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2016 (4) TMI 1049 - ITAT KOLKATA

2016 (4) TMI 1049 - ITAT KOLKATA - TMI - Sale of flat and plots of land - assessed as capital gains OR business income - Held that:- We hold that the revenue has been assessing the profits from the housing projects derived by the assessee as income from business and it cannot deviate its stand in the assessment year under appeal in respect of profits of the same project merely because there is no closing stock of plots and flat shown in the books of the assessee and merely because no sale of plo .....

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from Asst Year 2014-15 and not earlier. Hence upto the Asst Year 2013-14, the decision rendered by the Hon’ble Madras High Court in the case of CIT vs Thiruvengadam Investments P Ltd reported in (2009 (12) TMI 48 - MADRAS HIGH COURT ) would hold the fort during the assessment year under appeal. In the said case, the Hon’ble Madras High Court held that the property in the hands of the assessee was treated as a business asset and not as capital asset, and hence there is no question of invoking the .....

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of construction materials amounting to ₹ 4,60,858/- , the same were incurred on various dates by the assessee. We deem it fit and appropriate, in the interest of justice and fair play, to set aside this to the file of the Learned AO to verify the bills and vouchers submitted by the assessee in support of its claim and direct the Learned AO to allow the same as deduction if the same are found to be genuine - Decided in favour of assessee for statistical purposes.

Addition on acco .....

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labour charges from the assessee. Hence we find that the observation of the Learned CIT(A) that all the vouchers were signed by one person with identical hand writing is unjustified. We deem it fit and appropriate, in the interest of justice and fair play, to set aside this to the file of the Learned AO to verify the genuinity of the labour charges paid by the assessee together with the evidences submitted thereon and direct the Learned AO to decide this issue based on the evidences filed by the .....

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ssessment year 2006-07 against the order of assessment framed by the ld.AO u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The first issue to be decided in this appeal is as to whether the sale of flat and plots of land could be assessed as capital gains as against business income offered by the assessee in the facts and circumstances of the case. 2.1. The brief facts of this issue are that the assessee is engaged in the business of share trading and real estate .....

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he sale deed in respect of sale of one flat for ₹ 4 lakhs during the asst year under appeal and the same was not filed by the assessee. Accordingly, the Learned AO accepted the sale consideration to be correct and brought the entire sale consideration to tax under the head capital gains without giving any deduction towards cost of acquisition as according to Learned AO, the assessee was only engaged in the business of share trading and real estate promoter & developers activity was not .....

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gress was Nil as per the accounts but assessee company was holding two plots of land and one flat in its hand. In Asst Year 2005-06, there was no sale of flat / plot. In Asst Year 2005-06, the assessee started dealing in shares and stocks and for that purpose amended its Memorandum of Assocaition by inserting a new clause no. 5 to enable to the company to undertake the business of share trading and accordingly the assessee was carrying on the business of Real Estate Promoters & Developers an .....

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term capital gains are as below:- Sale of flat to Mr.Jungpoo Bhatia - ₹ 4,00,000/- The assessee sold one flat to Mr.Jungpoo Bhatia for a consideration of ₹ 4,00,000/-. The consideration was received and possession of the flat was delivered to the buyer but registration of conveyance deed was pending. The assessee offered the business income of ₹ 4,00,000/- in the year of receipt of consideration and handing over of possession itself and did not wait for the registration to hap .....

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ssee sold two plots of land for ₹ 1,20,000/- and ₹ 1,75,000/- to Sri Inder Chand Agarwal & Sri Bishnu Sharma. The Learned AO directed the assessee to file copies of the sale deeds against which the assessee filed only the IGR of two sales. According to Learned AO, the assessee had not filed the details about the date of acquisition of the plots and the Learned AO accordingly doubted the genuineness of sale of plot and estimated the fair market value of the plot at ₹ 5,00,00 .....

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ccording to Learned AO, the plot sold is only a capital asset and gave deduction towards indexed cost of acquisition and arrived at the capital gain of ₹ 20,09,224/- as against business income of ₹ 1,75,000/- offered by the assessee. It was argued that the plots of land was the trading asset of the assessee and accordingly the assessee had offered the entire sale proceeds as business income. 2.3. On first appeal, the Learned CIT(A) called for the remand report from the Learned AO. Th .....

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the balance sheets filed by the assessee that the value of one unsold flat and two unsold plots as on 31.3.2005 was Rs. Nil in the books of accounts. In the balance sheet as on 31.3.2004, the work in progress was shown at Rs Nil. During the Financial Year 2004-05, no further cost of construction or realization of sale proceeds has been disclosed by the assessee. He found that in the balance sheet of the assessee, the stock or work in progress under the head flats or plot of land has been shown i .....

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ed value without proper evidence and supporting materials. The Learned CIT(A) concluded that as it has not been established with any material evidence that the assessee has sold the flat and plot as his stock in trade, there is no reason to interfere with the findings of the Learned AO and accordingly the sale of flats and plots of land would only attract capital gains. But for the sake of justice, it is necessary to find out the exact sale proceeds of the assets and for that purpose, while givi .....

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the assessee is in appeal before us on the following grounds:- 1. a) FOR that on the facts and in the circumstances of the case the Ld. CIT(Appeals) erred in upholding the order of the AO. that the profit arising from sale of one Flat and two plots of land was income liable to tax as Capital Gains. b) FOR that the Ld. CIT(A)'s understanding and appreciation of the accounts is erroneous. The accounts during the year were maintained in the same manner as they were regularly maintained in the .....

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such finding of the AO. 3. FOR that the observation of the A O. that "in the TAR that the assessee's nature of business was trading in shares" is wrong and misleading. The appellant's nature of business was Real Estate Promoter and Developer, and that had been accepted all along in the past. The appellant had started business of trading in shares and securities also in the F. Y. 2004-2005 (Asst. Yr.2005- 2006) and during the year the business of the appellant consisted of both .....

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in respect of value of the two plots and for applying the same value by invoking sec.50C of the Act and determining the capital gains on sale of the plots - is wrong, unjustified, contrary to law and without jurisdiction. 5. FOR that the appellant's business being of Developer and Real Estate Promoter; provisions of sec.50C were not applicable in its case and the Ld. CIT(Appeals) erred in directing the AO. to apply the said provision. 6. Without prejudice to the foregoing grounds, the estim .....

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the Learned CIT(A) to set aside the appeal to the file of the Learned AO. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 2.5. We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove remain undisputed and hence are not reiterated for the sake of brevity. We find from the paper book filed by the assessee, that the assessee has been engaged in the business of construction, real estate developers a .....

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eon were duly offered to tax as income from business in the earlier years and accepted by the revenue as such. We find that in view of completed contract method of accounting followed by the assessee, the closing stock of work in progress in respect of flats and plots had become Rs Nil as on 31.3.2005 and accordingly the assessee had offered the entire sale consideration of flats and plots as income from business. We also find that the Learned CIT(A) had not disregarded the status of the assesse .....

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the profits from the housing projects derived by the assessee as income from business and it cannot deviate its stand in the assessment year under appeal in respect of profits of the same project merely because there is no closing stock of plots and flat shown in the books of the assessee and merely because no sale of plots had been offered as business income in the immediately preceding previous year by the assessee. Hence we hold that the profit derived from sale of plots and flat should be a .....

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P Ltd reported in (2010) 320 ITR 345 (Mad) would hold the fort during the assessment year under appeal. In the said case, the Hon ble Madras High Court held that the property in the hands of the assessee was treated as a business asset and not as capital asset, and hence there is no question of invoking the provisions of section 50 C of the Act. 2.5.1. With regard to the determination of sale of flat and sale of plots by the assessee, we find that the Learned AO had only merely made an estimati .....

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ce of expenditure for purchase of construction materials could be made in the facts and circumstances of the case. 3.1. The Learned AO observed that the assessee had claimed an expenditure on account of purchase of materials which were used for making boundary walls. According to him, it is not understood for which property, the boundary walls were constructed and hence he disallowed the whole of such expenses of ₹ 4,60,858/- in the assessment. Before the Learned CIT(A), the assessee expla .....

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ssessee. He further observed that even if any such work as claimed by the assessee was undertaken, the same cannot be attributable to the sale of one flat and further observed that the evidences furnished by the assessee in support of its claim are not reliable. He accordingly upheld the addition made by the Learned AO. Aggrieved, the assessee is in appeal before us on the following ground:- 7. FOR that on the facts and in the circumstances of the case the Ld. CIT(Appeals) erred in upholding the .....

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emently supported the orders of the lower authorities. 3.3. We have heard the rival submissions and perused the materials available on record. We have already held in the previous ground that the assessee is engaged in the business of real estate developer and promoter during the assessment year under appeal. The assessee has also shown income from business on sale of plots and sale of flat during the assessment year under appeal. We find from the ledger account of purchase of construction mater .....

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und to be decided in this appeal is as to whether an addition of ₹ 1,49,140/- on account of labour charges could be made in the facts and circumstances of the case. 3.1. The Learned AO observed that the assessee had claimed an expenditure on account of labour charges of ₹ 1,49,140/- for completing the walls. The Learned AO observed that the same was not incurred for the purpose of assessee s business and accordingly disallowed the same. Before the Learned CIT(A), the assessee explain .....

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