AO not justified in comparing market value of land for distress sale, which is less than that of the stamp duty value: ITAT deletes Addition [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) observed there is no rebuttal to the contention of the assessee that the market value of the land was less than the stamp duty value, thereby directing to delete the impugned additions.

During the assessment proceedings, the Assessing Officer noted that the assessee had allotted shares 1,06,74,500/- (face value of Rs.57,70,000/- + premium of Rs.49,04,500/-) to various shareholders. The Assessing Officer issued notices under Section 133(6) to the shareholders to verify the transactions. After receiving the reply from the shareholders, the Assessing Officer observed that the four shareholders were major shareholders who were the relatives of the directors of the assessee company.

The Assessing Officer further noted that on perusal of bank statement of the assessee and that of the aforesaid four shareholders, it revealed that the assessee had made a payment to the shareholders and the shareholders consequently from next day made the payment back to the assessee. On being asked to explain in this respect, the assessee explained that all the aforesaid four shareholders were existing shareholders of the assessee company and that they had earlier given loans to the assessee company, who were repaid by cheque to comply with the provisions of Section 269T of the Act.

Thereafter, the said shareholders paid back the amount through cheque towards share application money. That there was no doubt about the identity and creditworthiness of the shareholders. That the shareholders were close relatives of the Directors of the assessee company, who have duly confirmed the transactions. However, the Assessing Officer did not get satisfied with the above reply of the assessee and treated the entire amount of share application money of Rs.1,06,74,500/- as unexplained cash credits under Section 68 of the Income Tax Act.

After hearing both the parties, the tribunal held that Since, in this case, the assessee, right from the very beginning, had claimed that the market value of the land was less and that there was no taker of the land and the land was sold as a distress sale, the assessee had duly requested to the Assessing Officer to appoint a departmental valuation officer, which request was not acceded to by the Assessing Officer and there is no rebuttal to the contention of the assessee that the market value of the land was less than the stamp duty value.

The two member bench consisting of Rajesh Kumar (Accountant member) and Sanjay Garg (Judicial member) held that they do not find justification on the part of the lower authorities in making/confirming the impugned additions and the same were accordingly ordered to be deleted. Thus the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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