ACIT, CHENNAI vs. M/S. COROMANDEL OILS PRIVATE LTD., CHENNAI

First, let’s take the assessee’s appeals for assessment years 2009-10, 2010-11 and 2011-12 in 1881 & 1882/Mds/2013.

Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that the only issue arises for consideration is with regard to determination of sale consideration of the land for the purpose of computation of capital gains. The Ld. representative submitted that the assessee has also raised an issue of reopening reopening of the assessment, the Ld. representative submitted that the Assessing Officer based upon an errorneous information in respect of period of holding of the property, determined the short term capital loss instead of long term capital loss on mutual funds.

In fact, according to the Ld. representative, the assessment was reopened only for the purpose of assessing the capital loss on mutual funds by issuing notice under Section 148 of the Act. During the course of assessment proceedings, no income was found to have escaped in respect of capital loss on mutual funds. However, the Assessing Officer made addition in respect of capital gain on sale of land on assumption and presumption. On placing reliance on the judgment of Bombay High Court in CIT v. Jet Airways (I) Ltd. (2011) 331 ITR 236, the Ld. representative submitted that an Assessing Officer has not made any addition on the reasons for which the assessment was reopened under Section 148 of the Act, therefore, he cannot make any other addition in the reassessment proceedings under Section 147 of the Act. The Ld. representative also submitted that the time limit for issuing notice under Section 148 has expired for assessment years 2009-10 and 2010-11.

Coming to the merit of the appeal, the Ld. representative for the assessee submitted that there was a survey in the business premises of the assessee on 24.1.2012 and no material was found during the course of survey operation. The entire assessment was made on the basis of material found in the course of Coromandel Cables Pvt. Ltd. According to the Ld. representative, in the course of survey in the case of M/s Coromandel Cables Pvt. Ltd., it appears that the revenue authorities found certain development agreement and other material to indicate that M/s Coromandel Cables Pvt. Ltd. sold land to M/s Doshi Housing and received sale consideration over and above it was disclosed in the sale deed. On the basis of the material found in the case of Coromandel Cables Pvt. Ltd., the Assessing Officer came to a conclusion that the assessee also might have received the same amount for transfer of its land.

On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee owns a factory and land at Perungudi. The assessee-company entered into an agreement with M/s Doshi Housing to develop a residential project, namely, “Etopia-II”. In fact, the land belonging to the assessee is situated adjacent to the land owned by M/s Coromandel Cables Pvt. Ltd. According to the Ld. representative, the transaction between the assessee and the developers are so arranged that the higher sale consideration for the purpose of computing the capital gain in the hands of the assessee was suppressed by diverting the majority portion of the profits to the developer of the property so as to claim benefit under Section 80- partnership firm was reconstituted on 1.4.2007 in which one Shri M.G. Surendranath was introduced as partner with a share profit at 35%. However, he was not given any share of loss. According to the Ld. D.R., all the three entities, namely, M/s Coromandel Cables Pvt. Ltd., M/s Coromandel Oils Pvt. Ltd. (the present assessee) and M/s Doshi Housing Pvt. Ltd. are all belonging to one group, namely, Doshi Group in which Shri Harshad V. Doshi was at the helm of affairs having absolute control in all the spheres of activities. During the course of survey operation, the revenue authorities found that M/s Coromandel Cables Pvt. Ltd. entered into a joint development agreement with M/s Doshi Housing, a partnership firm, for developing a land belonging to M/s Coromandel Cables Pvt. Ltd. A copy of joint development agreement entered between M/s Coromandel Cables Pvt. Ltd. and M/s Doshi Housing was found during the course of survey operation.

The material found during survey operation shows that the value of the land belonging to M/s Coromandel Cables Pvt. Ltd. was found to be `35 Crores approx. as against the value of `10 Crores disclosed in the sale deed. In fact, according to the Ld. D.R., M/s Coromandel Cables Pvt. Ltd. disclosed the value as per guideline Coromandel Cables Pvt. Ltd., the Assessing Officer found that M/s Coromandel Cables Pvt. Ltd. is entitled for 37.54% of the value of saleable area in the project. Based upon that agreement, the Assessing Officer presumed that the assessee also might have received 37.54% of saleable area in the project. Other than the material found in the case of M/s Coromandel Cables Pvt. Ltd., no other material is available relating to the assessee to indicate that the assessee has received over and above the consideration disclosed in the relevant document. Since the land belonging to assessee is adjacent to the land owned by M/s Coromandel Cables Pvt. Ltd., the Ld. D.R. submitted that the value found in the case of M/s Coromandel Cables Pvt. Ltd. on the basis of the material found during the course of survey operation was adopted on estimation.

We have considered the rival submissions on either side and perused the relevant material on record. The only issue arises for consideration is with regard to determination of the value of the land for the purpose of computation of capital gains in the hands of the assessee. Admittedly, the assessee-company entered into an agreement with M/s Doshi Housing for sale of its land at Perungudi.

As repeatedly held by the Apex Court, market value is nothing but the price agreed between the willing purchaser and the willing seller. There may be several factors/reasons for agreeing to a particular price by the parties. One of the reasons presumably the assessee may be compelled to sell the property or transfer the property in any one of the possible mode agreed between the parties. Whatever may be the reasons when two parties came into an agreement to transfer the landed property, the judicial authorities may be worth more than what was agreed between the parties. In fact, in order to avoid this settled position, Parliament has introduced Section 50C of the I.T. Act with effect from 1.4.2003 by Finance Act, 2002. Therefore, when the assessee claims that the value of the land is less than the value determined by the stamp authorities for payment of stamp duty, the value adopted by the stamp authorities shall be deemed to be the full value of the consideration received or accrued to the assessee as a result of such transfer.

We have also carefully gone through the sale agreement entered between the assessee and M/s Doshi Housing, a copy of which is available in page 11 of the paper-book. The agreement clearly says that the assessee agreed to transfer the land to the extent of 1,06,196 sq.ft. for a total consideration of `10.50 Crores and agreed to execute the sale deed in favour of M/s Doshi Housing or its nominee. In fact, the assessee has executed several sale deeds in favour of the persons who are nominated by M/s Doshi Housing. Other than this agreement for sale dated 1.4.2008, no other material is available on record. The joint development agreement referred by the Assessing Officer and the CIT(Appeals) assessee. Therefore, this Tribunal is of the considered opinion that no reliance could be placed on those incriminating materials found in the case of M/s Coromandel Cables Pvt. Ltd. This Tribunal is of the considered opinion that the value of the land has to be taken only as `10.50 Crores. In case the value shown in the sale agreement as `10.50 Crores is less than the value determined by the stamp authorities, then at the best, the guideline value can be taken as value of the land. Therefore, the lower authorities are not justified in estimating the value of the land on the basis of the material relatable to M/s Coromandel Cables Pvt. Ltd. Income-tax proceeding, being a judicial proceeding, the assessment has to be made on the basis of material available on record. Documents relating to other assessees cannot be placed reliance in the case of present assessee unless there is sufficient reason to rely upon that document. This Tribunal is of the considered opinion that there is no material available on record to suggest that the assessee received more than `10.50 Crores as disclosed in the sale agreement dated 1.04.2008. Therefore, the lower authorities are not correct in estimating the value of the land on the basis of the materials relating to M/s Coromandel Cables Pvt. Ltd. this Tribunal is of the considered opinion that in the absence of any other agreement dated 1.04.2008. Accordingly the orders of the lower authorities are set aside and the appeals of the assessee are allowed.

Now coming to the Revenue’s appeals in 1939 & 1941/Mds/2013, the only contention of the Ld. D.R. is that the sharing ratio of the developed project was reduced by the CIT(Appeals) to 40% as against 45% determined by the Assessing Officer. According to the Ld. D.R., the agreement was entered into by M/s Coromandel Cables Pvt. Ltd. in the year 2005, whereas the present assessee entered into agreement in the year 2008.

We have heard Shri B. Ramakrishnan, the Ld. representative for the assessee also. By efflux of time, the cost of construction or cost of land might have increased. However, the percentage of the share would not increase. If the assessee entered into an agreement for sharing the constructed area at 37.5% in the year of time, the cost may increase, accordingly the price may also increase, it does not mean that the share in constructed area would also increase due to efflux of time. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly reduced the sharing ratio to 40% as against the ratio determined by the Assessing Officer at 45%. Therefore, this Tribunal do not have any reason to interfere with the order of the CIT(Appeals) and accordingly, the same is confirmed.

In the result, these appeals of the Revenue are dismissed.

Now coming to the Revenue’s appeals with regard to penalty in 1940 & 1942/Mds/2013, Sh. Pathlavath Peerya, the Ld. D.R. submitted that the Assessing Officer levied penalty.

On the contrary, Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that no material is available on record to suggest that the assessee has suppressed any part of the income arising out of the transfer of the land to M/s Doshi Housing. According to the Ld. representative, the only document available on record is the agreement of sale entered between the assessee and M/s Doshi Housing on 1.04.2008. This agreement of sale clearly says that the value of the land is `10.50 Crores. Other than this, there is no other material on record. The impugned addition was made only on the basis of the incriminating material found during the course of survey operation in the case of M/s Coromandel Cables Pvt. Ltd. This material found, which is relatable to M/s Coromandel Cables Pvt. Ltd., cannot be a basis for levy penalty under Section 271(1)(c) of the Act. Therefore, the CIT(Appeals) has rightly deleted the penalty.

We have considered the rival submissions on either side and perused the relevant material on record. For levying penalty under Section 271(1)(c) of the Act, the assessee has to furnish inaccurate during the course of survey, the so-called incriminating material, including joint development agreement dated 23.11.2005, in respect of M/s Coromandel Cables Pvt. Ltd. was found. In fact, no material was found relating to the present assessee. On the basis of the material found in the case of M/s Coromandel Cables Pvt. Ltd., the value of the land was estimated. In the earlier part of this order, while considering the quantum addition made by the Assessing Officer, this Tribunal found that there cannot be any addition on the basis of the material relatable to M/s Coromandel Cables Pvt. Ltd. In the absence of any material in respect of the present assessee other than the agreement for sale dated 1.04.2008, which discloses the sale consideration at `10.50 Crores, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the penalty. This Tribunal do not find any reason to interfere with the order of the CIT(Appeals). Accordingly, the same is confirmed.

In the result, the appeals of the assessee in 1881 & 1882/Mds/2013 are allowed and the appeals of the Revenue in I.T.A. Nos. 1937, 1938, 1939, 1940, 1941 & 1942/Mds/2013 are dismissed.