2023 (9) TMI 1679 - AT - Income Tax

Addition u/s 56(2)(vii)(b)(ii) - difference in the stamp value of the property and sale consideration has to be assessed under Income from other sources - as argued assessee has made payments for purchase of property through account payee cheques and complied with the provisions of the Act. HELD THAT - We find that in the appellate proceedings before the CIT(A) the assessee has mentioned about the understanding and the oral agreement fallowed by the payments in the F.Y 2012-13 through banking channel and the provisions of Sec. 56(2)(vii)(b)(ii) of the Act are complied. Whereas the submissions of the assessee on the disputed issue made before the CIT(A) are emerged for the first time and the A.O has to examine the facts and the nature of transactions. Accordingly to meet the ends of justice we set aside the order of the CIT(A) and restore the entire disputed issues to the file of the Assessing officer to examine and verify the issues discussed above. Appeal filed by the assessee is allowed for statistical purposes. Penalty u/s 271(1)(b) - assessee has not disclosed the reasonable cause for non compliance to the notice u/s 142(1) - HELD THAT - We found that the submissions made by the Ld. AR are realistic and when the assessment was completed u/s 143(3) r.w.s 263 of the Act the penalty u/s 271(1)(b) of the Act cannot be imposed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the addition of Rs. 35,28,000/- to the assessee's income under Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961, was justified.
• Whether the penalty imposed under Section 271(1)(b) for non-compliance with notices under Section 142(1) was valid.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition under Section 56(2)(vii)(b)(ii)

• Relevant legal framework and precedents: Section 56(2)(vii)(b)(ii) of the Income Tax Act deals with the taxation of immovable property purchased for a consideration less than the stamp duty value, where the difference exceeds fifty thousand rupees.
• Court's interpretation and reasoning: The Tribunal considered whether the payments made by the assessee in F.Y. 2012-13 should determine the applicable stamp duty value, despite the registration occurring in F.Y. 2013-14.
• Key evidence and findings: The assessee argued that payments were made via account payee cheques in F.Y. 2012-13, which should fix the consideration date for stamp duty purposes.
• Application of law to facts: The Tribunal noted that the assessee complied with the Act's provisions by making payments through banking channels, which were recorded in the sale deed.
• Treatment of competing arguments: The Department contended that the stamp duty value at the date of registration should apply. The Tribunal found merit in the assessee's argument that the consideration date should be based on the payment date.
• Conclusions: The Tribunal set aside the CIT(A)'s order, directing the Assessing Officer to re-examine the facts and provide the assessee an opportunity for a hearing.

Issue 2: Penalty under Section 271(1)(b)

• Relevant legal framework and precedents: Section 271(1)(b) imposes penalties for failure to comply with notices under Section 142(1).
• Court's interpretation and reasoning: The Tribunal examined whether the assessee had reasonable cause for non-compliance with notices.
• Key evidence and findings: The assessee argued that information was eventually submitted during assessment proceedings, and the assessment was completed under Section 143(3) r.w.s 263.
• Application of law to facts: The Tribunal found that the assessment completion indicated compliance, negating the basis for penalty imposition.
• Treatment of competing arguments: The Department maintained that the penalty was justified due to initial non-compliance. The Tribunal disagreed, citing judicial precedents favoring the assessee.
• Conclusions: The Tribunal directed the deletion of the penalty, setting aside the CIT(A)'s order.

SIGNIFICANT HOLDINGS

• Core principles established: Payments made through banking channels can determine the consideration date for stamp duty purposes under Section 56(2)(vii)(b)(ii), even if registration occurs later.
• Final determinations on each issue: The Tribunal allowed the appeal concerning the addition for statistical purposes, requiring further examination by the Assessing Officer. The appeal regarding the penalty was allowed, directing deletion of the penalty.
• Verbatim quotes of crucial legal reasoning: "We find that the contentions of the Ld.AR are that the sale consideration was paid in the F.Y 2012-13 based on the understanding between the parties though it was registered subsequently."