as per the second proviso to Section 56(2)(vii)(b) of the Act, the stamp duty value as on 2008 was to be considered for the purposes of Section 56(2)(vii)(b) of the Act as opposed to the stamp duty value of the impugned year i.e. FY 2014-15 as has been taken by the Ld. PC/T. The learned Counsel for the assessee took us through the various documents evidencing these facts being the agreement entered into by the confirming party initially with the vendors in 2008 (placed before us at paper-book page Nos. 42 to 47 in Gujarati language and its English translation at paper-book page Nos. 48 to 53) and the purchase deed entered into by the assessee with vendors including the confirming party in it during the impugned year on 05.11.2014 (placed before us at paper-book page Nos. 11 to 27 in Gujarati language and its English translation placed before us at paper-book page Nos. 28 to 41). Our attention was also drawn to the provisions of Section 56(2)(vii)(b) of the Act, more particularly its second proviso, which are reproduced in the order of the Ld. PC/T at page No.4 of his order as under:-
“(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,-
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
(b) any immovable property, –
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:
Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:
Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property:”
12. We are not convinced with this argument of the learned Counsel for the assessee also. The provision of law under which the assessee is seeking shelter i.e. the first and second proviso to Section 56(2)(vii)(b) of the Act, which requires the stamp duty value of the date of agreement to sale to be taken in place of the stamp duty value of the actual date of registration of sale only in the circumstance where the two dates are not the same and the consideration or a part thereof has been paid by modes other than cash on the date of agreement for transfer or prior to that. Which means that what the first and second proviso to Section 56(2)(vii)(b) of the Act envisage is a circumstance where the transaction of purchase of a property entered into between two persons by way of an agreement to sell is delayed to be registered, then in all fairness it gives the benefit of the fair market value as on the date of the agreement of sale to be considered for the purposes of determining whether the assessee had derived any benefit by acquiring the property at a lesser value than its stamp duty value. This is the sum and substance of the first and second proviso to Section 56(2)(vii)(b) of the Act. /n the facts of the present case, these two provisos are of no help to the assessee for the reason that firstly the agreement to sell dated 11.02.2008 was not entered into between the assessee and the vendors. /t was in fact between the sellers and five other persons. None of the present purchasers were party to this agreement to sell. These facts are noted by the Ld. PC/T in his order at paragraph no. 5 and have remained uncontroverted by the Ld. Counsel for the assessee. Also the consideration fixed for the purchase of land in the agreement to sell was Rs.9,51,000/-; while the property was finally purchased and registered by the assessee in the impugned year through the confirming party for a different consideration i.e. Rs.59,01,000/-. These facts emanate from the relevant documents filed before us. Therefore, the earlier agreement to sale in these facts cannot be said to be in continuation to the final registration of the said property in favour of the assessee. /t was a totally separate transaction in which the assessee was not a party. Even the considerations in both the agreement to sale and final sale deed, are different. Therefore, by no stretch of logic, the purchase of the property in the impugned year by way of registered sale deed can be said to be in lieu of the agreement to sale entered into in 2008 so as to enable the assessee to derive the benefit of stamp duty value of 2008 to be taken for the purposes of computing the benefit derived by the assessee as per the provisions of Section 56(2)(vii)(b) of the Act. Moreover the assessee also has furnished no evidence to prove the fulfilment of the other condition stipulated for taking benefit of the provisos, that consideration should have been paid prior to entering into final sale agreement, that too by modes other than cash. The findings of the Ld. PC/T in this regard at paragraph no.5 of his order are as under:-
“5. In view of the above, it transpires that the assessee had nothing further to say except what had already been stated vide his earlier replies. The same have been carefully considered but his contentions are not found acceptable in view of the following discussions:-
i. The assessee has contended that since he, along with other co-Owners, had agreed to purchase the property way back in 2008 and the stamp duty rates were revised in 20TI TI, the value of the property as per the revised rates of stamp duty cannot be considered for the purpose of purchase or sale of property. As per the first proviso to Section 56(2)(vii)(b) of the Act where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this section. However, the second proviso to the Section 56(2) (vii) (b) stipulates that the aforesaid first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been paid on or before the date of the agreement for the transfer of such immovable property. It is pertinent to mention here that the aforesaid proviso were inserted by Finance Act, 2013 with effect from 01.04.2014. For better appreciation of the facts, the relevant portion of the proviso is reproduced hereunder :-
“(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,-
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
(b) any immovable property, –
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:
Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:
Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property:”
However, in the instant case, the agreement dated 11.02.2008 furnished by the assessee was actually between the sellers and five other persons one of whom later became the confirming party in purchase deed dated 05.11.2014. Names of the present purchasers were nowhere mentioned in that agreement. It is pertinent to mention here that in the said agreement, there was even no mention of any condition or any promise by the sellers or the then purchasers that the aforesaid land would be later sold to the present assessee. No agreement to this effect has been furnished by the assessee which could substantiate that the land was in-fact agreed to be sold to him before the actual date of sale. Without prejudice to the above, as already discussed, the first proviso to section 56(2)(vii)(b) is applicable only when the condition of second proviso is met with. In the instant case, the condition stipulated in the second proviso is not met with by the ass essee which effectively rules out the applicability of the first proviso. The assessee has not submitted any evidence to justify that the amount of consideration, or even a part thereof had been paid by him during the year 2008 or any other subsequent year till the property was finally purchased on 05.11.2014. In this backdrop, the contention of the assessee is not acceptable and the purchase consideration has to be computed as per Registered Deed’ dated 05.11.2014.
ii. The assessee has also relied upon certain case laws. But these do not address the same factual issue. In fact in one of the decision relied by the assessee i.e. case of Shri Sujauddian Kasimsab Sayyed in ITA No. 5498/MUM/20T18 (ITAT Mumbai), it is observed that the Hon ble Tribunal has confirmed the addition made u/s. 56(2)(vii)(b) of the Act dismissing the appeal of the assessee. Same is with decision in the case of Shri Trilok Chand Sain vide ITA No. 449/JP/20T18. Hence these decisions are of no consequence with reference to the present matter.
iii.. The assessee had also relied on the judgement in the case of Shri Hari Om Garg in I.T.A. No.342/Agra/20T17. In the said case, the dispute is in respect of making reference to the Valuation Officer in the event of non agreement between the assessee and the AO with respect to valuation of immovable property. That being so, the findings in the above case are not applicable here.”
13. Even otherwise, the learned Counsel for the assessee was asked at Bar as to whether the assessee at any point of time had justified that the stamp duty rate of 2008 warranted no addition to be made in the hands of the assessee, to which the learned Counsel for the assessee replied in the negative.
14. Considering the above, as per law and even on merits, the assessee has been unable to justify his contention that no addition was warranted in the facts of the present case under Section 56(2)(vii)(b) of the Act. This contention raised by the learned Counsel for the assessee is, therefore, rejected.
15. Now coming to the argument of the learned Counsel for the assessee that the Ld. PC/T having found error with respect to a specific issue in the assessment order he could not have set aside the entire assessment, our attention was drawn to paragraph No.6 of the Ld. PC/T’s order wherein he set aside the entire assessment order passed under Section 143(3) of the Act and to paragraph No.7 of his order wherein he directs the Assessing Officer to pass order afresh within the time limit stipulated under Section 153(3) of the Act as under:-
“6. In the light of the aforementioned discussions and bearing in mind the entirety of the case, I am of the opinion that the assessment order passed by the AO u/s 143(3) of the I.T. Act, 1961 on 26.07.2017 is erroneous insofar as prejudicial to the interest of the revenue, as discussed in preceding paras, since the order has been passed without making adequate examination of the applicability of section 56(20(vii)(b)of the Act as per above discussion. By virtue of the powers vested in me u/s 263 of the IT Act, I hereby set aside the order passed u/s 143(3) of the I.T. Act, 1961 on 26.07.2017 and direct the Assessing Officer to pass a fresh assessment order after allowing adequate opportunities of being heard to the assessee, in accordance with the law following the prescribed procedure and duly examining the aforementioned issue in the light of the above discussion.
7. It may be ensured that the fresh assessment order is passed within the prescribed time limit as stipulated under section 153(3) of the Act. 0
16. He, therefore, contended that it was clear that the Ld. PC/T had set aside the entire assessment order which he could not have done in the facts of the case where he had noted specific error in the order of the Assessing Officer. /n this regard, he relied on judgement of Hon’ble jurisdictional High Court in the case of C/T Vs. Budhilal Hiralal Rana, reported in (2004) 186 CTR 0647 (Guj.).
17. We have heard the contention of the learned Counsel for the assessee and we do not find any merit in the same. The order of the Ld. PC/T is very clear wherein he directs the Assessing Officer to pass the order afresh after duly examining the issue discussed by him in his order passed under Section 263 of the Act. Therefore, his order is very clear requiring the Assessing Officer to examine only the issue relating to the applicability of Section 56(2)(vii)(b) of the Act in the facts of the present case. Even as per the facts noted by the Ld. PC/T in his order, the assessment in the present case was a limited scrutiny assessment for the purpose of examining the issue of cash deposits and purchase of property. Vis-à-vis the issue of purchase of property, the Ld. PC/T found the assessment order to be erroneous for the reason that the Assessing Officer having not examined the applicability and invocation of the provisions of Section 56(2)(vii)(b) of the Act. Therefore, it cannot be said that Ld. PC/T had directed the entire assessment to be framed afresh or that the entire assessment was open before the Assessing Officer even in the restored proceedings. The Assessing Officer, in any case, could not have exceeded the limited brief being a limited scrutiny assessment and, as we have noted, the order of the Ld. PC/T was very clear with regard to examination of the issue of invocation of Section 56(2)(vii)(b) of the Act. Therefore, this argument of learned Counsel for the assessee also merits no consideration and is rejected.
18. The learned Counsel for the assessee also raised another argument that the Ld. PC/T had directed the Assessing Officer to conduct further inquiry or to examine the issue in the light of provisions of Section 56(2)(vii)(b) of the Act and, therefore, he himself was not sure about the applicability of the same. We are not convinced with this argument of the learned Counsel for the assessee also. /t is settled law that for the purpose of Section 56(2)(vii)(b) of the Act, the Ld. PC/T has to be reasonably satisfied that the assessment order is erroneous causing prejudice to the Revenue. He need not be conclusive in his findings in this regard. /t is sufficient if he makes out a case of there being an apparent error in the order of the Assessing Officer. /n the present case, the Ld. PC/T has brought out the fact that the Assessing officer was required to examine the issue of purchase of property while framing the assessment in the present case as per the limited scrutiny norms; that the details of purchase of property before him showed that the assessee had purchased the property at a very low price as compared to its stamp duty value. The Assessing Officer had clearly not examined the applicability of section 56(2) (vii) (b)in the light of the above facts and therefore, it was a clear case of error in the order of the Assessing Officer. /t is not the case of the assessee that the stamp duty value taken by the Ld. PC/T was incorrect. Therefore, based on the facts before him, the Ld. PC/T had rightly found the non-examination of the issue of purchase of land by the assessee in the light of provisions of Section 56(2)(vii)(b) of the Act was an error in the order of the Assessing Officer causing prejudice to the Revenue and accordingly had set aside the assessment order to the Assessing Officer to examine this aspect after giving due opportunity of hearing to the assessee and in accordance with law. /t cannot be said in the light of these facts that the Ld. PC/T himself was not convinced whether the provisions of Section 56(2)(vii)(b) of the Act were applicable in the facts of the present case. On the contrary, the facts before him revealed that the provisions of Section 56(2)(vii)(b) of the Act were clearly applicable and accordingly in all fairness he had restored the issue to the Assessing Officer to give a fair and proper hearing to the assessee on this issue before making any addition to his income on this count. Therefore, this argument of the learned Counsel for the assessee is also rejected.
19. In view of the above, we hold that there is no infirmity in the order of the Ld. PC/T passed under Section 263 of the Act and the appeal of the assessee is liable to be dismissed.
20. In effect, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 12th April, 2023 at Ahmedabad.
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