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Facts
The assessee purchased a property in 2011 and sold it in 2014 for Rs. 2,36,44,000/-. The assessee claimed long-term capital gains and deduction u/s 54 for investing in another house. The AO treated the sale proceeds as business income, treating the transaction as an adventure in the nature of trade. The CIT(A) partly allowed the appeal, confirming the business income addition but reducing the amount.
Held
The Tribunal held that the property was held as an investment for more than 3 years and thus the gains arising from its sale were long-term capital gains, not business income. The Tribunal also directed the AO to consider the deduction u/s 54 of the Act.
Key Issues
Whether the sale of property constituted long-term capital gain or business income, and the eligibility for deduction u/s 54. Also, the genuineness and creditworthiness of unsecured loans received by the assessee.
Sections Cited
153, 143(3), 54, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’ NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI KRINWANT SAHAY
ORDER This appeal by the Assessee is arising out of the order of the Ld. CIT(A)-31, Delhi in Appeal No. CIT(A), Delhi-19/10495/2016-17 dated 07.12.2023. Assessment was framed by the ACIT, Circle 55(1), New Delhi for the assessment year 2015-16 u/s. 153 read with section 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘Act’) vide order dated 31.12.2016.
The ground no. 1 was not pressed, hence, the same is dismissed.
The next issue in this appeal is as regards the Order of CIT(A) in confirming the action of the AO in making the addition on long term capital gain at Rs. 1,35,94,000/- as business income and allowed the consequential deduction u/s 54 of the Act being investment made in purchase of residential house.
Brief facts of the case are that the assessee purchased property at Plot No. 5/1, Sector, Vaishali, Ghaziabad at a cost of Rs. 1.05 crore on 08.11.2011. This property was sold by the assessee in the month of December, 2014 for a total consideration of Rs. 2,36,44,000/-. The assessee claimed that he derives long term capital gain on this property to the tune of Rs. 99,47,185/- taking into considering the indexed cost of acquisition of Rs. 1,36,96,815/-. The assessee further claimed deduction u/s. 54 of the Act as he has invested it at another house property to the tune of Rs. 1,80,46,500/-. The AO noted that assessee had sold this property by splitting it in 05 units and selling them separately, the details thereof are as under:-
Particulars Nature Amount Unit G-1 Plot 5/1 Sector-5, Vaishali Sale 82,25,000/- Unit G-2 Plot 5/1 Sector-5, Vaishali Sale 74,64,000/- Unit G-3 Plot 5/1 Sector-5, Vaishali Sale 20,50,000/- Unit G-4 Plot 5/1 Sector-5, Vaishali Sale 30,50,000/- Unit G-5 Plot 5/1 Sector-5, Vaishali Sale 28,55,000/- Total 2,36,44,000/-
AO noted that assessee is engaged in the sale and purchase of many properties from 2010-11 to 2016-17 and he dealt various properties and accordingly that assessee is earning profit from business i.e. adventure in the nature of trade. Accordingly, the AO after considering the sale price of Rs. 1,05,000/- has taken total sale price of Rs. 2,40,94,000/- and the balance as profit from business at Rs. 1,35,94,000/-./
Aggrieved assessee preferred appeal before the CIT(A), CIT(A) partly allowed the appeal of the assessee to the extent of Rs. 5 lacs being no in consonance with the circular number and thereby reduced the amount of addition from Rs. 1,35,94,000/- to Rs. 1,31,44,000/- to hold the same as business income in hands of the assessee. Aggrieved, assessee preferred the appeal before the CIT(A).
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that assessee has held this property for at least for 3 years. This was purchased in the year 2011 i.e. on 8.11.2011 and hold this property upto December, 2014. It means that assessee has kept this property as an investment and in not for the purpose of business. The assessee sold this property by splitting into five different units and selling them separately for an amount of Rs. 2,36,44,000. We are of the view that this cannot be hold as property from business being adventure in the nature of trade rather this is a long term capital gain. We accordingly, direct the AO to treat this property as long term capital gain and also consider the claim of deduction u/s. 54 of the Act. The assessee filed details of property purchased during the financial year 2014-15 relevant to assessment year 2015-16 as under :-
(i) 2015-16 D-327, Vivek Vihar, Phase-I Purchased property at Rs. 58.55 lakh. (ii) 1/9119,Plot No. 14, Gali No. 4, West Purchased property at Rohtas Nagar, Shahdara Rs. 11.14 lakh
AO is directed to verify the claim in terms of section 54 of the Act where the condition of section 54 of the Act are met with and accordingly, decide the claim of deduction u/s 54 of the Act. This issue is partly remitted back to the file of the AO for verification whether the assessee is entitled for claim of deduction in terms of above. This ground is allowed for statistical purpose.
7. The next issue in this appeal is as regards the order of the CIT(A) in confirming the addition on account of unsecured loan of Rs. 48.60 lacs u/s. 68 of the Act. AO noted that assessee has taken unsecured loan of Rs. 60 lacs at the end of the year by Sh. Nirmal Kumar. AO noted that Sh. Nirmal Kumar does not have creditworthiness and genuineness to advance such huge amount of unsecured loans, hence, he added fresh unsecured loan of Rs. 35,50,000/- given by Nirmal Kumar to the hands of the assessee.
Further, Sh Shiv Kumar Gupta has advanced unsecured loans amounting to Rs.
4.46 lacs to the assessee at the end of March, 2015. AO noted that Shri Shiv Kumar Gupta does not have creditworthiness and genuineness to advance such amounts of unsecured loans who has also not filing the returns prior to AY 2013-14, hence, the fresh unsecured loan of Rs. 2,60,000/- given by Shiv Kumar Gupta was added to the hands of the assessee.
Further, AO noted that assessee has taken unsecured loan to the extent of Rs.
10.50 lacs during the year from Smt. Vikas Sneha Daga. The assesse has furnished only a copy of the return for AY 2015-16 and copy of the bank pass book. AO observed that Smt. Vikas Sneha Daga has shown total income of Rs. 2,90,000/- and also the bank account statement shows that the account was opened on 21.01.2015 and cash deposited of Rs. 2.50 lacs has been made and two transactions by clearing /NEFT from Neo Cables have been unsecured loan was advanced to Sh. Sunil Gupta of an amount of Rs. 10.50 lacs on 25.2.2015. AO summoned the Assessee to produce the persons from whom he has received unsecured loans because he could not establish the genuineness of these creditors as per law, he filed the reply but could not produce the loan creditors. Hence, he added the amount of Rs. 10.50 lacs.
All the above three additions viz. Rs. 35,50,000/-; Rs. 2,60,000/- and Rs. 10,50,000/- totaling to Rs. 48.60 lacs, the Ld. CIT(A) upheld the action of the AO and even not examined the requisite evidence viz. bank statement, return etc. of the assessee. Therefore, in the interest of justice, the AO is directed to examine the issues in respect of all the three additions and decide the same afresh, in terms of section 68 of the Act. Accordingly, this issue is remitted back to the file of the AO for fresh adjudication in the above terms. This ground is allowed for statistical purpose.
In the result, the assessee appeal is partly allowed for statistical purposes.
Order pronounced on 12.11.2025.