ACIT, Central Circle 1(1), Pune V. Sairang Developers & Promoters Pvt. Ltd., Pune

ITA 977/PUN/2012

• Counselvise Citation: 97724514 RSA 2012
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-11-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 16-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition
• Section: 143(3); 50C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 9 77 / P N/ 20 1 2 ASSESSMENT YEAR : 200 3 - 04 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1 (1) , PUNE VS. SAIRANG DEVELOPERS & PROMOTERS PVT. LTD., 501, 502 CORPORATE PLAZA, OFF SENAPATI BAPAT MARG, NEAR CHATIURSHINGI TEMPLE, SHIVAJINAGAR, PUNE (APPELLANT) (RESPONDENT) PAN NO. AACCS9538G APPELLANT BY: SHRI S.P. WALIMBE RESPO NDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 01 - 05 - 2014 DATE OF PRONOUNCEMENT : 26 - 05 - 2014 ORDER PER R.S . PADVEKAR , JM : - IN THE APPEAL, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDERS OF THE LD. CIT(A) - I, PUNE DATED 16 - 11 - 2011 FOR THE A.Y. 2 00 3 - 04 . THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND IN THE APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION O N ACCOUNT OF VALUATION OF LAND AT DATTAWADI, PUNE TH OUGH THE ASSESSEE HAD NO PLAUSIBLE EXPLANATION FOR THE UNDER VALUATION OF THE SAID LAND (I.E. LAND VALUED AT AVERAGE PURCHASE COST AS AGAINST AVERAGE SELLING COST) AND HAD FAILED TO APPORTION DEVELOPMENT EXPENSES TO THE SAID LAND. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A PVT. LTD. COMPANY ENGAGED IN THE BUSINESS OF PURCHASE OF LAND AND DEVELOPING THE SAME AND SELLING AFTER DEVELOPMENT. THE 2 ITA NO. 977/PN/2012, SAIRANG DEVELOPERS & PROMOTERS PVT. LTD., PU NE ASSESSMENT OF THE ASSESSEE FOR THE A.Y. 2003 - 04 HAS BEEN COMPLETED U/S. 143(3) O F THE INCOME - TAX ACT ON 13 - 03 - 2006. SUBSEQUENTLY THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S. 147 AND ISSUED THE NOTICE TO THE ASSESSEE U/S. 148 AND COMPLETED THE ASSESSMENT OF THE ASSESSEE U/S. 147 R.W.S. 143(3) OF THE INCOME - TAX ACT. THE MAIN R EASON FOR REOPENING OF THE ASSESSMENT OF THE ASSESSEE WAS THAT THE LAND DEVELOPED AND RETURNED TO ONE SHRI RAVINDRA RAMCHANDRA JADHAV AT DATTAWADI, PUNE VALUED AT AVERAGE PURCHASE COST AS AGAINST THE AVERAGE SELLING COST. IN THE OPINION OF THE ASSESSING O FFICER THE ADJUSTMENT IN THE PURCHASE ACCOUNT SHOULD HAVE BEEN DONE FOR RS.34,61,937/ - (AVERAGE COST WORKED OUT AT RS.47.32 PER SQ. FT.) AS AGAINST RS.11,05,000/ - (AVERAGE COST AT WHICH THE LAND WAS PURCHASED AT RS.15.10 PER SQ. FT.) AS THE ASSESSEE HAS DE VELOPED THE SAID LAND. AS OBSERVED BY THE ASSESSING OFFICER THE ASSESSEE HAS RETURNED THE LAND TO ONE SHRI RAVINDRA RAMCHANDRA JADHAV ORIGINAL OWNER OF LAND AND IN SUM AND SUBSTANCE T HE ASSESSEE HAS UNDERSTATED THE SELLING PRICE. THE ASSESSING OFFICER MA DE THE ADDITION IN HIS SHORT ASSESSMENT ORDER TO THE EXTENT OF RS.23,56,937/ - . 3. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD. CIT(A) AND LD. CIT(A) DELETED THE ADDITION. THE OPERATIVE PART OF THE FINDING AND DISCUSSION OF THE LD. CIT(A) ARE AS UNDER: 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM RECORDS. THE UNDISPUTED FACTS EVIDENT FROM THE ASSESSMENT ORDER AS WELL AS THE SUBMISSION OF THE APPELLANT ARE THAT THE APPELLANT WHICH IS ENGAGED IN THE BUSI NESS OF PURCHASE OF LAND AND ITS SALE AFTER DEVELOPMENT AND PLOTTING ETC. HAS PURCHASED LAND FROM SHRI RAVINDRA RAMCHANDRA JADHAV AND OTHERS AT DATTAWADI, PUNE AND THE VALUE OF OPENING STOCK AS WELL AS THE PURCHASES WAS APPROXIMATELY AT RS.15.1 PER SQ. FT. THE CLOSING STOCK ALSO IS VALUED AT APPROXIMATELY AT SAME PRICE I.E. RS.15.99 PER SQ. FT. THE SELLING PRICE WAS FOUND BY THE ASSESSING OFFICER AT RS.47.31 PER SQ. FT. IT WAS NOTED BY THE ASSESSING OFFICER THAT 3 ITA NO. 977/PN/2012, SAIRANG DEVELOPERS & PROMOTERS PVT. LTD., PU NE 73,168 SQ. FT. OF LAND WAS RETURNED TO THE O RIGINAL LAND OWNER MR. RAVINDRA RAMCHANDRA JADHAV AND THE SAME WAS REDUCED FROM THE OPENING STOCK. THE APPELLANT CLAIMED THAT THE AFORESAID LAND WAS NOT POSSIBLE TO BE DEVELOPED AND THEREFORE, WITHOUT INCURRING ANY ADDITIONAL DEVELOPMENT COST, THE MATTER WAS RE - NEGOTIATED WITH THE ORIGINAL SELLER AND RETURNED TO HIM AT THE ORIGINAL PRICE. THE STAMP DUTY VALUATION OF THE SAID LAND WAS CLAIMED TO BE LOWER THAN THE VALUE AT 'WHICH THE AFORESAID LAND WAS RETURNED. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFI ED AND AFTER NOTICING THAT THE APPELLANT HAS SOLD LAND @ 47.31 PER SQ. FT., HELD THAT THE DIFFERENCE IS THE INCOME WHICH HAS ESCAPED ASSESSMENT AND THE SAME WAS BROUGHT TO TAX AFTER INITIATING PROCEEDINGS U/S. 148 OF THE IT. ACT. FROM THE PERUSAL OF THE AS SESSMENT ORDER IT IS NOTED THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE ARGUMENTS MADE BY THE APPELLANT AND AT THE SAME TIME HAS NOT ANALYSED THE FACTS PROPERLY AS TO HOW HE FEELS THAT THE INCOME IS ASSESSABLE. EVEN IF THERE WAS A DIFFE RENCE IN THE PURCHASE PRICE AND THE SALE PRICE, UNLESS THERE ARE OTHER MATERIALS AVAILABLE WITH HIM WHICH CAN SHOW THAT THE APPELLANT HAS RECEIVED MONEY IN ADDITION TO WHAT HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS, NO ADDITION IS LEGALLY POSSIBLE. THE LA W EMPOWERS THE ASSESSING OFFICER IN CERTAIN SPECIFIC CIRCUMSTANCES TO ADOPT THE VALUE DETERMINED BY THE STAMP DUTY AUTHORITY AS PER SECTION 50C BUT THE SAME CAN ONLY BE APPLIED WHILE COMPUTING THE INCOME UNDER THE HEAD CAPITAL GAINS. IN THE PRESENT CASE, T HE TRANSACTION IN QUESTION RELATES TO THE BUSINESS ACTIVITY OF THE APPELLANT AND THE ACTION OF THE ASSESSING OFFICER CANNOT BE UPHELD. FURTHERMORE, IT HAS BEEN CONTENDED BY THE AUTHORIZED REPRESENTATIVE IN THEIR SUBMISSIONS THAT THE VALUE AS PER STAMP DUTY AUTHORITY IS ONLY OF RS.60,000 AND THEREFORE, EVEN THIS FIGURE IS LOWER THAN THE FIGURE AT WHICH THE LAND WAS ORIGINALLY PURCHASED AND RETURNED. THE ASSESSING OFFICER HAS SAID IN THE ASSESSMENT ORDER THAT THE APPELLANT SHOULD HAVE ADJUSTED A PRICE AT THE AVERAGE COST OF SALE, HOWEVER, SUCH A FINDING IS NOT IN ACCORDANCE WITH THE ESTABLISHED PRINCIPLES OF LAW AND CANNOT BE SUSTAINED. THE APPELLANT HAS ALSO CLAIMED THAT A PARTICULAR PART OF LAND WAS ONLY RETURNED AS IT WAS ANTICIPATED THAT THE AFORESAID PIEC E WOULD GET HIT BY ANTI FRAGMENTATION REGULATION (POPULARLY KNOWN AS GUNTHWARI). THE APPELLANT HAD ARGUED THAT THEY RENEGOTIATED AND CANCELLED/SOLD BACK 68 R (73,168 SQ. FT.) OF THE TOTAL LAND OF 358.9 R (3,86,176 SQ. 4 ITA NO. 977/PN/2012, SAIRANG DEVELOPERS & PROMOTERS PVT. LTD., PU NE FT.) FROM MR. RAVINDRA R. JADHAV AND OTHERS TO AVOID THE PERCEIVED RISK OF NON SALEABILITY OF THE SAID PORTION OF THE AGRICULTURAL LAND. FURTHERMORE, IT HAS BEEN CLAIMED THAT NO DEVELOPMENT COST WAS INCURRED ON THE IMPUGNED PIECE OF LAND. IN VIEW OF THE AFORESAID DISCUSSIONS, I AM OF THE OPIN ION THAT THE ASSESSING OFFICER HAS MADE THE ADDITION WITHOUT ANY BASIS OR BACKING OF LAW. IN VIEW OF THE ABOVE, GROUNDS NO. 3 AND 4 ARE ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSE D THE RECORD. AS PER THE FACTS ON RECORD, IT IS SEEN THAT THE ASSESSEE COMPANY HAS PURCHASED AGRICULTURAL LAND ADMEASURING 3,86,176 SQ. FT. EQUIVALENT TO 358.9 R FROM ONE SHRI RAVINDRA RAMCHANDRA JADHAV, SHRI BHASKAR LAXMAN JADHAV AND OTHERS FOR THE AGGRE GATE CONSIDERATION OF RS.5,832,125/ - IN FINANCIAL YEAR 2001 - 02 @ 15.10 PER SQ. FT. IT APPEARS THAT THE VISAR PAVATI WAS EXECUTED ON 13 - 11 - 2000. SUBSEQUENTLY THE SALE DEEDS WERE ALSO EXECUTED BETWEEN THE ASSESSEE COMPANY AND THE LAND OWNERS. THE ASSESSEE HAS PURCHASED THE SAID AGRICULTURAL LAND WITH A N INTENTION TO DEVELOP THE SA ID LAND INTO SMALLER PLOTS AND SELL THE SAME. IT APPEARS THAT IN VIEW OF THE IMPLEMENTATION OF THE ANTI - FRAGMENTATION REGULATIONS (POPULARLY KNOWN AS GUNTHEWARI) , T HE ASSESSEE DECIDED TO RETURN OR SOLD BACK 68 R EQUIVALENT TO 73168 SQ. FT. OF THE LAND TO SHRI BHASKAR LAXMAN JADHAV, ONE OF THE CO - OWNER ON THE COST TO COST BASIS AT AN AGGREGATE CONSIDERATION OF RS.1,105,000/ - @ PER SQ. FT. WAS 15.10 . FOR THE PURPOSE OF PAYMENT OF STAMP DUTY, THE VALUATION WAS WORKED OUT AT RS.66,000/ - . IT IS STATED BY THE ASSESSEE THAT IT HAS NOT INCURRED ANY DEVELOPMENT COST ON THE SAID PLOT OF LAND AS IT WAS RETURNED TO THE ORIGINAL OWNER. IT WAS, THEREFORE, PLEADED THAT THERE WAS NO BASIS IN THE CASE OF THE ASSESSING OFFICER TO SAY THAT THE ASSESSEE HAS SOLD THE LAND AT L ESSER COST EVEN AFTER DEVELOPMENT. WE FIND THAT THE LD. CIT(A) HAS EXAMINED THE FACTS AND ACCORDINGLY HE DELETED THE ADDITION. NOTHING HAS BEEN PRODUCED BEFORE US BY THE 5 ITA NO. 977/PN/2012, SAIRANG DEVELOPERS & PROMOTERS PVT. LTD., PU NE REV ENUE TO CONTROVERT THE FINDING OF THE LD. CIT(A). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26 - 05 - 20 1 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 26 TH MAY, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE