In Elvis Zepherin Crasto v. ITO [ITA No. 1921/M/2022] dated August 23,2023 for assessment year 2018/19 the facts were as under:
An assessee was a Non-Resident of individual based in Dubai, UAE with his family. Assessee filed his return of income for the A.Y. 2018- 19 on 28.08.2018 declaring total income of Rs. 2,20,630/-. The case of the assessee was selected for compulsory / manual scrutiny assessment under e-assessment scheme 2019. The main reason for selection of scrutiny was to examine the evasion of tax in purchase of high value immovable property during the year under consideration. Accordingly, notices u/s. 143(2) and 142(1) were issued and served on the assessee.
The Assessing Officer noticed that assessee has purchased an immovable property on 08.09.2017 for total consideration of Rs. 46,00,000/-. However, the stamp duty value adopted by the Stamp Duty Authorities in respect of the above said property for stamp duty purpose was Rs.2,53,56,000/-, hence there is a difference of Rs. 2,07,56,500/- in value as per the agreement value and the stamp duty valuation. The assessee was asked to provide necessary explanation along with documentary evidences to justify the difference between agreement value and the stamp duty valuation and why the provisions of section 56(2) of the Act should not be invoked.
In response assessee filed the explanation on 27.02.2021 and in which assessee has informed that assessee has purchased the above property jointly with his wife Mrs. Jane Elvis Crasto and purchased the above said agricultural vacant land vide agreement dated 09.08.2017 for a consideration of ` 46,00,000/-. It was submitted that the above said land falls under no development zone and situated at Survey No. 189, Hissa No. 19, CGTS No. 1743, Hissa No. 29, CTS No. 1748, Hissa No. 2, CTS No.
1680, Village Gorai, Taluka Borivali, Mumbai. It was also submitted that the above said plots of land are far away from main D.P. Road, and there is no easy access to reach these plots from main DP Road. It was informed that the above said reasons are also incorporated in the purchase agreement in clause No. (b) at Page No. 6 and 7. Further, it was submitted that assessee has invested in the above said land from the income earned in Dubai. The assessee also submitted that if the market value is higher as per stamp duty valuation, it does not mean that the higher amount was paid or received by the parties while carrying out the transaction purchased or sale. He also strongly objected for invocation of provisions of section 56(2) of the Act in his case. Further, he has also shown willingness to submit valuation report from Government valuer in respect of above land. After considering the submissions of the assessee, Assessing Officer rejected the same and was of the view that the plot of land in question are in Mumbai suburban and the stamp duty is paid by the assessee on the value of Rs. 2,53,56,000/- as adopted by the Stamp Duty Authorities and also assessee has not challenged the above valuation in any legal forum. Accordingly, he justified the invoking of provisions of section 56(2) of the Act, are mandatory and required to be applied in cases where the stamp duty value is more than the agreement value.
Further, Assessing Officer observed that in the present circumstances, the amount of Rs. 2,07,56,500/- being the difference between agreement value and the stamp duty valuation is hereby treated as unexplained u/s. 69 of the Act r.w.s. 115BBE of the Act and added to the total income of the assessee under the head “income from other sources” u/s. 56(2) of the Act. Accordingly, passed draft Assessment Order.
Aggrieved with above order, the assessee filed objection before Dispute Resolution Panel (DRP), but learned DRP agreed with the Assessing Officer
Against DRP order the assessee filed the appeal before the Hon’ble Tribunal, Mumbai, who after considering the facts observed as under:
All these facts were submitted before Ld. DRP even before the Assessing Officer, assessee has expressed his willingness to file the Registered valuation report for the same and the authorities below have not considered the above submission, they merely stated that since the land is situated in the outskirts of Mumbai and assessee has not raised any objection of the stamp duty valuation, hence, they have proceeded to make the addition.
Further, authorities below, have equated the provisions of section 56(2) and 50C of the Act and both these sections are to control the evasion of tax adopted by the buyer and seller respectively. Authorities below have ignored the fact that both these sections are exactly similar and if they are not convinced with the submissions made by the assessee and not happy with the valuation report submitted by the assessee, they could have atleast referred the matter to Department Valuation Officer, without considering the merits on record they have rejected the submissions of the assessee and even not bothered to refer the same to the Department Valuation Officer.
After considering the submissions of the assessee, we are of the opinion that there is substantial merit in this case that the land is situated in Green Zone and also vacant. As per the Table – 5 of Government Notification the plot of land is situated in Green Zone, the relevant FSI applicable is 0.10 whereas the stamp duty valuation was based on the FSI 1.00 which is clearly visible apparent on record. Just because assessee has not preferred to challenge the same before proper authorities, however, assessee has brought on record various issues and deficiencies on the land purchased by the assessee. Further, we note that the Registered Valuer has considered all the above facts, deficiencies on record and valued the same at Rs. 22,45,000/- against the sale consideration of Rs. ` 46,00,000/-, which justifies the claim made by the assessee. Ld. DRP has rejected the various submissions highlighted by the assessee and merely proceeded to sustain the addition made by the Assessing Officer based on the fact that stamp duty valuation is more than the sale consideration without going on actual merits of the case. Further, they have also ignored the fact that assessee is an NRI and all the remittances for making the payments of purchase consideration is from Dubai, the source of income is outside India and they have brought nothing on record to show that assessee has made any actual remittances from the sources in India and merely adopted to make the addition based on presumption and suspicion. The authorities could have made further investigation to determine the actual valuation of land by refereing to the Department Valuation Officer which they have failed. Since the facts on record shows that there is considerable merit in the submissions of the assessee. Accordingly, we are inclined to allow the grounds raised by the assessee on merit. Accordingly, appeal filed by the assessee is allowed and we direct the Assessing Officer to adopt the purchase consideration declared by the assessee.
Thus from the above decision, it is clear that section 56(2)(x) can not be applied ipso facto without considering the proper facts and without making any reference to DVO by the Department