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2015 (8) TMI 841 - ITAT MUMBAI

2015 (8) TMI 841 - ITAT MUMBAI - TMI - Unexplained investment in the property - difference between the stated consideration and the value determined by the stamp duty valuation - Held that:- Assessee has appropriately explained the reasons for the difference between the stated consideration and the value determined by the stamp duty valuation authority and/or the report of the DVO. The assessee had explained before the CIT(A) that the premises were acquired on the basis of a price negotiated in .....

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r rate in 2008 were almost 53.5% higher than those in 2007. All the aforesaid explanations furnished by the assessee to show that the purchase consideration paid was justified, has not been controverted or found to be false by the income tax authorities. Therefore, in the absence of any repudiation of the explanation furnished by the assessee, we are satisfied that the difference in the stated consideration paid vis--vis market value in March, 2008 is quite justified and is certainly not reflec .....

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the year 2001 as the President of the company. In the years 1999 and 2000, assessee was offered stock options which resulted in his getting 41000 equity shares of the said concern in 2004 and after the bonus issue in the year 2006-07, the total share holding increased to 82000 shares. Out of this holding, a small quantity of 6895 shares were sold by the assessee which has resulted in a long term capital gain of ₹ 2,61,39,275/-, out of the total long term capital gain of ₹ 3,85,55,83 .....

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ve been used for making the investment in shares. Thus no error on the part of the CIT(A) in holding that the long term as well as the short term capital gains earned by the assessee are not to be assessed as business income. - Decided against revenue. - ITA No. 28/MUM/2013, ITA No. 805/MUM/2013 - Dated:- 14-8-2015 - Shri G. S. Pannu And Shri Sanjay Garg, JJ. For the Petitioner : Shri Hiro Rai For the Respondent : Dr. Yogesh Kamat ORDER Per G. S. Pannu, A. M: The captioned cross-appeals by the a .....

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relevant facts are that the assessee is an individual, who filed his return of income for assessment year 2008-09 declaring an income of ₹ 56,94,817/-, which inter-alia, included income from salary, business, Futures and Options, short term / long term capital gains and other sources. The return of income filed by the assessee was subject to scrutiny assessment, wherein the total income has been assessed at ₹ 4,63,70,000/-, which interalia, included certain disallowances, whereby th .....

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Revenue is in appeal before us on the basis of Ground of appeal Nos.1 & 2, reproduced hereinafter:- (1) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to treat the Long Term Capital Gain as well as Short Term Capital Gains as such and not as business income without appreciating the following facts; (a) The magnitude of transactions is voluminous in very frequent interval which clearly establishes that the motiv .....

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tal gains in view of the fact that in past the Department had accepted the gains as capital gains without examining whether the facts were similar or whether the Department's stand in earlier years was correct. 4. With regard to the price paid for acquisition of property, the AO had proposed an addition of ₹ 2,04,65,000/- which has been scaled down by the CIT(A) to ₹ 1,00,25,000/-. Against the relief allowed by CIT(A) Revenue is in appeal by way of the following Ground of appeal: .....

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od of valuation of a property adopted by the stamp valuation authority similar to method adopted by the DVO was based on instances of sale in the recent past in respect of similar properties in the same locality. whereas the assessee in its appeal has contested the action of CIT(A) in retaining an addition of ₹ 1,00,25,000/- on account of undisclosed investment in acquisition of the property. 5. In this background, rival Counsels have made their submissions. In so far as the issue relating .....

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00/-. The AO referred the valuation of the said premises to the DVO under section 142A of the Act, 1961 whose report was not received till the completion of the assessment. Nevertheless, the AO proposed an addition of ₹ 2,04,65,000/- being the difference between the stamp duty value and the purchase price of the property. 5.1 In the course of the appellate proceedings before CIT(A), the valuation report of the DVO was received whereby the value of the property as on 14/3/2088 was estimated .....

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n September,2007 itself and out of the total consideration of ₹ 3.50 crores, a substantial amount of ₹ 2.50 crores was paid in September to October 2007. It was explained that since a substantial portion of the consideration was paid upfront knowing that the premises would be ready for occupation only after 3 ½ to 4 years, the assessee was able to get a good price from the builder. Secondly, assessee also explained that the registration of the property was actually done in Mar .....

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ering such variation, assessee demonstrated before the CIT(A) that there would hardly be any difference between the stamp duty value of ₹ 5,54,65,000/- and the actual price paid by the assessee. 5.2 On the point of law, assessee also asserted that there was no material or evidence available with the AO to show that assessee has paid any consideration over and above the consideration stated in the purchase deed. 5.3 The submissions of the assessee were considered by the CIT(A), but he has, .....

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as against ₹ 2,04,65,000/- determined by the Assessing Officer. 6. Before us, the Ld. Representative for the assessee has assailed the order of CIT(A) in law and on facts. Factually speaking, the Ld. Representative for the assessee pointed out that assessee had acquired the property on the basis of a negotiated price in the month of September, 2007 and comparing the purchase consideration with the valuation done by the stamp duty valuation authority on the basis of March, 2008 rates is no .....

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sessee over and above the stated consideration. It has also been submitted that in law, the value determined by the report of the DVO cannot form a basis to hold that assessee has paid any consideration over and above the stated consideration. 7. On the other hand, Ld. DR appearing for the Revenue has defended the action of the AO by pointing out that the value adopted by the stamp duty valuation authority was much higher than the stated consideration, which reflected that assessee did not acqui .....

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respectively. In our considered opinion, the value adopted by the stamp duty valuation authority for the purpose of payment of stamp duty can at best be deemed to be the full value of the consideration only on the strength of the deeming provisions of section 50C of the Act, and that too only in the hands of the seller. Operating mechanics of section 50C of the Act are quite clear and they do not in any manner, suggest that its deeming fiction can be applied in the hands of a purchaser of prope .....

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, the case of the AO that certain undeclared consideration has changed hand for acquisition of the property cannot rest merely on the basis that a higher value has been adopted by the stamp duty valuation authority or by the DVO. The Hon ble Delhi High Court in the case of Smt. Suraj Devei, 197 Taxman 173 (Del) has also held that the primary burden of proving understatement or concealment of consideration is on the Revenue and in the absence of such burden having been discharged, the Revenue wou .....

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assessee has paid any consideration over and above the stated consideration. In this view of the matter, we are unable to uphold the stand of the incometax authorities. 8.1 Factually speaking also, assessee has appropriately explained the reasons for the difference between the stated consideration and the value determined by the stamp duty valuation authority and/or the report of the DVO. The assessee had explained before the CIT(A) that the premises were acquired on the basis of a price negotia .....

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duty ready recknor rate in 2008 were almost 53.5% higher than those in 2007. All the aforesaid explanations furnished by the assessee to show that the purchase consideration paid was justified, has not been controverted or found to be false by the income tax authorities. Therefore, in the absence of any repudiation of the explanation furnished by the assessee, we are satisfied that the difference in the stated consideration paid vis-à-vis market value in March, 2008 is quite justified an .....

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way of Grounds of appeal Nos.1 & 2. 9.1 In this context, brief facts are that the assessee had declared income from sale and purchase of shares and securities under the head capital gains , being long term and short term capital gains depending on the period of holding. The long term capital gain of ₹ 3,85,55,838/- was declared in relation to transactions in equity shares and claimed as exempt. Long term capital gain on mutual fund was also declared at ₹ 16,19,350/-. The assessee .....

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periodicity of holding is a determining factor to treat the transaction as capital gain. The AO also concluded that the transactions were carried out repetitively and were intended to gain immediate benefits on account of increase in the trade values of the equity shares and, therefore, he treated the long term and short term capital gain on sale and purchase of shares and securities/mutual funds as incomes assessable under the head business income . 9.2 Before CIT(A), assessee contested the sta .....

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ould justify the treatment of long term or short term capital gain as business income. On the point of consistency with the past assessments, CIT(A) has relied upon the judgment of Hon ble Bombay High Court in the case of CIT vs. Gopal Purohit, 336 ITR 287(Bom). Against such a decision of CIT(A), Revenue is in appeal before us. 10. Before us, the Ld. DR appearing for the Revenue has primarily relied upon the order of the AO in support of the case of the Revenue. The reasoning adverted by the AO .....

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the assessee the facts considered by CIT(A) clearly establish that it is a case of investor in shares so as to assess the profit on sale and purchase of shares and securities as capital gains and not as business income . 12. We have carefully considered the rival submissions. It is quite well settled that the issue as to whether a particular transaction is a transaction of trade so as to be assessed under the head business or it is a transaction of investment, so as to be assessed under the head .....

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fered stock options which resulted in his getting 41000 equity shares of the said concern in 2004 and after the bonus issue in the year 2006-07, the total share holding increased to 82000 shares. Out of this holding, a small quantity of 6895 shares were sold by the assessee which has resulted in a long term capital gain of ₹ 2,61,39,275/-, out of the total long term capital gain of ₹ 3,85,55,838/-. The balance of the long term capital gain has also resulted out of the shares which ha .....

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