Sh. Umesh Garg, Uttar Pradesh V. ITO, Meerut

ITA 385/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4589 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANAJAY MALIK
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income
• Section: 143(3); 50C; 147

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 385/DEL/2015 (ASSESSMENT YEAR: 2010 - 11 ) UMESH GARG, C/O. M/S. MALIK & CO. (ADVOCATES), 305/7, THAPAR NAGAR, MEEUT CITY, UTTAR PRADESH, PAN:AFGP0404B VS. ITO, WARD - 2(4), MEERUT (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANAJAY MALIK, ADV REVENUE BY: SHRI ARUN KUMAR YADAV, SR. DR DATE OF HEARING 22/06 / 2017 DATE OF PRONOUNCEMENT 04 / 09 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 01 THIS APPEAL IS PREFERRED BY ASSESSEE IN THE ORDER OF AN, CIT(A) , MEERUT DATED 27/1 1/2014 FOR ASSESSMENT YEAR 2000 - 11 WHEREIN THE ACTION OF THE LD. ASSESSING OFFICER WITH RESPECT TO THE C OMPUTATION OF CAPITAL GAINS WAS CONFIRMED. 02 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. A).THAT IN THE COURSE OF TRADING ACTIVITY, THE ACQUISITION OF THE PROPERTY WAS AS STOCK IN TRADE AND NOT AS CAPITAL ASSET. THE SAID PROPERTY WAS SOLD RESULTING IN GAIN WHICH ON FACTS AND I N LAW WAS CHARGEABLE TO TAX UNDER THE HEAD BUSINESS. B). THE THE AUTHORITIES BELOW WENT WRONG ON FACTS AND IN LAW AND THE GROUNDS TAKEN AND BASIS ADOPTED TO HOLD THAT THE GAIN ARISING ON THE TRANSFER OF PROPERTY WAS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. THE FINDINGS RECORDED BY THE LD. ASSESSING OFFICER AS WELL AS LD. CIT(A) BEING ILLEGAL, VOID AND WITHOUT JURISDICTION DESERVE TO BE QUASHED. THE GAIN DESERVES TO BE TAXED AS INCOME UNDER THE HEAD BUSINESS. 2. THAT APPLICATION OF PROVISIONS OF SECTION 50 - C WAS ILLEGAL AND WITHOUT JURISDICTION. 3. THAT THE PROPERTY WAS SOLD FOR A SALE CONSIDERATION OF RS. 95,70,000/ - VIDE REGISTERED SALE DEED. THE APPELLANT NEITHER RECEIVED ANY SUM OVER AND ABOVE TH E RECORDED SUM OF RS. 95,70,000/ - THE PURCHA SER PAID ANY SUM OVER AND ABOVE THE RECORDED CONSIDERATION. IN THE ABSENCE OF EVIDENCE TO PROVE ANY RECEIPT OR PAYMENT OVER AND ABOVE THE RECORDED FIGURE, THERE WAS NO LEGAL WARRANT TO REJECT THE RECORDED SALE CONSIDERATION AND TO ESTIMATE THE CONSIDERATIO N AT RS. 1,14,84,000/ - PAGE 2 OF 4 RESULTING IN AN ADDITION OF RS. 19,14,000/ - WHICH DESERVES TO BE QUASHED AND DELETED BEING VOID, ILLEGAL AND WITHOUT JURISDICTION. 4. THAT THE EXPENDITURE INCURRED BY ASSESSEE INCLUDING STAMP PAPER, LAND DEVELOPMENT CHARGES AND OTHER EXPENSES AMOUNTING TO RS. 20,19,000/ - HAD NOT BEEN TAKEN INTO CONSIDERATION WHILE COMPUTING THE GAIN WITH THE RESULT THAT THE COMPUTED GAIN WAS WRONG AND ILLEGAL. 5. THAT THE COMPUTATION OF SHORT TERM CAPITAL GAIN AT RS. 20,70,000/ - AND ITS TAXABILITY DES ERVES TO BE QUASHED, CANCELLED AND DELETED BEING VOID, ILLEGAL AND WITHOUT JURISDICTION. SUCH COMPUTATION DESERVES TO BE REJECTED. 03 THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE BEING AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURING OF BREAD AND RUSK HAS SOLD A PROPERTY OF RS. 9570000/ - ON 20/03/2010 AND RATE FOR PAYMENT OF STEM DUTY WAS DETERMINED AT RS. 11484000/ . THEREFORE, THE DIFFERENCE WAS OF RS. 19.14 LACS A ND THE PROVISIONS OF SECTION 50 C WERE APPLIED. BEFORE THE LD. ASSESSING OFFICER IT WAS SUBMITTED THAT THE ASSESSEE HAD SOLD THE PROPERTY WHICH IS BEEN CONSIDERED IN HIS PROPRIETORSHIP FIRM NAMELY M/S A. R. DWELLINGS AND PROFIT AND LOSS AND SAME BUSINESS IS ALSO BEEN CONSIDERED IN THE ITR FOR ASSESSMENT YEAR 2010 - 11. THEREFORE, IT WAS THE SU BMISSION OF THE ASSESSEE THAT AS ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE PROVISIONS OF SECTION 50 C DOES NOT APPLY TO HIM. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND SUBMITTED THAT IN THE AUDITED ACCOUNTS OF THE ASSESSEE, NO SUCH MENTION WAS MADE AND THEREFORE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF REAL ESTATE. THEREFORE, ACCORDINGL Y, THE PROVISIONS OF SECTION 50 C WERE MADE APPLICABLE TO THE ASSESSEE AND RS. 19.14 LACS WAS ADDED TO THE SALE CONSIDERATION. FURTHER AS ACCORDING TO THE LORD ASSESSING OFFICER PROPERTY WAS PURCHASED ON 15/04/2008 IN SALES CONSIDERATION WAS ON 20/03/2010 THE INCOME WAS REQUIRED TO BE ASSESSED AS SHORT - TERM CAPITAL GAIN AND THEREFORE THE COMPOSITE ADDITION OF RS. 3984000/ - WAS MADE TO THE TO TAL INCOME OF THE ASSESSEE. CONSEQUENTLY, ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT WAS PASSED ON 25/03/2013 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 4200195/ - INSTEAD OF RS. 187950/ - AS PER RETURN OF INCOME O F THE ASSESSEE. 04 AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. 1 ST APPELLATE AUTHORITY WHO CONFIRMED THE ADDITION OF RS. 3 984000 ON ACCOUNT OF CAPITAL GAIN TO THE INCOME OF THE ASSESSEE AND THEREFORE ASS ESSEE IS IN APPEAL BEFORE US. 05 THE LD. AUTHORISED REPRESENTATIVE. ADVERTING TO THE GROUNDS OF APPEAL FILED BEFORE US SUBMITTED THAT THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT ARE NOT APPLICABLE TO THE ASSESSEE AS IT IS ENGAGED IN THE BUSINESS OF RE AL ESTATE. HE PAGE 3 OF 4 REFERRED TO THE COMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME, WHEREIN THE PROFIT AND LOSS AS PER THE AI DWELLINGS WAS ALSO SHOWN AT RUPEES (MINUS) 19873. HE FURTHER REFERRED TO FORM NO. 3 CEB AS WELL AS FORM NO. 3 CEB DAT ED 29/09/2010, WHICH IS FOR M/S AI DWELLINGS STATED TO BE PROPERTY DRILLERS AND HE FURTHER REFERRED TO THE PROFIT AND LOSS ACCOUNT OF THE UNIT WHEREIN SALE CONSIDERATION IS SHOWN AND THE LOSS INCURRED BY THE ASSESSEE OF RS. 19873 WAS ALSO SHOWN. THEREFORE, IT WAS STATED BY HIM THAT THE ASSESSEE IS A DEALER IN THE REAL ESTATE AND THEREFORE THE PROVISIONS OF SECTION 50C DO NOT APPLY TO THE FACTS OF THE CASE OF THE ASSESSEE. WITH RESPECT TO THE CHARGEABILITY OF THE SALE CONSIDERATION AS SHORT - TERM CAPITAL GAIN . HE SUBMITTED THAT THE ASSESSEE HAS INCURRED LOSS AND THEREFORE SAME WAS ALREADY OFFERED BY HIM AS INCOME. IN THE END. HE REFERRED TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN 79 TAXMANN.COM 238 WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF SECTI ON 50 C DOES NOT HAVE ANY APPLICATION WHILE DETERMINING THE PROFITS AND GAINS OF THE BUSINESS OF PROFESSION AND THEREFORE HE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THIS DECISION IN FAVOUR OF THE ASSESSEE. 06 THE LD. DEPARTMENTAL REPRESENTATIVE VEHEME NTLY SUPPORTED THE ORDER OF THE LOWER AUTHORITY AND SUBMITTED THAT THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS AT HAS SOLD THE PROPERTY AND THEREFORE IT IS CHARGEABLE TO INCOME TAX, AS INCOME FROM CAPITAL GAIN AND NOT BUSINESS INCOME. HE THEREFORE SUBMITT ED THAT THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT ARE SQUARELY APPLICABLE AND THE ORDER OF THE LOWER AUTHORITIES ARE CORRECT. 07 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. ASSESSEE SUBMITTED IN IS PAPER BOOK AT PAGE NO. 6 TO 21, BEING THE T AX AUDIT REPORT OF AI DWELLINGS WHERE THE PROPRIETARY SHOWN TO BE ASSESSEE AND THE RELEVANT SALE CONSIDERATION AND THE PURCHASE CONSIDERATION ALSO ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT. THEREFORE , IT IS APPARENT THAT ASSESSEE IS ENGAGED IN THE BUSIN ESS OF REAL ESTATE. THE INCOME OF THESE BUSINESSES ALSO SHOWN BY THE ASSESSEE IN ITS COMPUTATION OF TOTAL INCOME FILED BEFORE THE LD. ASSESSING OFFICER. THE ACCOUNTS OF THE REAL ESTATE BUSINESS OF THE ASSESSEE ARE ALSO AUDITED THEREFORE IT IS APPARENT THAT THE ASSESSEE IS CARRYING ON BUSINESS OF REAL ESTATE. HENCE, AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. NEELKAMAL REALTORS AND ERECTORS INDIA PVT. LTD 79 TAXMANN.COM 238 (BOMBAY) WHEREIN IT HAS BEEN HELD THAT PROVIS I ONS OF SECT I ON 50C DOES NOT APPLY TO AN ASSESSEE ENGAGED IN THE BUSINESS OF REAL ESTATE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE BOMBAY HIGH COURT WE REVERSE THE FINDING OF THE LD CIT(A) AND DIRECT THE LD ASSESSING OFFICER TO CONSIDER THE SALE CONS IDERATION AS PER ACTUAL SALE DEED OF THE PROPERTY INSTEAD OF AMOUNT ON PAGE 4 OF 4 WHICH STAMP DUTY HAS BEEN PAID, FOR THE REASON THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND PROVISIONS OF SECTION 50C DOES NOT APPLY TO HIM. IN THE RESULT GROUND NO. 1 TO 5 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 08 GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE IS AGAINST INTEREST WHICH IS CONSEQUENTIAL IN NATURE AND HENCE, SAME IS DISMISSED. 09 IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OP EN COURT ON 0 4 / 09 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 4 / 09 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI