2017 (2) TMI 113 - AT - Income Tax

Addition on unrecorded/undisclosed income u/s 69B - whether the provisions of Section 69 B of the Act as well as Section 56(2) (Vii)(b) r. w. s. 50C of the Act will apply or not? - Held that - What document or evidence is in the possession of the AO to prove that the assessee has paid the difference of value of agreement and stamp duty value in any other form of consideration to the extent of ₹ 1,08,75,400/- for making addition u/s 69B of the Act. We find from the facts of the case as well as the records of the case and else also the arguments of learned Sr. DR that there is no evidence in the possession of Revenue which proves that the assessee has paid over and above the value of agreement in any other form of consideration. Hon ble Gujarat High Court in the case of Berry Plastics (P) Ltd. (2013 (8) TMI 9 - GUJARAT HIGH COURT) has held that the DVO s report may be useful tool in the hands of the AO, nevertheless it is an estimation and without there being anything more cannot form basis for addition u/s 69 B of the Act. The burden to prove under statement is on the Revenue and in the absence of any evidence addition cannot be made. This view has been held by Hon ble Supreme Court in the case of KP Varghese Vs. ITO (1981 (9) TMI 1 - SUPREME Court ). Secondly, a new provision as introduced by the finance bill 2013 w. e. f. 01-04-2014 of provisions of Section 56 (2) (vii) (b), wherein immovable property purchased/received for inadequate consideration, which is less than stamp value by 50,000 or more, than the difference between the stamp duty value and inadequate consideration shall be taxable in the hands of the individual or HUF as income from other sources. This amendment applies in relation to A.Y. 2014-15 and subsequent assessment years and up to 31-03-2013, addition cannot be made in the hands of the buyer as explained by the explanatory note to finance bill, 2013. There is no dispute as regards to the amount and date of registration that the property was registered only on 19-01-2010, which is much before the amendment in Section 56(2) of the Act. Even the provision of Section 50C r. w. s. 69 and 69B, i.e. the special provision for full value of consideration in certain cases creates a legal friction for taxing capital gains in the hands of seller and it cannot be extended for taxing difference between apparent consideration and valuation done by stamp valuation authorities as undisclosed investment. - Decided against revenue.

Summary

Issues Involved:
Appeal against deletion of addition made by AO under section 69B of the Income Tax Act for unexplained investment in purchase of house property.

Analysis:

Issue 1: Deletion of addition under section 69B by CIT(A)
The Revenue challenged the deletion of the addition made by the Assessing Officer (AO) under section 69B of the Income Tax Act by the Commissioner of Income Tax (Appeals) (CIT(A)). The Revenue contended that the property was acquired in 2009, not in 2004 as claimed by the assessee, and that the unrecorded investments should be added to the income. The CIT(A) considered the arguments and evidence presented by both parties. The CIT(A) observed that the appellant had purchased the property at a discounted rate after surrendering an unauthorized shed and that there was a discrepancy between the purchase price and the stamp duty valuation. The CIT(A) analyzed the situation under two scenarios: whether the unauthorized structure existed or not. In both scenarios, the CIT(A) concluded that the provisions of section 69B did not apply as there was no concrete evidence to prove additional payments made by the assessee. The CIT(A) also considered the applicability of section 56(2)(vii)(b) and section 50C of the Act. The CIT(A) ultimately deleted the addition made by the AO, stating that the taxability in the assessment year was not attracted under any circumstances, regardless of the year of acquisition.

Issue 2: Applicability of Section 69B and Section 56(2)(vii)(b)
The Tribunal analyzed whether the provisions of Section 69B and Section 56(2)(vii)(b) of the Income Tax Act would apply in the case. The Tribunal noted that there was no evidence to prove that the assessee had paid any additional consideration beyond the agreement value. Referring to legal precedents, the Tribunal emphasized that the burden of proof lies with the Revenue, and without concrete evidence, additions cannot be made under section 69B. The Tribunal also discussed the introduction of a new provision under the Finance Bill 2013, which applied to inadequate consideration for immovable property purchased after April 1, 2014. Since the property in question was registered before this amendment, the Tribunal concluded that the provisions of Section 56(2)(vii)(b) did not apply. Additionally, the Tribunal highlighted that Section 50C, along with sections 69 and 69B, did not support taxing the difference between apparent consideration and valuation by stamp valuation authorities as undisclosed investment. Citing relevant case law, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition made by the AO under section 69B of the Income Tax Act. The judgment provided a detailed analysis of the issues involved, including the applicability of relevant legal provisions and precedents, ultimately emphasizing the importance of concrete evidence in tax assessments.