The provisions of Section 50C of the Income Tax Act do not apply to buyers of property
Fact and Issue of the case
The facts in brief are the Assessee firm is a Limited Liability Partnership firm engaged in the business of Real Estate Developers and other related activities. The Assessee firm submitted its return of income at an income of Rs.8880/- by filing its return of income electronically on 28.09.2015. The Case was selected for scrutiny assessment. The necessary details and papers were submitted before the Assessing Officer from time to time. The background of issue is that Mr. Bimal Sareen & Mrs. Sony Sareen entered into partnership agreement and formed Sharan Svadha LLP vide agreement dated 25.09.2014. Subsequently M/s Greenpower Marketing & Advertising Pvt. Ltd, was admitted into to the partnership as third partner vide agreement dated 10.10.2014. The assessing Officer passed the assessment order at an income of Rs.7,84,08,880/- after adding a sum of Rs.7,84,00,000/- to the income of the assessee firm being the difference between the purchase price of the property purchased by the assessee firm during the year(Rs.l2,34,00,000-Rs.4,50,00,000) on the basis of value adopted by the Registrar of Documents for stamp duty purpose over the actual amount paid by the assessee firm for purchase of property. The assessee firm made investment by purchase of property in N- 94, Panchsheel Park, New Delhi for Rs.4,50,00,000/- during the year, which was duly reflected in the sale deed submitted before the Assessing Officer and duly recorded in the books of the assessee firm. The assessee firm paid stamp duty of Rs.72,05,000/- on the property value arrived by the Registrar of Documents for stamp duty value purpose. The details of property purchased and reasons for difference in value adopted by Registrar of documents and actual amount paid for purchase of property were duly furnished to the assessing officer vide our letters dated 22.11.2017, 18.12.2017, 21.12.2017 and 24.12.2017. The Assessing Officer made the addition ignoring the submissions made by the assesse firm and passed the assessment order. Aggrieved by the Assessment Order passed by the Assessing Officer, the assesse firm filed appeal before the Commissioner of Income Tax (Appeals)-10, New Delhi who has deleted the addition.
Observation of the Court
Now giving thoughtful consideration to the matter on record, it can be observed that the assessee is purchaser of the property. Ld. AO had show caused assessee as to why fair market value of the property should not be considered contrary to property valued in valuation report without citing section under which such addition can be made. Not only this when assessee in its response referred to Section 56(2)(vii) the Ld. AO has even observed that the assessee has referred to said section suo moto whereas no notice / show cause / summons/ non-sheets has any reference of provisions of Section 56(2)(vii) of the Act.
Then relevant Section 50C cannot be invoked as the said section is applicable in the case of seller of the property only while the appellant is a buyer. Section 56(2)(vii)(a) and Section 56(2)(vii)(b) of the Act are also not applicable in case of partnership firm or LLP and the assessee is a LLP. The Section 56(2)(x) which may be applicable in case of partnership firm or LLP was introduced with effect from A.Y. 2018-19 while the present case is with regard to A.Y. 2015-16. Thus, in the absence of any statutory presumption the Ld. AO was under obligation to establish by definite evidence that purchaser had made more payment then stated in sale deed. Circumstances of distress sale are on record and there was no attempt of ld. AO to discredit the same. The CIT(A) has rightly taken all these aspects into consideration while allowing the relief of deletion and no interference is required.
The tribunal ruled in favour of the assessee and dismissed the appeal filed by the department and ruled out that Section 50C cannot be invoked as the said section is applicable in the case of seller of the property only and not in case of buyer of the propertyITO-Vs-Sharan-Svadha-LLP-ITAT-Delhi