Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (3) TMI 579 - AT - Income TaxValidity of reopening of assessment - whether non sanction was duly granted / approved by the competent authority? - Held that:- In response to the objections, the learned Departmental Representative has produced the assessment record before us indicating the requisite sanction was duly granted by the CIT. On perusal of the record, we find that the notice under Section 148 dt.16.3.2012 issued by the Assessing Officer after the sanction was duly granted / approved by the competent authority. Therefore, in view of the fact that the Assessing Officer obtained the necessary approval / sanction of the competent authority, the objections raised by the learned Authorised Representative against the validity of the notice under Section 148 does not survive. Addition on capital gains - Held that:- We find that the Assessing Officer has not conducted any enquiry to but just adopted the figure as given in the report of the Investigation Wing sent to the Assessing Officer for reopening of the assessment. There is no dispute that at the time of execution of the sale deed dt.15.2.2006, the parties have determined the value of the constructed share of the assessee to the extent of 53% at ₹ 6,22,72,000. There is also no dispute that the cost of land in question was ₹ 6,22,72,000 which has been admitted by the Assessing Officer in the assessment order. Therefore as per the claim of the assessee there was no capital gains on transfer of land in question in favour of the developer because cost as well as the sale consideration is same. The learned Authorised Representative has also relied upon the guideline value as notified by the Govt. of Karnataka in respect of the area in question and thus contended that the guideline value prescribed by the Govt. is much less than the sale consideration agreed between the parties. We find force in the contention of the learned Authorised Representative that the cost recorded by the developer in the books of accounts may also include some of the expenditure which have not directly related to the construction activity but may have been incurred in relation to the general administration and other business expenditure. Since income in the hands of the developer is assessed to tax as business income, therefore, the said expenditure which are in the nature of business expenditure are allowable from the sale consideration of the constructed area belongs to the developer. Accordingly, in the absence of any enquiry or any other material or evidence to show that the actual cost of construction or the value of the constructed area belonging to the assessee is more than the value shown by the assessee at ₹ 6,22,72,000 we do not approve the action of the Assessing Officer to compute the capital gains by adopting the figure of expenditure recorded in the books of the developer. There is a substantial difference between the cost of construction for the purpose of computing the capital gains on sale of capital asset and expenditure booked by the developer in the course of construction activity being the business activity of the developer. Therefore, the expenditure recorded by the developer being business expenditure having no direct nexus with construction cannot be adopted as cost of construction for the purpose of capital gains in the hands of the assessee. Accordingly, we delete the addition made by the Assessing Officer on account of capital gains. - Decided in favour of assessee
|