Mr. Satish Arora, Delhi V. ITO, New Delhi

ITA 1958/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6753 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 18-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N J BANSAL
• Assessee Lawyers: S K GUPTA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Corroborative evidences
• Section: 43CA; 50C; 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 1958/DEL/2015 ASSTT. YR: 2010-11 SH. SATISH ARORA, VS. INCOME-TAX OFFICER, B-202, VIVEK VIHAR, WARD-38(3), NEW DELHI. PHASE-I, NEW DELHI. PAN: ADHPA 5753 E ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI S.K. GUPTA CA RESPONDENT BY : SHRI N.J. BANSAL SR. DR DATE OF HEARING : 18/07/2016. DATE OF ORDER : _____/07/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 17.02.2015, PASSED BY THE LD. CIT(A)-XX, NEW DELHI, RELATING TO A.Y. 2010-11. 2. SOLE EFFECTIVE GROUND RAISED BY THE ASSESSEE IN HIS APPEAL IS AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) -XX HAS ERRED ON FACTS AND UNDER THE LAW BY CONFIRMING THE ADDITION OF RS. 12,40,000/- BEING THE DIFFERENCE BETWEEN THE CIRCLE RATE AND CONTRACT VALUE OF THE FLAT, WHEREAS ALL THE NEC ESSARY EVIDENCE INCLUDING SALE DEED ETC. WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD FI LED HIS RETURN OF INCOME DECLARING INCOME OF RS. 16,45,712/-. IN THE RELEVAN T ASSESSMENT YEAR THE ASSESSEE CARRIED OUT BUSINESS AS A BUILDER, DEVELO PER AND CIVIL CONTRACTOR. THE AO NOTICED THAT ASSESSEE HAD REPORTED SALE OF P ROPERTIES AMOUNTING TO RS. 3,10,51,500/-. HE CALLED FOR THE DETAILS OF THE SALES WITH NAMES, ADDRESSES AND SUPPORTING EVIDENCE BY WAY OF THE SAL E-DEEDS. FROM THE DETAILS FILED BY ASSESSEE IT TRANSPIRED THAT ASSESS EE HAD SOLD ON 1.10.2009 A PROPERTY, NAMELY, FLAT NO. GF-2, ON GROUND FLOOR, P LOT NO. NITIKHAND-I/913, INDIRAPURAM, GHAZIABAD, WITH A COVERED AREA OF 110 SQ. MTRS. TO MS. NAGINA WASAN FOR A CONSIDERATION OF RS. 22,50,000/-. THE A O FURTHER NOTICED THAT AS PER THE SALE-DEEDS THE CIRCLE RATE ON WHICH STAMP D UTY OF RS. 2.34 LAKHS WAS PAID WAS RS. 34.90,000/-. THE AO FURTHER NOTICED TH AT ON 17.4.2009THE ASSESSEE HAD REPORTED SALE OF FIRST FLOOR OF PLOT N O. NITIKHAND-I/913, INDIRAPURAM, GHAZIABAD, HAVING COVERED AREA OF 110 SQ. MTR. FOR A CONSIDERATION OF RS. 34,10,000/-. AS THE ASSESSEE H AD SHOWN THE SALE OF GROUND FLOOR FOR RS. 22,50,000/- AS AGAINST THE FIR ST FLOOR PROPERTY BEING RS. 34,10,000/-, WITHIN A PERIOD OF SIX MONTHS, THE AO SHOW CAUSED THE ASSESSEE AS TO WHY THE TRADING RESULTS BE NOT REJECTED U/S 1 45 AND THE INCOME BE ASSESSED AT A REASONABLE ESTIMATE. THE AO HAS NOTIC ED THE ASSESSEES CONTENTION AS UNDER: 3 THE ASSESSEE CONTENDED THAT THE PROPERTY UNDER SAL E WAS HELD AS STOCK IN TRADE AND INCOME THERE FROM WAS COMPUTE D UNDER THE HEAD 'PROFITS & GAINS FROM BUSINESS' AND NOT UN DER THE HEAD 'CAPITAL GAINS'. IT WAS FURTHER CONTENDED THAT PROVISIONS OF SECTION 50C OF I. T. ACT WHICH PROVIDES FOR DE EMED INCOME IN RESPECT OF THE DIFFERENCE OF CONSIDERATION BELOW THE CIRCLE RATE WAS APPLICABLE ONLY TO CAPITAL ASSETS. THE ASS ESSEE ALSO REFERRED TO THE PROPOSED AMENDMENT IN BUDGET 2013 W HERE A NEW SECTION 43CA WAS PROPOSED TO BE INSERTED IN RES PECT OF PROPERTIES HELD AS STOCK IN TRADE ALSO W.E.F AY 20 14-15. LASTLY, IT WAS CONTENDED THAT THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED SINCE ONLY THE ACTUAL SALE CONSIDERATION H AD BEEN RECORDED IN THE BOOKS OF ACCOUNTS WHILE THE CIRCLE RATE WAS ONLY A NOTIONAL PRICE WHICH CANNOT BE RECORDED IN THE BO OKS. 4. THE AO, AFTER CONSIDERING THE ASSESSEES REPLY C ONCLUDED THAT THOUGH THE ADDITION WAS NOT MADE U/S 50C, BUT THE DISPARIT Y IN PRICE OF SAME PROPERTY SOLD BY THE ASSESSEE HIMSELF CLEARLY LEADS TO THE CONCLUSION THAT THE PROPERTY WAS SOLD BELOW THE MARKET RATE. HE POINTED OUT THAT CIRCLE RATE MERELY PROVIDED A BASIS OF REASONABLE ESTIMATION FO R VALUE OF THE PROPERTY IN QUESTION. TAKING CLUE FROM THE VALUATION ADOPTED BY STAMP VALUATION AUTHORITIES AT RS. 34,90,000/-, THE AO MADE ADDITIO N OF RS. 12,40,000/- AFTER REJECTING THE BOOKS OF A/C U/S 145. LD. CIT(A) DISM ISSED THE ASSESSEES APPEAL. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASS ESSEE IS A DEVELOPER AND, THEREFORE, SINCE THE GROUND FLOOR COULD NOT BE SOLD FOR A HIGHER PRICE, 4 THEREFORE, IN ORDER TO LOWER THE BURDEN OF BANK LOA NS AND INTEREST THEREON, THE ASSESSEE CONCLUDED THE SALE AT A LESSER PRICE. IN T HE SUBJECT PERIOD, THERE WAS A TIME GAP OF SIX MONTHS IN WHICH THE PROPERTY PRIC E HAD GONE DOWN. HE RELIED ON FOLLOWING DECISIONS: - ITA NOS. 1089 & 1090/2011 IN THE CASE OF CIT VS. DI SCOVERY ESTATES PVT. LTD. JUDGMENT DATED 18.2.2013 (DELHI HIGH CO URT). - CIT VS. A. RAMAN & CO. 67 ITR 11 (SC) 6. WITH REFERENCE TO ABOVE DECISIONS, LD. COUNSEL S UBMITTED THAT DEPARTMENT CANNOT ASK THE ASSESSEE TO MAXIMIZE HIS PROFITS. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT D ISPUTED. ADMITTEDLY THE ASSESSEE HAD SOLD THE GROUND FLOOR PROPERTY AFTER S IX MONTHS OF THE SALE OF THE FIRST FLOOR PROPERTY IN THE SAME BUILDING AT A PRICE WHICH WAS 25% LESS THAN THE PRICE AT WHICH THE FIRST FLOOR PROPERTY WA S SOLD SIX MONTHS BEFORE. 8. ADMITTEDLY IN THE RELEVANT ASSESSMENT YEAR THE P ROVISIONS OF SECTION 50C WERE NOT APPLICABLE IN CASE A PROPERTY WAS HELD AS STOCK-IN-TRADE, BECAUSE SECTION 43CA HAS BEEN INSERTED BY THE FINAN CE ACT, 2013, W.E.F. 1.4.2014. THE AO HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT AND HAS MERELY REJECTED THE BOOKS OF ACCOUNT ON THE BAS IS OF LOWER SALE CONSIDERATION BEING RECEIVED FOR THE GROUND FLOOR P ROPERTY AS COMPARED TO 5 FIRST FLOOR PROPERTY. THIS IS NOT PERMISSIBLE IN LA W, BECAUSE THERE HAS TO BE SOME CONCRETE EVIDENCE TO COME TO THE CONCLUSION TH AT ASSESSEE HAS NOT DECLARED HIS FULL SALE CONSIDERATION. RELIANCE PLAC ED BY LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF A. RAMAN & CO. (SUPRA) CLEARLY SUPPORT THE ASSESSEES CONTEN TION. THE HONBLE DELHI HIGH COURT IN THE CASE OF DISCOVERY ESTATES PVT. L TD. HAS NOTED THE TRIBUNALS FINDINGS IN IT JUDGMENT AT PAGE 4 IN PAR A 8, WHICH ARE REPRODUCED HEREUNDER: (A) THE ASSESSEE IS MAINTAINING PROPER BOOKS OF AC COUNTS AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECI FIC DEFECTS THEREIN. (B) THE VIEW OF THE ASSESSING OFFICER THAT THERE CA N BE NO LOSS IN REAL ESTATE BUSINESS AND THE ASSESSEE CANNOT SEL L THE SHOPS BELOW COST PRICE IS NOT CORRECT, HAVING REGARD TO T HE FACTS. (C) THE ASSESSEE HAS GIVEN REASONS AS TO WHY IT BOO KED SALES AT THE INITIAL STAGE AT A LOWER PRICE. IT WAS FOUND TH AT THE ASSESSEE COULD NOT BOOK A SINGLE SHOP FOR SALE IN THE YEAR 2 004 AND DURING THE PERIOD FROM MAY 2003 TO DECEMBER 2004, I T COULD BOOK ONLY FIVE SHOPS FOR SALE. THESE FACTORS SUGGES T THAT IN THE BEGINNING OF THE BUSINESS, THE ASSESSEE IS FORCED T O OFFER SOME CONCESSION IN THE PRICE TO DRAW CUSTOM. (D) THE ASSESSING OFFICER COULD HAVE BROUGHT EVIDEN CE ON RECORD TO SHOW THAT ANY PURCHASER HAD ACTUALLY PAID A PRICE HIGHER THAN THE PRICE SHOWN IN THE BOOKS. NO SUCH E VIDENCE WAS FORTHCOMING. THERE WAS NOT EVEN MATERIAL TO DOUBT T HE SALE TRANSACTIONS. 6 (E) IT IS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO RELY ON THE PERCEIVED GENERAL MARKET CONDITIONS; THE PRICE SHOW N BY AN ASSESSEE CANNOT BE DOUBTED FOR THE REASON THAT IN T HE OPINION OF THE ASSESSING OFFICER, THE REAL ESTATE PRICES DID N OT SHOW ANY DOWNWARD TREND. (F) THE MARKET PRICES CAN AT BEST BE A STARTING POI NT FOR FURTHER INQUIRY BUT THEY CANNOT BE SUBSTITUTED FOR THE PRIC E SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. 9. IN VIEW OF ABOVE DISCUSSION, THE ASSESSEES APPE AL IS ALLOWED. 10. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED . ORDER PRONOUNCEMENT IN OPEN COURT ON _____/07/2016. (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: _____/07/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.