2024 (7) TMI 903 - HC - Income Tax

Unexplained money u/s 69A - petitioner contended that Section 69A does not apply in cases where books of account are not required to be maintained - HELD THAT - In the case of an assessee who is not required to maintain books of account, but the Income Tax Department receives information that such person is the owner of unexplained money or other article, such assessee would be called upon to provide an explanation and the same consequences would follow if the assessee does not reply or if the reply of the assessee is not satisfactory. This is evident from the use of the expression books of account, if any , in Section 69A. If any other interpretation is placed on this provision, any assessee not required to file books of account would get away scot-free when such assessee is found to have unaccounted money. In response to the notice u/s 148A(b), the assessee stated that the source of funds for the purchase of the immovable property was from her husband. She stated categorically that the funds were accounted for in her husband's books of account. She also requested that she be provided an opportunity to make more detailed submissions if the explanation is not satisfactory. In reply to the show cause notice, once again, the bank statements were attached. It is stated therein that the payments were numbered on the bank statements and that such payments were made directly to the vendor. It should be noticed, however, that the petitioner did not submit the return of income of her husband or the ledger account, if any, relating to the purchase of this property. As petitioner submitted that such documents were not called for by the Income Tax Department. This submission is not entirely satisfactory because it was incumbent on the petitioner to not only establish the source of funds, but also to show that the sum was duly reported by her husband in his return of income and that applicable tax thereon had been paid. Petitioner has placed on record evidence that her husband paid for the purchase of the relevant immovable property. In the event that her husband had duly declared this income and paid applicable taxes thereon, grave injustice would be caused inasmuch as the same income would be subject to tax in the hands of two persons. For such reason, the impugned order warrants interference. Since the petitioner did not avail of the opportunities and provide all necessary documents, the petitioner is liable to pay costs. Addition u/s 56(2)(x)(b)(B) OR 56(2)(x)(b)(B)(i)/(ii) - Addition was proposed on account of the fact that the Sub Registrar concerned concluded that the market value of the property was more - petitioner contended that the show cause notice referred to Section 56(2)(vii)(b), which is not applicable to the assessee, whereas the impugned order refers to Section 56(2)(x)(b)(B) - HELD THAT - The provisions are substantially similar albeit Section 56(2)(vii)(b) applies to transactions that took place on or before 01.04.2017, whereas Section 56(2)(x)(b)(B) applies to transactions subsequent thereto. Stamp duty was admittedly paid on Rs. 1,83,12,000/- and the differential amount of Rs. 26,16,000/- exceeds both the Rs. 50,000/- and 10% thresholds specified in Sections 56(2)(x)(b)(B)(i) and (ii). For the above reason and by taking into account the fact that the provisions are substantially similar and the petitioner had sufficient opportunity to show cause in respect of the proposed addition, conclude that the mentioning of a different provision in the show cause notice does not vitiate the order in this respect. Stamp duty is leviable on the guideline value - Stamp duty is imposed on conveyances under Article 23 of the Schedule to the Indian Stamp Act, 1899, as applicable in Tamil Nadu. As per Article 23, stamp duty is payable on the instrument of conveyance at a fixed percentage of the market value and not the guideline value. In the reply to the show cause notice, the petitioner stated that she was unable to object to the determination of stamp duty on the basis of the open market value of Rs. 1,83,12,000/- due to family and other personal reasons, and that the petitioner is taking steps to claim a refund of excess stamp duty. The contention of the petitioner and the learned counsel on this aspect cannot be accepted. As a corollary, no case is made out for interference with the impugned order on this aspect. Subject to the fulfillment of above condition, the petitioner is permitted to file additional documents within fifteen days from the date of receipt of a copy of this order. In order to enable the petitioner to upload the same, the respondent shall provide access to the portal. Upon receipt of such additional documents, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing through video conference, and thereafter issue a fresh order insofar as the addition under Section 69A is concerned within three months from the date of receipt of a copy of this order. For the avoidance of doubt, it is clarified that the order does not call for any interference as regards the addition under Section 56(2).

Summary

Issues:
Challenge to assessment order for assessment year 2019-20 based on income below exemption limit; Addition of Rs. 1,56,96,000 under Section 69A and Rs. 26,16,000 under Section 56(2)(x)(b)(B); Failure to declare market value of property and pay taxes; Discrepancy in provisions relied on by respondent.

Analysis:

1. The petitioner challenged an assessment order for the assessment year 2019-20, arguing that her income was below the exemption limit. The assessing officer issued notices under various sections of the Income Tax Act, leading to the impugned assessment order dated 13.03.2024.

2. The petitioner contended that Section 69A, which deals with unexplained money, should not apply as she is not required to maintain books of account. The assessing officer was initially satisfied with the explanation regarding the source of funds for the property purchase. However, a discrepancy of Rs. 26,16,000 was noted between the purchase consideration and market value.

3. The respondent argued that the petitioner failed to provide complete information despite multiple opportunities, leading to adverse inferences. The respondent maintained that the additions of Rs. 1,56,96,000 and Rs. 26,16,000 were justified based on the available information.

4. The court analyzed Section 69A and the petitioner's submissions. It noted that while the petitioner established the source of funds from her husband, she did not prove that the amount was duly reported and taxed in her husband's returns. The court emphasized the importance of providing all necessary documents to avoid double taxation.

5. Regarding the second issue of the Rs. 26,16,000 addition, the court found that the discrepancy in the provisions cited did not invalidate the assessment. Stamp duty was calculated based on the market value of the property, and the petitioner's reasons for objecting to it were deemed insufficient.

6. The court set aside the assessment order only concerning the Rs. 1,56,96,000 addition, subject to the petitioner paying costs and submitting additional documents within a specified timeframe. The respondent was directed to review the case within three months based on the new evidence. The court clarified that no interference was needed regarding the Rs. 26,16,000 addition.

7. The judgment concluded by disposing of the case with specific conditions and instructions for further proceedings, emphasizing the importance of providing complete and accurate documentation in tax matters to avoid discrepancies and ensure fair assessments.