Sri.Sohanlal, Bangalore V. Income Tax Officer, Bangalore

ITA 533/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5332 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS JT BENGALURU
• Assessee Lawyers: H N KHINCHA
• Keywords: Business income
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.533/BANG/2017 ASSESSMENT YEAR : 2012-13 SHRI SOHANLAL, M/S. RAMDEV JEWELLERS, # 1, M.G. ROAD, KANAKAPURA 562 117. PAN: AGDPS 4826R VS. THE INCOME TAX OFFICER, WARD 2(2)(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA, CA RESPONDENT BY : SMT. SWAPNA DAS, JT.CIT(DR)(ITAT)-2, BENGALURU DATE OF HEARING : 17.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN MAK ING AN ADDITION OF RS. 33,79,546/- TO THE INCOME OF THE AP PELLANT AS INCOME FROM BUSINESS OF REAL ESTATE AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE SAME. THE AUTHORITIES BELOW HAVE NOT PROPERLY A PPRECIATED THE FACTS AND CIRCUMSTANCES OF THE CASE, RESULTING IN E RRONEOUS CONCLUSION ABOUT INCOME AND BUSINESS ACTIVITIES AND SUCH A CONCLUSION BEING AGAINST THE FACTS OF THE CASE IS T OTALLY TO BE IGNORED. ITA NO. 533/BANG/2017 PAGE 2 OF 8 2. THE AUTHORITIES BELOW HAVE NOT APPRECIATED THAT THE SHARE OF LAND BELONGED TO THE APPELLANT WAS TRANSFERRED B Y THE APPELLANT ON 02.04.2010, RELEVANT TO ASSESSMENT YEAR 2011-12 AND HAVE ERRED IN TAXING THE INCOME FROM BUSINESS OF THE SAM E TRANSACTION IN ASSESSMENT YEAR 2012-13 BEING THE YEAR UNDER APP EAL. SUCH AN ACTION HAVING NO FORCE IN LAW, BEING ERRONEOUS O N FACTS IS TO BE IGNORED AND THE ADDITION MADE IS TO BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON APPRECIATION OF EVIDENCE AVAILABLE, IT WOULD BE CLE AR THAT THE CONCLUSION OF AUTHORITIES BELOW THAT THE APPELLANT HAD SOLD SITES AND THAT THE APPELLANT HAD ENTERED INTO BUSINESS VE NTURE WOULD BE TOTALLY ERRONEOUS AND CONSEQUENTLY THE ADDITION AS MADE AND SUSTAINED ALSO BEING ERRONEOUS IS TO BE DELETED. 4. IN ANY CASE AND WITHOUT PREJUDICE, THE COMPUTAT ION OF INCOME, BOTH SALE PRICE AND COST ARE INCORRECT AND THE COMPUTATION IS EXCESSIVE. THE EXCESSIVE INCOME AS C OMPUTED, IS TO BE DELETED. 5. THE ASSESSING OFFICER HAD ERRED IN LEVYING INTE REST U/S. 234A AND U/S. 234B OF I.T. ACT, 1961. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. 6. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT IMPUGN ED ORDER BE QUASHED OR AT LEAST THE ADDITION AS MADE BE DELETED AND INTEREST LEVIED BE ALSO DELETED. 2. THOUGH VARIOUS GROUNDS ARE RAISED, BUT THEY ALL RELATE TO ADDITION OF RS.33,79,546 TO THE INCOME OF THE ASSESSEE AS INCOM E FROM BUSINESS OF REAL ESTATE. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT ASSESSEE HAS ENTERED INTO A SALE AGREEMENT WITH M/S. ROYAL PRIME DEVELOPERS FOR SALE OF CONVERTED LAND MEASURING 3 ACRES 20 GUNTAS SITUATED AT MALLAPURA V ILLAGE, KASABA HOBLI, ITA NO. 533/BANG/2017 PAGE 3 OF 8 NELAMANGALA TALUK, BANGALORE RURAL DISTRICT FOR A C ONSIDERATION OF RS.2,62,50,000. CONSEQUENT TO SALE AGREEMENT, THE A SSESSEE OFFERED LONG TERM CAPITAL GAIN FOR A.Y. 2011-12. LATER ON, FLAT S WERE CONSTRUCTED AND SALE DEEDS WERE EXECUTED BY THE ASSESSEE BEING OWNE R OF THE LAND TO THE PROSPECTIVE BUYERS AS PER TERMS OF LEASE AGREEMENT AND MEMORANDUM OF UNDERSTANDING (MOU) EXECUTED BETWEEN THE ASSESSEE A LONG WITH OWNERS OF DIFFERENT LANDS WITH THE DEVELOPER. 4. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS CONDUCTED AN ENQUIRY WITH M/S. ROYAL PRIME DEVELOPERS WITH WHOM THE ASSESSEE HAS ENTERED INTO SALE AGREEMENT. M/S. ROYAL PRIME DEVEL OPERS VIDE LETTER DATED 18.02.2015 HAVE MADE THE STATEMENT, WHICH WAS RECOR DED BY THE AO IN PARA 4 OF HIS ORDER. THE STATEMENT MADE BY THE DEV ELOPER THROUGH ITS LETTER DATED 18.02.2015 AND THE DOCUMENTS FILED BY IT WERE THOROUGHLY EXAMINED BY THE AO AND HE CAME TO THE CONCLUSION THAT ASSESS EE HAD DEVELOPED THE SITES IN THE LAND HELD BY HIM THROUGH M/S. ROYAL PR IME DEVELOPERS AND SOLD THE SITES TO THE PURCHASERS DIRECTLY AND HE WAS OF THE VIEW THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ADVENTURE A ND ACCORDINGLY THE INCOME DERIVED BY THE ASSESSEE WAS BROUGHT TO TAX U NDER THE HEAD INCOME FROM BUSINESS. THEREAFTER HE CALCULATED T HE BUSINESS INCOME OF THE ASSESSEE AND MADE ADDITION OF THE SAME. 5. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPE ALS), BUT DID NOT FIND FAVOUR WITH HIM. NOW THE ASSESSEE IS BEFORE THE TR IBUNAL AND HAS INVITED ITA NO. 533/BANG/2017 PAGE 4 OF 8 MY ATTENTION TO THE AGREEMENT FOR SALE AND MOU EXEC UTED WITH THE DEVELOPER WITH THE SUBMISSION THAT BY VIRTUE OF AGR EEMENT OF SALE, ASSESSEE HAS HANDED OVER POSSESSION OF THE LAND TO THE DEVELOPERS AGAINST A SUM OF RS.2,62,50,000, THOUGH PAYMENT WAS RECEIVED ON SUBSEQUENT DATES WHEN THE SALE DEED WAS EXECUTED. THE CORRESPONDING CAPITAL GAIN WAS OFFERED IN THE YEAR OF EXECUTION O F SALE AGREEMENT. THEREFORE, IT IS NOT PROPER TO ASSESS THE BUSINESS INCOME IN THE HANDS OF ASSESSEE AS HE HAS SIMPLY EXECUTED THE SALE DEEDS I N FAVOUR OF PROSPECTIVE BUYERS AS PER THE TERMS OF SALE AGREEME NT AS WELL AS THE MOU. 6. THE LD. DR, ON THE OTHER HAND, HAS INVITED MY AT TENTION THAT AO HAS CATEGORICALLY RECORDED IN HIS ORDER THE MODUS OPERANDI OF THESE TRANSACTIONS. HE HAS STATED THAT THE DEVELOPER WOU LD DEVELOP THE PROPERTY AND SELL THE SAME ON BEHALF OF LAND OWNERS IRRESPEC TIVE OF OWNERSHIP IN THE PROPERTY. ALL THE OWNERS WOULD EXECUTE THE SALE DE ED AS PER THE AGREED SALE CONSIDERATION AND THEREAFTER THE ASSIGNMENT FE E FOR DEVELOPMENT INCLUDING MARGIN WOULD BE TRANSFERRED AND PAID TO T HEM ON CASE TO CASE BASIS. IT MEANS THAT ASSESSEE HAS RECEIVED CERTAIN AMOUNTS OVER AND ABOVE THE FIXED SALE CONSIDERATION OF RS.2,62,50,00 0. THE ASSESSEE HAS NOT FURNISHED THE COMPLETE DETAILS, THEREFORE AO WA S CONSTRAINED TO CALCULATE THE ACTUAL RECEIPTS IN THE HANDS OF ASSES SEE EITHER ON ACCOUNT OF CAPITAL GAIN OR BUSINESS INCOME. ITA NO. 533/BANG/2017 PAGE 5 OF 8 7. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT UNDER SALE AGREEM ENT, ASSESSEE HAS AGREED FOR SALE OF LAND AGAINST A SUM OF RS.2,62,50 ,000 WHICH WAS TO BE RECEIVED ON SUBSEQUENT DATES. AS PER THE MOU, ASSE SSEE WAS REQUIRED TO EXECUTE THE SALE DEEDS IN FAVOUR OF PROSPECTIVE BUY ERS. IN THESE DOCUMENTS, THERE IS NO REFLECTION OF MOU OF THE TRA NSACTIONS. BUT WHEN THE AO MADE NECESSARY ENQUIRY FROM THE DEVELOPER, THE D EVELOPER MADE ITS SUBMISSIONS IN WHICH IT HAS BEEN STATED THAT IRRESP ECTIVE OF OWNERSHIP OF THE PROPERTY, THE OWNERS WOULD EXECUTE THE SALE DEE D AS PER AGREED SALE CONSIDERATION AND THEREAFTER ASSIGNMENT FEE FOR DEV ELOPMENT INCLUDING MARGIN WOULD BE TRANSFERRED AND PAID TO THEM ON COS T TO COST BASIS. IT WAS FURTHER STATED BY THE AUTHORIZED REPRESENTATIVE OF THE DEVELOPER THAT SALE CONSIDERATION MENTIONED IN THE SALE DEEDS ARE CONSI DERATION RECEIVED BY THE LAND OWNERS AND DOES NOT INCLUDE ASSIGNMENT FEE S COLLECTED BY THE DEVELOPER. THE RELEVANT OBSERVATIONS OF THE AO IN THIS REGARD IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ENQ UIRIES WERE CONDUCTED WITH M/S. ROYAL PRIME DEVELOPERS WITH WHO M THE ASSESSEE HAD ENTERED INTO SALE AGREEMENT. THE M/S. ROYAL PRIME DEVELOPERS VIDE LETTER DATED: 18.02.2015 HAS MADE T HE FOLLOWING SUBMISSION: 1) THEY HAVE ENTERED INTO SALE AGREEMENT WITH THE ASSESSEE MR. SOHANLAL IN RESPECT 3 ACRE 20 GUNTAS OF LAND. ITA NO. 533/BANG/2017 PAGE 6 OF 8 2) THE DEVELOPER STATED THAT THEY HAVE ALSO ENTERE D INTO SALE AGREEMENT WITH OTHER LAND OWNERS MR. KHIWARAM AND M R. BHOLERAM IN RESPECT OF THEIR PROPERTIES 3) THE DEVELOPER STATED THAT THE SALE AGREEMENTS A RE ENTERED IN RESPECT LAND TOTALLY MEASURING OF 5 ACRES 25 GUNTAS AND OUT OF THIS ASSESSEE LAND IS 3 ACRE 20 GUNTAS. 4) THE DEVELOPER STATED THAT MODUS OPERANDI OF THE TRANSACTION IS THAT THEY WOULD DEVELOP THE PROPERTY AND SELL TH E SAME ON BEHALF OF THE LAND OWNERS. THE DEVELOPER FURTHER ST ATED THAT IRRESPECTIVE OF THE OWNERSHIP IN THE PROPERTY ALL T HE OWNERS WOULD EXECUTE THE SALE DEED AS PER AGREED SALE CONS IDERATION AND THEREAFTER ASSIGNMENT FEE FOR DEVELOPMENT INCLU DING MARGIN WOULD BE TRANSFERRED/PAID TO THEM ON CASE TO CASE BASIS. 5) THE DEVELOPER STATED THAT THEY HAVE DEVELOPED T HE PROPERTY BASED ON AGREEMENT OF SALE WITHOUT BEING REGISTERED WITH CONCERNED AUTHORITY AND WITHOUT HAVING GENERAL POWE R OF ATTORNEY. 6) THE DEVELOPER IN HIS LETTER STATED THAT THEY HA VE MADE THREE TYPES OF TRANSACTION IN SALE OF PLOTS. THE DETAILS GIVEN BY THE DEVELOPER IS REPRODUCED HEREUNDER: 1. SALE OF PLOT AGAINST BANK LOANS/FINANCIAL INSTI TUTION LOANS : IN THIS TYPE OF TRANSACTION LOAN FACILITY IS AVAILE D BY THE INTENDED PURCHASER OF PLOT AND SAME HAD BEEN PAID DIRECTLY TO THE JOINT BANK ACCOUNT OF THE OWNERS OF THE PROPERTY MAINTAINED AT THE CANARA BANK. FOR THIS KI ND OF TRANSACTION OUR ASSIGNMENT FEES WERE PAID BY THE OW NERS BY WAY OF CHEQUES. 2. SALE OF PLOTS AGAINST CASH DIRECTLY BY THE OWNE R : IN THIS TYPE OF TRANSACTION, AT THE TIME OF REGISTR ATION PURCHASER WOULD PAY THE ENTIRE AGREED SALE CONSIDER ATION TO THE OWNER OF THE LAND BY WAY OF CASH AND AT THE SAME TIME WE WOULD COLLECT OUR ASSIGNMENT FEES BY WAY OF CASH. ITA NO. 533/BANG/2017 PAGE 7 OF 8 3. COLLECTION ON BEHALF OF THE OWNER IN THIS TYPE OF TRANSACTION, THE INTENDED PURCHA SER WOULD EITHER PAID THE PART OF THE ENTIRE AGREED SALE CONS IDERATION TO US OR PAID IN FULL AMOUNT OF THE ENTIRE AGREED S ALE CONSIDERATION. WHEN PART PAYMENT IS RECEIVED BY US AT THE TIME OF REGISTRATION, THE BALANCE AMOUNT OF AGREED AMOUNT OF SALE CONSIDERATION WOULD BE PAID DIRECTLY BY THE PURCHASER TO THE OWNER AND WE, AFTER RETAINING OUR ASSIGNMENT FEES, HAVE SETTLED THE BALANCE AMOUNT TO THE OWNER, PERIODICALLY BY WAY OF CHEQUE. WHEN FULL AMO UNT IS RECEIVED BY US, AFTER REGISTRATION OF THE PLOT, THE ENTIRE SALE CONSIDERATION HAS BEEN PAID, PERIODICALLY TO T HE OWNER AFTER RETAINING OUR ASSIGNMENT FEES. 7) THE AUTHORISED REPRESENTATIVE OF THE DEVELOPER A LSO STATED THAT THE SALE CONSIDERATION MENTIONED IN THE SALE D EEDS ARE CONSIDERATION RECEIVED BY THE LAND OWNERS AND IT DO ES NOT INCLUDE ASSIGNMENT FEES COLLECTED BY THE ROYAL PRIM E DEVELOPERS. 8. FROM A CAREFUL PERUSAL OF THE SALE AGREEMENT, MO U AND THE LETTER OF DEVELOPER DATED 18.02.2015, IT APPEARS THAT ASSESSE E HAS RECEIVED CERTAIN AMOUNT OVER AND ABOVE THE AMOUNT PAYABLE UNDER THE AGREEMENT FOR SALE AT THE TIME OF EXECUTION OF THE SALE DEED IN FAVOUR OF PROSPECTIVE BUYERS. BUT THE QUANTIFICATION OF THE AMOUNT IS NOT DONE BY THE AO NOR ANY FORMULA WAS WORKED OUT. IN THE LIGHT OF THESE FACTS, I AM OF THE VIEW THAT THIS ISSUE REQUIRES READJUDICATION BY THE AO IN THE LIGHT OF T HE LETTER OF THE DEVELOPER, AGREEMENT FOR SALE AND MOU. IF NEED BE, THE AO MAY SUMMON THE DEVELOPER AND EXAMINE HIM IN THE PRESENCE OF ASSESS EE. IF THE ASSESSEE HAS RECEIVED AMOUNT OVER AND ABOVE THE SALE CONSIDE RATION, THE SAME ITA NO. 533/BANG/2017 PAGE 8 OF 8 SHOULD BE ASSESSED AS INCOME OF THE ASSESSEE. ACC ORDINGLY, THIS ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR READJ UDICATION AFRESH IN THE TERMS INDICATED ABOVE. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MAY, 2017. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE, DATED, THE 26 TH MAY, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.