Shyamsree Promoters Pvt. Ltd. , Kolkata V. PCIT-1, Kolkata, Kolkata

ITA 299/KOL/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5596 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2023
• Assessment Year: misc
• Appeal Filed On: 30-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Revision of order; Fair market value; Valuation report; Assessment record; Set aside
• Section: 263; 143(3); 50C

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA श्री राज े श क ु मार, ल े खा सदस्य एवं श्री संजय शमा ा , न्याधयक सदस्य क े समक्ष Before SRI RAJESH KUMAR, ACCOUNTANT MEMBER & SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited......................Appellant [PAN: AAKCS 0359 P] Vs. PCIT-1, Kolkata....................................................Respondent Appearances: Assessee represented by – Sh. Siddharth Agarwal, A/R. Department represented by – Sh. S. Datta, CIT D/R. Date of concluding the hearing : August 28 th , 2023 Date of pronouncing the order : November 6 th , 2023 ORDER Per Rajesh Kumar, Accountant Member: This appeal preferred by the assessee is against the order passed by the Pr. Commissioner of Income Tax-1, Kolkata (hereinafter referred to Ld. 'Pr. CIT') dated 02.02.2023 for the Assessment Year (in short ‘AY’) 2018-19. I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 2 of 9 2. The issue raised in ground no. 1 is against the invalid exercise of jurisdiction u/s 263 of the Act by Ld. Pr. CIT thereby setting aside the assessment order passed by the Assessing Officer (in short ld. 'AO') u/s 143(3) of the Act read with Sections 143(3A) & 143(3B) of the Act dated 02.03.2021. 3. The facts in brief are that the assessee filed the return of income at NIL which was accepted by the AO while framing assessment u/s 143(3) of the Act dated 02.03.2021. Thereafter, the upon examination of assessment records, the Ld. PCIT observed that the assessee had purchased a piece of land for a consideration of Rs. 59,90,000/- the fair market value of which as the Stamp Valuation Authority, Government of West Bengal for stamp duty purposes was Rs. 1,19,49,869/- and accordingly came to the conclusion that the provisions of Section 56(2)(x) of the Act were attracted. Accordingly, Ld. Pr. CIT held that the value as per the Stamp Valuation Authority exceeds by more than Rs. 50,000/- and therefore, the same is chargeable under the head ‘income from other sources’. Ld. Pr. CIT also observed that the AO should have referred the matter to the DVO, however, the same was not done. Ld. Pr. CIT noted that the assessment was framed without application of mind and without conducting any enquiry and verification which has rendered the assessment so framed as erroneous and prejudicial to the interests of the revenue. Accordingly, a show cause notice was issued u/s 263(1) of the Act as to why the assessment should not be cancelled on the ground of being erroneous and prejudicial to the interests of the revenue I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 3 of 9 which was replied by the assessee by submitting that the assessee has filed valuation report in support of the consideration received by it and the AO has accepted the same and thus came to the conclusion that there is no need to refer the same to the valuation officer and therefore, the order of the AO cannot be said to be erroneous and prejudicial to the interests of the revenue as the AO has examined the issue and has taken a considered and objective conclusion that the consideration adopted by the assessee is fair and reasonable though the same is less than the Stamp Valuation Authority. However, the reply of the assessee did not find favour of Ld. Pr. CIT and he revised the assessment with a direction to the AO to frame the assessment afresh after affording reasonable opportunity to the assessee. 4. We have heard rival contentions and perused the material on record placed before us. We find that during the year the assessee has sold a piece of land and the consideration received was apparently less than the value as per the Stamp Valuation Authority. However, the AO accepted the valuation furnished by the assessee and accepted the income returned by the assessee on sale of land. Ld. Pr. CIT revised the assessment on the ground that the AO has failed to examine the issue correctly and has not carried out any enquiry or investigation into the issue as it was not referred to the DVO for valuation. In our opinion, where the AO has examined the issue and accepted the valuation furnished by the assessee then Ld. Pr. CIT does not have any power to revise the said order by invoking Section 263 of the Act as the AO being a I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 4 of 9 quasi-judicial authority has accepted the valuation. The case of the assessee finds support from the decision of Coordinate Bench in the case of The Peerless Gen. fin. & Inv. Co. Ltd. vs. DCIT in ITA No. 892/KOL/2019 for AY 2014-15 order dated 19.03.2021 wherein the Coordinate Bench held as under: “15. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the short term capital gain arising from the sale of four flats being the depreciable assets forming part of the block of assets ‘building’ was computed and offered to tax by the assessee as per section 50 of the Act since the said block of assets was completely exhausted in the year under consideration as a result of sale consideration of the four flats was more than the opening value of the building of the block of assets and the additions made during the year under consideration to the said block. Out of these four flats sold by the assessee, three flats were short-term capital assets being held by the assessee for less than 36 months and the capital gain arising from the sale thereof was computed by the assessee by taking into consideration the stamp duty value wherever it was more than the sale consideration actually received in accordance with section 50C of the Act. In respect of the remaining forth flat which was long-term capital asset being held by the assessee for more than 36 months, the actual sale consideration received by the assessee amounting to Rs.7,00,80,000/-was less than the stamp duty valuation and the same was adopted by the assessee for computation of capital gain. As submitted by the ld. Counsel for the assessee, a specific query was raised by the Assessing Officer in this regard during the course of assessment proceedings and the assessee was called upon by him to explain and justify the actual sale consideration received and adopted for computation of capital gain which was lower than the stamp duty valuation with reference to section 50C. The ld. Counsel for the assessee has also invited our attention to the letter dated 23.12.2016 (copy placed at page 18 of the paper book), wherein the following explanation was offered by the assessee in this regard:- “4. In the computation of the short term capital gain on the sale of the flat at 5, Lala Lajpat Rai Sarani, the sale proceed of the flat has been taken at Rs.8,02,01,600/- as per sale deed (copy enclosed) as I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 5 of 9 against the stamp duty valuation of Rs.8,81,25,600/-. The stamp duty valuation has not been taken into account in computing the short term capital gain as the assessee, before the sale of this property, got it valued by a registered valuer. A copy of valuation report as on 14.04.13 showing its market value at Rs.5,84,00,000/- is enclosed. From the report of the valuer it may kindly be seen that the flat had no car parking space or a garage without which the high value buyers were not interested in acquiring the flat. There was also no scope of getting a high voltage electric connection. Because of such defects, the assessee could not realize full market value of the sale of this flat. The assessee therefore submits that its fair market value was much less compared to the stamp duty valuation. If your Honour does not however accept the assessee’s contention, it is requested that before adopting the stamp duty valuation, you may kindly ref4er the valuation of this property to the DVO as provided in u/s 50C(2) of the I. T. Act”. 16. As is evident from the submission made by the assessee before the Assessing Officer during the course of assessment proceedings, the actual sale consideration adopted by the assessee for computation of capital gain arising from the sale of concerned flats which was lower than the stamp duty valuation was duly explained by the assessee and the same was also supported by a valuation report of the registered valuer, which had valued the market value of the flats at Rs.5.84 crores just before its sale by the assessee. It is also relevant to note here that a specific request was also made by the assessee to the Assessing Officer to refer the matter relating to the valuation of the property to DVO in terms of section 50C(2) of the Act if the lower sale consideration actually received by the assessee than the stamp duty value as justified by it was not acceptable. No such reference, however, was made by the Assessing Officer and keeping in view the same as well as all the facts of record, we find merit in the contention of the ld. Counsel for the assessee that the explanation/justification offered by the assessee in the matter was found acceptable by the Assessing Officer and on appreciation thereof a well considered view was taken by the Assessing Officer. This issue thus was examined by the Assessing Officer during the course of assessment proceedings and after having satisfied himself with the explanation/justification offered by the assessee, which was duly supported by the valuation report of the Registered Valuer, a possible I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 6 of 9 view was taken by the Assessing Officer accepting the stand of the assessee. 17. In the case of R.K. Construction Co. (supra) cited by the ld. Counsel for the assessee, it was held by the Hon’ble Gujarat High Court that when the necessary details and documents were furnished by the assessee to the Assessing Officer and a particular view was taken by the Assessing Officer on the basis of the same, it was not open for the Commissioner to take a different view in the revision proceedings under section 263 of the Act. If the facts of the present case as discussed above are considered in the light of the decision of the Hon’ble Gujarat High Court in the case of R.K. Construction Co. (supra), we find that there was no error in the order of the Assessing Officer on this issue as alleged by the ld. Pr. CIT and the impugned order passed by the ld. Pr. CIT revising the order of the Assessing Officer on this issue is not sustainable. We accordingly set aside the impugned order passed by the ld. Pr. CIT under section 263 on this issue and restore that of the Assessing Officer. Ground No. 4 of the assessee’s appeal is accordingly allowed. 18. As regards the next issue raised in Ground No. 5 relating to the head of income and year of taxability of the profit arising to the assessee from sale of right in 37 flats, the ld. Counsel for the assessee submitted that the assessee had acquired the right in the said flats as per the agreement for sale and MoU executed on 26.08.2011. He submitted that even though right in the said flats was transferred by the assessee to third party individuals by execution of tripartite agreements in previous years relevant to assessment year 2012-13, 13-14, 14-15 & 2015-16, there was a specific clause in the tripartite agreements that sale would be complete and sale deed would be executed in favour of the buyers only on receiving the full payments against the property. Referring to the relevant details of payments placed in the paper book, he pointed out that the full payment from buyers was received in the previous year relevant to A.Y. 2015-16 and accordingly gain arising from the right in sale of 37 flats was offered by the assessee in the return of income filed for A.Y. 2015-16. He submitted that the assessee is a Non-Banking Finance Company and investment made in these flats represented capital asset. He submitted that the said flats purchased by the assessee were shown under the head ‘investment’ for A.Y. 2012-13, 13-14 & 2014-15 and this accounting treatment given by the Assessing Officer was I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 7 of 9 accepted by the Assessing Officer. He contended that when the assessee offered this income as long-term capital gain in AY 2015-16, the Assessing Officer did not accept the same and assessed it as business income. He contended that on appeal, the ld. CIT(A) however allowed the claim of the assessee that this income was chargeable to tax in AY 2015-16 as long-term capital gain and the Tribunal has already upheld the order of the ld. CIT(A) on this issue vide his order dated 05.12.2019 passed in ITA No. 1470/KOL/2019. He contended that there was thus no error in the order of the Assessing Officer on this issue and the ld. Pr. CIT is not justified in revising the same under section 263. 19. The ld. CIT, D.R., on the other hand, submitted that the right in 37 flats acquired by the assessee in the previous year relevant to A.Y. 201213 was transferred to third party individually by way of tripartite agreements executed in A.Ys. 2012-13, 2013-14 and 2014- 15. He contended that the intention of the assessee thus was clear to sale the right in the said flats immediately to earn profit and it was thus a clear case of business transactions representing trading, the profit of which was chargeable to tax under the head “ profit and gains of business or profession”. He contended that the accounting treatment given by the assessee to the said flats as investment is not conclusive to decide the nature of the relevant transactions and keeping in view all the facts of the case as well as the intention of the assessee to transfer the right in the 37 flats to earn profit, the income arising from these transactions was clearly in the nature of business profit. He contended that this issue in any case was not at all considered and examined by the Assessing Officer during the course of assessment proceedings for the year under consideration and since right was acquired by the assessee in the residential flats, it cannot be said that the same was in the nature of capital asset being purchased by the assessee for its office purpose. He accordingly strongly supported the impugned order passed by the ld. Pr. CIT under section 263 of the Act on this issue. 20. We have considered the rival submissions and also perused the relevant material available on record. It is observed that Right to the Property representing 37 flats was acquired by the assessee under the agreement for sale and MoU executed on 26.08.2011. The said right was subsequently transferred by the assessee to the third party individuals by execution of tripartite agreements from time to time in I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 8 of 9 the previous years relevant to A.Y. 2013-14, 2014-15 and 2015-16. There was however a specific clause in the said tripartite agreements that sale would be complete and conveyance will be executed in favour of the buyers only on receiving the full payment of the property. As demonstrated by the ld. Counsel for the assessee from the relevant details, full payments were received by the assessee from the buyers in the previous year relevant to A.Y. 2015-16 and accordingly the income arising from the sale of flats was offered by the assessee to tax as long-term capital gain in A.Y. 2015-16. The ld. CIT, D.R. has not disputed the fact that full payment against the flats were received by the assessee in the subsequent year, i.e. A.Y. 201516 and not in the year under consideration. He, however, has pointed out certain facts involved in the assessee’s case to contend that the income arising to the assessee as a result of sale of these flats is chargeable to tax as business income in the earlier years including the year under consideration, when the right in the flat was transferred by the assessee to the third party individuals by execution of tripartite agreements. It is, however, observed that the issue relating to the head of income under which this income is chargeable to tax in the hands of the assessee as well as the issue relating to year of taxability of the same are already decided by the Tribunal as pointed out by the ld. Counsel for the assessee. In this regard, it is observed that the entire income arising from the sale of right in 37 flats was offered by the assessee in A.Y. 2015-16 under the had “long-term capital gain” and when the Assessing Officer assessed the same as business income of the assessee, an appeal was filed by the assessee before the ld. CIT(A), who allowed the appeal of the assessee on this issue and directed the Assessing Officer to assess the income arising to the assessee from the sale of flats under the head “long-term capital gain”. This decision rendered by the ld. CIT(A) has already been upheld by the ITAT vide its order dated December 5, 2019 passed in ITA No. 1470/KOL/2019. Keeping in view the same, we find merit in the contention of the ld. Counsel for the assessee that both these issues relating to head of income under which the income in question is chargeable to tax as well as the year of taxability of the same have already been decided by the Tribunal in assessee’s own case for A.Y. 2015-16 and consequently the order of the Assessing Officer passed for the year under consideration under section 143(3), which is in consonance with the view taken by the Tribunal, cannot be said to be erroneous as alleged by the ld. Pr. CIT. We, therefore, set aside the impugned order passed by the ld. Pr. CIT under section I.T.A. No.: 299/KOL/2023 Assessment Year: 2018-19 Shyamsree Promoters Private Limited. Page 9 of 9 263 on this issue and restore that of the Assessing Officer. Ground No. 5 of the assessee’s appeal is accordingly allowed.” 5. Since the facts of the case as decided by the Coordinate Bench (supra) are materially same to that of assessee’s case, we therefore, respectfully following the same quash the revisionary order passed by Ld. Pr. CIT. 6. In the result, the appeal filed by the assessee is allowed. Kolkata, the 6 th November, 2023. Sd/- Sd/- [Sonjoy Sarma] [Rajesh Kumar] Judicial Member Accountant Member Dated: 06.11.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. Shyamsree Promoters Private Limited, Plot No. DH-6/11, Premises No. 03-319, Action Area-ID, New Town, Rajarhat, North 24 Parganas-700 156. 2. PCIT-1, Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata