Subramanian Land Developers, Coimbatore V. ITO, Coimbatore

ITA 172/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96650 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: JHARNA B HARILAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Opportunity of being heard
• Section: 143(3); 50C; 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.172/MDS/2013 ( / ASSESSMENT YEAR: 2009-10) M/S. SUBRAMANIAN LAND DEVELOPMENTS, 10,SUBBU PLAZA, 3 RD FLOOR , 82-A, STATE BANK ROAD, COIMBATORE - 641 018. VS THE INCOME TAX OFFICER, WARD-II(3), COIMBATORE. PAN: AAEFS6997G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS. JHARNA B.HARILAL, FCA /RESPONDENT BY : DR. B.NISCHAL, JCIT /DATE OF HEARING : 30 TH NOVEMBER, 2015 /DATE OF PRONOUNCEMENT : 30 TH DECEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COIMBAT ORE DATED 30.11.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONF IRMING THE ORDER PASSED BY THE ASSESSING OFFICER AS NOTICE UNDER SECTION 143(2) WAS NOT SERVED PROPERLY WITHIN THE T IME AND ASSESSMENT ORDER BASED ON SUCH NOTICE IS NOT VALID . AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS 2 ITA NO.172/MDS/2013 GROUND OF APPEAL IS NOT PRESSED. THUS, THIS GROUND IS DISMISSED AS NOT PRESSED. 3. THE NEXT GROUND OF APPEAL OF THE ASSESSEE IS TH AT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF ` 1,17,60,850/- AS UNDISCLOSED INCOME FROM REAL ESTATE BUSINESS. 4. BRIEF FACTS ARE THAT ASSESSEE FIRM ENGAGED IN RE AL ESTATE BUSINESS FILED RETURN OF INCOME ON 30.07.2009 ADMI TTING INCOME OF ` 48,75,714/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 30.12.2011 DETE RMINING THE INCOME OF THE ASSESSEE AT ` 1,66,36,564/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MA DE ADDITION OF ` 1,17,60,850/- AS UNDISCLOSED INCOME FROM REAL ESTATE BUSINESS. 5. THERE WAS A SURVEY CARRIED ON UNDER SECTION 133A OF THE ACT ON 12.08.2008. IN THE COURSE OF SURVEY, IT WAS NOTICED THAT OUT OF 32 SITES SOLD BY THE ASSESSEE, 11 SITES WERE SOLD TO OUTSIDE PARTIES AND OUT OF BALANCE 21 SITES, 11 3 ITA NO.172/MDS/2013 SITES WERE SOLD TO PARTNERS OF THE ASSESSEE FIRM AN D BALANCE 10 SITES WERE SOLD TO RELATIVES OF PARTNERS. IT WAS FOUND THAT SITES SOLD TO PARTNERS AND THEIR RELATIVES WERE AT NOMINAL RATES AS COMPARED TO SITES SOLD OUTSIDE PARTIES. TH US, THE ASSESSING OFFICER CONCLUDED THAT DIFFERENCE OF GUID ELINE VALUE AND SALE CONSIDERATION OF 22 PLOTS SOLD TO PARTNER S AND THEIR CLOSE RELATIVES AMOUNTING TO ` 1,17,60,850/- HAS TO BE TREATED AS UNDISCLOSED INCOME FROM REAL ESTATE BUSI NESS AND BROUGHT TO TAX ACCORDINGLY. ON APPEAL, THE COMMIS SIONER OF INCOME TAX (APPEALS) SUSTAINED ADDITION AGREEING W ITH THE CONCLUSION OF THE ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 6. COUNSEL FOR THE ASSESSEE SUBMITS THAT LOWER AUTHORITIES ARE NOT JUSTIFIED IN APPLYING THE PROV ISIONS OF SECTION 50C AND ADOPTING THE GUIDELINE VALUE AS M ARKET VALUE AND COMPARING SUCH VALUE WITH THE ACTUAL SALE CONSIDERATION AND BRINGING THE DIFFERENCE AMOUNT T O TAX AS UNDISCLOSED INCOME FROM REAL ESTATE BUSINESS. COUNS EL FOR THE ASSESSEE SUBMITS THAT PROVISIONS OF SECTION 50C APPLY TO CAPITAL ASSET FOR THE PURPOSE OF SECTION 48 BUT THE SAME CANNOT BE APPLIED IN THIS CASE AS THE PLOTS ARE BUS INESS 4 ITA NO.172/MDS/2013 ASSETS AND INCOME ARISING ON SALE OF PLOTS IS BUSIN ESS INCOME. COUNSEL PLACES RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. THIRUVENGADAM INVESTMENTS (P)LTD. (320 ITR 345) AND THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CA SE OF ITO VS. INDERLOK INFRA-AGRO PVT. LTD. IN ITA NO.3719/MU M/2012 DATED 19.06.2013. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE COULD NOT SELL THE PLOTS TO OUTSI DERS AS NOBODY IS WILLING TO PURCHASE THE ABOVE SITES FROM 1989, SO AMONG THE PARTNERS IN ORDER TO SETTLE THIS VENTURE, THESE SITES HAVE BEEN TAKEN AWAY BY THEM AT REASONABLE PRICE AN D THIS AMOUNT WAS SHOWN AS BUSINESS INCOME. THE ABOVE SITE S ARE NOT AT ALL GOOD SITES AND ALL THE SITES ARE NOT SQU ARE OR RECTANGLE AND ARE NOT AS PER VASTHU . IT IS ALSO SU BMITTED THAT SOME SITES ARE NEAR POND AND ROAD ACCESSIBILITY IS NOT AS PER VASTHU, BECAUSE OF THIS SITUATION, ASSESSEE COULD N OT ABLE TO MARKET / SELL THE PLOTS TO OUTSIDERS. IN SUCH CIRCU MSTANCES, IT WAS INEVITABLE TO TAKE THE UNSOLD SITES BY THE PART NERS. COUNSEL THEREFORE SUBMITS THAT IT WAS PLEADED BEFOR E THE LOWER AUTHORITIES TO ADOPT THE PRICE QUOTED BY THEM FOR ARRIVING AT THE TAXABLE INCOME. COUNSEL SUBMITS THA T BRUSHING 5 ITA NO.172/MDS/2013 ASIDE ALL THESE SUBMISSIONS, THE LOWER AUTHORITIES ADOPTED 50C AND BROUGHT TO TAX THE DIFFERENCE AMOUNT BETWEE N THE GUIDELINE VALUE AND SALE PRICE ADOPTED BY THE ASSES SEE AS UNDISCLOSED INCOME FROM REAL ESTATE BUSINESS WHICH IS NOT AT ALL JUSTIFIED. 7. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF LOWER AUTHORITIES. DEPARTMENTAL REPRESENTATIVE FUR THER SUBMITS THAT THERE IS NO VALID REASON WHY THE ASSES SEE SOLD THE PLOTS TO PARTNERS AND THEIR RELATIVES FOR SUCH A LOW RATES. IN THE CIRCUMSTANCES, DEPARTMENTAL REPRESENTATIVE S UBMITS THAT LOWER AUTHORITIES ARE JUSTIFIED IN ADOPTING TH E GUIDELINE VALUE AS MARKET VALUE BY INVOKING PROVISIONS OF SEC TION 50C OF THE ACT. 8. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT BROUGHT TO TAX THE DIFFERENCE OF GUIDELINE VALUE AN D SALE CONSIDERATION FOR 22 PLOTS SOLD TO PARTNERS AND THE IR CLOSE RELATIVES AT ` 1,17,60,850/- AS UNDISCLOSED INCOME FROM REAL ESTATE BUSINESS STATING THAT ASSESSEE SOLD PLOTS TO PARTNERS AND THEIR RELATIVES FOR NOMINAL AMOUNT AS COMPARED TO THE 6 ITA NO.172/MDS/2013 RATE AND PLOTS SOLD TO OUTSIDERS. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE MAKIN G SUCH ADDITION, IT APPEARS THAT THE ASSESSING OFFICER HAS TAKEN THE GUIDELINE VALUE AS PER SECTION 50C OF THE ACT FOR BRINGING THE DIFFERENCE AMOUNT BETWEEN THE GUIDELINE VALUE AND M ARKET VALUE ADOPTED BY THE ASSESSEE TO TAX. 9. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. THIRUVENGADAM INVESTMENTS PVT. LTD (SUPRA) HELD AS UNDER:- 6. IT IS NOT IN DISPUTE THAT THE ACTIVITY OF THE ASSES SEE IS PROPERTY PROMOTER. IT CAN BE GATHERED FROM THE FACT S AVAILABLE ON RECORD THAT THE ASSESSEE HAS OBTAINED POWER OF ATTORNEY FROM THE OWNER OF THE PROPERTY AND PAID A SUM OF RS. 3,19,49,496 TO THE OWNER OF THE PROPERTY AND ALSO INCURRED EXPENDITURE IN A SUM OF RS. 2,55,87,815 IN CONNECTION WITH THE SAID PROPERTY FOR THE ASST. YR. 2004-05 AND THE BALANCE OF RS. 63,61,681 DURING THE ASST. Y R. 2004-05 (SIC). THE AMOUNTS SO PAID WERE SHOWN UNDER THE HEAD 'LOANS AND ADVANCES' IN THE BALANCE SHEET AND NOT UNDER THE HEAD 'FIXED ASSETS'. LATER ON, THE PROPER TY WAS SOLD TO MIS MRF LTD. FOR A SUM OF RS. 5 CRORES BY A DEED OF CONVEYANCE, IN WHICH, THE ASSESSEE REPRESENTED T HE OWNER IN THE CAPACITY OF THE POWER OF ATTORNEY HOLD ER. THE AO, IN ORDER TO DETERMINE THE VALUE OF THE PROPERTY , HAS INVOKED THE PROVISIONS OF SEC,50C OF THE ACT AND TH EREBY BROUGHT THE ENTIRE AMOUNT TO RS. 6,94,45,920. THE APPELLATE AUTHORITY HAS DELETED THAT PORTION OF THE ORDER OF THE AO HAVING THE SALE CONSIDERATION TO RS. 6,94,45 ,920 AS AGAINST RS. 5 CRORES-THE APPARENT SALE CONSIDERA TION SHOWN IN THE SALE DEED. THE TRIBUNAL ALSO, TAKING N OTE OF THE FACTS STATED ABOVE, HAS COME TO THE CONCLUSION THAT INVOCATION OF SEC.50C OF THE ACT IS NOT WARRANTED AS THE PROPERTY WAS NEVER HELD BY THE ASSESSEE AS CAPITAL ASSET AND AS PER THE ACCOUNTS ALSO, THE AMOUNT GIVEN TO T HE OWNER OF THE PROPERTY HAS BEEN SHOWN AS LOANS AND ADVANCES THEREBY THE PROPERTY HAS BEEN TREATED AS BUSINESS ASSET AND NOT AS CAPITAL ASSET. THE INVOCA TION OF SEC.50C OF THE ACT AS CAN BE SEEN FROM THE PROVISIONS OF 7 ITA NO.172/MDS/2013 THE ACT CAN BE MADE IN ORDER TO FIND OUT THE TRUE V ALUE OF THE CAPITAL ASSET. IN THE VERY FACTS AND CIRCUMSTAN CES OF THE CASE, THE PROPERTY IN THE HANDS OF THE ASSESSEE WAS TREATED AS BUSINESS ASSET AND NOT AS CAPITAL ASSET, THERE IS NO QUESTION OF INVOKING THE PROVISIONS OF SEC.5 0C OF THE ACT, WHICH IS, AS ALREADY STATED, PERTAINING TO DET ERMINING THE FULL VALUE OF THE CAPITAL ASSET. THE TRIBUNAL H AS TAKEN IN AID THE OBSERVATION OF THE MUMBAI BENCH IN THE C ASE OF INDERLOK HOTELS (P) LTD. VS. ITO (2009) 122 TTJ (MU MBAI) 145 : (2009) 20 DTR (MUMBAI)(TRIB) 148, WHICH, IN O UR CONSIDERED VIEW, IS IN CONSONANCE WITH THE STATUTOR Y PROVISIONS AND IS WELL IN ACCORDANCE WITH LAW. 10. THE JURISDICTIONAL HIGH COURT WHILE HOLDING SO TAKEN NOTE OF THE FACT THAT THE TRIBUNAL HAS TAKEN IN AID THE OBSERVATION OF THE MUMBAI BENCH IN THE CASE OF IND ERLOK HOTELS PVT.LTD. WHICH IS INCONSONANCE WITH THE STAT UTORY PROVISIONS AND IS WELL IN ACCORDANCE WITH LAW. IN THE CASE OF ITO VS. INDERLOK INFRA-AGRO PVT.LTD. (SUPRA), THE T RIBUNAL HELD THAT PROVISIONS OF SECTION 50C ARE NOT APPLICABLE T O CASES WHERE THE INCOME IS COMPUTED UNDER THE HEAD PROFIT S AND GAINS UNDER BUSINESS OR PROFESSION. ADMITTEDLY, I N THIS CASE THE PLOTS IN QUESTION SOLD BY THE ASSESSEE ARE STOC K-IN-TRADE AND NOT CAPITAL ASSETS OF THE ASSESSEE. IN VIEW OF THE ABOVE DECISION OF THE JURISDICTIONAL HIGH COURT, THE PROV ISIONS OF SECTION 50C HAVE NO APPLICATION TO THE ASSESSEE SIN CE THE ASSESSEE IS INTO THE BUSINESS OF PLOTS AND SUCH PLO TS ARE STOCK-IN-TRADE AND NOT CAPITAL ASSET. THUS, THE ASS ESSING 8 ITA NO.172/MDS/2013 OFFICER CANNOT ADOPT GUIDELINE VALUE AND COMPARE SU CH VALUE AGAINST SALE PRICE FOR BRINGING THE SAID DIFFERENCE TO TAX AS UNDISCLOSED INCOME OF THE ASSESSEE. AT THE SAME TI ME, WE FIND FROM THE ORDER OF THE COMMISSIONER OF INCOME T AX (APPEALS) THAT RATES AT WHICH THE PLOTS WERE SOLD T O OUTSIDERS AND THE RATES AT WHICH THE PLOTS SOLD TO PARTNERS A ND THEIR RELATIVES STOOD AT ` 6,00,000/- AND ` 82,638/- RESPECTIVELY FOR THE PLOT SIZE OF 2400 SQ.YARDS. WE ALSO SEE THAT T HE LOWER AUTHORITIES HAVE NOT AT ALL EXAMINED THE ASPECT WH Y THE ASSESSEE SOLD THE PLOTS FOR SUCH LOW RATES FOR THE PARTNERS AND THEIR RELATIVES WHEN COMPARED TO THE OUTSIDERS, IN SPITE OF THE SUBMISSIONS OF THE ASSESSEE THAT PLOTS COULD NO T BE SOLD DUE TO VARIOUS DEFECTS, DISADVANTAGE OF LOCATION, S IZE OF PLOTS, VASTHU ETC. THE ASSESSING OFFICER HAS NOT APPLIED H IS MIND TO THE FACTS OF THE CASE PROPERLY AND HE HAS NOT ASCE RTAINED THE FACTS, NOT EXAMINED THOROUGHLY THE ISSUE BEFORE HI M. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT TH IS MATTER SHOULD GO BACK TO THE ASSESSING OFFICER FOR THOROUG H EXAMINATION AND THE ASSESSING OFFICER SHOULD FIND O UT THE REAL MARKET VALUE OF THE PLOTS IN VIEW OF THE SUBMI SSIONS OF THE ASSESSEE THAT THESE PLOTS ARE DEFECTIVE, NOT AC CORDING TO 9 ITA NO.172/MDS/2013 THE VASTHU ETC. THUS, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDA NCE WITH LAW, AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH DECEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2.RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .