Nirmal B. Chavda, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2(1)(2), RAJKOT-GUJARAT

ITA 74/RJT/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8907 (ITAT-RAJKOT)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 14-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAMITA KHURANA
• Assessee Lawyers: GAURAV MEHTA
• Keywords: Sale consideration of property below Jantri Value; Business income; Principle of natural justice; Cost of acquisition
• Section: 50C; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] MR. NIRMAL BAHADURBHAI CHAVDA, AT: LALKA, POST: GOKHLANA, VIA: JASDAN, DIST: RAJKOT - 360050 PAN: AFHPC0859H (APPELLANT) VS THE ITO, WARD 2 (1)(2), RAJKOT (RESPONDENT) REVENUE BY : SMT. NAMITA KHURANA , SR. D . R. ASSESSEE BY: S H RI GAURAV MEHTA , A.R. DATE OF HEARING : 07 - 12 - 2 017 DATE OF PRONOUNCEMENT : 12 - 01 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THI S ASSESSEE S APPEAL FOR A.Y. 2008 - 09 , AR ISES FROM ORDER OF THE CIT(A) - 2, RAJKOT DATED 08 - 12 - 2016 , IN PROCEEDINGS UNDER SECTION 144 R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 74 / RJT /20 17 A SSESSMENT YEAR 200 8 - 09 I.T.A NO. 7 4 /RJT /20 17 A.Y. 2008 - 09 PAGE NO MR. NIRMAL BAHADURBHAI CHAVDA VS. ITO 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED INCOME TAX OFFICER, WARD 2(1) (2), RAJKOT, HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER ERRED IN LAW BY ADOPTING SALE VALUE OF THE PROPERTY DECLARED BY THE ASSESSEE TO RS.18,62,000 AS AGAINST ACTUAL AGREEMENT VALUE OF RS.35,00,000 IN WHICH THE ASSESSEE IS HAVING 176 TH SHARE WHICH WORKS OUT TO RS.5,83,333(1/6T H OF RS.35,00,000). 2. THE ASSESSING OFFICER ERRED IN LAW BY NOT ALLOWING THE ASSESSEE' S 176 TH SHARE IN PURCHASE PRICE OF THE PROPERTY WHICH WORKS OUT TO RS.1,79,203(1 /6 TH OF RS. 10,75,215). 3. THE ASSESSING OFFICER HAS ERRED IN LAW BY ADOPTING STAMP DUTY VALUATION U/S 50C AS THE ASSESSEE HAS FILED RETURN MENTIONING INCOME FROM SALE OF PROPERTY AS BUSINESS INCOME AND AS PER CASE LAW OF INDERLOK HOTELS PVT. LTD. V. ITO [2009] 32 SOT 419(MUM.), CIT V. THIRUVENGADAM INVESTMENTS PVT. LTD. [2010] 320 ITR 345(MAD.) SECTION 50C IS NOT APPLICABLE FOR CALCULATING BUSINESS INCOME UNDER SECTION 28. 4. THE ASSESSING OFFICER HAS ERRED IN LAW B Y NOT GIVING ENOUGH OPPORTUNITY TO THE ASSESSEE BEFORE PASSING ORDER AND NOT FOLLOWS THE PRINCIPLE OF NATURAL JUSTICE. 5. THE COMMISSIONER OF INCOME TAX - 2 HAS WRONGLY ENHANCED INCOME OF ASSESSEE BY RS.1,45,639. 3. IN THIS CASE, ASSESSEE FILED HIS RETURN OF INCOME DECLARING INCOME OF RS. 1 , 42 , 670/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 OF THE ACT BY ISSUING OF NOTICE U/S. 148 ON 25 TH MARCH, 2015. THE BRIEF FACT OF THE CASE IS THAT THE ASSESSEE ALONG WITH THE FIVE CO - OWNER HAD SOL D IMMOVEABLE PROPERTY. O N VERIFICATION THE ASSESSING OFFICER NOTICED THAT THE SALE CONSIDERATION FROM THE PROPERTY WAS SHOWN ON LOWER SIDE IN COMPARISON TO THE SALE VAL UE ACCORDING TO STAMP DUTY PAID . THE ASSESS EE HAS DECLARED TH E SALE VALUE AT RS. 18,62,000/ - AS AGAINST THE SALE VALUE DETERMINED ON THE BASIS OF ST AMP DUTY AT RS. 53,21,1 00/ - . CONSEQUENTLY , THE LONG TERM CAPITAL GAIN WAS ARRIVED AT R S. 34,59.1 00/ - AND 1/6 TH SHARE OF THE ASSESSEE ON THE ABOVE ESCAPED INCOME WAS C OMPUTED TO THE AMOUNT OF RS. 5 , 76 , 517/ - AS PER THE PROVISION OF SECTION 50C OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE NEITHER I.T.A NO. 7 4 /RJT /20 17 A.Y. 2008 - 09 PAGE NO MR. NIRMAL BAHADURBHAI CHAVDA VS. ITO 3 ATTENDED NOR FILED ANY WRITTEN SUBMISSION BEFORE THE ASSESSING OFFICER. CONSEQUENTLY , THE ASSESSING OFFICER ADDED THE AFORESAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE AS UNDISCLOSED RECEIPT RECEIVED BY HIM. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). TH E LD. CIT(A) HAS REJECTED THE APPEAL OF THE ASSESSEE AND ENHANCED THE SHORT TERM CAPITAL GAIN TO RS. 7 , 22 , 156/ - BY OBSERVING AS UNDER: - 8. DECISION: HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND RIVAL CONTENTIONS, I FIND THAT THE ONLY SUBSTANTIAL GROUND TO BE DECIDED IS WHAT SHOULD BE THE LONG TERM CAPITAL GAIN OF THE AS SESSEE ON SALE OF PROPERTY DURING THE YEAR IN WHICH ASSESSEE'S SHARE WAS 1/6 TH . THE DECLARED VALUE OF SALE WAS RS.18,62,000/ - AND THE DEEMED SALE CONSIDERATION U/S.50C WAS RS.53,21,100/ - . THE AO TAXED 1/6 TH OF THE DIFFERENCE OF RS.34,59,100/ - AT RS.5,76,51 7/ - AS CAPITAL GAIN OF THE ASSESSEE. THE ASSESSMENT WAS COMPLETED U/S.144 AFTER SHOW CAUSE NOTICE TO ABOVE EFFECT WAS NOT RESPONDED BY THE ASSESSEE. THE OBJECTIONS OF THE ASSESSEE IN GROUND OF APPEAL ARE THREEFOLD. FIRST IS AGAINST TAKING THE SALE CONSIDER ATION AS PER SECTION 50C SECOND IS AGAINST NOT ALLOWING THE COST OF ACQUISITION AND THIRD IS NOT ALLOWING DEDUCTION OF COMPENSATION PAID TO TENANTS. THE ASSESSEE HAS CONTENDED THAT THE IMPUGNED PROPERTY WAS PURCHASED ON 18.05.2006 FOR A COST OF RS. 10,75,2 15/ - INCLUDING STAMP DUTY AND REGISTRATION CHARGES. THE FACT THAT THE PROPERTY WAS PURCHASED FOR RS.10 LACS ON 10.05.2006 IS EVIDENCED BY THE PURCHASE DEED PRODUCED IN PAPER BOOK. THE ASSESSEE DURING APPELLATE PROCEEDINGS HAS CONTENDED THAT THE SAID PROPER TY WAS A BUSINESS ASSET AND THEREFORE, IT WAS NOT LIABLE FOR PROVISION U/S. 50C. IT IS CONTENDED THAT THE BUSINESS INCOME OF THE ASSESSEE COMES TO RS.5,62,785/ - AS FOLLOWING COMPUTATION : SALE VALUE 35,00,000 LESS: PURCHASE COST (10,75,215) L ESS : SALE VALUE OF PROPERTY DECLARED BY ASSESSEE IN ASSESSMENT ORDER (18,62,000) ADDITIONAL NET PROFIT 5,62,785 (IN WHICH SHARE OF ASSESSEE IS 176 TH ) I FIND THAT ABOVE COMPUTATION IS BEYOND COMPREHENSION ARITHMETICALLY AND NO CO GNIZANCE OF SAME CAN BE TAKEN. I FIND THAT THE ASSESSE E HAD NOT DISCLOSED ANY CAPITAL GAIN IN RETURN OF INCOME. THE BUSINESS INCOME DECLARED AT RS.1,42,670/ - CANNOT BE SAID TO BE BUSINESS INCOME FROM THE ABOVE STATED PROPERTY TRANSACTION BECAUSE AS PER ASSESSEE'S OWN CALC ULATION THIS INCOME SHOULD BE MORE THAN RS. 4 LAC. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT MAKE ANY SUCH PLEA I.T.A NO. 7 4 /RJT /20 17 A.Y. 2008 - 09 PAGE NO MR. NIRMAL BAHADURBHAI CHAVDA VS. ITO 4 THAT IT WAS A BUSINESS TRANSACTION. THE ASSESSEE HAS BROUGHT NOTHING ON RECORD THAT HE WAS ENGAGED IN BUSINESS OF REAL ESTATE. THEREFOR E, THE ASSESSESS'S CONTENTIONS AT APPELLATE STAGE REGARDING BUSINESS NATURE OF TRANSACTION IS NOTHING BUT AN AFTERTHOUGHT AND IT IS NOT SUPPORTED BY ANY EVIDENCE. THIS, CLAIM OF THE ASSESSEE IS THEREFORE NOT TENABLE, AND REJECTED BOTH ON MERITS AND BEING A DDITIONAL EVIDENCE/CLAIM WHICH IS NOT ADMISSIBLE WITHOUT SATISFYING CONDITIONS UNDER RULE 46A. THE CONTENTION THAT COMPENSATION WAS PAID TO TENANTS OUT OF SALE CONSIDERATION IS REJECTED AS NO EVIDENCE HAS BEEN ADDUCED. HAVING HELD THAT THE ASSESSEE IS LI ABLE FOR CAPITAL GAINS IN RESPECT OF THE SAID TRANSACTION, IT IS FOUND THAT THE COMPUTATION OF CAPITAL GAIN BY THE AO IS ERRONEOUS AS THE CAPITAL GAINS SHOULD HAVE BEEN COMPUTED AS DIF FERENCE BETWEEN THE SALE CONSIDERATION AS PER SECTION 50C AND THE COST O F ACQUISITION WHEREAS THE AO HAS TAKEN DIFFERENCE OF DEEMED SALE CONSIDERATION U/S.50C AND THE DECLARED SALE CONSIDERATION. ACCORDINGLY, THE ASSESSEE WAS GIVEN AN ENHANCEMENT NOTICE VIDE ORDER SHEET ENTRY DATED 28.11.2016 TO ABOVE EFFECT. THE ASSESSEE MERE LY REITERATED THAT HE WAS NOT LIABLE FOR CAPITAL GAIN. THIS CLAIM OF THE ASSESSEE ALREADY STANDS REJECTED. THE CHARGEABLE SHORT TERM CAPITAL GAIN OF THE ASSESSEE ARE THEREFORE COMPUTED AT RS.7,22,156/ - AS AGAINST RS.5,76,51 7 - COMPUTED BY THE AO, AS SHOWN BE LOW : SALE CONSIDERATION 5408163 - PURCHASE COST 1075225 TOTAL CAPITAL GAIN 4332938 ASSESSESS'S SHARE AT 1/6 TH 722156 ACCORDINGLY, THE GROUND OF APPEAL ARE REJECTED AND S.T.C.G. IS ENHANCED TO RS.7,22,156/ - . THE GROUNDS OF APPEAL ARE ACCORDINGLY REJECTED WITH ENHANCEMENT. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING WRITTEN SUBMISSION FILED BEFORE LD. CIT(A), COPY OF PURCHASE DEED, COPY OF SALE DEED ETC. LD. COUNS EL HAS CONTENDED THAT SECTION 50 C IS NOT APPLICABLE IN HIS CASE AS THE NATURE OF INCOME IS BUSINESS INCOME ON WHICH PROVISION OF SECTION 50C IS NOT APPLICABLE. LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT ASSESSEE HAS FAILED TO SUBSTANTIATE THAT T HE INCOME FR OM SALE OF ASSET IS HIS BUSINESS INCOME. I.T.A NO. 7 4 /RJT /20 17 A.Y. 2008 - 09 PAGE NO MR. NIRMAL BAHADURBHAI CHAVDA VS. ITO 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE GROUND NO. 1 TO 3 AND 5 ARE INTERCONNECTED, THEREFORE, BEING ADJUDICATED TOGETHER AS UNDER. THE ASSESSEE HAD SOLD IMMOVEABLE PROPERTY OWNED ALONG WITH OTHER FIVE CO - OWNERS. THE ASSESSING OFFICER HAS DETERMINED THE TOTAL INCOME UNDER THE HEAD CAPIT AL GAIN AS 1/6 TH SHARE OF THE ASSESSEE COMPANY AT RS. 5,76,517/ - AFTER ADOPTING THE SALE VALUE ON T H E BASIS APPLICABLE OF JANTRI R ATE A S PER THE PROVISIONS OF SECTION 50C OF THE ACT. SUBSEQUENTLY DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE CLAIMED THAT INCOME FROM THE SALE OF PROPERTY SHO ULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME AS AGAINST CAPITAL GAIN UNDER THE PROVISION O F SECTION 5 0C OF THE ACT. WE OBSERVED THAT ASSESSEE FAILED TO SUBSTANTIATE BEFORE THE LD. CIT(A) THAT THE AFORESAID INCOME WAS EARNED FROM BUSINESS TRANSACTION . THE ASSESSEE HAS N EITHER PRODUCED ANY EVIDENCE BEFORE THE LD. CIT(A) NOR BEFORE US TO DEMONS TRATE THAT HOW HE HAS EARNED BUSINESS I N COME FROM THE SALE OF ONLY ABOVE SAID PROPERTY. THE ASSESSEE HAS ALSO FAILED TO PRODUCE ANY EVIDENCE THAT HE HAS PAID ANY COMPENSATION TO ANY TENANTS .HE HAS NOT PRODUCED ANY EVIDENCE TO DEMONSTRATE THAT H E WAS E NG AG E D IN THE BUSINESS OF REAL ESTATE. THE FACTS OF THE CASE OF THE ASSESSEE ARE DISTINGUISHABLE FROM THE FACT OF THE JU DICIAL PRONOUNCEMENT REFERRED IN THE GROUND 3 OF APPEAL OF ASSESSEE , THEREFORE , THE SAME IS DISMISSED. WE HAVE FURTHER NOTICED THAT THE A SSESSEE WAS GIVEN ENOUGH OPPORTUNITY BUT HE FILED TO FILE ANY EVIDENCE AND PROVE HIS CONTENTION BEFORE THE ASSESSING OFFICER AND LD. CIT(A), THEREFORE, THERE IS NO MERIT IN THE GROUND OF 4 OF THE I.T.A NO. 7 4 /RJT /20 17 A.Y. 2008 - 09 PAGE NO MR. NIRMAL BAHADURBHAI CHAVDA VS. ITO 6 ASSESSEE AND SAME IS ALSO DISMISSED. WE OBSERVED THERE IS NO ERROR IN THE FINDING OF THE LD. CIT(A) AS THE CAPITAL GAIN IN THE CASE OF THE ASSESSEE WA S DETERMINED ACCORDING TO PROVISIONS OF SECTION 50C OF THE ACT AND HE HAS CORRECTLY ENHANCED INCOME BY RS. 145639/ - AS THE ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATI ON THE ACTUAL COST OF LAND WHILE COMPUTING CAPITAL GAIN. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). THEREFORE, THE GROUND S OF APPEAL OF THE ASSESSEE FROM 1 TO 3 AND 5 ARE ALSO DISMISSED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 12 - 01 - 201 8 SD/ - SD/ - (RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 12 /01 /2 01 8 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT