2015 (12) TMI 389 - AT - Income Tax

Additions u/s 69B - unexplained investment - CIT(A) deleted the addition invoking the provisions of Section 50-C - Held that - In this case, the property was allotted by Ansal Housing and Construction Ltd. at its market value based on the rate of return from rentals and it was business asset for them. Therefore, the provisions of Section 50C will not be applicable in the case of purchaser of the property. The space was already rented, therefore, the fair market value of the property is decided by its rentals and the same was transferred to the assessee in the assessment year 2008-09. In this particular assessment year i.e. the assessment year 2009-10, the execution of sale deed was executed. It is very pertinent to mention that the provisions of Section 50C applies in case of calculation of sale consideration for the purpose of capital gain in the hands of seller of any capital asset. This aspect has been rightly taken into consideration by the Ld. CIT(A). Therefore, the action of Assessing Officer in making addition u/s 69B of the Income Tax Act, 1941 towards unexplained investment was not correct and Ld. CIT(A) has rightly directed the Assessing Officer to delete addition - Decided in favour of assessee.

Summary

Issues:
1. Whether the addition of Rs. 65,05,000 made under section 69B of the IT Act for unexplained investment in a property should be deleted.
2. Whether the provisions of Section 50-C were correctly invoked in deleting the addition made under section 69B of the IT Act.

Analysis:
1. The issue of the addition of Rs. 65,05,000 under section 69B of the IT Act was raised due to discrepancies in the registered value of a property purchased jointly by two parties. The Assessing Officer added the amount to the income of the assessee, alleging undisclosed investment. However, the assessee argued that Section 50C, applicable to sellers for determining capital gains, did not apply to buyers. The Ld. CIT(A) agreed, stating that the AO needed to prove any underhand dealings for such additions. The Ld. CIT(A) directed the AO to delete the addition, emphasizing that Section 50C is not applicable to property buyers.

2. The second issue involved the correct invocation of Section 50-C in deleting the addition made under section 69B of the IT Act. The AR contended that the AO did not verify the actual payment made during the property purchase, leading to an incorrect addition. The ITAT observed that the property was rented out, and the sale consideration was based on rental returns. As the property was a business asset for the seller, Section 50C did not apply to the buyer. The ITAT upheld the Ld. CIT(A)'s decision to delete the addition of Rs. 65,05,000, emphasizing that Section 50C pertains to sellers for capital gains calculation.

In conclusion, the ITAT upheld the Ld. CIT(A)'s decision to delete the addition of Rs. 65,05,000, dismissing the appeal of the Revenue. The judgment clarified the application of Section 50C and highlighted the distinction between buyers and sellers concerning the determination of capital gains in property transactions.