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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 4TH DAY OF SEPTEMBER 2013
PRESENT
THE HON'BLE MR.JUSTICE DILIP B.BHOSALE
AND
THE HON'BLE MR.JUSTICE B.MANOHAR
ITA NO.288/2012
BETWEEN
M/s Kochi Property Developers Pvt Ltd no.54, Richmond Road Bangalore - 560 025.
... Appellant
(By Sri.Ganesh.R.Ghale, Adv for Sri.K.R.Prasad)
AND
The Assistant Commissioner of Income Tax, Circle-11(5) Nrupathunga Road Bangalore – 560 001.
... Respondent
(By Sri.K.V.Aravind, Advocate)
ITA filed under Sec.260-A of I.T Act, 1961 arising out of order dated 30/03/2012 passed in ITA No.421/Bang/2011 Annexure-C and order of the CIT (Appeals) in ITA No.183/AC-11(5)/A-I/08-09 dated 28/02/2011 Annexure-B, for the Assessment year
2006-07, praying that this Hon'ble Court may be pleased to formulate the substantial questions of law stated therein, and to allow the appeal by setting aside the order of the ITAT in ITA No.421/Bang/2011 dated 30/03/2012 Annexure-C and order of the CIT (Appeals) in ITA No.183/AC-11(5)/A-I/08-09 dated 28/02/2011 Annexure-B, in the interest of justice and equity.
This appeal coming on for Admission this day, B. MANOHAR J., delivered the following:
J U D G M E N T
The appellant-assessee has filed this appeal under Section 260-A of the Income Tax Act, 1961 (‘the Act’ for short) challenging the order dated 30-03-2012 made in ITA No.421/Bang/2011 passed by the Income Tax Appellate Tribunal, Bangalore (‘the Tribunal’ in brevity) dismissing the appeal filed by the assessee and confirming the order passed by the First Appellate Authority and the Assessing Authority for the assessment year 2006-07.
Appellant is a Private Limited Company registered under the Companies Act, engaged in the business of property development. The appellant-Company filed
return of income on 20-11-2006 for the assessment year 2006-07 declaring a loss of Rs.9,60,710/-. The return of income was processed under Section 143(1) of the Income Tax Act, the case was selected for scrutiny and notice under Section 143(2) of the Act was issued on 7-10-2007. In response to the said notice, the authorized representative appeared and the matter was discussed. During the assessment year 2005-06, the assessee-company had purchased three properties in New Delhi for a total consideration of Rs.3,53,00,000/- (Rupees three crores and fifty three lakhs). On verification of the sale deeds, it was found that in addition to the sale consideration of Rs.3,53,00,000/-, a sum of Rs.28.24 lakhs was spent towards Stamp Duty and Corporation Tax. The said expenditure was not shown in the books of accounts. The authorized representative of the assessee has replied that the total price paid for the properties includes registration costs and the Vendor defrayed the cost of the registration and
the assessee has not incurred any such expenditure. However, the authorized representative of the assessee has not produced any document in this regard. On verification of those three sale deeds, it is seen that at clause Nos.5 and 6 it is clearly mentioned that the Vendor shall clear and pay all the dues and Cess including the property tax upto the date of handing over the possession of the property. Further all the expenses relating to stamp duty for registration of sale deeds and other incidental charges for transfer of the said properties in the name of Vendee or his nominees have to be borne and paid by the Vendee. The Assessing Officer taking into consideration the expenditure incurred for registration of the properties, treated the same as unexplained expenditure under Section 69-C of the Income Tax Act and processed the returns under Section 143(1) of the Act and called upon the assessee to pay the tax, by an order dated 31-12-2008. Being aggrieved by the said assessment order, the appellant
preferred an appeal before the Commissioner of Income Tax (Appeals), Bangalore (hereinafter referred to as ‘the First Appellate Authority’), challenging the same on various grounds.
The Appellate Authority after considering the matter in detail found that the appellant has not produced any document to show that the Vendor has paid the stamp duty and other incidental expenditure. In the absence of necessary documents, the contention of the appellant cannot be accepted and accordingly, dismissed the appeal, by an order dated 28-2-2011. Being aggrieved by the order passed by the First Appellate Authority, the appellant approached the Income Tax Appellate Tribunal challenging the order passed by the Assessing Authority as well as the First Appellate Authority.
The Appellate Tribunal after considering the matter in detail and on verification of the original sale
deeds and other relevant records dismissed the appeal, by an order dated 30-03-2012. Being aggrieved the order passed by the Tribunal, the appellant has preferred this appeal, with following substantial question of law: (i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the addition of Rs.28.24 lakhs made by the Assessing Officer.?
(ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal committed an error and recorded perverse finding contrary to the evidence on record in holding that the expenditure incurred on account Stamp Duty and Corporation Tax was borne by the appellant.?
(iii) Whether on the facts and in the circumstances of the case, the addition of Rs.28.24 lakhs as
unexplained expenditure by invoking Section 69-C is in accordance with law.?
Sri.Ganesh A Ghali, learned counsel appearing for the appellant contended that the order passed by the Income Tax Appellate Tribunal confirming the orders passed by the First Appellate Authority as well as the Assessing Authority is contrary to law. It was contended that the sale price of the properties includes the expenditure of Rs.28.24 lakhs spent on Stamp Duty and Corporation Tax. Therefore, the appellant/buyer was not obliged to show the same as expenditure in their books. The stamp paper clearly discloses that, it was purchased by Mr.S.K.Goel, the authorized representative of the Vendor. Hence, the addition of expenditure under Section 69-C of the Act is contrary to law. Further, as per clause 5 of the sale deeds, the Vendor shall clear and pay all the dues and Cess including property tax. Accordingly, the property tax
was paid by the Vendor. Hence, the orders passed by the respondents are contrary to law and sought for allowing the appeal by setting aside the orders passed by the respondents.
On the other hand, Sri.K.V.Aravind, learned counsel appearing for the respondents argued in support of the orders passed by the Income Tax Appellate Tribunal, the Appellate Authority as well as the Assessing Authority and contended that the assessee has to pay the stamp duty on registration of properties as well as surcharge on the stamp duty. A sum of Rs.17,65,000/- was paid on stamp duty in respect of three sale deeds and a sum of Rs.10,59,000/- was paid towards the surcharge on the stamp duty and it is not the Corporation Tax. He also made available the order dated 25-09-2001 issued by the Inspector General of Registration, Delhi. Further, no document has been produced before the Assessing Authority or
the First Appellate Authority to prove their case. All the three authorities concurrently held that the appellant has paid the stamp duty and surcharge on stamp duty and sought for dismissal of the appeal.
We have carefully considered the arguments addressed by the learned counsel for the parties and perused the orders passed by the Income Tax Appellate Tribunal, First Appellate Authority as well as the Assessing Authority.
The sale deed dated 03-03-2006 executed by Mrs.Sheela Gehlot in favour of the appellant-Company was also made available to the court for perusal. Clause Nos. 5 and 6 of the said sale deed read thus:
That the Vendor shall clear and pay all the dues and cesses including property tax upto the date of handing over the possession of the Said Unit to the Vendee and thereafter the Vendee shall be responsible to pay for the same.
That all the expenses relating to the stamp duty for execution and registration of the sale deed and other incidental charges for transfer of the Said Unit in the name of the Vendee or its nominee or nominees have been borne and paid by the Vendee from its own account.
Further, the order dated 25-09-2001 issued by the Inspector General of Registration, Delhi clearly discloses that the transfer duty @ 5% has to be levied on the transfer deeds of immovable property and also surcharge on stamp duty imposed by the Indian Stamp Act, 1899. The appellant has paid stamp duty of Rs.17,65,000/- and Rs.10,59,000/- was paid in the form of surcharge on stamp duty and it is not the Corporation Tax. As per Clause 5 of the sale deed, till handing over of the Unit, the Vendor has to pay the dues. As per clause 6, all expenditures with regard to execution and registration had to be borne by the Vendee. The contention of the appellant that the sale price is inclusive of registration expenditure and
surcharge on stamp duty is totally incorrect. No document has been produced before the Assessing Authority to show that the Stamp Duty and Corporation Tax are inclusive of the sale price as contended by the appellant. All the three authorities concurrently held that the appellant has failed to disclose the expenditure incurred with regard to the Stamp Duty as well as Corporation Tax. Accordingly, income was assessed.
We find that there is no infirmity or irregularity in the orders passed by all the three authorities. The substantial questions of law are held against the assessee. Accordingly, the appeal is dismissed.
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JUDGE
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JUDGE mpk/-*