2022 (10) TMI 457 - AT - Income Tax

Addition u/s 56(2)(vii) - difference between the purchase price of the property purchased by the assessee firm during the year on the basis of value adopted by the Registrar of Documents for stamp duty purpose over the actual amount paid by the assessee firm for purchase of property - HELD THAT - AO was taking benefit of any presumption under law that any amount was paid from undisclosed source to the seller by purchaser then certainly that relevant section should have been mentioned in the show cause itself. Then relevant Section 50C cannot be invoked as the said section is applicable in the case of seller of the property only while the appellant is a buyer. Section 56(2)(vii)(a) and Section 56(2)(vii)(b) of the Act are also not applicable in case of partnership firm or LLP and the assessee is a LLP. Section 56(2)(x) which may be applicable in case of partnership firm or LLP was introduced with effect from A.Y. 2018-19 while the present case is with regard to A.Y. 2015-16. Thus, in the absence of any statutory presumption the AO was under obligation to establish by definite evidence that purchaser had made more payment then stated in sale deed. Circumstances of distress sale are on record and there was no attempt of AO to discredit the same. CIT(A) has rightly taken all these aspects into consideration while allowing the relief of deletion and no interference is required.The appeal of revenue is dismissed.

Summary

Issues:
1. Addition of Rs. 7,84,00,000/- by the Assessing Officer based on the difference in sale consideration of a property.
2. Deletion of the addition by the Commissioner of Income Tax (Appeals)-10, New Delhi.
3. Appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals).

Issue 1: Addition of Rs. 7,84,00,000/- by the Assessing Officer:
The Assessing Officer added Rs. 7,84,00,000/- to the income of the Assessee firm, being the difference between the purchase price of a property and the value adopted by the Registrar of Documents for stamp duty purposes. The Assessee firm purchased a property for Rs. 4,50,00,000/- and paid stamp duty of Rs. 72,05,000/- based on the Registrar's valuation. Despite providing details and reasons for the difference in values, the Assessing Officer made the addition, alleging undisclosed sources. The Assessee firm appealed the Assessment Order, leading to the deletion of the addition by the Commissioner of Income Tax (Appeals)-10, New Delhi.

Issue 2: Deletion of the addition by the Commissioner of Income Tax (Appeals)-10, New Delhi:
The Commissioner of Income Tax (Appeals) concluded that there was no evidence to prove that the Assessee had paid more than stated in the sale deed. Referring to legal precedents, including the decision in K P Verghese v ITO, it was emphasized that the burden of proof lies with the Revenue to establish any understatement of consideration. The Commissioner highlighted that valuation for stamp duty purposes does not necessarily reflect the actual consideration. Citing various judicial pronouncements, the Commissioner deleted the addition of Rs. 7,84,00,000/-, considering the factual matrix and legal principles.

Issue 3: Appeal filed by the Revenue:
The Revenue raised grounds challenging the deletion of the addition, arguing that the Commissioner erred in law by not appreciating the facts mentioned by the Assessing Officer. The Revenue contended that the sale consideration should be based on the Circle Rate of the property, and the Assessee failed to provide concrete evidence justifying the lesser value. During the hearing, the Revenue defended the Assessing Officer's findings, claiming that the circumstances of distress sale were not justified. However, the Appellate Tribunal, after considering all aspects, concluded that the Assessing Officer's approach lacked statutory support and evidence to establish undisclosed sources, leading to the dismissal of the Revenue's appeal.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the addition of Rs. 7,84,00,000/-, emphasizing the lack of statutory presumption and concrete evidence supporting the Assessing Officer's position. The Tribunal highlighted the importance of legal provisions and burden of proof in such cases, ultimately dismissing the Revenue's appeal on 11th October, 2022.