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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeal), Coimbatore-3, dated 27.07.2020 and pertains to assessment year 2013-14.
The assessee has raised the following grounds of appeal:
:-2-: ITA. No:838 /Chny/2020 1.“That, on the facts and circumstances of the case the learned CIT(A) is not justified in sustaining the addition of Rs.53,12,025/- made by the AO as short term capital gain. The details submissions made by the appellant on this aspect before the AO and the first appellate authority has not been considered in all its aspects. 2. That, on the facts and circumstances of the case the CIT(A) is not justified in sustaining the sum of Rs. 17,721/- in the total disallowance of other expenses made by the AO to an extent of Rs.80,340/-. 3. That, on the facts and circumstances of the case the impugned order of CIT(A) is bad in law and on facts. 4. That the appellant may be allowed to add, supplement, revise or amend grounds raised hereinabove in the interest of justice.”
The brief facts of the case are that the assessee company had filed its return of income for the AY 2013-14 on 15.02.2014. The case has been subsequently taken up for scrutiny and during the course of assessment proceedings, it was noticed that the assessee company had declared short term capital loss of Rs. 12,42,17,815/- on the sale of land and building. The assessee company was asked to provide copies of sale and purchase deeds of property. In response the assessee submitted a copy of Memorandum of Understanding (MoU) dated 04.11.2009 between Mr. Man Singh Mehta, Mr. Harshad Mehta and Mrs. Sushma Maheshwari represented by their Power of Attorney (PoA) holder, Mr. G.K. Dalmia for
:-3-: ITA. No:838 /Chny/2020 transfer of property measuring 3177.78 sq.yds. along with building constructed area of approximately 25000 sq.ft. to the assessee company in lieu of allotment of 6500 equity shares of the assessee company at face value of Rs. 1000 per share and premium of Rs. 19900 per share. Further, the sale deed dated 17.11.2009 between the assessee company represented by its director Mr. G.K. Dalmia and assessee company for an amount of Rs. 20,69,160/- has been entered. The AO on the basis of documents submitted by the assessee noticed that the assessee is rotating the transactions in the hands of the persons related to each other. Therefore, issued show cause notice and called upon the assessee to explain why computation of long term capital loss from transfer of property cannot be rejected. In response, the assessee vide letter dated 22.02.2016 submitted that the company had purchased a property for consideration of Rs. 13,59,99,000/- under the sale deed dated 17.11.2009 and property has been registered for a consideration of Rs. 16,75,000/-. The balance consideration has been paid by allotment of equity shares with a premium. Since, the assessee transferred the property for a consideration of Rs. 20,69,160/-, it has declared short term capital loss. The AO however, not convinced to the
:-4-: ITA. No:838 /Chny/2020 explanation given by the assessee and according to AO the assessee has arranged a transaction and artificially inflated cost of property and thus, rejected the MoU between the parties and considered sale deed dated 17.11.2009 as per which the sale consideration of the property was fixed at Rs. 73,81,185/-. Therefore, by taking into account sale consideration as stated in the sale deed, computed short term capital gain of Rs. 53,12,025/- and made additions.
Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the CIT(A), the assessee reiterated its arguments taken before the AO and submitted that the AO has erred in computing short term capital gain of Rs. 53,12,025/- as against a short term capital loss declared by the assessee at Rs. 12,42,17,815/-. The Ld. CIT(A) after considering the facts, rejected the arguments of the assessee and sustained the additions made by the AO towards short term capital gains on the ground that MoU between the parties is unregistered and further the same is arranged transactions between the related parties. Therefore, the AO rightly computed short term capital gains after taking into account sale consideration as per sale deed dated
:-5-: ITA. No:838 /Chny/2020 17.11.2009 and thus, rejected the arguments of the assessee and sustained additions made by the AO. Aggrieved, the assessee is in appeal before us.
The Ld. AR for the assessee submitted that the CIT(A) has erred in sustaining additions made towards computation of short term capital gains as per the provisions of section 50C of the Income-tax Act, 1961 (herein after referred to as “the Act”) without appreciating the fact that the assessee has derived short term capital loss from sale of property as per MoU and sale deed between the parties. The assessee has incurred short term capital loss and thus, the question of computation of short term capital gain does not arise.
The Ld. DR on the other hand supporting the order of the ld. CIT(A) submitted that as per sale deed between the parties, the sale consideration fixed by the authorities for payment of stamp duty was at Rs. 73,81,185/- and thus, the AO rightly computed short term capital gain in terms of provisions of section 50C of the Act. Therefore, their order should be upheld.
:-6-: ITA. No:838 /Chny/2020 7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, MoU between the assessee and its director through the PoA holder is an unregistered document and further the consideration fixed for transfer of property has been paid by allotment of equity shares with a huge premium of Rs. 19,900/- per share. Since, it is a transfer between the related parties and also the purported document was unregistered, the authentication of the document and value fixed for transfer of property cannot be ascertainable. Therefore, we are of the considered view that the AO has rightly rejected MoU between the parties and purported consideration paid for purchase of the property. Further, as per the registered sale deed for purchase of property, the assessee has purchased property for a consideration of Rs. 16,75,000/- in the year 2009 and the same has been transferred on 17.11.2009 for a consideration of Rs. 20,69,160/-. The guideline value fixed for the purpose of payment of stamp duty as per sale deed was at Rs. 73,81,185/-. The AO has considered registered document between the parties and computed short term capital gains by taking into account deemed consideration as per provisions of
:-7-: ITA. No:838 /Chny/2020 section 50C of the Act. In our considered view, the AO has rightly computed short term capital gains on the basis of registered document and ignored unregistered MoU between the parties, because the assessee could not substantiate transactions with necessary evidences. Hence, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to sustain additions made by the AO towards computation of short term capital gains and thus, we are inclined to upheld the findings of the ld. CIT(A) and reject the ground taken by the assessee.
The next issue that come for consideration from ground no.2 of assessee appeal is disallowance of other expenses made by the AO amounting to Rs. 17,721/-. The AO has disallowed a sum of Rs. 80,340/- out of other expenses on the ground that the assessee had incurred all the expenses in cash and could not file necessary evidences. Therefore, the AO has disallowed 30% of total expenditure incurred by the assessee at Rs. 2,69,799/- and made addition of Rs. 80,340/-. The Ld. CIT(A) after considering submissions of the assessee, except general expenses, printing and stationery and vehicle expenses all other expenses are incurred through cheque and
:-8-: ITA. No:838 /Chny/2020 which are supported by necessary evidences. However, general expenses amounting to Rs. 63,035/-, printing and stationery amounting to Rs. 12,958/- and vehicle expenses amounting to Rs. 12,616/- is incurred in cash and thus, violated provisions of section 40A(3) of the Act. Therefore, out of total expenses incurred in cash at Rs. 88,609/-, the CIT(A) has disallowed 20% which was worked out at Rs. 17,721/- and balance amount of Rs. 62,619/- has been deleted. Fact remains unchanged that the assessee could not controvert the findings of the facts recorded by the Ld. CIT(A) with evidence except stating that books of accounts of the assessee were audited and the assessee has explained the expenses with documentary evidence. But, fact remains that no evidence has been filed to justify expenditure incurred in cash and also payments in cash in excess of prescribed limit as provided u/s. 40A(3) of the Act. Therefore, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to sustain disallowance of expenses amounting to Rs. 17,721/- and thus, we are inclined to upheld the findings of the ld. CIT(A) and reject the ground taken by the assessee.
:-9-: ITA. No:838 /Chny/2020 9. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the court on 14th October, 2022 at Chennai. Sd/- Sd/- (वी दुगा� राव) (जी. मंजुनाथ) (V. DURGA RAO) (G. MANJUNATHA) �या�यकसद�य/Judicial Member लेखासद�य/Accountant Member
चे�ई/Chennai, �दनांक/Dated: 14th October, 2022 JPV आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF