ITO, UDAIPUR V. Shri Mahendra Kumar Taya, UDAIPUR

ITA 313/JODH/2009

• Counselvise Citation: 31323314 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL

Judgement Text

1 ITA 313-09 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 313/JODH/2009 ASSTT. YEAR : 2005-06. THE INCOME-TAX OFFICER, VS. SHRI MAHENDRA KUMAR TAYA, WARD 2(1), UDAIPUR. 50, ASHOK NAGAR, UDAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.H. GOHEL RESPONDENT BY : SHRI RAJENDRA JAIN DATE OF HEARING : 07.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2005-06. 2. FIRST ISSUE IS AGAINST DELETING THE ADDITION OF RS. 5,06,000/- AND RS. 3,28,552/- ON ACCOUNT OF STCG AND LTCG RESPECTIVELY. 3. THE ASSESSEE IS AN INDIVIDUAL DRAWING INCOME FRO M SALARY, HOUSE PROPERTY AND FROM CAPITAL GAIN. DURING THE ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SOLD SOME LAND BUT NO CAPITAL GAIN WAS DECLARED BY ASSESSEE CLAIMING THAT THE SHORT TERM CAPITAL GAIN WAS NIL. DETAILS OF TH ESE PROPERTIES HAVE BEEN GIVEN AT PAGE 2 OF THE ORDER OF LD. CIT (A). THE ASSESSING OFFICER NOTICED THAT THE LAND IS SITUATED WITHIN 8 KM OF MUNICIPAL LIMIT AND ASSESSEE HAS WRONGLY NO T SHOWN THE CAPITAL GAIN. REPORT FROM INSPECTOR WAS ALSO OBTAINED BY THE ASSESSING O FFICER IN RESPECT TO DISTANCE OF 2 AGRICULTURAL LAND FROM MUNICIPAL LIMIT. ACCORDINGL Y THE CONTENTION OF THE ASSESSEE WERE REJECTED AND THE CAPITAL GAIN WAS COMPUTED BY THE A SSESSING OFFICER AT RS. 6,65,706/- AS LONG TERM CAPITAL GAIN AND RS. 5,06,003/- AS SHORT TERM CAPITAL GAIN. DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT (A). IT WAS SUBMITTED TH AT THE DISTANCE IS MORE THAN 9 KM AND THIS REPORT HAS BEEN GIVEN BY THE INSPECTOR HIMSELF . ATTENTION OF LD. CIT (A) WAS DRAWN ON THE ORDER OF ASSESSING OFFICER WHERE THIS FACT H AS BEEN NOTED. ALTERNATIVELY IT WAS SUBMITTED THAT THE CONVERSION OF LAND WAS MADE FOR FARM HOUSE AND IT DOES NOT ATTRACT THE PROVISIONS OF CAPITAL GAIN. ALTERNATIVELY IT WAS S UBMITTED THAT IF THE CAPITAL GAIN IS TO BE ARRIVED AT THEN CALCULATION MADE BY ASSESSING OFFIC ER IS NOT CORRECT. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD , THE LD. CIT (A) ALLOWED THE ISSUE IN PART. THE FINDINGS OF LD. CIT (A) HAVE BEEN RECORD ED IN PARA 7 & 8 AT PAGES 6 TO 8 OF HIS ORDER ARE AS UNDER :- 7. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSION OF THE LD. A/R AND FOUND THAT THE AO MADE THE CALCULATION OF THE SHORT TERM AND LONG TERM CAPITAL GAIN ON THE GROUND THAT THE SOME OF THE LANDS WERE CONVERTED BY THE UIT AND THE LAND SITUAT ED WITHIN 8KM FROM THE UDAIPUR CITY AND ALSO THE LAND SOLD WERE N OT AGRICULTURE LAND. THE LD. A/R SUBMITTED THAT THE LANDS IN QUEST ION RELATING TO ARAJI NO. 2521 TO 2525, 2502 AND 2503 ON WHICH CAPI TAL GAIN HAS BEEN WRONGLY ADDED BY THE AO AT RS. 506000/- AND RS . 328552/- WHICH ARE NOT AT ALL CONVERTED INTO ABADI BY THE UT I AND SITUATED BEYOND 8 KMS. FROM MUNICIPAL LIMIT, WHICH IS ALSO E VIDENT FROM THE INSPECTORS REPORT. FURTHER THE AO HAS TAKEN THE DISTANCE BY AERIAL ROUTE AND NOT BY ROAD. THE LANDS IN QUESTION WERE AGRICULTURE LAND AND BEYOND THE PRESCRIBED MUNICIPAL LIMIT I.E. 8KMS, HENCE THE QUESTION OF TAXING CAPITAL GAIN ON THE SALE OF THESE LANDS DOES 3 NOT ARISE.. ON GOING THROUGH THE ORDER IT IS NOTICE D THAT THE AO HIMSELF ADMITTED, ON THE BASIS OF INSPECTORS REPOR T THAT THE LAND IS SITUATED AROUND 9KMS AWAY FROM MUNICIPAL LIMIT. THE DISTANCE CANNOT BE TAKEN BY AERIAL AS TAKEN BY THE AO. THE D ISTANCE SHOULD BE TAKEN BY ROAD ROUTE. AS THE LANDS ARE OF AGRICUL TURAL LANDS AND DOES NOT COME WITHIN THE DISTANCE OF 8KMS FROM THE MUNICIPAL LIMIT, THE CAPITAL GAIN ARISED FROM THE SALE OF SUC H LAND CANNOT BE TAXED. THE ADDITION OF RS. 506000/- AND RS. 328552/ - IS DELETED BEING EXEMPTED U/S 2 (1A) OF THE ACT. 8. AS FAR AS THE COMPUTATION OF CAPITAL AT RS. 33 7154/- IN RESPECT OF ARAJI NO. 2490 TO 2497, 3943/2498 IS CON CERNED, AS PER AO THE LANDS IN QUESTION ARE CONVERTED INTO ABADI A S PER JAMABANDI QUOTED BY THE AO IN THE ORDER. THE LD. A/ R SUBMITTED THAT THE LANDS WERE NOT CONVERTED INTO ABADI BUT CO NVERTED INTO FARM HOUSE ABADI, WHICH IS FOR AGRICULTURE PURPOSE ONLY. THE LD. A/R FURTHER SUBMITTED THAT IN COMPUTING THE CAPITAL GAIN THE AO HAS NOT GIVEN INDEXATION TO THE COST, NOT CONSIDERI NG THE REGISTRATION CHARGES/ STAMP DUTY AMOUNTING TO RS. 1 3024/- (INDEXED COST RS. 14675/-) BORNE BY THE APPELLANT O N PURCHASE IN COMPUTING THE COST. THE AO HAS ALSO NOT CONSIDERED THE REGISTRY EXPENSES AND STAMP DUTY BORNE BY THE APPELLANT AT R S. 24690/-. THE AO HAS NOT GIVEN INDEXATION BY TREATING THE GAI N AS SHORT TERM. IN THIS CASE THE LANDS IN QUESTION PURCHASED 28.09. 01, 13.06.2001 AND 13.08.2001 AND SOLD ON 21.03.2005. THEREFORE TH E APPELLANT IS ENTITLED TO CLAIM NET EFFECT OF INDEXATION ON COSTS OF LANDS, STAMP DUTY ON PURCHASES AND REGISTRY EXPENSES ETC. ON SAL E AS UNDER:- INDEXATION NOT TAKEN IN EFFECT RS. 34535/- STAMP DUTY ON PURCHASE RS. 14675/- REGISTRY EXPENSES ON SALE RS. 24690/- RS. 73900/- INT. SPENT ON LOAN BORROWED FOR 4 CONVERSION OF LAND RS. 24003/- TOTAL RS. 97903/- THE AO COMPUTED THE CAPITAL GAIN AT RS. 337154/- ON THE GROUND THAT THE LANDS WERE CONVERTED INTO ABADI BY THE UIT WITHOUT ALLOWING THE ABOVE CLAIM OF THE APPELLANT. THE CLAI M FOR INDEXATION OF STAMP DUTY, BORNE BY THE APPELLANT AS PER COPY O F SALE DEED, COST OF PURCHASE ETC. IS ALLOWABLE AGAINST THE CAPITAL G AIN. HENCE THE REVISED CAPITAL GAIN COMES TO RS. 239251/- (RS. 337 154 97903/-). THE ADDITION IS REDUCED TO RS. 239251/-. THE APPELL ANT GETS A RELIEF OF RS. 97903/- ON THIS ACCOUNT. THE APPEAL IS PARTL Y ALLOWED ON THIS GROUND. THESE FINDINGS REMAINED UNCONTROVERTED WHICH ARE SE LF EXPLANATORY. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A) IN THIS RESPECT AS THE FINDING OF LD. CIT (A) REMAINED UNCONTROVERTED. ACCORDINGLY WE CONFIR M THE FINDING OF LD. CIT (A) IN THIS RESPECT. 4. NEXT ISSUE IS AGAINST DELETING THE ADDITION OF R S. 1,45,625/- ON ACCOUNT OF SALE OF FLAT. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SOLD FIVE FLATS AT 115 ASHOK NAGAR, BUT NO PROF IT HAS BEEN DECLARED BY THE ASSESSEE. IT WAS NOTICED THAT ON 28.8.2004 M/S. UNITEC ENGINEERS HAS GIVEN ITS FINAL BILL FOR CONSTRUCTION OF BUILDING. AS SUCH THE CLAIM OF THE ASSESSEE THAT THE PROJECT WAS INCOMPLETE, WAS FOUND INCORRECT. FURTHER, ON PERUS AL OF BUILDING ACCOUNT, IT WAS FOUND THAT THERE IS NO EXPENSES DEBITED IN THE NEXT TWO Y EARS AS SUCH CLAIM OF THE ASSESSEE WAS ALSO PROVED INCORRECT. THEREAFTER, ON THE BASIS OF REGISTRATION AND ON THE BASIS OF PURCHASE OF LAND, THE ASSESSING OFFICER COMPUTED TH E PROFIT FROM SALE OF FLAT AT RS. 5 1,45,625/- AND ADDED TO THE INCOME OF THE ASSESSEE. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT THE ASSESSING OFFICER HAS MADE A MISTAKE IN CA LCULATION OF STOCK. IT WAS ALSO STATED THAT ASSESSEE DID NOT DECLARE ANY INCOME FROM THIS PROJECT AS THE PROJECT WAS INCOMPLETE. THE AGREEMENT OF THE LAND WAS DONE FOR RS. 15,00,00 0/- IN WHICH THE LAND ALSO INCLUDED THE OLD BUILDING. BUT THE REGISTRATION OF THE SAME WAS DONE FOR RS. 12,00,000/- BECAUSE THE CONSTRUCTED PART WAS TOTALLY DISMANTLED BY THE ASSESSEE AND SO THE REGISTRY WAS DONE FOR RS. 12,00,000/-. COST OF REGISTRATION EXPENSES WAS BORNE BY ASSESSEE JOINTLY. THE TOTAL COST OF REGISTRATION AMOUNTED TO RS. 1,44,200 /-. COMPUTATION OF TOTAL COST OF STOCK WORKED OUT TO RS. 16,44,200/- AND ASSESSEES SHARE COMES TO RS. 8,22,100/- WHEREAS THE ASSESSING OFFICER HAS TAKEN THE COST AT LOWER SIDE AT RS. 6,71,000/-. IF THE SAME IS CONSIDERED THEN THERE WILL BE NO PROFIT. AFTER CO NSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, THE LD. CIT (A) GAVE HIS FI NDING IN PARA 12 AT PAGES 9 TO 10 WHICH ARE AS UNDER :- 12. I HAVE CONSIDERED THE SUBMISSION OF THE LD. A/R AND FOUND THAT THE AO HAS COMPUTED THE CAPITAL GAIN OF RS. 14 5625/- BY TAKING THE PROPORTIONATE VALUE OF FLATS SOLD AT RS. 15 LACS. THE AO HAS COMPUTED THE COST OF 5 FLATS AT RS. 1354375/- B Y ADOPTING THE 1/2 SHARE OF LAND AT RS. 671000/- AND THE COST OF C ONSTRUCTION AT RS. 1547900/-. THE A/R SUBMITTED THAT THE AO HAS WRONGL Y TAKEN THE SHARE OF LAND AT RS. 671000/- (RS. 12LACS VALUE O F LAND AND RS. 142000/- REGISTRY EXPENSES). THE LD. A/R SUBMITTED THAT THE LAND AND THE OLD BUILDING PURCHASED FOR RS. 15 LACS AS P ER AGREEMENT. THE APPELLANT DISMANTLED THE OLD STRUCTURE AND THE GOT THE REGISTRY MADE AT RS. 12 LACS AFTER EXCLUDING THE COST OF BUI LDING. THE APPELLANT MADE THE FULL PAYMENT OF RS. 15LAC THROUG H CHEQUE NO. 448400 DATED 19.09.2003 FOR RS. 830000/- AND VIDE C HEQUE NO. 6 244118 DATED 19.09.2003 FOR RS. 670000/- TOTALING T O RS. 15LAC DRAWN ON SBBJ , SHASTRI CIRCLE, UDAIPUR AS PER AGRE EMENT. THE APPELLANT ALSO INCURRED REGISTRY EXPENSES OF RS. 14 2000/-. THUS THE TOTAL COMES TO RS. 1642000/- AND SHARE OF THE APP ELLANT CAME TO RS. 821000/-. FROM THE AGREEMENT AT CLAUSE (3) ITSE LF IT CAN BE VERIFIED THAT THERE WAS SOME PORTION CONSTRUCTED. A S THE APPELLANT IS ENGAGED IN BUILDING OF FLATS AND SALE THEREOF. T HEREFORE THE CONSTRUCTED PORTION WAS NOT SUITED FOR HIM FOR FURT HER CONSTRUCTION. THEREFORE DISMANTLED AND THE REGISTRATION GOT DONE FOR PLOT ONLY. HOWEVER FROM THE AGREEMENT IT IS VERY CLEAR THAT TH E APPELLANT PAID RS. 15LACS AS COST OF PLOT AND INCURRED REGISTRY EX PENSES THEREFORE, THE AO WAS NOT JUSTIFIED IN TAKING THE VALUE OF LAN D AT RS. 12LACS + REGISTRY EXPENSES I.E. TAKING RS. SHARE OF THE AP PELLANT AT RS. 671000/- AS COST OF LAND INSTEAD OF RS. 821000/-. T HUS THERE IS DIFFERENCE OF RS. 150000/- IN THE COST OF LAND. IF THIS IS CONSIDERED THEN THERE IS NO PROFIT FROM SALE OF FLAT DURING TH E YEAR. THEREFORE THE ADDITION IS DELETED. THE APPEAL IS ALLOWED ON T HIS GROUND. THE ABOVE FINDING OF LD. CIT (A) ARE FINDING OF FAC T WHICH DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY WE CONFIRM THE SAME. 6. THE REMAINING GROUND IS AGAINST REDUCING ADDITIO N FROM RS. 15,600/- TO RS. 5,225/- ON ACCOUNT OF SALE OF SHOP. 7. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT DECLARED ANY INCOME FROM MULL TALAI PROJECT. ONE SHOP WAS SOLD IN THAT PROJ ECT AT RS.4,18,000/- AND SHARE OF THE ASSESSEE WAS RS. 1,04,500/-. THE ASSESSING OFFICER NOTED THAT IN RESIDENTIAL BUILDING THE PROFIT WAS ALMOST 10%. THE SHOP BEING COMMERCIAL B UILDING, THE ASSESSING OFFICER ESTIMATED PROFIT AT 15% AND ADDITION OF RS. 15,600/ - WAS MADE. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT ASSESSEE SOLD ONLY ONE SHOP, THERE FORE, NO PROFIT CAN BE ARRIVED AT THIS 7 STAGE AS OTHER SHOPS ARE PENDING TO BE SOLD. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT (A) GAVE THE FOLLOWING FINDING RECORDED IN PARA 20 AT PAGE 12 OF HIS ORDER ARE AS UNDER :- 20. ON GOING THROUGH THE ORDER IT IS REVEALED THA T THE AO SIMPLY ESTIMATED THE PROFIT @ 15% ON THE APPELLANTS SHARE . THE AO HAS NOT BOUGHT OUT ANY MATERIAL ON RECORD TO SHOWN THAT THE APPELLANT EARNED PROFIT @15%. FURTHER IN THIS LINE OF BUSINES S GENERALLY PART SALE CONSIDERATION IS DEDUCTED FROM THE TOTAL COST. THUS THERE IS NO PROFIT. HOWEVER THE APPELLANT DID NOT FURNISH ANY D ETAILS OF EXPENSES. THEREFORE, CORRECT POSITION CANNOT BE ASC ERTAINED. THE AO HAS ALSO NOT GIVEN ANY BASIS FOR ESTIMATING THE PROFIT AT 15% LOOKING TO THE TOTALITY OF THE CASE, I CONSIDER IT REASONABLE TO RESTRICT THE PROFIT TO 5% OF SALE I.E. RS. 5225/- ( 5% OF RS. 418000/4). THEREFORE THE ADDITION IS REDUCED TO RS. 5225/- INSTEAD OF RS. 15600/- MADE BY THE AO. THE APPELLANT GETS A RELIEF OF RS. 10375/-. THE APPEAL IS PARTLY ALLOWED ON THIS GROUN D. THESE FINDINGS ARE ALSO SELF EXPLANATORY WHICH DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, WE CONFIRM THE FINDINGS OF LD. CIT (A) . 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 9. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15. 12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, 8 COPY FORWARDED TO :- THE ITO WARD 2(1), UDAIPUR. SHRI MAHENDRA KUMAR TAYA, UDAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 313/JODH/2009) BY ORDER, AR ITAT JODHPUR.