Saras Metals Pvt. Ltd., Ghaziabad V. ITO, New Delhi

ITA 2770/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0022 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.C. SUDHIR , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 2770 /DEL / 2013 ASSESSMENT YEAR: 2009 - 10 SARAS METALS PVT. LTD. VS. INCOME TAX OFFICER, K1 - 13, KAVI NAGAR, WARD - 7(3), NEW DELHI GHAZIABAD. (PAN: AAGCS0349R ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AKHILESH KUMAR, ADV. RESPONDEN T BY: SH. B.R.R. KUMAR, SR. DR DATE OF HEARING: 29.04.2015 DATE OF PRONOUNCEMENT: 06.05.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS IS AN APPEAL FILED BY THE APPELLANT FOR THE ASSESSMENT YEAR 2009 - 10 IMPUGNING THE ORDER OF LEARNED CIT(A), NEW DELHI, DATED 01.03.2013 RAISING THE FOLLOWING GROUNDS OF APPEAL: I. BECAUSE, THE ORDER OF LEARNED LOWER AUTHORITY IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE IS UNSUSTAINABLE. II. BECAUSE. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) GROSSLY ERRED IN UPHOLDING THE FINDING OF LD. AO THAT 'PLOT' ACTUALLY WAS AN INVESTMENT AND NOT STOCK IN TRADE AS CLAIMED, MERELY BY OBSE RVING THAT EVIDENCE IN SUPPORT OF BUSINESS OF SALE/PURCHASE OF LAND ARE INADEQUATE EVEN AFTER EXAMINING THE AUDITED BALANCE SHEETS/RESOLUTION ETC RELATING EVIDENCES ON THE RECORD AND WRONGLY STATED THAT B/S OF EARLIER YEARS NEEDS VERIFICATION BY AO AS THEY WERE NEVER PRODUCED BEFORE HIM WHILE AO HIMSELF NEVER STATED SO. HENCE, FINDING OF LOWER AUTHORITIES IS PERVERSE AND APPLICATION OF SECTION 50 C WITH CONSEQUENT ADDITION OF RS. 39,04,000/ - IS INHERENTLY ILLEGAL. 2 ITA NO. 2770/DEL /2013 ASSESSMENT YEAR: 2009 - 10 III. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN OBSERVING THAT ACTIVITY OF SALE/PURCHASE IS VERY LESS IN EARLIER YEAR AND MEN TION OF SALE/PURCHASE BUSINESS IS INSIGNIFICANT IN THE MEMORANDUM, SO AO IS CORRECT TO INVOKE PROVISIONS OF SECTI ON 50C AND HENCE APPLICATION OF PROVIS ION OF SECT ION 50C IS BASED ON IRRELEVANT CONSIDERATIONS/PRESUMPTIONS AND WITHOUT ANY MATERIAL IN SUPPORT OF SUCH FINDING WHICH IS NOT ACCEPTABLE UNDER LAW. IV. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HA S FAILED TO APPRECIATE THAT THE ASSESSEE' S RECORDS ARE CLEARLY PROVING THE PLOT UNDER QUESTION AS 'STOCK IN TRADE' EVEN BEFORE THE SCRUTINY FOR CURRENT YEAR AND HE ALSO EXPLAINED THE REASON FOR LOWER SALE PRICE ETC. AND NOW IT WAS THE TURN OF REVENUE TO PROVE THE ALLEGED/PRESUMED STAND WITH EVIDE NCE IN WHICH IT MISERABLY FAILED BUT STILL SAID ADDITION IS UPHELD. V. BECAUSE, WITHOUT PREJUDICE TO ABOVE AND ONLY IN ALTERNATIVE, EVEN IF THE PLOT IS HELD AS 'INVESTMENT' FOR ARGUMENT SAKE THAN ALSO BOTH THE LEARNED LOWER AUTHORITIES HAVE WRONGLY COMPUTED/ UPHELD SHORT TERM CAPITAL GAIN ON SALE OF SUCH PLOT DESPITE REPEATEDLY STATING IN THE ORDERS THAT THE PLOT IS HELD FOR MORE THAN 3 YEARS AND SO ONLY LONG TERM CAPITAL GAIN COULD BE COMPUTED BY INDEXING THE COST ETC IN TERMS OF SECTIONS 48 OF THE ACT AND HE NCE, COMPUTATION IS WRONG BEING AGAINST THE SPECIFIC PROVISIONS OF LAW. AS SUCH APPLICATION OF PROVISIONS OF SECTION 50 C AND CONSEQUENT ADDITION OF RS. 39,04,000/ - IS ILLEGAL BEING AGAINST THE SPECIFIC PROVISION OF LAW WITH FACTS AND CIRCUMSTANCES ON TH E RECORD HENCE IT IS HEREBY PRAYED THAT THE TOTAL ADDITION MAY KINDLY BE QUASHED WITHOUT PREJUDICE TO THE ABOVE BUT ONLY AND ONLY IN ALTERNATIVE, IF IT IS NOT POSSIBLE TO ALLOW THE ABOVE PRAYER THAN IT IS ALSO PREYED THAT LD. AO MAY KINDLY BE DIRECTED TO C OMPUTE LONG TERM CAPITAL GAIN AS PER LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. FOR THE ASSESSMENT YEAR 2009 - 10, THE APPELLANT HAS FILED THE RETURN OF INCOME ON 03.12.2009 DECLARING NIL INCOME AND THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS AND FINALLY THE ASSESSMENT ORDER CAME TO BE PASSED VIDE ORDER DATED 30.12.2011 UNDER SECTION 143(3) OF THE INCOME - T AX ACT, 1961 (FOR SHORT THE ACT ) AT A TOTAL INCOME OF RS. 3 ITA NO. 2770/DEL /2013 ASSESSMENT YEAR: 2009 - 10 39,04,000/ - . THE DISPARITY BETWEEN RETURNED INCOME AND ASSESSED INCOME IS ON ACCOUNT OF ADDITION OF RS. 39,04,000/ - UNDER THE PROVISIONS OF SECTION 50C OF THE ACT. IN RESPECT OF THE PROPERTY SOLD, THE ASSESSING OFFICER HAD NOT ACCEPTED THE CONTENTIONS OF THE APPELLANT THAT THE PROPERTY SOLD WAS FORMING A PART OF STOCK IN TRADE. HENCE, THE PROVISIONS OF SECTION 50C OF THE ACT CANNOT BE APPLIED. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LEA RNED CIT(A) WHO VIDED ORDER DATED 01.03.2013 DISMISSED THE APPEAL BY HOLDING THAT THE SUBJECT PROPERTY WAS NOT A PART OF STOCK IN TRADE BUT A CAPITAL ASSET AND THEREFORE, THE PROVISIONS OF SECTION 50C OF THE ACT ARE APPLICABLE . HENCE, THE PRESENT APPEAL IS BEFORE US. 3. LEARNED AUTHORIZED REPRESENTATIVE HAS VEHEMENTLY ARGUED THAT THE SUBJECT PROPERTY WAS HELD AS A PART OF THE STOCK IN TRADE AND OUR ATTENTION WAS DRAWN TO THE BALANCE SHEET OF THE APPELLANT COMPANY AS ON 31 ST MARCH, 2006 THAT IS THE YEAR IN WHICH THE PROPERTY WAS ACQUIRED, WHEREIN IT WAS SHOWN AS A PART OF INVENTORY. HE ALSO BROUGHT OUT ATTENTION TO THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS WHEREIN IT WAS RESOLVED TO START THE NEW BUSINESS AS PER CLAUSES 45 AND 46 OF OBJECTS CLAUSE OF M EMORANDUM OF ASSOCIATION , PLACED AT PAGE NO. 43 OF THE PAPER BOOK. HE ALSO DRAWN OUR ATTENTION TOWARDS CLAUSES 45 AND 46 OF THE OTHER OBJECTS OF MEMORANDUM OF ASSOCIATION OF THE COMPANY TO DRIVE HIM THE POINT THAT THE APPELLANT S BUSINESS IS TO DEAL IN IMM OVABLE PROPERTIES. THEREFORE, HE SUBMITTED THAT WHERE THE PROPERTY SOLD IS FORMING PART OF STOCK IN TRADE, THE 4 ITA NO. 2770/DEL /2013 ASSESSMENT YEAR: 2009 - 10 PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE. IN SUPPORT OF THIS PROPOSITION, HE RELIED UPON THE FOLLOWING JUDGMENTS: I. CIT VS. KAN CONS TRUCTION AND COLONIZERS (P) LTD., (2012) 20 TAXMANN.COM 381 (ALL.) II. ACIT VS. NIPUN BUILDERS & DEVELOPERS PVT. LTD., ITA NO. 3867/2011, ORDER DATED 28.06.2013 III. CIT VS. THIRUVENGADAM INV. P. LTD. , (2010) 320 ITR 345 (MAD. ) IV. CIT VS. MUKESH KISHORE BAROT CO - OWN ERS, (2013) 33 TAXMANN.COM 87 (GUJ.) V. K.P. VERGESE, 131 ITR 297 (SC) . 4. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IT IS A SOLITARY INSTANCE OF PURCHASE AND SALE OF THE IMMOVABLE PROPERTY, HE CANNOT BE TREATED AS A TRADER IN THE IMMOVABLE PROPERTY. HE FURTHER SUBMITTED THAT IN THE BO OMING CONDITION OF REAL ESTATE, IT CANN OT BE BELIEVED THAT THERE IS NO GAIN ON THE PROPERTY EVEN AFTER LAPSE OF THREE YEARS. THE VERSION OF THE APPELLANT COMPANY IS NOTHIN G BUT A MAKE BELIEVE STORY TO AVOID THE CAPITAL GAIN TAX. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, WE ARE REQUIRED TO ADJUDICATE IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHET HER THE SUBJECT PROPERTY WAS SOLD IN THE CAPACITY OF INVESTOR OR TRADER. IF THE SUBJECT PROPERTY HAD BEEN SOLD AS INVESTOR, OBVIOUSLY IT IMPLIES THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE. ON THE OTHER HAND, IF THE SUBJECT PROPERTY IS SOLD IN THE CA PACITY OF TRADER, THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. SO IN THE GIVEN CIRCUMSTANCES, WE HAVE TO 5 ITA NO. 2770/DEL /2013 ASSESSMENT YEAR: 2009 - 10 ADJUDICATE WHETHER THE APPELLANT COMPANY IS INVESTOR OR A TRADER IN IMMOVABLE PROPERTIES. 6. ON PERUSAL OF MAIN OBJECTS AND OTHER OBJECTS MENTIO NED IN THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT COMPANY, IN OUR UNDERSTANDING, THERE WAS NO CLAUSE ENABLING THE APPELLANT COMPANY TO DEAL IN THE PROPERTIES. CLAUSE 45 OF THE OTHER OBJECTS ONLY ENABLES THE APPELLANT COMPANY TO HOLD THE PROPERTIES AS I NVESTOR. IT DOES NOT SPECIFICALLY EMPOWER THE COMPANY TO DEAL IN THE IMMOVABLE PROPERTIES. THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS, PLACED AT PAGE NO. 43 OF THE PAPER BOOK, DOES NOT COME TO THE RESCUE OF THE APPELLANT COMPANY AS CLAUSES 45 AND 46 D O NOT ENABLE THE APPELLANT COMPANY TO INDULGE IN DEALING WITH PROPERTIES. WE ALSO NOTE THAT ONLY TWO PROPERTIES WERE HELD BY THE APPELLANT COMPANY AND OUT OF WHICH ONE IS SOLD DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. THE MAIN OBJECTS FOR W HICH THE COMPANY WAS INCORPORATED IS TO CARRY ON BUSINESS OF MANUFACTURES, PROC ESSORS, IMPORTERS, EXPORTERS AND DEALERS IN ALL KINDS OF FERROUS AND NON - FERROUS MATERIAL MEANT FOR ANY INDUSTRIAL OR NON - INDUSTRIAL USE WHATSOEVER AND TO CARRY ON THE BUSINESS OF CASTINGS, FABRICATION, COLD AND HOT ROLLING, RE - ROLLING , S LITTING, ADGEMILTING, SHEETING, STAMPING, PRESSING, EXTRUDING, FORGING, DRAWING, FLATTENING, STRAIGHTENING , HEAT TREATMENT OF ALL KINDS OF STEEL AND OTHER METALS OR ANY OTHER STRIPES, SHEETS, FOI LS, TAPES, WIRES, RODS, PLATES AND ANY OTHER SECTIONS, SHAPES OR FORMS. 6 ITA NO. 2770/DEL /2013 ASSESSMENT YEAR: 2009 - 10 7. KEEPING IN VIEW THE ABOVE, WE HOLD THAT THE APPELLANT SOLD THE PROPERTY ONLY AS INVESTOR. THE VERSION OF THE APPELLANT THAT THE PROPERTY IS HELD AS S TOCK IN TRADE CANNOT BE BELIEV ED. H AVING HELD THAT THE PROPERTY SOLD WAS HELD AS INVESTMENT OR CAPITAL ASSET, THEN THE PROVISIONS OF SECTION 50C ARE CLEARLY APPLICABLE. THE FACT THAT THE APPELLANT HAD NOT RECEIVED CONSIDERATION OVER ABOVE SALE PROCEEDS STATED IN THE REGISTERED DOCUMENT SHALL HAVE ANY BEARING ON THE APPLICABILITY OF THE PROVISIONS OF SECTION 50C OF THE ACT. 8. HENCE, THE APPEAL FILED BY THE APPELLANT IS DISMISSED. 9. IN THE RESULT, THE APPEAL IS DISMISSED . THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 6 T H MAY , 2015. S D / - S D / - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6 T H MAY , 2015. RK/ - COPY FORWARDED TO: 1. APPELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI