ITO, CHENNAI V. Cholan Property Developers Pvt. Ltd., CHENNAI

ITA 97/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6423 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: MANOHAR DOSS VAKALAT NOT FILED
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Business income; Cost of acquisition; Fair market value; Revised return

Judgement Text

, .. - , IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH, CHENNAI , !' # BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER . / ITA NO. 97/MDS/2017 / ASSESSMENT YEAR : 2010-11 THE INCOME-TAX OFFICER, CORPORATE WARD 1(3), CHENNAI 600 034. ( /APPELLANT) VS. M/S. CHOLAN PROPERTY DEVELOPERS PVT. LTD., R-34, MMDA COLONY, ARUMBAKKAM, CHENNAI 600 106. PAN AACCC4546 N RESPONDENT) / APPELLANT BY : SHRI B. SAGADEVAN, JCIT / RESPONDENT BY : SHRI MANOHAR DOSS, ADVOCATE (VAKALAT NOT FILED) ! / DATE OF HEARING : 12 .07.2017 '# ! / DATE OF PRONOUNCEMENT : 21.08.2017 !$ / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-1,CHENNA I DATED 17.10.2016 FOR ASSESSMENT YEAR 2010-11. - - ITA 97/MDS/11 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E ASSESSMENT OF CAPITAL GAINS MADE INVOKING PROVISION S OF SEC.50C AS NOT CORRECT. 2.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E A.O. WAS BOUND BY THE PROVISIONS OF SEC.50C OF THE I.T. ACT TO ADOPT THE VALUE FIXED BY THE STAMP AUTHORITIES AS T HE SALE CONSIDERATION. 2.2 THE LEARNED CIT(A) FACTUALLY ERRED IN HOLDING T HAT THE VALUE ADOPTED AS PER SEC.50C BY THE AO WAS A NOTION AL VALUE AND THAT THE CONSIDERATION AS ADMITTED BY THE ASSESSEE WAS ABOVE THE FMV FOR STAMP DUTY PURPOSES. 2.3 THE LEARNED CIT(A) FAILED TO NOTE THAT THE STAM P DUTY FEES HAS BEEN CALCULATED AND PAID BY THE ASSESSEE O N THE FMV FIXED BY THE STAMP AUTHORITIES AND HENCE VA LUE ON WHICH STAMP DUTY WAS PAID WAS TO BE TAKEN AS THE SALE CONSIDERATION. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASS ET TRANSFERRED BY THE ASSESSEE WAS A LONG TERM CAPITAL ASSET. 3.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC T THAT THE CAPITAL ASSET DEVOLVED ON THE ASSESSEE ONLY ON THE EXECUTION OF THE GPA ON 28.5.2008 AND THEREFORE THE PERIOD OF HOLDING IN THE ASSESSEES HAND DID NOT EX CEED 36 MONTHS AND HENCE THE IMPUGNED ASSET WAS NOT A LO NG TERM CAPITAL ASSET. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT D EEMING PROVISION IN RESPECT OF THE COST OF ACQUISITION AS PER SEC.49 OF THE I.T. ACT IS APPLICABLE ONLY IN CASES WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF AN ASSESSE E THROUGH (I) PARTITION OF HUF (II) GIFT OR WILL (III ) SUCCESSION, INHERITANCE OR DEVOLUTION ETC. AND NOT IN A CASE TR ANSFER IS BY WAY OF EXECUTION OF GPA. - - ITA 97/MDS/11 3 3. THE FACTS OF THE CASE ARE THAT THIS CASE WAS REO PENED U/S.148 OF THE ACT TO ASSESS THE INCOME THAT HAS ES CAPED UNDER CAPITAL GAINS. THE AO OBSERVED THAT THE ASSESSEE I S THE POWER AGENT OF ONE SHRI PALSARAK MOHAMED SHAUAIB RESIDING AT SAUDI ARABIA. THE POWER OF ATTORNEY WAS GIVEN TO M/S. CH OLAN PROPERTY DEVELOPERS PVT. LTD. REPRESENTED BY ITS MA NAGING DIRECTOR MR. D. SOLAIRAJ TO SELL 66.95 CENTS OF THE PROPERTY SITUATED AT NO.32, KARANAI VILLAGE, CHENGALPATTU TA LUK IN SURVEY NOS. 103/5, 103/6, 97/1, 97/2, 95/1, 95/2, 95/10, 9 5/3 & 94. THE POWER OF ATTORNEY WAS REGISTERED ON 26.5.2008. ACC ORDING TO THE AO, THE ASSESSEE SOLD 61 CENTS OF THE ABOVE MENTION ED PROPERTY ON 11.11.2009 REGISTERED AS TWO DOCUMENTS VIDE NOS. 4086/2009 AND 4087/2009 FOR 49 CENTS AND 12 CENTS RESPECTIVELY. THE ASSESSEE SOLD 49 CENTS OF THE AB OVE MENTIONED PROPERTY VIDE DOCUMENT NO.4086/2009 FOR A SALE CONSIDERATION OF 30,55,000/- AND BALANCE 12 CENTS WERE SOLD VIDE DOCUMENT NO. 4087/2009 FOR A SALE CONSIDERATIO N OF 7,80,000/- AND THE MARKET VALUE OF THE PROPERTY WAS 13,20,000/-. - - ITA 97/MDS/11 4 3.1 THE AO FOUND THAT IN THE RETURN FILED ON 1.10.2 014, THE ASSESSEE DID NOT ADMIT THE SALE CONSIDERATION RECEI VED FOR THE SALE OF 49 CENTS. WHEN THIS WAS POINTED OUT, THE A SSESSEE FILED A REVISED RETURN ON 7.3.2015 ADMITTING TOTAL INCOME OF 11,39,819/-. ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRUCTION AND HAS ADMITTED BUSINESS INCOME OF 26,145/-. IN THE PROFIT AND LOSS ACCOUNT, IT WAS SEEN BY THE AO THAT THE AS SESSEE HAS CLAIMED A SUM OF 13,68,362/- AS MATERIALS PURCHASED AND A SUM OF 5,58,420/- AS LABOUR CHARGES. AS THE ASSESSEE COU LD NOT PRODUCE PROPER VOUCHERS, A SUM OF 1,36,836/- UNDER THE HEAD MATERIALS PURCHASED AND FOR A SUM OF 55,842/- UNDER THE HEAD LABOUR CHARGES BOTH THE EXPENSES ARE DISALLOWE D. THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED A SUM OF 83,500/- AS PROFESSIONAL RECEIPTS IN 26AS, BUT THE SAME WAS OMITTED TO BE INCLUDED IN THE TOTAL INCOME AND THEREFORE, THE SAM E IS ADDED TO THE BUSINESS INCOME. 3.2 FURTHER, THE AO OBSERVED THAT THE OWNERSHIP OF THE PROPERTY SOLD AT NO.32, KARANAI VILLAGE, CHENGALPAT TU TALUK, VESTED WITH THE ASSESSEE ONLY FROM 26.5.2008 I.E. T HE DATE OF REGISTRATION OF POWER OF ATTORNEY. THE PROPERTY WA S SOLD ON - - ITA 97/MDS/11 5 11.11.2009 AND THE GUIDELINE VALUE AS ON 1.8.2007 T O 31.3.2012 IS 40,00,000/- PER ACRE. THE COST PRICE IS TAKEN AS 24,40,000/- FOR 61 CENTS AND THEREFORE, THE GAIN ON SALE OF PROPERTY APPLYING SEC.50C OF THE ACT IS ASSESSED AS SHORT TERM CAPITAL GAIN BY THE AO. AGGRIEVED, THE ASSESSEE WE NT IN APPEAL BEFORE THE CIT(APPEALS). 4. BEFORE THE CIT(APPEALS), IT IS SUBMITTED THAT TH E ASSESSEE SOLD 61 CENTS OF TWO PROPERTY ON 11.11.2009 AS TWO DOCUMENTS VIDE NOS.4086/2009 AND 4097/2009 FOR 49 CENTS RESPE CTIVELY. THE ASSESSEE SOLD 49 CENTS VIDE DOCUMENT NOS.4086/2 009 FOR A SALE CONSIDERATION OF 30,55,000/- AND BALANCE 12 CENTS WERE SOLD VIDE DOCUMENT NO.4087/2009 FOR A SALE CONSIDER ATION OF 7,80,000/- TOTALLY COMING TO A CONSIDERATION OF 38,35,000/-. BUT THE AO HAS ASSESSED TO A VALUE OF 53,90,000/- FOR 49 CENTS AND 13,20,000/- FOR 12 CENTS WHICH COMES TO 67,10,000/-. 4.1 THE ASSESSEE RELIED ON THE JUDGMENT OF THE SUPR EME COURT IN THE CASE OF GAUTHAM VS. UNION OF INDIA (19 9 ITR 530), WHEREIN IT HAD RECOGNIZED A TOLERANCE LIMIT FOR PRE EMPTIVE PURCHASE OF PROPERTY UNDER CHAPTER XXC AT 15% OF VA RIATION. IF - - ITA 97/MDS/11 6 THE DEVIATION IS BELOW 15%. NO ADDITION SHOULD BE MADE. THE ASSESSEE FURTHER SUBMITTED THAT THE AO, IN THIS CAS E, ASSESSED THE INCOME OF 67,10,000/- INSTEAD OF 38,35,000/-, THE DIFFERENCE IS 28,75,000/-, WHICH COME TO 75%. ACCORDING TO THE ASSESSEE, THE VALUATION HAS NOT REFERRED TO DEP ARTMENT VALUATION OFFICER AND THE AO HAS TAKEN THE MAXIMUM MARKET VALUE FOR ASSESSMENT TO THE TUNE OF 67,10,000/- INSTEAD OF GUIDELINE VALUE OF 38.35.000/-. BEFORE THE CIT(APPEALS), THE ASSESSEE ALSO RELIED ON THE FOLLOWING JUDGMENTS : A) RITZ ENTERPRISES PVT. LTD. VS. ACIT, LUCKNOW (IT AT) B) KHOOBSURAT RESORTS PVT. LTD. VS. CIT (DELHI-HC) C) C.B.GAUTAM VS. UNION OF INDIA (SC). 5. ACCORDING TO THE CIT(APPEALS), THERE ARE TWO IS SUES FOR DETERMINATION, VIZ., WHETHER IN THE ABSENCE OF ANY MATERIAL THE AO COULD HAVE ADOPTED FARI MARKET VALUE ON NOTIONAL BASIS AND SUBSTITUTED THE SAME FOR THE SALE CONSIDERATION AS REPORTED BY THE ASSESSEE, ESPECIALLY WHEN THE IMPUGNED PROPERTY WAS SOLD AT A PRICE WHICH WAS MORE THAN THE GUIDELINE VALUE AND WHETHER THE AO WAS CORRECT IN ADOPTING THE DATE OF ASSIGNME NT OF THE POWER OF ATTORNEY TO THE AGENT TO TRANSACT THE PROP ERTY AND - - ITA 97/MDS/11 7 SUBSTITUTE THE SAME FOR THE DATE OF OWNERSHIP IGNOR ING THE ACTUAL PERIOD OF HOLDING BY THE ASSESSEE. 5.1 THE CIT(APPEALS) OBSERVED THAT ON THE FIRST ISS UE, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE FAIR MARK ET VALUE ADOPTED HAD ANY BASIS. FURTHER, THE AO HAS NOT REJ ECTED THE SALE CONSIDERATION REPORTED BY THE ASSESSEE NOR CON FRONTED THE PROPOSED FAIR MARKET VALUE PROPOSED TO THE SUBSTITU TED. ON THE CONTRARY, THE PROPERTY TRANSACTED BY THE ASSESSEE W AS ABOVE THE FAIR MARKET VALUE FOR STAMP DUTY PURPOSES AND THIS HAS NOT BEEN DISPUTED BY THE AO. THEREFORE, THE CIT(APPEALS) O BSERVED THAT THE AO WAS NOT CORRECT IN SUBSTITUTING A NOTIONAL F IGURE WITH THE SALE CONSIDERATION REPORTED BY THE ASSESSEE. 5.2 ON THE SECOND ISSUE, THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE HAD ACQUIRED THE IMPUGNED PROPERTY BY WAY OF A SALE DEED (PURCHASE DEED BY THE ASSESSEE) EXECUTED ON 14 .6.1994, WHICH IS EVIDENT FROM THE COPY OF SALE DEED DATED 1 6.6.1994 REGISTERED BEFORE THE SUB-REGISTRAR, DISTRICT OF TH IRUPORUR. ACCORDING TO THE CIT(APPEALS), THE SALE DEED SIMILA RLY OF THE IMPUGNED PROPERTY IN FAVOUR OF THE PURCHASE IS DATE D 11.11.2009 - - ITA 97/MDS/11 8 AS EVIDENT FROM THE DEED REGISTERED. THEREFORE, AC CORDING TO THE CIT(APPEALS), THE PERIOD OF HOLDING CLEARLY EXCEEDS 36 MONTHS AS PRESCRIBED IN SEC.2(42A) AND BOTH THE PARCELS OF LAND OF 49 CENTS AND 12 CENTS WERE ACQUIRED BY THIS DEED. HE NCE, THE CIT(APPEALS) OBSERVED THAT THEY WERE LONG-TERM ASSE TS. ACCORDING TO THE CIT(APPEALS), THE AO DID NOT APPRE CIATE THE FACTS PROPERLY IN REJECTING THE PLEA OF THE ASSESSE E THAT THE LAND SOLD WAS ON A GUIDELINE VALUE AS ALSO THAT THE SAID LAND WAS HELD AS A LONG-TERM CAPITAL ASSET THEREBY GIVING RISE TO LONG-TERM CAPITAL GAINS ON ITS SALE AND DIRECTED THE AO TO RE COMPUTE THE LONG-TERM CAPITAL GAINS, ACCORDINGLY. AGAINST THIS , THE REVENUE IS IN APPEAL BEFORE US. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE FIRST ISSUE FOR CONSIDERATION IS APPLI CABILITY OF SEC.50C OF THE ACT. THE AO MENTIONED IN HIS ASSESS MENT ORDER THAT GUIDELINE VALUE OF THE PROPERTY AS ON 01.08.20 07 TO 31.03.2012 IS ` 40 LAKHS PER ACRE. CONTRARY TO THIS, LD.CIT(A) OBSERVED THAT THE IMPUGNED PROPERTY TRANSACTED BY T HE ASSESSEE WAS ABOVE THE GUIDELINE VALUE FOR STAMP DUTY PURPOS E. THERE IS - - ITA 97/MDS/11 9 NO DISCUSSION FOR SUCH CONCLUSION ARRIVED AT BY THE LD.CIT(A). HENCE, THIS ISSUE IS TO BE LOOKED INTO WITH REFEREN CE TO THE SPECIFIC STATE GOVERNMENT NOTIFICATION AND FOR THIS PURPOSE, THIS ISSUE IS REMITTED TO THE FILE OF LD. ASSESSING OFFI CER FOR FRESH CONSIDERATION. HENCE, THIS GROUND OF APPEAL IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 7. THE NEXT ISSUE IS WITH REGARD TO CAPITAL GAINS WHETHER THE LD. ASSESSING OFFICER WAS CORRECT IN ADOPTING THE D ATE OF REGISTRATION OF POWER OF ATTORNEY TO THE AGENT TO T RANSACT THE PROPERTY AND SUBSTITUTE THE SAME FOR THE DATE OF OW NERSHIP. 8. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. AS PER THE FINDINGS OF THE AO, THE POWER O F ATTORNEY WAS REGISTERED ON 26.05.2008 AND THE ASSESSEE SOLD THE PROPERTY ON 11.11.2009. HOWEVER, THE LD.CIT(A) MENTIONED THAT T HE ASSESSEE HAD ACQUIRED THE IMPUGNED PROPERTY BY WAY OF SALE DEED EXECUTED ON 14.06.1994, REGISTERED ON 16.06.19 94. THERE IS NO WHISPER ABOUT THIS DOCUMENT IN THE ASSESSMENT ORDER. BEING SO, LD.CIT(A) CAME TO A CONCLUSION THAT THE A SSESSEE HAD BECOME THE OWNERSHIP OF THE IMPUGNED PROPERTY FROM THIS DATE - - ITA 97/MDS/11 10 OF SALE DEED DATED 16.06.1994 WITHOUT FURNISHING TH E SAME TO THE LD. ASSESSING OFFICER. HENCE, IN THE INTEREST OF JU STICE, I REMIT THE ISSUE IN DISPUTE TO THE FILE OF LD. ASSESSING OFFIC ER TO EXAMINE THE SAME AFRESH AND DECIDE IN ACCORDANCE WITH LAW. HEN CE, THIS GROUND OF APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 21 ST AUGUST, 2017 AT CHENNAI. SD/- ( $ % & ' ) ()*+,-*.//0*-12 ! 34566/7+8*+89:;<:- $= /CHENNAI, >3 /DATED, THE 21 ST AUGUST, 2017. K S SUNDARAM 3? @ABA / COPY TO: 1 . / APPELLANT 3. C2 / CIT(A) 5. ADE F / DR 2. / RESPONDENT 4. C / CIT 6. EGH / GF