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2016 (4) TMI 130 - ITAT AHMEDABAD

2016 (4) TMI 130 - ITAT AHMEDABAD - TMI - Addition on account of difference in estimated value of shops and actual receipt - assessee has dissolved firm and distributed shop to partners - Held that:- CIT(A) has examined the issue lucidly and that too of all possible angles. The firm was disallowed w.e.f. 1-4-2006. On dissolution of the firm, assets must have been distributed. Unsold stocks represented shops/offices space fallen to the assessee. The moment the firm was dissolved, this stock was c .....

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e in its grounds of appeal. - Decided against revenue

Addition on advances given to some agriculturists in cash - Held that:- No merit in this ground of appeal raised by the Revenue. The assessee has explained that the source of money has duly been accounted for in his books. The AO has not doubted this source of money. Therefore, he cannot make the addition.- Decided against revenue - ITA No. 1239/Ahd/2012 - Dated:- 1-4-2016 - Shri Rajpal Yadav, Judicial Member And Shri Manish Borad .....

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ifference in estimated value of shops and actual receipt , without appreciating the fact that on one hand assessee has dissolved firm and distributed shop to partners and the assessee sold these shops, the difference of profit should be treated as income of the assessee. 3. Brief facts of the case are that the assessee has filed his return of income on 9.1.2009 declaring total income at ₹ 5,00,674/-. The case of the assessee was selected for scrutiny assessment and notice under section 143 .....

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e four shops should not be estimated at ₹ 60,00,000/- instead of ₹ 25,83,750/- shown by the assessee. In response to the query of the AO, the assessee contended that he was partner in M/s. Shri Rang Developers (partnership firm). The said firm was engaged in the business of development of project known as 21st Century Business Centre at Survey No.3, Ward No.2, Nr.World Trade Centre, Ring Road, Surat. The firm was dissolved on and from 1st April, 2006. At the time of dissolution, ther .....

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apital account being unrealized amount of office no.601, 602, 609 and 610. When the shops were sold, the entries reverse and the assessee has shown sale consideration. The ld.AO was not satisfied with the explanation of the assessee. He harboured a belief that the rate in this area must be around ₹ 2,500 per sq.feet. Adopting this rate, he calculated the values of the shops and made an addition of ₹ 1,63,16,250/-. 4. On appeal, the ld.CIT(A) has deleted the addition by observing that .....

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see of a capital asset, being land or building or both, is less than the value adopted by an authority of a state government for the purpose of payment of stamp duty, then the consideration received or accruing as a result of such transfer would be deemed equivalent to the value adopted for the purpose of stamp duty payment. By adopting this method, the ld.CIT(A) has observed that the value of all the properties for the purpose of stamp duty was of ₹ 27,52,800/-. The assessee has shown sal .....

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e of the shops at ₹ 2,500/- per sq. ft. on the basis that the rate of ₹ 2,500/- is most conservative price as the complex is situated in the heart of Surat city. Further, Jantri price of this area based on scientific study on 01.04.2008 is near to ₹ 3,200/- per sq. ft. and sale price in Mllennium Textile Market during the year under assessment is near to ₹ 3,500/- per sq. ft. and the building of appellant is located at very advantageous place on the same road on which Mll .....

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business income out of sale of shops by treating them as business assets. Though in the concluding para of assessment order it is not mentioned that income is being assessed as business income but the show cause notice issued as well as the heading in the assessment order reflect that income on account of sale of shops have been assessed as business income. Now the question arises whether any business asset can be valued on market price opposed to what the assessee has shown in the computation o .....

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tute, market value or full value of consideration is determined mostly for the purpose of valuation of capital asset. In the case of appellant, once the shops have been termed as business asset, the valuation of shops cannot be made on the basis of Jantri rates as it becomes out of the purview of section 50C of I.T. Act. Being business asset, it cannot be referred to valuation authority also u/s. 55A of I.T. Act. Had the AO treated these shops as capital asset, the provisions of section 50C and .....

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e of CIT vs. Smt. Nilofer I. Singh (309 ITR 233), following the judgments of Hon'ble Supreme Court in the cases CIT vs. Gillenders Arbuthnot and Co. (87 ITR 407) and CIT vs. George Henderson and Co. Ltd (66 ITR 622) has held that in the case of sale price of asset, there would be no question of any market value and all that one has to see that what is the consideration bargained for. In view of these legal provisions, if a property has been held as business asset not the capital asset, it ca .....

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tioned that he had objected the reference on the ground that the reference to Valuation Officer was made by AO much after the completion of assessment proceedings. As pointed out by appellant in the appellate proceedings, reference to Valuation Officer was made on 27.07.2011 by AO whereas the assessment order was34 passed on 29.12.2010 for-the year under consideration. It has also been pointed out by appellant that he had written a letter to Commissioner of Income Tax-1, Surat on 07.11.2011 obje .....

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ate the market value of assets in consideration. 5.3 One more basis given by AO for estimating the market price of shops is that the complex wherein these shops are situated is on the Ring Road from where flyover starts and near to Millennium Textile Market, therefore situated at very advantageous place. However, the AO has not given any comparable rates prevalent in adjoining shops or market. He has just described the location of the shops without giving specific instance. The appellant has sub .....

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erent. However, these arguments given by appellant during the assessment proceedings, have not been controverted by AO. Since the location of complexes, structure and business viability of shops being business- assets are different and no comparison can be made, the rates applied to the shops of Millennium Market cannot be applied to the shops of appellant. 5.4 In view of the above discussion, it is held that the market rate i.e. @ ₹ 2,500/- per sq. ft. applied by AO is presumptive, withou .....

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mating the rates of shops at ₹ 2,500/- per sq. ft. is presumptive, unreasonable and without any basis. In my opinion, shops of appellant, being building, are capital assets which attract the provisions of section 50C of I.T. Act. Since, the reference to Valuation Officer to value the market price of the property could not reach to the conclusion and proceedings were dropped without making valuation of property, the rates determined by Stamp Valuation Authority of those very shops are to be .....

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d sale consideration received / accruing as a result of transfer. Hon'ble Bombay High Court in the case Bhatia Nagar Premises Co-operative Society Ltd vs. Union of India and others (334 ITR 145), held that section 50C is measure provided to bridge the gap as it was found that assessees were not correctly declaring the full value of consideration or resorting to the practice of under valuation and value adopted or assessed by the Stamp Valuation Authority is only a measure of tax u/s.50C of I .....

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facts also. In that also, they have mentioned this figure apart from the figure of ₹ 1,83,16,250/-. Probably, this amount has been mentioned in the ground, because, the assessee has shown sale of four shops at ₹ 20,50,680/-. The AO has confronted the assessee to show the reasons as to why the value of these four shops should not be estimated at 1,60,00,000/-, meaning thereby, ₹ 60,00,000/- minus ₹ 20,50,680 is equal to ₹ 39,49,320/-. In the first show cause notice, .....

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ned in the ground of appeal has been given at ₹ 39,49,320/-. 6. On due considerations of the facts and circumstances, we find that the ld.CIT(A) has examined the issue lucidly and that too of all possible angles. The firm was disallowed w.e.f. 1-4-2006. On dissolution of the firm, assets must have been distributed. Unsold stocks represented shops/offices space fallen to the assessee. The moment the firm was dissolved, this stock was converted into capital assets of the partners. The AO cou .....

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we do not find any error in the order of the ld.CIT(A) on this issue. The ground no.1 is rejected. 7. In the ground no.2, the grievance of the Revenue is that the ld.CIT(A) has erred in deleting the addition of ₹ 15,65,000/-. 8. Brief facts of the case are that the AO has alleged that the assessee has given advances to some agriculturists in cash aggregating to ₹ 15,65,000/-. According to the AO, these advances were given without entering into any agreement. He harboured a belief tha .....

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mitted that he had filed the copies of confirmations, cash book and the balance sheet to the AO and these documents clearly show that these advances were duly accounted for and reflected in his accounts. It is also submitted by appellant that there is no need of entering into agreements for giving such advances and the source of funds stands explained as these are reflected in the accounts of the appellant. 6.4 In view of the above facts, I do not see any merit in the case of AO. The source of m .....

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