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TMI Blog2010 (3) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... in the body of order as to how this decision is applicable in our case. The said decision is not discussed in their respective orders. 2. The learned C.I.T. (Appeals) has erred in confirming 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 after 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 written submission as per 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 pages of document and confirmed the addition, might be trough over sight and as such valuation of bungalows should be reduced to the valuation adopted 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, facts ,in brief, as per relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Dhirubhai L. Narola (supra) , the assessee was deprived of an opportunity to defend itself against the proposed addition. In the light of these 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 earlier years was also restricted to around 20% of the gross agricultural receipts is to be accepted because of the reason that the agricultural activity is confined only to the 4 months of the monsoon season, then the AR ought to have also explained how the agricultural income had jumped so drastically from Rs.90,870 in the year relevant to AY 02-03 and Rs.95,970 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 restrict the expenditure incurred but would also restrict the gross agricultural receipts. This has not been explained, even though the family may have been expert farmers. Further, no details of, the gross receipt, nor of the expenditure incurred was furnished before the AO. Therefore, in my opinion the ratio of the case of Dhirubhai L. Narola (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. We are born farmers. Our family consists of members who themselves do the work of agriculture as done by labourer. This saves the expenses of labour charges. We also preserve seeds and seeds of previous years' crops put in the use for current years' agriculture operation, which saves considerable amount which is incurred for obtaining seeds. There also a considerable savings on fertilizer as we use gobar as fertilizer, which costs us nil as it is product of our cows. We also use manpower and animal power to cultivate the land which is cheaper than mechanized farming (noted in Namuna 7/12 as Gharkhed Land). We are aware of economic farming as we have established method of farming which 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 land admeasuring vinghas i.e., it is a big holding of land. So expenses are also divided on such bulk quantity land. Certain 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 reduction." 6. The written submissions of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 objected to the demand raised by the Stamp Duty Valuation Officer prior to the show-cause notice issued by the AO, the AO added an amount of Rs.2,39,542 x 2 = 4,79,084 by way of undisclosed investment of the assessee u/s Sec.69 of the IT Act. 7 On appeal, the assessee contended that the value of each bunglow was finally determined by the Stamp duty valuation 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 finally determined by the valuation cell. Accordingly, the assessee pleaded that the addition of Rs.4,79,084 may be reduced to Rs.2,28,904 (l,14,452x 2). However, the ld. CIT(A) upheld the addition made by the AO holding as under: "10. I have carefully considered the findings and conclusions of the AO and the submissions of the AR. To begin with, I find that the order of the valuation ceil which the AR has claimed to have received and; which allegedly had reduced the final price of each bunglow to Rs.6,06,451, and the copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions 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 during the year:- Sr. No. Bunglow No. Address Purchase Price Date on which Sale Deed were executed Details of Registration 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. 250. Bunglow No. Estimation made by the Stamp duty Valuation Officer in Notice Document Price Difference between Estimation of Stamp Duty Officer and 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stain the stand of the CIT(Appeals), there being no ambiguity in the section 50-C of the Act, we are of the opinion that these provisions are not applicable to be purchaser." 9.1 Another co-ordinate Bench of the ITAT in their 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 difference between apparent consideration recorded in the transfer deed and valuation 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 thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated accordingly. Legal fiction cannot be extended any further and has to be limited 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by 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 expenditure 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 sale consideration as compared to the valuation made by Stamp Valuation Authorities for the purposes of levying stamp duty then it was thought necessary to introduce section 50C for substituting apparent sale consideration by valuation done by Stamp Valuation Authorities. This fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to tax th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 6 STC 446, it is well settled that the legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond that legitimate field. Provisions of sec. 50C falling under the Chapter 'Capital Gains' were enacted with a specific purpose of determining the full value of consideration in case of transfer of immovable property for the purpose of sec. 48 of the Act. In the absence of any evidence that the assessee paid consideration higher than stated in the purchase deed , provisions 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 material to support the addition. In our opinion, rates adopted by Stamp Valuation Authority cannot be taken, by itself, as the price, for which the property was purchased. In view thereof and in the light of aforesaid decisions of the ITAT and of the Hon'ble Rajasthan High Court, the findings of the ld. Commissioner of Income Tax (Appeals) are reversed and the AO is directed to delete the addition . Therefore, ground no. 2 in the appeal is all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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