ITO 17(2)(1), MUMBAI V. JAINAM CONSTRUCTIONS, MUMBAI

ITA 5292/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7389 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: NARAYAN ATAL; GAUTAM MEISHERIAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 43CA; 143(3); 50C

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5292/MUM/2016 (ASSESSMENT YEAR 201 2-13 ) ITO 17(2)(1), ROOM NO. 134, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. VS. M/S JAINAM CONSTRUCTIONS, B-10, SHANKHESHWAR DARSHAN, SETH MOTISHA LANE, MAZGAON, MUMBAI -400010. PAN: AACFJ8965D APPELLANT RESPONDENT C.O. NO.57/MUM/2018 (ASSESSMENT YEAR 2012-13 ) M/S J AINAM CONSTRUCTIONS, B-10, SHANKHESHWAR DARSHAN, SETH MOTISHA LANE, MAZGAON, MUMBAI -400010. PAN: AACFJ8965D VS. ITO 17(2)(1), ROOM NO. 134, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. APPELLANT RESPONDENT APPELLANT BY : S. PADMAJA (DR) RESPONDENT BY : SHRI NARAYAN ATAL & GAUTAM MEISHERI(AR) DATE OF HEARING : 15.05.2018 DATE OF PRONOUNCEMEN T : 18.05.2018 ORDER UNDER SECTION 254(1) OF INCOMETAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF THE INC OME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-28 [LD. CIT(A)], MUMBAI DATED 30.06.2016. IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 30.05.2015 FOR ASSESSMENT YEAR 2012-13. ON SERVICE OF NOTICE OF AP PEAL, THE ASSESSEE HAS ITA NO.5292/M/16 & CO . 57 MUM 18- M/S JAINAM CONSTRUCTIONS 2 FILED THE CROSS OBJECTION. THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING UPON THE DECISION OF HON'BLE MUMBAI ITAT IN THE CASE OF NEELKAMAL REALTORS & ERECTORS INDIA PVT. LTD., AND THEREBY DIRECTING TO DELETE THE ADDITION OF RS.14,78,00,145/- ON THE GROUNDS TH AT THE ADDITION ON THE BASIS OF PROVISIONS OF SEC.SOC OF THE I.T. ACT CANNOT BE MADE IN THE CASE OF A BUILDER, AS THE FLATS SOLD ARE THEIR STOCK IN TRADE AND NOT CAPITAL ASSETS; WITHOUT APPRECIATING THE FACT THAT THE DECI SION OF THE HON'BLE MUMBAI ITAT IN THE SAID CASE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT, AND APPEAL U/S.260A OF THE ACT HAS BEEN FILED WHICH IS PENDING FOR DISPOSAL BEFORE THE HON'BLE BOMBAY HIGH COURT.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO DELETE THE ADDITION OF RS .14,78,00,145/- ON THE GROUNDS THAT THE ADDITION AMANATING FROM THE PROVISIONS OF SEC.SOC OF THE I. T. ACT CANNOT BE MADE IN THE CASE OF A BUILDER, AS THE FLA TS SOLD ARE THEIR STOCK IN TRADE AND NOT CAPITAL ASSETS, WITHOUT APPRECIATING THE FA CT THAT THE SAID PROPOSITION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT, AND AS THE SAID ISSUE IS PENDING FOR DISPOSAL AT VARIOUS STAGES OF APPEAL, THE SAME HAS NOT ATTAINED FINALITY.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF THE A.O. SHOULD BE RESTORED AND ORDER OF THE CIT(A) SHOULD BE SET ASIDE.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF REDEVELOPMENT OF PROPERTY, FILED ITS RETURN OF I NCOME FOR ASSESSMENT YEAR 2012-13 ON 18.09.2012 DECLARING NIL INCOME. TH E ASSESSMENT WAS COMPLETED ON 30.03.2015 UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE THE ADDITION OF RS. 14,78,00,145/- ON ACCOUNT OF DIFFERENCE OF VALUE OF SALE OF FLATS/PROPERTY SHOWN BY ASSESSEE AND THE VALUATION OF STAMP VALUAT ION AUTHORITY. ON APPEAL BEFORE THE LD. CIT(A), THE ENTIRE ADDITION W AS DELETED. THEREFORE, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE H AS FILED THE PRESENT ITA NO.5292/M/16 & CO . 57 MUM 18- M/S JAINAM CONSTRUCTIONS 3 APPEAL BEFORE US. AS REFERRED ABOVE ON SERVICE OF N OTICE OF REVENUES APPEAL, THE ASSESSEE HAS FILED ITS CROSS OBJECTION. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSES SEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE RE VENUE SUBMITS THAT ASSESSEE HAS SOLD THE DIFFERENT UNITS/FLATS IN LESS THAN THE MARKET VALUE OR THE VALUATION OF STAMP DUTY VALUATION AUTHORITIES. THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AS TO WHY, THE SAID UNITS WER E SOLD BELOW THE MARKET VALUE/STAMP DUTY VALUATION EXCEPT SUBMITTING THAT S ECTION 43CA IS APPLICABLE FROM 01.04.2014 AND THEREFORE, NOT APPLI CABLE FOR AY 2012-13. IT IS FURTHER SUBMITTED THAT DURING THE RELEVANT PE RIOD, THE ASSESSEE DEVELOPED A PROPERTY IN MAZGAON WHEREIN LEASE HOLDI NG RIGHT FOR RESIDUAL PERIOD WAS BOUGHT BY THE ASSESSEE IN PUBLIC AUCTION FROM MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM). THE ASSESSING OFFICER ON THE BASIS OF INFORMATION FROM DATA BASE OF ASSESSEE INF ORMATION REPORT (AIR) DATED 11.07.2014, RECEIVED FROM THE OFFICE OF CENTR AL INFORMATION BUREAU THAT ASSESSEE SOLD ONE FLAT AT RS. 19,65,000/- WHER EAS STAMP DUTY AUTHORITY VALUATION WAS FOR RS. 35,71,000/-. THE AS SESSEE WAS ASKED TO FURNISH THE DETAILS OF VARIOUS FLAT SOLD BY THE ASS ESSEE. FROM THE DETAILS SUPPLIED BY ASSESSEE, THE ASSESSEE WAS ASKED TO SUB STANTIATE WITH EVIDENTIARY PROOF AND THE REASONS FOR SELLING THE F LAT LESS THAN THE STAMP DUTY AUTHORITY VALUATION. THE ASSESSEE INSTEAD OF G IVING ANY DOCUMENTARY ITA NO.5292/M/16 & CO . 57 MUM 18- M/S JAINAM CONSTRUCTIONS 4 EVIDENCE AND TO SUBSTANTIATE THE CLAIM CONTENDED TH AT SECTION 43CA HAD BEEN INSERTED FROM 01.04.2014, THEREFORE, THE PROVI SION IS NOT APPLICABLE TO THE RELEVANT AY. THEREFORE, THE ASSESSING OFFICER A DDED THE DIFFERENCE STAMP DUTY AUTHORITY VALUATION AND SALE PRICE TO TH E TOTAL INCOME OF THE ASSESSEE. IN SUPPORT OF HIS SUBMISSION, THE LD. DR FOR THE REVENUE RELIED UPON THE DECISION OF CIT VS. SHATRUNJAY DIAMONDS [2 003] 128 TAXMAN 759 (BOM.). 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE RELIE D UPON THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT PRO VISIONS OF SECTION 50C WOULD NOT APPLY TO THE ASSESSEE. THE ASSESSEE HAS N OT MADE ANY SALE AFTER 01.04.2014. THERE IS NO PROVISION TO SUBSTITUTE THE FULL VALUE OF CONSIDERATION AT THE STAMP DUTY VALUATION IN CASES WHERE THE STOCK-IN- TRADE BEING FLATS ARE AGREED TO BE SOLD AT LOWER VA LUE. THEREFORE, THE PROVISION OF SECTION 50C CAN ALSO NOT BE INVOKED AG AINST THE ASSESSEE. SECTION 50C APPLIES TO THE CASE WHERE CAPITAL ASSET IS TRANSFERRED. THE ASSESSEE IS A BUILDER AND FLATS ARE IS STOCK-IN-TRA DE AND NOT CAPITAL ASSET. THE PROVISION OF SECTION 50C THEREFORE, DOES NOT AP PLY WHERE IMMOVABLE PROPERTY IS STOCK-IN-TRADE AND THE INCOME THEREFORE , IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION. IN SUPP ORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF CIT VS NEELKAM AL REALTORS & ERECTORS INDIA (P.) LTD. [2017] 79 TAXMANN.COM 238 (BOMBAY). THE LD. AR OF THE ITA NO.5292/M/16 & CO . 57 MUM 18- M/S JAINAM CONSTRUCTIONS 5 ASSESSEE FURTHER SUBMITS THAT IN CASE THE GROUNDS O F APPEAL ARE REJECTED, HE WOULD NOT PRESS ITS CROSS OBJECTION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSING OFFICER MADE THE ADDITION AFTER TAKING HIS VIEW THA T THE ASSESSEE HAS SOLD A FLAT IN LESS THAN VALUE OF STAMP DUTY AUTHORITY VAL UATION. THE ASSESSING OFFICER IN PARAGRAPH-9 OF HIS ORDER HAS TABULATED T HE DIFFERENCE OF SALE VALUE AND THE STAMP DUTY AUTHORITY VALUATION. BEFOR E THE LD. CIT(A), THE ASSESSEE SPECIFICALLY URGED THAT THE ASSESSEE IS A BUILDER AND THE FLAT/UNITS CONSTRUCTED BY BUILDER ARE HIS STOCK-IN-TRADE AND N OT CAPITAL ASSET. SECTION 50C OF THE ACT APPLIES TO CAPITAL, WHERE THE CAPITA L IS TRANSFERRED. THERE IS NO DISPUTE THAT ASSESSEE IS A DEVELOPER/BUILDER. FU RTHER, THERE IS NO DISPUTE THAT ASSESSEE CONSTRUCTED THE SAID FLATS, WHICH WER E SHOWN AS STOCK-IN- TRADE. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS NEELKAMAL REALTORS & ERECTORS INDIA (P.) LTD.(SUPRA) HELD THA T SECTION 43CA HAS BEEN INTRODUCED IN THE ACT FROM 01.04.2014 WHICH GOVERNS TAKING OF FULL VALUE OF CONSIDERATION FOR TRANSFER OF ASSETS OTHER THAN CAPITAL ASSETS ON THE BASIS OF STAMP DUTY VALUATION. THIS SECTION 43CA FINDS A PLACE AS A PART OF CHAPTER-IV-D-PROFITS AND GAINS OF BUSINESS OR PROFE SSION. THEREFORE, WITH EFFECT FROM 1-4-2014 THE STAMP DUTY VALUATION OF AS SETS SOLD COULD BE TAKEN AS FULL VALUE OF CONSIDERATION. FURTHER, SECT ION 50C ACT HAS NO APPLICATION TO VALUE STOCK-IN-TRADE IS ALSO A VIEW TAKEN BY IN CIT V. KEN ITA NO.5292/M/16 & CO . 57 MUM 18- M/S JAINAM CONSTRUCTIONS 6 CONSTRUCTION AND COLONIZERS (P.) LTD. [2002] 208 TA XMAN 478/20 TAXMANN.COM 381 (ALL.). THE DECISION RENDERED BY TH E HONBLE JURISDICTIONAL HIGH COURT IS DIRECTLY APPLICABLE ON THE FACT OF PRESENT CASE. THEREFORE, WE DO NOT FIND ANY REASON TO DEVIATE FRO M THE FINDING OF LD. CIT(A). THE CASE LAW RELIED BY LD. DR IN CIT VS SHA TRUNJAY DIAMONDS (SUPRA) ARE NOT APPLICABLE ON THE FACTS OF THE PRES ENT CASE. THE SAID CASE IS RELATES TO SECTION 40A(2), WHICH DEALS WITH THE EXC ESSIVE OR UNREASONABLE PAYMENTS MADE TO RELATED PARTIES IN BUSINESS DEALIN GS. IN THE RESULT, GROUNDS OF APPEAL RAISED BY REVENUE ARE DISMISSED. C.O. NO. 57/MUM/2018 BY ASSESSEE 6. AS WE HAVE NOTED HEREINABOVE THAT THE LD. AR WHILE MAKING SUBMISSION, SUBMITTED THAT HE WILL NOT PRESS HIS CROSS OBJECTIO N IN CASE THE REVENUES APPEAL IS NOT SUCCEEDED ON MERIT. CONSIDERING THE S UBMISSION OF LD. AR OF THE ASSESSEE, THE CROSS OBJECTION OF ASSESSEE IS DI SMISSED AS NOT PRESSED. 7. IN THE RESULT, APPEAL FILED BY REVENUE AND THE CROS S OBJECTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.05.2018. SD/- SD/- B.R. BASKARAN PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 18.05.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI ITA NO.5292/M/16 & CO . 57 MUM 18- M/S JAINAM CONSTRUCTIONS 7 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI