Smt Karri Sitamahalakshmi, Palangi, Undrajavaram Mandal, W.G.Dt. V. The DCIT, Circle-1, Rajahmundry

ITA 94/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56780 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Opportunity of being heard; Cost of acquisition
• Section: 50C

Judgement Text

ITA NO94/V/2011 K. SITAMAHALAKSHMI, PALANGI. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 94 /VIZAG/ 20 11 ASSESSMENT YEAR : 2006 - 07 SMT. KARRI SITAMAHA LAKSHMI PALANGI VS. DCIT CIRCLE - 1(1) RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.BHPPK 0482B APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI D. KOMALI KRISHNA, SR. DR D ATE OF HEARING : 21.6.2011 D ATE OF PRONOUNCEMENT: 11.8.2011 ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT HE HAS ERRED IN CO NFIRMING THE ADDITION MADE BY THE A.O. AFTER ADOPTING THE MARKET VALUE AT ` 44,83,125/- OF THE LAND SOLD AFTER INVOKING PROVISIONS OF SECTION 50C OF THE INC OME TAX ACT (HEREINAFTER CALLED AS AN ACT). 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE HAS PURCHASED AGRICULTURAL LAND OF AC. 2.27 CENTS AT PA LANGI VILLAGE ON 12.1.2005 FOR A CONSIDERATION OF ` 4,68,000/-. IN ADDITION, SHE INCURRED DEVELOPMENT EXPENDITURE OF ` 6,56,761/- AND CLAIMED THE TOTAL COST AT ` 11,06,761/-. THE SAID LAND WAS SOLD TO ONE SMT. NISHI DEVI ON 17.11. 2005 FOR ` 2,98,875/-. THE ASSESSEE SUBSEQUENTLY FILED HER RETURN OF INCOME CL AIMING LOSS OF ` 8,07,890/- DURING THE ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED TO THE A.O. THAT AFTER PURCHASE OF THE SAID LAND, SHE INCURRED DEVELOPMENT CHARGES AND CONVERTED SUCH LAND INTO PLOTS. HOWEVER, SHE COULD NOT SELL THE PLOTS IMMEDIATELY AND LATER SOLD THE ENTIRE DEVELOPMENT LAND TO SMT. NISH I DEVI AT A LOSS ON ACCOUNT ITA NO94/V/2011 K. SITAMAHALAKSHMI, PALANGI. 2 OF FINANCIAL STRINGENCIES ON HER PART. ON FURTHER EXAMINATION AND ON PERUSAL OF SALE DEED, THE ASSESSING OFFICER OBSERVED THAT T HE MARKET VALUE OF THE PROPERTY AS DETERMINED BY THE STAMP VALUATION AUTHO RITIES WAS ` 44,83,125/- AND, ACCORDINGLY, HE INVOKED THE PROVISIONS OF SECT ION 50C OF THE ACT FOR ADOPTING THE MARKET VALUE DETERMINED BY THE STAMP V ALUATION AUTHORITY FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS IN HER C ASE AND AFTER ALLOWING DEDUCTIONS OF THE ADMITTED PURCHASE COST INCLUDING DEVELOPMENT EXPENDITURE OF ` 11,06,761/-. THE A.O. DETERMINED THE TAXABLE CAPIT AL GAINS AT ` 33,76,364/-. THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) BUT DID NOT FIND FAVOUR WITH HIM. 3. NOW THE ASSESSEE IS BEFORE US WITH THE SUBMISSIO N THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REAL ESTATES. SHE D ID NOT HOLD THE AGRICULTURAL LAND AS A PART OF CAPITAL ASSET. SHE PURCHASED THE LAND AND DEVELOPED IT AND SOLD IT AFTER CUTTING INTO PLOTS. THEREFORE, THE L OSS SUFFERED BY THE ASSESSEE IS A BUSINESS LOSS AND NOT THE SHORT TERM CAPITAL LOSS AS SUGGESTED BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSE E FURTHER CONTENDED THAT FOR COMPUTATION OF BUSINESS INCOME, THE PROVISIONS OF SECTION 50C CANNOT BE INVOKED TO DETERMINE THE MARKET VALUE OF THE PROPER TY AT THE TIME OF ITS SALE. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR T HE ASSESSEE HAS INVITED OUR ATTENTION TO THE COPIES OF RETURN IN WHICH THIS LOS S WAS OFFERED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. 4. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED THA T THE ASSESSEE ITSELF CLAIMED THE LOSS TO BE A SHORT TERM CAPITAL LOSS. THEREFORE, THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 50C OF TH E ACT TO DETERMINE THE SHORT TERM CAPITAL GAIN. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CARE FUL PERUSAL OF THE ORDER OF THE AUTHORITIES BELOW, WE FIND THAT THE AS SESSEE IN HIS RETURN OF INCOME HAS CLAIMED THIS LOSS TO BE A BUSINESS LOSS BUT IN ITS REPLY FILED BEFORE THE ASSESSING OFFICER, ASSESSEE HAS STATED THAT IT IS NOT A LONG TERM CAPITAL GAIN BUT IT IS A SHORT TERM CAPITAL LOSS. THESE WO RDINGS OF THE ASSESSEE MADE ITA NO94/V/2011 K. SITAMAHALAKSHMI, PALANGI. 3 THE ENTIRE CONFUSION WHETHER SHE TREATED THIS PROPE RTY OF AGRICULTURAL LAND TO BE THE PART OF CAPITAL ASSET OR SHE WAS DOING BUSIN ESS IN SALE/PURCHASE OF LAND. IF IT IS A CASE OF COMPUTATION OF CAPITAL GA IN OR LOSS, THE PROVISIONS OF SECTION 50C CERTAINLY BE INVOKED TO DETERMINE THE M ARKET VALUE AT THE TIME OF SALE OF THE PROPERTY. BUT SO FAR AS APPLICATION OF PROVISIONS OF SECTION 50C IS CONCERNED TO DETERMINE THE MARKET VALUE IN BUSINESS ACTIVITIES OF THE ASSESSEE, THIS ASPECT WAS NOT EXAMINED BY THE ASSES SING OFFICER. WE, THEREFORE, OF THE VIEW THAT THE IMPUGNED ISSUE WAS NOT PROPERLY EXAMINED BY THE ASSESSING OFFICER. WE ACCORDINGLY, SET ASIDE T HE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO RE-ADJUDICATE THE ISSUE AFRESH I N THE LIGHT OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSE E AND ALSO TO FIND OUT WHETHER THE ASSESSEE WAS DOING BUSINESS OF SALE/PUR CHASE OF LANDS AND HOW THIS AGRICULTURAL LAND WAS SHOWN IN HER BALANCE SHE ET. IF THE LAND WAS HELD BY THE ASSESSEE AS A PART OF CAPITAL ASSET, THE A.O . CAN RIGHTLY COMPUTE THE SHORT TERM CAPITAL GAIN OR LOSS IN THE LIGHT OF PRO VISIONS OF SECTION 50C OF THE ACT. BUT IF THE ASSESSEE IS DOING BUSINESS OF SALE AND PURCHASE OF PLOTS, THE A.O. HAS TO EXAMINE THE ASPECT OF APPLICABILITY OF PROVISIONS OF SECTION 50C AND THEREAFTER TO COMPUTE THE PROFIT OR LOSS IN THE BUSINESS TAKING INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES AND THE MARKE T VALUE OF THE PLOT. ACCORDINGLY, THE A.O. IS DIRECTED TO RE-ADJUDICATE THE ISSUE IN TERMS INDICATED ABOVE AND IN ACCORDANCE WITH LAW AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11.8.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH AUGUST, 2011 ITA NO94/V/2011 K. SITAMAHALAKSHMI, PALANGI. 4 COPY TO 1 SMT. KARRI SITAMAHALAKSHMI, W/O SRI SATYANARAYANA R EDDY, D.NO.1 - 175, ALAPATINAGAR, PALANGI, UNDRAJAVARAM MANDAL, W.G. DI ST. 2 DCIT, CIRCLE - 1, RAJAHMUNDRY 3 THE CI T, RAJAHMUNDRY 4 THE CIT ( A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM