SIDHIDATRI BUILDERS & DEVELOPERS,DEHRADUN vs. ITO, WARD-2(3), DEHRADUN

This assessee’s appeal for assessment year 2014-15, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Dehradun’s order dated 23.03.2018 passed in 10340/CIT(A)/DDN/2017-18(357389210060118), involving proceedings under sections 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).

We notice during the course of hearing that the assessee/appellate herein is aggrieved against both the learned lower authorities’ action adding short-term capital gains in its hands to the tune of Rs.2,07,10,000/-; in assessment order dated 18.12.2017 and upheld in the lower appellate discussion reading as under: “6. I have gone through the assessment order and the submission made by the appellant alongwith the documents submitted by it. The genesis of this case arise from deal between one Siddhivinayak Hospitality Services and one Sh. Deep Chand. Siddhivinayak Hospitality Services wishes to buy a piece of land at Niranjanpur from Sh. Deep Chand. For some reasons, this deal did not materialize and Siddhivinayak Hospitality Services then use the services of the assessee who is a commission agent, to obtain this land. The assessee purchased that land from Sh. Deep Chand for Rs. 4.10 crores and sold it to Siddhivinayak Hospitality Services for Rs. 4.50 crores. The assessee purchased the land on 29.07.2013 and sold the land on 31.07.2013.

Believing that this was merely a transaction in which it had earned commission, ignoring the fact that it had actually bought and sold this piece of land, the assessee did not reflect this transaction as short term capital gain and only showed the commission in its tax return. In the assessment order the AO has treated this transaction as short term capital gain and has substituted the sale price of Rs. 4.50 crores with the circle rate of Rs. 6,17,10,000/-.

The appellant before the undersigned has stated that the sale and purchase that it made was merely a device to get Siddhivinayak Hospitality Services the ownership of the land. The appellant has stated that actual seller was Sh. Deep Chand and actual buyer was Siddhivinayak Hospitality Services and it has only earned commission in between. This plea of the assessee is a lame one. It has actually entered into a purchase transaction and sale transaction. The Income Tax Department cannot be party to any device that the assessee may have entered into with Siddhivinayak Hospitality Services to give possession of the land in spite it has dispute with Sh. 2 | P a g e Deep Chand. The transaction shall be treated as what it is and the AO has correctly treated the income arising from it as short-term capital gain. The AO may examine whether any other expenses like stamp duty charges, registration charges need to be deducted for calculation of short-term capital gain. Subject to this, the addition made by the AO is upheld.” This is what leaves the assessee aggrieved who has filed the instant appeal before us.

We now advert to the basic relevant facts of the case, a partnership firm engaged in the real estate development business had in fact purchased a land in question on 24.07.2013 for Rs.4,10,00,000/- followed by its sale/transfer to Sh. Siddhivinayak Hospitality Services which was executed on 31st July, 2013. In this factual backdrop, the learned lower authorities have proceeded to add the difference between the stamp value of the above asset of Rs.6,17,10,000/- as reduced by the actual purchase price of Rs.4.1 crores coming to Rs.2,07,10,000/- forms subject matter of short- term capital gains under challenge before us.

That being the case, the Revenue could hardly dispute that going by section 50C(2) of the Act, both the learned lower authorities had nowhere made any statutory reference to the DVO which has already been held as mandatory. We thus direct the learned Assessing Officer to first refer the instant valuation to the 3 | P a g e DVO and then proceed as per law after affording adequate opportunity of hearing to the assessee. All other remaining issues herein stand rendered academic.