RAM SHRAN KATTA, 257, KATTA STREET, JAIN MANDIR WALI GALI, DURGAPURA, JAIPUR,JAIPUR V. ITO WARD-6(4), JAIPUR

ITA 623/JPR/2019

AI Insights

The case involves two appeals filed by Ram Sharan Katta against the orders of the Commissioner of Income Tax (Appeals)-2, Jaipur, concerning the assessment years 2009-10 and 2010-11. The appeals challenged the additions made under Sections 143(3) r.w.s. 153C and 50C of the Income Tax Act, 1961, following a search operation on the Katta Group. The main issues revolved around the legality of the proceedings under Section 153C, the disallowance of business losses, and the adoption of a higher stamp duty valuation under Section 50C. The tribunal's decision emphasized the lack of incriminating material and the procedural lapses in adopting the stamp duty valuation without a proper reference to a Valuation Officer.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35334 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Other Referred Cases: Pepsi Foods P. Ltd. Vs. ACIT, Sunil Kumar Agarwal, Sou. Kamlesh Tiwari, Vijay Kumar Patni, Sarwan Kumar v. ITO, Anil Kumar Jain vs. ITO, Raj Kumari Agarwal Vs DCIT, Kabul Chawla, M/s Jadau Jewellers & Manufacturers Pvt. Ltd. vs. ACIT, Commissioner of Income Tax-III, Pune vs. Sinhgad Technical Education Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR
• Assessee Lawyers: ROHAN SOGANI
• Keywords: Set aside; Business income; Capital asset; Opportunity of being heard; Corroborative evidences; Sale consideration of property below Jantri Value; Fair market value; Cost of acquisition; Document seized; Documents seized; Capital Gains
• Section: 143(3); 143(2); 143(1); 48; 153; 132; 153A; 139(1); 22; 13; 139; 153C; 50C; 20

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh xxu xks;y] ys[kk lnL;] ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 622 & 623/JPR/2019 fu/kZkj.k o\"kZ@AssessmentYears : 2009-10 & 2010-11 Ram Sharan Katta 257, Katta Street, Jain Mandir Wali Gali, Durgapura, jaipur. cuke Vs. The ITO, Ward-6(4), Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACVPK5103D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assesseeby : Shri Rohan Sogani (C.A.) jktLo dh vksj ls@Revenue by: Shri Arvind Kumar (CIT-DR) lquokbZ dh rkjh[k@Date of Hearing : 25/11/2024 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 30/12/2024 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. These are two appeals filed by the assessee against three different orders of the Learned Commissioner of Income Tax (Appeals)-2, Jaipur [herein after referred to as “CIT(A)”] all dated 27.02.2019 for the assessment years 2009-10 & 2010-11 respectively, in the matter of Section 143(3) r.w.s. 153C of the Act. 2 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 2. Since the issues involved are common in all the above appeals and the appeals were heard together, therefore, these are being disposed off by this common order for the sake of convenience and brevity. 3. As a lead case, for deciding the appeals, we take ITA No. 622/JPR/2019 for the A.Y. 2009-10 wherein following grounds have been raised by the assessee:- \"1. a) In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the action of Id. AO of the searched party whose cases were covered u/s 153A in proposing for initiating proceedings u/s 153C of the income Tax Act, 1961. (b) In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the action of Id. AO of the assessee for initiating the proceedings u/s 153C of the Income Tax Act, 1961. 2. In the facts and circumstances of the case and in law the Id. CIT(A) has erred in confirming the action of the ld. AO in disallowance of business. loss of Rs. 4,29,946/- incurred on account of trading in real estate. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the loss of Rs. 4,29,946/-. 3. In the facts and circumstances of the case and in law the Id. CIT(A) has erred in confirming the action of the Id. AO in making addition of Rs. 2,63,580/- as short term capital gain, whereas assessee had declared the said amount as profit from real estate business. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 2,63,580/-. 4. In the facts and circumstances of the case and in law the Id. CIT(A) has erred in confirming the acition of the Id. AO in making addition of Rs. 7,59,696/- as short term capital gain, whereas assessee had declared the long term capital loss of Rs. 1,79,799/- on account of sale of plots. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 7,59,696/-and allowing the declared loss of 1,79,799/-. 5. In the facts and circumstances of the case and in law the Id. CIT(A) has erred in confirming the action of the Id. AO in invoking the provisions of section 50C of the Income Tax Act, 1961 without referring it to DVO and adopting the sale consideration of Rs. 23,06,888/- as against the actual sale consideration of 18,91,000/-. The action of the 3 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the sale consideration at Rs. 18,91,000/- as evidenced by the sale deed. 6. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing.” 4. Brief facts of the case is that search operations u/s 132 was conducted on 31.07.2012 in the case of Siyaram (Katta) group, Jaipur. During the course of search, following seized materials, belonged to appellant assesseeas per “Performa for Recording Satisfaction under section 153C” of AO of search party were found:  Annexure-AS-Exhibit No.-2- Page No. 57 to 59(PB: 1-3)  Annexure-AS-Exhibit No.-2- Page No. 60 to 62(PB: 4-6) The annexure ‘AS-Exhibit No.-2- Page No. 60 to 62’ is an agreement made by the appellant assessee to purchase a land situated at A-31, Gayatri Nagar, Maharani farm, Durgapura, Jaipur for Rs. 1,25,00,000/- dated 25.11.2010 from Hanuman Sahay Regar and Bhanwar Singh Chauhan. However, the deal could not be finalized and no payment was actually made by him, which can be evidenced through an AS-Exhibit No.-2- Page No. 57 to 59, which is unsigned sale deed of December, 2010 of same property with same parties. The above seized material is related to A.Y. 2011-12. No incriminating materials/documents related to appellant assessee were found for the relevant assessment year. The ld. AO of searched party 4 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO recorded satisfaction u/s 153C on 22-1-2015.The ld. AO of the appellant assessee recorded ‘Satisfaction Note’ for initiation proceedings u/s 153C vide order sheet dated 23.01.2015.Objection was raised by the appellant assessee against initiation of proceedings and issuance of notice u/s 153C, which was disposed off by the ld. AO vide order dated 11th January, 2016. 4.1 During the year, the assessee had started real estate trading and executed the following trading transaction: Particulars Sale Amount (Rs.) Purchase Amount (Rs.) Profit earned (Rs.) Plot No. 5, Shiv Shankar Nagar, Sanganer 8,80,000 8,11,730 68,270 Plot No. 5A, Shiv Shankar Nagar, Sanganer 6,90,000 5,76,150 1,13,850 Plot No. 5B, Shiv Shankar Nagar, Sanganer 5,60,000 4,78,540 81,460 Total 21,30,000 18,66,420 2,63,580 Less: Interest Paid 6,93,526 Net Loss from Real Estate Business 4,29,946 During the course of assessment proceedings, the ld. AO observed that on sale of three plots, business loss of Rs. 4,26,946 were claimed by the assessee. Ld. AO found it unreasonable and unjustifiable as some transactions of immovable property were shown as business trading activity while some were shown in capital 5 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO gain. Ld. AO also observed that the said transaction of sale and purchase of plots had not been shown in the proprietorship concern of assessee i.e. M/s S.R. Buildhome which was meant for real estate business. Therefore, ld. AO disallowed the said business loss of Rs. 4,29,946 and made addition of Rs. 2,63,580 as short term capital gains. 4.2 During the financial year 2005-06, assessee appellant purchased a plot no. 65B on 22-11-2005 for Rs. 10,88,940 for investment purpose, situated at 65B, Khaswash ji ka bagh, Durgapura, Jaipur. Assessee appellant further incurred expenses Rs. 5,50,000 on account of sand filling, boundary wall, land cleaning etc. in the same F.Y. 2005-06, resulting into total cost of the plot at Rs. 16,38,940. Assessee appellant then divided the said plot into four plots measuring areas of 88.88, 88.88, 90 and 43.35 Sq. yards(65B-1, 65B-2, 65B-3 and 65B-4). Assessee appellant had made construction on only three plots during the financial year 2007- 08 and 2008-09 of Rs. 6,78,165and Rs. 5,00,000 respectively. During the year, the assessee appellant had sold two of above plots i.e. 65B-1and 65B-2,on 16.07.2008, having measuring area 88.88 Sq. Yd. each for a total consideration of Rs. 18,91,000.Total stamp duty value of such plots were Rs. 23,06,888. During the course of assessment proceedings, the ld. AO observed that value adopted by 6 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO stamp valuation authority was higher than the sale consideration. Ld. AO invoked the provisions of section 50C and adopted the sale consideration of Rs. 23,06,888 instead of actual sale consideration of Rs. 18,91,000. The assessee disputed the Stamp Duty Valuation, but ld. AO, without referring the valuation to DVO, computed the gains, w.r.t. Stamp Duty Valuation. In addition to above, ld. AO observed that expenses incurred Rs. 5,50,000, in FY 2005-06 on account of sand filling, boundary wall and land cleaning, was not justifiable. Thus, he estimated the same at Rs. 2,50,000. Accordingly, ld. AO calculated the cost, capital gain on sale of the plot and made addition amounting to Rs. 7,59,696. 5. Being aggrieved, from the said order of assessment, the assessee has filed an appeal before the ld. CIT(A). The ld. CIT(A) after hearing the contention of the assessee partly allowed the appeal of the assessee by giving following findings on the issue:- “3. Ground No. 2 and 3 are as under: \"2. In the facts and circumstances of the case and in law the Ld. Assessing Officer has erred in disallowing the business loss of Rs. 4,29,946/- incurred on account of trading in real estate. The action of the Ld. Assessing Officer is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the loss of Rs. 4,29,946/-.\" 7 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO \"3. In the facts and circumstances of the case and in law the Ld. Assessing Officer has erred in making an addition of Rs. 2,63,580/- as short term capital gain, where assessee had declared the said amount as profit from real estate business. The action of the Id. Assessing Officer is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 2,63,580/-.\" 3.1 The relevant extract of the assessment order is as under. \"7.1 The assessee in his return of income filed in response to notice u/s 153C of the LT. Act which was in variance with the return of income filed u/s 139 of the LT. Act. The same thing was brought into the notice of the assessee vide show cause notice dated 18-12-2015. Relevant extract of the same is reproduced as under: \"It has also been ……………….gain in this regard\" 7.2 The A/R of the assessee filed written submission in this regard the relevant the extract of which is reproduced as under: \"9. During the relevant…………… of Rs. 2,63,380/-.” 7.3 The above submission of the assessee wat duly considered and the assessee was issed a show cause notice dated 26-02-2016 in this regard requiring the assessee to file his reply by 01-03-2016. The relevant extract of show cause notice is reproduced as under\". 2. After going “………....not be made.\" 7.4 The assessee did not file any reply in response to the above show cause notice Therefore, it can safely be assumed that he has nothing to say even after providing enough opportunity of being heard. Therefore, as discussed in the show casse notice dated 26-02-2016, the business loss of Rs. 4,29,946/- is not acceptable and the same is disallowed and short term capital gain of Rs. 263580/- [ax declared in return filed wis 139(1)) is taxable at the hands of the assessee and is added to his total income. 3.2 The relevant extract of the submission of the appellant is as under: \"3.1 During the year, assessee, along with business activities of civil construction work in the name of M/s S.R. Buidhome & Investment, had also started real estate trading in his personal capacity. 8 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 3.2 Assessee regularly maintained his personal books of accounts of real estate business trading. Such books of accounts were duly audited during the reirvans assessment year 2009-10 3.3 It is submitted that, during assessment proceedings, assessee's personal audited books of accounts along with each purchase and sale deed of properties were placed before ld AO. Ld. AO accepted the audited books of accounts without pointing out any defects 3.4 It is pertinent to note that in the audit report form no. 3CD, the nature of business or profession carried during the year is clearly mentioned as \"Real Estate\". There fine no adverse interference should be drawn where intention of avere was to carry the real estate trading and the hooks were duly audited 3.5 It is further submitted that, as per settled position of law that for deciding as to whether such sale transaction is on account of business of an assessee or simply sale of a capital asset attracting capital gains, the intention of the assessee at the time of purchasing the land in question is paramount. The 40 has not discussed as to whether the intention of the appellant at the time of purchasing this property could be said to be for dealing in this property as capital nature or not Purchases and sales transactions of above said plots were taken place in the same year with the intention to earn business profiles instead of earning investment gains in long to the pr considerations and expenses claimed were also not doubted by id AO. 36 It is submitted that the contention of 40 that all the transaction of immoveable properties not included in the trading a/c of M/s Buildhome are of capital nature, is purely on estimate basis, without bringing on record any cogent and corroborative material. Therefore, in view of above, the said disallowance of business loss of Rs. 4,29,946/- and treating the same as STCG, deserves to be deleted.” 3.3Ground no. 02 and 03 are being taken up together I have perused the facts of the case, the assessment order and the submissions of the appellant. It is observed that appellant has not shown the above so called real estate transaction claimed as business income in the proprietorship concern in which business of real estate is shown. I am not inclined to accept the contentions which are made without any basis, In view of facts and circumstances discussed above, appellant failed to prove its contention, therefore, disallowance of Rs. 9 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 4,29,946/- and addition of Rs. 2,63,580/- made by the Assessing Officer is confirmed. Ground No. 2 and 3 are dismissed. 4. Ground No. 4(a) and 4(b) are as under: \"a) In the facts and circumstances of the case and in law the Ld. Assessing Officer has erred in making an addition of Rs. 7,59,696/- as short term capital gain, where assessee had declared the long term capital loss of Rs. 1,79,799/- on account of sale of plots. The action of the Ld. Assessing Officer is may please be granted by deleting the said addition of Rs. 7,59,696/- and allowing the declared loss of Rs. 1,79,799/-. b) In the facts and circumstances of the case and in law the Ld. Assessing Officer has erred in invoking the provisions of section 50C of the Income Tax Act, 1961 without referring it to DVO and adopting the sale consideration of Rs. 23,06,888/- as against the actual sale consideration of Rs. 18,91,000/-. The action of the Ld. Assessing Officer is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the sale consideration at Rs. 18,91,000/- as evidenced by the sale deed.\" The relevant extract of the assessment order is as under:- \"8.1. The assessee in his computation of total income showed capital gain on sale of property situated at 65B, Khawas Ji ka Baagh, Durgapura, Jaipur as under:-…………………….. capital loss Rs. 179799/- will not set off from any other head income. 8.2 The assessee was required vide show cause notice dated 18-12-2015 to submit necessary supporting evidences in this regard. The A/R of the assessee filed written submission in this regard, the relevant extract of which is reproduced as under: \"8. During the relevant...... .....Rs. 17,16,272/-\" 8.3 The submission made by the assessee was considered. After going through the relevant details submitted by the A/R of the assessee, some observation were made. The assessee was issued a show cause notice dated 26-02-2016 the relevant extract of which is reproduced as under: \"4.1 A long term........... reply, if any.” 8.4 The assessee was required to file his reply by 01-03-2016 which he failed to furnish and no reply was received till 08-03-2016. Therefore, it can safely be assumed that the assessee has nothing to say in this regard. The cost of plots 10 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO (land) which have sold during the year under consideration is to be derived as per discussion in show cause notice dated 26-02-2016. (i) The assessee purchased a plot bearing No. 65, Khwash Ji Ka Bagh Durgapura, Jaipur on 22-11-2005. The plot then was divided into four plots measuring areas of 88.88. 88.88, 90 and 43.35 Sq. yards (65B-1, 65B-2, 65B-3 and 65B-4). He is said to have constructed three plots during financial year 2007-08 and 2008-09. Two plots measuring 88.88 Sq. yards have been sold. The assesee has added cost of Rs. 550000/-on account of sand filling, boundary wall and land cleaning into purchase consideration of Rs. 10,88,940/-. The assessee was required vide show cause notice dated 26-02-2016 to substantiate with necessary evidences the cost of Rs. 550000/-on account of sand filling, boundary wall and land cleaning as the seemed on higher footing. The assessee failed to justify the same and failed to produce bills/vouchers in respect of sand filling, boundary wall and land cleaning. Therefore, the cost of Rs. 550000/-on account of sand filling. boundary wall and land cleaning is not acceptable and looking to the size of the plot and construction being made on it, the cost of the same is estimated at Rs. 250000/- on estimate basis. Hence, the cost of land comes to Rs. 13,38,940/- (Rs. 10,88,940+250000). Therefore, the cost of plots sold and their construction cost is calculated as under: Sr. No. Particulars Plot No. 65B-1 Plot No. 65B-2 1. Cost of land 1338940x88.8311.11 382517 382517 2. Cost of construction (total here plot constructed have area of 88.88,88.88 and 90 Sq.yrd= total 267.76) 11,78,135x88.88 267.76 391079 391079 Total cost 773596 773596 (ii) Since, the assessee has not filed any reply as required vide show cause notice dated 26-02-2016 with respect to applicability of Sec. 50C of the L.T. Act in the instant case regarding sale of the immoveable properties as mentioned above. Therefore, the full value of consideration is to be taken as discussed in show cause notice. The short term capital gain capital is calculated as under: Sr. No. Plot No. Full value of consider (sec. 48 r.w.s. 50C) (Rs.) Cost of acquisition (para 8.4(1) Short term capital gain (3)(4) 11 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO (0) (2) (3) (4) (5) 1. Plot No. 65B- 1 1159256 773596 385660 2. Plot No. 65B- 2 1147632 773596 374036 Total 2306888 1547192 759696 (iii) Hence, in view of the above, there is short term capital gain of Rs. 759696/- instead of long term capital loss of Rs. 179799/- as claimed by the assessee which is absolutely not acceptable as per above discussion. Therefore, Short term capital gain of Rs. 7,59,696/- is added to total income of assesee.\" ……………………………. 1.5 It is humbly submitted that books of accounts of assessee's proprietorship concern M's S.R. International were duly audited. Therefore, contention of Id. AO that the cost of Rs. 5,50,000 on account of sand filling, boundary wall and land cleaning was not acceptable and his estimate of the same at Rs. 2,50,000 is without any cogent basis. Thus, the correct cost should be considered as claimed by assessee at Rs. 5,50,000 where payments are done through proper banking channel. 1.6 The Id. 40 has adopted sale consideration of Rs. 23,06,888 u/s 50C without providing any opportunity to dispute the value furnished by the Stamp Authorities. 1.7 It is humbly submitted that during the course of assessment, request was made by the assessee to refer the valuation of property to valuation officer as prescribed in u/s 50C (2) of the Income Tax Act, 1961 (PB: 67-68). 1.8 It is further submitted that, the Stamp Duty Valuation is not sacrosanct, nor is mandatory for computation of Capital Gain w/s 50C. The mechanism is provided in the section itself. If the assessee claims before Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should refer the valuation of the capital asset to a Valuation Officer. 1.9 Section 50C(2) provides for such situation under which Id. AO is required to refer the matter to Valuation Officer. The said sub-section provides following two conditions: 12 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 3.9.1 The assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; 3.9.ii. The value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court. 1.10 Neither any specific manner nor any particular Form in Income Tax Rules is prescribed for requesting the AO to refer the matter to Valuation Officer. The basic condition is \"claiming\" before the AO that value adopted by Stamp Valuation Authorities exceeds the Fair Market Value at which the transaction of sale has taken place Subsequent condition is that no appeal is filed under Stamp Duty Law. 1.11 In the present case, both the conditions are fulfilled. Claim was made vide letter submitted (PB 67-68) in response to show cause notice. Further, no appeal was filed under Stamp Duty Law. 1.12 It is a settled legal proposition that lid. AO, while discharging his duties, is bound to refer the valuation to the valuation officer when the assessee has disputed the value adopted by the Stamp Authorities. 1.13 Reliance is also placed on the following judicial pronouncements the extracts of which have been set out for the sake of comenienceHigh Court In the case of Sunil Kumar Agarwal (2014) 47. com 158 (Calcutta) Jaipur ITATIn the case of Sou. Kamlesh Tiwari, ITA No. 387JP/2013 followed the rotio laid down by the Hon'ble Calcutta High Court in the case of Sunil Kumar Agarwal (Supra) held that even though the assessee simply disputed the roped by the Sump Valuation Authority but had not made any specific request to refer the matter to the FaluationOfficer, the Assessing Officer should have referred the matter to the Yahsation Officer In the case of Vijay Kumar Patni, ILAN 202:JP/2012 Hon ble Bench relying on the case of Sunil Kumar Agarwal (supra) held as under: \"As per Section 50C”…………….Assessing Officer.\" Other ITAT  Sarwan Kumar v. ITO [2014] 45 taxmann.com 16 (Delhi-Trib.)  Anil Kumar Jain vs. ITO [2013] 34 taxmann.com 258 (Delhi-Trib)  Raj Kumari Agarwal Vs DCIT [2014] 47 taxmann.com 88 (Agra-Trib) 13 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO In view of the above, the ld AO hax erred in adopting the Stamp Duty Valuation without referring the matter to Valuation Officer, therefore, the same deserves to be quashed and capital gains be directed to be completed w.r.t. actual sale consideration of Rs. 18.91.000 instead of Rs. 23,06,888,\" 4.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. It is observed that appellant has not been able to substantiate the cost incurred on the property with proper evidences. Further, the calculation adopted by the AO for computing the capital gain on sale of plot is in order. AR has not been able to point out any defect in the computation. Thus, the addition made by the AO is upheld and the ground of appeal of assessee is dismissed. 5. Ground No. 5 general in nature and does not require any adjudication. 6. In the result, the appeal is dismissed.” 6. As the assessee did not find any favour from the appeal filed before ld. CIT(A) who filed the present appeal against the said order of the ld. CIT(A) before this tribunal on the grounds as reiterated in para 2 above. To support the grounds so raised the ld. AR appearing on behalf of the assessee has placed reliance on the written submission which is extracted herein below:- “ 1. FACTS 1.1. Search operations u/s 132 was conducted on 31.07.2012 in the case of Siyaram (Katta) group, Jaipur. 1.2. During the course of search, following seized materials, belonged to appellant assesseeas per “Performa for Recording Satisfaction under section 153C” of AO of search party (PB: 7-8 ) were found:  Annexure-AS-Exhibit No.-2- Page No. 57 to 59(PB: 1-3)  Annexure-AS-Exhibit No.-2- Page No. 60 to 62(PB: 4-6) 1.3. The annexure ‘AS-Exhibit No.-2- Page No. 60 to 62’ is an agreement made by the appellant assessee to purchase a land situated at A-31, Gayatri Nagar, Maharani farm, 14 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO Durgapura, Jaipur for Rs. 1,25,00,000/- dated 25.11.2010 from Hanuman Sahay Regar and Bhanwar Singh Chauhan. However, the deal could not be finalized and no payment was actually made by him, which can be evidenced through an AS-Exhibit No.-2- Page No. 57 to 59, which is unsigned sale deed of December, 2010 of same property with same parties. 1.4. The above seized material is related to A.Y. 2011-12. No incriminating materials/documents related to appellant assessee were found for the relevant assessment year. 1.5. The ld. AO of searched party recorded satisfaction u/s 153C on 22-1-2015. (PB: 7-8). 1.6. The ld. AO of the appellant assessee recorded ‘Satisfaction Note’ for initiation proceedings u/s 153C vide order sheet dated 23.01.2015. (PB: 9) 1.7. Objection was raised by the appellant assessee against initiation of proceedings and issuance of notice u/s 153C, which was disposed off by the ld. AO vide order dated 11th January, 2016.(PB:14-19) 2. SUBMISSION 2.1. No addition is permissible in respect of completed assessments without any incriminating material having found in the course of search. 2.2. Ld. AO completed the assessment of the appellant assessee u/s 153C of the Income Tax Act, 1961 which reads as under: (before amendment by Finance Act, 2015) : “Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied thatany money, bullion, jewellery or other valuable article or thing or books of account or documents, seized or requisitioned, belongs or belong to a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other personand that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person.” 15 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 2.3. Section 153C of the Act makes it mandatory for AO of searched person to record satisfaction that the seized material belongs to the person other than the searched person, before handing over the documents to AO of other person. In the present case ld. AO of searched person has recorded his satisfaction merely by using following words:(PB: 7-8) ‘Yes, I am satisfied’. Hon’ble Delhi High Court in the case of Pepsi Foods P. Ltd. Vs. ACIT [2014] 367 ITR 112 (Delhi)(HC), held that “It is evident from the satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word 'satisfaction' or the word I am satisfied in the order or the note would not meet the requirement of the concept of the satisfaction as used in section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. Going through the contents of the satisfaction note, any 'satisfaction' of the kind required under section 153C of the said Act could not be discerned. [Para 11] This being the position the very first step prior to the issuance of a notice under section 153C has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under section 153C are liable to be quashed. [Para 12]” SLP, filed by revenue, dismissed by Hon’ble Supreme Court against above High Court ruling that before issue of notice under section 153C, Assessing Officer is required to arrive at a conclusive satisfaction that documents belongs to a person other than searched person. [ACIT Vs. Pepsi Foods (P.) Ltd. 89taxmann.com10 (SC)] [2018]. (PB: 93) In view of the above settled legal position, the assessment u/s 153C is bad in law and therefore deserves to be deleted at threshold. GROUND NO. 1(b): LD. AO OF APPELLANT ASSESSEE HAD ERRED IN MAKING ASSESSMENT U/S 153C 1. SUBMISSION 1.1. The formation of satisfaction by the ld. AO of other person that the seized materials etc handed over to him have a bearing on the determination of the total income of such other person is a condition precedent to issue of notice u/s 153C. However, the satisfaction 16 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO provided for issue of notice u/s 153C does not indicate any application of mind by the Assessing Officer of appellant assessee. Notice is simply issued mechanically. He had not satisfied that the seized materials etc handed over to him have a bearing on the determination of the total income of such other person. (PB: 9) 1.2. Section 153C clearly sets out that for carrying out the assessment under the said section, any money, bullion, jewellery or other valuable articles or thing or Books of Account or document seized during the course of search should belong to the person other than the searched person. However, in the instant case, no books of accounts or documents or assets were seized or requisitioned for the relevant assessment year. Therefore, there is no question of satisfaction that seized materials etc handed over to him have a bearing on the determination of the total income of assessee for the relevant assessment year. Thus, assessment u/s 153C is bad in law. 1.3. Ld. AO while disposing off the objection, himself at para 3.2 of page 5 of the letter disposing off objection, accepted the fact that no material/document belonging to the assessee for the relevant year was seized. (PB: 18) 1.4. At Para 3.3 of page 6 (PB: 19) of the letter disposing off objection, ld. AO wrongly observed that it is not necessary that seized material/documents / books of account should relate/pertain to that assessment year for which the notice is issued. He wrongly argued that as per section 153C, seized documents/ books of accounts should have a bearing on the determination of total income of the assessee for that assessment year. The ld. AO also made farfetched remarks that huge cash payments of seized material suggests manipulation of various kinds of ramification, which span over numbers of years. 1.5. It is humbly submitted that for issuance of notice u/s 153C, both the condition, first that seized material/documents / books of account should relate/pertain to that assessment year for which the notice is issued and second that seized documents/ books of accounts should have a bearing on the determination of total income of the assessee for that assessment year should be complied with. If seized material/documents/books of account etc are not related/pertained to that assessment year for which the notice is issued, there cannot be any question that seized documents/ books of accounts can have a bearing on the determination of total income of the assessee for that assessment year. 1.6. The same is further reinforced by the fact that during the relevant year, none of the additions pertain to any material found during the search. All additions have been made for which no material was found during search. These additions have been made by way of routine proceedings of assessments. 17 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 1.7. Reliance is placed on the recent judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax-III, Pune vs. Sinhgad Technical Education Society(2017) 397 ITR 344 (SC), (PB: 73-81) Hon’ble Supreme Court upheld the view of Hon’ble ITAT that as per provisions of section 153C of the Act, incrementing documents which was seized, has to pertain to the Assessment Year in question. The relevant Para 18-20 at page 7-8 of the order (supra) are reproduced below for the sake of convenience: “18.The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy “20. Insofar as the judgment of the Gujarat High Court relied upon by the learned Solicitor General is concerned, we find that the High Court in that case has categorically held that it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act. This proposition of law laid down by the High Court is correct, which is stated 18 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO by the Bombay High Court in the impugned judgment as well. The judgment of the Gujarat High Court in the said case went in favour of the Revenue when it was found on facts that the documents seized, in fact, pertain to third party, i.e. the assessee, and, therefore, the said condition precedent for taking action under Section 153C of the Act had been satisfied. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish.” 1.8. The case of the appellant for A.Y. 2009-10 stood completed as on 31.07.2012 i.e. the date on which search was conducted. Details are as under: A.Y. ROI Due date ROI Filing date 143(2) Notice Time* Expiry 2009-10 30.09.2009 30/09/2009 30-Sept-10 No order u/s 143(3) *143(2) Notice Time: Six months from the end of the financial year in which return is furnished. 1.9. The legal issue of scope of assessment u/s 153A/153C is covered in favor of the appellant by a recent judgment of the Hon’ble ITAT Jaipur Bench vide order in M/s JadauJewellers& Manufacturers Pvt. Ltd. vs. ACIT, Central Circle-2, Jaipur, dated 14.12.2015 in ITA No. 686/JP/2014 for A.Y. 2008-09. (PB:82-92) 1.10. In the above case no incriminating documents were found during the course of search, which had any relevance to the additions made in assessment u/s 153A. The argument before the ld. CIT(A) that assessment stood completed and was not abated because the time limit for issue of notice u/s 143(2) had expired, was rejected by the ld. CIT(A) placing reliance on the judgment of Hon’ble Apex Court in the case of Assistant Commissioner of Income-tax v/s Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC). The order of the ld. CIT(A) on above issue was reversed by the Hon’ble ITAT by holding as under at Para 6 of the order (reproduced below for the sake of convenience): “6. We have heard the rival contentions of both the parties and perused the material available on the record. In this case the return U/s 139(1) was filed on 30/09/2008 as per law for the year under consideration. The Assessing Officer could issue notice by 30/09/2009 U/s 143(2). In this case, search was conducted on 06/5/2010. Thereafter the Assessing Officer issued notice on 16/09/2011 U/s 153A read with Section 143(2) of the 19 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO Act. During the course of search, no incriminating documents were found. Therefore, no notice can be issued U/s 153A read with Section 143(3) of the Act because no proceeding was pending before the Assessing Officer, which has abated for issue of notice on the date of initiation of search. Various case laws referred by the assessee including Hon’ble Jurisdictional High Court decision in the case of Jai Steel (India) Vs. ACIT (supra) are squarely applicable on the case of the assessee. Thus, on technical ground, the assessee’s appeal succeeds and order passed U/s 153A read with Section 143(3) of the Act is held void ab initio.” 1.11. For the above legal proposition, reliance is placed on the order of the Hon’ble Jurisdictional High Court of Rajasthan in the case of Jai Steel India 259 CTR 281(HC) (Rajasthan), in which it was held that “..29. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under s. 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition……...if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A),ITAT and the high court , on a notice issued under section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon’ble Supreme Court in the case of K.P. Varghese…” 1.12. In the case of Kabul Chawla [2016] 380 ITR 573 (Delhi) (PB: 94-106), Hon’ble Delhi High Court observed that as on the date of the search, no assessment proceedings were pending for AYs 2002-03, 2005-06 and 2006-07. For the said AYs, assessments had already been made under Section 143(1) of the Act. Further Hon’ble Delhi High Court summarizing the legal position qua assessments under section 153A held as under:- “…Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material..” “….Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income 20 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment…” “…The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed…” 1.13. Further reliance is placed on the orders of the different benches of the Hon’ble ITAT:- 1.13.i All Cargo Global Logistics Ltd. v/s DCIT – (2012) 18 ITR (Trib) 106 (Mumbai) (SB) “for the proposition that in assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.” 1.13.ii ACIT v/s ManojNarain Aggarwal, [2014] 151 ITD 286 (Delhi - Trib.) “12.2 In our considered view this proposition is by now well-settled that in sec. l53A/153C-assessments, additions cannot be made unless they are based on any incriminating material or inquiries based on such material. It clearly emerges from record that there is neither reference nor reliance on any incriminating material. Besides there is no reference to any inquiries conducted by AO based on any incriminating material. In these circumstances and relying on these case laws we hold that these additions have been rightly deleted by the CIT(A) on this count.” 1.13.iii Asstt. Commissioner of Income-tax v/s Sri Narendra Kumar Gupta ITA NOS. 843 TO 848/Hyd/10 “In the present case, there is no incriminating material found during the course of search to frame assessment u/s 143(3) read with section 153C of the Act. The determination of undisclosed income consequent to search action and framing assessment under section 153C of the Act is different from regular assessment or it is not substitute for regular assessment. Being so, the AO shall frame assessment on the basis of incriminating material found during the course of 21 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO search action under sec. 153C of the Act. The Assessing Officer was not justified in making additions by way of disallowance of interest without any specific incriminating material on hand. The disallowance has been made in respect of interest expenditure only and no information relating to this expenditure was available with the Assessing Officer in the material seized during the search proceedings of P. Prabhakar Reddy.” 1.13.iv JCIT (OSD), C.C-4, Hyderabad v/s M/s Spectrum Pearls & Exports Pvt. Ltd., Secunderabad. - ITA Nos. 2107 to 2113 of 2011 “The case records reveal that no incriminating material was found during the course of search operations. The determination of undisclosed income consequent to search action and framing assessment under section 153C of the Act is different from regular assessment or it is not substitute for regular assessment. Being so, the AO shall frame assessment on the basis of incriminating material found during the course of search action under sec. 153C of the Act. The AO without bringing any incriminating material on record for the purpose of determination of undisclosed income on estimate basis is not possible in the present circumstances to frame the assessment under section 153C of the Act. Therefore, after considering the totality of facts and the circumstances of the case and after going through the order of the CIT (A) in the instant case, we find the CIT (A) is perfectly justified in allowing the claims of the assessee. In this view of the matter, no interference is called for. Accordingly, we reject the grounds raised by the Revenue for all the years under consideration as the grounds raised in all these appeals are quite identical and similar.” In view of the above settled legal position, the additions made in the course of assessment proceedings u/s 153C are beyond scope and therefore deserve to be deleted at threshold. GROUND NO. 2& 3: DISALLOWANCE OF REAL ESTATE’S BUSINESS LOSS OF RS. 4,29,946 AND ADDITION OF RS. 2,63,580 AS SHORT TERM CAPITAL GAIN 1. FACTS 1.1 During the year, the assessee had started real estate trading and executed the following trading transaction: Particulars Sale Amount (Rs.) Purchase Amount (Rs.) Profit earned (Rs.) 22 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO Plot No. 5, Shiv Shankar Nagar, Sanganer 8,80,000 8,11,730 68,270 Plot No. 5A, Shiv Shankar Nagar, Sanganer 6,90,000 5,76,150 1,13,850 Plot No. 5B, Shiv Shankar Nagar, Sanganer 5,60,000 4,78,540 81,460 Total 21,30,000 18,66,420 2,63,580 Less: Interest Paid 6,93,526 Net Loss from Real Estate Business 4,29,946 1.2 During the course of assessment proceedings, the ld. AO observed that on sale of three plots, business loss of Rs. 4,26,946 were claimed by the assessee. Ld. AO found it unreasonable and unjustifiable as some transactions of immovable property were shown as business trading activity while some were shown in capital gain. 1.3 Ld. AO also observed that the said transaction of sale and purchase of plots had not been shown in the proprietorship concern of assessee i.e. M/s S.R. Buildhome which was meant for real estate business. Therefore, ld. AO disallowed the said business loss of Rs. 4,29,946 and made addition of Rs. 2,63,580 as short term capital gains. 2. SUBMISSION 2.1 During the year, assessee,along with business activities of civil construction work in the name of M/s S.R. Buidhome & Investment, had also started real estate trading in his personal capacity. 2.2 Assessee regularly maintained his personal books of accounts of real estate business trading. Such books of accounts were duly audited during the relevant assessment year 2009-10. 2.3 It is submitted that, during assessment proceedings, assessee’s personal audited books of accounts along with each purchase and sale deed of properties were placed before ld. AO. Ld. AO accepted the audited books of accounts without pointing out any defects. 2.4 It is pertinent to note that in the audit report form no. 3CD, the nature of business or profession carried during the year is clearly mentioned as “Real Estate”. Therefore, no 23 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO adverse interference should be drawn where intention of assessee was to carry the real estate trading and the books were duly audited. 2.5 It is further submitted that, as per settled position of law that for deciding as to whether such sale transaction is on account of business of an assessee or simply sale of a capital asset attracting capital gains, the intention of the assessee at the time of purchasing the land in question is paramount. The AO has not discussed as to whether the intention of the appellant at the time of purchasing this property could be said to be for dealing in this property as capital nature or not. Purchases and sales transactions of above said plots were taken place in the same year with the intention to earn business profits instead of earning investment gains in long term. Also the purchase/sales considerations and expenses claimed were also not doubted by ld. AO. 2.6 It is submitted that the contention of ld. AO that all the transaction of immoveable properties not included in the trading a/c of M/s S.R. Buildhome are of capital nature, is purely on estimate basis, without bringing on record any cogent and corroborative material. Therefore, in view of above,the said disallowance of business loss of Rs. 4,29,946 and treating the same as STCG, deserves to be deleted. GROUND NO. 4(a)& 4(b): ADDITION OF RS. 7,59,696 AS SHORT TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SECTION 50C WITHOUT REFERRING TO VALUATION OFFICER 1. FACTS 1.1 During the financial year 2005-06, assessee appellant purchased a plot no. 65B on 22- 11-2005 for Rs. 10,88,940 for investment purpose(PB: 20-31), situated at 65B, Khaswash ji ka bagh, Durgapura, Jaipur. Assessee appellant further incurred expenses Rs. 5,50,000 on account of sand filling, boundary wall, land cleaning etc. in the same F.Y. 2005-06, resulting into total cost of the plot at Rs. 16,38,940.(PB:64) 1.2 Assessee appellant then divided the said plot into four plots measuring areas of 88.88, 88.88, 90 and 43.35 Sq. yards(65B-1, 65B-2, 65B-3 and 65B-4). Assessee appellant had made construction on only three plots during the financial year 2007-08 and 2008-09 of Rs. 6,78,165and Rs. 5,00,000 respectively.(PB: 65-66) 24 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 1.3 During the year, the assessee appellant had sold two of above plots i.e. 65B-1(PB: 32- 47)and 65B-2(PB: 48-63),on 16.07.2008, having measuring area 88.88 Sq. Yd. each for a total consideration of Rs. 18,91,000.Total stamp duty value of such plotswere Rs. 23,06,888(PB:32-63). 1.4 During the course of assessment proceedings, the ld. AO observed that value adopted by stamp valuation authority was higher than the sale consideration. Ld. AO invoked the provisions of section 50C and adopted the sale consideration of Rs. 23,06,888 instead of actual sale consideration of Rs. 18,91,000. The assessee disputed the Stamp Duty Valuation, but ld. AO, without referring the valuation to DVO, computed the gains, w.r.t. Stamp Duty Valuation. 1.5 In addition to above, ld. AO observed that expenses incurred Rs. 5,50,000, in FY 2005- 06 on account of sand filling, boundary wall and land cleaning, was not justifiable. Thus, he estimated the same at Rs. 2,50,000. 1.6 Accordingly, ld. AO calculated the cost, capital gain on sale of the plot and made addition amounting to Rs. 7,59,696. 2. SUBMISSION 2.1 During the year, assessee had sold two plots, plot no. 65B-1 and 65B-2 on 16.07.2008 for Rs. 18,91,000(PB: 32-63), which were purchased on 22.11.2005(PB: 20-31). 2.2 Inadvertently, while filing the return, assessee had taken the sales consideration at Rs. 18,30,000 instead of Rs. 18,91,000 and considered the same as long term capital asset instead of short term capital asset. Accordingly, assessee derived long term capital loss of Rs. 1,79,799 as follows: Particulars Amount (Rs.) Sales consideration 18,30,000 Less: Indexed cost (17,16,272/497*582) 20,09,799 Long Term Capital Loss 1,79,799 2.3 Details of purchase and sale of plot no. 65B-1 and 65B-2,are as under: Particulars Date/Year Amount (Rs.) 25 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO Purchase Cost of Plot No. 65B (311.11 sq. yd.) 22/11/2005 10,88,940 Further Cost at Plot No. 65B 22/11/2005 & 19/01/2005 5,50,000 Total Cost of land (311.11 sq. yd.) 16,38,940 Proportionate land cost of three plots (88.88+88.88+90) 2005-06 14,07,146 Construction Cost on three plots 2007-08 to 2008-09 11,78,165 Total Cost of three plots (267.76 sq. yd.) 25,85,311 Proportionate Cost of plot sold during the year (88.88 sq. yd. each)(B) 17,16,272 Sale of plot no. 65B-1 and 65B-2(A) 16/07/2008 18,91,000 Short Term Capital Gain (A-B) 1,74,728 Therefore, it is submitted that short term capital gain should be restricted to Rs. 1,74,728 only. 2.4 During the financial year 2005-06, assessee appellant incurred expenses Rs. 5,50,000 on account of sand filling, boundary wall, land cleaning etc. The same was paid through proper banking channel of M/s S.R. International as follows: Date Payment Mode Amount (Rs.) PB 22-11-2005 SBBJ Bank, Cheque No. 742960 2,50,000 64&69 19-01-2006 SBBJ Bank, Cheque No. 415427 3,00,000 64&71 Total 5,50,000 2.5 It is humbly submitted that books of accounts of assessee’s proprietorship concern M/s S.R. International were duly audited. Therefore, contention of ld. AO that the cost of Rs. 5,50,000 on account of sand filling, boundary wall and land cleaning was not acceptable and his estimate of the same at Rs. 2,50,000 is without any cogent basis. Thus, the correct cost should be considered as claimed by assessee at Rs. 5,50,000 where payments are done through proper banking channel. 2.6 The ld. AO has adopted sale consideration of Rs. 23,06,888 u/s 50C without providing any opportunity to dispute the value furnished by the Stamp Authorities. 26 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 2.7 It is humbly submitted that during the course of assessment, request was made by the assessee to refer the valuation of property to valuation officer as prescribed in u/s 50C (2) of the Income Tax Act, 1961 (PB: 67-68). 2.8 It is further submitted that, the Stamp Duty Valuation is not sacrosanct, nor is mandatory for computation of Capital Gain u/s 50C. The mechanism is provided in the section itself. If the assessee claims before Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should refer the valuation of the capital asset to a Valuation Officer. 2.9 Section 50C(2) provides for such situation under which ld. AO is required to refer the matter to Valuation Officer. The said sub-section provides following two conditions: 3.9.i. The assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; 3.9.ii. The value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court. 2.10 Neither any specific manner nor any particular Form in Income Tax Rules is prescribed for requesting the AO to refer the matter to Valuation Officer. The basic condition is “claiming” before the AO that value adopted by Stamp Valuation Authorities exceeds the Fair Market Value at which the transaction of sale has taken place. Subsequent condition is that no appeal is filed under Stamp Duty Law. 2.11 In the present case, both the conditions are fulfilled. Claim was made vide letter submitted(PB 67-68) in response to show cause notice.Further, no appeal was filed under Stamp Duty Law. 2.12 It is a settled legal proposition that ld. AO, while discharging his duties, is bound to refer the valuation to the valuation officer when the assessee has disputed the value adopted by the Stamp Authorities. 2.13 Reliance is also placed on the following judicial pronouncements the extracts of which have been set out for the sake of convenience:- High Court 27 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO In the case of Sunil Kumar Agarwal [2014] 47 taxmann.com 158 (Calcutta) in which it was held that: “….For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law….” Jaipur ITAT In the case of Smt. Kamlesh Tiwari, ITA No. 587/JP/2013 followed the ratio laid down by the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal (Supra) held that even though the assessee simply disputed the valuation adopted by the Stamp Valuation Authority but had not made any specific request to refer the matter to the Valuation Officer, the Assessing Officer should have referred the matter to the Valuation Officer. In the case of Vijay Kumar Patni, ITA No. 202/JP/2012 Hon’ble Bench relying on the case of Sunil Kumar Agarwal (supra) held as under: “As per Section 50C, the Id Assessing Officer is duty bound to take value as taken by the Stamp Authorities. As per law the assessee can challenge the valuation made by the stamp authority by filing the appeal against the stamp duty paid before the appellate authority under the Registration of Stamp Act and another alternative is that he can object the valuation proposed by the Assessing Officer on the basis of Section 50C of the Act and on that basis the Assessing Officer can refer the issue to the DVO and get valuation as per law. The Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal (supra) cited by the assessee are squarely applicable. Therefore, the ld Assessing Officer is directed to refer the matter to the DVO and take fair market value on the date of sale/transfer. On that basis, he will compute the capital gain as per law. Therefore, we set aside this issue to-the Assessing Officer.” Other ITAT Sarwan Kumar v. ITO [2014] 45 taxmann.com 16 (Delhi - Trib.) 28 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO “Head Notes - Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases (Conditions precedent) - Assessment year 2006-07 - Whether where an assessee has claimed before Assessing Officer that value of land and building assessed by stamp valuation authority exceeded fair market value of property, then in terms of section 50C(2)(a), Assessing Officer ought to have referred matter to valuation officer instead of straightway deeming value adopted by stamp valuation authority as full value of consideration - Held, yes [Para 6] ….” Anil Kumar Jain vs. ITO [2013] 34 taxmann.com 258 (Delhi - Trib.) “..Head Notes - Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration in certain cases [Reference to Valuation Officer] - Assessment year 2009-10 - Assessee earned short term capital gain on sale of property - Assessee made a claim before Assessing Officer that value adopted or assessed by stamp valuation authority was higher than fair market value - Value adopted by stamp valuation authority had not ever been disputed by assessee in any appeal or revision or otherwise to any other authority or Court as referred to in section 50C(2) - Whether it was incumbent upon Assessing Officer to refer matter for valuation to a Valuation Officer as provided in section 50C(2) - Held, yes..” Raj Kumari Agarwal Vs DCIT [2014] 47 taxmann.com 88 (Agra - Trib.) “…Head Notes Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value consideration (Valuation by DVO) - Assessment year 2008-09 - Whether where assessee had claimed that actual market value of her land was less than stamp duty valuation adopted by Assessing Officer, it was incumbent upon Assessing Officer to refer valuation of said land to Departmental Valuation Officer (DVO) - Held, yes - Whether where same had not been done, matter was to be remitted back for fresh adjudication - Held, yes [Para 8] …” In view of the above, the ld AO has erred in adopting the Stamp Duty Valuation without referring the matter to Valuation Officer, therefore, the same deserves to be quashed and capital gains be directed to be completed w.r.t. actual sale consideration of Rs. 18,91,000 instead of Rs. 23,06,888.” 29 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 7. To support the various grounds so raised by the ld. AR of the assessee and has relied upon the following evidences in support of the contentions so raised:- S. No. Particulars Page No. 1. Copy of search document Annexure-AS-Exhibit No-2 Page No. 57 to 59 1-3 2. Copy of search document Annexure-AS-Exhibit No-2 Page No.60 to 62 4-6 3. Copy of satisfaction recorded u/s 153C by ld. AO of searched party 7-8 4. Copy of satisfaction recorded u/s 153C by ld. AO of appellant assessee 9 5. Copy of objection raised by the appellant assessee 10-13 6. Copy of speaking order passed by the Id. AO to dispose off the objections raised by the appellant assessee 14-19 7. Copy of registered purchase deed of Plot No. 65B 20-29 8. Copy of registered sale deed of Plot No. 658-1 30-45 9. Copy of registered sale deed of Plot No. 658-2 46-58 10. Copy of ledger statement of Plot No. 65B reflecting total cost at Rs. 16,38,940 for FY 2005-06 59 11. Copy of ledger statement of Building Construction reflecting total construction cost at Rs. 6,78,165 for FY 2007-08 and Rs. 5,00,000 for FY 2008-09 60-63 12. Copy of Bank Statement of SBBJ Bank for the period 01.11.2005 to 14.02.2005 64-67 13. Copy of order of Hon'ble Supreme Court in the case of Commissioner of Income Tax-III, Pune vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) 68-76 14. Copy of order of Hon'ble ITAT Jaipur Bench in the case of M/s Jadau Jewellers & Manufactures Pvt. Ltd. Vs ACIT, Central Circle-2, Jaipur, dated 14.12.2015 in ITA No. 686/JP/2014 for A.Y. 2008-09 77-87 15. Copy of order of SLP rejection by Hon'ble Supreme Court against High Court ruling in the case of Pepsi Food P. Ltd. Vs. ACIT [2014] 367 ITR 112 (Delhi)(HC) 88 16. Copy of order of Hon'ble Delhi High Court in the case of Kabul Chawla [2016] 380 ITR 573 (Delhi) 89-101 17. Copy of the written submission filed by the assessee before Id. CIT(A) in the first appellate proceedings 102-127 8. Per contra to this, the ld. DR has relied upon the order of the lower authorities and objected to the contentions raised by the ld. AR of the assessee, 30 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 9. We have heard both the parties and perused the materials available on record. We note from the submission of Ld AR for the assessee that assessee has challenged the jurisdiction assumed by the AO under Section 153C and the resultant additions made to the income for both assessment year. further noted that a search under Section 132 was conducted on the Katta Group on 31.07.2012. Based on the seized materials, jurisdiction was assumed under Section 153C in the case of the assessee. Subsequently, orders under Section 143(3) r.w.s 153C were passed on 10.03.2016 for AY 2009-10 and AY 2010-11. Ground No. 1, 10. We note from the submission of ld. AR of the assessee has challenged the additions made to the income of the assessee, which were based on assumptions under Section 153C. It has been submitted before us that the additions in the assessment proceedings for both the AY 2009-10 and AY 2010-11, which are under appeal before us, have been made de hors the incriminating material found during the course of the search conducted on the Katta Group. 11. It has further noted that as on the date of the search on the Katta Group i.e. on 31.07.2012, assessments for both the years, i.e. AY 2009-10 and AY 2010-11 stood completed. As per the ld. AR of the assessee, for the AY 2009-10, the time 31 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO limit for issuing a notice under Section 143(2) had expired on 30.09.2010. Similarly, for the AY 2010-11, the time limit for issuing a notice under Section 143(2) had expired on 30.09.2011, in accordance with the law as it stood during that period. 12. Further we note that no scrutiny assessments had been conducted under Section 143(3), for both such years under appeal, prior to issuance of notice under Section 153C. We note from the submission of the ld. AR of the assessee that the additions made for both AY 2009-10 and AY 2010-11 were not based on any incriminating material found during the search on the Katta Group. In this regard, reliance before us has been placed on the decisions of Hon’ble Supreme Court in the case of Sinhgad Technical Education Society [2017] 397 ITR 344 (SC) and UK Paints (Overseas) Ltd. [2023] 454 ITR 441 (SC). Both judgments have laid down that in the absence of incriminating material, no additions can be made under Section 153C for completed assessments. 13. We note that the ld. AR of the assessee submitted that specific paragraphs in the assessment orders: Para 3.2 (Page 8) of the order for AY 2009-10 and Para 3.2 (Page 8) of the order for AY 2010-11. In these paragraphs, the AO categorically stated that no material or document belonging to the assessee for both the years 32 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO under appeal was found or seized during the search. The ld. AR of the assessee has filed elaborate written submissions before us, which are reproduced hereunder, challenging the additions made for the AY 2009-10 and AY 2010-11 in the absence of any incriminating material. It was submitted that the assessments for both these years had already been completed as of the date of the search. 14. We note further, the ld. AR of the assessee submitted that the case for AY 2008-09, which had been decided by a Coordinate Bench of this Tribunal, was distinguishable from the present cases. In that year, additions were based on material found during the search, unlike AY 2009-10 and AY 2010-11, where no such material was found. 15. Per contra to this, the ld. DR has relied upon the order of the lower authorities and objected to the contentions raised by the ld. AR of the assessee, during the course of hearing before us. We have carefully considered the contentions and examined the material available on record. Upon reviewing the factual position, we find that for both the assessment years, i.e., AY 2009-10 and AY 2010-11, for which additions have been made, such additions were made without reference to any incriminating material. 33 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO 16. Further, we concur with the submission of the ld. AR of the assessee that the assessments for both the years under appeal were completed as of the date of the search on the Katta Group, which took place on 31.07.2012. As the time limit for issuing notices under Section 143(2) had already expired, these assessments stood completed as of the date of the search. 17. In this regard, we have gone through the decisions of the Hon'ble Supreme Court in the cases of Sinhgad Technical Education Society (supra) and UK Paints (Overseas) Ltd. (supra), where it has been categorically held that in the absence of incriminating material, no addition can be made to the income of the assessee under Section 153C for assessments that were completed as of the date of the search. Respectfully following the decisions of the Hon'ble Supreme Court, we hold that the additions made for the AY 2009-10 and AY 2010-11 are not sustainable. 18. The fact of the case in ITA No. 623/JPR/2019 is similar to the case in ITA No. 622/JPR/2019 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 623/JPR/2019 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels 34 ITA No. 622 & 623/JPR/2019 Ram Sharan Katta vs. ITO that the decision taken by us in ITA No. 622/JPR/2019 for the Assessment Year 2009-10 shall apply mutatis mutandis in the case of Ram Sharan Katta in ITA Nos. 623/JPR/2019 for the Assessment Year 2010-11. In the result, the appeals of the assessee are allowed. Order pronounced in the open court on 30/12/2024. Sd/- Sd/- ¼xxu xks;y½ ¼MkWa-,l-lhrky{eh½ (GAGAM GOYAL) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30/12/2024 *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Ram Sharan Katta, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward-6(4), Jaipur. 3. vk;dj vk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZ QkbZy@ Guard File ITA No.622 & 623/JPR/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar "