Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
This appeal is filed by Suraj Hotel & Resorts Private Limited (The assessee /appellant) against the order passed by the Pr. Commissioner of Income-Tax -5, Mumbai (The learned PCIT) for Assessment Year 2015-16 on 15th March, 2021 under section 263 of the Act holding that the assessment order passed under section 143(3) of
Facts gathered from the record shows that assessee is a private Limited company having business of investment in partnership firm and rental income. For Assessment Year 2015-16, it filed return of income on 26th September, 2015 declaring total income at ₹45,09,480/-.
Return of assessee was selected for limited scrutiny for verification of i. Large increase in investment in unlisted equities during the year and ii. Sale of property reported in form No. 26QB.
Based on this, the learned Assessing Officer issued a notice under section 142(1) of the Act on 27 June 2017 asking various details. Amongst other information, as per query no (g) of the inquiry letter, assessee was asked to show the complete details with respect to large increase in investment in unlisted activities with documentary evidences and query no (h), details of sale of immovable properties during the year Under consideration and computation of capital gain arising out of such sale. For the transaction of sale of the property, the learned assessing officer further asked to show the transaction in the bank statement, bankbook and in cashbook of the assessee. The assessee was also asked to produce the
On examination of these details The Income Tax Officer Ward 4 (1) (2), Ahmadabad [the learned AO] passed assessment order under section 143(3) of the Act on 11/12/2017 at the returned income of ₹45,09,480/-.
On examination of the record, the learned PCIT issued a show cause notice under section 263 of the Act observing that assessee has sold an immovable property being land
Assessee submitted a reply dated 23 March 2020 wherein it submitted as Under :-
iv. The assessee submitted these complete details along with the copies of the sale deed for sale of land as well as copies of development agreement, details of the cost of acquisition including stem duty et cetera were letter dated 28 November 2017. This letter has been verified by the learned assessing officer and thereafter, ld AO accepted the computation of long- term capital gain with respect to the sale of above land. v. Therefore the property is held by assessee since the execution of development agreement and not from Registered sale deed, therefore assets is a long term capital asset as it is held for more than 36 months. vi. Before learned PCIT, it further referred to several clauses of the Development agreement dated 18 April 2006 to show that the assessee is the owner of the property from that date and ownership of land effectively vested in the assessee on 18/4/2006. Therefore, the property is held for more than three years by the assessee and therefore capital gain resulting on sale of the above property is chargeable vii. In view of this, it was submitted that the learned assessing officer after examination of the same has accepted the computation of long-term capital gain, in fact the property is held also for more than three years and therefore there is nothing left for the assessing officer to further enquire and hence the order passed by the learned assessing officer is not erroneous and prejudicial to the interest of revenue.
The learned PCIT passed an order under section 263 of the Act on 15th March, 2021 wherein she recorded in paragraph no. 4 that as assessee has not appeared nor furnished any written submission, therefore, assessee does not have any explanation to offer. Therefore, she held that there has been failure on the part of the Assessing Officer to conduct proper enquiry and order passed by the Assessing Officer dated 11 December 2017 is erroneous as well as prejudicial to the interest of the Revenue. Therefore, she setting aside the order directed the Assessing Officer to conduct denovo verification and pass a fresh assessment order.
The learned authorised representative submitted that i. Assessee Company purchased the plot of land number 2 and 5 at Pune on 18th day of April 2006 by executing a development agreement duly registered with the sub- registrar for a consideration of ₹ 70 lakhs. Consideration was paid to the seller at the time of execution of development agreement. Possession of the property was also granted to the assessee on the same date. An irrevocable power of attorney was also given by the seller to the assessee company. After that date, i.e. 18/4/2006 all the risk and reward of the property were transferred to the assessee. Subsequently on 8/10/2012, the assessee registered the sale deed of the above property in favour of the assessee based on the irrevocable power of attorney granted by the seller. He therefore submitted that in fact the assessee became owner of the property only on 18 April 2006. He specifically referred to several conditions of the development agreement and submitted that all risk
ii. He also submitted that the assessee’s case was selected for the scrutiny for the purposes of sale of property as reported in form number 26QB. The learned assessing officer examined the same with respect to the details of the sale of immovable property as well as the computation of the capital gain arising out of such sale. The transactions were traced from the bank statement of the assessee and bankbook and cashbook of the assessee. Therefore, the learned assessing officer made a requisite enquiry as required by law. iv. He further stated that there is no finding given by the learned PCIT that what further enquiry the learned assessing officer should have done. v. Even otherwise, the learned assessing officer has taken one of the view that whether the assessee is an owner with effect from the date of development vi. He further referred to the show cause notice dated 18 March 2020 and referred paragraph number four of the showcause notice stating that the reference for the revision u/s 263 has been made by the learned assessing officer and based on the reference of the learned assessing officer the learned PCIT has invoked the provisions of Section 263 of the income tax act which is not a valid assumption of jurisdiction. vii. He further referred to the paper book filed by him containing 109 pages and the copy of the filed on 13 February 2021 before the learned PCIT.
Accordingly, he submitted that the order passed by the learned PCIT is not sustainable in law.
The learned CIT DR vehemently supported the order of the learned PCIT stating that i. The property that is required by the assessee is held only for 19 months and therefore it should have been taxed as a short-term capital gain on transfer of a short-term capital asset. The learned assessing officer has treated it as a long-term capital gain
ii. He further referred to explanation 2 of Section 263 of the income tax act introduced with effect from 1 June 2015, which shows that if the adequate enquiries have not been made by the learned assessing officer it makes the order passed by the learned that AO is erroneous and prejudicial to the interest of revenue.
We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present case, the return of income of the assessee was selected for scrutiny for verifying the details available in form No. 26QB of transfer of property with the return of income. As this question was asked by the learned Assessing Officer by issue of notice under section 142(1) dated 27 June 2017. The Assessing Officer enquired about the details of sale of the property along with bank statement and bankbook and in cashbook. Assessee submitted the details of purchase and sale of property with deeds and explanation on computation of total income. Bank statement, cashbook, and bankbook were also shown.
According to the assessee, the property was purchased by way of a development agreement dated 18 April 2006. Therefore, the date of acquisition of the property should be considered as 18th day of April 2006 and period of holding should be counted from the date. Therefore as it is held for more than 36 months, it is a long-term capital asset and gain arising there from is chargeable as a long- term capital gain.
The learned PCIT is of the view that sale deed is executed and registered in favour of the assessee only on 8/10/2012 and therefore the property is a short-term capital asset and consequent capital gain arising there on is chargeable to tax as a short-term capital gain.
According to the provisions of Section 2 (29AA) long-term capital asset means a capital asset, which is not a short- term capital asset, and according to the provisions of Section 2 (29B) long-term capital gain means capital gain arising from the transfer of a long-term capital asset. According to the provisions of Section 2 (42A) short-term capital asset means a capital asset held by an assessee for
According to the development agreement entered into by the assessee on 18/4/2006, assessee obtained the development right for a consideration of ₹ 70 lakhs, which was paid by the assessee on the same date to the seller. The description of the payment made by the assessee is contained in paragraph number 4 of that agreement. Further as per clause number 3 the owner of the property on the execution of the development agreement put the developer (assessee) in peaceful and vacant possession of the above property for its exclusive use and occupation for development. According to clause 5, owner, on the execution of the development agreement entered into a revocable power of attorney in favour of the developer. Accordingly, it granted irrevocable power of attorney to the director of the assessee company. As per clause number 6, the original documents of the property [title deeds] of the said property were handed over to the assessee by the seller. As per clause number 7, same rights given to the assessee by development agreement, which are available to the buyer of the property. The assessee also got a right to transfer the above property to any other person. From the date of the development agreement all taxes duties etc pertaining to the above property would be the liability of the assessee. Further all the rewards of the property on development would also “12. The definition as contained in Section 2 (42A) of the Act, though uses the words, "a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer", for the purpose of holding an asset, it is "Facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Where it is possible to draw two inferences from the facts and where there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hyper-technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered............... Courts should, whenever possible unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice oriented inference. Facts must be viewed in the social milieu of a country."
Therefore, keeping the aforesaid principles in mind, when we look at Section 48, the language employed is unambiguous. The intention is very clear. When a
Therefore, it is not proper for the learned principal Commissioner of income tax to disturb view which is sustainable in law taken by the learned assessing officer and then to direct him to consider that assessee has held the property from the date on which registered sale deed is executed in favour of the assessee i.e. 8/10/2012 and not from 18/6/2014 on which assessee acquired complete right over the property by development agreement. Even otherwise, the learned PCIT also did not support her view that why only the period of holding of the asset should be
Before the assessing officer assessee submitted the development agreement, as well as registered sale deed dated 8/10/2012
Form No. 26QB is a statement of deduction of tax under section 194 IA of the Act, where the buyer deposits the TDS on behalf of the vendor (seller). As assessee has sold the property by sale deed dated 18th June 2014 for total consideration of ₹1,80,00,000/-. The buyer paid ₹1,79,20,000/- by demand draft to the assessee and deposited ₹80,000/- as TDS on behalf of the assessee under section 194 IA of the Act. The above information has disclosed in Form No.26QB filed by the buyer, for verification of the same, the case of the assessee was selected for limited scrutiny. The learned Assessing Officer for verification of the same enquired and assessee replied those enquiries. Thus there were no further inquiries were required to be conducted by ld AO. Even ld PCIT also did not say what further inquiry should have been carried out by the ld AO. Therefore we do not find that ingredient of explanation [2] of 263 of the Act are fulfilled.
In view of this we hold that there is no error in the order of the ld AO in holding that assessee held property from the date of development agreement after verifying the
In the result order passed by the ld PCIT u/s 263 of the Act is quashed. Appeal of assessee is allowed.
Order pronounced in the open court on 12.04.2022.