2018 (1) TMI 1605 - AT - Income Tax

Disallowance u/s 14A - CIT(A) restricted the disallowance u/s 14A to the extent of 10% of the income - HELD THAT - AO made the disallowance by invoking the provisions of Rule 8D of the Income Tax Rules, 1962, which is applicable for the assessment year 2008-09 and not for the year under consideration i.e. assessment year 2007-08. We, therefore, do not see any merit in this ground of the departmental appeal. Addition invoking the provisions of Section 69C - CIT(A) has deleted the above addition - HELD THAT - Reply of the parties from whom the enquiries were conducted by the AO and in fact they confirmed that the transaction of the sale of the properties is at the purchase price shown by the appellant. Provision of section 50C for that relevant year applied in the hands of the seller and not the buyer. In the present case the assessee is a buyer. Hence, he stated that income cannot be added in the hands of the assessee by invoking provision of section 50C - As examined that provision of section 56(1)(vii)(b) of the Act is not applicable as it applies w.e.f. 01.04.2014. DR also could not point out any infirmity in the order of the ld CIT(A). We are also of the considered view that there is no provision of difference between stamp duty value as well as the transacted value can be added in the hands of the buyer - Appeal of the department is dismissed.

Summary

Issues:
1. Disallowance u/s 14A of the I.T. Act
2. Addition of unexplained investment u/s 69C of the I.T. Act, 1961

Issue 1: Disallowance u/s 14A of the I.T. Act:
The department appealed against the CIT(A)'s order restricting the disallowance u/s 14A to 10% of the amount made by the AO. The assessee's counsel argued that a similar issue was addressed in a previous year's case where the disallowance was limited to 10% of dividend income. The Tribunal agreed, stating that Rule 8D, invoked by the AO, was not applicable for the current assessment year. Therefore, the disallowance was upheld at 10% of the income, in line with the previous judgment.

Issue 2: Addition of unexplained investment u/s 69C of the I.T. Act, 1961:
The department contested the deletion of the addition made by the AO under Section 69C. The assessee's counsel referred to a previous case where a similar issue was decided in favor of the assessee. The Tribunal examined the previous judgment, which concluded that the provision of section 50C did not apply to the buyer, thus dismissing the appeal of the Revenue. Following this precedent, the Tribunal found no merit in the department's appeal, leading to the dismissal of the appeal.

In conclusion, the Tribunal dismissed the department's appeal concerning both the disallowance u/s 14A of the I.T. Act and the addition of unexplained investment u/s 69C of the I.T. Act, 1961, based on the precedents and legal interpretations presented during the proceedings.