2019 (2) TMI 277 - AT - Income Tax

Income chargeable to tax under the head Income from other sources - addition u/s 56 - difference amount of stamp duty value and purchase value - Held that - On reading of provisions of 56(2)(vii)(b) we find that it refers to any immoveable property and the same is not circumscribed or limited to any particular nature of immoveable property. It refers to any immoveable property which by its grammatical meaning would mean all and any property which is immoveable in nature i.e attached to or forming part of earth surface. In the instant case the assessee has purchases three plots of agricultural land and such agricultural land is clearly an immoveable property. Whether such agriculture land falls in the definition of capital asset u/s 2(14) or whether such agriculture land is stock-in-trade of the assessee in our considered view are issues which cannot be read in the definition of any immoveable property used in context of section 56(2)(vii)(b) and are thus not relevant. In the result we set- aside the order of the ld CIT(A) to this extent and upheld the order of the Assessing officer. In the result ground no. 1 of the Revenue s appeal is allowed. Unexplained investment in purchase of three properties - Held that - The total investment in the land including stamp duty and other transfer charges comes to Rs. 32, 38, 600/-. Considering a reasonable household expenditure of Rs. 1 lakh it is reasonable to infer that investment to the extent of Rs. 23, 97, 600/- is explained. Therefore the balance investment of Rs. 8, 41, 000/- remain unexplained and liable to be taxed U/s 69 of the Act. Accordingly the addition on this account is reduced to Rs. 8, 41, 000/-. Appellant s ground of appeal on this issue is partly allowed

Issues Involved:
1. Deletion of addition made by AO on account of difference between stamp duty value and purchase value.
2. Reduction of addition made by AO from Rs. 23,00,000/- to Rs. 8,41,000/-.
3. Confirmation of addition by CIT(A) treating the source for purchase of land as unexplained.

Detailed Analysis:

1. Deletion of addition made by AO on account of difference between stamp duty value and purchase value:

The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 1,51,06,224/- made by the AO. The AO had invoked Section 56(2)(viib) of the Income Tax Act, 1961, which deals with the difference between the sale consideration and the stamp valuation. The AO's addition included Rs. 1,51,06,224/- as the difference between the sale consideration per the sale deeds and the stamp valuation determined by the Stamp Valuation Authority. The CIT(A) held that the land in question is agricultural land and does not fall under the definition of a capital asset as per Section 2(14) of the Act, and thus, the provisions of Section 56(2)(viib) are not applicable. Additionally, since the land was the assessee's stock-in-trade, it was excluded from the definition of a capital asset.

Upon review, it was determined that Section 56(2)(viib) refers to "any immovable property" without limiting it to a particular type of property. Therefore, agricultural land, being immovable property, falls under the purview of this section. The Tribunal concluded that the CIT(A)'s interpretation was incorrect, and the provisions of Section 56(2)(viib) were applicable. Consequently, the order of the CIT(A) was set aside, and the AO's addition was upheld.

2. Reduction of addition made by AO from Rs. 23,00,000/- to Rs. 8,41,000/-:

The AO had made an addition of Rs. 23,00,000/- as unexplained investment in the purchase of three properties. The CIT(A) reduced this addition to Rs. 8,41,000/-. The CIT(A) considered additional evidence submitted by the assessee, which was examined in the remand proceedings. The CIT(A) accepted the sources of Rs. 15,40,000/- from gifts and advances from various individuals, and also considered the assessee's declared income and proceeds from the sale of a car. After accounting for reasonable household expenses, the CIT(A) concluded that the balance investment of Rs. 8,41,000/- remained unexplained.

The Tribunal reviewed the findings of the CIT(A) and affirmed the reduction of the addition to Rs. 8,41,000/-, agreeing with the CIT(A)'s reasoning and evidence evaluation.

3. Confirmation of addition by CIT(A) treating the source for purchase of land as unexplained:

The assessee's cross objection challenged the CIT(A)'s confirmation of the addition of Rs. 8,41,000/-. The CIT(A) had accepted the sources of Rs. 15,40,000/- from gifts and advances, and considered the declared income and car sale proceeds. However, the CIT(A) found that a portion of the investment remained unexplained after accounting for household expenses.

The Tribunal upheld the CIT(A)'s decision, concluding that the addition of Rs. 8,41,000/- was justified based on the evidence and reasonable inference drawn by the CIT(A).

Conclusion:

The Tribunal allowed the Revenue's appeal regarding the deletion of the addition of Rs. 1,51,06,224/- and upheld the AO's addition. The Tribunal dismissed the Revenue's appeal and the assessee's cross objection regarding the addition of Rs. 23,00,000/-, affirming the CIT(A)'s reduction to Rs. 8,41,000/-. The appeal of the Revenue and the cross objection of the assessee were disposed of with the above directions.

Order Pronounced:

The order was pronounced in the open Court on 07/01/2019.

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