THE HUBLI TALUKA AGRICULTURAL PRODUCE CO-OP MARKETING SOCIETY LTD,HUBLI vs. THE INCOME TAX OFFICER WARD-3(3), HUBLI

The ld. AO erred in assessing the income from capital gains during this assessment year. It is submitted that the transfer of property took place on 18-05-2008. Hence the income from capital gains arose for AY: 2009-10 and shall be assessed in that year only. Therefore, the order of assessment is contrary to the provisions of the Act and liable to be cancelled or set aside in the ends of justice.

The ld. AO erred in adopting the fair market value (FMV) of the property as on 01-04-1981 at Rs.1766/- gunta(i.e.Rs.146 sq.yard). It is submitted that the property sold is industrial land. Hence, as per the Registered Valuer’s Report, is at Rs.42084/- gunta. Therefore, the valuation of the property adopted by the AO in determining the cost of the property as on 011-04-1981 is arbitrary and bad in law. 4. That the order of assessment is barred by limitation. Therefore, the order of assessment is illegal, void, non-est in law and liable to be cancelled or set aside in the ends of justice”. 2. Brief facts of the case are as under: Assessee is a co-operative society formed by farmers being members, for purposes of marketing of agricultural produce. It 3 derives its income from business, rent and interest. For year under consideration, assessee filed its return of income on 30/09/08 declaring total loss of Rs.3,27,170/-. The case was selected for scrutiny and notice under section 143 (2) was issued to assessee. In response to statutory notices, representatives of assessee appeared before Ld. AO and filed various details as called for. It has been submitted that assessee was carrying on as society and purchased perpetual lease hold rights of land situated at woman’s College Road, JC Nagar, Hubli bearing CTL No.2868,2869 and 2870 respectively. Assessee had also purchased a factory building, godowns, office building, residential building garage and other structures and fixtures, plant and machinery spare parts, dead stocks, stock in trade, furniture’s and other movables appertaining to factory and all interest in factory and stock in trade goods and effects from M/s Gujarat Ginning and manufacturing Co Ltd. 2. Ld.AO observed that assessee during the year sold certain properties vide sale deed dated 28/03/08. Ld. AO held that income arising out of transfer of property is assessable for assessment year 2008-09 instead of AY: 2008-09 as submitted by assessee. 2.1 Another issue that arose was in respect of the fair market value of the property as on 01/04/81. Ld.AO relied on two instances of properties sold, located nearby the alleged land sold by assessee and computed fair market value at Rs.1.46 per yard, thereby determining capital gains at Rs.1,43,54,300/- (B)/2017 4 Ld.AO thus made addition in the hands of assessee amounting to Rs.1,40,79,950/-. 3. Aggrieved by addition made by Ld.AO, assessee preferred appeal before Ld. CIT (A) who upheld addition. 4. Aggrieved by order of Ld. CIT (A), assessee is in appeal before us. Is Ld.AR submitted that Ground No.1 is general in nature and therefore do not require any adjudication. Ground No. 4 has also been submitted to be not pressed and accordingly this ground is dismissed as not pressed. Ground No.2 is in respect of year in which income from transfer of property is to be taxed in the hands of assessee. 5. Ld.AR submitted that due to heavy losses in the past years assessee decided by way of resolution to sell permanent leasehold right in respect of property situated at CTS No. 2870, area 3025yards. Accordingly, attended notification in ‘Sanjevani” Kannada daily newspaper was made calling upon intending purchaser. Ld.AR submitted that, as per terms and conditions of tender, earnest money deposit amount was fixed at Rs.10 Lacs and successful bidder to take possession of property only after having paid entire tender amount and registration of sale deed. He submitted that, upon completion of calling for tender, proceedings to sell was initiated by finalising the highest bidder to be the purchaser. Consequently, sale deed was executed on 28/03/08 and was kept pending till contingent conditions were complied as under by purchaser, regarding full payment of tender and registration. (B)/2017 5 Ld.AR submitted that purchasers gave post dated cheques as under to assessee in respect of balance payment. Sl.No. Chque Date Amount Drawn on No. 1 306651 10/03/2008EMD 10,00,000.00 SBI, Vidyanagar, Hubli 2 306653 28/03/208 27.50,025.00 SBI, Vidyanagar, Hubli 3 303354 10/4/2008 35,00,000.00 SBI, Vidyanagar, Hubli 4 300055 20/04/2008 35,00,000.00 SBI, Vidyanagar, Hubli 5 296756 30/04/2008 35,00,000.00 SBI, Vidyanagar, Hubli 6 293457 10/5/2008 35,00,000.00 SBI, Vidyanagar, Hubli Total 1,77,50,025.00

Ld.AR submitted that entire payment received from purchaser was paid by 10/05/2008 and agreement was registered on 01/04/2008 at sub registrar, Hubli. Ld.AR submitted that possession of said property was handed over to the purchaser vide letter dated 18/05/08 upon settling the full payment. He thus submitted that transfer of property has actually taken place during financial year 01/04/08 to 31/03/09 relevant to assessment year 2009-10. In support of his contention, Ld.AR placed reliance upon various documents in paper book, which were either not legible nor were in vernacular language.

Ld. DR submitted that issue may be set-aside to Ld. CIT (A) for verification as submissions advanced by assessee is not verifiable from documents relied upon.