SOUTH KANARA AGRICULTURISTS CO-OPERATIVE MARKETING SOCIETY LTD., ,MANGALURU vs. ACIT,CIRCLE-1(1), MANGALORE

Therefore, assessee is in appeal before us raising several grounds of appeal. In the grounds of appeal, the assessee has contested that the assessment order passed under section 143 (3) is arbitrary and against the principles of natural justice and facts of the case. It is also stated

The brief fact of the case shows that assessee is a co-operative society engaged in wholesale and retail trading of agricultural products, filed its return of income on 30/11/2014 at the net loss of ₹ 23,582,958/–. The return was picked up for scrutiny and notice under section 143 (2) was issued on 31/8/2015 which resulted into the assessment wherein provisions of section 50C of The Income Tax Act was invoked stating that assessee has entered into a joint development agreement with MA Capital Smart Developers Mangalore Private Limited for sale of 90.50 cents for a consideration of ₹ 8 crores and also 30% of the built up area after construction. The learned assessing officer held that the value of the property for the stamp duty purposes was ₹ 283,900,000/-, whereas the consideration as per the sale deed is only ₹ 8 crores. The assessee has also claimed the tax deduction at source of ₹ 6 lakhs from above

Assessee preferred an appeal before the learned CIT–A which was disposed of ex parte as stated above. Therefore, assessee is in appeal before us.

Before us, the assessee filed an appeal through Official liquidator. It was submitted that due to the ongoing liquidation proceedings, the society seized its operation and making it unable to monitor legal and tax-related communications effectively. The lack of administrative resources resulted in the assessee’s inability to comply with the procedural requirements and make necessary submissions before the learned CIT–A. Further the communications sent by the Commissioner of Income Tax, Appeals, were not received by the assessee and no physical notice was also found on the appellant. Accordingly, the appeal of the assessee was dismissed by the ld. CIT–A for non- prosecution, but notices have not been received by the assessee. It was stated that as assessee has gone into liquidation and now official liquidator is pursuing this appeal, the order of the learned CIT–A should be set-aside.

The learned authorised representative also submitted the order of the liquidation, copy of the affidavit, copy of the joint development agreement, copy of the sale deed, writ petitions filed before the Hon’ble Karnataka High Court and the stay orders issued by the Hon’ble Karnataka High Court. It further submitted a paper book containing 112 pages to support its case.

The learned authorised representative further submitted that assessee had an immovable property in Mangalore. This was handed over to M/s MA Smart developers Mangalore Private Limited under a joint development agreement dated 11th day of October 2013 along with a deed of sale of the immovable property on which the development activities were to be carried out. The transaction price of the property was shown at ₹ 8 crores. The joint developer was to construct commercial complex and as per the agreement the assessee was also to get 30% of the constructed property. For the stamp duty purposes a sum of ₹ 28.39 crores were shown as the stamp duty value which was taken by the learned AO as deemed sale consideration by invoking the provisions of section 50C of the Act. Meanwhile, the society is under liquidation and construction activity is also pending. The petition has also been filed before the Hon’ble Karnataka High Court questioning the above sale and the joint development agreement which is pending before the Hon’ble High Court. It was further submitted that in case of a joint development agreement, it shall be taxable in the year of the handing over of the possession of the constructed area as per provisions of the Income Tax Act and not in the year of execution of the joint Development agreement. The assessee further relied upon the decision of the coordinate bench in ITA number 988/B/2018. Thus, it was submitted that the order passed by the learned lower authorities are not in accordance with the law.

The learned departmental representative vehemently supported the orders of the learned lower authorities and submitted that assessee has not submitted any documents before the learned that lower authorities and therefore it resulted into an addition in the hands of the assessee, as it has sold a property for ₹ 8 crores whose value as per the stamp duty authority is ₹ 29.83 crores and therefore under the provisions of section 50C of the Act was applied on capital gain computation. Thus, there is no infirmity in the orders.

We have carefully considered the rival contention and perused the orders of the learned lower authorities. In this case the order of the learned CIT – A is passed not on the merits of the addition but for non- prosecution. In the statement of facts filed before him, facts which are narrated before us are also mentioned that Hon’ble Karnataka High Court has admitted the writ petition and has granted interim stay. Despite mentioning the above fact, without considering the issues on the merits of the case, the learned CIT – A has dismissed the appeal of the assessee for non-prosecution. According to the provisions of the Income Tax Act, the learned CIT – A is duty-bound to decide the appeal of the assessee on its merit. Therefore, the order of the learned CIT – A is not sustainable.

Before the learned assessing officer, assessee did not submit any details about the joint development agreement. It is also not known whether the assessee has handed over possession of the property to the other party. The status of writ petition before the Hon’ble Karnataka High Court was also not brought to the attention of the AO. At present, we are also not aware of the final decision of the Hon’ble Karnataka High Court as the writ petition prayed for cancellation of sale. Therefore, to ascertain the correct facts, we restore the matter back to the file of the learned assessing officer with direction to the assessee to substantiate whether there is any transfer of asset or not, what is the mode of transfer of the property, if any, what are the documents/deeds entered into by the assessee, status of the non-refundable deposit amount, chargeability of capital gain with respect to the transfer of the capital asset etc. Assessee is also free to substantiate any further information related to the issue. Assessee is also directed to place before the ld. AO outcome of the case before the Hon’ble Karnataka High Court. Thereafter, the learned assessing officer may examine the issue afresh and decide the issue of about chargeability of capital gain in accordance with the law in the hands of the assessee after giving an opportunity of hearing.

In view of the above facts, appeal of the assessee is allowed for statistical purposes.