Dilip Sambhaji Shirodkar vs. ITO ITAT “D” Bench, Mumbai Before P.M.Jagtap (A.M.) and Dr S.T.M. Pavalan (J. M.) ITA No.8899/Mum/2010 Assessment Year: 2006-07. Decided on 12.06.2013 Counsel for Assessee/Revenue: Jitnedra Jain & Sachin Romani / Rajarshi Dwivedy

Facts:
The assessee was an individual engaged in the occupation of goldsmith. In his return of income he had declared a total income at Rs. 0.80 lakh. The AO, in assessment made u/s.143(3) found that during the year under consideration the assessee had purchased a property worth Rs. 50.35 lakh. The AO treated this impugned investment as unexplained and made an addition of Rs.50.35 lakh u/s.69. On appeal, the CIT(A) confirmed the action of the AO.

Before the tribunal, the assessee submitted that he had acquired tenancy right as per Agreement dated 09-04-2001 for a sum of Rs. 4 lakh. Thereafter, pursuant to the agreement dated 07-10-2005, the assessee was allotted a flat in another building in lieu of surrender of his tenancy right. The value of the flat allotted in lieu of surrender of tenancy right was Rs. 50.35 lakh as per the valuation done by the Stamp Duty Authorities, while registering the agreement. He further submitted that the consideration on the surrender of the tenancy rights, equal to the value of the new flat, stood fully invested in a residential flat, the Long Term Capital Gain arising on the said transaction was not chargeable to tax u/s.54F. The contention of the revenue was that the assessee had not been able to prove that he had received the flat by virtue of the surrender of tenancy rights.

Held:
The tribunal agreed with the assessee that the agreement dated 07-10-2005 clearly indicated that the new flat was acquired by the assessee in lieu of surrender of his tenancy right in the old building. The perusal of the agreement dated 09-04-2001, also indicated that the old tenants transferred the tenancy rights in respect of the said property to the assessee for a consideration of Rs. 4 lakh. Secondly, as regards the reasoning of the CIT(A) that the acquisition value of Rs. 4 lakh had not been paid by the assessee, the tribunal found merit in the contention of the assessee that the same had been by way of constructive payment made by the builder on behalf of the assessee, which according to it was not a new practice of the developer in business of construction industry. Thirdly, regarding the finding of the lower authorities as to the difference in values between the consideration for relinquishment of rights by the old tenant (Rs.4 lakh) and the market value of the new flat (more than Rs.50 lakh), the tribunal opined that it was beyond the purview of the lower authorities to suspect a transaction solely on the ground of adequacy/inadequacy of consideration in the absence of any other corroborating evidence and thereby making any adverse inferences. Further, the value as adopted by AO was based on the valuation determined by the stamp duty authorities while registering the agreement dated 07-10-2005. Therefore, it held that mere suspicion without evidence on record could not be the basis for making an addition to income u/s. 69 and hence, the addition made was deleted.