2024 (10) TMI 654 - AT - Income Tax

Unexplained investment - sale deed was registered by declaring sale consideration less than Stamp Duty Valuation Authorities as determined its value for the purpose of charging the Stamp - as per AO section 50C would contemplate that for the purpose of computing capital gain u/s 4 full value of consideration is to be construed equivalent to the amount on which Stamp Duty was charged - AO made a reference to section 50C and observed that full value of sale consideration is being taken - Since the assessee has purchased 25% of the total land, hence, in his hand, he deemed as an unexplained investment HELD THAT - We are of the view that this addition is not sustainable because the assessee is a vendee and not the vendor. Section 56(2)(vii) of the Income Tax Act has been introduced in the Statute Book by the Finance Act, 2013 w.e.f. 1st April, 2014. This section provides deeming fiction of deemed gift. Subclause (vii) of section 56(2) would contemplate that if a vendee purchased a property, for example, Rs. 100/- and Stamp Duty Valuation Authority has determined the value of such property at Rs. 150/-, then purchase cost would be deemed equivalent to Rs. 150/- and the difference between both is to be added under the head deeming gift in the hands of the purchaser. There are other exceptions provided in the section and deeming fiction would be invoked subject to those exceptions. The assessment year involved herein is A.Y. 2012-13, therefore, no deeming fiction could be invoked in the hands of the purchaser in this A.Y. The reference to section 50C is meant for the vendor and not for the vendee. It is meant for the seller and not for the purchaser. Therefore, this inference by the ld. Assessing Officer is contrary to the law and absurd one. Apart from the above, we find that total purchase consideration has been disclosed at Rs. 48,60,000/-. This has not been debited from the alleged deemed gift. 1/4th of this at least ought to have been reduced from the total addition worked out by AO. No hesitation in observing that both the revenue authorities have acted against the assessee with the vindictive approach without appreciating the right controversy and without understanding the issue. Hence, the additions made in the hands of the assessee are not sustainable. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre for A.Y. 2012-13; Ex-parte decision due to absence of assessee; Confirmation of addition of Rs. 42,39,000/-; Interpretation of section 50C of Income Tax Act; Application of section 56(2)(vii) introduced by Finance Act, 2013; Deletion of addition made by Assessing Officer.

Analysis:
The judgment pertains to an appeal before the Appellate Tribunal ITAT PATNA against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre for the assessment year 2012-13. The Tribunal noted that despite the assessee raising multiple grounds of appeal, the main grievance was the confirmation of an addition of Rs. 42,39,000/- made by the Assessing Officer. The Tribunal proceeded ex-parte as no one appeared on behalf of the assessee during the hearing. The primary issue under consideration was whether this addition was sustainable or not.

The Assessing Officer had based the addition on the discrepancy between the declared sale consideration and the value determined by Stamp Duty Valuation Authorities, invoking section 50C of the Income Tax Act. However, the Tribunal observed that the assessee was a vendee, not the vendor, and highlighted the introduction of section 56(2)(vii) by the Finance Act, 2013. This section deals with deeming fiction of deemed gift in cases where Stamp Duty Valuation Authorities determine a higher value than the purchase cost. The Tribunal clarified that for the assessment year 2012-13, no deeming fiction could be invoked in the hands of the purchaser, and section 50C was applicable to the seller, not the purchaser. Therefore, the Tribunal deemed the Assessing Officer's inference as contrary to the law and unsustainable.

Furthermore, the Tribunal noted that the total purchase consideration disclosed by the assessee was Rs. 48,60,000/-, which should have been considered in the assessment. The Tribunal criticized the revenue authorities for acting with a vindictive approach and without a proper understanding of the legal issues involved. Consequently, the Tribunal held that the additions made by the revenue authorities were not sustainable and proceeded to delete the addition of Rs. 42,39,000/-.

In conclusion, the Tribunal allowed the appeal of the assessee, pronouncing the order in open court on 10.10.2024.