2013 (10) TMI 164 - HC - Income Tax

Unexplained expenditure u/s 69C - expenditure of stamp duty paid for registration of property sold - Held that - order dated 25-09-2001 issued by the Inspector General of Registration, Delhi clearly discloses that the transfer duty @ 5% has to be levied on the transfer deeds of immovable property and also surcharge on stamp duty imposed by the Indian Stamp Act, 1899. The appellant has paid stamp duty of Rs.17,65,000/- and Rs.10,59,000/- was paid in the form of surcharge on stamp duty and it is not the Corporation Tax. As per Clause 5 of the sale deed, till handing over of the Unit, the Vendor has to pay the dues. As per clause 6, all expenditures with regard to execution and registration had to be borne by the Vendee. The contention of the appellant that the sale price is inclusive of registration expenditure and surcharge on stamp duty is totally incorrect. No document has been produced before the Assessing Authority to show that the Stamp Duty and Corporation Tax are inclusive of the sale price as contended by the appellant. All the three authorities concurrently held that the appellant has failed to disclose the expenditure incurred with regard to the Stamp Duty as well as Corporation Tax. Accordingly, income was assessed - Decided against assessee.

Summary

Issues:
1. Challenge to order dismissing appeal and confirming assessment for assessment year 2006-07.
2. Treatment of unexplained expenditure under Section 69-C of the Income Tax Act.
3. Discrepancy in showing Stamp Duty and Corporation Tax expenditure in books of accounts.
4. Interpretation of clauses in sale deeds regarding payment of dues and expenses.

Issue 1: Challenge to Order Dismissing Appeal and Confirming Assessment:
The appellant, a Private Limited Company engaged in property development, challenged the order dismissing its appeal and confirming the assessment for the assessment year 2006-07 under Section 260-A of the Income Tax Act. The case underwent scrutiny due to discrepancies in the treatment of certain expenditures related to property purchases in New Delhi. The Assessing Officer treated the unaccounted expenditure as unexplained under Section 69-C, leading to the appeal and subsequent orders by the First Appellate Authority and the Income Tax Appellate Tribunal.

Issue 2: Treatment of Unexplained Expenditure under Section 69-C:
The Assessing Officer invoked Section 69-C of the Income Tax Act due to the unexplained expenditure incurred for registration of properties, which was not reflected in the books of accounts. The appellant failed to provide sufficient documentation to support the claim that the Vendor had covered these expenses. The Appellate Tribunal, after thorough consideration and verification of records, upheld the addition of the unexplained expenditure, leading to the appellant's challenge on legal grounds.

Issue 3: Discrepancy in Showing Stamp Duty and Corporation Tax Expenditure:
The appellant contended that the Stamp Duty and Corporation Tax expenditure was included in the sale price of the properties, thus not requiring separate disclosure in their books. However, the authorities found no evidence to support this claim. The sale deeds and the order from the Inspector General of Registration, Delhi, indicated that the appellant was responsible for paying the stamp duty and surcharge, contradicting the appellant's argument. The lack of documentation to prove the appellant's assertions led to the dismissal of the appeal by all three authorities.

Issue 4: Interpretation of Clauses in Sale Deeds Regarding Payment of Dues and Expenses:
The clauses in the sale deeds clearly outlined the responsibilities regarding payment of dues, property tax, and expenses related to stamp duty and registration. The court examined these clauses alongside the order from the Inspector General of Registration, Delhi, to determine the appellant's obligations. The failure to produce supporting documents and the discrepancy between the appellant's claims and the contractual obligations outlined in the sale deeds led to the rejection of the appellant's arguments and the dismissal of the appeal.

In conclusion, the High Court upheld the orders passed by all three authorities, finding no irregularities and ruling against the appellant on the substantial questions of law raised. The appeal was consequently dismissed, affirming the assessment for the assessment year 2006-07.