ITO, WARD-16(1) , HYDERABAD vs. NARNE CONSTRUCTIONS PRIVATE LIMITED, HYDERABAD

Succinctly stated, the assessee company had e-filed its return of income for AY 2015-16 on 29/09/2015, declaring an income of Rs.3,27,597/-. Subsequently, the assessee company's case was selected for scrutiny assessment under section 143(2) of the Act.

During the course of the assessment proceedings, the AO observed that the assessee company had, during the subject year, sold two properties for the documented value, viz., vide Document No.13845/14, dated 30/03/2013: Rs.15,00,000/-; and (ii) vide Document No.13844/14, dated 26/12/2012: Rs.7,50,000/-. However, it was observed that the registered values of the properties were Rs. 22,02,20,000/- and Rs. 11,01,10,000/-, respectively, and the said documents were registered on 24/09/2014. 3

The AO observed that a perusal of the return of income filed by the assessee company revealed that it had not disclosed any capital gains on the transfer of the aforementioned properties. On being queried, the assessee company claimed that it had purchased the subject land vide SAGPA 4645/98 dated 22/06/1998. Elaborating further, it was stated that in order to consolidate the land holdings and perfect the title of the land it was decided to transfer the land in favour of its group companies, viz., (i) CIHIPL; and (ii) SVPL vide sale deed Nos.13844/14 on 26/07/2012 and 13845/14 on 30/03/2013, and since then the said group companies were in possession of and in enjoyment of the land as their inventory. It was further stated that the aforesaid inventory, after being developed as a real estate project, would be sold, and the income arising from its sales, after deducting the expenditure, would be duly offered for tax.

The AO observed that it was the claim of the assessee company before him that the subject properties in question were held as inventory by its group companies and, thus, no capital gain arose therefrom. However, the AO did not find favor with the assessee company's aforesaid explanation. It was observed by him that the assessee company was the owner of the subject properties vide Document No. 4645/98, dated 22/06/1998, through a General Power of Attorney-cum- Agreement, wherein it had parted with an amount of Rs. 32.50 lakhs to obtain vacant physical possession of the said properties. It was 4 ITO vs. Narne Constructions Private Limited observed that the assessee company had vide Document No.13844/14 and Document No.13845/14 sold the subject properties to its group companies, a fact which would safely be gathered from the balance sheets of the group companies, which had shown the aforementioned properties in their balance sheets for the year under consideration. It was further observed that though the documents were presented for registration on earlier days, they were actually registered on 24/09/2014, i.e., the period relevant to the year under consideration. Also, the AO observed that the assessee company had itself recognized the sale during the subject year, i.e., AY 2015-16. 6. The AO, based on his aforesaid observations, concluded that the assessee company, which had purchased the subject property in Financial Year 1998-99, sold the same during the subject year, i.e., Financial Year 2014-15. Thereafter, the AO adopted the value determined by the