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2012 (11) TMI 590 - HC - Income TaxUndervaluation - Difference between the circle rate and the purchase price of immoveable properties - ITAT deleted the addition - Held that - The express provision of Section 50-C enabling the revenue to treat the value declared by an assessee for payment of stamp duty, cannot be a legitimate ground for concluding that there was undervaluation, in the acquisition of immovable property. The finding cannot start and conclude with the fact that such stamp duty value or basis is higher than the consideration mentioned in the deed. The compulsion for such higher value, is the mandate of the Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates. In the present case, the revenue did not rely on any objective fact or circumstances, consequently, the Court holds that there is no infirmity in the approach of the lower authorities and the Tribunal, granting relief to the assessee - in favour of the assessee. Addition u/s 68 - CIT(A) deleted the addition - Held that - The record reveal that the PAN number and material particulars of the Director (of the assessee) and his proprietorship concern, was made available, even the Income Tax Returns concerned, were filed. The CIT (A) scrutinized this aspect in detail, and held that the assessee had discharged its onus of proving that the funds were received, and revealed particulars of the source. This court finds no unreasonableness in regard to such findings, as to call for interference under Section 260-A of the Act - in favour of the assessee.
Issues Involved:
1. Correctness of the ITAT's order upholding the deletion of Rs.12,22,000/- added back to the income of the assessee by the A.O. due to the difference between the circle rate and the purchase price of immovable properties. 2. Correctness of the ITAT's order upholding the setting aside of the addition of Rs.45,87,350/- made by the A.O. under Section 68 of the Income Tax Act. Issue-wise Detailed Analysis: Issue 1: Deletion of Rs.12,22,000/- The Revenue challenged the ITAT's decision to uphold the deletion of Rs.12,22,000/-, which the A.O. had added back to the assessee's income due to the difference between the circle rate and the purchase price of immovable properties. The A.O. noted that the market value declared by the assessee for stamp duty purposes was higher than the consideration mentioned in the sale deeds. Consequently, the A.O. directed the addition of the difference amounting to Rs.12,22,000/-. The Commissioner (Appeals) set aside this addition, reasoning that the stamp duty valuation did not necessarily indicate that the assessee paid an amount over and above the consideration disclosed in the sale deeds. The ITAT affirmed this view, noting that Section 50C of the Income Tax Act, which presumes higher valuation for capital gains purposes, did not apply to the circumstances of the case. The High Court agreed with this conclusion, emphasizing that Section 50C creates a presumption for capital gains determination in the hands of the seller, not the purchaser. The court held that the declaration of a higher cost for stamp duty purposes could be a starting point for inquiry but could not alone justify the addition. The Revenue did not rely on any objective facts or circumstances to support the addition. Therefore, the court found no infirmity in the lower authorities' approach and upheld the deletion of Rs.12,22,000/-. Issue 2: Addition of Rs.45,87,350/- under Section 68 The A.O. added Rs.45,87,350/- to the assessee's income under Section 68, questioning the genuineness of the source of funds provided by Bright Star International, a proprietorship concern of Mr. Waseem Ahmad Khan, a director of the assessee company. The A.O. concluded that the assessee failed to prove the genuineness of the source of funds as it did not furnish the balance sheet and profit and loss account of Bright Star International. The Commissioner (Appeals) and the ITAT found that the assessee had discharged its onus to prove the genuineness of the loans. The assessee provided confirmation from Mr. Waseem Ahmad Khan, along with his PAN, address, income tax returns, and details of the source of investment. The CIT (Appeals) noted that the A.O. selectively disbelieved cash transactions while accepting cheque payments made by Mr. Waseem Ahmad Khan. The CIT (Appeals) held that if the A.O. had doubts about the cash payments, he should have inquired directly from Mr. Waseem Ahmad Khan. The High Court upheld the findings of the CIT (Appeals) and the ITAT, noting that the assessee had provided all necessary documents to prove the genuineness of the source of funds. The court found no unreasonableness in the concurrent findings of the lower authorities and affirmed the deletion of the addition of Rs.45,87,350/-. Conclusion: The High Court dismissed the Revenue's appeal, holding that both issues were decided correctly in favor of the assessee. The deletion of Rs.12,22,000/- and Rs.45,87,350/- was upheld, and the appeal was found to be devoid of merit.
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