2022 (6) TMI 1015 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - AR submitted that the case was selected for limited scrutiny, hence, the AO had no power to make addition u/s 56(2)(vii)(b) - AR moved a petition for filling additional evidence - HELD THAT - As per Section 56(2)(vii)(b) the consideration is market value means the actual investment made by the vendee is not the amount mentioned as consideration in the sale deed but the market value mentioned by the Stamp Authorities for the purpose of Stamp Duty. Thus, when we read it in totality the AO has acted as per the directions of CBDT and has not gone beyond the reason mentioned for limited scrutiny. The CBDT Instruction no.20/2015 mentions scope of inquiry as under iii Scope of Enquiry Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s ) of AIR/CIB/26AS data . In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. There is no dispute that the case was selected for limited scrutiny on the parameters of AIR. Therefore, as per the CBDT instruction 20/2015, the AO had power to investigate issue pertaining to AIR information. In this case, it is a fact that AIR information did mention market value of the property. Therefore, AO had rightly invoked provisions of Section 56(2)(vii)(b). AR moved a petition for filling additional evidence - AR explained that the said information had not been filed before the AO due to the subsequent developments in the Civil case of the appellant.It is also observed that there were Criminal and Civil proceedings in relations to the impugned land sale. Name of the Vendor and vendee appeared in the FIR. Ld.AR filed copies of the submission made during Civil suit and other documents related to civil suit. Ld.AR also submitted copy of the FIR. We are satisfied that there were sufficient reasons for not filling these documents before the AO. Therefore, we admit these documents as additional evidence. It is observed that these documents goes to the root of the taxability of impugned sale. It is also admitted fact that these documents were not filed before the Assessing Officer. Therefore, we set-aside the order of the Ld.AO, with a direction to do a de-nova assessment. The assessee will be at liberty to file all necessary evidence/documents. The AO will provide reasonable opportunity of hearing to the assessee. However, the Assessee will file all relevant documents at the earliest before the AO during the set aside proceedings, accordingly, the Additional Grounds No. II , III and Main Ground No s.1 2 are allowed for statistical purpose

Summary

Issues:
1. Addition under section 56(2)(vii)(b) disregarding stamp duty valuation.
2. Validity of assessment under limited scrutiny.
3. Nature of property as capital or trading asset.
4. Validity of addition under section 56(2)(vii)(b) due to lack of actual transfer.
5. Admission of additional grounds and evidence for de-novo assessment.

Analysis:

Issue 1: Addition under section 56(2)(vii)(b) disregarding stamp duty valuation
The assessee contested the addition of Rs. 18,24,312 under section 56(2)(vii)(b) of the Income Tax Act, 1961, due to a difference in stamp duty valuation. Despite raising objections regarding the correctness of stamp duty valuation, both the Assessing Officer and Commissioner of Income Tax (Appeals) upheld the addition. The appellant's argument that the Assessing Officer had referred the valuation to the Assistant Valuation Officer, but the report was not received within the statutory time limit, was considered. However, the tribunal found that the addition was made in accordance with the provisions of the Act, leading to the dismissal of this ground of appeal.

Issue 2: Validity of assessment under limited scrutiny
The appellant raised concerns regarding the assessment conducted under limited scrutiny, arguing that the Assessing Officer exceeded his authority by invoking section 56(2)(vii)(b) for a different ground than the one specified for scrutiny. The tribunal examined the case selection for limited scrutiny based on the Annual Information Report (AIR) and determined that the Assessing Officer acted within the scope of the CBDT's directions. As the AIR information included details relevant to the addition made, the tribunal upheld the validity of the assessment under limited scrutiny.

Issue 3: Nature of property as capital or trading asset
The appellant contended that the property in question was a trading asset, not a capital asset, and therefore section 56(2)(vii)(b) should not apply. However, the tribunal found that the nature of the property did not exempt it from the provisions of the said section, as the market value determined by the Stamp Authorities was considered the actual consideration for the transaction. Thus, the argument regarding the nature of the property was not accepted.

Issue 4: Validity of addition under section 56(2)(vii)(b) due to lack of actual transfer
The appellant further argued that no actual transfer took place due to fraud, citing a court order as evidence. The tribunal acknowledged the additional grounds raised by the appellant and admitted additional evidence related to criminal and civil proceedings concerning the property sale. Despite the lack of submission of these documents before the Assessing Officer, the tribunal set aside the assessment and directed a de-novo assessment, allowing the appellant to submit all relevant documents for consideration.

In conclusion, the tribunal partially allowed the appeal for statistical purposes, setting aside the assessment for a fresh determination based on the additional evidence to be provided during the reassessment proceedings.