Shri Narendra Anopsinh Jadeja, Surat v. The Income tax Officer,Ward-3(4),, Surat

ITA 3951/AHD/2007 | 2004-2005
Pronouncement Date: 22-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 395120514 RSA 2007
Assessee PAN AACHN3364G
Bench Ahmedabad
Appeal Number ITA 3951/AHD/2007
Duration Of Justice 2 year(s) 4 month(s) 27 day(s)
Appellant Shri Narendra Anopsinh Jadeja, Surat
Respondent The Income tax Officer,Ward-3(4),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 22-03-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-03-2010
Date Of Final Hearing 22-03-2010
Next Hearing Date 22-03-2010
Assessment Year 2004-2005
Appeal Filed On 25-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI D T GARASIA JM AND A N PAHUJA AM) ITA NO.3951/AHD/2007 (ASSESSMENT YEAR:-2004-05) NARENDRASINH ANOPSINH JADEJA HUF 27 PANCHRATNA SOCIETY-1 ANAND MAHAL ROAD RANDER SURAT [PAN:AACHN3364G] V/S THE INCOME-TAX OFFICER WARD-3(4) AAYAKAR BHAWAN MAJURA GATE SURAT [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI YOGESH B SHAH AR REVENUE BY:- MS. SMITI SAMANT DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 16-08-2007 OF THE LD.CIT(APPEALS)-II SURAT RAISES THE FOLLOWING GROUNDS :- 1. THE LEARNED C.I.T (APPEALS) HAS ERRED IN ESTIMAT ING THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE BY CONFIRMING THE ADDI TION OF RS.107458/- BEING THE DIFFERENCE BETWEEN AGRICULTURAL EXPENSES SHOWN BY THE ASSESSEE AND AS DETERMINED BY THE ASSESSING OFFICER AT 40% OF THE TOTAL AGRICULTURE RECEIPTS KEEPING IN VIEW THE DECISION IN THE CASE OF DHIRABHAI L. NAROLA IN I.T.A. NO. 2190 AND 2922/AHD/2004 DATE D 17/09/2004 NEITHER THE ASSESSING OFFICER NOR THE C.I.T (APPEAL) HAS TA KEN TROUBLE TO PROVIDE THE TEXT OF THE DECISION OR COPY OF THE DECISION TO THE ASSESSEE. IT IS REGARDED THAT BOTH THE AUTHORITIES HAS ALSO OMITTED TO NARRATE THE DECISION IN THE BODY OF ORDER AS TO HOW THIS DECISION IS APP LICABLE IN OUR CASE. THE SAID DECISION IS NOT DISCUSSED IN THEIR RESPECTIVE ORDERS. 2. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CONFIR MING THE ADDITION OF RS.491999/- MADE ON THE BASIS OF DIFFERENCE BETWEEN DOCUMENT PRICE AND VALUATION ADAPTED BY THE STAMP DUTY VALUATION CELL IN ITS NOTICE. THE ADDITION IS MADE ON THE BASIS OF MERE NOTICE ISSUED BY THE STAMP DUTY VALUATION CELL WHICH HAS PASSED THE FINAL ORDER AFT ER THE DATE OF ASSESSMENT. THE FINAL ORDER IS WRITTEN ON THE LAST PAGE OF ORIGINAL DOCUMENTS BY THE STAMP DUTY VALUATION CELL. COPIES OF THE ORDERS WERE SUBMITTED TO THE C.I.T APPEAL ALONG WITH THE WRITTE N SUBMISSION AS PER ITA NO.3951/AHD/2007 2 ANNEXURE-D ON PAGES 17 TO 46. THE LEARNED C.I.T HAS NOT TAKEN IN TO CONSIDERATION THE SAID ORDER WHICH IS ON THE LAST P AGES OF DOCUMENT AND CONFIRMED THE ADDITION MIGHT BE TROUGH OVER SIGHT AND AS SUCH VALUATION OF BUNGALOWS SHOULD BE REDUCED TO THE VALUATION ADOPTE D FOR STAMP DUTY PROPOSE BY THE STAMP DUTY AUTHORITIES . 3. THE APPELLANT MAY BE PERMITTED TO RAISE MODIFY THE GROUNDS OF APPEAL AT THE HEARING STAGE. 2 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FA CTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECL ARING INCOME OF RS.57 740/- FILED ON 8.12.2004 BY THE ASSESSEE T RADING IN LUBRICATING OILS & AUTOMOBILE PARTS AFTER BEING PROCESSED ON 14.2.200 5 U/S 143(1) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT ON 13.6.2005 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER[AO IN SHORT] NOTICED THAT THE ASSESSEE DISCLOSED A NET PROFIT OF RS.57 740 FROM THEIR BUSINESS OF TRADING IN LUBRICATING OIL AND AUTOMOBI LE SPARE PARTS BESIDES NET AGRICULTURAL INCOME OF RS.4 35 941/- [LYRS. 95 730/-]. THE AGRICULTURAL EXPENSES OF RS.1 11 530 SHOWN BY T HE ASSESSEE WERE 20.37% OF THE GROSS RECEIPTS. SINCE THESE EXPE NSES WERE LOW RELYING ON THE DECISION DATED 17.9.2004 OF THE ITAT IN THE CASE OF DHIRUBHAI L. NAROIA IN ITA NO.2190 AND 2922/AHD/200 4 THE AO ASKED THE ASSESSEE TO EXPLAIN WHY THE AGRICULTURAL EXPENSES SHOULD NOT BE ESTIMATED @ 40% OF THE GROSS RECEIPTS. IN RE SPONSE THE ASSESSEE SUBMITTED THAT IN THE PRECEDING YEAR NO IR RIGATION FACILITY WAS AVAILABLE WHILE THE FAMILY BEING OF FARMERS HAD VAST EXPERIENCE IN ECONOMISING THE EXPENSES ON AGRICULTURAL ACTIVIT Y. THEY HAD SAVED SEEDS AND USED NATURAL FERTILIZERS. INSTEAD OF USI NG ANY MACHINERY THEY USED MAN-POWER AND ANIMAL-POWER TO CULTIVATE T HE LAND. HOWEVER THE AO OBSERVED THAT IRRIGATION FACILITY W AS AVAILABLE TO THE ASSESSEE FOR 3.3 HECTARES WHEREAS THE ASSESSEE OWN ED 51 HECTARES. THE ASSESSEE HAD GROWN CASH CROPS FOR WH ICH THEY NEEDED PESTICIDES FERTILIZERS AND MANPOWER ETC. TH E AO THEREFORE REJECTED THE SUBMISSIONS OF THE ASSESSEE AND ESTIMA TED THE ITA NO.3951/AHD/2007 3 EXPENSES @ 40% OF THE GROSS RECEIPTS WHICH WORKED OUT TO RS.2 18 988/- AS AGAINST RS.1 11 530 DISCLOSED BY T HE ASSESSEE. ACCORDINGLY THE DIFFERENCE OF RS.1 07 458/- WAS AD DED AS INCOME FROM UNDISCLOSED SOURCES. 3 ON APPEAL THE ASSESSEE SUBMITTED THAT THEY HAD EXPLAINED BEFORE THE AO THAT BECAUSE OF SHORTAGE OF WATER TH E AGRICULTURAL ACTIVITY WAS RESTRICTED TO ONLY 4 MONTHS OF THE MONSOON AND ACCO RDINGLY EXPENSES WERE ALSO RESTRICTED TO THE SAID PERIOD. EVEN IN EARLIER YEAR S THE EXPENSES INCURRED WERE- APPROXIMATELY 20% OF THE GROSS RECEIPTS. THE FAMILY WERE EXPERIENCED FARMERS AND HAD FULL KNOWLEDGE OF ECONOMIC FARMING. MOREOVE R THE AO HAVING FAILED TO PROVIDE THE FULL TEXT OF THE JUDGMENT OF THE HON. I TAT IN THE CASE OF DHIRUBHAI L. NAROLA (SUPRA) THE ASSESSEE WAS DEPRIVED OF AN OP PORTUNITY TO DEFEND ITSELF AGAINST THE PROPOSED ADDITION. IN THE LIGHT OF THES E SUBMISSIONS THE LD. CIT(A) SUSTAINED THE ADDITION HOLDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. IF THE AR'S ARGUMENT THAT THE EXPENDITURE INCURRED IN THE EARLI ER YEARS WAS ALSO RESTRICTED TO AROUND 20% OF THE GROSS AGRICULTURAL RECEIPTS IS TO BE ACCEPTED BECAUSE OF THE REASON THAT THE AGRICULTURA L ACTIVITY IS CONFINED ONLY TO THE 4 MONTHS OF THE MONSOON SEASON THEN TH E AR OUGHT TO HAVE ALSO EXPLAINED HOW THE AGRICULTURAL INCOME HAD JUMP ED SO DRASTICALLY FROM RS.90 870 IN THE YEAR RELEVANT TO AY 02-03 AND RS.9 5 970 IN THE AY 03-04 TO RS.4 35 941 IN THE YEAR UNDER CONSIDERATION. THE RESTRICTION IN THE PERIOD OF AGRICULTURAL ACTIVITY WOULD NOT ONLY REST RICT THE EXPENDITURE INCURRED BUT WOULD ALSO RESTRICT THE GROSS AGRICULT URAL RECEIPTS. THIS HAS NOT BEEN EXPLAINED EVEN THOUGH THE FAMILY MAY HAVE BEE N EXPERT FARMERS. FURTHER NO DETAILS OF THE GROSS RECEIPT NOR OF T HE EXPENDITURE INCURRED WAS FURNISHED BEFORE THE AO. THEREFORE IN MY OPINI ON THE RATIO OF THE CASE OF DHIRUBHAI L. NAROLA (SUPRA) WAS SQUARELY APPLICA BLE TO THE FACTS OF THE ASSESSEE'S CASE. EVEN IF THE FULL TEXT OF THE DECIS ION IN THE SAID CASE WAS NOT PROVIDED TO THE ASSESSEE BY THE AO YET FROM TH E CITATION PROVIDED BY THE AO THE ASSESSEE COULD HAVE EASILY OBTAINED -TH E FULL TEXT AND IF NOT IN ASSESSMENT PROCEEDINGS THE APPLICATION OR OTHERWIS E OF THE RATIO OF THE SAID CASE COULD HAVE BEEN ARGUED AT LEAST-IN APPELL ATE PROCEEDINGS. THIS HAS NOT BEEN DONE. IT IS THEREFORE ONLY A VERY FLIM SY ARGUMENT IN AN ATTEMPT TO DEFEND THE ASSESSEES CASE. 6.1 THUS TAKING INTO ACCOUNT THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE I HAVE COME TO THE CONCLUSION THAT THE AO WAS FULLY JUSTIFIED IN ITA NO.3951/AHD/2007 4 ESTIMATING THE EXPENSES INCURRED ON THE AGRICULTURA L ACTIVITY OF THE ASSESSEE AT 40% OF THE GROSS RECEIPT. THE ASSESSEE THUS HAD OVERSTATED THE AGRICULTURAL INCOME BY THE SUM OF RS.1 07 458. THE AO WAS FULLY JUSTIFIED IN REDUCING THE AGRICULTURAL INCOME DISCL OSED BY THE ASSESSEE BY THE SAID AMOUNT AND TREATING THE SAME AS INCOME FRO M UNDISCLOSED SOURCES. THE AO'S ACTION IS SUSTAINED. 4 THE ASSESSEE IS NOW IN APPEAL BEFORE US. AT THE O UTSET THE LD. AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT ON SIMI LAR FACTS AND CIRCUMSTANCES THE ITAT VIDE THEIR DECISION DATED 26-02-2008 IN THE CASE OF MAHAVIRSINH ANOPSINH JADEJA IN ITA NO.3598/ AHD/2007 FOR THE AY 2004-05 LIMITED THE EXPENSES TO 30% OF GR OSS AGRICULTURAL RECEIPTS WHILE DISTINGUISHING THE DECISION OF THE ITAT RELIED UPON BY THE AO. ON THE OTHER HAND THE LEARNED DR RELIED O N THE ORDERS OF THE LOWER AUTHORITIES. 5 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON BY BOTH THE PARTIES. WE FIND THAT THE ITAT AFTER CONSIDERING TH E DECISION OF THE ITAT IN THE CASE OF DHIRUBHAI L. NAROLA (SUPRA) FOR THE AY 2001-02 IN THE CASE OF MAHAVIRSINH ANOPSINH JADEJA IN ITA NO.3598 /AHD/2007 VIDE THEIR ORDER DATED 26-02-2008 HELD AS UNDER: 5. IN THE WRITTEN SUBMISSIONS THE ASSESSEE SUBMIT TED THAT THERE IS NO SUCH RULE THAT EXPENDITURE MUST BE 40% OF THE RECEI PTS. THERE IS ALSO NO FORMULA IN THE ACT FOR DETERMINING THE EXPENDITURE. AS REGARDS THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI DHIRUBHAI L. NA ROLA (SUPRA) IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER THAT THE FACTS OF THAT CASE ARE DISTINGUISHABLE BY STATING IN ITS LET TER DATED 13.11.2006 WHICH READS AS UNDER:- '1. WE ARE BORN FARMERS. OUR FAM'LY CONSISTS OF MEM BERS WHO THEMSELVES DO THE WORK OF AGRICULTURE AS DONE BY LA BOURER. THIS SAVES THE EXPENSES OF LABOUR CHARGES. WE ALSO PRESE RVE SEEDS AND SEEDS OF PREVIOUS YEARS' CROPS PUT IN THE USE FOR C URRENT YEARS' AGRICULTURE OPERATION WHICH SAVES CONSIDERABLE AMO UNT WHICH IS INCURRED FOR OBTAINING SEEDS. THERE ALSO A CONSIDER ABLE SAVINGS ON FERTILIZER AS WE USE GOBAR AS FERTILIZER WHICH COS TS US NIL AS IT IS PRODUCT OF OUR COWS. WE ALSO USE MANPOWER AND ANIMA L POWER TO CULTIVATE THE LAND WHICH IS CHEAPER THAN MECHANIZED FARMING (NOTED IN NAMUNA 7/12 AS GHARKHED LAND). WE ARE AWARE OF E CONOMIC ITA NO.3951/AHD/2007 5 FARMING AS WE HAVE ESTABLISHED METHOD OF FARMING WH ICH IS CHEAPER AND COST EFFECTIVE. 2. WE ALSO HAVE WATER FACILITY OF OUR OWN. SO THERE IS LOWER EXPENSES FOR OBTAINING WATER. 3. IT MUST BE RESPECTFULLY SUBMITTED THAT HUF HAS L AND ADMEASURING VINGHAS I.E. IT IS A BIG HOLDING OF LAND. SO EXPENSES ARE ALSO DIVIDED ON SUCH BULK QUANTITY LAND. CERTAI N EXPENSES ARE FIXED BY NATURE WHETHER THE SIZE OF PLOT IS BIG OR SMALL IN OUR CASE SUCH FIXED EXPENSES ARE DIVIDED RESULTS IN COST RED UCTION. 6. THE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE CONS IDERED AND THE ARGUMENTS RAISED BY THE LEARNED D.R IN DEFENSE ARE GONE THROUGH. WE ARE OF THE OPINION THAT THE DECISION OF THE TRIBUNA L IN THE CASE OF SHRI DHIRUBHAI L. NAROLA (SUPRA) CANNOT BE APPLIED MECHA NICALLY AND AS STATED BY THE ASSESSEE THEY ARE BORN FARMERS AND THEMSELV ES DOING THE AGRICULTURAL ACTIVITIES AS DONE BY THE LABOURERS IN OTHER CASE. IT SAVED THE EXPENDITURE ON THAT ACCOUNT. BESIDES THE MANPOWER THE ASSESSEE HAD USED ANIMAL POWER TO CULTIVATE THE LAND WHICH IS CH EAPER THAN MECHANIZED FARMING. IN THESE FACTS AND CIRCUMSTANCES THE ENDS OF JUSTICE WOULD MEET IF THE EXPENDITURE IS ESTIMATED AT 30% INSTEAD OF 4 0% ADOPTED BY THE AO. WE THEREFORE MAKE AN AD-HOC ADDITION OF RS.40 000 /- TO THE TOTAL INCOME OF THE ASSESSEE. 5.1 IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DE CISION RELEVANT FOR THE AY 2004-05 WE ARE OF THE OPINION THAT THE ENDS OF JUSTICE WOULD MEET IF THE EXPENDITURE IS ESTIMATED AT 30% INSTEAD OF 4 0% ADOPTED BY THE AO& THE LD. CIT(A) ON THE BASIS OF A DECISION RELEVANT FOR THE AY 2001-02 . THUS GROUND NO.1 IN THE APPEAL IS ALLOWED TO THAT EXTENT. 6 AS REGARDS GROUND NO.2 THE AO NOTICED THAT DURI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PURCHASE D VIDE DEED EXECUTED ON 18.3.2004 BUNGLOW NO.165 & 166 AT KAWAS JINAGAR BADRINARAYAN TEMPLE ROAD ADAJAN SURAT FROM SMT. G EETABEN PARMAR AND SHRI PRAKASHBHAI PARMAR THROUGH THEIR PO WER OF ATTORNEY HOLDER SHRI NIKHILESH D.RAMPURIA FOR A CON SIDERATION OF RS.4 91 999 FOR EACH OF THE BUNGLOW. THE AO FURTH ER OBSERVED THAT THE STAMP DUTY VALUATION OFFICER HAD ESTIMATED THE VALUE OF EACH BUNGLOW AT RS.7 31 541/- AND HAD THUS RAISED DEMA ND FOR ITA NO.3951/AHD/2007 6 ADDITIONAL STAMP DUTY OF RS.26 740 AND A PENALTY OF RS.250 FOR EACH BUNGLOW. IN RESPONSE TO A SHOW-CAUSE NOTICE PROPOS ING TO ADOPT PURCHASE CONSIDERATION AS ESTIMATED BY THE STAMP DU TY VALUATION OFFICER AND ADDITION OF UNDISCLOSED INVESTMENT OF. RS.2 39 542 (RS.7 31 541 - 4 91 999) FOR EACH BUNGLOW U/S SEC.6 9 OF THE ACT THE ASSESSEE REPLIED THAT THEY HAD RAISED AN OBJECTION BEFORE THE AO AGAINST THE VALUATION MADE BY THE STAMP DUTY VALUA TION OFFICER AND UNTIL THE MATTER WAS DECIDED BY THE DY COLLECTOR N O ADDITION COULD BE MADE. HOWEVER THE AO REJECTED THE ASSESSEE'S S UBMISSIONS ON THE GROUND THAT THE BUNGLOWS WERE LOCATED VERY CLOS E TO THE SARDAR BRIDGE ON THE ADAJAN SIDE AND WERE SURROUNDED BY T EMPLES SCHOOLS OTHER APARTMENTS AND GARDENS AND THEREFORE THE VALUATION MADE BY THE STAMP DUTY VALUATION OFFICER @ RS.2 500 PER SQ. MTR. WAS QUITE REASONABLE. SINCE THE ASSESSEE HAD NOT OB JECTED TO THE DEMAND RAISED BY THE STAMP DUTY VALUATION OFFICER P RIOR TO THE SHOW-CAUSE NOTICE ISSUED BY THE AO THE AO ADDED A N AMOUNT OF RS.2 39 542 X 2 = 4 79 084 BY WAY OF UNDISCLOSED IN VESTMENT OF THE ASSESSEE U/S SEC.69 OF THE IT ACT. 7 ON APPEAL THE ASSESSEE CONTENDED THAT THE VALU E OF EACH BUNGLOW WAS FINALLY DETERMINED BY THE STAMP DUTY VA LUATION OFFICER AT RS.6 06 451 EACH AND THEREFORE DIFFERENCE REDUCED TO ONLY RS.1 14 452 BETWEEN THE DOCUMENT PRICE OF RS.4 91 999 AND THE VALUE FIN ALLY DETERMINED BY THE VALUATION CELL. ACCORDINGLY THE ASSESSEE PLEADED T HAT THE ADDITION OF RS.4 79 084 MAY BE REDUCED TO RS.2 28 904 (L 14 452 X 2). HOWEVER THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE AO HOLDING A S UNDER: 10. I HAVE CAREFULLY CONSIDERED THE FINDINGS AND C ONCLUSIONS OF THE AO AND THE SUBMISSIONS OF THE AR. TO BEGIN WITH I FIN D THAT THE ORDER OF THE VALUATION CEIL WHICH THE AR HAS CLAIMED TO HAVE REC EIVED AND; WHICH ALLEGEDLY HAD REDUCED THE FINAL PRICE OF EACH BUNGL OW TO RS.6 06 451 AND THE COPIES OF WHICH HAVE BEEN CLAIMED TO HAVE BEEN ANNEXED TO THE WRITTEN SUBMISSION AS PER ANNEXURE-D PAGES 17 TO 4 6 ARE NOTHING BUT COPIES OF THE SALE DEEDS INDICATING THE PURCHASE PR ICE OF RS.4 91 499 FOR ITA NO.3951/AHD/2007 7 EACH BUNGLOW. THIS CLEARLY SHOWS THAT THE AR HAS BL ATANTLY ATTEMPTED TO MISLEAD ON FACTS. HE HAS ALSO MADE A FALSE AND .BAS ELESS CLAIM THAT THE ORDER OF THE VALUATION CELL HAD BEEN' RECEIVED WHER EAS IT IS CLEARLY SEEN THAT NO SUCH ORDER HAS BEEN RECEIVED BY THE ASSESSE E AT LEAST NONE HAS BEEN FURNISHED IN COURSE OF THE APPELLATE FEEDINGS. THUS THE AO WAS FULLY JUSTIFIED IN RELYING UPON THE VALUATION OF THE STAM P DUTY VALUATION OFFICER OF RS.7 31 541 OR EACH BUNGALOW. THIS MEANT THAT TH E ASSESSEE HAD UNDERSTATED THE PURCHASE CONSIDERATION BY THE SUM O F RS.2 39 542 (RS 7 31 541 - 4 91 999). THE TOTAL UNDISCLOSED INV ESTMENT WAS THEREFORE RIGHTLY WORKED OUT BY THE AT RS.2 39 542 X 2 = 4 79 084. THE ACTION TAKEN BY THE AO WAS BASED PURELY ON THE VALUE DETERMINED BY THE STAMP DUTY VALUATION OFFICER. 10.1 THE ASSESSEE CLAIMED TO HAVE RAISED OBJECTION AGAINST THE VALUATION. AS CORRECTLY POINTED OUT BY THE AO THE OBJECTION W AS RAISED AFTER DETECTION BY THE AO OF THE UNDERSTATEMENT. THE SHOW-CAUSE NOT ICE WAS ISSUED BY THE AO ON 17.10.2006. THE DEMAND FOR ADDITIONAL STA MP DUTY WAS RAISED VIDE NOTICE DATED 22.6.2004. TILL THE TIME OF ISSUE OF THE SHOW-CAUSE NOTICE I.E. FOR MORE THAN 2 YEARS THE ASSESSEE DID NOT F IND IT NECESSARY TO RAISE ANY OBJECTION AGAINST THE VALUATION MADE BY THE STA MP DUTY OFFICER. IT WAS ONLY AFTER THE ASSESSEE RECEIVED THE SHOW-CAUSE NOT ICE THAT IT RAISED THE OBJECTION ON 24.11.2006. THE FACTS OF THE CASE WOUL D THUS CLEARLY SHOW THAT BOTH IN ASSESSMENT PROCEEDINGS AND IN APPELLA TE PROCEEDINGS THE ASSESSEE AND THE AR HAVE MADE DELIBERATE ATTEMPT TO MISLEAD AND MISREPRESENT THE FACTS. THE AO FURTHER REINFORCED T HE VALUATION OF THE STAMP DUTY VALUATION OFFICER BY NOTING THAT BOTH TH E BUNGLOWS HAD VERY ADVANTAGEOUS LOCATION ON THE ADAJAN SIDE OF THE SA RDAR BRIDGE AND WERE SURROUNDED BY TEMPLES SCHOOLS GARDENS AND ALL OTH ER AMENITIES. IT WAS ABSOLUTELY CLEAR THEREFORE THAT THE PURCHASE CONSI DERATION HAD BEEN GROSSLY UNDERSTATED. 10.2 TAKING INTO ACCOUNT THE OVERALL FACTS AND CIRC UMSTANCES OF THE CASE IT IS HELD THAT THE AO WAS FULLY JUSTIFIED IN ADDIN G THE SUM OF RS.4 79 084 AS UNDISCLOSED INVESTMENT OF THE ASSESSEE UNDER THE P ROVISIONS OF SECTION 69 OF THE I.T. ACT. 8 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE WHILE REITERATING THEIR CONTENTIONS BEFORE THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE PURCHASED FOLLOWING IMMOVABLE PROPERTIES D URING THE YEAR:- SR. NO. BUNGLOW NO. ADDRESS PURCHASE PRICE DATE ON WHICH SALE DEED WERE DETAILS OF REGISTRATION ITA NO.3951/AHD/2007 8 EXECUTED 1 165 KAWASJI NAGAR BADRI NARAYAN TEMPLE ROAD ADAJAN SURAT 491999.00 18/3/2004 2885 DATED 19/3/2004 2 166 KAWASJI NAGAR BADRA NARAYAN TEMPLE ROAD ADAJAN SURAT 491991.00 18/3/2004 2886 DATED 19/3/2004 THE DEPUTY COLLECTOR THE STAMP DUTY VALUATION CELL SURAT CITY- 1 ESTIMATED THE VALUE OF EACH BUNGLOW AS UNDER AND HE ISSUED A NOTICE REQUIRING US TO PAY ADDITIONAL STAMP DUTY OF RS.26 740 WITH FINE RS. 25 0. BUNGLOW NO. ESTIMATION MADE BY DOCUMENT DIFFERENCE BETWEEN THE STAMP DUTY PRICE ESTIMATION OF STAMP VALUATION OFFICER IN DUTY OFFICER AND NOTICE DOCUMENT PRICE 165 7 31 541.00 4 91 999.00 2 39 542.00 166 7 31 541.00 4 91 999.00 2 39 542.00 TOTAL 4 79 084.00 ON THEIR OBJECTIONS THE VALATION CELL DETERMINED THE VALUATION AS UNDER: . BUNGALOW NO. DOCUMENT PRICE PRICE FINALLY DETERMINED BY THE VALUATION CELL DIFFERENCE ITA NO.3951/AHD/2007 9 165 4 91 999.00 6 06 451.00 1 14 452.00 166 4 91 999.00 6 06 451.00 1 14 452.00 TOTAL 2 28 904.00 ACCORDINGLY THE ASSESSEE PLEADED THAT THE ADDITION OF RS.4 79 084.00 MAY BE REDUCED TO RS.2 28 904.00.THE LEARNED DR ON THE OT HER HAND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE AO MADE THE ADDITION ONLY ON THE B ASIS OF VALUATION OF BUNGLOWS MADE BY THE STAMP DUTY VALUATION AUTHORITIES WITHOU T BRINGING ANY MATERIAL ON RECORD THAT THE VALUE DETERMINED FOR THE PURPOSE S OF STAMP DUTY WAS THE ACTUAL CONSIDERATION PASSED BETWEEN THE PART IES TO THE SALE. WE FIND THAT A CO-ORDINATE BENCH OF THE ITAT IN A DECISION DATED 2 0.02.2008 IN THE CASE OF BHARATKUMAR N PATEL VS ACIT CIRCLE-.3 SURAT IN IT A NO.1749/AHD/2008 WHILE ADJUDICATING A SIMILAR ISSUE HELD IN THE FOLLO WING TERMS: 10. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMI SSIONS FACTS AND CIRCUMSTANCES OF THE CASE PROVISIONS OF LAW AS WEL L AS DECISION(S) OF HONBLE SUPREME COURT AND VARIOUS BENCHES RELIED UPON BY THE PARTIES WE ARE OF THE OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION BY DRAWING THE ANALOGICAL P ROVISIONS OF SECTION 50-C OF THE ACT. THE CIT(APPEALS) CONFIRME D THE ADDITION BY OBSERVING THAT IF THIS PROPOSITION TO BE ACCEPTE D THEN THE DEEMING PROVISIONS OF SECTION 50-C OF THE ACT WILL BECOME INOPERABLE. HE FURTHER HELD THAT SECTION 50-C OF THE ACT IS APPLICABLE TO THE SELLER AND PROVIDES THAT THE VALU ATION MADE BY THE STAMP VALUATION AUTHORITY IS TO BE DEEMED AS THE CO NSIDERATION RECEIVED BY THE SELLER. HAVING SAID SO THE CIT (A PPEALS) FURTHER HELD THAT THE CONVERSE WILL ALSO HAVE TO BE ACCEPT ED AS TRUE I.E. THE VALUATION OF STAMP VALUATION AUTHORITY WILL HAV E TO BE DEEMED AS THE CONSIDERATION PAID BY THE PURCHASER OF THE PROP ERTY AS WELL. 10.1 WE ARE UNABLE TO AGREE WITH THE AFORESAID ANAL OGY DRAWN BY THE CIT(APPEALS) BECAUSE HAD THE LEGISLATURE INTEND ED SO IT COULD HAVE EASILY SPECIFIED SUCH A PROPOSITION IN THE PRO VISION ITSELF. 11. IN VIEW OF THE SETTLED PROPOSITION OF LAW THAT THE APPELLATE AUTHORITY HAS NO RIGHT EITHER TO ADD OR TO DELETE A NY WORD FROM THE ITA NO.3951/AHD/2007 10 PROVISIONS OF LAW UNLESS AND UNTIL THE SAME ARE FOU ND TO BE HAVING SOME AMBIGUITY WE ARE UNABLE TO SUSTAIN THE STAND OF THE CIT(APPEALS) THERE BEING NO AMBIGUITY IN THE SECTI ON 50-C OF THE ACT WE ARE OF THE OPINION THAT THESE PROVISIONS AR E NOT APPLICABLE TO BE PURCHASER. 9.1 ANOTHER CO-ORDINATE BENCH OF THE ITAT IN T HEIR DECISION DATED 24.7.2009 IN THE CASE OF JALARAM AND CO. IN ITA NO.3964/AHD/ 2008 WHILE ADJUDICATING A SIMILAR ISSUE CONCLUDED AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ONLY ISSUE INVOLVED IS WHETHER DIFFEREN CE BETWEEN APPARENT CONSIDERATION RECORDED IN THE TRANSFER DEED AND VAL UATION DONE BY THE STAMP VALUATION AUTHORITIES FOR LEVYING STAMP DUTY CAN BE TREATED AS UNDISCLOSED INVESTMENT TO BE TAXED U/ S 69. IN OUR CONSIDERED VIEW THIS PRESUMPTION RAISED BY THE ASSESSING OFFICER AND CIT (A) CANNOT BE LEGALLY SUSTAINED. SECTION 50C CREATES A LEGAL FICTION THER EBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED ACCORD INGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITE D TO THE AREA FOR WHICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HELD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEGITIMATELY IN TENDED BY THE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PROVISIONS OF SEC. 171(1) OF THE I.T.ACT IN THE CONTEXT OF WHICH IT WAS HELD THAT JOINT FAMI LY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CASE S OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSS IBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY T HE HON'BLE KERLA HIGH COURT IN CIT V. KAR VALVES LTD. (1987) 168 ITR 41 6 (KER.) WHEREIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE F OR WHICH THEY ARE CREATED AND COULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FR AME HON'BLE KERALA HIGH COURT WAS DEALING WITH THE CASE WHERE ASSESSE E SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABIL ITIES ARE NOT LIQUIDATED AND OUTSTANDINGS ARE NOT COLLECTED THEN BUSINESS COULD BE DEEMED TO CONTINUE. HON'BLE ALLAHABAD HIGH COURT IN CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 56 1 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION THE COURT SHOULD ASC ERTAIN THE PURPOSE FOR WHICH IT WAS CREATED AND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT TO THE FICTION. HON'BLE SUPREME COUR T IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITR 711 (SC) H ELD THAT LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUS T BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CIT V BHARANI PICTURES (1981) 129 ITR 244 (MAD ) IT IS HELD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYO ND ITS LEGITIMATE FIELD. STATUTORY FICTION INTRODUCED IN ONE ENACTMEN T CANNOT BE INCORPORATED IN OTHER ACT. THE POINT THAT LEGAL FICTION CANNOT B E EXTENDED TO A NEW FIELD ITA NO.3951/AHD/2007 11 WAS HIGHLIGHTED BY HON'BLE MADRAS HIGH COURT I N CIT V. RAJAM T.S (1988) 125 ITR 207(MAD ) WHEREIN IT IS HELD THAT SE CTION 41(2) CREATES A LEGAL 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 BECOME DEEMED DIVIDE ND 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 ASSES SEE COMPANY AND WAS NOT EXTENDED IN THE HANDS OF THE SHAREHOLDERS. 7. 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 V ALUATION DONE BY STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTME NT U/S 69. IN FACT SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVEST MENT INTO AN ASSET IS TREATED AS INCOME IF IT IS NOT DISCLOSED IN THE REG ULAR 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 LEGIS LATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RE CEIPTS OR EXPENDITURE WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PR EVENT TAX EVASION BY UNDERSTATING APPARENT SALE CONSIDERATION AS COMPARE D TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES FOR THE PURPOSE S OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SEC TION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATI ON DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION CANNOT BE EXTEN DED ANY FURTHER AND THEREFORE CANNOT BE INVOKED BY ASSESSING OFFICER T O TAX THE DIFFERENCE IN THE HANDS OF THE PURCHASER. 8. HON'BLE MADRAS HIGH COURT IN CGT V R. DAM ODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHORISES HAVE THE IR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE FOR THE PUR POSE 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. HON'BLE ALLAHABAD 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 AMOUNT PAID AND THE VALUE FO R PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY THE ASS ESSING OFFICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THA T THE VALUE DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUA L CONSIDERATION PASSED BETWEEN THE PARTIES TO THE SALE I TAT SMC AHMEDABAD IN ITA NO. 4120/AHD/2003 IN NISNABEN AMINBHAI MITHANI DELE TED THE ADDITION MADE U/S 69 ON ACCOUNT OF DIFFERENCE BETWEEN APPARE NT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AFTER FOLLOWING VARIOUS AUTHORITIES AS REFERRED TO AS ABOVE. AS A RESULT WE DELETE THE ADDITION AND ALLOW THE A PPEAL OF THE ASSESSEE. ITA NO.3951/AHD/2007 12 9.2 SIMILAR VIEW WAS TAKEN IN THEIR DECISIONS IN RICHA NARESH JAIN VS. ITO ITA NO.3997/ AHD./ 2008 AS ALSO IN THE DECISIO N DATED 11.12.2009 IN THE CASE OF ITO VS.SMT. KUSUM GILANI IN ITA NO. 1576/D EL./2008 AND ITO VS.OPTEC DISC MANUFACTURING 11 DTR (CHD)(TRIB) 264. MOREOVE R HON'BLE RAJASTHAN HIGH COURT IN THEIR DECISION IN THE CASE OF CIT VS. KRIS HAN KUMAR & OTHERS 315 ITR 204(RAJ) HELD THAT IT BECOMES A PURE QUESTION OF FACT AS TO WHETHER THE CONSIDERATION SHOWN IN THE DOCUMENT OF CONVEYANCE IS THE ACTUAL AMOUNT PAID BY WAY OF CONSIDERATION TO BE TAKEN TO BE UNDISCLO SED INCOME OF THE ASSESSEE OR IT IS A DEFLATED FIGURE AND THEREFORE ADDITION IS REQUIRED TO BE MADE. IF IT IS TAKEN TO BE DEFLATED FIGURE THEN IT IS FOR THE DEP ARTMENT TO LEAD POSITIVE EVIDENCE ABOUT THE FAIR MARKET VALUE OF THE PROPERTY AND FU RTHER TO SHOW THAT THE PROPERTY WAS UNDERVALUED IN THE DOCUMENT OF SALE BEFORE MA KING ANY ADDITION IN THE INCOME ON THAT COUNT. 9.3 AS OBSERVED BY THE HONBLE APEX COURT IN CIT V S. MOTHER INDIA REFRIGERATION INDUSTRIES PVT. LTD. 155 ITR 711(SC) WHILE REFERRI NG TO THEIR DECISION IN BENGAL IMMUNITY COMPANY LIMITED V. STATE OF BIHAR [1955] 2 SCR 603 606 ; 6 STC 446 IT IS WELL SETTLED THAT THE LEGAL FICTIONS ARE CREA TED ONLY FOR SOME DEFINITE PURPOSE AND THESE MUST BE LIMITED TO THAT PURPOSE AND SHOUL D NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. PROVISIONS OF SEC. 50C FALLI NG UNDER THE CHAPTER CAPITAL GAINS WERE ENACTED WITH A SPECIFIC PURPOSE OF DET ERMINING THE FULL VALUE OF CONSIDERATION IN CASE OF TRANSFER OF IMMOVABLE PROP ERTY FOR THE PURPOSE OF SEC. 48 OF THE ACT. IN THE ABSENCE OF ANY EVIDENCE THAT T HE ASSESSEE PAID CONSIDERATION HIGHER THAN STATED IN THE PURCHASE DEED PROVISIO NS OF SEC. 50C CAN NOT BE EXTENDED WHILE MAKING ADDITIONS U/S 69B OF THE ACT. 9.4 ADMITTEDLY IN THE PRESENT CASE APART FROM RELYING UPON THE RATES ADOPTED BY STAMP VALUATION AUTHORITY THERE IS NO OTHER MAT ERIAL TO SUPPORT THE ADDITION. IN OUR OPINION RATES ADOPTED BY STAMP VALUATION AUTHO RITY CANNOT BE TAKEN BY ITSELF AS THE PRICE FOR WHICH THE PROPERTY WAS PU RCHASED. IN VIEW THEREOF AND IN THE LIGHT OF AFORESAID DECISIONS OF THE ITAT AND OF THE HONBLE RAJASTHAN HIGH COURT THE FINDINGS OF THE LD. COMMISSIONER OF IN COME TAX (APPEALS) ARE ITA NO.3951/AHD/2007 13 REVERSED AND THE AO IS DIRECTED TO DELETE THE ADDIT ION . THEREFORE GROUND NO. 2 IN THE APPEAL IS ALLOWED. 10. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF RESIDUARY GROUND NO.3 IN THE APPEAL OF THE ASSESSEE ACCORDINGLY THIS GROUN D IS DISMISSED. 11 IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 22 -03 -2010 SD/- SD/- (D T GARASIA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 22 -03-2010 COPY OF THE ORDER FORWARDED TO : 1. NARENDRASINH ANOPSINH JADEJA HUF 27 PANCHRAT NA SOCIETY-1 ANAND MAHAL ROAD RANDER SURAT 2. THE ITO WARD-3(4) SURAT 3. CIT CONCERNED 4. CIT(A)-II SURAT 5. THE DR ITAT B BENCH AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD