PERSONAL FINANCE
Section 56 of the I-T Act prescribes that in case a taxpayer purchases a property for a consideration, which is less than the stamp duty value of the property by an amount in excess of Rs 50,000, then the difference between the stamp duty value and the consideration paid shall be income of the taxpayer
A taxpayer, who was into the business of civil contracting, filed his return of income for the assessment year 2014-15 on 30.9.14 declaring his total income of Rs 14.70 lakhs, which was also summarily assessed by the Income Tax Department within the prescribed timelines.
Further, his case was selected for scrutiny to verify large investment made in the property as compared to his total income. The tax officer noted that during the previous year, the taxpayer has purchased an immovable property for an agreement value of Rs 60 lakhs wherein his share was 18.75%. However, the circle rate (value adopted by stamp duty authorities for the purpose of levying stamp duty) for the said property was Rs 1.68 crores.
Section 56 of the Income Tax Act ('the Act') prescribes that in case a taxpayer purchases a property for a consideration, which is less than the stamp duty value of the property by an amount in excess of Rs 50,000; then the difference between the stamp duty value and the consideration paid shall be income in the hands of the taxpayer.
When this provision was brought up before the taxpayer during the course of assessment, the taxpayer agreed to offer the difference between the circle rate and the actual sale consideration for taxation. Accordingly, the taxpayer's share @ 18.75% was calculated at Rs 31.66 lakhs and the difference of Rs 20.41 lakhs (Rs 31.66 lakhs – Rs 11.25 lakhs) was added to the income of the assessee in the assessment order. The taxpayer accepted the said addition and did not file an appeal against the same in order to buy peace with the Income Tax Department.
The tax officer further initiated penalty proceedings and also levied penalty under the relevant provisions of the Act on the addition made as above vide a separate penalty order. The taxpayer filed an appeal against this penalty order. Before the first appellate authority, the taxpayer argued that the addition has been made on account of the deemed income being the difference between the stamp duty valuation and the actual transaction price. In view of the same, it is definitely not a case of concealment of income or furnishing inaccurate particulars of income, as is required for levy of penalty. However, the first appellate authority agreed with the tax officer.
When the matter came up for hearing before the Tax Tribunal, the taxpayer argued that the relevant provision under section 56 of the Act that deals with the buyer of properties have been introduced in the Act only with effect from April 1, 2014, which is the applicable assessment year under appeal. Prior to this, there were no such provisions in the Act. The addition made by the tax officer is on account of the newly introduced deeming provision and therefore it is not a case of concealment or furnishing inaccurate particulars of income.
The Tribunal observed that the tax officer has not brought any positive evidence on record to show that the taxpayer has concealed income or furnished inaccurate particulars, but has only relied on the addition made under the newly introduced deeming provision. The Tribunal relied on previous judgements wherein the absence of any positive evidence of actual payment of money by the taxpayer over and above what is recorded in the sale deed, the authorities have deleted penalties for lack of justification for the same. The valuation of the stamp duty authority cannot be a conclusive evidence of payment of money by taxpayer over and above what is recorded in the sale deed. Accordingly, the Tribunal deleted the penalty and ruled in favour of the taxpayer.
The writer is a Sebi-registered investment advisor
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