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TMI Blog2024 (5) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee that addition towards the impugned transaction u/s 69B of the Act could not have been made without the AO recording a finding that the assessee has spent more amount towards purchases than what is recorded in the books of accounts. Addition u/s 56(2)(x) - The section is applicable to individuals and HUF and the assessee being a company the said section is not applicable. The legislature by subsequent amendment in Finance Act, 2017 introduced section 56(2)(x) to bridge this lacuna in the statute covering all types of assessee s. However, it is relevant to notice that section 56(2)(x) is applicable only from AY 2017-18 and therefore, the addition towards the impugned transaction which happened during the year under consideration could not have been taxed under section 56(2)(x) of the Act. Revenue's contention that the assessee's name is not appearing in the family settlement agreement - There is merit in the submission the assessee company is part of the settlement agreement though not specifically mentioned in the agreement and that the impugned transaction took place consequent to the family agreement. It is also relevant to notice that in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B without giving any finding as to how the said Sections were applicable to the facts of the Appellant's case. 4) Both the lower authorities erred in ignoring decisions of the High Courts led before them. 5) Both the lower authorities erred in ignoring the fact that under a Family Settlement, there is no transfer of property. 6) Having regard to the facts and circumstances of the case and the provisions of law, the Appellant submits that the addition of Rs. 2,38,99,000/- is unjustified and requires to be deleted. (7) The Commissioner of Income Tax (Appeals) erred in sustaining an addition of Rs. 2,24,000/- under the head Income from House Property. The Appellant submits that the addition is unjustified and the same is required to be deleted. 8) Without prejudice to Ground No. 7, and in any event, the addition is highly excessive and arbitrary and the same requires to be reduced substantially. 9) The Assessing Officer/ Commissioner of Income Tax(Appeals) erred in levying interest under section 234B amounting to Rs. 28,12,284/-. 2. The assessee is a company and engaged in the business of builders and construction. During the Assessment Year (AY) 2013-14 the assessee did not carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stamp duty value and the actual consideration is not applicable to the assessee since the said section is applicable only for individuals and HUF. Therefore, the assessee submitted that the addition made by the AO is not sustainable. The CIT(A) however, did not accept the submissions of the assessee and sustained both the additions made by the AO by holding that 5.2 During the appellate proceedings, the assessee has uploaded copy of family settlement deed dated 17.05.2012 alongwith copy of purchase deed of the property under reference. The assessee has also referred several case laws wherein undisputedly it has been held that transfer of property under family settlement is not a 'transfer' for capital gain purposes. I have perused carefully the family settlement deed, purchase deed and other details and documents filed by the assessee. As per schedule 2C to the family settlement, at S.No. 12, the property under reference has been described as owned by KK (Krishna Kotak)/KK Entities to be transferred to NK (Naresh Kotak)/NK Entities. From this much information, it transpires that the assessee company (buyer entity) was owned by NK/NK Entities and M/s N. Jamnadas Co. (Selle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement. The ld. AR relied on the decision of Hon'ble Madras High Court in the case of CIT Vs. Kay ARR Enterprises and Ors (299 ITR 348) and CIT Vs. R. Ponnammal (164 ITR 706) in this regard and submitted the SLP against which are dismissed by Hon'ble Supreme Court (306 ITR 5). The ld. AR further submitted that the definition of income under section 2(24) of the Act does not cover the transaction where immovable property is purchased at a price lower than the market value fixed for stamp duty purposes. The ld. AR also submitted that there is no provision in law during the year under consideration to tax the difference between the market value for stamp duty purposes and the actual purchase price paid by the assessee as deemed income. In this regard, the ld. AR drew our attention to the provisions of section 56(2)(vii)(b) of the Act which provides for taxation of such deemed income to submit that the said section is applicable only in the case of individual and HUF and that the assessee being a company the deemed income could have been added in the hands of the assessee. The ld. AR submitted that section 56(2)(x) which was brought into legislature to pluck the loophole by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raders (P) Ltd. Vs. DCIT (2017) 82 taxmann.com 397 (Bom.) wherein it is held that artificial judicial person cannot be part of family settlement. Accordingly the ld DR submitted that the assessee being a company cannot be held to be part of the family settlement which can happen only between individuals. With regard to reliance placed by the ld. AR in the case of Dinesh Jain HUF (supra) towards addition made under section 69B the ld. DR submitted that the assessee's case distinguishable for the reason that the decision was rendered in the context of addition made based on wealth tax valuation and not valuation for the purpose of stamp duty. Therefore, the ld. DR submitted that the AO has correctly applied section 69B for the purpose of making addition. 8. We heard the parties and perused the material on record. The assessee is contending the addition made by the AO towards the difference between the stamp duty value and the sale consideration under section 69/69B of the Act with respect to purchase of property. The assessee's arguments against the addition are multi fold (i) The addition cannot be made under section 69 or 69B, (ii) Section 56(2)(vii)(b) which brings to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition under the said section can be made only towards those investments which are not recorded in the books accounts. In assessee's case it is an admitted fact that the purchase of the impugned property is recorded in the books of the assessee and therefore there is merit in the contention that the addition could not have been made under section 69. Now coming to the question of whether addition could be made under section 69B, a careful reading of the section leads us to the interpretation that the AO has to find that the assessee has expended an amount which is more than the amount recorded in the books of accounts for the purpose of invoking section 69B of the Act. In this regard we notice that the Hon'ble Delhi High Court in the case of Dinesh Jain HUF (supra) has considered a similar issue of addition under section 69B of the Act where it has been held that the burden of providing satisfactory explanation to the AO by the assessee regarding the amount in excess of what is recorded in the books of accounts would arise after the AO first finds that the assessee has expended more that what is recorded in the books of accounts. From the perusal of the materials, we no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family settlement agreement our attention was drawn to subclause (iv) of clause 4 of the agreement to submit that is that the said clause also covers those entities which are majorly/solely owned by Shri Naresh Kotak. The relevant clause is extracted as under: (iv) ensure that the immovable properties described in Schedule 2C, free from all encumbrances shall be transferred for a consideration of Rs. 1,00,00,000/- (Rupees One Crore only) by KK Entities owning these immovable properties to such entities which are majority owned and solely controlled by NK and as may be designated by NK in this regard. 14. It is also brought to our attention that the assessee company was incorporated prior to Family Settlement Agreement with 99.99% of the shareholding held by Shri Naresh Kotak. It is further noticed that the list of immovable properties described in schedule-2C contains the impugned property (page 48 of PB). Considering these facts, there is merit in the submission the assessee company is part of the settlement agreement though not specifically mentioned in the agreement and that the impugned transaction took place consequent to the family agreement. It is also relevant to notice tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the admission of additional evidence and supported the order of the lower authority. 18. We have heard the parties and perused the material on record. The AO has not disputed the fact that the property remained vacant and that the assessee has not received any actual rent during the year under consideration. The AO made the addition based on the information received from the society in response to notice under section 133(6) of the Act stating that the impugned property could fetch a rent of Rs. 33,000/- per month. The contention of the assessee is that for the purpose of deemed income from House Property it is the Municipal Ratable Value that needs to be considered and not the rent which the property is expected to receive by letting out. The additional evidence now submitted by the assessee in terms of ratable value fixed by Mumbai Municipal Corporation goes to the root of the issue. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. Since the lower authority did not have an opportunity to examine the additional evidence now submitted by the assessee we deem it fit to remit the issue back to the AO for fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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