2024 (5) TMI 907 - AT - Income Tax

Addition made u/s. 69/69B - difference between the stamp duty value and the sale consideration with respect to purchase of property - as per assessee impugned transaction which is part of a family settlement does not amount to transfer - HELD THAT - As in the case of Dinesh Jain HUF 2012 (10) TMI 158 - DELHI HIGH COURT has considered a similar issue of addition under section 69B of the Act where it has been held that the burden of providing satisfactory explanation to the AO by the assessee regarding the amount in excess of what is recorded in the books of accounts would arise after the AO first finds that the assessee has expended more that what is recorded in the books of accounts. From the perusal of the materials, we notice that the AO has not brought on record any evidence to support that the assessee has expended more than what is recorded in the books and has made the addition based on the valuation for stamp duty purposes. Therefore, we are inclined to agree with the contention of the assessee that addition towards the impugned transaction u/s 69B of the Act could not have been made without the AO recording a finding that the assessee has spent more amount towards purchases than what is recorded in the books of accounts. Addition u/s 56(2)(x) - The section is applicable to individuals and HUF and the assessee being a company the said section is not applicable. The legislature by subsequent amendment in Finance Act, 2017 introduced section 56(2)(x) to bridge this lacuna in the statute covering all types of assessee s. However, it is relevant to notice that section 56(2)(x) is applicable only from AY 2017-18 and therefore, the addition towards the impugned transaction which happened during the year under consideration could not have been taxed under section 56(2)(x) of the Act. Revenue's contention that the assessee's name is not appearing in the family settlement agreement - There is merit in the submission the assessee company is part of the settlement agreement though not specifically mentioned in the agreement and that the impugned transaction took place consequent to the family agreement. It is also relevant to notice that in the case of Kay ARR Enterprises Ors. 2007 (7) TMI 171 - MADRAS HIGH COURT while considering a similar issue has held that the transaction under a family settlement agreement do not amount to transfer and that the SLP filed by the Department against the said case has been dismissed by the Hon'ble Supreme Court. Therefore, in our considered view on this count also the addition made towards the impugned transaction is not tenable. Addition towards Income from House Property - AO made the addition based on the information received from the society in response to notice u/s 133(6) of the Act stating that the impugned property could fetch a rent of Rs. 33,000/- per month - contention of the assessee is that for the purpose of deemed income from House Property it is the Municipal Ratable Value that needs to be considered and not the rent which the property is expected to receive by letting out - HELD THAT - The additional evidence now submitted by the assessee in terms of ratable value fixed by Mumbai Municipal Corporation goes to the root of the issue. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. Since the lower authority did not have an opportunity to examine the additional evidence now submitted by the assessee we deem it fit to remit the issue back to the AO for fresh consideration. The AO is directed to examine the evidence submitted by the assessee and decide in accordance with law keeping in mind the decision of the Co-ordinate Bench in the case of Abhijit Rajan 2011 (4) TMI 1363 - ITAT MUMBAI

Summary

Issues Involved:
1. Addition under Section 69/69B amounting to Rs. 2,38,99,000/-
2. Jurisdiction under Section 69/69B
3. Applicability of Section 69/69B to the facts of the case
4. Ignoring High Court decisions
5. Family Settlement and its implications on property transfer
6. Justification of the addition of Rs. 2,38,99,000/-
7. Addition of Rs. 2,24,000/- under "Income from House Property"
8. Excessiveness and arbitrariness of the addition under "Income from House Property"
9. Levy of interest under Section 234B amounting to Rs. 28,12,284/-

Detailed Analysis:

1. Addition under Section 69/69B amounting to Rs. 2,38,99,000/-
The AO noticed that the assessee company purchased an immovable property for Rs. 9,00,000/- while the stamp duty value was Rs. 2,50,39,000/-. The difference of Rs. 2,38,99,000/- was added as undisclosed investment under Section 69/69B. The CIT(A) sustained this addition, rejecting the assessee's claim that the property was obtained through a family settlement, which does not amount to "transfer."

2. Jurisdiction under Section 69/69B
The assessee argued that the conditions for assuming jurisdiction under Sections 69 and 69B were not fulfilled. The Tribunal noted that Section 69 applies only to investments not recorded in the books, which was not the case here. For Section 69B, the AO must "find" that the assessee expended more than recorded, which was not substantiated by any evidence other than the stamp duty valuation.

3. Applicability of Section 69/69B to the facts of the case
The Tribunal held that the addition under Section 69 was not applicable as the investment was recorded in the books. For Section 69B, the AO did not provide evidence that the assessee expended more than what was recorded. The Tribunal referenced the Delhi High Court decision in CIT Vs. Dinesh Jain HUF, which requires the AO to find actual expenditure beyond the recorded amount.

4. Ignoring High Court decisions
The assessee cited decisions from the Madras High Court and the Supreme Court, which held that transactions under family settlements do not amount to "transfer." The Tribunal agreed, noting that the impugned transaction was part of a family settlement and thus not taxable under Sections 69 or 69B.

5. Family Settlement and its implications on property transfer
The Tribunal accepted the assessee's argument that the property transfer was part of a family settlement. The Tribunal referred to the family settlement deed and the Madras High Court's decision in Kay ARR Enterprises, which was upheld by the Supreme Court, to conclude that such transactions do not amount to "transfer."

6. Justification of the addition of Rs. 2,38,99,000/-
The Tribunal found that the addition was unjustified as the AO did not provide evidence of actual expenditure beyond the recorded amount. The Tribunal also noted that Section 56(2)(vii)(b), which taxes the difference between stamp duty value and actual consideration, was not applicable to companies during the assessment year in question.

7. Addition of Rs. 2,24,000/- under "Income from House Property"
The AO added Rs. 2,24,000/- based on the deemed annual value of Rs. 33,000/- per month, as opposed to the Rs. 5,000/- per month declared by the assessee. The Tribunal admitted additional evidence regarding the municipal ratable value and remitted the issue back to the AO for fresh consideration, directing the AO to examine the evidence and decide in accordance with the law.

8. Excessiveness and arbitrariness of the addition under "Income from House Property"
The Tribunal noted that the additional evidence regarding the municipal ratable value needed to be considered. The issue was remitted back to the AO for fresh consideration, ensuring the assessee is given a proper opportunity to be heard.

9. Levy of interest under Section 234B amounting to Rs. 28,12,284/-
The Tribunal held that the levy of interest under Section 234B is consequential and does not require separate adjudication.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to re-examine the issues related to the addition under "Income from House Property" based on the additional evidence provided. The addition under Section 69/69B was deleted, and the Tribunal emphasized the need for proper substantiation and adherence to legal provisions.