Shri Madahlal Prajapati, Indore V. The I..T.O., Indore

ITA 29/IND/2010

• Counselvise Citation: 2922714 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: H P VERMA
• Keywords: Sale consideration of property below Jantri Value; Business income; Cost of acquisition
• Section: 44AD; 50C

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. : AGTPP2699F I.T.A.NO. 29/IND/2010 A.Y. : 2006-07 SHRI MADANLAL PRAJAPTI, INCOME-TAX OFFICER, 49, GOVIND COLONY, VS 3(2), KILA COLONY, INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H.P.VERMA, ADV. AND SHRI ASHISH GOYAL, CA RESPONDENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 19.10.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1. STAMP DUTY GUIDELINE NOT APPLICABLE FOR BUSINESS INCOME THAT THE ADDITION OF RS. 5,59,950/- ON ACCOUNT OF SALE OF PLOT NO. 162C , SCHEME NO. 97/4/2, INDORE IS -: 2: - 2 UNJUSTIFIED AND IMPROPER. THE LEARNED AO HAS TAKEN STAMP DUTY GUIDE LINE AS THE MARKET VALUE OF PLOT. SUCH STAMP DUTY GUIDE LINE CAN BE TAKEN AS MARKET VALUE U/S 50C IN RESPECT OF CAPITAL GAIN. THE APPELLANT DERIVES INCOME FROM BUSINESS OF CIVIL CONSTRUCTION AND PURCHASE AND SALE OF PLOTS. SUCH ACTIVITY IS OFFERE D AND ASSESSED AS 'BUSINESS INCOME'. THUS, ADOPTION OF GUIDELINE VALUE FOR DETERMINING SALES PRICE OF PLOT IS UNJUSTIFIED AND IMPROPER. 2. WRONG GUIDELINE TAKEN THAT WITHOUT PREJUDICE TO ABOVE, THE LEARNED AO HAS DETERMINED MARKET VALE OF PLOT NO 162C SCHEME NO 97/4/2 AT @ RS 5,000/- PER METER AS PER GUIDELINE PUBLISHED IN DAILY NAI DUNIYA FOR THE YEAR 2008-09. HE FAILED TO APPRECIATE THAT THE YEAR OF TRANSACTION I S 2005-06 AND GUIDELINE DURING THE RELEVANT YEAR WAS RS 2,500/- PER SQUARE METER AND NOT RS. 5,000/- PER METER. 3. EXPENSES ON REGISTRATION, BROKERAGE AND DEVELOPMENT -: 3: - 3 OF PLOT ARE DEDUCTIBLE THAT THE APPELLANT PURCHASED THE ABOVE PLOT FOR RS 1,35,371/- FROM IDA AND INCURRED RS 70,629/- ON REGISTRATION, BROKERAGE, DEVELOPMENT AND OTHER INCIDENTAL EXPENSES. THE PLOT WAS SOLD FOR RS 3,60,000/- AS PER AFFIDAVIT OF THE PURCHASER FILED DURING ASSESSMENT PROCEEDINGS. THE LEARNED AO ERRED IN NOT ALLOWING DEDUCTION FOR ABOVE PURCHASE EXPENSES. THE SALES PRICE OF PLOT OUGHT TO HAVE BEEN TAKEN AT RS. 3,60,000/- AS CONFIRMED BY THE PURCHASER IN HIS AFFIDAVIT. 4. PURCHASE PRICE OF PLOT AT E-7, SUDAMA NAGAR WRONGLY TAKEN THAT THE ADDITION OF RS 89,746/- ON ACCOUNT OF SALE OF 500 SQUARE FEET OF PLOT AT E- 7, SUDAMA NAGAR, INDO RE IS UNJUSTIFIED AND IMPROPER. THE LEARNED AO FAILED TO APPRECIATE THAT THE PLOT WAS PURCHASED FOR RS. 5,10,000/- INCLUDING REGISTRATION EXPENSES AND NOT FOR RS 1,51,017/- AS DETERMINED BY HIM. THE APPELLANT PAID RS.4,60,000/- TO SMT. MASUDA KHATUN FOR PURCHASE OF -: 4: - 4 PLOT AND INCURRED RS 50,000/- ON REGISTRATION OF PLOT AS CONFIRMED BY MR. IMRAN SON OF LATE SMT. MASUDA KHATUN IN THE AFFIDAVIT FILED DURING ASSESSMENT PROCEEDINGS. THUS THE DETERMINATION OF PROFIT ON SA LE OF 1/4TH PLOT AT RS 1,01,746/- AS AGAINST RS ]2,000/- SHOWN BY THE ASSESSEE IS UNJUSTIFIED AND IMPROPER. 5. INCOME OFFERED U/S 44AD @ 8% OF CIVIL CONSTRUCTION SHOULD BE TAKEN THAT THE DETERMINATION OF PROFIT OF RS. (269138+140060) = RS 4,09,198/- ON SALE OF PLOT AND STRUCTURE ON 1500 SQUARE FEET OF PLOT AT E-7 SUDAMA NAGAR IS UNJUSTIFIED. THE APPELLANT OFFERED INCOME OF RS 70,400/- ON CIVIL CONSTRUCTION OF RS 8,83,000/- @ 8 % U/S 44AD WHEREAS THE LEARNED AO ESTIMATED THE PROFI T AT RS 4.09,198/-. THE APPELLANT HAS NOT MAINTAINED BOOKS OF ACCOUNT AND IS COVERED U/S 44AD. 6. FINISHING WORK NOT UNDERTAKEN BY ASSESSEE THAT THE LD. AO HAS ERRED IN DETERMINING PROFIT OF RS. 2,69,138/- AND RS. 1,40,060/- IN RESPECT OF PLOT AN D STRUCTURE ON E-17, SUDAMA NAGAR, INDORE, ON THE -: 5: - 5 GROUND THAT THE PLOT WAS PURCHASED FOR RS. 1,51,017 /- AND NOT RS. 5,10,000/-. THE LD. AO ERRED IN HOLDING THAT THE FINISHING WORK WAS DONE BY THE ASSESSEE THOUGH IT WAS SPECIFICALLY MENTIONED BY THE PURCHASER THAT MR.SURESH KHARARIA DID FINISHING WORK. FURTHER, THE LD. AO HAS COMPUTED PROFIT OF 20 % ON CIVIL CONSTRUCTIO N WORK WITHOUT ANY BASIS AND MATERIAL ON RECORD. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUS ED. 4. AN ADDITION OF RS. 5,59,950/- WAS MADE BY THE ASSESSING OFFICER IN RESPECT OF SALE OF PLOT NO.162 -C. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE AND PUR CHASE OF PLOT AND PROPERTIES DEVELOPMENT. IN RESPECT OF SALE OF PLOT NO.162-C, WE FOUND THAT THE ASSESSEE HAS SOLD PLOT AREA OF 165.49 SQ.MTR. ON A SALE CONSIDERATION OF RS. 3,60, 000/-. PURCHASE COST OF THE PLOT WAS RS. 1,96,000/- ON WHI CH BROKERAGE OF RS. 10000/- WAS PAID. THUS, THE NET PR OFIT OF RS. 1,54,000/- WAS EARNED BY THE ASSESSEE. HOWEVER, THE AO HAS TAKEN SALE CONSIDERATION OF THIS PLOT AT RS. 8,27,4 50/- BY ADOPTING MARKET RATE OF RS. 5,000/- PER SQ. MTR. HO WEVER, WE FOUND THAT EVEN WHILE APPLYING SECTION 50C, THE AO SHOULD -: 6: - 6 HAVE TAKEN THE GUIDELINE VALUE OF THE PLOT AS PER S UB REGISTRARS OFFICE, WHICH AT THE RELEVANT TIME WAS RS. 2500/- PER SQ. MTR. EVEN WHILE COMPUTING THE PURCHASE COST OF PLOT, THE AO HAS APPLIED THE MARKET VALUE IN PLACE OF THE ACTUAL COST INCURRED BY THE ASSESSEE, WHICH WAS RS. 1,96,000/-. THERE IS NO JUSTIFICATION IN THE AOS ACTION FOR TAKING PURC HASE COST AT RS. 1,13,500/- IN PLACE OF ACTUAL PURCHASE COST OF RS. 1,96,000/- AS INCURRED BY THE ASSESSEE FOR ACQUIRIN G THE PLOT. ACCORDINGLY, WE DIRECT THE AO TO RECOMPUTE THE PROF IT ON SALE OF THIS PLOT BY TAKING THE PURCHASE COST AT RS. 1,9 6,000/- PLUS BROKERAGE CHARGES OF RS. 10,000/-. THE AO IS DIRECT ED TO COMPUTE SALE PRICE BY ADOPTING GUIDELINES VALUE AT RS. 2500/- PER SQ.MTR. IN RESPECT OF PLOT AREA OF 165.49 SQ. M TR. WE DIRECT ACCORDINGLY. 5. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION OF RS. 89,746/- IN RESPECT OF SALE OF 500 SQ.FT. OF PLOT A T E-7. 6. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUS ED. WE FOUND THAT THE ASSESSEE HAS ACQUIRED A PLOT OF 2 000 SQ.FT., WHICH WAS DIVIDED INTO THREE PARTS. THIS PLOT WAS A CQUIRED BY THE ASSESSEE AT RS. 4,50,000/-. A SUM OF RS. 60,000 /- WAS -: 7: - 7 PAID FOR REGISTRY AND OTHER CHARGES. THUS, THE TOTA L COST OF 2,000 SQ.FT. OF PLOT WORKS OUT AT RS. 5,10,000/-. W HILE COMPUTING PROFIT ON SALE OF SUCH PLOT, THE AO HAS T AKEN PURCHASE COST OF TOTAL 2000 SQ. FT. AT RS. 80,000/- AND RS. 71,017/- AS REGISTRY AND OTHER CHARGES. THUS, TOTAL COST AS TAKEN BY THE ASSESSING OFFICER WORKS OUT AT RS. 1,5 1,017/-. ACCORDINGLY, AN ADDITION OF RS. 89,746/- WAS MADE B Y THE ASSESSING OFFICER FOR PART OF 500 SQ.FT. OF LAND SO LD BY THE ASSESSEE AND ADDITION OF RS. 2,69,138/- WAS MADE WH ICH HAS BEEN SEPARATELY DEALT BY US IN THE SUBSEQUENT PARAS . ON THE BASIS OF MATERIAL ON RECORD, WE DIRECT THE AO TO TA KE THE TOTAL COST OF PLOT AT RS. 4.50 LAKHS AND REGISTRY CHARGES OF RS.60,000/- AS ACTUALLY PAID BY THE ASSESSEE AND TO REWORK OUT PROFIT ON SALE OF SUCH PLOT. WE DIRECT ACCORDIN GLY. 7. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDIT ION OF RS. 1,40,060/- IN RESPECT OF SALE OF CONSTRUCTED AR EA BY THE ASSESSEE. 8. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAS SOL D THE CONSTRUCTED AREA FOR RS. 8,82,800/- OUT OF WHIC H COST OF PLOT WAS RS. 3,82,500/-. THUS, THE COST OF CONSTRUC TION -: 8: - 8 REMAINED AT RS. 5,00,300/-. HOWEVER, THE AO HAS TAK EN COST OF FURNISHING AT RS. 2 LAKHS AND COMPUTED PROFIT ON SALE OF RS. 7,00,300/- ( RS. 5,00,300/- + RS. 2,00,300/-) BY AP PLYING PROFIT RATE OF 20 %. THUS, HE ESTIMATED THE PROFIT AT RS. 1,40,060/-. CONTENTION OF THE ASSESSEE WAS THAT THE ASSESSEE HAS SOLD ONLY STRUCTURES TO THE BUYERS AND DID NOT DO ANY FURNISHING WORK. ON INQUIRY BY THE ASSESSING OFFICE R, THE BUYER HAS CONFIRMED THAT THE ASSESSEE HAS NOT DONE FURNISHING WORK AND IT WAS DONE BY MR.SURESH KHARAR IA. SINCE THE ASSESSEE HAS NOT UNDERTAKEN ANY FURNISHING, THE RE IS NO REASON FOR COMPUTING PROFIT ON SUCH FURNISHING WORK , WHICH HAS NOT BEEN UNDERTAKEN BY THE ASSESSEE. THE AO IS, THEREFORE, DIRECTED TO RE-COMPUTE PROFIT ON SALE OF RS. 5,00,300/-. 9. WITH REGARD TO ESTIMATION OF PROFIT OF RS. 2,69,138 /- ON PURCHASE OF 1500 SQ.FT. OF PLOT, FACTS ARE NOT CLEA R FROM THE RECORD, WE, THEREFORE, RESTORE THE MATTER BACK TO T HE FILE OF AO FOR DECIDING AFRESH BY TAKING INTO ACCOUNT THE ACTU AL COST OF LAND PAID BY THE ASSESSEE. THE AO IS AT LIBERTY TO VERIFY THE -: 9: - 9 ACTUAL COST INCURRED BY THE ASSESSEE AND THE REGIST RY AND OTHER CHARGES PAID THEREON. WE DIRECT ACCORDINGLY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST APRIL, 2011. CPU* 2021