ITAT confirms Addition under the head “Other Income” since Assessee understated Sale Value of Agricultural Land to avoid payment of Stamp Duty [Read Order]

While hearing the case of ACIT vs Sh. Mohinder Singh, ITAT Chandigarh confirmed addition since assessee has understated sale consideration of agricultural land to avoid payment of stamp duty.

While confirming the order of the first appellate authority, the bench comprising Judicial Member Sanjay Garg and Accountant Member Dr.B.R.R.Kumar clarified that such practices are defrauding the exchequer.

“He cannot take advantage of his own wrong and is estopped from contending that the amount received from the purchaser is a higher amount than was stated in the agreement. The incremental amount is assessable as ‘income from other sources’ and not as ‘agricultural income’,” the bench said.

However, the bench deleted penalty u/s 271(1)(c) finding that it cannot be levied for the said wrong claim.

The assessee in the instant case is an individual. During the year an amount of Rs. 2,46,30,000 was recovered from the assessee by the police related to a vehicle issue. On the basis of this information, Income Tax Authorities were asked to the assessee about the source of the said fund. In response, the assessee stated that the aforesaid cash was from the sale of his agricultural land.

However, it was noted by the authority that the total sale value mentioned in the sale deed was Rs. 42,37,500. Consequently, the assessee again asked about the remaining source and the assessee insisted that the entire amount was relating to the aforesaid sale of land. But the authority was not satisfied with his submission, hence, an authorization under section 132 A of the Income Tax Act was issued by the and cash amounting to Rs. 2,03,92,500 was requisitioned and seized under section 132A of the Income Tax Act 1961.

It was also noted that during the assessment proceedings the Assessing Officer (AO) observed that in the case of the assessee, the AO concluded that in the registered sale deeds the sale proceeds were mentioned at Rs. 42,37,500 and the AO treated the same as capital gain. The rest of amount of Rs 2,03,92,500 and the rest of amount of Rs 2,03,92,500 was considered as unexplained cash for which the assessee had failed to offer a satisfactory explanation and he accordingly added the same into the income of the assessee under section 69A of the Act.

On appeal, the CIT (A) has deleted the addition made by the AO. Aggrieved by the order of the authority revenue approached the tribunal on appeal.

After analyzing the material facts and circumstances deeply, the tribunal bench observed that while perusing the available documents regarding the sale transaction, it is clear that the actual sale consideration received was at Rs. 2,46,30,000 whereas the sales deed executed at a very low amount of Rs. 42,37,500 in order to avoid stamp duty payable to the government and the bench also upheld the addition made by the lower authority to the total income of the assessee.

Insofar the division bench declared that ‘nowadays it was a common practice to execute and register the sale deeds at lower/circle rates to avoid stamp duty in the name of the agricultural property in order to avoid tax liability’, the bench said.

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