M/s. Shri Rang Infrastructure Pvt. Ltd., Gandhinagar V. DCIT, Gandhinagar Circle, Gandhinagar

ITA 666/AHD/2019

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5534 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 27-05-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Deemed dividend
• Section: 143(3); 2(14); 142(1); 2(22)(e); 133(6); 143(1); 143(2); 44AB; 73

Judgement Text

ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.666/Ahd/2019 Assessment Year: 2013-14 M/s. Shri Rang Infrastructure Pvt. Ltd., Shyamvan, B/h. Vrundavan Hotel, Koba Circle, Post: Koba Dist. Gandhinagar – 382 007 Gujarat. [PAN – AAICS 9126 J] Vs. Deputy Commissioner of Income Tax, Gandhinagar Circle, Gandhinagar. (Appellant) (Respondent) Assessee by Shri M.S. Chhajed, AR Revenue by Shri Ashok Kumar Suthar, Sr. DR D a t e o f H e a ri n g 28.05.2024 D a t e o f P ro n o u n c e m e n t 30.07.2024 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER: This appeal is filed by the Assessee against order dated 18.03.2019 passed by the CIT(A), Gandhinagar for the Assessment Year 2013-14. 2. The assessee has raised the following grounds of appeal :- “1. The order passed by the Ld. CIT(A) is against law, equity & justice. 2. The Ld. CIT(A) has erred in law and on facts in not granting claim of appellant that capital gain arised on sale of land is Long Term Capital Gain. 3. The Ld. CIT(A) has erred in law and on facts in upholding disallowance of deduction claimed of Rs.2,03,000/- & Rs.42,000/- by the appellant towards cost of acquisition of land. ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 2 of 8 4. The Ld. CIT(A) has erred in law and on facts not allowing amount paid of Rs.4,11,00,000/- for revocation of Banakhat right to Shri Kalpesh K. Patel” 3. The assessee has also raised the following additional ground:- “(1) The assessment order passed by the Ld. AO is bad and illegal as the Ld. AO had no valid jurisdiction.” 4. The return of income was e-filed on 13.09.2013 declaring total income of Rs.8,54,68,080/- by the assessee. The return of income was processed under Section 143(1) of the Income Tax Act, 1961. The case was selected for scrutiny and accordingly notice under Section 143(2) of the Act was issued on 05.09.2014 which was duly served to the assessee. Notice under Section 143(2) read with Section 129 of the Act was issued on 03.06.2015 and served to the assessee. Thereafter, notices under Section 142(1) of the Act were issued on various dates. In response to the above notices, the Ld. AR of the assessee (Chartered Accountant) attended the proceedings and submitted the details called for. The Assessing Officer observed that during the year under consideration the assessee company was engaged in the activities of developing and construction of Industrial Park, Estate and dealing in land. The assessee has also furnished copy of Audit Report in Form 3CD/CD as required under Section 44AB of the Act and audited annual accounts. The Assessing Officer observed that from the perusal of return of income and statement of income that the assessee has shown Long Term Capital Gain (LTCG) of Rs.6,14,28,921/- on account of sale of land at Ranip, Ahmedabad. The detailed scrutiny revealed that the assessee had purchased the land bearing Survey Nos.220, 224/1, 224/2 & 228 at Ranip, Ahmedabad on 22.03.2007 i.e. during the F.Y. 2006-07 for Rs.10,77,35,827/- with the finance from Banks and unsecured loans. The assessee had held this land as stock- in-trade till F.Y. 2019-10. In the F.Y. 2010-11, the assessee had converted 55% of the land into fixed asset and held 45% of the land as stock-in-trade for carrying out its business activities. During the period from F.Y. 2006-07 to 2011-12 the assessee capitalised certain amount of interest expenses with the cost of the land on the ground that no business activities were carried out during the period. During the year under consideration the assessee sold 55% of the land converted into asset of M/s Shukan Corporation Pvt. Ltd. for Rs.31,80,00,000/- on 26.06.2012 vide Registration Deed No.6372 of 2022. While computing the LTCG, the assessee in the statement of ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 3 of 8 income worked out the cost of indexation of the land with respect to the F.Y. 2006-07 in which the assessee purchased the land and held as stock-in-trade till F.Y. 2009-10. Accordingly, the Assessing Officer issued show cause notice dated 16.03.2016 and the assessee replied the same vide submission dated 21.03.2016. After taking into consideration the submissions, the Assessing Officer held that 55% of land holds the status of Capital Asset only from the F.Y. 2010-11 and, therefore, the claim of the assessee for indexation of the cost of the land with respect to F.Y. 2006-07 is rejected and is worked out with respect to the year 2010-11 in which the land is converted to capital asset. The Assessing Officer further held that while computing the LTCG the assessee has capitalised a sum of Rs.2,03,80,000/- and Rs.42,000/- claimed to have paid to the land owner during the F.Y. 2007-08 & 2009-10 respectively. The Assessing Officer observed that the payments of Rs.2,03,80,000/- was claimed by the assessee as payments to the land owner over and above the cost mentioned in the deeds. After taking cognisance of the assessee’s reply, the Assessing Officer held that the claim of this payment to the land owner is not justified and rejected the same as the total cost of land is as per the registered deed but there is no mention in any of the deeds to the extent of payment of Rs.2,03,80,000/- in addition to the deed price to the land owner in future. The Assessing Officer further observed that while computing the capital gain, the assessee also claimed to have paid Rs.4,11,00,000/- to Kalpesh K. Patel as the confirming party. The assessee was called upon the details vide notice dated 16.03.2016 and the assessee replied vide submissions dated 21.03.2016. The sale deed dated 26.06.2012 contained neither any right nor mentions any payment to the so-called confirming party Kalpesh K. Patel but the assessee produced the copy of Banakhat/Agreement substantiating its claim of proposed sale of the land to Kalpesh K. Patel. In reply to the notice under Section 133(6) of the Act, Kalpesh K. Patel accepted the said transaction and submitted copy of ledger account of the assessee in his books of accounts. After taking cognisance of all the submissions and the details, the Assessing Officer rejected the assessee’s claim of making payment to the extent of Rs.4,11,00,000/- to the confirming party i.e. Kalpesh K. Patel out of capital gain and made the addition. The Assessing Officer also observed that the assessee has given loan of Rs.1,04,78,866/- to Ms. Tapasvi A. Patel who is one of the Directors having voting power exceeding 10% of the total shares and Rs.41,64,532/- to Shri Arvindbhai T. Patel who is a shareholder having voting power exceeding 10% of the ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 4 of 8 total shares of the company. After taking cognisance of the assessee’s submissions, the Assessing Officer held that Section 2(22)(e) of the Act, deemed dividend amounting to Rs.1,04,78,866/- and Rs.41,64,532/- which is restricted to the accumulated profit of the assessee needs to be taxed in the hands of Ms. Tapasvi A. Patel and Shri Arvindbhai T. Patel respectively. The assessee company was liable to pay dividend distribution tax of Rs.21,96,510/- i.e. 15% of Rs.1,46,43,398/-, on deemed dividend as applicable as per Income Tax Act. 5. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 6. At the time of hearing the assessee has taken additional ground thereby challenging the jurisdiction of the Assessing Officer thereby stating that there was no transfer order under Section 127 of the Act in respect of the Assessment Order to be passed by a Valid Jurisdictional Officer. The Ld. AR submitted that the assessment itself is bad in law as the Assessing Officer did not have jurisdiction under Section 127 of the Act. 7. The Ld. DR submitted that the Assessing Officer has rightly derived the jurisdiction and in fact the transfer under Section 127 of the Act is not required as the assessment is completed under Section 143(3) of the Act as the Assessing Officer himself has followed procedure as per the norms of Section 143(1) and issuing notices of Section 143(2) read with Section 129 as well as notices under Section 142(1) of the Act. 8. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the jurisdiction as mentioned by the Ld. AR that there was no transfer order under Section 127 of the Act does not hold any footing as the Assessing Officer while passing the Assessment Order has taken precaution by issuing notice under Section 143(2) and also 143(2) read with Section 129 of the Act was also passed and served to the assessee. In fact, the notices under Section 142(1) of the Act were issued on various dates, thus applied the statutory guidelines and, therefore, there is no defect in assessment itself as the Assessing Officer has rightly derived the jurisdiction as per the guidelines set out by the Income Tax Statute as well ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 5 of 8 as the Tribunal guideline issued by CBDT for proper assessment within the respective Circles. Thus, additional ground is dismissed. 9. As regards ground no.2 relating to not granting claim of assessee that capital gain arised on sale of land is LTCG. The Ld. AR submitted that the assessee purchased four plots on 21.03.2007 from Gujarat Composite Limited wherein Shri Ram Tooth House Management Pvt Ltd is a confirming party. The assessee also submitted that the assessee had purchased 4 plots of land as for the total cost of Rs.10,77,35,827/- which includes registration charges. The assessee had to pay the amount of Rs.2,03,80,000/- for clearing encumbrances over land. Payment made for clearance of title clear was made by cheques and in A.Y. 2009-10 the assessee sold land bearing no.224/1 having area of 1457 sq. mtr. for Rs.21,00,000/-. The assessee has taken permission from Ahmedabad Urban Development Authority (AUDA) for the development on the same land. The Ld. AR submitted that the land purchased of 4 plots has duly reflected as stock-in-trade in the books of the assessee and the said land was converted into assessee’s capital asset on 01.04.2010. The assessee sold the same land on 22.06.2012 for Rs.31,80,00,000/- and earned LTCG of Rs.6,14,28,921/-. The Ld. AR submitted that Section 2(14) of the Act clearly state that “capital asset” means property of any kind held by an assessee whether or not connected with his business or profession but does not include any stock-in-trade consumable stores or raw material held for the purpose of his business or profession. In the present case, the assessee converted the said land from stock-in-trade to capital asset on 01.04.2010. The said land was purchased by the assessee on 21.03.2007 and sold by the assessee on 22.06.2012 and hence the assessee has held the said land for a period exceeding 36 months. Thus, the assessee has rightly considered the asset as LTCG as he has held the asset for more than 36 months and hence treated the same as gain from sale of said land as LTCG. The Ld. AR relied upon the following decisions:- 1) Daulat Ram vs. Income Tax Officer, (7 ITD 0789 - ITAT, Delhi Bench) 2) Commissioner of Wealth Tax vs. Harshad Rambhai Patel (1964) 54 ITR 749 3) Kalyani Exports & Investments (P) Ltd. Vs. DCIT, 78 ITD 95 4) ACIT vs. Dr. Dhurjati Gupta,127 TTJ 356 5) Keshavji Karsondas vs CIT, 73 Taxmann 571 ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 6 of 8 10. The Ld. DR submitted that the Assessing Officer as well as the CIT(A) has rightly held the same as Short Term Capital Gain (STCG) thereby rejecting the contention of the assessee as the same cannot be termed as Long Term Capital Gain (LTCG) in the light of the said land being held for more than six months immediately preceding the date of its transfer and cannot be termed as LTCG. The Ld. DR relied upon the Assessment Order and the Order of the CIT(A). 11. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee purchased the said four pots on 21.03.2007 and converted the said land into capital asset on 01.04.2010 and sold the said land on 22.06.2012. The holding of the land since the beginning of 2007 to 2010 and, thereafter, also that of conversion to the actual sale of land on 22.06.2012, the same if calculated, amounts to LTCG and, therefore, this cannot be treated as STCG. thereby observing that since the assessee converted the said land as stock-in-trade to capital asset the same amounts to the STCG. Thus, the contention of the Ld. AR that it is a LTCG and claiming the same as LTCG is justifiable. The Assessing Officer as well as the CIT(A) was not right in holding the same as STCG. Thus, ground no.2 is allowed. 12. As regards to ground no.3 related to disallowance of deduction claimed of Rs.2,03,000/- and Rs.42,000/- by the assessee towards cost of acquisition of land, the Ld. AR submitted that the details related to deduction of claim towards cost of acquisition of land was submitted to the Assessing Officer and both the Assessing Officer as well as the CIT(A) totally ignored the same. 13. The Ld. DR relied upon the Assessment Order and the Order of the CIT(A). 14. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the cost of acquisition of land was very much detailed by the assessee in the books and in fact the details have been given to both the Authorities which was totally ignored and, therefore, the disallowance of deduction claimed of Rs.2,03,000/- and Rs.42,000/- by the assessee towards cost of acquisition of land is not justifiable on the part of the Assessing Officer as well as by the CIT(A). Thus, ground no.3 is allowed. ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 7 of 8 15. As regards to ground no.4 wherein the amount paid of Rs.4,11,00,000/- for revocation of Banakhat Right to Shri Kalpesh K. Patel which was rejected by the Assessing Officer. The Ld. AR submitted that these were mentioned in detail in the Banakhat in case of revocation and once it has been stated by Shri Kalpesh K. Patel and confirmed by the amount paid for revocation of Banakhat, the Assessing Officer or the CIT(A) cannot simpliciter reject the evidences of the assessee without giving any valid reasons. 16. The Ld. DR relied upon the Assessment Order and the Order of the CIT(A). 17. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee while paying the amount of revocation of Banakhat, it was clear on the part of the assessee as well as the document agreed by both the parties including Shri Kalpesh K. Patel who has confirmed the same and demonstration of the assessee to his accounts and the ledger book about the said amount being paid to the party who has confirmed the same, the details and the evidences cannot be simply ignored by the Assessing Officer as well as by the CIT(A) and hence the Assessing Officer was not right in disallowing the same. Hence, ground no.4 is allowed. 18. In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on this 30 th July, 2024. Sd/- Sd/- (NARENDRA PRASAD SINHA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 30 th July, 2024 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File ITA No.666/Ahd/2019 Assessment Year: 2013-14 Page 8 of 8 By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad