ACIT, New Delhi V. Shri Santosh Kumar Garg, New Delhi

ITA 2864/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4223 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Share purchase agreement; Fair market value
• Section: 143(3); 50C; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 2864 /DEL/201 3 A.Y. : 2009-10 ACIT, CENTRAL CIRCLE-5, NEW DELHI ROOM NO. 361, 3 RD FLOOR, ARA CENTRE, E-2, JHANDEWALAN EXTENSION, NEW DELHI 110 055 VS. SH. SANTOSH KUMAR GARG, 141, SUNDER NAGAR, NEW DELHI 110 024 (PAN: AANPG3624R) (ASSESSEE) (RESPONDENT) REVENUE BY : SH. S.S. RANA, CIT(DR) ASSESSEE BY : SH. RAJIV SAXENA, ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMP UGNED ORDER DATED 19.2.2013 OF THE LD. CIT(A)-XXXI, NEW DELHI REL EVANT TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: - 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2 2. ON THE FACTS AND CIRCUMSTANCED OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 2,21,09,600/- HOLDING THAT THE PROVISION OF SECTION 50C OF THE I.T. ACT, 1961 CANNOT BE INVOKED IN THIS CASE WHEN THERE WAS A TRANSFER OF IMMOVABLE PROPERTY IN VIEW OF THE PROVISIONS OF SECTION 2(47)(VI) OF THE INCOME TAX ACT, 1961? 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING THE FACT THAT THE CHOICE OF THE ASSESSEE IN SELECTING A PARTICULAR MODE OF TRANSFER OF SUCH ASSETS WILL NOT ALTER OR DETERMINE THE NATURE OR CHARACTER OF THE ASSET. 4. THE APPELLANT CRAVES LEAVE TO AD, AMEND ANY/ ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILE D HIS RETURN OF INCOME ON 30.9.2008 DECLARING INCOME OF RS.19,18,63 0/-. SUBSEQUENTLY, FIRST NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 3 (HEREINAFTER REFERRED AS THE ACT) WAS ISSUED ON 16.7. 2010 AND DULY SERVED UPON THE ASSESSEE. AFTER THAT, A QUESTIONNAIR E ALONGWITH NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 09.8.2010 AND REQUIRED THE PART DETAILS. IN RESPONSE THERETO, THE A.R. OF THE AS SESSEE FILED THE DETAILS/DOCUMENTS FROM TIME TO TIME WHICH HAVE BEE N EXAMINED BY THE AO. AFTER THE SEARCH OPERATION, VIDE HIS LETTER DATED 26.9.2008, THE ASSESSEE SURRENDERED AN AMOUNT OF RS.2,50,00,000/- AS HIS ADDITIONAL INCOME FOR AY 200 9-10 ON ACCOUNT OF CASH RECEIVABLE AS ON 31.07.2008 AND ON ACCOUNT OF HOUSE HOLD ITEMS AND EXPENSES AMOUNTING TO RS. 25,00 ,000/-. THE AO OBSERVED THAT ASSESSEE HAS INCLUDED THE SURRENDERED AMOUNT OF RS.2,50,00,000/- AS UNDISCLOSED INCOME AND THE SAM E HAS BEEN DECLARED UNDER INCOME FROM OTHER SOURCES. AO ON PERU SING THE I.T. RETURN OF THE ASSESSEE HAS OBSERVED THAT NO CAPITAL G AIN WAS DECLARED BY THE ASSESSEE IN THE A.Y. 2008-09 ON TRANS FER OF IMMOVABLE PROPERTIES. HOWEVER, IN THE NEXT ASSESSME NT YEAR I.E. A.Y. 2009-10, THE ASSESSEE HAS DECLARED A LONG TERM CAPITAL LOSS OF RS. 5,58,792/- ON TRANSFER OF SHARES OF M/S RAJ REFU LLERS AND FIRE SAFETY EQUIPMENT PRIVATE LIMITED. SINCE NO CAPITAL GAI N WAS SHOWN BY THE ASSESSEE IN A.Y. 2008-09, ENQUIRIES WERE MADE FROM THE PURCHASERS. THE SUMMONS U/S 131 OF I.T. ACT WERE IS SUED TO SH. MAHESH MEHTA (PURCHASER) WHO INFORMED THAT THE SAID D EAL DID NOT 4 MATURE AND THE AMOUNT OF RS. 2,18,00,000/- PAID TO SH. RAKESH KUMAR GARG AND SH. SANTOSH KUMAR GARG WERE RETURNED BACK. IT WAS FURTHER OBSERVED THAT ANOTHER 'SHARE PURCHASE AGR EEMENT' DATED 6.11.2008 WAS ENTERED INTO BETWEEN SH. RAKESH K UMAR GARG & SH. SANTOSH KUMAR GARG (SELLERS) AND MRS. DEEPTI AR ORA & SH. RAMESH KUMAR (PURCHASERS) FOR TRANSFERRING THE ENTIRE SHAREHOLDING TO PURCHASERS FOR A CONSIDERATION OF RS.2,18,00,000/ -. THIS TIME THE DEAL MATURED AND THE CAPITAL GAINS (LOSS) ON THE TRANSF ER OF SHARES HAVE BEEN DECLARED BY THE ASSESSEE IN A.Y. 2009-10. HOWEVER, THE SEQUENCE OF ABOVE EVENTS CLEARLY SUGGEST THAT THE PURP OSE OF TRANSFER OF ENTIRE SHARE HOLDING OF M/S RAJ REFULLER S AND FIRE SAFETY EQUIPMENT PRIVATE LIMITED TO MRS. DEEPTI ARORA & SH. RAMESH KUMAR WAS ONLY FOR TRANSFERRING THE LAND BELONGING TO M/S RAJ REFULLERS AND FIRE SAFETY EQUIPMENT PRIVATE LIMITED. THE TRANSFER OF SHARES OF RAJ REFULLERS AND FIRE SAFETY EQUIPMENT PR IVATE LIMITED IS MERELY THE MODE OR THE VEHICLE TO TRANSFER THE LAND. FURTHER, THE SECTION 2(47)(VI) OF THE I.T. ACT, 1961 PROVIDES THA T 'TRANSFER' IN RELATION TO THE CAPITAL ASSET INCLUDES:- ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN 5 ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. 3.1 ACCORDINGLY VIDE LETTER DATED 01.12.2010, THE ASS ESSEE WAS REQUESTED TO SHOW CAUSE AS TO WHY HIS CLAIM OF CAPI TAL GAINS (LOSS) COMPUTED ON THE BASIS OF SALE CONSIDERATION OF SHAR ES OF M/S RAJ REFULLERS AND FIRE SAFETY EQUIPMENT PRIVATE LIMITED SHO ULD NOT BE REJECTED AND WHY CAPITAL GAINS SHOULD NOT BE COMPUTED BY ADOPTING THE FAIR MARKET VALUE OF THE LAND & BUILDING AS ON 6. 11.2008, AS SALE CONSIDERATION FOR THE PROPERTY NO. 115, PHASE 1. UDYOG VIHAR, GURGAON. IN RESPONSE TO THIS, VIDE LETTER DATED 23.12. 2010, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS ONLY A SHAREHOLDER AND NOT THE OWNER OF THE PROPERTY OWNED BY THE COMPANY . THEREFORE. IT CANNOT BE SAID THAT THE ASSESSEE HAS TRAN SFERRED THE LAND. AO FURTHER OBSERVED THAT IN THE PRESENT CASE, THE TRANSACTION WAS ACTUALLY FOR TRANSFERRING THE LAND AND SHARES WER E ONLY MEANS OF CONTROLLING THE OWNERSHIP OF THE LAND. ACCORDINGLY T HE INCOME UNDER THE HEAD CAPITAL GAINS IS CHARGEABLE FOR TRANSFER OF L AND AND NOT FOR TRANSFER OF SHARES AS DECLARED BY THE ASSESSEE. HE F URTHER NOTED THAT IT IS ALSO A WELL SETTLED LAW THAT CORPORATE VEIL CAN BE LIFTED IF IT IS USED FOR AVOIDING THE PAYMENT OF DUE TAXES. AS PE R THE AO, THE PRESENT CASE IS COVERED BY SECTION 2(47)(VI) OF THE I.T. ACT. 1961 AS 6 SALE OF THE SHARES OF THE COMPANY HAS THE EFFECT OF TR ANSFERRING OR ENABLING THE ENJOYMENT OF THE IMMOVABLE PROPERTY. IN VIEW OF ABOVE. IT WAS HELD BY THE AO THAT THE CAPITAL GAINS S HALL BE CHARGEABLE AS IF THE LAND WAS TRANSFERRED AND NOT SHA RES. AS PER PROVISIONS OF SECTION SOC. IN CASES WHERE THE SALE C ONSIDERATION IS LESS THAN THE VALUE AT WHICH STAMP DUTY IS CHARGEABLE B Y THE SUB- REGISTRAR, THE CAPITAL GAINS IS TO BE COMPUTED BY TAK ING THE VALUE AT WHICH STAMP DUTY IS CHARGEABLE. TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY, MATTER WAS REFERRED TO DVO, JAIPUR BY THE CIT CC- 12 WHICH HAS NOT BEEN RECEIVED. HENCE, HE DECIDED TH E SALE CONSIDERATION AS PER THE CIRCLE RATE PREVAILING AT THE TIME. IN ONE RELATED CASE OF THE SAME GROUP, THE CIRCLE RATE WERE G ATHERED FROM THE OFFICE OF TEHSILDAR, GURGAON FOR THE F.Y. 2005-0 6. HE HAS FORWARDED THE CHART OF CIRCLE RATES AS PER WHICH THE PREVAILING CIRCLE IN THE F.Y. 2005-06 FOR INDUSTRIAL PLOT AT MARUTI IND USTRIAL AREA, UDYOG VIHAR, GURGAON WAS AT MINIMUM OF RS. 12,000/- PER SQUARE YARDS AND THE SAID PLOT WAS TRANSFERRED IN THE F.Y. 20 08-09, THEREFORE, AN INDEXATION OF 15% IS ESTIMATED. HENCE, F OR THE YEAR UNDER CONSIDERATION, THE CIRCLE RATE WAS CALCULATED A T MINIMUM OF RS, 13,800/- PER SQUARE YARD. THE AREA OF THE PLOT I S 4000 SQUARE METER. THUS, THE FAIR MARKET VALUE OF THE SAID PLOT W AS COMPUTED TO MINIMUM OF RS. 6,60,19,200/-. THE ASSESSEE HAD THE O WNERSHIP OF 7 50% OF THIS LAND, THEREFORE, THE SALE CONSIDERATION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN IN THE CASE OF THE ASSE SSEE COMES TO RS.3,30,09,600/-. SINCE, THE ASSESSEE HAS ALREADY S HOWN AN AMOUNT OF RS. 1,09,00,000/- ON ACCOUNT OF THIS TRANSA CTION, THEREFORE, THE DIFFERENCE AMOUNT I.E. RS. 2,21,09,600 /- WAS BEING ADDED IN THE HANDS OF THE ASSESSEE AS LONG TERM CAPIT AL GAIN, SUBJECTIVE TO REPORT OF THE DISTRICT VALUATION OFFICE R AND ASSESSED THE INCOME OF THE ASSESSEE AT RS.2,40,28,230/- VIDE OR DER DATED 30.12.2010 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. AGAINST THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A)-XXVI, NEW DELHI, WHO VIDE HIS IMPUGNED ORDER DATED 19.2.2013 HAS ALLOWED THE APPEAL OF THE ASSESSEE. A GGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT DURING THE COURSE OF THE SEARCH, A 'SHARE PURCHASE AGREEMENT' WA S FOUND. THE 8 SALE CONSIDERATION ACCOUNTED BY THE ASSESSEE IN HIS R/ I, IS SAME AS THAT WAS MENTIONED IN THE SAID AGREEMENT. NO EVIDENC ES HAVE BEEN FOUND EITHER DURING THE SEARCH, OR THEREAFTER, ABOUT ANY EXTRA AMOUNT CHANGING HANDS. IN THE ABSENCE OF ANY SUCH EVI DENCE, THE AO HAS ATTEMPTED TO BRING TO TAX CAPITAL GAIN ON THE B ASIS OF THE FAIR MARKET VALUE OF THE PLOT OF LAND AS PER SECTION 50C OF THE IT ACT. WE FIND THAT SECTION 50C CANNOT BE INVOKED IN THE INSTANT CASE. THE RELEVANT PORTION OF S.50C AS IS APPLICABLE TO THE PRE SENT ASSESSMENT YEAR IS AS UNDER: SECTION50C SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION I N CERTAIN CASES. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED [OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE 'STAMP VALUATION AUTHORITY'') FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED [OR ASSESSED OR ASSESSABLE] SHALL; FOR THE 9 PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. 6.1 ON PERUSING THE ABOVE, IT IS OBSERVED THAT THIS THE SECTION IS APPLICABLE FOR TRANSFER OF LAND OR BUILDING WHICH I S REGISTERED WITH THE REGISTERING AUTHORITY BY PAYING STAMP DUTY. SECTION 50C COULD BE INVOKED ONLY IF THE SALE CONSIDERATION RECEIVED IS LESS THAN THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY OF THE STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. HOW EVER, THERE IS NO EVIDENCE THAT ANY STAMP DUTY HAS BEEN PAID TOWARDS TRANSFER OF THE PLOT OF LAND AS HELD BY THE AO AND THA T THE STAMP VALUATION AUTHORITY ADOPTED ANY PARTICULAR VALUE AS S ALE CONSIDERATION FOR PAYMENT OF STAMP DUTY IN THE PRESEN T TRANSACTION. IN FACT, IN THIS CASE THERE IS A MERE TRANSFER OF SHAR ES OF A COMPANY AND NO STAMP DUTY APPEARS TO BE PAYABLE TOWARDS PLOT O F LAND. IN THE ASSESSMENT ORDER ALSO IT IS NOWHERE STATED THAT AN Y STATE GOVERNMENT AUTHORITY HAS ADOPTED A PARTICULAR VALUE AT THE TIME OF PAYMENT OF STAMP DUTY BY THE PARTIES TO THE SAID SHARE PURCHASE AGREEMENT. WE FURTHER FIND THAT SECTION 50C HAS UNDER GONE AMENDMENT WITH EFFECT FROM 01/10/2009. THE WORD 'ASSES SED OR ASSESSABLE' HAS BEEN INSERTED IN PLACE OF 'ASSESSED' APPEARING BEFORE THAT DATE. IF THE TRANSACTION WERE TO HAVE TAKEN PLACE AFTER 10 01/10/2009, IT WOULD HAVE BEEN POSSIBLE TO TAKE THE VA LUE WHICH COULD HAVE BEEN ASSESSABLE BY THE STAMP VALUATION AUT HORITY EVEN IN CASES WHERE SUCH VALUE HAS NOT BE ASSESSED OR ADO PTED. SINCE THE TRANSACTION HAS TAKEN PLACE ON 06/11/2008, THE S AID AMENDMENT IS NOT APPLICABLE FOR THE CURRENT ASSESSME NT YEAR AND THEREFORE THE AO CANNOT ADOPT ON HIS OWN THE CIRCLE RA TES. THE PROCEDURE ADOPTED BY THE AO IN DETERMINING THE CAPITAL G AIN FROM THE SAID TRANSACTION IS NOT TENABLE UNDER THE LAW AS IT STOOD APPLICABLE FOR THE CURRENT ASSESSMENT YEAR. WE ARE OF THE VIEW THAT SECTION 2(47)(VI) IS APPLICABLE IN THE CASES WHERE THE ASSET IN QUESTION IS LIKE A GROUP OF HOUSES OWNED BY A COMPA NY AND EACH SHAREHOLDER IS ALLOTTED A HOUSE FOR HIS PERSONAL ENJ OYMENT SIMILAR TO WHAT IS PREVALENT IN HOUSING COOPERATIVE SOCIETIES. H OWEVER, THERE IS NO NECESSITY TO ADJUDICATE ON THIS ISSUE AS EVEN IF T IS ASSUMED THAT TRANSFER OF SHARES OF THE SAID COMPANY AMOUNTED TO TR ANSFER OF PLOT OF LAND, IN THE ABSENCE OF ANY EVIDENCE OF EXTRA AMO UNT HAVING BEEN EXCHANGED, NO ADDITION CAN BE MADE INVOKING SECTION 5 0C AS NOTED IN THE PREVIOUS PARAGRAPH. THEREFORE, ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A), WHICH DOES NOT NEE D ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTIO N OF THE LD. CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE. 11 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T STANDS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 29/09/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 29/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S