N.K. Billaiya, Accountant Member - These cross appeals by the assessee and the Revenue are directed against the very same order of the Ld. CIT(A)-12, Mumbai dt.05.03.2013 pertaining to A.Y. 2008-09. As both these appeals involved common issues, they were heard together and disposed of by this common order for the sake of convenience and brevity.
ITA 3222/Mum/2013 - Assessee's appeal &
ITA No. 4508/Mum/2013 - Revenue's appeal
2. The only grievance of the assessee is that the Ld. CIT(A) erred in sustaining the addition of Rs. 56,46,500/- u/s. 69B of the I.T. Act.
3. It would be better to consider the first two grounds of Revenue's appeal here itself as grievance of both the parties revolve around the same facts. The first two grounds of Revenue's appeal in ITA No. 4508/M/2013 read as under:
| "1. |
On the facts and circumstances of case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 50,00,000/-u/s. 69B of the I.T. Act, 1961 on the basis of a receipt dt. 1.3.2012 without appreciating the fact that this receipt dt. 1.3.2012 pertain to A.Y. 2012-13 and that there is no evidence to co-relate this payment with the purchase of property made by the assessee in A.Y. 2008-09, more so in view of the fact that the name of the assessee is not reflecting as a debtor in the balance sheet as on 31.3.2011 of M/s. Sonam Earth Movers and Construction Pvt. Ltd. (the seller). |
2. |
On the facts and circumstances of case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 50,00,000/-u/s. 69B of the I.T. Act, 1961 without appreciating the fact that no confirmation was received from the seller i.e. M/s. Sonam Earth Movers and Construction Pvt. Ltd. regarding the receipt of payment from the assessee during the course of assessment proceedings for the period pertaining to A.Y. 2008-09." |
4. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown income from house property which was not there in the earlier assessment year. The assessee was asked to explain the same. The assessee explained that the said rental income is derived from a property purchased during the year under consideration. The AO observed that as per the Sale-Purchase Agreement dt. 7.12.2007, the assessee entered into an "Agreement for Sale' for the purchase of nine units admeasuring 1483 Sq. ft. on the second floor of the building known as "Station Centre" situated at Malad (W), on the S.V. Road, Mumbai from M/s. Sonam Earthmovers & Construction Pvt. Ltd for a consideration of Rs. 60,00,000/-. The AO further observed that the assessee has issued two cheques for Rs. 10,00,000/- and Rs. 50,00,000/- each. The AO noticed that the parties have paid the Stamp Duty on the said agreement of Rs. 5,45,000/-. When the document was lodged with the Collector of Stamps' he determined the market value of the property at Rs. 1,16,46,500/-. The assessee was required to pay additional Stamp duty of Rs. 37,330/-. The assessee was also penalized for undervaluation of the liability of payment of proper Stamp duty. The penalty so levied was at Rs. 5,973/-.
4.1 Taking a leaf out of these facts, the AO was of the firm belief that the assessee has purchased the said property for Rs. 1,16,46,500/-whereas the assessee has shown the value at Rs. 60,00,000/-. The assessee was asked to explain why the difference should not be treated as un-recorded expenditure u/s. 69B of the Act. The assessee filed a detailed reply dt. 22.11.2010 and explained that the purchase price paid for the said property as per the agreement for sale dt. 4.12.2007 is Rs. 60,00,000/-. The value adopted for the purpose of payment of Stamp duty cannot be taken as sale consideration received for the purpose of Sec. 48. It was strongly contended that the valuation done by Stamp agency for the purpose of Stamp duty would not substitute the actual sale consideration. It was further explained that Sec. 50C is applicable in the case of a seller of a property and not to the purchaser. The assessee relied upon the decision of Punjab & Haryana High Court in the case of CIT v. Chandni Bhuchar [2010] 323 ITR 510/191 Taxman 142 and Allahabad High Court in the case of Dinesh Kumar Mittal v. ITO [1992] 193 ITR 770/[1991] 58 Taxman 179. The AO considered the submissions of the assessee in the light of the decisions relied upon and, distinguishing the facts of the case in hand relied upon by the assessee, added the difference of Rs. 56,46,500/- u/s. 69B of the Act being amount of investments not fully disclosed in the books of account.
4.2 The AO further observed that out of the consideration of Rs. 60,00,000/- as claimed by the assessee only Cheque No. 516573 for Rs. 10,00,000/- was presented and cleared on 10.12.2007 and cheque No. 516574 for Rs. 50,00,000/- was not even presented. The AO further noted that the assessee did not have the amount of Rs. 50,00,000/- to her credit any time during the entire financial year leave alone the date after the issue of cheque. When the assessee was confronted with this vide letter dt. 22.11.2010, the assessee replied that there were irregularities in the building hence the payment was withheld. This submission of the assessee was contradictory to the fact that within 6 days from the agreement of purchase, the assessee had entered into a Leave and Licence Agreement with Axis Bank Ltd. by which the assessee received a security deposit of Rs. 10,20,000/- and rent of Rs. 1,70,000/- per month. The AO was of the firm belief that these undisputed facts clearly show that no prudent builder would hand over the possession of the property by taking a payment of Rs. 10,00,000/-. The AO went on to make the addition of Rs. 50,00,000/- u/s. 69B of the Act.
5. The assessee carried these additions before the Ld. CIT(A) and reiterated her claim that Stamp duty value cannot substitute the actual consideration and therefore the difference cannot be added u/s. 69B of the Act. Before the Ld. CIT(A), the assessee strongly contended that the AO has not confronted the assessee with any comparable cases during the course of the assessment. The assessee also filed an additional evidence in the form of a Writ petition/PIL against the seller and argued that the said building was under litigation therefore its price could not be a regular fair market price which was ascertained by the Stamp duty authority. It was further explained that litigated property always have a lesser value and the owner likes to sell it off in the best possible rate it can get.
5.1 After considering the facts and the submissions, the Ld. CIT(A) observed that there is a huge difference in the amount shown to have expended by the assessee on the purchase of property and the amount valued by the Stamp duty authority for the same property. The Ld. CIT(A) observed that during the appellate proceedings, the assessee has strongly relied upon the PIL filed against the builder by an NGO. According to the Ld. CIT(A) by submitting the PIL as evidence, the assessee has agreed to the fact that there has been under valuation of property transacted with in respect of the sale deed vis-à-vis the market rate. The Ld. CIT(A) further observed that even the PIL was not against the property but it was against the builder therefore the PIL could not have affected the market value of the property. After considering all these facts, the Ld. CIT(A) finally concluded that there is no infirmity in the order of the AO and confirmed the additions made u/s. 69B of the Act at Rs. 56,46,500/-.
5.2 On the second addition of Rs. 50,00,000/-, the remand report was called from the AO. It has been stated by the Addl. Commissioner of Income Tax that a receipt dt. 1.3.2012 cannot be evidence for an assessment proceedings that took place for A.Y. 2008-09. The AO was directed to ascertain from the assessment records from the AO of the builder. The enquiry revealed that the builder M/s. Sonam Earthmovers & Construction Pvt. Ltd. has not filed the returns for the A.Y. 2004-05 to 2011-12. The returns for A.Y. 2011-12 have been filed but the name of Ms. Priya Kothari was not reflected in the list of sundry debtors of M/s. Sonam Earthmovers & Construction Pvt. Ltd.
5.3 After considering all these facts and the remand report, the Ld. CIT(A) observed that the AO has not made further enquiries from the AO of the builder nor any enquiry was made from the bank concerned. The Ld. CIT(A) further observed that the assessee has now submitted the certificate of the City Bank which clearly shows that the amount of Rs. 50,00,000/- was paid to M/s. Sonam Earthmovers & Construction Pvt. Ltd. on 1.3.2012. The Ld. CIT(A) having been convinced deleted the addition of Rs. 50,00,000/-.
6. The assessee is before us in respect of the first addition of Rs. 56,46,500/- and the Revenue is before us against the deletion of addition of Rs. 50,00,000/-. Before us, the Ld. Counsel for the assessee reiterated the facts as they were presented before the lower authorities. It is the say of the Ld. Counsel that the entire addition has been made solely on the basis of Stamp duty charged by the Collector of Stamps on the agreement for sale. Other than this nothing has been brought on record which could suggest that the assessee has paid consideration over and above the stated consideration. The Ld. Counsel strongly relied upon the decision of the Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13, Allahabad High Court in the case of CIT v. Smt. Raj Kumari Vimla Devi [2005] 279 ITR 360, Punjab & Haryana High Court in the case of Chandani Bhuchar (supra), Delhi High Court in the case of CIT v. Khoobsurat Resorts (P.) Ltd. [2012] 211 Taxman 510/28 taxmann.com 93 (Delhi) and Delhi High Court in the case of CIT v. Dinesh Jain HUF [2013] 352 ITR 629/[2012] 211 Taxman 23/25 taxmann.com 550.
6.1 Regarding the second addition of Rs. 50,00,000/-, the Ld. Counsel for the assessee stated that the assessee had paid the consideration by two cheques of Rs. 10,00,000/- and Rs. 50,00,000/- each. If the cheque of Rs. 50,00,000/- was not presented by the seller, the assessee cannot be held responsible for that. The Ld. Counsel further argued that ultimately on 1.3.2012, a consideration of Rs. 50,00,000/- was actually paid by a demand draft therefore there is no reason for making addition u/s. 69B of the Act. The Ld. Counsel further stated that suspicion of the Revenue authorities cannot be substituted for the evidences on record. The Ld. Counsel stated that though the AO has referred to comparable cases but no such case was confronted to the assessee.
7. Per contra, the Ld. Departmental Representative strongly supported the findings of the AO.
8. We have considered the rival submissions and carefully perused the orders of the lower authorities and the relevant material evidences brought on record and referred to in the light of the Income Tax Appellate Rules 1963 Rule 18(6). It is an undisputed fact that on "Agreement for Sale", the assessee was required to pay additional Stamp duty when the Collector of Stamps determined the fair market value of the property at Rs. 1,16,46,500/-. It is also an admitted fact that not only the assessee paid the additional stamp duty but also paid the penalty. The assessee did not appeal against this and accepted the value of the Collector of Stamps. However, it is also an undisputed fact that though the AO at para-4.2 of his assessment order has referred to various comparable commercial properties but did not confront a single comparable case to the assessee nor such cases have been brought on record.
8.1 Let us also consider the other related facts. The assessee had paid consideration by two cheques of Rs. 10,00,000/- and Rs. 50,00,000/-. It is a fact that only cheque of Rs. 10,00,000/- was presented and cleared. The other cheque of Rs. 50,00,000/- was not even presented and as per the observations of the AO at para 4.10, the assessee was not even having sufficient balance by which the cheque of Rs. 50,00,000/- could have been cleared. Thus, in fact, the assessee got the possession of a commercial property by paying just Rs. 10,00,000/-. The property is situated at Malad (W) on S.V. Road, Mumbai. By any stretch of imagination in a place like Mumbai, no builder would give the possession of property for a meager amount of Rs. 10,00,000/- to someone who is not even remotely related to him, the property of which the fair market value was determined at Rs. 1.16 crores. The test of human probability as laid down by the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 clearly applies on these facts. Another fact which is very alarming is that the agreement for sale was entered on 7th December, 2007 and within 6 days i.e. on 13.12.2007, the assessee let out the said property to Axis Bank vide Leave and License agreement dt. 13.12.2007. The assessee received a security deposit of Rs. 10,20,000/- on 1.1.2008 and rent of Rs. 1,70,000/- per month for the first 3 years and Rs. 1,95,000/- for the next 2 years. These undisputed facts suggest that by merely paying a sum of Rs. 10,00,000/-, the assessee was in a position to get a security deposit of Rs. 10,20,000/- and rent of Rs. 20,40,000 per annum. These facts are nothing short of res ipsa loquitur, facts speaking for themselves, loud and clear, that the assessee has understated the transaction and the consideration have been passed over and above what has been stated. The contention of the assessee that the property was subject to dispute as evidenced by Writ petition/PIL does not support the case of the assessee inasmuch as the said WP/PIL was against the builders and not against the property. If the property was under dispute, leave aside the purchaser, by any stretch of imagination a bank of the stature of Axis Bank would not have taken the property on rent by paying a deposit of Rs. 10,20,000/- and rent of Rs. 1,70,000/- per month. The AO was left with no other choice but to accept the fair market value determined by the Collector of Stamps as the purchase consideration. Therefore, considering the peculiar facts of the case, we have no hesitation in confirming the addition of Rs. 56,46,500/- as investment not fully disclosed in the books of account u/s. 69B of the Act. Appeal of the assessee is accordingly dismissed. The AR has relied upon certain decisions mentioned at para 6 above. We are not stating that the value as per stamp duty authority is the sale consideration but on the facts before us, considering the surrounding events, and by preponderance of probabilities, the AO was left with no choice but to adopt the value adopted for stamp duty as sale consideration. Because of the peculiarity of the facts of case, the decisions relied upon by the AR are distinguishable.
9. Let us now consider the grievance of the Revenue raised as per first two grounds as per para-3 above. Before the Ld. CIT(A) the assessee has furnished certificate from City Bank evidencing that payment of Rs. 50,00,000/- was made on 1.3.2012. We fail to understand how this could justify the purchase of property for Rs. 10,00,000/- in F.Y 2007-08. It appears that not only the Ld. CIT(A) but also the AO has not appreciated the facts. The addition has been made by the AO u/s. 69B of the Act. Section 69B reads as under:
"69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year."
10. The sine qua non of Section 69B is that the amount expended on making such investments as mentioned in that section exceeds the amount recorded in this behalf in the books of account maintained by the assessee. The assessee had claimed to have purchased the property for a consideration of Rs. 60,00,000/-. Two cheques of Rs. 10,00,000/- and Rs. 50,00,000/- were tendered to the seller which means that the assessee has accounted this amount in the books of account maintained, if any. Since the consideration as claimed by the assessee is fully recorded in the books, notwithstanding the fact that cheque of Rs. 50,00,000/- was never presented therefore never cleared would not ipso facto attract the provisions of Sec. 69B of the Act. In our understanding of the law, the proper section should have been Sec. 69C which reads as under:
"69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :"
11. The Ld. CIT(A) has deleted the addition only because the assessee could produce a certificate from the bank that the amount of Rs. 50,00,000/- was actually paid on 1.3.2012. The Ld. CIT(A) has grossly erred in accepting this certificate for the transaction which took place 4 years and 3 months ago. Therefore, the findings of the Ld. CIT(A) are clearly erroneous. It would be better to consider other related and very relevant facts. Within 6 days of the purchase of property, the assessee entered into a Leave and License Agreement with Axis Bank by which the assessee got a deposit of Rs. 10,20,000/- and rent of Rs. 1,70,000/-per month for the first three years and Rs. 1,95,000/- for the next two years which means that in F.Y. 2008-09 the assessee got rent for three months of Rs. 1,70,000/- per month totaling to Rs. 5,10,000/-, in F.Y. 2009-10, the assessee got annual rent of Rs. 20,40,000/-, in F.Y 2010-11 once again annual rent of Rs. 20,40,000 and in F.Y 2011-12 annual rent of Rs. 23,40,000/- at the rate of Rs. 1,95,000/- per month. Thus, the total rent received by the assessee on the date of making the payment to the builder by a demand draft was Rs. 69,30,000/-. By preponderance of probabilities, it appears that Rs. 50,00,000/- paid in 2012 must have come out of the rent received by the assessee till that date, which means that on the date of purchase even the agreed consideration was not fully paid by the purchaser. These facts which are speaking for themselves loud and clear suggest that the assessee had incurred expenditure on the date of purchase amounting to Rs. 50,00,000/- without having proper balance in her bank account. But then, as mentioned hereinabove, the addition cannot be made u/s. 69B of the Act. We, therefore restore this issue back to the files of the AO. The AO is directed to decide this particular issue afresh keeping in mind the aforestated facts in the light of the provisions of Sec. 69C of the Act. The AO is also directed to verify the bank account of the assessee from which she tendered the cheque of Rs.50 lacs and whether the assessee was having sufficient balance on that date by which the cheque could have been honored by that bank. All these facts need verification at the assessment stage. For this proposition, we draw support from the ratio of decision of the Hon'ble Supreme Court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451/7 Taxman 6, wherein the Hon'ble Supreme Court has laid down the following ratio:
"It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute."
12. Needless to mention that the AO shall give a reasonable and sufficient opportunity to the assessee. Ground No. 1 & 2 are accordingly allowed for statistical purposes.
13. Now their remains only one more ground in Revenue's appeal which relates to deletion of addition of Rs. 11,20,000/- made u/s. 68 of the Act.
14. During the course of the scrutiny assessment proceedings, the AO noticed that the assessee has received loan from Krish Sanjeev Kothari. The assessee was his natural guardian. When asked about the source of Rs. 11,20,000/- in the hands of her son, it was explained that the son has received Rs. 11,20,000/- from his father Sanjiv Shasikant Kothari. The assessee filed the details of the cheques and also the bank statement along with PAN card of Shri Sanjiv Shasikant Kothari. The details of the bank statements are exhibited at page-10 of the assessment order. A perusal of the said bank statement clearly shows that Shri Sanjiv Kothari was very much in a position to give 11 lakhs to his son. The Ld. CIT(A) has very correctly appreciated these facts and deleted the addition of Rs. 11,20,000/-.
15. After considering the facts on record, in our humble opinion, findings of the Ld. CIT(A) are based on facts and therefore no interference is called for. This ground of the Revenue is accordingly dismissed.
16. In the result, the appeal filed by the assessee is dismissed and the cross appeal filed by the Revenue is allowed in part for statistical purpose.