Gayatri Enterprise Vs ITO (Gujarat High Court)
Provisions of Section 50C of the Income Tax Act cannot be applied for the purpose of making addition under section 69B of the Act. We fail to understand why section 50C of the Act has been brought into play having regard to the facts of the present case. It is settled law that section 50C will apply to the seller of the property and not to the purchaser of the property. However, section 50C of the Act does not seem to have been invoked by the authority below for the purpose of adding the income under section 69B of the Act. At the most, the principle of law, as discernible from the provisions of section 50C, could be said to have been indirectly applied for the purpose of taking the income under Section 69B of the Act.
Therefore, we propose to examine the issue at hand from a limited angle whether a presumption could have been drawn about the excess amount alleged to have been made by the appellant – assessee at the time of the purchase of the land having regard to the fact why he thought fit to pay such a huge stamp duty on a total sale consideration of Rs. 45 lakh and odd. We shall confine our adjudication only on this limited issue whether such a presumption is permissible in law.
Section 69B of the Act reads as under:
“Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable articles, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.”
First, there is nothing on record to indicate as to what was the price of the land at the relevant time. Even otherwise, the same is a pure question of fact. Apart from the fact that the price of the land was different than the one, recited in the sale deed unless it is established on record by the department that as a matter of fact, the consideration as alleged by the department did pass to the seller from the purchaser, it cannot be said that the department had any right to make any additions.
Section 69B of the Act does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to the tax contrary to the strict provisions of Article 265 of the Constitution of India which must be “taxes on income other than agricultural income”.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. This Tax Appeal under Section 260A of the Income-tax Act, 1961 (for short, ‘the Act, 1961’) is at the instance of an assessee and is directed against the order passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Ahmedabad dated 28th February 2019 in the ITA No.825/Ahd/2016 for the assessment year 2011-12.
2. The present Tax Appeal came to be admitted by this Court vide order dated 15th July 2019 on the following substantial question of law:
“Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding that the order of the Principal CIT, which is based on the presumption that the difference between the stamp duty valuation and the actual purchase price is undisclosed investment in the hands of assessee purchaser, and therefore, the order of Assessing Officer not taxing the differences in hands of purchaser assessee is erroneous and prejudicial to the revenue?”
3. The case of the appellant, in his own words as pleaded in the memorandum of the Tax Appeal, is as under:
‘1.1 During the course of scrutiny assessment u/s. 143(3) for Asst. Year 2011-12, the Assessing Officer raised various queries, which were replied by the appellant. To one such query, in regard to investment in land of Rs. 1,17,93,542/- as on 31.03.2011 by a notice dated 18.10.2013 u/s. 142(1), the Chartered Accountant of the appellant by a letter dated 19.11.2013 gave a detailed reply pointing out that the possession of the land was taken on 31.03.2008 and the appellant is already assessed in Asst. Year 2008-09 and annexed the assessment order for Asst. Year 2008-09 along with that reply. The Assessing Officer passed an order u/s. 143(3) dated 28.11.2013. Thereafter, the Principal Commissioner of Income Tax-1, Vadodara issued a notice u/s. 263 dated 12.01.2016 pointing out that the above assessment was erroneous insofar as it was prejudicial to the interest of Revenue on account of the following:
“On verification of P&L account, balance sheet computation of Income & submissions in respect of construction business, it is revealed that investment of Rs. 1,17,93,542/- is made in the land situated at Survey Nos.183 & 184 at village Tandalja. The break-up of the said investment as shown in the books comprises of:
