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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI SHAMIM YAHYA & MS. ASTHA CHANDRA
O R D E R PER ASTHA CHANDRA, JM
The appeal filed by the assessee is directed against the order dated 16.05.2019 of the Ld. Commissioner of Income Tax (Appeals)-38, New Delhi (“CIT(A)”) pertaining to Assessment Year (“AY”) 2015-16.
The assessee has raised the following grounds:
“1. That on the facts and circumstances of case and in law, the learned CIT(Appeals) has erred in law and on the facts in confirming the disallowance of Rs. 25,39,908/- on account of expenses incurred by the assessee to keep its corporate entity intact and ignoring the submission made by AR of appellant, as laid down by the jurisdictional Income Tax Appellate Tribunal – Delhi in case of Jng Builders Pvt. Ltd. New Delhi vs. Department of Income Tax ITA No. 3873/Del/2011.
2. That on the facts and circumstances of case and in law, the learned CIT(Appeals) has erred in law and on the facts in confirming disallowance of expenses incurred during the period of temporary suspension to keep business alive and revive the same at the earliest opportunity and ignoring the intention to revive by paying salary and wages to staff and other financial cost were incurred., thus against the ratio as laid down by the jurisdictional High Court, Delhi in case of CIT vs. Integrated Technologies Limited ITA No. 530/2011.
3. That on the facts and circumstances of case and in law, the learned CIT(Appeals) has erred in law and on the facts ignoring the submission dated 14.11.2017 and 29.11.2017 of the AR of appellant, considering the sale consideration as per the provisions of section 50C of the Act without being referred refereed to the valuation of the property under question.
4. That on the facts and circumstances of case and in law, the learned CIT(Appeals) has erred in law and on the facts in confirming action of the AO that provision for making a reference to valuation officer though not mandatory as the word used is “may” used but once the appellant seeks the reference to the valuation officer the word may should be read as “shall” in the section 50C(2) of the Act, 1961 as held in case of M/s. Kaysons Builders Pvt. Ltd. Income Tax Appellant Tribunal Bench “A” Lucknow, ITA No. 290/LKW/2013.
5. That the learned CIT (Appeals) failed to appreciate the facts that appellant never claimed the value adopted or assessed or assessable by the stamp valuation authority exceeded the fair market value of property in order to require a reference for valuation under section 50C (2) resulting in cause of justice being defeated, thus necessary direction to be issued to the learned CIT(Appeals) to refer the matter regarding the ascertainment of fair market value of property as per provision of section 50C(2) of act.”
The facts are that the assessee company is stated to have been incorporated on 17.10.1990. During the year the assessee did not carry out any business activity but filed e-return on 31.03.2017 declaring income of Rs. 23,16,730/- for AY 2015-16. The case was selected for limited scrutiny through CASS to verify whether capital gain/loss on sale of property has correctly been shown in ITR and whether sales turnover / receipts have been offered correctly to tax.
During assessment proceedings, on being asked by the Ld. Assessing Officer (“AO”) the assessee filed details/documents. The Ld. AO observed that the assessee claimed a loss of Rs. 25,39,908/- during the year. He issued show cause notice dated 23.11.2017 to show cause why said loss be not disallowed as no business activity was carried out during the year. The assessee replied that it was engaged in the business of offset printing press till 31.02.2014 but took temporary break due to some private plan of the company.
4.1 The explanation of the assessee was not acceptable to the Ld. AO. Since no business activity was carried out during the year, the Ld. AO disallowed the said loss and added it to the income of the assessee.
4.2 The appeal of the assessee on this issue before the Ld. CIT(A) was not successful. Hence the assessee is in appeal before the Tribunal and Ground No. 1 and 2 relate thereto.
On perusal of details filed by the assessee, the Ld. AO found that the assessee has sold immovable property for consideration of Rs. 90,00,000/- but as per sale deed the stamp value of the said property was Rs. 1,41,44,000/-. The Ld. AO issued show cause as to why difference of Rs. 51,44,000/- be not added to the income of the assessee under section 50C of the Income Tax Act, 1961 (the “Act”). The assessee replied that the property was sold with bonafide intention and for good reason at lesser price than the circle rate of the said property for the purpose of payment of stamp duty, thus section 50C has no application. The assessee made reference under section 144A of the Act before the Ld. Addl. CIT on 29.11.2017 to direct the Ld. AO to refer the property for valuation to determine the Fair Market Value (FMV) of the property. However, the Ld. Addl. CIT did not give any clear-cut direction to the Ld. AO to refer the property for valuation of FMV. Holding that it is not mandatory for the Ld. AO to refer the property for valuation of FMV, he made the impugned addition of Rs. 51,44,000/- to the income of the assessee under section 50C of the Act. Accordingly, the Ld. AO completed the assessment on total income of the assessee at Rs. 1,00,00,640/- vide is order dated 12.12.2017 under section 143(3) of the Act.
5.1 The appeal of the assessee on the addition of Rs. 51,44,000/- under section 50C met the same fate before the Ld. CIT(A) who also held that it is the discretion of the Ld. AO to refer or not to refer to DVO for valuation. Aggrieved, the assessee is in appeal before the Tribunal and Ground No. 3, 4 and 5 relate thereto.
Hearing was fixed for 14.06.2022, 23.11.2022 and 08.08.2022 but none appeared for and/or on behalf of the assessee though Ld. DR attended the hearing on all the above dates. We, therefore, proceed to decide the appeal ex-parte after hearing the Ld. DR.
We have gone through the order of the Ld. AO as also the appellate order of the Ld. CIT(A). We have considered the submissions of the Ld. DR as well. Perusal of the record shows that the case of the assessee for its claim of loss of Rs. 25,39,908/- is that the business activity of the assessee has been temporarily suspended. The assessee incurred the expenses on account of wages and salary to staff and other financial expenses related to the business in order to keep the corporate entity intact which is a going concern. Was it a case of temporary lull in the business requires verification? On the issue of addition of Rs. 51,44,000/- under section 50C the Ld. DR agreed that due procedure prescribed for valuation of FMV has not been followed. Lot of emphasis has been laid on interpretation of the word “may” occurring in section 50C(2) of the Act ignoring that the word “may” also be interpreted as “shall” if the context so requires. We are, therefore of the considered view that a fresh look needs to be given to both the issues. We, therefore set aside the order of the Ld. CIT(A) and restore both the issues to the file of the Ld. AO to decide them afresh in accordance with law after allowing adequate opportunity of hearing to the assessee. This will meet the ends of justice. We order accordingly.
In the result the appeal of the assessee is treated as allowed for statistical purposes.