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Income Tax Appellate Tribunal, BENCH “A”, KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM]
This is an appeal by the Revenue directed against the order dated 10.06.2008 of CIT(A)-VIII, Kolkata relating to A.Y.2005-06.
Ground No.1 raised by the revenue reads as follows :- “On the facts and in the circumstances of the case, the CIT(A)-VIII, Kolkata erred in deleting the addition of Rs. 65,87,275 ignoring the Rule of Revenue Recognition as stated in the Accounting Standard-9 and violating the provisions of Rule 46A of the I.T.Rule 1962. “ 3. The Assessee is a limited Company engaged in the business of Real Estate and other investments. During the previous year the Assessee purchased the following properties as per the tabulated details : Property Seller Rate/sq Area (Sq Total Stamp Gross Total No. feet feet) duty S101 S.K.Sethi 3,000 2,116.60 63,49,800 6,22,290 69,72,090 S101A S.K.Sethi 1,823 603.31 11,00,000 66,270 11,66,270 S102 S.K.Sethi 3,000 2,417.61 72,52,830 7,10,790 79,63,620 S001 M.L.Agarwal 4,300 1,683.08 72,37,674 4,03,950 76,41,624 HUF S002 Anand 4,300 2,120.15 91,16,645 5,08,860 96,25,505
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 Agarwal S003 and M.S.Agarwal 4,300 1,099.46 47,27,678 2,63,880 49,91,558 S004 HUF S005 and Manju 4,300 1,106.08 47,56,144 2,65,470 50,21,614 S006 Agarwal S58 Amisha 6,700 240.81 16,13,427 91,050 17,04,477 Agarwal S059 Sumitra 4,300 447.72 19,25,196 1,07,460 20,32,656 Agarwal 4,40,79,394 30,40,020 4,71,19,414 The Assessee filed documents evidencing purchase of the aforesaid properties. On examination of the documents, the AO found the property was developed by M/S.Sahara India Commercial Corporation Ltd., and the persons who sold the properties to the Assessee were the original allottees of the properties developed by M/S Sahara India Commercial Corporation Limited. They had bargained to purchase the properties from M/S Sahara India Commercial Corporation Limited for the following sums:
Property Seller Rate/sq Area (Sq Total No. feet feet) S101 S.K.Sethi 4900 2,116.60 1,03,71,340 S101A S.K.Sethi 1830 603.31 11,04,057 S102 S.K.Sethi 4900 2,417.61 1,18,46,289 S001 M.L.Agarwal 4000 1,683.08 67,32,320 HUF S002 Anand 4000 2,120.15 84,80,600 Agarwal S003 and M.S.Agarwal 4000 1,099.46 43,97,840 S004 HUF S005 and Manju 4002 1,106.08 44,26,240 S006 Agarwal S58 Amisha 6300 240.81 15,17,103 Agarwal S059 Sumitra 4000 447.72 17,90,880 Agarwal 5,06,66,669
It can be seen from the details given above, that there were six original allottees from whom the Assessee purchased the properties and five out of those six allottees bargained to purchase the properties at a price higher than the price at which the M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 Assessee ultimately purchased the property and only one vendor has sold the property to the assessee at a price higher than the price at which she bargained to purchase the property from M/S.Sahara India.
The total cost of the assessee for acquiring all the above properties is Rs.4,71,19,414/- (including stamp duty), whereas the total cost for which the original allottes bargained to purchase the property from M/S.Sahara India was Rs.5,37,06,689/- (including stamp duty). According to the Assessee, since the original allottees, had not registered the property in their own name, they merely signed all transfer papers in the name of the assessee and the assessee had acquired the right to get the above property transferred in its own name from M/s. Sahara India Commercial Corporation Limited, directly.
On the above facts the AO was of the view that it was improbable that properties which were originally bargained to be acquired for a sum of Rws.5,06,66,669/- would be acquired by the assessee at a later point of time of Rs.4,40,79,394/-. The AO therefore added the difference namely Rs.65,87,275/- as unexplained/unreconciled investments made in immovable properties.
On appeal by the assessee it was contended by the assessee that the conclusions of the AO that the Assessee had made unexplained investment is based on false premise that the assessee had actually paid the transaction value at which vendors had purchased the property from M/s. Sahara India Commercial Corporation Limited. It was argued that the conclusion of the AO based on the premise that the original allottees of M/s. Sahara India Ltd would have sold those properties to the Assessee at the same price at which they had bargained to purchase it from M/s. Sahara India Ltd., was erroneous. It was contended that the AO failed to prove that the assessee had paid much more than the sum of Rs.4,40,75,394/- to M/s. Sahara India Ltd. It was also pointed out that the assessee had furnished all the details of the original allottees of M/s Sahara India Ltd., and the AO even issued summons u/s 131 of the Act to one of the vendors but could not establish that the assessee had in fact paid over and above
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 the price it actually showed in the original deed of conveyance. The assessee placed reliance on several judicial pronouncements including the decision of the Hon’ble Supreme Court in the case of K.P.Verghese vs ITO and Another 131 ITR 597 (SC).
The CIT(A) on a consideration of the aforesaid submission was of the view that the onus was on the AO to prove that the assessee had in fact paid much more than what is recorded in the original deed of conveyance and that the revenue had not brought any such evidence on record. He had also held that in the assessment completed against one of the original allottees of M/s Sahara India Ltd., notice u/s 133(6) of the Act was issued. The Assessee confirmed the consideration as evidenced by the registered deed of conveyance. No addition was made in the hands of the original allottee concerned. Taking note of the aforesaid circumstance and placing reliance on various judicial pronouncements in the case of K.P.Verghese vs ITO (supra) CIT(A) deleted the addition made by the AO.
Aggrieved by the order of CIT(A) revenue has raised ground no.1 before the Tribunal.
We have heard the submissions of the learned DR, who placed reliance on the order of AO. The learned counsel for the assessee placed reliance on the order of CIT(A) and the submissions made before CIT(A). We have considered the rival submissions. The following documents were filed by the assessee in the proceedings before AO. Sl.No. Nature of Documents Page No. of paper book 1 ) Conveyance deed between Sahara India Commercial Corporation 1-9 Ltd. and the assessee for Property No.S-101 2) Agreement to sell between original allotee and the assessee for Property No.S-101 10-13 3) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No.S-101 14-27 4) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property No.S-102 28-36 5) Agreement to sell between original allotee and the assessee for Property No.S-102 37-40
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 6) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No.S-102 41-53 7) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property No.S-001 54-62 8) Agreement to ell between original allotee and the assessee for Property No.S.001 63-66 9) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No.S-001 67-78 10) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property No.S-002 79-87 11 ) Agreement to sell between original allotee and the assessee for Property No.S-002 88-91 12) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No. S-002 92-104 13) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property No. S-003 and S-004 105-122 14) Agreement to sell between original allotee and the assessee for Property No.S-003 and S-004 123-126 15) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No. S-003 and S-004 127-139 16) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property 0.S-005 and S-006 140-157 17) Agreement to sell between original allotee and the assessee for Property No. S-005 and S-006 158-161 18) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No. S-005 and S-006 162-185 19) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property No.S-058 186-194 20) Agreement to sell between original allotee and the assessee for Property No. S-058 195-202 21) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No. S-005 and S-008 203-214 22) Conveyance deed between Sahara India Commercial Corporation Ltd. and the assessee for Property No.S-058 215-223 23) Agreement to sell between original allotee and the assessee for Property No. S-059 224-227 24) Mall Buyers Agreement between Sahara India Commercial Corporation Ltd. and the original allotee for Property No. S-005 and S-009 228-240 25) Letter of the AO of Shri S.K.Sethi from whom the assessee has Purchased the property no.S-101 , 101A, 102 issued u/s 131 241 26) Reply of the assessee to the AO of Shri S.K.Sethi 242
It is clear from the documents filed by the assessee that all the evidences in the form of agreements between original allottees and M/s. Sahara India Ltd and the deeds
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 conveyance between the assessee and M/s. Sahara India Ltd in respect of each of the shop set out in the order of AO were filed by the assessee before AO. As rightly contended by the assessee before CIT(A) there is no evidence brought on record by the AO to show that the assessee had made investment much more than what is shown in the registered deed of conveyance. The conclusions of the AO were based on pure assumption that property bargained by a person to be purchased at a particular price cannot be sold at a lesser price at a later point of time. In this regard it is further noticed that the AO had all the addresses of the original allottees of M/s. Sahara India Ltd and he has not chosen to examine them except issue of summons u/s 131 of the Act to any of the allottees Shri S.K.Sethi. In such circumstances there is no basis for the conclusions arrived at by the AO. On the other hand, the circumstances that AO of Shri S.K.Sethi in the assessment of S.K.Sethi had issued summons u/s 131 of the Act to the assessee and the assesse in reply to such summons gave all the details regarding price at which Shri S.K.Sethi originally agreed to buy shops from M/s. Sahara India Ltd and the price at which the assessee ultimately acquired the same shop from M/s. Sahara India Ltd. No adverse inference has been drawn in the assessment of S.K.Sehti as stated at the bar before us. In such circumstances we are of the view that addition made by the AO was without any basis and the same was rightly deleted by CIT(A).
The learned counsel for the assessee has rightly placed reliance on the decision of the Hon’ble Delhi High Court in the case of CIT vs Discovery Estates Pvt. Ltd. 356 ITR 159 (Delhi). In the aforesaid case the AO noticed that the Assessee had booked sales at Rs.6000 per sq.ft. in ground floor in the year 2003 whereas in the year 2005 shops in the same floor were booked at the rate of Rs.3390 per sq.ft. The AO was of the view that no person would sell property at prices lesser than he sold the same property earlier. The Hon’ble Delhi High Court held that no addition could be made on such basis. The Hon’ble court held that such discrepancy would be starting point of inquiry and not to be taken as evidence or material showing any suppression or understatement of sale price.
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 13. We may also add that the grievance projected by the revenue in the ground of appeal is without any basis as there was no revenue’s recognition as per the accounting standard-9 that came for consideration before the revenue authorities. There was also no additional evidence admitted by CIT(A) in the proceedings before him. Grounds of appeal raised by the revenue are therefore found to be not arising out of the order of CIT(A) for the reasons stated above. We dismiss ground no.1 raised by the revenue.
14. Ground No.2 raised by the revenue reads as follows :- “On the facts and in the circumstances of the case, the Ld. CIT(A)-VIII, Kolkata erred in holding that Long Term Capital Loss of Rs. 21,90,000 was fit for carry forward violating the provisions of Rule 46A of the I.T.Rule 1962. “
The assessee had purchased 4,50,000 shares of M/S Haldiram Snacks Pvt. Ltd. of Rs.10 each at a premium of Rs.90 vide allotment letter dated 30th March, 2002 having folio no. T003, Distinctive numbers, 7073671 - 7523670, and certificate nos. 428-472. Out of the above shares, 25000 shares were sold during the previous year to Mrs. Manju Agarwal at Rs. 12.40 per share, the consideration amounting to Rs. 3,10,000/- and suffered a long term capital loss of Rs. 21,90,000 as per the under mentioned details.
Consideration received on sale of 25000 shares of 3,10,000 M/S Haldiram Snacks Pvt. Ltd. to Mrs. Manju Agarwal Cost of acquisition of 25000 shares @ Rs.1 00/- each 25,00,000 Long Term Capital Loss 21,90,000
The full details consisting of copies of the allotment letter, sale invoice/contract note and the money receipt issued by the assessee were produced before the AD. But the AO, while passing the assessment order, held that the assessee has not filed the detailed computation of loss and the contract notes for purchase and sale, disallowed the entire long term capital loss of Rs.21,90, 000/-.
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 17. The CIT(A) however held as follows:- “7. I have carefully considered the assessment order and the submission of the appellant. The AO has disallowed the carry forward of long term capital loss on the ground that appellant has not filed the detailed computation of loss and the contract notes for purchase and sale. On the other hand, appellant furnished before me a letter filed before the AO. As per the letter the sale bill, the letter of allotment at the time of purchase, contract note were filed in the course of the assessment. In order to verify the facts, the assessment records were called for. From the same it is evident I -that the appellant had filed the sale bill, the letter of allotment at the time of . purchase and the contract note. The computation of long term capital gain appears in the computation of income itself. As such no disallowance of carry forward of loses is called for. Thus this is ground of appeal is allowed.”
18. Aggrieved by the order of CIT(A) revenue has raised ground no.2 before the Tribunal.
The learned DR placed reliance on the order of AO. The learned counsel for the assessee filed before us a copy of the reply given by the assessee to the AO in the course of assessment proceedings whereby the assessee had given the allotment letter of equity shares by M/s. Haldiram Snacks Pvt. Ltd. And the sale invoice/contract note dated 04.09.2004 whereby the assessee sold the shares of M/s. Haldiram Snacks Pvt. Ltd. It was submitted before us that these documents were filed before the AO and the conclusions of the AO to the contrary in the order of assessment are not correct.
We have considered the rival submissions. It is clear from the evidence on record that the conclusions of the AO were based on wrong premise that the assessee had not filed details of computation of loss, contract notes or purchase and sale of shares. The evidence filed before us and the order of CIT(A)clearly show that all the evidence were before the AO and the AO is therefore not justified in disallowing long term capital loss claimed by the assessee. We do not find any ground to interfere in the order of CIT(A). Accordingly ground no.2 raised by the revenue is dismissed.
Ground No.3 raised by the revenue reads as follows :- “On the facts and in the circumstances of the case, the CIT(A)-VIII, Kolkata erred in deleting the addition of Rs. 1,234/- relating to Telephone expenditure and Rs. 1,000/- relating to motor Car expense.”
M/s. Tickewell Commercial Pvt.Ltd.. A.Yr.2005-06 22. The AO in the assessment proceedings disallowed 10% of the telephone expenses and 10% of the motor car expenses on the ground of personal use. CIT(A), however deleted the addition made by following the decision of the Hon’ble ITAT, Kolkata Bench in the case of ACIT vs Perfect Project Ltd (2002) 253 ITR 16 (AT- Cal) wherein it was held that the personal use of motor cars and telephone would constitute the perquisites in the hands of the person because the assessee was a company and therefore as far as the assessee is concerned all expenses should be considered as having been incurred for the purpose of business of the assessee. We are of the view that the conclusion drawn by CIT(A) are correct and calls for no interference. Ground no.3 raised by the revenue is accordingly dismissed.
In the result the appeal of the revenue is dismissed.
Order pronounced in the court on 02.03.2016.