2024 (6) TMI 986 - AT - Income Tax

Unexplained investment u/s 69 OR 56(2)(x)/6(2)(vii) - difference between assessee s actual purchase price and stamp value - HELD THAT - There is not even an iota of evidence indicating the assessee to have actually paid the impugned sum to the vendor(s) concerned before or at the time or after the registration of sale deed. Section 69 of the Act stipulating such an addition of unexplained investment is applicable only when an investment is actually made than which is considered for the purpose of stamp collection only. We accordingly conclude that the learned lower authorities have erred in facts in law in making the impugned addition of Rs. 51.20 lacs; which is also not taxable in case of a partnership firm u/s. 56(2)(x) for the assessment year 2016-17 since inserted w.e.f. 01.04.2017 carrying prospective effect. Faced with this situation we accept the assessee s sole substantive ground in very terms. Assessee s appeal is allowed.

Summary

Issues Involved:
The judgment involves the following Issues:
1. Addition under section 69 of Income Tax Act for the difference in Stamp duty valuation and actual purchase cost of immovable property.
2. Applicability of sections 56(2)(viii) and 56(2)(x) to partnership firms for assessment year 2016-17.

Issue 1: Addition under section 69 of Income Tax Act:
The assessee contested the addition of Rs. 51,20,000 made by the Assessing Officer under section 69 of the Income Tax Act, pertaining to the variance between Stamp duty valuation and actual purchase cost of immovable property. The CIT(A) upheld the addition, citing non-recording of the investment in the books of accounts and lack of satisfactory explanation from the assessee. The Appellate Authority found all conditions of section 69 satisfied, as the unrecorded investment of Rs. 51,20,000 was not explained by the assessee. However, the ITAT Pune disagreed with the lower authorities, ruling that the addition was unwarranted. They highlighted the absence of evidence showing actual payment by the assessee to the vendor(s) before or after the registration of the sale deed. The ITAT clarified that section 69 applies when an actual investment is made, not merely for stamp duty purposes. Additionally, they noted that the provision of section 56(2)(x) was not applicable to partnership firms for the assessment year 2016-17. Consequently, the ITAT allowed the assessee's appeal, overturning the addition under section 69.

Issue 2: Applicability of sections 56(2)(viii) and 56(2)(x) to partnership firms:
The assessee argued that section 56(2)(viii) was only applicable to Individuals and HUFs, not partnership firms. They contended that section 56(2)(x), effective from 01.04.2017, was not applicable for the assessment year 2016-17. The Appellate Authority rejected the assessee's claim, stating that the difference in valuation as per sale deed and stamp duty was taxable under section 56(2)(x). The Authority emphasized that the assessee failed to provide sufficient proof or documents to support their stance. However, the ITAT Pune, in allowing the appeal on the first issue, indirectly addressed the applicability of section 56(2)(x) to partnership firms by ruling in favor of the assessee and overturning the addition.