ITO, LOWER PAREL V. SOHIT SHRAVANKUMAR SADH, LOWER PAREL

ITA 3180/MUM/2024

AI Insights

The case involves the Income Tax Officer (ITO) appealing against the decision of the Commissioner of Income Tax (Appeals) (CIT(A)), which had deleted the additions made by the Assessing Officer regarding the difference in stamp duty value and the income from other sources. The assessee, Sohit Shravankumar Sadh, was involved in two main transactions: the acquisition of leasehold rights to a residential property in Noida and the purchase of a going concern from M/s. SK International Export Co. The ITO argued that these transactions should be taxed under section 56(2)(x) of the Income Tax Act, 1961, as income from other sources due to discrepancies in the declared and stamp duty values. However, the CIT(A) found that the transactions were either not taxable under the said section or were exempted due to specific provisions applicable to slum sales and the nature of leasehold rights.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 25664 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 14-08-2024
• Assessment Year: misc
• Appeal Filed On: 13-06-2024
• Other Referred Cases: Bafna Charitable Trust vs. CIT, CIT vs. Tata Services Ltd., ACIT vs. Smt. Hansaben B. Mehta, Smt. Nargis K. Irani vs. ITO, R. C. Cooper vs. Union of India, Premier Automobiles vs. ITO, DCIT vs. Sumit Securities Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH JHUNJHUNWALA; RAJESH MESHRAM
• Keywords: Capital asset; Sale consideration of property below Jantri Value; Charitable institution
• Section: 143(3); 142(1); 56(2)(vii)(b); 50C; 2(14); 264

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SHRI GIRISH AGRAWAL, AM ITA No.3180/Mum/2024 (Assessment Year: 2018-19) Income Tax Officer Room No. 213, 3rd Floor, Piramal Chambers, Lalbaug, Mumbai – 400 012 Vs. Sohit Shravankumar Sadh A-2, Unit No. 79, Shah & AMP, Nahar Industrial Estate, S J Road, Mumbai-400 013 PAN/GIR No. AAGPS 1094 N (Assessee) : (Respondent) Assessee by : Shri Prakash Jhunjhunwala Respondent by : Shri Rajesh Meshram Date of Hearing : 14.08.2024 Date of Pronouncement : 12.11.2024 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the Revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19. 2. The Revenue has challenged the ld. CIT(A)’s order deleting the addition of Rs.19,64,304/- made by the ld. Assessing Officer ('A.O.' for short) u/s. 56(2)(x) of the Act as ‘income from other sources’ on account of difference in the stamp duty value received on sale of immovable property and on the deletion of addition of Rs.3,12,00,000/-, aggregating to Rs.3,31,64,304/- u/s. 56(2)(x) of the Act along with the other related grounds. 2 ITA No. 3180/Mum/2024 (A.Y.2018-19) ITO vs. Sohit Shravankumar Sadh 3. The brief facts are that the assessee is engaged in the business of manufacturer and exporter of readymade garments since 2014 and the sole proprietor of M/s. True Fashion. The assessee is also said to be a partner in the partnership firm of M/s. S. K. International Exports Co. which was also into the business of manufacturing and exporting of ladies garments since 2003. The assessee then retired from partnership firm on 31.03.2013. The assessee during the year under consideration had e-filed his return of income on 30.10.2018, declaring total income at Rs.48,30,780/- as ‘income from business’. The assessee’s case was selected for limited scrutiny under CASS for the reason that purchase value of the property was less than the value as per the stamp authority. Notice u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. 4. After duly considering the assessee’s submission, the ld. A.O. passed the assessment order on 09.04.2021 u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act, thereby determining the total income at Rs.3,79,95,084/-, after making the addition on the difference in the value of the properties purchased by the assessee with that of the value as per stamp authority aggregating to Rs.3,31,64,304/-. 5. Aggrieved the assessee was in appeal before the ld. CIT(A) who vide order dated 19.04.2024 allowed the appeal of the assessee on various grounds. 6. The Revenue is in appeal before us, challenging the impugned order. 7. The learned Departmental Representative ('ld.DR' for short) for the Revenue relied on the order of the ld. A.O. and contended that the assessee has failed to comply with the provisions of section 56(2)(x) of the Act. 8. The learned Authorised Representative ('ld. AR' for short) for the assessee contended that ground no. 1 raised by the Revenue on addition of Rs.19,64,304/- pertains 3 ITA No. 3180/Mum/2024 (A.Y.2018-19) ITO vs. Sohit Shravankumar Sadh to a residential premises situated at Noida for which the assessee had acquired a lease hold rights from the vendor and the same is not a transfer of ownership. The ld. AR further stated that the said transactions is evidenced from the ‘agreement to sell’ dated 09.01.2012 from the allottee for a consideration of Rs.43,85,904/- in which case the developer of the said property had executed a sub lease deed dated 22.01.2018 transferring the title along with the possession to the assessee. The ld. AR further relied on the allotment letter issued by the developer to the assessee dated 24.02.2012 for the purpose of sub leasing the said property to the assessee. The ld. AR stated that the assessee has also paid a stamp duty of Rs.3,32,500/- for the said transfer. The ld. AR relied on the ld. CIT(A)’s order. 9. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee had entered into an ‘agreement to sell’ pertaining to the property situated in Noida vide a deed dated 09.01.2012, as per which the assessee acquired a ‘right to purchase/acquire a property’ in lease hold property of a residential premises from the lawful allottee as per the said agreement for a consideration of Rs.43,85,904/- along with any additional charges, if any, to the developer. Pursuant to this, the developer issued an amended allotment letter to the assessee dated 24.02.2012 and executed a sub lease deed dated 22.01.2018, thereby transferring the right/title/interest in the residential premises along with peaceful possession to the assessee. The assessee had also paid a stamp duty of Rs.3,34,500/-, thereby capitalizing the sale consideration and the stamp duty paid for the residential premises where the aggregate total purchase value amounts to Rs.47,20,404/-. The assessee’s contention that the said property was an under construction property which was evidenced by the 4 ITA No. 3180/Mum/2024 (A.Y.2018-19) ITO vs. Sohit Shravankumar Sadh ‘agreement to sell’ and the ‘allotment letter’, thereby acquiring ‘a right to acquire property’ in January, 2012 itself. The assessee contends that a right to acquire a property is a ‘capital asset’ as per the definition of section 2(14) of the Act and relied on the following decisions : 230 ITR 864 (Bom) Bafna Charitable Trust vs. CIT 122 ITR 594 (Bom) CIT vs. Tata Services Ltd. 90 ITD 44 (Mum-Trib) ACIT vs. Smt. Hansaben B. Mehta 287 ITR 142 (Pune-ITAT) Smt. Nargis K. Irani vs. ITO 10. The ld. A.O. invoked section 56(2)(vii)(b) in his first draft assessment order dated 15.02.2021 and, subsequently invoked section 56(2)(x)(b)(B) of the Act in the second draft assessment order dated 05.03.2021, as the former section was not in operation w.e.f. 01.04.2017, for the reason that the assessee had registered the said property only on 22.01.2018. The ld. CIT(A), on the other hand, held that as the date of ‘agreement to sell’ is 09.01.2012 and the allotment letter has also been furnished to the assessee on 24.02.2012, where the assessee has also paid the full and final consideration to the developer/builder, which fact was also not disputed by the ld. A.O., the impugned addition made by the ld. A.O. on the difference in the stamp duty value, was deleted on the ground that the proviso to section 56(2)(x)(b)(B) of the Act provides that where on the date of agreement the consideration has been fixed for transfer of immovable property and when the date of agreement and date of registration are not the same, then the stamp duty value as on the date of agreement may be taken for the purpose of determination of the stamp duty value. It is also not the case of the Revenue that the assessee has not paid the consideration or failed to establish the payment for the said property at the time of ‘agreement to sell’. Though the ld. AR has extensively argued that it is the case of transfer of lease hold rights for which section 50C of the Act cannot be invoked, there is 5 ITA No. 3180/Mum/2024 (A.Y.2018-19) ITO vs. Sohit Shravankumar Sadh no specific finding on the same by the lower authorities nor was it raised as a ground of appeal. In the absence of the same, and on perusal of the relevant documentary evidence furnished by the assessee, we find no infirmity in the order of the ld. CIT(A) in deleting the impugned addition made by the ld. A.O. Ground no. 1 raised by the Revenue is hereby dismissed. 11. Ground no. 2 pertains to the addition of Rs.3,12,00,000/- as ‘income from other sources’ u/s. 56(x) of the Act on account of difference in the stamp duty value. It is observed that the assessee had acquired an undertaking (export oriented unit (EOU)) with all its assets and liabilities which includes Industrial Gala nos. 85 to 86 from M/s. SK International Export Co. as a going concern for a slum sale consideration of Rs.30 lacs vide agreement for slum sale dated 29.04.2016 w.e.f. 01.04.2016. The assessee’s contention is that the same was accounted in the books of accounts of the assessee in F.Y. 2016-17 when the said consideration was paid, though the same was registered in F.Y. 2017-18. The assessee had placed reliance on the decision of the Hon'ble Apex Court in the case of R. C. Cooper vs. Union of India [1970] 3 SCR 530 (SC) and the decision of Hon'ble Jurisdictional High Court in the case of Premier Automobiles vs. ITO [2003] 264 ITR 193 which has held that the sale of the entire undertaking as a ‘going concern’ will be a ‘slum sale’ and not acquisition of individual assets. The assessee has also relied on the decision of jurisdictional co-ordinate bench in the case of DCIT vs. Sumit Securities Ltd. in ITA No. 4977/Mum/2009 (SB) wherein it was held that in a slum sale, the value of individual assets should not be considered for determining the value of consideration for such transfer. The ld. CIT(A) after duly considering the submission of the assessee 6 ITA No. 3180/Mum/2024 (A.Y.2018-19) ITO vs. Sohit Shravankumar Sadh has deleted the impugned addition that section 56(2)(x) will not be applicable to the said transaction. 12. Upon perusal of the factual aspects and considering the documentary evidence relied upon by the assessee, we find no infirmity in the other of the ld. CIT(A) in deleting the impugned addition made by the ld. A.O. Ground no. 2 raised by the Revenue is hereby dismissed. 13. Ground nos. 3 to 8 being general in nature requires no separate adjudication. 14. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 12.11.2024. Sd/- Sd/- (Girish Agrawal) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 12.11.2024 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "