ACIT, Hyderabad V. M/s. A.L.Sudershan Construction Co.Ltd, Secunderabad

ITA 1459/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53823 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: V SRINIVAS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Search and seizure; Question of law; Fair market value; Onus to prove
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A. NO. 1508/HYD/2010 (ASSESSMENT YEAR : 2007-08) M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. SECUNDERABAD PAN: AABCA7368K VS. THE ACIT CENTRAL CIRCLE-5 HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 1459/HYD/2010 (ASSESSMENT YEAR : 2007-08) THE ACIT CENTRAL CIRCLE-5 HYDERABAD VS. M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. SECUNDERABAD PAN: AABCA7368K APPELLANT RESPONDENT ASSESSEE BY: SHRI V. SRINIVAS REVENUE BY: SHRI K. MYTHILI RANI DATE OF HEARING: 0 9 .1 2 .2011 DATE OF PRONOUNCEMENT: 26.12.2011 O R D E R PER BENCH: THE APPEAL BY THE ASSESSEE AND THE CROSS APPEAL BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A )-VII, HYDERABAD DATED 30.9.2010 FOR THE ASSESSMENT YEAR 2 007-08. 2. THE ASSESSEE IS IN APPEAL BEFORE US ON CONFIRMING T HE DISALLOWANCE OF RS. 40 LAKHS BY THE CIT(A) IN RESPE CT OF CAPITAL GAIN FROM SALE OF LAND. I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 2 3. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE YEAR U NDER CONSIDERATION AN OPEN PLOT IN SY. NO. 33 (PART) ADM EASURING 847 SQ. YARDS SITUATED AT BOWENPALLY (V), SECUNDERABAD CANTONMENT HELD IN THE NAME OF THE ASSESSEE-COMPANY WAS SOLD A S UNDER: A) 400 SQ. YDS. SOLD TO SRI S. RAMACHANDRA REDDY VIDE SALE DEED DATED 6.5.2006 BEARING DOC. NO. 999/2006. RS. 15,40,000 B) 447 SQ. YDS. SOLD TO SRI S. MALLA REDDY VIDE SALE DEED DATED 6.5.2006 BEARING DOC. NO. 928/2006. RS. 17,67,000 ------------------ TOTAL RS. 33,07,000 ============ 3.1 THE ABOVE PROPERTY WAS ORIGINALLY PURCHASED IN THE YEAR 1990 ON THE NAME OF A.L. SUDERSHAN & CO., WHICH WAS THEN A PARTNERSHIP FIRM. THE FIRM WAS CONVERTED INTO THE ASSESSEE- COMPANY IN THE YEAR 1992. LATER THE PARTNERSHIP FI RM WAS DISSOLVED. AS COULD BE SEEN FROM THE ABOVE, THOUGH THE PROPERTY WAS REGISTERED IN FAVOUR OF THE PURCHASERS FOR RS. 33,07,000 THE ASSESSEE ADMITTED ACTUAL SALE CONSIDERATION OF RS. 60 LAKHS AND ACCORDINGLY COMPUTED CAPITAL GAINS AT RS. 58,96,200 IN THE RETURN. HOWEVER, THE ASSESSING OFFICER ADOPTED THE SALE CON SIDERATION ON THE BASIS OF THE COPY OF THE EARLIER SALE AGREEMENT DATED 14.11.2005 FOUND IN THE PREMISES OF THE COMPANY VID E SEIZED MATERIAL A/ALSCCL/PO/5. IN THIS REGARD IT IS SUBMI TTED THAT THE PROPERTY WAS ORIGINALLY AGREED TO BE SOLD TO ONE SR I GOWTHAMCHAND KATARIA FOR RS. 120 LAKHS AGAINST WHIC H RS. 40 LAKHS WAS RECEIVED AS ADVANCE. THE AGREEMENT WAS S UBSEQUENTLY I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 3 CANCELLED AND THE ENTIRE ADVANCE OF RS. 40 LAKHS HA S BEEN REFUNDED TO THE AGREEMENT HOLDER AS UNDER: A) REFUND BY BANKER'S CHEQUE DRAWN ON ICICI BANK IN FAVOUR OF SRI GOWTHAMCHAND. RS. 21,10,000 B) REFUND IN CASH RS. 18,90,000 ------------------ TOTAL RS. 40,00,000 ============ 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONFIRMATION LETTER FROM ICICI BANK WAS ALSO SUBMIT TED IN SUPPORT OF REFUND GIVEN TO SRI GOWTHAMCHAND BY WAY OF BANKE RS CHEQUE, ON CANCELLATION OF THE AGREEMENT. LATER THE PROPER TY WAS SOLD FOR RS. 60 LAKHS TO A NEW PARTY IN RESPECT OF WHICH CAP ITAL GAINS HAS BEEN ADMITTED. THE ASSESSING OFFICER, WITHOUT ANY EVIDENCE OR VALID GROUND, PRESUMED THE CONSIDERATION OF RS. 120 LAKHS AS AGAINST THE ADMITTED CONSIDERATION OF RS. 60 LAKHS AND MADE AN ADDITION OF RS. 40 LAKHS AT THE HANDS OF THE ASSESS EE-COMPANY AND RS. 20 LAKHS IN THE ASSESSMENT OF THE EX-DIRECTOR S RI A.L. UDAYSHANKER WHO HANDLED THE TRANSACTION. THE ASSES SMENT ORDER ONLY SPEAKS OF SOME DECISION TAKEN IN THE JOINT MEE TING AS THE ONLY REASON FOR THE ADDITION. THUS, IT IS APPARENT THAT THE ASSESSING OFFICER MERELY RELIED ON THE DECISION TAKEN IN THE JOINT MEETING WITHOUT CONSIDERING THE EVIDENCE ON RECORD AND WITH OUT PROPER APPLICATION OF MIND, WHICH IS GROSSLY ERRONEOUS AND BEYOND ONE'S COMPREHENSION. THE PROVISIONS OF SECTION 50C OF TH E IT ACT ARE ALSO NOT APPLICABLE SINCE THE ADMITTED SALE CONSIDE RATION OF RS. 60 LAKHS IS MUCH HIGHER THAN THE REGISTERED VALUE OF R S. 33.07 LAKHS. I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 4 THE ASSESSING OFFICER DID NOT AFFORD ANY OPPORTUNIT Y TO THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS ON THIS ISSUE AND UNILATERALLY MADE THE ADDITION. THE DEPARTMENT WAS CARRIED AWAY BY THE FIRST SALE AGREEMENT FOR RS. 120 LAKHS AND PROCEEDED TO ASSESS THE CAPITAL GAINS RELYING ON THE CANCELLE D AGREEMENT WITHOUT HAVING ANY LEGAL CREDIBILITY. THE ASSESSIN G OFFICER FAILED TO APPRECIATE THAT THE PROPERTY WAS SUBSEQUENTLY REGIS TERED FOR RS. 33,07,000 AGAINST WHICH THE ASSESSEE HAS ADMITTED R S. 60 LAKHS ON THE BASIS OF CONSIDERATION ACTUALLY RECEIVED BY THEM. THE ASSESSING OFFICER ALSO FAILED TO APPRECIATE THAT TH E REAL ESTATE MARKET, PARTICULARLY IN HYDERABAD, HAS BEEN VERY VO LATILE FOR THE PAST FIVE TO SIX YEARS. THOUGH THE PROPERTY WAS OR IGINALLY AGREED TO BE SOLD FOR RS. 120 LAKHS THE INTENDING PURCHASER F AILED TO HONOUR THE AGREEMENT AND THE ASSESSEE WAS CONSTRAINED TO F INALLY SELL THE PROPERTY FOR RS. 60 LAKHS. 5. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT THE ORIGINAL SALE AGREEMENT HAS BEEN CANCELLED AND A FRESH AGREEMENT WAS ENTERED INTO WITH ANOTHER PARTY AND T HE SAME HAS TO BE GIVEN DUE CONSIDERATION ON THE REASON THAT TH E AMOUNT RECEIVED ON ORIGINAL AGREEMENT WHICH WAS CANCELLED WAS REFUNDED TO THE CONCERNED PARTY AND THE DECISIONS OF THE LOW ER AUTHORITIES TO TREAT THE ORIGINAL AGREEMENT AS ACTED UPON IS ON LY ON SUSPICION AND WRONG ASSUMPTION OF FACTS. FOR THIS PURPOSE HE RELIED ON THE JUDGEMENT OF ACIT VS. HOTEL HARBOUR VIEW (184 TAXMA N 42) I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 5 (COCHIN). HE ALSO PLACED RELIANCE ON CIT VS. BHANW ARLAL MURWATIYA (2008) 215 CTR (RAJ.) 489, AND 294 ITR 49 (SC) WHEREIN THE SUPREME COURT CONFIRMED THE JUDGEMENT O F MADRAS HIGH COURT REPORTED IN 282 ITR 259 BY HOLDING AS FO LLOWS: ' HELD , AFFIRMING THE DECISION OF THE HIGH COURT, THAT TH E IMPLICATION OF CONTRADICTORY STATEMENTS MADE BY THE VENDOR OR WHETHER RELIANCE COULD BE PLACED ON THE LOOSE SH EETS RECOVERED IN THE COURSE OF THE RAID WERE ALL QUESTI ONS OF FACT, AND NO QUESTION OF LAW AROSE OUT OF THE ORDER OF TH E APPELLATE TRIBUNAL.' 6. THE LEARNED DR STRONGLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS A VALID AGR EEMENT ENTERED BY THE ASSESSEE DATED 14.11.2005 AND THIS AGREEMENT WAS FOUND DURING THE COURSE OF SEARCH ACTION CONDUCTED ON THE ASSESSEE U/S. 132 OF THE INCOME-TAX ACT, 1961 ON 30.8.2007 REFLEC TING THE SALE CONSIDERATION AT RS. 120 LAKHS. CONTRARY TO THIS, THE ASSESSEE HAS TAKEN A PLEA BEFORE US THAT THE SAID BOWENPALLY PRO PERTY WAS SOLD TO ONE MR. C. REDDY FOR A CONSIDERATION OF RS. 60 L AKHS. THE ASSESSEE WAS NOT ABLE TO PLACE BEFORE US ANY EVIDEN CE REGARDING THE CANCELLATION OF ORIGINAL AGREEMENT AND ALSO HE IS NOT ABLE TO EXPLAIN HOW THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH ONE MR. C. REDDY WITHOUT CANCELLING THE ORIGINAL AGREEMENT. THE ASSESSEE PLEADED BEFORE US THAT THE AMOUNT RECEIVED ON ENTER ING INTO THE FIRST SALE AGREEMENT HAS BEEN RETURNED BACK TO THE CONCERNED PARTY BUT WE ARE UNABLE TO APPRECIATE THIS ARGUMENT OF THE LEARNED I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 6 COUNSEL FOR THE ASSESSEE WITHOUT ANY EVIDENCE WITH REGARD TO CANCELLATION OF SALE AGREEMENT. BEING SO, THE APPA RENT IS TO BE CONSIDERED AS REAL UNLESS IT IS PROVED OTHERWISE. FOR THIS PURPOSE WE RELY ON THE JUDGEMENT OF SUPREME COURT IN THE CA SE OF K.P. VARGHESE VS. ITO (131 ITR 597) WHEREIN IT WAS HELD AS UNDER: 'ONE IT IS ESTABLISHED THAT THE CONSIDERATION ACTUA LLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT IS DECLA RED OR DISCLOSED BY HIM, THE REVENUE IS NOT REQUIRED TO SH OW WHAT IS THE PRECISE EXTENT OF THE UNDERSTATEMENT, OR, IN OTHER WORDS, WHAT IS THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE. THAT WOULD IN MOST CASES BE DIFFICULT, I F NOT IMPOSSIBLE, TO SHOW, AND, HENCE, SUB-S. (2) RELIEVE S THE REVENUE OF ALL BURDEN OF PROOF REGARDING THE EXTENT OF UNDERSTATEMENT OR CONCEALMENT. IT DOES NOT CREATE ANY FICTIONAL RECEIPT. IT DOES NOT DEEM AS RECEIPT SOM ETHING WHICH IS NOT IN FACT RECEIVED. IT MERELY PROVIDES A STATUTORY BEST JUDGEMENT ASSESSMENT OF THE CONSIDERATION ACTU ALLY RECEIVED BY THE ASSESSEE AND BRINGS TO TAX CAPITAL GAINS ON THE FOOTING THAT THE FAIR MARKET VALUE OF THE CAPIT AL ASSET REPRESENTS THE ACTUAL CONSIDERATION RECEIVED BY THE ASSESSEE AS AGAINST THE CONSIDERATION UNTRULY DECLARED OR DI SCLOSED BY HIM.' 8. HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE, WE ARE INCLINED TO UPHOLD THE ADDITIO N MADE BY THE LAST. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS D ISMISSED. 9. THE REVENUE RAISED THE GROUND BEFORE US IS THAT THE CIT(A) OUGHT NOT HAVE ALLOWED SET OFF OF CURRENT YEAR'S BU SINESS LOSS AGAINST THE INCOME UNDER THE HEAD CAPITAL GAIN. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE QUESTION WHETHER THE ASSESSEE IS ENTIT LED TO SET OFF OF BUSINESS LOSS AGAINST THE CAPITAL GAIN OR NOT HAS B EEN DEALT WITH IN SECTION 71(2) OF THE INCOME-TAX ACT, 1961 WHICH REA DS AS UNDER: I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 7 'SECTION 71: SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER: (1) ..... (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS', IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER T HE HEAD 'CAPITAL GAINS', SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD 'CAPITA L GAINS' (WHETHER RELATING TO SHORT-TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS).' 11. A BARE READING OF SECTION 71(2) OF THE ACT MAKES IT CLEAR THAT IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT O F THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS' IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UN DER THE HEAD 'CAPITAL GAINS', THE ASSESSEE WOULD BE ENTITLED TO SET OFF OF SUCH LOSS AGAINST HIS INCOME ASSESSABLE FOR THAT ASSESSM ENT YEAR UNDER ANY OTHER HEAD INCLUDING INCOME ASSESSABLE UNDER TH E HEAD 'CAPITAL GAINS'. IN VIEW OF THE ABOVE REFERRED STA TUTORY PROVISION, WE ARE OF THE OPINION THAT ON THE FACTS AND CIRCUMS TANCES OF THE CASE, THE ASSESSEE IS ENTITLED TO SET OFF OF CURREN T YEAR BUSINESS LOSS AGAINST ITS CAPITAL GAINS AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. 12. IN THE RESULT, BOTH ASSESSEE'S APPEAL AND REVENUE A PPEAL ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON _26 TH DECEMBER, 2011. SD/- SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (H.S. SIDHU JUDICIAL MEMBER HYDERABAD, DATED THE 26 TH DECEMBER, 2011 I.T.A. NOS. 1508 & 1459/HYD/2010 M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD. ================================= 8 COPY FORWARDED TO: 1. M/S. A.L. SUDERSHAN CONSTRUCTION CO. LTD., 7 - 3 - 720, 3 RD FLOOR, R.P. ROAD, SECUNDERABAD-500 003. 2. THE ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 5, HYDERABAD. 3. THE CIT(A) - VII , HYDERABAD . 4. THE CIT (CENTRAL) , HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD TPRAO