Section 68 to 69B applicable only if assessee is required to maintain books of accounts

Provisions of section 68 to 69B applicable only if assessee is required to maintain books of accounts under provisions of section 44AA of the Income Tax Act, 1961.

In a recent judgment, the ITAT Jabalpur has held that provisions of section 68 to 69B of the Income Tax Act, 1961 applicable only where assessee is required to maintain the books of accounts as per the provisions of section 44AA of the Act.

ABCAUS Case Law Citation:
ABCAUS 4122 (2024) (06) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Centre (NFAC) confirming the addition made u/s 68 of the Income Tax Act, 1961 (the Act).

The AO received the information that assessee had purchased one flat and out of her undisclosed income, had paid cash amount over and above the sale price to the seller. In addition to this the assessee had not disclosed amount paid towards stamp duty on property.

In view of above, the case of the assessee was re-opened and a notice u/s 148 of the Act was issued. In response to the notice assessee again filed return of income declaring same income as in original return. The assessee furnished her explanation in response to notices issued u/s 142(1) of the Act and statement of the assessee was also recorded u/s 131 of the Act.

But the AO was not satisfied with the above statement and explanations of the assessee and finally assessed the case by making addition u/s 69 of the Act for alleged cash payment and stamp duty.

The Tribunal noted that the assessee had submitted copy of purchase deed wherein the value of property was duly accepted by the State Stamp Authorities.

The Tribunal further observed the allegation made against the assessee is being covered by the provisions of section 50C (In case of the assessee it will be section 43CA, as the seller was a builder and property under consideration was assuming to be his inventory and not a capital asset) r.w.s. 56(2)(vii) of the Act.

It was observed that both section 43C and 56(2)(vii) become operative only where the sale consideration is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty.

The Tribunal observed that in such type of transactions of property, the AO is duty bound to apply provisions of section 43CA/50C r.w.s. 56(2)(vii) of the Act. However, there was no finding against the assessee that transaction entered into violated section 43CA at the end of seller and section 56(2)(vii) of the Act at the end of buyer, i.e. the assessee under consideration.

The Tribunal opined that the paramount evidence against the assessee would have been the violation of section 43CA and 56(2)(vii) of the Act. It was also not demonstrated by the authorities below that what action they have taken against the seller. As far as the difference between the value of agreement vis-à-vis registry value, there was no anomaly in the same.

The Tribunal opined that provisions of section 68 to 69B of the Act applicable only in those cases where the assessee is duty bound to maintain the books of accounts as per the provisions of section 44AA of the Act. Whereas in the instant case the assessee was a salaried employee and was not liable to maintain the books of accounts as prescribed u/s. 44AA of the Act. Secondly the provisions of section 68 to 69B of the Act are deeming provisions and can be applied only when there is some strong glitching evidence found against the assessee. like in an action u/s. 132(Search and seizure) or 133A (Power of survey) of the Act, revenue discovered any evidence, which the assessee was not able to explain.

The Tribunal held that AO and the CIT (A) applied wrong provisions of the Act. Therefore, the orders impugned were based on wrong application of law and the assessee’s contentions were found to be bona fide.

Accordingly, the Tribunal directed AO to delete the addition.

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