Due Date for Income Tax Compliance (July 2024)

Head Note:

In case of Weldon Polymers (P.) Ltd. (‘Assessee’), the Assessing Officer (‘AO’/ ‘Tax Officer’) appealed against the order of CIT(Appeal) before the Hon’ble ITAT. This assessment was for the AY 2017-18 where the Tax Officer had questioned the adequacy of the Valuation Report submitted by the Assessee, that was issued by an Independent Chartered Accountant and not by a Merchant Banker.

Facts in Brief:

1. The Assessee had allotted 5% Non-Cumulative Redeemable Preference Shares (‘NCRPS’) to a Company @ Rs. 20 per share, which included a share premium of Rs. 10 per share.

2. The Tax officer argued that the Assessee failed to furnish a Valuation Report from a Merchant Banker justifying the rationale behind the price calculated for issuing NCRPS (as per Rule 11UA) and accordingly, made addition to the income of the Assessee.

3. However, the CIT(A) deleted the addition made by the AO.

Issue Involved:

The primary issue was that the Tax Officer rebutted the Valuation Report issued by an Independent CA rather than a Merchant Banker for supporting the price at which NCRPS were issued.

Hon’ble Tribunal Decision:

The ITAT gave the status of ‘statutory evidence’ to the Valuation Report by an Independent Chartered Accountant, while putting an onus on the AO to demonstrate with evidences any fundamental errors/ apparent mistakes in the Report, where the AO wishes to rebut the said Report.

Further, the ITAT held that the Valuation of Shares is a technical and complex issue for which the AO has limited authority to tinker the valuation of methodology applied. Resting an additional onus of proof on the Assessee, apart from tendering the valuation report to substantiate the report also, cannot be sustained.

2.[ITAT Raipur]: Difference between Stamp Duty Value (SDV) and Purchase Consideration of an immovable property to not attract rigours of Unexplained Investments u/s 69

Head Note:

In the case of Mr. Ravi Shankar Gupta, who obtained a title of an immovable property (after expiry of his father) that was originally purchased by his father in 1991 for a consideration of Rs. 1.05 lakhs. The Assessee had paid registration charges of Rs. 89,218 and stamp duty of Rs. 9.47 lakhs at the time of registration in 2017. Here, the Assessing Officer (‘AO’) observed that the SDV of the said property was Rs. 1.11 crores. Accordingly, the AO made an addition to the income of the Assessee under section 56(2)(vii)(b) being the difference between purchase value & DSV, also holding that the Assessee failed to prove the source of deficit investment of Rs. 1.10 crores & levied section 69 for this alleged unexplained investment.

Facts in Brief:

As per an agreement originally executed between Assessee’s father & a builder, to purchase the property in 1991 for Rs. 92,000 (including development charges), the consideration of that property was paid through cheques/ drafts. After the Assessee’s father’s death in 2017, the property was registered in the Assessee’s name and in the year 2017 the Assessee paid stamp duty value & registration charges.
The AO had made addition to the income of the Assessee without giving due regard to the fact that Date of Agreement was in 1991 (when purchase consideration was paid) and Date of Registration was in 2017. However, the Commissioner (Appeals) deleted the said addition.

Issue Involved:

The AO taxed the difference between SDV value of the property as prevailing 2017 and the purchase price paid for that property in 1991. Further, the AO also declared the said difference as an Unexplained Investments & levied rigorous provisions of section 69.

Hon’ble ITAT decision:

The Hon’ble ITAT upheld the decision of the CIT(A). The CIT(A) stated that where the ‘Date of Agreement’ fixing the consideration and the ‘Date of Registration’ of the property are not the same, the Stamp Duty Value on the date of agreement shall be taken for the purpose of application of Section 56(2)(vii)(b), subject to the condition that the whole or a part of the consideration has been made in a mode other than cash on or before the date of agreement for the transfer of immovable property.
Further, the CIT(A) also held that this transaction will not be treated as unexplained investments because the difference between Stamp Value of the property and the actual consideration is only a deemed/notional income.
The Hon’ble ITAT upheld the decision of the CIT(A) on both the grounds:
1. For taxing the difference value between SDV of property & purchase price paid, in case when a property is purchased for a value less than SDV, the date of the agreement to be taken into account (subject to, if the consideration was paid by any mode other than cash on the date of agreement.)

2. Rigours of Section 69 will not be attracted in a case of an income which is taxed under a deeming fiction of the provisions of the Income Tax Act. In other words, tThe difference between the stamp duty value and the purchase consideration is deemed/notional income, not unexplained investment under section 69.