The ACIT, Circle-3, Surat V. M/s. Vatika Developers, Surat

ITA 2453/AHD/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67699 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 20-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: MEHUL PATEL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Business income; Cost of acquisition
• Section: 143(3); 50C; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.2453/AHD/2009 A.Y. 2006-07 THE ACIT CIRCLE-3, SURAT VS M/S. VATIKA DEVELOPERS, SURAT. 10/B, RATNASHYAM APARTMENTS, RAVI DHAM COMPLEX, GHOD DOD ROAD, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P.L. KUREEL, SR.D.R., ASSESSEE(S) BY : SHRI MEHUL PATEL, A.R. / DATE OF HEARING : 23/09/2013 / DATE OF PRONOUNCEMENT: 30/09/2013 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-V, SURAT, DATED 22.05.2009. THE REVE NUE HAS CHALLENGED THE RELIEF GRANTED BY LEARNED CIT(A) AS PER THE ORI GINAL GROUND RAISED AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS .66,49,643/- AS UNEXPLAINED INVESTMENT U/S.69B OF THE ACT. 1.1 LATER ON ADDITIONAL GROUND HAS ALSO BEEN RAISED IN RESPECT OF AN ANOTHER ISSUE; WHICH WAS DECIDED BY LEARNED CIT(A); AS PER THE FOLLOWING ADDITIONAL GROUND. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LAW LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE SEC TION 50C WILL BE APPLICABLE ON THE SALE OF LAND. ITA NO.2453/AHD/2009 ACIT VS. M/S. VATIKA DEVELOPERS, SURAT FOR A.Y. 2006-07 - 2 - 1.2 REVENUE HAS ALSO REVISED THE GROUND AND IN RESP ECT OF ORIGINAL GROUND FURTHER AN ISSUE HAS BEEN RAISED AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LAW LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF TRANSACTION OF SALE OF LAND, HOLDING THAT THE ASSESSEE WAS DOING BUSINESS WHERE AS THE ASSESSEE ITSELF ADMITTED THE INCOME UNDER CAPITAL GAIN. 2. AT THE OUTSET, IN RESPECT OF THE ADMISSION OF TH E ADDITIONAL GROUND, WE HAVE HEARD BOTH THE SIDES AND ON DUE CONSIDERATI ON OF THE FACTS AND THE LEGAL POSITION SINCE THE ISSUE IS LEGAL IN NATU RE ARISING FROM THE FACT ALREADY ON RECORD, THEREFORE, THE SAME IS HEREBY AD MITTED AND TO BE ADJUDICATED UPON AS FOLLOWS. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE IT ACT, DATED 30 TH SEPTEMBER, 2008 WERE THAT THE ASSESSEE FIRM HAS PURCHASED A LAND SITUATED AT BLOCK NO.171, GAM NIMLAI, TEHSIL JALALPOR FOR A CONSIDERATION OF RS.1 5 LACS AND PAID THE STAMP DUTY OF RS.5,58,570/-. IT WAS FOUND BY THE AO THAT THE VALUE FOR THE PURPOSE OF STAMP DUTY WAS DECLARED AT RS.81,49, 643/-. THE DIFFERENCE BETWEEN THE PRICE CONSIDERATION AS STATED BY THE AS SESSEE AND THE PRICE OF THE LAND AS PER THE STAMP DUTY PURPOSE WAS THUS PRO POSED TO BE ASSESSED AT RS.66,49,643/- BY INVOKING THE PROVISION OF SECT ION 69 OF IT ACT. THE ASSESSEE HAS RAISED CERTAIN OBJECTIONS; HOWEVER, TH E AO WAS NOT CONVINCED AND HELD THAT THE AFORESAID DIFFERENCE WA S NOTHING BUT UNACCOUNTED INVESTMENT IN THE PURCHASE OF THE PROPE RTY. ACCORDINGLY, THE SUM OF RS.66,49,643/- WAS TREATED AS UNEXPLAINED IN VESTMENT WHICH WAS TAXED BY INVOKING THE PROVISION OF SECTION 69 OF TH E IT ACT IN THE HANDS OF THE ASSESSEE. ITA NO.2453/AHD/2009 ACIT VS. M/S. VATIKA DEVELOPERS, SURAT FOR A.Y. 2006-07 - 3 - 4. THE MATTER WAS CARRIED BEFORE LEARNED CIT(A) WHO HAS RELIED UPON FEW DECISIONS OF THE TRIBUNAL AND GRANTED RELIEF IN THE FOLLOWING MANNER: I HAVE PERUSED THE FACTS OF THE CASE AS DISCUSSED BY THE ASSESSING OFFICER AND ALSO CAREFULLY WENT THROUGH THE SUBMISSIONS MADE BY THE AR AND JUDICIAL DECISIONS RELIED UPON. I HAVE GONE THROUGH THE REGI STERED SALE DOCUMENTS IN RESPECT OF PURCHASE AS WELL AS SALE OF PROPERTY AND I AM OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 69 CANNOT BE MAD E APPLICABLE TO THE ASSESSEE FIRM ON THE BASIS OF THE STAMP VALUATION A UTHORITY AS WELL AS WITHOUT ANY COGENT EVIDENCE OF EXCESS PAYMENT MADE BY THE A SSESSEE FIRM TO THE SELLER. HE ANALOGY DRAWN BY THE AO CANNOT BE AGREED UPON BECAUSE HAD THE LEGISLATURE INTENDED SO, IT COULD HAVE EASILY SPECI FIED SUCH A PROPOSITION IN THE PROVISION ITSELF. THE DECISION IN THE CASE OF (1) I TO V/S. OPTEC DISC MANUFACTURING REPORTED IN (2008) 11 DTR (CHD)(TRIB) 264 AND IN THE CASE OF BHARATKUMAR V. PATEL VS. ACIT, VIDE ITA NO.1748/AHD /2008 OF ITAT AHMEDABAD, RELIED UPON BY THE ASSESSEE IS DIRECTLY APPLICABLE WHEREIN IT HAS BEEN LAID DOWN THAT THE PROVISION OF SECTION 69 IS NOT APPLICABLE TO THE PURCHASER ON THE BASIS OF STAMP VALUATION AUTHORITY . IN THE CIRCUMSTANCES, THE ADDITION MADE U/S.69 IS HEREBY DELETED. 5. ON THIS ISSUE, WE HAVE HEARD BOTH THE SIDES. ONC E THE ADMITTED FACTUAL POSITION IS THAT THE PROVISION OF SECTION 5 0C WERE INVOKED BY THE AO IN RESPECT OF PROPERTY WHICH WAS PURCHASED BY TH E ASSESSEE AND THE DIFFERENCE OF THE CONSIDERATION WAS TAXED IN THE HA NDS OF THE ASSESSEE U/S. 69 OF THE IT ACT, A SERIES OF DECISIONS ARE IN FAVO UR OF THE ASSESSEE WHEREIN IT IS HELD THAT IN SUCH A SITUATION THE PRO VISION OF SECTION 50C CANNOT BE INVOKED. IN THIS CONNECTION, THE DECISION S CITED BY LEARNED CIT(A) ARE CORRECT. ONCE, THE LAW IS VERY WELL SETT LED THAT THE PROVISION OF SECTION 50C ARE APPLICABLE ONLY IN THE CASE OF T HE SALE OF THE PROPERTY AND NOT IN THE CASE OF THE PURCHASE OF THE PROPERTY , THEREFORE, RESPECTFULLY FOLLOWING THESE DECISIONS, WE FIND NO FALLACY IN TH E VIEW TAKEN BY LEARNED CIT(A). THE SAME IS HEREBY CONFIRMED AND THIS GROUN D OF THE REVENUE IS HEREBY REJECTED. ITA NO.2453/AHD/2009 ACIT VS. M/S. VATIKA DEVELOPERS, SURAT FOR A.Y. 2006-07 - 4 - 6. NEXT GROUND IS THE ADDITIONAL GROUND, WHICH HAS EMANATED FROM THE FACT OF THE CASE THAT THE SAME LAND, AS DESCRIB ED ABOVE WAS SOLD BY THE ASSESSEE FOR A PRICE CONSIDERATION OF RS.20,65,000/ -. ACCORDING TO THE AO, THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF THE LAND. THE AO HAS ALSO NOTED THAT TH E ASSESSEE HAD TO MAKE A PAYMENT OF ADDITIONAL STAMP DUTY OF RS.5,18,300/- . THE AO HAD APPLIED THE JANTRY RATE AND THEREUPON ARRIVED AT THE FIGU RE OF RS.82,35,238/-, WHEREAS THE ASSESSEE HAD DISCLOSED THE SALE CONSIDE RATION OF RS.20,65,000/-. ACCORDING TO THE AO, SECTION 50C IS A DEEMING PROVISION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN AS PER THE JANTRY PRICE FIXED FOR THE PURPOSE OF LEVY OF STAMP DUTY. SINCE, THE ASSESSEE HAS ACCEPTED THE VALUE DETERMINED BY THE STAMP DUTY AUT HORITY AND PAID THE ADDITIONAL STAMP DUTY, THEREFORE, THE AO HAS DETERM INED THE SALE CONSIDERATION ACCORDINGLY. SINCE, THE COST OF ACQUI SITION BY THE AO WAS ENHANCED; HENCE, THE SHORT TERM CAPITAL GAIN COMPUT ED BY THE AO WAS AS UNDER: FULL VALUE OF CONSIDERATION : RS.82,35,238 LESS: DEEMED COST OF ACQUISITION : RS.81,49,643 AS DISCUSSED IN PARA 4 DIFFERENCE : RS. 85,595 7. WHEN THIS ISSUE WAS CARRIED BEFORE THE LEARNED C IT(A), HE HAS HELD THAT THE TRANSACTION BEING CARRIED OUT WITHIN A SPA N OF ONE AND A HALF MONTHS, THEREFORE, THIS WAS A BUSINESS TRANSACTION AND NOT TO BE ASSESSED AS SHORT TERM CAPITAL GAIN. AFTER HOLDING THIS, LEA RNED CIT(A) HAS THEN HELD THAT SINCE IT WAS A BUSINESS TRANSACTION, THER EFORE, THERE WAS NO QUESTION OF THE APPLICABILITY OF THE PROVISION OF S ECTION 50C OF IT ACT. IN THIS REGARD, THE RELEVANT PORTION OF THE FINDINGS O F LEARNED CIT(A) ARE REPRODUCED BELOW: ITA NO.2453/AHD/2009 ACIT VS. M/S. VATIKA DEVELOPERS, SURAT FOR A.Y. 2006-07 - 5 - HAVING APPLIED MY MIND TO THE ISSUE CAREFULLY AND HAVING CONSIDERED PLETHORA OF JUDGMENTS INCLUDING THOSE OF JURISDICTI ONAL ITAT ON THIS VERY ISSUE, I AM UNABLE TO AGREE WITH THE PROPOSITION OF THE AO THAT PROVISIONS OF SECTION 50C IS APPLICABLE TO THE ASSESSEE FIRM BECA USE OF THE FACT THAT THE DEED OF PARTNERSHIP EXECUTED ON 05/09/2005 CLEARLY INDICATES THE NATURE OF BUSINESS AS LAND DEVELOPERS. MOREOVER, THE TRANSA CTION OF PURCHASE AND SALE OF LAND IN QUESTION IS WITHIN A SPAN OF 1 MO NTH PERIOD ONLY WHICH ALSO FAVOURS THE INTENTION OF THE ASSESSEE FIRM TO DO LA ND BUSINESS AND NOT TO EARN CAPITAL GAINS. IT IS ALSO A FACT THAT JUST BECAUSE THE EX-CA ON A WRONG FOOTING WORKED OUT THE BUSINESS INCOME OF THE ASSESSEE AS S HORT TERM CAPITAL GAIN, THE REAL CHARACTERISTICS OF THE TRANSACTION EXECUTE D AS BUSINESS INCOME CANNOT BE DENIED TO THE ASSESSEE FIRM AND THEREFORE ALSO I T WOULD NOT BE CORRECT TO APPLY THE PROVISIONS OF SECTION 50C TO THE ASSESSEE FIRM. THE DECISION IN THE CASE M/S. INDERLOK HOTELS PVT. LTD V/S. ITO VIDE ITA NO.4376/MUM/2008 ITAT MUMBAI BENCH I RELIED UPON BY THE ASSESSEE I S DIRECTLY APPLICABLE IN THIS CASE, WHEREIN IT HAS BEEN LAID DOWN THAT THE P ROVISION OF SECTION 50C IS NOT APPLICABLE WHEN THE SALE OF LAND IS TREATED AS BUSINESS INCOME AND NOT AS CAPITAL GAIN. IN THE CIRCUMSTANCES, THE ADDITION MA DE U/S. 50C IS ALSO DESERVES TO BE DELETED. 8. SINCE, THE LEARNED CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ASSIGNING ALTOGETHER DIFFERENT REASONING W HICH WAS NOT DECIDED BEFORE THE AO, THEREFORE, THE REVENUE DEPARTMENT HA D REVISED THE GROUND AS REPRODUCED ABOVE. WE HAVE, THEREFORE, HEA RD BOTH THE SIDES IN RESPECT OF THE REVISED GROUND AS WELL AS THE ADDITI ONAL GROUND. ON HEARING THE RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THIS ISSUE IS REQUIRED TO BE REFERRED BACK TO THE FILE OF THE AO SO THAT THE PRO VISIONS OF SECTION 50C CAN BE JUDICIOUSLY INVOKED IN RESPECT OF THE SALE O F THE PROPERTY. ONCE, THE ADMITTED LEGAL POSITION IS THAT THE PROVISIONS OF SECTION 50C CAN BE APPLIED FOR SALE TRANSACTIONS; HENCE, IT IS EXPECTE D FROM THE AO TO INVOKE THE PROVISIONS OF SECTION 50C AS PRESCRIBED UNDER L AW. IN THIS REGARD, THE LAW IS UNAMBIGUOUS THAT SECTION 50C(2) PRESCRIBES T HAT WHERE THERE IS A DIFFERENCE IN THE CONSIDERATION AS DECLARED BY THE ASSESSEE AND THE VALUE AS ADOPTED BY THE STAMP VALUATION AUTHORITY THEN TH E AO IS REQUIRED TO ITA NO.2453/AHD/2009 ACIT VS. M/S. VATIKA DEVELOPERS, SURAT FOR A.Y. 2006-07 - 6 - REFER THE ISSUE OF VALUATION OF THE ASSET IN QUESTI ON TO A VALUATION OFFICER. IN THE PRESENT CASE, SINCE THE AO HAS NOT PROCEEDED AS PER THE SAID PROVISION OF THE ACT, THEREFORE, IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE AO FOR DE NOVO ADJUDICATION AS PER LAW. 9. THE ABOVE EXERCISE OF INVOCATION OF SECTION 50C CAN ONLY BE UNDERTAKEN IF THE AO FIRST ARRIVE AT THE CONCLUSION THAT THE TRANSACTION IN QUESTION WAS A CAPITAL GAIN AND NOT A BUSINESS INCO ME. THE AO IS, THEREFORE, EXPECTED TO EXAMINE THE INTENTION BEHIND THE PURCHASE OF THE PROPERTY AS ALSO THE PURPOSE FOR WHICH THE FIRM HAS BEEN CONSTITUTED. ON EXAMINATION OF THOSE FACTS AND THE INTENTION OF THE ASSESSEE, THE AO CAN ARRIVE AT A JUDICIOUS CONCLUSION ABOUT THE NATURE O F THE TRANSACTION. IF ACCORDING TO AO IT WAS A SHORT TERM CAPITAL GAIN THEN ONLY THE PROVISIONS OF SECTION 50C CAN BE INVOKED, OTHERWISE NOT. WITH THESE DIRECTIONS, WE REFER THIS ISSUE BACK TO THE AO TO B E DECIDED DE NOVO AS PER LAW. RESULTANTLY, THE ADDITIONAL GROUND OF THE REVENUE DEPARTMENT MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED AS PER THE TERMS DIRECTED HEREINABOVE, THAT TOO FOR STATISTICAL PURP OSE ONLY. SD/- SD/- (ANIL CHATURVEDI) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD; DATED 30/09/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY