ITO, Ward - 6(3), Kolkata, Kolkata v. M/s. Niwas Nirman (Calcutta) (P) Ltd., Kolkata

ITA 1249/KOL/2010 | 2005-2006
Pronouncement Date: 30-03-2011 | Result: Dismissed

Appeal Details

RSA Number 124923514 RSA 2010
Bench Kolkata
Appeal Number ITA 1249/KOL/2010
Duration Of Justice 9 month(s) 13 day(s)
Appellant ITO, Ward - 6(3), Kolkata, Kolkata
Respondent M/s. Niwas Nirman (Calcutta) (P) Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 30-03-2011
Assessment Year 2005-2006
Appeal Filed On 17-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE /AND . . !' ) [BEFORE HONBLE SRI MAHAVIR SINGH JM & HONBLE SHR I C. D. RAO AM] # # # # / I.T.A NO. 1249/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR : 2005-06 INCOME-TAX OFFICER WD-6(3) KOLKATA VS M/S. NIWA S NIRMAN (CALCUTTA) (P) LTD. (PAN-AAACN 9614 J) ( )* /APPELLANT ) (+ )*/ RESPONDENT ) FOR THE APPELLANT: SHRI V. A. RAJU FOR THE RESPONDENT: SHRI S. L. KOCHAR !- / ORDER PER MAHAVIR SINGH JM ( ): THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A) VI KOLKATA IN APPEAL NO.814/CIT(A)-VI/KOL/WD.6(3)/2009-10 DATED 2 2.03.2010. THE ASSESSMENT WAS FRAMED BY ITO WD-6(3) KOLKATA U/S. 254/143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2005-06 VIDE HIS ORDER DATED 31.12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF PROPERTY PURCHASED BY ASSESSEE BY ADOPTING SALE VALUE DETERMINED BY STAM P DUTY AUTHORITIES AT RS.1 07 20 000/- AS AGAINST THE SALE CONSIDERATION RECORDED IN THE SALE DEED AND PASSED ON AT RS. 44 32 586/-. FOR THIS THE REVENUE HAS R AISED THE FOLLOWING GROUND: THAT THE LD. CIT(A)-VI KOLKATA ERRED IN LAW AND ON FACTS IN DELETING THE UNDISCLOSED INVESTMENT TO THE TUNE OF RS.62 87 414/ - WITHOUT ANY GENUINE REASONS AND RHYMES. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE H AD PURCHASED PROPERTY AT 69 D.H. ROAD KOLKATA FOR A SUM OF RS.44 32 586/-. THE ASS ESSING OFFICER NOTED FROM THE DEED OF CONVEYANCE THAT THE PROPERTY VALUATION DETERMINE D BY STAMP DUTY AUTHORITIES WAS AT RS.1 07 20 000/- AND ACCORDINGLY IN VIEW OF THE PR OVISIONS OF SECTION 69B OF THE ACT 2 ITA 1249/K/201 0 NIWAS NIRMAN (CAL) (P) LTD. A.Y. 05-06 HE DETERMINED THE INVESTMENT IN THE PROPERTY AT RS. 1 07 20 000/- AND AS SUCH UNDISCLOSED INVESTMENT ACCORDING TO HIM IN THE PRO PERTY IS AT RS.62 87 414/-. THE ASSESSING OFFICER TREATED THIS AS UNEXPLAINED INVES TMENT AND ADDED U/S. 69B OF THE ACT. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND HE ALLOWED THE CLAIM OF THE ASSESSEE BY NOTING THAT SECTION 50C ARE APPLICABLE IN THE CASE OF SELLER WHERE CAPITAL GAIN IS TO BE COMPUTED AND NOT IN THE HANDS OF PURC HASER. AGGRIEVED REVENUE CAME IN APPEAL BEFORE US. 4. IN VIEW OF THE ABOVE FACTS AND AFTER HEARING BOT H THE SIDES WE FIND THAT THE AO HAS DETERMINED THE UNEXPLAINED INVESTMENT IN VIEW O F VALUE DETERMINED BY STAMP DUTY AUTHORITIES AND ASSESSED THE DIFFERENCE BETWEEN THE SALE CONSIDERATION RECORDED IN THE SALE DEED AND VALUE AS DETERMINED BY STAMP DUTY AUT HORITIES AS UNEXPLAINED INVESTMENT BY INVOKING THE PROVISIONS OF SECTION 50 C OF THE ACT. APART FROM THE VALUE OF STAMP DUTY AUTHORITIES THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE THAT OVER AND ABOVE THE SALE CONSIDERATION RECORDED IN THE SALE DEED HAS BEEN PASSED ON TO SELLER FROM THE PURCHASER I.E. THE ASSESSEE. IN THE ABSENCE OF ANY OTHER FINDINGS THAT OVER AND ABOVE THE SALE CONSIDERATION RECORDED IN THE SALE DEED T HE UNEXPLAINED INVESTMENT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE-PURCHASER. THIS VIEW OF OURS IS SUPPORTED BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL OF AH MEDABAD BENCH IN THE CASE OF ITO VS HARLEY STREET PHARMASSUTICALS LTD. IN ITA NO.249 2/AHD/2007 FOR ASSESSMENT YEAR 2004-05 DATED 16.3.2010 WHEREIN THE TRIBUNAL HAS H ELD AS UNDER: 7. IN VIEW OF THE ABOVE PROVISION AND EXPLAINING TH E PROVISION WE ARE OF THE VIEW THAT THE LAW U/S. 50C HAD BEEN PROVIDED ADEQUATE PR OTECTION TO THE TAX-PAYERS AGAINST ADOPTION OF ARBITRARY VALUES FOR THE COMPUTATION OF CAPITAL GAINS AND THE FOLLOWING PRECAUTIONARY ARE PROVIDED:- (I) THE VALUE WHICH IS CONSIDERED AS THE PROPER VAL UE OF THE PROPERTY AS FIXED BY THE AUTHORITY FOR REGISTRATION FOR STAMP D UTY PURPOSES IS PRESUMED TO BE THE FAIR MARKET VALUE FOR THE PURPOSES OF COM PUTATION OF CAPITAL GAINS ON THE SALE OF PROPERTY. (II) IT IS OPEN TO THE TAXPAYER TO PLEAD THAT SUCH STAMP VALUE IS ABNORMAL AND CONTEST THE SAME IN APPEAL UNDER THE STAMP LAW REQUIRING ADOPTION OF REDUCED VALUE. IF SUCH VALUE IS REDUCED IN APPEAL U NDER THE PROVISIONS OF THE RELEVANT STAMP LAW SUCH REDUCED VALUE WOULD AL ONE BE ADOPTED. (III) WHERE SUCH STAMP VALUE IS NOT DISPUTED IT IS OPEN TO THE ASSESSEE TO REQUIRE THE ASSESSING OFFICER TO REFER THE VALUATIO N TO THE VALUATION OFFICER WHO SHALL FIX THE VALUATION BY ADOPTION OF THE PROCEDURE PRESCRIBED UNDER SECTION 16A OF THE WEALTH-TAX ACT. IT IS SUCH VALUE WHICH WILL BE ADOPTED BY THE ASSESSING OFFICER. 3 ITA 1249/K/201 0 NIWAS NIRMAN (CAL) (P) LTD. A.Y. 05-06 WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF SECTION 50C IN THE FINANCE BILL 2002 WHICH CLEARLY STATES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAN D OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A SAT E GOVT. FOR THE PURPOSES OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE S O ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPIT AL GAINS SHALL BE COMPUTED ACCORDINGLY U/S.48 OF THE ACT. IN CASE THE VALUE ADOPTED OR AS SESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFERENCE THE A SSESSMENT MADE SHALL BE AMENDED TO RE- COMPUTE THE CAPITAL GAINS BY TAKING THE REVISED VAL UE AS THE FULL VALUE OF CONSIDERATION. ACCORDINGLY WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY FOR THE COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRA NSACTION IN RESPECT TO SELLER ONLY AND NOT FOR THE PURCHASER. WE FIND FROM SECTION 50C OF THE ACT THAT IT CREATES A LEGAL FICTION THEREBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULA TED ACCORDINGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITED TO TH E AREA FOR WHICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HELD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEGITIMATELY INTENDED BY THE STATUTE. THE HON'BLE COURT WAS DEAL ING WITH THE PROVISIONS OF SEC. 171(1) OF THE I.T. ACT IN THE CONTEXT OF WHICH IT WAS HELD THAT JOINT FAMILY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CASES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSSIBLE TO EX TEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY THE HON'BLE KERLA HIGH COURT IN C IT V. KAR VALVES LTD. (1987) 168 ITR 416 (KER.) WHEREIN IT IS HELD THAT LEGAL FICTIO N IS LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND COULD NOT BE EXTENDED BEYOND THAT L EGITIMATE FRAME HON'BLE KERALA HIGH COURT WAS DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABILITIES ARE NOT LIQUIDATED AND OUTSTANDING ARE NOT COLLECTED THEN BUSINESS COULD BE DEEMED TO CONT INUE. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTI ON THE COURT SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREATED 2ND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT TO THE FICTION HON'BLE SUPREME COURT IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITGR 711 (SC) HELD THAT LEGAL FIC TIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT P URPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CIT V BHAR ANI PICTURES (1981) 129 ITR 244 (MAD ) IT IS HELD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURP OSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATUTORY FICTION INTRODUCED IN ONE ENACTMENT CANNO T BE INCORPORATED IN ANOTHER ENACTMENT. THE POINT THAT LEGAL FICTION CANNOT BE E XTENDED TO A NEW FIELD WAS HIGHLIGHTED BY HON'BLE MADRAS HIGH COURT IN CIT V. RAJAM T.S (19SS) 125 ITR 207(MAD ) WHEREIN IT IS HELD THAT SECTION 41(2) CREATES A LEG AL FICTION UNDER WHICH THE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WHEN THIS AMOUNT IS DISTRIBUTED TO SHAREHOLDERS THEN IT WOULD NOT BECOM E DEEMED DIVIDEND AND IT WOULD BE ONLY A CAPITAL RECEIPT AND NOT DISTRIBUTION OF ACCU MULATED PROFITS. THUS A LEGAL FICTION WAS INVOKED IN THE HANDS OF THE ASSESSEE COMPANY AN D WAS NOT EXTENDED IN THE HANDS OF THE SHAREHOLDERS. IN THE PRESENT CASE SECTION 50C CREATES A LEGAL FICTION FOR TAXING CAPITAL GAINS IN THE HANDS OF THE SELLER AND IT CAN NOT BE EXTENDED FOR TAXING THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE B Y STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTMENT U/S 69. IN FACT SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS INCOME IF IT IS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICTION FROM ELSEWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF SECTION 69. IT IS FOR THE LEGISLATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR EXPENDITUR E WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UNDERSTATING APPARENT SAL E CONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES FOR T HE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SALE 4 ITA 1249/K/201 0 NIWAS NIRMAN (CAL) (P) LTD. A.Y. 05-06 CONSIDERATION BY VALUATION DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND THEREFORE CANNOT BE INVO KED BY ASSESSING OFFICER TO TAX THE DIFFERENCE IN THE HANDS OF THE PURCHASER. HON'BLE M ADRAS HIGH COURT IN CGT V R. DAMODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUAT ION AUTHORITIES HAVE THEIR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE F OR THE PURPOSE OF STAMP DUTY PROPERTY IS VALUED AT HIGHER COST IT CANNOT BE SAI D THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS STATED IN THE SALE DEED. THE HON'BLE A LLAHABAD HIGH COURT IN DINESH KURNAR MITTAL V. ITO (1992)193 ITR 770 (ALL.) QUASHED THE ORDER OF AUTHORITIES BELOW WHEREIN HALF OF THE DIFFERENCE BETWEEN THE AMO UNT PAID AND THE VALUE FOR PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY T HE ASSESSING OFFICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALU E DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUAL CONSIDERATION P ASSED BETWEEN THE PARTIES TO THE SALE. IN THE PRESENT CASE THE ASSESSING OFFICER HAS APPLI ED THIS PROVISION OF SECTION 50C FOR THE COMPUTATION OF UNEXPLAINED INVESTMENT U/S.69B OF TH E ACT AND WHICH IS NOT PERMISSIBLE UNDER THE ACT. APART FROM THE STAMP DUTY VALUATION THERE IS NOTHING ON RECORD WHICH SUGGESTS THAT THE REVENUE HAS PROVED THAT THE ASSES SEE HAS ACCEPTED OVER AND ABOVE WHAT HAS BEEN RECORDED AS PURCHASE CONSIDERATION OF THE LAND IN THE INSTRUMENT I.E. THE SALE DEED. WE ARE IN FULL AGREEMENT WITH THE ARGUM ENTS OF THE ASSESSEE THAT SECTION 50C IS NOT APPLICABLE IN THE CASE OF PURCHASER AND THIS PROVISION BEING A DEEMING PROVISION WILL APPLY FOR DETERMINING THE FULL VALUE OF CONSID ERATION AS A RESULT OF TRANSFER OF CAPITAL ASSETS FOR THE PURPOSES OF COMPUTATION OF CAPITAL G AINS U/S.48 OF THE ACT. WE FURTHER FIND THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT TH E CONSIDERATION OVER AND ABOVE WHAT HAS BEEN RECORDED IN THE SALE DEED HAS BEEN MADE B Y THE ASSESSEE AND IN THE ABSENCE OF THE SAME NO ADDITION OF UNDISCLOSED INVESTMENT CAN BE MADE BY INVOKING THE PROVISION OF SECTION 69B OF THE ACT. ACCORDINGLY WE CONFIRM TH E ORDER OF CIT(A) DELETING THE ADDITION AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE AND THE CASE OF HARLEY STREET PHARMASSUTICALS LTD. (SUPRA) FACTS BEING EX ACTLY IDENTICAL RESPECTFULLY FOLLOWING THE SAME WE CONFIRM THE ORDER OF CIT(A) DELETING T HE ADDITION AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.3.20 11 SD/ SD/- . . !' (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ') )) ) DATED 30TH DAY OF MARCH 2011 ./ $01 2 JD.(SR.P.S.) 5 ITA 1249/K/201 0 NIWAS NIRMAN (CAL) (P) LTD. A.Y. 05-06 !- 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ITO WARD-6(3) KOLKATA. 2 + )* / RESPONDENT M/S. NIWAS NIRMAN (CALCUTTA) (P) LTD. 3 BENTINCK STREET 1 ST FLOOR KOLKATA-700 001.. 3 . -$ ( )/ THE CIT(A) KOLKATA 4. 5. -$ / CIT KOLKATA 4 <= +$ / DR KOLKATA BENCHES KOLKATA 4 +/ TRUE COPY !-$>/ BY ORDER 1 /ASSTT. REGISTRAR .