M/s Global Company, Bhopal V. The ITO 3(1), Bhopal

ITA 210/IND/2012

• Counselvise Citation: 21022714 RSA 2012
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Assessee Lawyers: H P VERMA; SAKSHI VERMA
• Keywords: Unexplained expenditure; Capital asset; Cost of acquisition
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AADFG6679E I.T.A.NO. 210 /IND/201 2 . A.Y. : 2006 - 07 M/S.GLOBAL COMPANY, INCOME - TAX OFFICER, 4, VRINDAVAN, 1 ST FLOOR, V S 3(1), MALVIYA NAGAR, BHOPAL BHOPAL APPELLANT RESPONDENT PAN NO. : AACCG3020D I.T.A.NO. 211/IND/2012. A.Y. : 2006 - 07 M/S.GLOBAL MEGHAVENTURES PVT.LTD., INCOME - TAX OFFICER, 32, NADIR COLONY, SHYMLA HILLS, VS 3(1), MALVIYA NAGAR, BHOPAL BHOPAL APPELLANT RESPONDENT PAN NO. : AACCG3020D I.T.A.NO. 21 5 /IND/2012. A.Y. : 2006-07 INCOME - TAX OFFICER, M/S.GLOBAL MEGHAVENTURES PVT.LTD., 3(1), VS 32, NADIR COLONY, SHYMLA HILLS, BHOPAL MALVIYA NAGAR, BHOPAL -: 2: - 2 APPELLANT RESPONDENT APPELLANT BY : SHRI H.P.VERMA, ADV. AND MS.SAKSHI VERMA, C.A. RESPONDENT BY : SHRI DARSHAN SINGH, CIT DR DATE OF HEARING : 11 . 10 .2012 DATE OF PRONOUNCEMENT : 31 . 10 .201 2 O R D E R PER R. C. SHARMA, A.M. THESE ARE CROSS APPEAL FILED BY THE ASSESSEES AND REVENUE AGAINST SEPARATE ORDER OF CIT(A) DATED 31.1 .2012 AND 20.1.2012 FOR THE ASSESSMENT YEAR 2006-07 IN THE MA TTER OF ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED FOR ADDIT ION MADE ON ACCOUNT OF COST OF LAND INCURRED BY THE ASS ESSEE AND COMPUTING NET PROFIT ON TRANSFER OF CLOSING STOCK. 3. IN THE APPEAL FILED BY THE ASSESSEE IN CASE OF I.T. A.NO. 211/IND/2012, THE ASSESSEE IS AGGRIEVED FOR ENHANCE MENT OF ASSESSMENT BY THE LD.CIT(A). -: 3: - 3 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE M/S. GLOBAL COMPANY IS A PARTNERSHIP CONCERN ENGAGED IN CONSTRU CTION AND SALE OF BUILDING, FLATS, SHOPS ETC. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PURCHASED LAND FOR CONS TRUCTION OF BUILDING THEREON AND FOR THIS PURPOSE PAYMENT WAS M ADE TO ONE SHRI THAKUR PRASAD SINGH ( FOR SHORT TPS) FOR ARRANGING PURCHASE OF ONE CONTINUOUS PIECE OF LAND IN VILLAGE KATTARA, DISTRICT BHOPAL. FOR THIS PURPOSE, AN AGREEMENT WAS EXECUTED BETWEEN ASSESSEE AND TPS DATED 27.1.2000. PAYMENT F OR PURCHASES WAS MADE THROUGH CHEQUE AS WELL AS BY CAS H. AS PER TERMS OF AGREEMENT, TPS WOULD ARRANGE FOR 50 AC RES OF LAND FOR THE ASSESSEE FIRM. FOR DEVELOPMENT OF COLO NY, THE LAND PIECE OWNED BY VARIOUS AGRICULTURISTS WERE TO BE AD JACENT TO EACH OTHER TO FORM A BIG CONTINUOUS LAND. AS PER TE RMS OF AGREEMENT, THE ASSESSEE FIRM WAS TO MAKE PAYMENT OF RS. 20 LAKHS PER ACRE TO TPS IF THE LAND WAS ARRANGED AND TRANSFERRED UP TO 15 TH MARCH, 2003, AND THEREAFTER AT RS. 15 LAKHS PER ACRE. THE TRANSFER WAS TO BE MADE DIRECTLY FROM THE OWNER OF THE LAND I.E. AGRICULTURISTS TO THE ASSESSEE FIRM. DURING THE -: 4: - 4 YEAR, THE ASSESSEE FIRM HAS PURCHASED 14.82 ACRES O F LAND THROUGH TPS AFTER 15 TH MARCH, 2003, AND FOR WHICH TRANSFER WAS DIRECTLY MADE THROUGH OWNER OF THE LAND TO THE ASSESSEE. FOR THIS PURPOSE, PAYMENT OF RS. 2,22,30,000/- ( RS . 14.820 ACRES @ RS. 15 LAKHS PER ACRE), WAS TO BE MADE. THE ASSESSEE ALSO ENTERED INTO JOINT VENTURE AGREEMENT WITH ITS SISTER CONCERN M/S. MEGHA STRUCTURES PRIVATE LIMITED ON 14 .2.2005 FOR DEVELOPMENT OF THIS LAND AND AGREED TO TRANSFER THE SAID LAND TO M/S. MEGHA STRUCTURES PRIVATE LIMITED FOR R S. 3 CRORES. THE COST OF THE LAND IN THE HANDS OF THE AS SESSEE FIRM WORKED OUT AT RS. 3.03 CRORES. DURING THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT ASSE SSEE HAD SHOWN THIS LAND MEASURING 14.82 ACRES AS ITS STOCK IN TRADE, VALUED AT RS. 3.03 CRORES. ASSESSING OFFICER FURTHE R OBSERVED THAT AS PER JOINT VENTURE AGREEMENT DATED 24.11.200 5, THE ASSESSEE HAD TRANSFERRED THIS LAND FOR A CONSIDERAT ION OF RS. 3.00 CRORES TO M/S. GLOBAL MEGHA VENTURES. ASSESSEE WAS ASKED TO EXPLAIN THE PROFIT AROSE OUT OF THIS TRANS ACTION. THE ASSESSEE VIDE ITS REPLY DATED 09.12.2008 SUBMITTED AS UNDER :- -: 5: - 5 THE ASSESSEE HAD THE OPENING STOCK AS ON 01.04.2005 OF LAND, INNERCOURT LAND, FLATS AND MATERIAL AT SITE OF RS. 4,03,40,114/- AS PER ANNEXURE ENCLOSED HEREWITH, WHICH WAS REFLECTED AS THE CLOSING STOCK AS ON 31.03.2005 IN THE BALANCE SHEET. THE COPY OF THE BALANCE SHEET DATED 31.03.2005 AND THE DETAILED WORKING OF CLOSING STOCK AS ON 31.03.2005 IS ENCLOSED AS ANNEXURE A. THE ASSESSEE HAD THE STOCK, WHICH INCLUDED FLATS, LAND AND MATERIAL AT SITE AT COST PRICE AS PER ANNEXURE-B. THE ASSESSEE ENTERED INTO THE JOINT VENTURE AGREEMENT WITH M/S. GLOBAL MEGHA VENTURES PVT.LTD. 14.12.2005 FOR FURTHER DEVELOPMENT OF 14.82 ACRES OF LAND, PURCHASE PRICE OF WHICH WITH THE ASSESSEE WAS WORKED OUT AT RS. 2,22,30,000/- (ANNEXURE-C) AS PER AGREEMENT BETWEEN THAKUR PRASAD AND AVTAR SINGH AND JAIDEEP SINGH. THE ASSESSEE HAD INCURRED THE REGISTRATION EXPENSES OF RS. 4,00,000/- AND HAD ALSO INCURRED THE EXPENDITURE DEVELOPMENT AT RS. 77,59,398/- WHICH WORKED OUT TO RS. 3,03,89,398/- AND ACCORDINGLY, CREATED THE LIABILITY OF RS. 3,00,00,0-00/- AGAINST M/S. GLOBAL MEGA VENTURES PVT.LTD. IN THE BOOKS OF THE ASSESSEE AS THE ASSESSEE AGREED TO TRANSFER THE LAND WITH DEVELOPMENT TO M/S. GLOBAL MEGA VENTURES PVT.LTD. IT MAY BE SEEN THAT THE COST OF LAND AND DEVELOPMENT FOR THE ASSESSEE WAS AT RS. 3,03,89,398/- AND THE ASSESSEE HAS AGREED TO TRANSFER THE SAME FOR RS. 3,00,00,000/- AND, THEREFORE, THERE IS NO CAPITAL GAIN. EVEN OTHERWISE THERE IS NO TRANSFER OF LAND WITHIN THE -: 6: - 6 MEANING OF GENERAL LAW OR WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME-TAX ACT, 1961. FROM THE ABOVE FACTS, IT IS CLEARLY SEEN THAT AS THERE IS NO TRANSFER OF LAND AND HENCE NO CAPITAL GAIN IS APPLICABLE. EVEN IF IT IS PRESUMED THAT THERE IS A TRANSFER, IT CAN BE SEEN THAT THERE WAS NO PROFIT SINCE LAND AND DEVELOPMENT COST STANDS AT RS. 3,03,89,398/- AS SHOWN IN ANNEXURE B. THEREFORE, THE PROPOSAL TO LEVY TAX ON THE ENTRY OF RS. 3,00,00,000/- SHOULD BE KINDLY DROPPED. THE ASSESSEE WAS REQUIRED TO, PRODUCE EVIDENCE IN S UPPORT OF COST OF LAND. THE ASSESSEE HAS RELIED UPON AN AGREE MENT WITH THAKUR PRASAD AS PER WHICH THE COST OF LAND IS RS. 2,22,30,000/- (PLACED AT ANNEXURE A OF ASSESSING OF FICERS ORDER) AND REPLIED AS UNDER :- REGARDING THE PURCHASE PRICE OF LAND AT RS. 2,22,30,000/- IT IS SUBMITTED THAT THE PARTNERS OF THE ASSESSEE FIRM HAD ENTERED INTO AN AGREEMENT WITH THAKUR PRASAD SINGH THAT HE WILL PROVIDE 50 ACRES OF LAND BEFORE 15.04.2003 TO THEM AT THE RATE OF RS. 20,00,000/- PER ACRE. BUT IN CASE OF HIS FAILURE TO PROVIDE 50 ACRES OF LAND WITHIN THE STIPULATED TIME THE RATE OF LAND SHALL BE AT RS. 15,00,000/- PER ACRE. THE REGISTERED SALE DEED HAVE NO RELEVANCE IN THE PRESENT CIRCUMSTANCES. IT IS SUBMITTED THAT THE ASSESSEE HAS PAID RS. 2,21,51,000/- TO SHRI THAKUR PRASAD SINGH TILL 31.03.2006 TOWARDS THE PURCHASE PRICE OF LAND AND THE BALANCE AMOUNT PAYABLE TO HIM IS -: 7: - 7 INDICATED IN THE BALANCE SHEET AS LIABILITY PAYABLE TO HIM AT RS. 78,900/- WHICH GIVEN THE PURCHASE PRICE OF LAND A RS. 2,22,30,000/-. IT WILL NOT BE OUT OF PLACE TO MENTION THAT UNDER THE SAME AGREEMENT, THE LAND IN THE OTHER CONCERN OF THE ASSESSEE I.E. M/S. GLOBAL MEGA VENTURES PVT.LTD. HAS BEEN PURCHASED AND THE SALE DEEDS ARE EXECUTED AT THE RATE OF RS. 20,00,000/- PER ACRE BUT THE PURCHASE PRICE OF LAND HAS BEEN SHOWN AT THE RATE OF RS. 15,00,000/- PER ACRE BY THE SAID CONCERN AT THE AMOUNT OF RS. 2,63,11,000/- ( INCLUDING REGISTRATION CHARGES ) AS AGAINST RS. 3,07,08,000/- FOR WHICH THE REGD. SALE DEEDS HAVE BEEN EXECUTED. 5. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT PURCHASE OF LAND THROUGH TPS ON THE PLEA THAT THERE WAS NO REFERENCE OF THE AGREEMENT ENTERED WITH TPS IN THE REGISTERED SALE DEED ENTERED WITH AGRICULTURISTS. THE ASSESSIN G OFFICER ALSO STATED THAT THE ASSESSEE TOOK DIFFERENT STAND FOR THE COST OF LAND BEFORE THE REGISTERING AUTHORITY AND BEFORE INCOME TAX AUTHORITIES, IN SO FAR AS LAND SO PURCHASED WAS REG ISTERED AT A LOWER AMOUNT THAN WHAT WAS AGREED TO BE PAID BY THE ASSESSEE FIRM TO TPS. ACCORDINGLY, THE ASSESSING OFFICER DEC LINED TO ALLOW THE PRICE PAID FOR ACQUISITION OF LAND TO TPS OVER AND ABOVE REGISTERED VALUE OF THE LAND. AS THE LAND WAS TRANSFERRED -: 8: - 8 TO M/S. MEGHA VENTURES PRIVATE LIMITED FOR RS. 3 CR ORES, THE ASSESSING OFFICER WORKED OUT PROFIT AT RS. 1,98,02 ,602/- AFTER ALLOWING ONLY THE PRICE SHOWN TO THE REGISTERING AU THORITY. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE AC TION OF THE ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 6. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATI VE THAT THE ASSESSEE FIRM HAS ENTERED INTO AGREEMENT F OR PURCHASE OF THE LAND WITH TPS, WHO IS AN INFLUENTIA L MAN OF THE LOCALITY. SINCE THE ASSESSEE WAS REQUIRING BIG CONTINUOUS LAND, IT WANTED TO UTILIZE THE CONTACTS AND INFLUEN CE OF SHRI T.P.SINGH FOR ACQUIRING SUCH BIG AGRICULTURAL LAND FROM THE FARMERS. THE AGREEMENT SO ENTERED WITH TPS WAS ALSO FOUND WITH THE DEPARTMENT DURING THE COURSE OF SURVEY AT ASSESSEES BUSINESS PREMISES, THEREFORE, THERE IS NO JUSTIFICA TION FOR THE ASSESSING OFFICER TO DISREGARD THE AGREEMENT SO ENT ERED WITH TPS ACCORDING TO WHICH ASSESSEE WAS TO MAKE PAYMENT @ RS. 15 CRORES PER ACRE TO TPS. HE FURTHER SUBMITTED THA T AS PER THE TERMS OF AGREEMENT, THE LAND WAS TO BE TRANSFERRED TO THE ASSESSEE FIRM DIRECTLY FROM THE AGRICULTURISTS/OWNE R. -: 9: - 9 ACCORDINGLY, REGISTRY WAS MADE BY AGRICULTURISTS DI RECTLY IN FAVOUR OF THE ASSESSEE FIRMS. AS PER LD. AUTHORIZED REPRESENTATIVE , THE SURPLUS OVER AND ABOVE THE REG ISTERED COST OF LAND WAS TO BE RETAINED BY TPS FOR ARRANGING SUC H LAND. HE FURTHER SUBMITTED THAT ONLY BECAUSE OF THE EFFORTS OF TPS THAT THE ASSESSEE WAS ABLE TO GET DIFFERENT LANDS, SO AS TO MAKE A BIG AREA OF LAND SUITABLE FOR CARRYING OUT THE HOUS ING PROJECT THEREON. AS THE FARMERS ARE NOT WILLING TO PART WIT H THEIR LAND, TPS BEING A POWERFUL AND INFLUENTIAL MAN OF AREA HA D ARRANGED THE DESIRED LAND FOR THE ASSESSEE AND THE PAYMENT W AS MADE FOR ARRANGING THE LAND FOR THE ASSESSEE. IT WAS FUR THER ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT PAYMENT MADE TO TPS TOWARDS PURCHASE OF LAND, AGREEMENT SO ENTERED WITH TPS AND THE LAND SO ARRANGED BY TPS FOR ASSESSEES PROJ ECT HAD NOT BEEN POSSIBLE WITHOUT TPS. HE FURTHER SUBMITTED THA T PAYMENT MADE TO TPS OR ITS NOMINEES THROUGH CHEQUES BY THE ASSESSEE AND ITS SISTER COMPANY HAVE NOT BEEN DENIED BY THE DEPARTMENT AND THERE IS NO EVIDENCE TO SHOW THAT TH E MONEY PAID TO TPS CAME BACK TO THE ASSESSEE OR ITS SISTER CONCERN. OUR ATTENTION WAS ALSO INVITED TO COPY OF ACCOUNTS OF TPS IN -: 10: - 10 THE UNION BANK OF INDIA FOR THE PERIOD 1.1.2004 TO 17.11.2005 WHICH INDICATED PAYMENT MADE TO TPS BY THE ASSESSEE AND M/S. GLOBAL MEGHAVENTURES PRIVATE LIMITED AND PAYME NT MADE BY TPS TO DIFFERENT PERSONS TOWARDS ADVANCE OF LAND TRANSFER. THIS BANK ACCOUNT OF TPS ALSO INDICATED P URCHASE OF TRACTOR BY HIM AND MAKING OF F.D. OF RS. 40,02,400/ -. LD. AUTHORIZED REPRESENTATIVE, THEREFORE, SUBMITTED THA T COST OF THE LAND INCURRED BY THE ASSESSEE AT RS. 2,22,30,00 0/- IS TO BE ACCEPTED IN PLACE OF COST OF LAND CALCULATED BY THE ASSESSING OFFICER. 7. ON THE OTHER HAND, THE LD. CIT DR RELIED ON THE ORD ER OF LOWER AUTHORITIES AND SUBMITTED THAT THE RATE OF LAND ACCEPTED BY REGISTERING AUTHORITY WAS THE ACTUAL CO ST OF LAND INCURRED BY THE ASSESSEE AND NOT THE PRICE PAID TO TPS FOR ACQUIRING LAND. ACCORDING TO HIM, THE ASSESSING OFF ICER WAS JUSTIFIED IN NOT ACCEPTING THE PRICE PAID TO TPS AS COST OF LAND. 8. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE FIRM IS ENGAGED IN DEVELOPMENT OF COLONY AND REAL ESTATE BUSINESS. IT WAS HAVING TWO CONCERNS, ONE NAMED AS M/S. GLOBAL COMPANY, WHI CH IS A -: 11: - 11 PARTNERSHIP FIRM HAVING PARTNER SHRI AVTAR SINGH AN D JAIDEEP SINGH. BOTH THESE PERSONS ARE ALSO DIRECTORS OF THE COMPANY M/S. MEGHA STRUCTURES PRIVATE LIMITED. THE ASSESSEE FIRM WAS IN THE PROCESS OF DEVELOPING RESIDENTIAL COLONY IN VILAGE KATTARA, TAHSIL HUZUR, DISTRICT BHOPAL. AS BIG CHUN K OF CONTINUOUS LAND WAS REQUIRED FOR THIS PROJECT, IT E NTERED INTO AGREEMENT WITH ONE SHRI TPS OF KATTARA ON 27.1.2003 . SHRI TPS WAS INFLUENTIAL MAN OF THE LOCALITY AND IT WAS AGREED THAT TPS WOULD ARRANGE 50 ACRES OF LAND FOR THE ASSESSEE FIRM. FOR DEVELOPMENT OF BIG COLONY, THE LAND PIECES OWNED BY DIFFERENT AGRICULTURISTS WERE TO BE ADJACENT TO EACH OTHER TO FORM A BIG CONTINUOUS LAND, WHICH WAS DIFFICULT TO GET AND IN THE ABSENCE OF INFLUENTIAL PERSON WHO CAN CONVINCE DIFFERENT AG RICULTURISTS, OWNING THE LAND FOR TRANSFER IN ASSESSEES FAVOUR. FOR ALL THESE PURPOSES, THE ASSESSEE HAD ENTERED INTO AGREEMENT W ITH TPS. AS PER TERMS OF AGREEMENT, THE ASSESSEE WAS REQUIRE D TO MAKE PAYMENT AT RS. 20 LAKHS PER ACRE IF THE LAND WAS AR RANGED AND TRANSFERRED UP TO 15.3.2003 AND THEREAFTER RS. 15 L AKHS PER ACRE. THE TERMS OF THE AGREEMENT ALSO PROVIDED FOR TRANSFER OF LAND DIRECTLY FROM OWNERS OF THE LAND TO THE ASSESS EE FIRM. AS -: 12: - 12 THE LAND WAS ARRANGED AND TRANSFERRED IN FAVOUR OF ASSESSEE FIRM ONLY AFTER 15 TH MARCH, 2003, THE ASSESSEE FIRM MADE PAYMENT TO TPS @ RS. 15 LAKHS PER ACRE INSTEAD OF R S. 20 LAKHS PER ACRE AS AGREED. THIS AGREEMENT WAS FOUND BY THE DEPARTMENT DURING THE COURSE OF SURVEY U/S 133A ON 20 TH DECEMBER, 2005, AT ASSESSEES BUSINESS PREMISES AND THE SAME WAS SEIZED BY THE DEPARTMENT. THUS, WHATEVER P RICE WAS AGREED BY THE ASSESSEE FIRM FOR PAYMENT TOWARDS LA ND TO TPS WAS THE COST OF LAND. PAYMENT AGREED TO BE MADE TO TPS AND ACTUALLY PAID TO TPS WAS NOT DISPUTED BY LOWER AUTH ORITIES. HOWEVER, THE ASSESSING OFFICER ONLY ACCEPTED THE PR ICE OF LAND DETERMINED FOR STAMP DUTY PURPOSES INSTEAD OF ACTUA L PRICE AGREED TO BE PAID FOR ACQUIRING THE LAND AS PER TER MS OF AGREEMENT ENTERED INTO. WE DO NOT FIND ANY JUSTIFIC ATION IN THE ACTION OF THE ASSESSING OFFICER IN SO FAR AS THE AS SESSEE BEING ENGAGED IN CONSTRUCTION OF BUILDING, LAND SO ACQUIR ED BY ASSESSEE IN THE NORMAL COURSE OF ITS CONSTRUCTION B USINESS WAS ITS STOCK-IN TRADE. WHATEVER PRICE IS BEING PAID OR PAYABLE FOR ACQUIRING STOCK IN TRADE, SHOULD BE TREATED AS COST TO THE ASSESSEE. MERELY BECAUSE THE LAND WAS REGISTERED AT A LOWER -: 13: - 13 VALUE, ACTUAL AMOUNT PAID BY THE ASSESSEE FOR ACQUI RING THE LAND AS PER AGREEMENT WITH TPS CANNOT BE OVERLOOKED OR BRUSHED ASIDE. GENUINENESS OF AGREEMENT ENTERED WIT H TPS IS NOT IN DISPUTE. THE TERMS OF AGREEMENT ALREADY PROV IDED FOR THE PRICE TO BE PAID AND MODE OF REGISTRY. THE FAC TUM OF ACTUAL PAYMENT HAVING BEEN MADE TO TPS IS ALSO NOT IN DISP UTE. IT WAS NOT SIMPLY A CASE OF BUYING THE GOODS FROM THE OPEN MARKET, WHICH IS AVAILABLE IN AMPLE, HOWEVER, IT WA S A CASE OF PURCHASE OF LAND IN A DESIGNATED AREA HAVING HUGE S IZE FOR DEVELOPMENT OF BIG HOUSING PROJECT. SINCE THE LAND WAS OWNED BY DIFFERENT PERSONS AND THE ASSESSEE WAS REQUIRING CONTINUOUS LAND SO THAT THE PROJECT AS A WHOLE CAN BE EXECUTED THEREON, IT HAD ENTERED INTO AGREEMENT WIT H AN INFLUENTIAL PERSON OF THE LOCALITY VIZ. TPS, WHO CO ULD ARRANGE THE LAND FOR ASSESSEE AS PER ITS REQUIREMENT. THERE FORE, THE PRICE AGREED TO BE PAID BY THE ASSESSEE IN TERMS OF AGREEMENT EXECUTED WITH TPS WAS THE COST OF LAND IN ASSESSEE S HAND AND THERE IS NO JUSTIFICATION ON THE PART OF THE ASSESS ING OFFICER TO IGNORE THE SAID PRICE, MERELY ON THE PLEA THAT LAND WAS FINALLY REGISTERED AT A LOWER VALUE. FURTHERMORE, THE CONDI TIONS OF -: 14: - 14 PAYMENT WERE ALREADY STIPULATED IN THE AGREEMENT SO ENTERED WITH TPS AND IF ANYTHING REMAINED TO BE PAID EVEN A FTER TRANSFER OF LAND, THE ASSESSEE FIRM WAS UNDER OBLIG ATION TO PAY THE SAME EVEN AFTERWARDS. COST OF LAND IN ASSESSEE S HANDS WAS THE PAYMENT AGREED TO BE MADE TO TPS AS PER AG REEMENT AND NOT PRICE DETERMINED BY REGISTERING AUTHORITIES . 9. AFTER PURCHASE OF LAND THE ASSESSEE FIRM ENTERED IN TO JOINT VENTURE AGREEMENT WITH M/S. MEGHA STRUCTURES PRIVATE LIMITED, BHOPAL, ON 14.12.2005, AND AGREED TO TRANS FER THE SAID LAND TO MEGHA STRUCTURES PRIVATE LIMITED FOR R S. 3 CRORES. AS THE COST OF THE LAND IN ASSESSEES HANDS WORKED OUT AT RS. 3,03,89,398/- ( RS. 2,22,30,000/- + 4,00,000/- REGI STRATION CHARGES + RS. 77,59,398/- DEVELOPMENT EXPENSES ), T HE ASSESSEE HAD CLAIMED TO SUFFER LOSS OF RS. 3,89,398 /-. SINCE THE LAND OF RS. 303.89 LAKHS WAS AGREED TO BE TRANS FERRED AT RS. 300 LAKHS, IT SUFFERED LOSS OF RS. 3.89 LAKHS. 10. IT IS ALSO PERTINENT TO MENTION HERE THAT M/S. GLOB AL COMPANY AND M/S. GLOBAL MEGHAVENTURES PRIVATE LIMIT ED WERE SISTER CONCERNS HAVING SAME PERSONS AS PARTNER AS WELL AS DIRECTORS, THEREFORE, WHATEVER COST WAS INCURRED FOR -: 15: - 15 ACQUISITION OF LAND IN THE HANDS OF THE ASSESSEE FI RM, THERE IS NO REASON FOR TRANSFERRING THE SAME LAND TO SISTER CONCERN M/S. GLOBAL MEGHAVENTURES COMPANY, AT A LOWER CONSIDERATION OF RS. 3 CRORES. SINCE TRANSFER OF L AND WAS TO SISTER CONCERN, THE LOSS OF RS. 3.89 LAKHS CLAIMED BY ASSESSEE FIRM CANNOT BE ACCEPTED. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE GAIN BY TAKING COST OF LA ND AT THE PRICE PAID TO TPS AND TO IGNORE THE LOSS OF RS. 3.8 9 LAKHS AS CLAIMED BY THE ASSESSEE. WE DIRECT ACCORDINGLY. 11. IN THE CASE OF M/S. GLOBAL MEGHA VENTURES PRIVATE LIMITED, WHILE FRAMING ASSESSMENT FOR THE ASSESSMEN T YEAR 2006-07, THE ASSESSING OFFICER REQUIRED THE ASSESSE E TO FURNISH DETAILS OF EXPENSES SHOWN AS PER REGISTRY O F LAND AND EXPENSES BOOKED IN THE PROFIT AND LOSS ACCOUNT, ON WHICH ASSESSEE HAS MADE FOLLOWING SUBMISSION :- YOUR HONOUR HAS REQUIRED THE ASSESSEE TO EXPLAIN THE DIFFERENCE IN THE AMOUNT OF LAND PURCHASE IN TH E PROFIT AND LOSS ACCOUNT AND IN THE REGISTRY. IN THI S CONNECTION IT IS SUBMITTED THAT THE ASSESSEE COMPAN Y AND M/S. GLOBAL COMPANY HAD A JOINT VENTURE -: 16: - 16 AGREEMENT DURING THE YEAR. THE PARTNERS O THE FIRM HAD ENTERED INTO AN AGREEMENT WITH THAKUR PRASAD SINGH THAT HE WILL PROVIDE 50 ACRES OF LAND BEFORE 15.04.03 TO THEM AT THE RATE OF RS. 20,00,000/- PER ACRE. BUT IN THE CASE OF FAILURE TO PROVIDE 50 ACRE S OF LAND WITHIN THE STIPULATED TIME THE RATE OF LAND SH ALL BE AT RS. 15,00,000/- PER ACRE. UNDER THE SAME AGREEMENT THE LAND HAS BEEN PURCHASED BY THE ASSESSEE AND THE SALE DEEDS HAS BEEN EXECUTED AT THE RATE OF RS. 15,00,000/- PER ACRE BY THE ASSESSE E AT THE AMOUNT OF RS. 2,63,11,000/- (INCLUDING REGISTRATION CHARGES ) AS AGAINST RS. 3,07,08,000/- FOR WHICH THE REGISTERED SALE DEED HAS BEEN EXECUTE D. THE EXPENSES OF STAMP DUTY ARE INCLUDED IN THE PURCHASE PRICE TAKEN IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION AND WORKED OUT THE TOTAL CONSIDERATION O F LAND AT RS. 3,18,88,000/-. THE CONCLUSION OF THE ASSESSING OFFICER WAS AS UNDER :- -: 17: - 17 AS PER THE REGISTRY OF LAND SUBMITTED BY THE ASSESSEE, TOTAL CONSIDERATION OF LAND HAS BEEN WORKED IN THE FOLLOWING TABLE :- LAND AMOUNT ( RS. ) 1 1,06,80,000 2 2,00,28,000 3 11,80,000 3,18,88,000 BUT IN THE BOOKS OF ACCOUNTS ASSESSEE HAS BOOKED LAND EXPENSES AT KATARA OF RS. 3,39,88,000/-, THEREFORE, THE DIFFERENCE AMOUNT OF RS. 21,00,000/- HAS NOT BEEN SHOWN IN THE BOOKS OF ACCOUNT. HENCE, THE AMOUNT OF RS. 21,00,000/- IS ADDED AS UNEXPLAINED EXPENDITURE OF ASSESSEE COMPANY. ON PURCHASE OF ABOVE LAND ASSESSEE HAS PAID TOTAL REGISTRY EXPENSES OF RS. 29,97,552/- BUT ASSESSEE HAS NOT BOOKED ABOVE EXPENSES IN ITS BOOKS OF ACCOUNT. THEREFORE, IT IS CLEAR THAT ABOVE AMOUNT I S UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE COMPANY. -: 18: - 18 12. IN THE APPEAL FILED BEFORE THE CIT(A), THE LD. CIT( A) ENHANCED THE ASSESSMENT BY TAKING THE COST OF LAND AS PER THE AMOUNT DETERMINED BY REGISTERING AUTHORITY. HOWEVER , THE CIT(A) DID NOT ACCEPT THE CONSIDERATION PAID TO TPS . THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS PURCHASED LAN D ADMEASURING 15.354 ACRES FROM FOUR LAND OWNERS. THE LEDGER ACCOUNT OF THE LAND OWNERS IN THE BOOKS OF THE ASSE SSEE SHOWS PAYMENT OF CONSIDERATION FOR PURCHASE TO THE FOUR L AND OWNERS AT RS. 78 LAKHS, WHEREAS THE LAND OF KATARA LEDGER ACCOUNT SHOWS PAYMENT TO THESE LAND OWNERS AT RS. 2,30,31,0 00/-. THUS, THE LD. CIT(A) FOUND THAT DIFFERENCE AMOUNT C OMING TO RS. 1,52,31,000/- WAS PAID TO THAKUR PRASAD SINGH, WHICH CANNOT BE ALLOWED AS COST OF LAND. THE CIT(A) FURTH ER OBSERVED THAT :- 3.4 ON EXAMINATION OF THE MATERIAL BEFORE ME IT WAS FOUND THAT ALTHOUGH IN THE LAND OF KATARA LEDGER ACCOUNT SHOWS PAYMENT OF RS. 2,30,31,000/- TO THE FOUR LAND OWNERS THE LEDGER ACCOUNT OF THESE LAND OWNERS SHOWS PAYMENT OF ONLY RS. 78,00,000/-. SINCE THE CONSIDERATION PAID TO THE -: 19: - 19 LAND OWNERS ONLY RS. 78,00,000/-, THE APPELLANT WAS ASKED TO SHOW CAUSE AS WHY THE COST OF PURCHASE OF LAND SHOULD NOT BE REDUCED BY RS. 1,52,31,000/- AND WHY THE ADDITION SHOULD NOT BE ENHANCED BY THAT AMOUNT. IN REPLY, IT IS REITERATED THAT THE BALANCE PAYMENT WAS MADE TO THAKUR PRASAD UNDER THE AGREEMENT WITH HIM IN WHICH IT WAS PROVIDED THAT THE APPELLANT WILL PAY RS. 20,00,000/- PER ACRE IF HE FACILITATES PURCHASE OF LAND BEFORE 15.03.2003 AND AT RS. 15,00,000/- PER ACRE IF HE FACILITATES PURCHASE AFTER THAT. IT IS S TATED THAT AS PER THIS AGREEMENT TOTAL PAYMENT OF RS. 2,63,11,000/- INCLUDING REGISTRATION CHARGES HAVE BEEN MADE WHICH INCLUDE PAYMENT TO THE LAND OWNERS AT RS. 78,00,000/- AND BALANCE AMOUNT OF RS. 1,52,31,000/- IS PAID TO THAKUR SINGH, THIS ARGUMENT IS NOT PLAUSIBLE. THE COST OF LAND IS RS. 78,00,000/- ONLY WHICH IS PAID TO THE SELLERS. THE REGISTRATION CHARGES HAVE BEEN SEPARATELY BOOKED IN ACCOUNTS. THE FACTS OF THE CASE SHOW THAT SHRI -: 20: - 20 THAKUR SINGH HAS PLAYED THE ROLE OF A BROKER ONLY. THE COMMISSION RATE FOR PAYMENT OF BROKERAGE IN THE REAL ESTATE DOES NOT EXCEED 2 % OF THE TOTAL CONSIDERATION. THE MAXIMUM BROKERAGE PAYABLE COMES TO RS. 1,56,000/-. AGAINST THIS THE APPELLANT HAS CLAIMED PAYMENT OF RS.1,52,31,000/-. ALTHOUGH THE PAYMENT TO THAKUR PRASAD SINGH ARE SHOWN IN THE BOOKS OF ACCOUNT BUT THESE PAYMENT DOES NOT QUALIFY TO BE ALLOWED AS CONSIDERATION PAID FOR PURCHASE OF THE LAND. IN VIEW OF THE ABOVE THE COST OF LAND IS DETERMINED AT RS. 78,00,000/- PAID TO THE SELLERS AND COMMISSION PAID TO THAKUR PRATAP SINGH AT RS. 1,56,000/-. THE TOTAL COST COMES TO RS. 78,56,000/-. IN VIEW OF THIS THE COST PURCHASE OF LAND IS DISALLOWED TO THE EXTENT OF RS. 1,50,75,000 /- . OUT OF COST OF LAND CLAIMED AT RS. 2,30,31,000/-, THE ASSESSING OFFICER HAS WRONGLY MADE ADDITION OF RS. 21,00,000/- ON THIS ISSUE DUE TO MISUNDERSTANDING OF THE FACTS OF THE CASE. THERE IS NO EVIDENCE OF UNACCOUNTED PAYMENT OF RS. -: 21: - 21 21,00,000/- HENCE THE SAME IS DELETED. ON THE FINDING GIVEN ABOVE THE EXPENDITURE DEBITED TO BOOK S OF ACCOUNT IS DISALLOWED TO THE EXTENT OF RS. 1,50,75,000/-. IN VIEW OF THE ABOVE, THE ADDITION I S ENHANCED TO RS. 1,50,75,000/-. 4. IN THE FOURTH GROUND OF APPEAL THE ADDITION OF RS. 29,97,552/- ON ACCOUNT OF PAYMENT FOR REGISTRATION DUTY IS CHALLENGED. THE ASSESSING OFFI CER HAD HELD THAT THIS PAYMENT WAS NOT REFLECTED IN THE BOOKS AND TREATED THIS AS UNEXPLAINED EXPENDITURE. ON EXAMINATION OF ACCOUNT IT IS FOUND THAT THE REGISTRATION EXPENSES ARE DULY ACCOUNTED IN THE BOOKS OF ACCOUNT. HENCE, THE ADDITION OF RS. 29,97,552/- IS DELETED. 13. AGAINST THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS AGGRIEVED FOR THE ENHANCEMENT MADE BY THE LD.CIT(A) , WHEREAS THE REVENUE IS AGGRIEVED FOR DELETION OF DISALLOWAN CE OF REGISTRY CHARGES. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE HAS PAID REGISTRY CHA RGES AT RS. -: 22: - 22 29,97,552/- AS OBSERVED BY THE ASSESSING OFFICER AL SO. THE DISALLOWANCE WAS MADE MERELY ON THE PLEA THAT EXPEN SES WERE NOT BOOKED IN THE BOOKS OF ACCOUNT. 15. HOWEVER, THE CIT(A) HAS DELETED THE DISALLOWANCE OF RS. 29,97,552/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF REGISTRY CHARGES ALLEGED TO BE NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE CIT(A) RECORDED A FINDING THAT ON EXAM INATION OF ACCOUNTS, THE REGISTRATION EXPENSES WERE DULY FOUND TO BE ACCOUNTED IN THE BOOKS OF ACCOUNT. THE CIT(A) ALSO DELETED THE ADDITION OF RS. 21 LAKHS MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF UNEXPLAINED EXPENDITURE BY OBSERVING THA T THERE IS NO EVIDENCE OF UNACCOUNTED PAYMENT OF RS. 21 LAKHS. THE FINDING RECORDED BY THE LD.CIT(A) WAS AS PER MATERI AL ON RECORD, AND THE SAME HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECO RD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING RECORDED BY THE CIT(A) RESULTING INTO DELE TING ADDITION OF RS. 21 LAKHS AND RS. 29,97,552/- MADE ON ACCOUNT OF PAYMENT FOR REGISTRATION DUTY. -: 23: - 23 16. IT IS CLEAR FROM THE ORDER OF CIT(A) THAT OUT OF TH E CONSIDERATION OF RS. 1,52,31,000/- PAID TO SHRI T.P . SINGH AS PER THE AGREEMENT, THE CIT(A) ONLY ALLOWED COMMISSI ON OF RS. 1,56,000/-. AS PER THE AGREEMENT ENTERED BETWEEN TH E ASSESSEE AND TPS, WE HAVE ALREADY OBSERVED HEREINAB OVE THAT THE TERMS OF AGREEMENT CLEARLY PROVIDED THAT TPS WA S TO BE PAID RS. 20 LAKHS PER ACRE IF THE LAND IS ARRANGED AND TRANSFERRED UP TO 1 5TH MARCH, 2003, AND THEREAFTER AT RS. 15 LAKHS PER ACRE. SINCE LAND WAS ARRANGED AND TRANSAF ERRED AFTER 1 5TH MARCH, 2003, THE ASSESSEE HAD MADE PAYMENT TO TP S @ RS. 15 LAKHS PER ACRE, ACCORDINGLY, THERE IS NO MER IT IN THE ORDER OF CIT(A) IN ALLOWING ONLY RS. 1,56,000/- AS AGAINST THE ACTUAL AMOUNT PAYABLE TO TPS AS PER AGREEMENT. 17. WITH REGARD TO THE COST OF ACQUISITION AS FURNISHED BY THE ASSESSEE AND DETERMINED BY THE ASSESSING OFFI CER, WHICH THE CIT(A) DID NOT ACCEPT AND ENHANCED THE ASSESSME NT, THE ISSUE HAS BEEN DISCUSSED IN GREAT DETAIL IN THE CAS E OF SISTER CONCERN OF ASSESSEE M/S. GLOBAL COMPANY HEREINABOVE , WHEREIN WE HAVE HELD THAT THE AMOUNT PAID TO THAKUR PRASAD SINGH FOR ACQUISITION OF LAND, AS PER THE TERMS OF AGREEMENT SO -: 24: - 24 ENTERED SHOULD BE TAKEN AS COST OF LAND IN THE HAND S OF THE ASSESSEE. FOLLOWING THE SAME REASONING, WE MODIFY T HE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO TAKE COS T OF LAND IN THE HANDS OF THE ASSESSEE AS PER THE PRICE OF RS. 1 5 LACS PER ACRE AGREED TO BE PAID TO THAKUR PRASAD SINGH IN TE RMS OF AGREEMENT. WE DIRECT ACCORDINGLY. 18. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART WHEREAS APPEAL OF REVENUE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :31 ST OCTOBER, 2012. CPU* 171825