2013 (5) TMI 439 - AT - Income Tax

Addition u/s 69 - difference between the value of the property purchased as per the Stamp Duty Authorities and the sale consideration - AO made difference of Rs. 19.68 lacs as unaccounted consideration and invoked the provisions of section 50C - Held that - The provisions used the expressions transfer by an assessee which imply unambiguously that the section 50C applies to the seller i.e. transferor of the capital asset being land or building or both. Therefore, the transferee or the purchaser is outside the scope of these provisions. Thus, the AO erroneously invoked these provisions mistakenly to this assessee, who is undisputedly a transferee. Thus considering the settled nature of the issue the provisions of section 50C are no application to the assessee-purchaser of the property. The assessee is entitled to relief on this count itself. Accordingly, the issue raised by the assessee is allowed. 6. In the result, the appeal filed by the assessee is allowed.

Issues:
1. Addition of Rs. 19,68,000 under section 69 of the Income Tax Act, 1961 based on presumptions and surmises.
2. Valuation discrepancy in property purchase leading to a substantial rise in valuation.
3. Applicability of section 50C of the Act to the purchaser of the property.

Analysis:

Issue 1: Addition under section 69 of the Income Tax Act:
The appeal challenged the addition of Rs. 19,68,000 under section 69 of the Income Tax Act, 1961, based on presumptions and surmises. The CIT (A) upheld this addition, considering the variance between the purchase value and the valuation by the Stamp Duty Authorities. The appellant argued that the provisions of section 50C should not apply to the purchaser, citing relevant case law. The tribunal agreed with the appellant, ruling that section 50C is meant for sellers, not purchasers. As the appellant was the purchaser, the provisions of section 50C were wrongly applied. Consequently, the tribunal allowed the appeal on this ground.

Issue 2: Valuation Discrepancy in Property Purchase:
The appellant contended that the valuation discrepancy arose due to an error by the Sub-Registrar, who included the open terrace area in the property's valuation, which was not part of the original purchase agreement. This inclusion led to a significant increase in valuation within a short period, raising doubts about its accuracy. The appellant argued that the Inspector of Income Tax was not competent to ascertain property value, and if there were concerns, a Departmental Valuer should have been consulted. The tribunal did not delve into the merits of the case but focused on the incorrect application of section 50C to the purchaser, ultimately allowing the appeal based on this legal issue.

Issue 3: Applicability of Section 50C to the Purchaser:
The central legal issue revolved around the applicability of section 50C of the Act to the purchaser of the property. The tribunal clarified that section 50C pertains to the seller or transferor of a capital asset, not the purchaser. Despite the absence of a specific ground challenging this point, the tribunal acknowledged the general nature of the appellant's argument and granted relief based on the settled legal position that section 50C does not extend to purchasers. By recognizing the legal error in applying section 50C to the appellant as the purchaser, the tribunal allowed the appeal on this basis.

In conclusion, the tribunal allowed the appeal filed by the assessee, emphasizing the incorrect application of section 50C to the purchaser and the legal inapplicability of such provisions to the appellant in this case. The judgment highlighted the importance of precise interpretation of tax laws and the necessity to adhere to legal provisions accurately in tax assessments.

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