SRI NALIN RANJAN, JAMSHEDPUR V. ITO WD-1(3), JSR

ITA 331/RAN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3759 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 14-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 45(2); 50C; 201

Judgement Text

P A G E 1 | 7 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE S/ SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. 331 / RAN /201 7 ASSESSMENT YEA R: 2014 - 15 SRI NALIN RANJAN, D - 41, PHASE - V, VIJAYA HERITAGE, ULIYAN, KADMA, JAMSHEDPUR VS. ITO, WARD 1(3), 47, C.H. AREA, BISTUPUR, JAMSHEDPUR PAN/GIR NO. AAUPR 7041 Q (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI DEVESH PODDAR, ADV REVENUE BY : SHRI P.K.MONDAL, ADDL. CIT( DR ) DATE OF HEARING : 2 7 / 08/ 201 9 DATE OF PRONOUNCEMENT : 29 / 0 8/ 201 9 O R D E R PER BENCH THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) - JAMSHEDPUR DATED 10.10.2017 FOR THE ASSESSMENT YEAR 2014 - 2015. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: 1. FOR THAT THE ORDER AS PASSED BY THE CIT(A) IS CONTRARY TO THE FACTS ON RECORD. 2. FOR THAT THE CIT(A) HAS GROSSLY ERRED IN ARBITRARILY REJECTING ALL THE CONTENTIONS MADE BY THE ASSESSEE SUPPORTED BY MATERIAL EVIDENCE TO SHOW THAT THE AMOUNT OF RS.750/ - PER SQ.FT AS APPEARING IN THE JOINT DEVELOPMENT AGREEMENT BY THE ASSESSEE WITH M/S. SWASTIKA GAUTAM DEVELOPERS IS MERELY AN AMOUNT FIXED AS PAYABLE TO THE ASSESSEE FOR ANY SHORTFALL IN CONSTRUCTED AREA TRANSFERABLE AS AGREED CONSIDERATION AGAINST TRANSFER OF LAND & BUILDING BELONGING TO THE ASSESSEE. ITA NO.331/RAN/2017 ASSESSMENT YEAR: 2014 - 15 P A G E 2 | 7 3. FOR THAT THE CIT(A) ERRED IN UPHOLDING THE COST OF CONSTRUCTION AT RS.750/ - PER SQ.FT DETERMINED AR BITRARILY BY THE AO AND ALSO BY UPHOLDING THE METHOD OF COMPUTING CAPITAL GAIN AS EMPLOYED BY THE AO NOTWITHSTANDING THAT THE QUESTION OF THE VALUE OF LAND IS WHOLLY IRRELEVANT, AS THE SAME IS NOT SUBJECT MATTER OF SALE TRANSACTION WHERE FLAT IS BEING SOLD , THE COST PRICE OF FLAT AND SALE CONSIDERATION OF FL A T HAS TO BE TAKEN INTO ACCOUNT. 4. THE CIT(A) OUGHT TO HAVE NOT HELD THAT THE CASE FOR THE ASSESSMENT YEAR 2014 - 15 WAS SELECTED FOR LIMITED SCRUTINY MERELY FOR THE REASON SALE CONSIDERATION OF PROPERT Y IN ITR IS LESS THAN CONSIDERATION REPORTED IN CIB 401 AND ON THIS COUNT NO ADVERSE INFERENCE WAS DRAWN THEREBY GROSSLY ERRED IN COMPLYING WITH THE PARAMETERS OF THE SCRUTINY GUIDELINES. 2. FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE ALONGWITH SMT. BRINDA DEVI (MOTHER OF THE ASSESSEE NOW DECEASED) ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. SWASTIK GAUTAM DEVELOPERS MEASURING 4.5 KATHA OF LAND ON 4.2.2010 . AS PER THE AGREE MENT, THE DEVELOPERS AFTER CO NSTRUCTION OF FLAT/BUILDING HAND ED OVER FLAT NOS.1A, 1B 1C AND 1D, WHICH COMPRISED ENTIRE FIRST FLOOR OF THE BUILDING NAMED AS MATRI CHHAYA. THE ASSESSEE SOLD HIS SHARE (FLAT 1C) ON 9.11.2013 FOR A CONSIDERATION OF RS.9,10,000/ - BUT THE STAMP DUTY AUTHORITY HAS ASSESSED THE VALUE FOR THE PURPOSE OF STAMP DUTY AT RS.24,40,000/ - . HENCE, AS PER PROVISIONS OF SECTION 50C OF THE I.T.ACT, THE AO WAS OF THE VIEW THAT THE SALE CONSIDERATION WOULD BE TAKEN AT RS.24,40,000/ - . BASED ON THE DEVELOPMENT AGREEMENT, THE ASSESSING OFFICER WORKED OUT THE SHORT TERM CAPITAL GAI N AT RS.17,08,750/ - (RS.24,40,000/ - - RS.7,31,250/ - ). HENCE, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE SHORT TERM CAPITAL GAIN OF RS.17,08,750/ - SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.331/RAN/2017 ASSESSMENT YEAR: 2014 - 15 P A G E 3 | 7 IN REPLY TO THE QUERY OF THE ASSESSING OFFICER, THE ASSESSEE, INTER ALIA, SUBMITTED THAT T HERE IS A CLAUSE IN THE AGREEMENT, ACCORDING TO WHICH, IN RESPECT OF FRACTIONAL PORTION OF AGREED COMPENSATION RS.750/ - PE R SQ .FT WILL BE PAID BY THE DEVELOPER TO THE OWNERS OF THE LAND AND NO S TAMP DUTY WAS PAID AS PER THE REQUIREMENT OF STAMP VALUATION AUTHORITY. IT WAS SUBMITTED THAT IT WAS AN AGREED CONSIDERATION AND NO SALE DEED WAS EXECUTED. IT WAS ALSO SUBMITTED THAT NO INCOME HAVE ARISEN TO THE ASSESSEE INASMUCH AS THE COST OF ACQUISITI ON OF FLAT IN EXCHANGE OF LAND/BUILDING AS PER THE PROVISIONS OF THE ACT 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER OPINED THAT THE COST OF THE BUILDING WAS AGREED AT RS.750/ - P.SQ.FT. HE OBSERVED THAT SINCE THE HOLDING OF THE FLAT IS FOR LESS THAN 36 MONTHS FROM THE DATE OF ALLOTMENT DT.7.2.2013 AND SOLD ON 19.11.2013, IT IS CONSIDERED TO BE THE SHORT TERM CAPITAL ASSET. HE ALSO OBSERVED THAT THE SALE CONSIDERATION TAKEN AS PER SECTION 50C OF THE ACT IS NOT OBJECTED BY TH E ASSESSEE. THE SHARE OF THE ASSESSEE ALONGWITH SMT. BRINDA DEVEI IS 4.5 KATHA AND 4 KATHA. AS PER THE DEVELOPMENT AGREEMENT, THE ASSESSEE WAS ENTITLED TO GET 35% OF THE BUILT UP AREA CONSISTING OF COMPLETE 1 ST FLOOR, WHICH COMES TO 25% OF THE SHARE, 1 F LAT IN 3 RD FLOOR APPROX. 6.25% OF THE SHARE AND FOR REST 3.75% CONSIDERATION @ RS.750/ - PER SQ.FT WOULD BE GIVEN TO LAND LORD. HENCE, THE COST OF THE FLAT IS TAKEN AT RS.750/ - PER. SQ.FT WHICH COMES TO RS.7,31,250/ - (RS.750X975 SQ.FT). THEREFORE, THE SHORT TERM CAPITAL GAIN IS APPORTIONED IN THE SAME PROPORTION AS UNDER: ITA NO.331/RAN/2017 ASSESSMENT YEAR: 2014 - 15 P A G E 4 | 7 SALE CONSIDERATION OF FLAT 1C AS PER SECTION 50C OF THE ACT : RS.24,40,000 LESS: COST OF THE FLAT AS PER AGREEMENT : RS. 7,31,250 SHORT TERM CAPITAL GAINS ON SALE OF FLAT: RS.17,08,750/ - HENCE, THE ASSESSEES SHARE IS WORKED OUT = RS.17,08,750/8.5/4.5= RS.9,04,632/ - . 4. BEFORE THE CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO RECALCULATE THE LONG TERM CAPITAL GAIN BY ALLOWING SOME RELIEF TO THE ASSESSEE. 5. STILL AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. LD A.R. SUBMITTED THAT RS.750/ - PER SQ. FT WAS AGREED BETWEEN THE ASSESSEE AND T HE DEVELOPER IN THE YEAR 2010 WHEN THE AGREEMENT WAS ENTERED INTO BUT THE FLAT WAS SOLD DURING 2013. HE ALSO SUBMITTED THAT RS.750/ - PER SQ.FT WAS FOR BAREN LAND, WHICH DOES NOT INCLUDE ANY COST OF CONSTRUCTION. THE COST OF ACQUISITION AS ON 2013 SHALL I NCLUDE COST OF CONSTRUCTION. HE ALSO SUBMITTED THAT THE ASSESSEE HAS SOLD TWO MORE FLATS IN ASSESSMENT YEAR 2016 - 17, WHICH WAS SOLD AT A PRICE OF RS.2400/ - PER SQ.FT AND FOR CAPITAL GAINS THE COST OF INDEXATION WAS CALCULATION AT RS.2235/ - PER SQ.FT AND T HE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. HE ALSO SUBMITTED THAT THE REGISTRY RATE OF FLAT IN THE MONTH OF NOVEMBER, 2013 WAS RS.2502/ - SQ.FT AND AS SUCH BY NO MEANS THE COST OF ACQUISITION AT RS.750/ - PER SQ.FT SHOULD BE TAKEN FOR JUST TWO MONTHS BACK. ITA NO.331/RAN/2017 ASSESSMENT YEAR: 2014 - 15 P A G E 5 | 7 7. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. IT IS AN UNDISPUTED FACT THAT ASSESSEE ALONGWITH SMT. BRINDA DEVI (NOW DECEASED) ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. SWASTIK GAUTAM DEVELOPERS MEASURING 4.5 KATHA OF LAND O N 4.2.2010. IN LIEU OF SUCH AGREEMENT, THE ASSESSEE WAS ALLOTTED SOME FLATS. THE ASSESSEE SOLD (FLAT 1C) ON 9.11.2013 FOR A CONSIDERATION OF RS.9,10,000/ - BUT THE STAMP DUTY AUTHORITY HAS ASSESSED THE VALUE FOR THE PURPOSE OF STAMP DUTY AT RS.24,40,000/ - . THEREFORE, THE ASSESSING OFFICER WORKED OUT THE SHORT TERM CAPITAL GAINS ON SALE OF FLAT AT RS.17,08,750/ - . ON APPEAL, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO RECALCULATE THE CAPITAL GAINS BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE ORDER OF THE AO AS WELL AS THE WRITTEN SUBMISSION MADE BY THE APPELLANT. I HAVE GONE THROUGH THE SECTION 45(2) OF THE I.T.ACT, WHICH READS AS UNDER: (2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (1), THE PROFITS OR GAINS ARISING FROM THE TRANSFER BY W AY OF CONVERSION BY THE OWNER OF A CAPITAL ASSET INTO, OR ITS TREATMENT BY HIM AS STOCK - IN - TRADE OF A BUSINESS CARRIED ON BY HIM SHALL BE CHARGEABLE TO INCOME - TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK - IN - TRADE IS SOLD OR OTHERWISE TRANSFER RED BY HIM AND, FOR THE PURPOSES OF SECTION 48 , THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET.] FROM THE PLAIN READING OF THE SECTION, IT IS CLEAR THAT CAPITAL GAIN IS CHARGEABLE IN THE YEAR IN WHICH SUCH CONVERSION TOOK PLACE AND CAPITAL GAIN IS CHARGED U/S.4 8 ACCORDINGLY. IN THE INSTANT CASE THE CONVERSION TOOK PLACE ON 4.2.2010 AS PER THE AGREEMENT ENTERED INTO BY AND BETWEEN DEVELOPER AND THE ASSESSEE. ACCORDINGLY, THE CAPITAL GAIN WHETHER SHORT TERM OR LONG TERM DEPENDING UPON PERIOD OF HOLDING IS CHARGE ABLE IN A.Y. 2010 - 2011, WHICH HAS NOT BEEN TAKEN EITHER BY THE ASSESSEE OR CHARGED BY THE REVENUE. HENCE, THE AO ITA NO.331/RAN/2017 ASSESSMENT YEAR: 2014 - 15 P A G E 6 | 7 RESORTED TO CHARGE THE SAME IN THE YEAR 2014 - 15 I.E. THE RELEVANT PERIOD ON WHICH FLAT WAS ACTUALLY ACQUIRED AND SOLD GIVING RISE TO CAPITAL G AIN. THE AO ADOPTED VALUE AS PER APPLICABLE FOR A.Y. 2010 - 2011 TAKING ONLY COST OF CONSTRUCTION. HAD IT NOT BEEN TAKEN, THE ASSESSEES COST IS ONLY COST OF LAND WHICH WHEN ADOPTED, THERE WOULD BE HIGHER CAPITAL GAIN. THEN VALUE ADOPTED BY THE AO IS JUST IFIED AS ON 4.2.2010. THE FLAT HAS BEEN SOLD ON 19.11.2013 WHEREAS THE DATE OF AGREEMENT FOR DEVELOPMENT IS 4.2.2010. THUS, THE PERIOD OF HOLDING IS MORE THAN 36 MONTHS. HENCE, THE AO IS DIRECTED TO CALCULATE LONG TERM CAPITAL GAIN ON SUCH TRANSACTION A FTER GIVING COST INFLATION INDEX TO THE ASSESSEE. THE ADDITION MADE BY THE AO IS TO BE RECALCULATED AS LONG TERM CAPITAL GAIN. 9. L D A.R. OF THE ASSESSEE SUBMITTED THAT IT WAS AN AGREED CONSIDERATION IN THE YEAR 2010 AT THE TIME OF DEVELOPMENT AGREEMENT AT RS.750/ - BUT THE FLAT WAS SOLD IN THE YEAR 2013. ANOTHER POINT RAISED BY THE LD A.R. OF THE ASSESSEE IS THAT IN THE ASSESSMENT YEAR 2016 - 17, THE ASSESSEE HAS SOLD THE FLAT AT A PRICE OF RS.2450/ - PER SQ.FT AND THE SAME HAS BEEN DULY ACCEPTED BY THE DEPARTMENT IS NOT A GROUND TO CONSIDER TO CALCULATE THE INDEXED COST AT RS.2235/ - IN THE YEAR 2013. THE FINDINGS OF THE CIT(A) THAT THE FLAT HAS BEEN SOLD ON 19.11.2013 WHEREAS THE DATE OF AGREEMENT FOR DEVELOPMENT IS 4.2.2010 AND THUS, THE PERIOD OF HOL DING IS MORE THAN 36 MONTHS. HENCE, HE DIRECTED THE AO TO CALCULATE LONG TERM CAPITAL GAIN ON SUCH TRANSACTION AFTER GIVING COST INFLATION INDEX TO THE ASSESSEE. THE ADDITION MADE BY THE AO IS TO BE RECALCULATED AS LONG TERM CAPITAL GAIN. THIS FINDINGS O F THE CIT(A) IS NOT CONTROVERTED BY LD A.R. OF THE ASSESSEE. SINCE, THE CIT(A) H AS DIRECTED THE AO TO CALCULATE THE CAPITAL GAINS AFTER GIVING COST INFLATION INDEX TO THE ASSESSEE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS HEREBY C ONFIRMED. ACCORDINGLY, GROUNDS OF APPEAL OF THE ASSESSEE ARE REJECTED. ITA NO.331/RAN/2017 ASSESSMENT YEAR: 2014 - 15 P A G E 7 | 7 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 29 / 0 8 /201 9 . S D/ - SD/ - ( CHANDRA MOHAN GARG ) (LAXMI PRASAD SAHU JUDICIALMEMBER ACCOUNTANT MEMBER RANCHI ; DATED 29 / 0 8 /20 9 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK CAMP AT RANCHI 1. THE APPELLANT : SRI NALIN RANJAN, D - 41, PHASE - V, VIJAYA HERITAGE, ULIYAN, KADMA, JAMSHEDPUR 2. THE RESPONDENT. SRI NALIN RANJAN, D - 41, PHASE - V, VIJAYA HERITAGE, ULIYAN, KADMA, JAMSHEDPUR 3. THE CIT(A) - JAMSHEDPUR 4. PR.CIT - JAMSHEDPUR 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//