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TMI Blog2021 (6) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... higher payment to tempt the seller to sell the property. In such type of cases it cannot be said that the other sellers must have received payments at the same rate. Since, in the instant case, the assessee has sold her 12.5% share in the property to her son at the prevailing circle rate and there is no evidence on record that the assessee has received something more than the amount mentioned in the sale deed and there is no addition in the hands of the son of the assessee on account of such extra payment made for purchase of the property, therefore, the addition made by the AO on presumption and surmises which has been sustained by the CIT(A), in our opinion, deserves to be deleted. We accordingly set aside the order of the CIT(A) on this issue and direct the AO to delete the addition. Amount received by the assessee due to non-fulfillment of certain obligations - HELD THAT:- As an amount of ₹ 1.30 crores was yet to be received by the assessee since it was forfeited by the buyer of the property on account of non-fulfillment of the obligations set out in the sale deed itself. Under these circumstances, we are of the considered opinion that when the amount was not rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te For the Revenue : Shri Ashok Gautam, Sr. DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 2nd February, 2017 of the CIT(A)-16, New Delhi, relating to assessment year 2012-13. 2. Facts of the case, in brief, are that the assessee is an individual and filed her return of income on 31st July, 2012 declaring total income at ₹ 7,49,01,810/-. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed capital gain on sale of her undivided 12.5% share of 921.06 sq. yard. of land in property No.11B, Jungpura, New Delhi 110014 which was sold for ₹ 74 lacs to her son Mr. Aniljit Singh, whereas Mr. Aniljit Singh has purchased the undivided 25% share of the above said property from his uncle at ₹ 2,40,00,000/-. According to the Assessing Officer, since both are part of the same property, the rate at which it is sold by the assessee is under valued. Rejecting the various explanations given by the assessee, the Assessing Officer made addition of ₹ 45.50lakhs being the difference between the value of 12.5% share at ₹ 1.20 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of the property and, therefore, the same cannot be compared with the entire 25% (first floor of the property)and the Assessing Officer had not referred the matter to the DVO before making the addition. 4. However, the ld.CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the addition of ₹ 45.50 lakhs by observing as under:- I have considered all the facts and circumstances of the case. It is not disputed by the Ld AR that the purchaser of the party Sh Aniljit Singh acquired the one floor in the property 11 B, Jangpura, New Delhi-110014 for a consideration of ₹ 2.4 crore, which constitute only 25% of the said property. It is also undisputed fact that the appellant had sold the one half of the floor (12.5% of the property) to her son Sh Aniljit Singh for a consideration of ₹ 74.50 lac. In spite of the fact that the property sold is at the back portion of the property, the property is grossly under valued. The Assessing Officer has merely adopted the valuation of the property which has been declared by Sh Aniljit Singh in purchase of other floor of the same property. There is a stark difference in the value adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember, 2011 signed by Hero Corporate Service Ltd. and counter signed by the Appellant, the vendee, Hero Corporate Service Ltd., held back a sum of ₹ 2.50 Crore initially on account of certain obligations which were to be fulfilled by the Appellant to enable Hero Corporate Service Ltd. to enjoy total right to the property sold. 1.3 That out of the sum of ₹ 2.50 Crores held back the Appellant received ₹ 1.20 Crores and never received ₹ 1.3 Crore on account of the fact that the Appellant was unable to produce Completion Certificate with respect to the building. 1.4 That the amount of ₹ 1.30 Crores has been held back on the ground that a portion of building sold was unauthorized and subject to demolition by the authorities. 1.5 That accordingly the Appellant is not entitled to consideration of ₹ 1.30 Crores, since the sword of demolition would always be hanging on the vendee. Furthermore, in any case cost of obtaining completion by paying compounding fee and legal fee would be more than ₹ 1.30 Crores. 1.6 As such the amount of ₹ 1.30 Crores was not to be paid by the Appellant to the vendee. 1.7 Therefore he con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm a belief that income has escaped assessment within the meaning of provisions section 147/148 of the act and as a sequel present reopening action of Ld. AO, order passed by Ld. AO thereon and impugned order of Ld. CITA are liable to be quashed. 1.1. That on the facts and in the circumstances of the case and in law, the reasons recorded in present case are based on non application of mind as evident from the reasons which are based on mere suspicion and guess work. 1.2. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in reopening the reasons on basis of unaccrued and hypothetical income, against the concept of real income. 1.3. That on the facts and in the circumstances of the case and in law, Ld. AO erred in trespassing the reasons, making assessment on the issues which have no reference to information received and for which no separate notice u/s 148 is issued, and there is no fresh material received during the course of the reopening proceedings. On Merits 2. That on the facts and in the circumstances of the case and in law, Ld. CITA erred in confirming the addition of ₹ 45,50,000/- on account of alleged under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 45,50,000/- on account of alleged under-valuation. The ld. Counsel for the assessee, referring to para 2 of the assessment order, submitted that the assessee was having an undivided share of 12.5% in the property which was transferred at the prevailing circle rate to her son. Referring to page 3 of the paper book, he submitted that the undivided share of the assessee in the property was at the back side of the whole property. Referring to page 3 of the paper book, again, he submitted that the assessee transferred the property to her son as a result of which he became the owner of 75% of undivided share of the property. The ld. Counsel for the assessee, referring to page 3 of the paper book, submitted that the AO made the addition in the hands of the assessee by merely comparing the sale of another share without appreciating that the son of the assessee paid ₹ 2.40 crore for 25% share as opportunity cost to the uncle to become owner of the entire property. Further, provisions of section 50C was not applied by the AO since it was not applicable. He submitted that no addition on the basis of assumed consideration can be made until and unless the AO has shown that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no evidence with the Department that the assessee has received something more than the amount mentioned in the sale deed. It is also his argument without prejudice that the difference at best can be treated as gift made by the mother to her son and, therefore, it cannot be assessed u/s 56(vii) of the IT Act, 1961. 12.1 We find some force in the above arguments of the ld. counsel for the assessee. It is an admitted fact that the property has been sold at the prevailing market rate and provisions of section 50C have not been applied by the AO. It is also a fact that the AO has not referred the matter to the DVO. We find, the AO has basically made the addition on the ground that Shri Aniljit Singh has purchased the undivided 25%. share of the above-said property from his uncle at ₹ 2,40,00,000/- and, therefore, 12.5% share of the assessee in the said property should have been sold at ₹ 1,20,00,000/- and since the assessee has sold her 12.5% share in the property at ₹ 74.50 lakhs, he made the addition of ₹ 45.50 lakhs. As mentioned earlier, the assessee has sold her 12.5% share in the property to her son and not to an outsider and at the prevailing mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee issued a show cause notice to the buyer M/s Hero Corporate Services Ltd., to make payment of ₹ 1,30,00,000/- when the buyer stated to the AO in reply to notice u/s 133(6) that the said sum is payable to the assessee. He submitted that in reply to the notice issued by the assessee M/s Hero Corporate Services Ltd. sent a reply, vide letter dated 29th May, 2015, copy of which is enclosed at pages 7 and 8 of the paper book, stating that although in their books of account an amount of ₹ 1,30,00,000/- is payable, but, the same is subject to fulfillment of the given condition. Since the assessee could not fulfill the obligation cast on it, they had no other alternative, but, to forfeit the amount of ₹ 1,30,00,000/-. He accordingly submitted that since the assessee could not perform a part of the obligation mentioned in the sale deed and has not received the amount of ₹ 1,30,00,000/-, therefore, the ld.CIT(A) was not justified in sustaining the addition. So far as the observation of the ld.CIT(A) that nonreceipt of the amount does not change the character of receipt is concerned, he submitted that a perusal of the copy of the sale deed shows that a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the addition. We find, in appeal, the ld.CIT(A) upheld the addition made by the AO, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the ld. counsel that as per the terms of the sale deed, the assessee was required to fulfill certain obligations and for that an amount of ₹ 2.50 crores was retained by the buyer. Since the assessee could not fulfill the above obligation and could fulfill the obligation to the extent of ₹ 1.20 crores, therefore, the balance amount of ₹ 1.30 crores forfeited by the buyer was not considered by the assessee in the sale consideration. It is his submission that the consideration for the obligation which was not discharged by the assessee was never received and, therefore, the sale consideration to the extent the obligations are not performed cannot be the part of the apparent consideration. 16. We find some force in the above argument of the ld. counsel. As per the sale deed, the consideration of ₹ 39.20 crores has to be paid to the vendor in the following manner (page 5 and 6 of the sale deed and paper book pages 18 19):- S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that an amount of ₹ 2.50 crores was retained by the vendee to be released on fulfillment of the obligations in terms of letter dated 19th December, 2011. Similarly, in reply to the legal notice issued by the assessee to M/s Hero Corporate Services Ltd, after their response to the notice issued by the AO u/s 133(6) of the Act, they have replied as under (page 7 8 of the paper book):- 2. That the contents of para no.2 are not admitted as it is erroneous and is factually different from the averments made herein. Your client was to receive the entire sale consideration and except ₹ 1.50 crores which was retained by us being conditional on the fulfillment of the obligations in terms of letter dated 19.12.2011 from your client. As per this letter your client was supposed to complete the regularization of this building no. 264 Okhla, Phase - 3, New Delhi - 110 020, within a reasonable time after the execution of the sale deed. However, inspite of repeated reminders, verbal and electronic through mail (copies of which has been retained in our office), your client has failed to perform the obligations. 6. While in our books of ac ..... 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