ITO, NEW DELHI vs. MRS PINKY GANJU, NEW DELHI

During the period under consideration Mrs. Pinki Ganju and M/S Delight Realtors Pvt. Ltd. jointly have purchased a commercial space bearing no. GF SR of 2045 square ft. at Ansal Plaza, Vaishali for total consideration of Rs.40,90,000/- only. However, Registrar of property had registered this property at Rs.1,71,00,000/- and on which registry charge has been paid to the extent of Rs.11,87,000/- both the partners have invested equal share of money to the extent of 50%. The assessee was asked to give the explanation as to why the value of property at Rs.1,71,00,000/- should not be taken as cost of property purchased interest of Rs.40,90,000/- shown by the assessee and why not the difference of Rs.65,05,000/- i.e 50% of Rs. 1,71,00,000/-(-) Rs.40,90,000/- being half share in the purchased property should not be treated as investment not fully disclosed and added to the income of the assessee. The assessee gave the reply that Section 50C was enacted to decide the sale consideration of an immovable property for the purpose of capital gain in the case of seller of an immovable property as his capital asset below the value determined by stamp authorities and applies to the head of income under ‘Income under the head Capital Gain’. The assessee submitted that she was buyer of the property from a builder M/s Ansal Housing and Construction Ltd. to purchase the plot and constructed the entire building. Therefore, the seller was having this activity as his business activity and he has sold part of building out of his stock. The assessee submitted that the provisions of Section 50C apply where the sale of immovable property is in the course of business and not capital gain as decided in CIT vs. Thiruvengadam Investments P. Ltd 320 ITR 345 (Mad), ACIT Vs. Excellent Land Developers P Ltd. 1 ITR (Trib.) 563 (Delhi) to Vs. Venu Proteins Industries 4 ITR (Trib.) 602.

The Assessing Officer has rejected the contention of the assessee and added Rs.65,05,000/- to the income of the assessee. The assessee filed appeal before Ld. CIT(A).

The Ld. CIT(A) held in Para 4 that :

The DR relied on the Assessing Officer’s order and submitted that the Assessing Officer while rejecting the contention of the assessee, has rightly given a reason that if the Registrar of the properties agrees with the view of the purchasers and seller of the said properties then registry of the property must have been registered at the value of Rs. 40,90,000/- and not on Rs.1,71,00,000/-.

The AR submitted that the property was purchased in A.Y 2008-09. The AR further submitted that the A O without having any evidence of excess amount paid by the buyer, has ignored the fact that assessee paid total amount of Rs. 40,90,000/- to the seller which was confirmed by the seller in front of the registrar at the time of registry. The AR submitted that AO has not verified this fact from registry and simply made addition of Rs.65,05,000/-.

We have perused all the records and the submissions made by both the parties. The AO not verified from the registry as to whether the excess payment was made by the assessee in this Assessment Year or not. It is observed that the assessee along with M/s Delight Realtors Pvt. Ltd. has purchased commercial space Bearing No. GFSR 29 at Ansal Plaza. The same space was already rented out by Ansal Housing and Construction Ltd, the builder and owner of Ansal Plaza to Vishal Retail Ltd for a term of 9 years on 50:50 basis. The total consideration of Rs. 40,90,000/- was paid contributing equally by both investors in July 2007 pertaining to Assessment Year 2008-09. The source of investment of Rs. 40,90,000/- were explained to the satisfaction of the Assessing Officer by the assessee. Since the space was rented the sale consideration was agreed upon on the basis of rate of return basis. The sale deed was not executed at the time of purchase of space. The same was executed in the A.Y 2009-10. The stamp duty was paid amounting to Rs. 11,87,000/- as per value assessed by stamp valuation officer at Rs.1,71,00,000 which further reduced the rate of return of the rented space. Therefore, the total consideration of Rs. 40,90,000/- which was paid at the time of purchase of this space has been mentioned in the sale deed. These factors have been submitted before the Ld. CIT(A) as well as before the Assessing Officer by the assessee. But the same was ignored by the Assessing Officer. Regarding the sale deed at Rs. 1,71,00,000/- the provisions of Section 50C provides that if any immovable property is sold at less than its value assessed by the Stamp Officer of the State, the value assessed by the Stamp Officer shall be deemed to be the sale value of the immovable property. In this case, the property was allotted by Ansal Housing and Construction Ltd. at its market value based on the rate of return from rentals and it was business asset for them. Therefore, the provisions of Section 50C will not be applicable in the case of purchaser of the property. The space was already rented, therefore, the fair market value of the property is decided by its rentals and the same was transferred to the assessee in the assessment year 2008-09. In this particular assessment year i.e. the assessment year 2009-10, the execution of sale deed was executed. It is very pertinent to mention that the provisions of Section 50C applies in case of calculation of sale consideration for the purpose of capital gain in the hands of seller of any capital asset. This aspect has been rightly taken into consideration by the Ld. CIT(A). Therefore, the action of Assessing Officer in making addition u/s 69B of the Income Tax Act, 1941 towards unexplained investment was not correct and Ld. CIT(A) has rightly directed the Assessing Officer to delete addition of Rs.65,05,000/-.

In result, the appeal of the Revenue is dismissed.