2021 (12) TMI 1074 - AT - Income Tax

Addition u/s 69A - difference in the amount charged by the assessee from sale of office space in Siddh Icon project, Baner - HELD THAT - Section 69A of the Act provides that where in any financial year an assessee is found to be the owner of any money, bullion, jewellery etc., which is not recorded in the books of account and the assessee offers no explanation about the nature and source of its acquisition or the explanation offered is not found by the AO to be satisfactory, the money and the value of such bullion, jewellery etc., may be deemed to be the income of the assessee for such financial year. AO simply took peak sale rate for the two periods under consideration and applied the same to the other properties sold by the assessee during such periods for making the addition. There is no material on record to substantiate that the assessee, in fact, received some thing over and above the declared consideration. Per contra , the assessee tendered host of reasons justifying difference in the rates charged. Secondly, section 69A can be invoked only for such financial year in which the assessee is found to be the owner of the unexplained money, bullion, jewellery etc. Admittedly, section 69A is not applicable to the first two periods which do not fall in the previous year relevant to the assessment year under consideration. We, therefore, hold that the ld. CIT(A) was justified in deleting the addition. Addition u/s.43CA - Reference to stamp value OR amount realized in respect of some other flats sold by the assessee during the period - HELD THAT - Section 43CA has been inserted by the Finance Act, 2013 w.e.f. 01-04-2014. The assessment year under consideration is 2014-15 and the same is, therefore, applicable. Section 251 of the Act does not empower the CIT(A) to restore any matter to the AO for reconsideration inasmuch as he can only confirm, reduce, enhance or annul the assessment in an appeal filed against the order of assessment. From that angle, the decision of the CIT(A) cannot be countenanced, Howbeit , it is seen that the provision of section 43CA r.w.s.50C govern the situation under consideration. Though technically, we set-aside the view of the ld. CIT(A) in restoring the matter to the file of AO, we direct the AO to compute the amount of addition u/s.43CA with reference to stamp value and not the amount realized in respect of some other flats sold by the assessee during the period. In case the assessee disputes, a valid reference u/s.50C(2), may be ordered by the AO. This ground is disposed off accordingly. Addition u/s.36(1)(iii) - interest bearing loans were found to have been advanced on which no interest was charged - HELD THAT - The balance in the Reserves and Surplus account at the beginning of the year was at ₹ 2.35 crore, which at the end of the year shot up to ₹ 6.68 crore. Note No.2 gives bifurcation of such amount as indicating that the increase in the Reserves and Surplus was only because of profit during the year at ₹ 4,33,62,794/-. If we exclude the amount of profit during the year, the amount of Share Capital and Reserves and Surplus is short of the fresh loans advanced during the year. As the amount of share capital and the opening balance in the reserves and surplus account is less than the amount of fresh loans given during the year, the presumption as countenanced in Reliance Utilities 2009 (1) TMI 4 - BOMBAY HIGH COURT does not ipso facto apply fully to the facts of the case. On a pertinent query, the ld. AR could not point out the dates on which such fresh loans were advanced during the year so as to find out the amount of shareholders fund existing on such dates. We, therefore, set-aside the impugned order and remit the matter to the file of the AO for deciding this issue afresh in the light of the judgment of Hon ble Jurisdictional High Court in the case of Reliance Utilities (supra). Needless to say, the assessee will be allowed reasonable opportunity of hearing. Deemed dividend u/s 2(22)(e) - HELD THAT - As seen that the protective addition has been made in the hands of the assessee, who advanced the loans to its sister concerns. The assessee is not the one to have received loans. Section 2(22)(e) applies only when a loan is received which is treated as deemed dividend. As the assessee did not receive any amount from its related companies, the provisions of section 2(22)(e) cannot be applied. We, therefore, uphold the impugned order on this legal issue. Addition as annual letting value of unsold commercial units of the real estate project Siddha Icon - HELD THAT - It implies that where any building or land appurtenant thereto, held as stock in trade, is unsold at the end of the year, the annual letting value is required to be determined in terms of section 23(5) after a period of one year from the end of the relevant financial year in which the construction is completed. This amendment came into effect from 01-04-2018. The assessment year under consideration is 2014-15 and hence, the insertion will not apply to the instant case. The question as to whether notional rent on the unsold flats lying as stock in trade can be charged to tax as Income from the property came up for consideration before the Pune Tribunal in Kumar Properties and Real Estate (P) Ltd. Vs. DCIT 2021 (4) TMI 1163 - ITAT PUNE . After considering the decisions - both for and against -, the Tribunal decided the issue in favour of the assessee. Respectfully following the aforesaid precedent in Kumar Properties (supra) , we set-aside the impugned order and order to delete the addition sustained in the first appeal.

Summary

Issues Involved:
1. Deletion of addition under Section 69A of the Income-tax Act, 1961.
2. Setting aside and restoration of the addition under Section 69A.
3. Deletion of addition under Section 36(1)(iii) of the Income-tax Act, 1961.
4. Deletion of addition on account of deemed dividend under Section 2(22)(e) of the Income-tax Act, 1961.
5. Confirmation of addition as annual letting value of unsold commercial units.

Detailed Analysis:

1. Deletion of Addition under Section 69A:
The first issue pertains to the deletion of an addition of ?3,82,07,505 out of a total addition of ?5,02,03,472 made by the Assessing Officer (AO) under Section 69A. The AO observed significant rate differences in the sale of office space by the assessee and applied peak rates to compute the difference, resulting in the addition. The CIT(A) deleted the addition for the periods February 2012 to July 2012 and April 2011 to October 2011, as they did not fall within the relevant financial year. The Tribunal upheld the CIT(A)'s decision, noting that Section 69A applies only to the financial year in question and that there was no material evidence to substantiate that the assessee received amounts over and above the declared consideration.

2. Setting Aside and Restoration of Addition under Section 69A:
The second issue concerns the addition of ?1,19,95,966 made under Section 69A for the period December 2013 to February 2014. The CIT(A) restored this addition to the AO for reconsideration under Section 43CA, which deals with the full value of consideration for assets other than capital assets. The Tribunal noted that Section 43CA, read with Section 50C, governs the situation and directed the AO to compute the addition with reference to the stamp value. If the assessee disputes, a valid reference under Section 50C(2) may be ordered.

3. Deletion of Addition under Section 36(1)(iii):
The third issue involves the deletion of an addition of ?51,68,089 made by the AO under Section 36(1)(iii). The AO disallowed interest on loans advanced to related parties, arguing that the assessee diverted business funds. The CIT(A) deleted the addition, noting that no fresh loans were advanced during the year and that the assessee had sufficient funds. The Tribunal found that fresh loans were indeed advanced during the year and remitted the matter to the AO for reconsideration in light of the judgment in CIT vs. Reliance Utilities and Power Ltd., which presumes that investments in sister concerns are made out of interest-free funds if the assessee has sufficient such funds.

4. Deletion of Addition on Account of Deemed Dividend under Section 2(22)(e):
The fourth issue concerns the deletion of an addition of ?2,29,28,728 made by the AO on a protective basis under Section 2(22)(e). The AO made this addition because the assessee advanced loans to related parties with common shareholding exceeding 20%. The CIT(A) deleted the addition, and the Tribunal upheld this decision, noting that Section 2(22)(e) applies only when a loan is received, not when it is advanced.

5. Confirmation of Addition as Annual Letting Value of Unsold Commercial Units:
The final issue pertains to the confirmation of an addition of ?18,36,968 as the annual letting value of unsold commercial units. The AO computed deemed rent for the unsold units, which the CIT(A) upheld. The Tribunal noted that Section 23(5), which provides for the annual value of property held as stock-in-trade to be taken as Nil for one year, does not apply to the assessment year 2014-15. Citing a precedent from the Pune Tribunal in Kumar Properties and Real Estate (P) Ltd. vs. DCIT, the Tribunal set aside the addition.

Conclusion:
The appeal by the Revenue was partly allowed for statistical purposes, and the Cross Objection by the assessee was allowed. The Tribunal upheld the deletion of the addition under Section 69A for periods outside the relevant financial year, remitted the matter of addition under Section 69A for the relevant period to the AO for reconsideration, and directed the AO to reconsider the disallowance of interest under Section 36(1)(iii) in light of relevant case law. The Tribunal also upheld the deletion of the addition on account of deemed dividend and set aside the addition of annual letting value for unsold commercial units.