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2016 (5) TMI 105 - ITAT DELHI

2016 (5) TMI 105 - ITAT DELHI - TMI - Sale of the plots - chargeable to tax as business income or capital gains - Held that:- On reading of the entire documents placed before us, we could not find the relevant dates when the assessee converted this capital asset into stock in trade, if at all and what price(value), prevalent circle rates thereof,documents and actions of assessee for such conversion to convert the capital asset into stock in trade is not demonstrated. Further, from the remand rep .....

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ade in prior years, then part of the profit arising on sale of land, shall be chargeable to tax under the head capital gains and part of the profit under the head business income.On verification of computation of total income furnished by the assessee for assessment year 2010-11, we did not find any income offered by the assessee under the head business income on sale of the plots. As these vital facts are not brought on record, either by the assessee or by the revenue, in the interest of the Ju .....

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urcation. It is also not apparent that even despite the assessee has not furnished the bills and vouchers related to these expenses under this head how he has come to the conclusion that ₹ 5 53 400 is disallowable. Therefore, as these expenses are related to the development of the above said property which has been dealt with by us in ground No. 1 and 2 of the appeal, We also set aside this ground of appeal to the file of the assessing officer to verify the amount of expenditure incurred b .....

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purchase of the residential flat - Held that:- The deduction under section 54F of the income tax act is allowable only if the assessee has earned any capital gain on sale of the property. No such deduction is allowable if the income is chargeable to tax under the head business income. As we have already set aside Ground No. 1 and 2 of the appeal of the assessee to the file of assessing officer, we also set aside this ground of appeal to the file of assessing officer and to grant deduction under .....

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hat:- Before us, appellant submitted a chart, which it is placed at paper book paper book page No. 47 to 48. According to the chart ₹ 28,35,000/- has been deposited in cash in the IDBI bank account of the assessee. The assessee is stated that out of those ₹ 34 lakhs are withdrawn on various dates from syndicate bank and IDBI bank by the assessee. Precisely an amount of ₹ 5,75,000/- has been withdrawn from IDBI bank account itself and ₹ 34 lakhs from Syndicate bank on vari .....

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this count.- Decided in favour of assessee

Allowance of expenditure under the head development charges - Held that:- Assessee has claimed to have incurred an expenditure of ₹ 45 lakhs on development of the properties, and out of that the claim of ₹ 953,400/- has been made. Learned CIT (A) out of the disallowance of ₹ 9,53,400/- allowed expenditure of Rs. Four lakhs and confirmed disallowance of ₹ 5 53 400/- Both the parties contested the respective aggrieved ac .....

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- It is an admitted fact that assessee has purchased residential flat on 08/02/2010 for an investment of ₹ 1962400 in cash. For the purpose of availability of the cash assessee has shown that it is received ₹ 3863905/-as its source, which has derived from sale of plot before date of investment in residential house and firm. This statement of the funds is not disputed. Therefore, in our opinion assessee has enough sources of funds available to buy that property in cash on 08/02/2010. .....

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re, a presumption can be drawn that the amount that has been invested by the assessee in the interest-free advances given to some parties is out of the capital of the assessee, which is free of interest. Therefore, in view of the above, we confirm the action of the CIT (A) in deleting the disallowance on account of interest expenditure of ₹ 47135/-.

Disallowance made by the assessing officer under section 37 (1) being 20% of various miscellaneous expenses - Held that:- We are of .....

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the appeals filed by the assessee and the revenue against the order of the learned Commissioner of Income tax (Appeals), Meerut dated 20.08.2014 for the Assessment Year 2010-11. 2. The assessee has raised the following grounds:- 1. That under the facts & circumstances of the case, the learned lower authority has erred to hold, that appellant was engaged in trading of property as a property dealer. The finding is arbitrary, unjust, uncalled-for and in any case against the history and material .....

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tified to disallow the development charges at ₹ 5,53,400/-. The confirmation of disallowance at ₹ 5,53,400/- is arbitrary, unjust, uncalled-for and in any case highly excessive and without any basis. 4. That under the facts & circumstances of the case, the learned ITO has erred, not to allow the exemption u/s 54F at ₹ 10,41,901/- for purchase of the residential flat, ignoring the provision of section 45(2). Nor allowance of deduction is, therefore, arbitrary, unjust, uncall .....

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nces of the case, the CIT(A) was justified in allowing the expenditure of ₹ 4,00,000/- under the head 'development charges' ignoring the fact that the assessee did not submit any bills and vouchers in respect of the same. 2. Whether in the facts and circumstances of the case, the CIT(A) was justified in deleting the addition of ₹ 19,62,400/- made by the A.O u/s 68 of the IT. Act, on account of unexplained cash investment in purchase of property ignoring the fact that the asse .....

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eleting the addition of ₹ 47,135/- which had been made by the AO on proportionate basis as interest which had not been charged on loans advanced by the assessee. 5. Whether in the facts and circumstances of the case, the CIT(A) erred in deleting the addition of ₹ 42,289/- that was made by the AO u/s 37(1), being 20% of various miscellaneous expenses such as car running and maintenance expenses, telephone expenses, etc. ignoring the fact that personal use by the assessee cannot be rul .....

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ng. According to assesseee Plot of land were capital assets and later on converted in to stock in trade. Therefore, applying the provisions of section 45 (2) of the act fair market value of the property as on the date of conversion shall be treated as full value of consideration received and capital gain tax shall be charged on the converted assets in the year in which stock in trade is sold. Assessing officer rejected the explanation of the assessee as he has not maintained any books of account .....

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thority, leveling, filling of the roads, construction of the roads and other expenses without which the products sold could not have been sold in small pieces and fetch good value. All these expenses are incurred and bifurcated over total area of land anddevelopment charges on the proportionate basis of land sold during the year works out to ₹ 623.59 per square meter. Ld. assessing officer also rejected the explanation of the assessee that as assessee has not submitted any bills and vouche .....

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wable. Further, the above-impugned property was purchased for ₹ 1962400/- in cash. As the assessee could not explain source of investment in the property is added back to the income of the assessee as unexplained investment. Further during the year assessee has deposited cash of ₹ 2925000/- in the IDBI bank account of the assessee but assessee could not furnish the sources of cash deposit to the satisfaction of the assessing officer is added to the income of the assessee. Further, so .....

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/2010. Further, it was noted by him that the appellant has entered into similar activity of the sale of property during the assessment year 2009-10 also and furthermore, the appellant has purchased many properties during the assessment year 2010-11; therefore, It is a clear-cut pattern of sale and purchase of property on regular basis. He noted that assessee has incurred several expenditure under different heads during the year and therefore these expenses according to him clearly show that the .....

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d property in a very professional manner by providing electricity line, transformer,roads andboundary wall etc. This activity clearly showed, according to him, that appellant is developing the property not for his own personal use but by selling it for the commercial consideration. According to him, intention of the assessee was to earn profit out of the sale of land, which was developed by him in a professional manner. Therefore, according to him, the income on sale of plot is not chargeable to .....

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f ₹ 953400/- to ₹ 553400/- and in turn allowed a deduction of ₹ 4 lakhs as expenditure under the head development expenses for the property. Regarding the claim of deduction under section 54F of the act as he has already held that the assessee has not earned any capital gain, but is carrying on the business in the sale of the property and therefore the deduction under section 54F is not allowable. Regarding purchase property for ₹ 1962400/- paid in cash by the assessee It .....

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e of the appellant has come in cash and further, the appellant has also withdrawn money from his bank account from time to time, but also shows that the withdrawal of cashmade, which has been generated from property sold by the appellant along with other parties. Further, before CIT (A) it was argument of the assessee that the entire deposit cannot be taken for making addition under section 68 of the income tax act. Therefore, the peak deposit can only be taken for making addition. Therefore bas .....

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rading of property. This finding is arbitrary and just uncalled for and in any case against the history and material placed on record as per assessee. The second ground of appeal was that the income of the assessee is charged to tax under the head business income, whereas the assessee has offered same as long-term capital gain under the head capital gain. In nutshell ground No. 1 and 2 are against the order of the CIT (A) confirming the action of the assessing officer that assessee is a Trader i .....

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f land admeasuring 4379.10 m² in 2005 for ₹ 2304500/-. At page No. 62 of the paper book, he submitted details of investment in purchase of property. He has made an investment of ₹ 51,95,804/- and properties were converted into 64 small size plots out of which 18 plots have been sold and colony was developed by construction of road and electrification along with transformer installed therein. Therefore, it was a submission that property was purchased on 07/08/2004 andin 2005 whic .....

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way of plotting construction of road electrification, etc., therefore, assets cannot be said to be a business asset but it is a capital asset of the assessee. He further submitted that the very intention of assessee at the time of the purchase of asset is a relevant factor to decide whether itwas the stock in trade or the capital asset and in the purchase of these properties the intention of the assessee was to keep it for a very long time and develop them and then sell them off to maximize the .....

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and area soldis 149.43 square yards. Against sale consideration received by him he has incurred an expenditure of ₹ 1639142, comprising of selling expenses, development expenses of ₹ 953, 400/- and interest paid. Therefore, according to him, net consideration received is ₹ 3455161/- and out of which the indexed cost of acquisition was granted as deduction of ₹ 1620704/- resulting into the capital gain of ₹ 1834457/-. He further submitted that assessee does not maint .....

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s of lower authorities and submitted that assessee is a dealer in property and according to the remand report assessee is dealing in various properties which are listed at page No. 84 and 85 of the paper book and therefore it is clear that assessee was engaged in business in trading of purchase and sale of properties from A Y. 2008 - 09 to 2010 - 11. He vehemently argued that that the property was further developed to exploit commercially by the assessee and therefore the reasons given by the CI .....

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of those properties is to be seen, one of the characteristics of capital asset is satisfied. However, assessee has also dealt with in numerous properties, which are listed by the assessing officer in remand report based on the report of inspector. However, on looking at the details of the properties, it is apparent that some of the properties included by the assessing officer while holding that assessee has dealt with in numerous properties, he also included the property which is not owned by th .....

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n slum area and therefore assessee along with the co-owners planned to sell of the land in small pieces by developing it and therefore they developed it into a 64 plots. He submitted that the real development of the entire land was made during the period from March 2009 to March 2010 by way of constructing the guardroom, boundary wall, or filling on road, interlocking tiles, civil lines, water lines, boundary wall, fixing of electric line, steel pole and RCC poll. It was further stated that that .....

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the assessee, but the properties owned by the other person is also listed. Therefore, we are of the view that the finding of the assessing officer was not based on the list of properties purchased or owned by the assessee. It is also apparent that assessee has not shown any business income from the sale of stock in trade, which was stated to have been converted from the capital asset. If the assessee has converted capital asset into stock in trade in prior years, then part of the profit arising .....

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e these grounds of appeal to the file of the assessing officer to verify the facts and then to decide issue accordingly. That assessing officer shall afford proper opportunity to the assessee to substantiate its claim before deciding the issue on the merit. In the result,we allow ground No. 1 and 2 of the appeal of the assessee with above direction. 12. The third ground of appeal was against conformation of the disallowance of the development charges at ₹ 553400/-. It was noted that assess .....

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s arbitrarily restricted the disallowance to ₹ 553 400 /- where he should have allowed the complete expenditure of ₹ 9 53 400/- 14. Learned departmental representative relied on the orders of lower authorities and submitted that that CIT (A) has wrongly allowed the deduction of ₹ 4 lakhs also which is also the ground of the appeal of revenue. He submitted that as no details were filed for evidence of the expenses incurred deductioncould not be granted to the assessee. 15. We ha .....

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₹ 553 400/-did not give any reason for such bifurcation. It is also not apparent that even despite the assessee has not furnished the bills and vouchers related to these expenses under this head how he has come to the conclusion that ₹ 5 53 400 is disallowable. Therefore, as these expenses are related to the development of the above said property which has been dealt with by us in ground No. 1 and 2 of the appeal, We also set aside this ground of appeal to the file of the assessing o .....

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. 3 of the appeal is allowed. 16. The ground No. 4 of the appeal of the assessee is against not granting exemption under section 54F of the act at ₹ 1 041 914/- for purchase of the residential flat ignoring the provisions of section 45 (2) of the Act. 17. We have considered the rival contentions. However, the deduction under section 54F of the income tax act is allowable onlyif the assessee has earned any capital gain on sale of the property. No such deduction is allowable if the income is .....

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ection 54F of the income tax act after affording reasonable opportunity of hearing and to produce relevant evidence before him. In the result ground No. 4 of the appeal is allowed with above direction. 18. Ground No. 5 of the appeal is against the addition of ₹ 976805/- confirmed by the CIT (A) for the cash deposited in IDBI bank account of the assessee. During the course of assessment proceedings. It was found that the assessee has deposited ₹ 29,25,000/- in bank account maintained .....

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5/-and deleted the balance addition. Against this, assessee is in appeal before us. 19. Ld. AR submitted that that the assessee has assessee has deposited a sum of ₹ 28,35,000 in the IDBI bank account and for this amount source is cash withdrawal from syndicate bank of the assessee amounting to ₹ 34 lakhs. He submitted detailed chart showing the source of funds that has been withdrawn from the syndicate bank stating the amount of withdrawal, the date of withdrawal andlinked it with t .....

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s now being relied upon by the assessee was not before the assessing officer and therefore the source of depositing cash in IDBI bank account cannot be said to have been explained out of the withdrawal of the assessee from syndicate bank. It was further submitted that that the assessee himself accepted addition of peak deposit now, therefore assessee cannot contest this ground. 21. We have carefully considered the rival contentions. It is undisputed fact that amount of ₹ 29,25,000/- was re .....

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ls are available with the assessing officer. It was further submitted that though there is a deposit of more than 28 Lacs in cash the peak deposited never exceeded the ₹ 8 Lacs. Before the assessing officer assessee has further submitted a chart of deposited source of deposited wide letter dated 26th may 2012. However, AO has rejected all the contentions of the assessee and made an addition of ₹ 2925000/-. 22. Before us, appellant submitted a chart, which it is placed at paper book p .....

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credit is only an alternative argument and it was not the only contention of the assessee when it is submitted the detailed cash flow chart before lower Authorities.The particular chart either was not controverted by the assessing officer, CIT (A) or learned DR before us. In view of this, we are of the view that the addition of rupees, 976805/- confirmed by the CIT appeal is not proper and we reverse his findings on this count. In the result, we allow ground No. 5 of the appeal of the assessee. .....

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ssee has claimed to have incurred an expenditure of ₹ 45 lakhs on development of the properties, and out of that the claim of ₹ 953,400/- has been made. Learned CIT (A) out of the disallowance of ₹ 9 53 400/- allowed expenditure of Rs. Four lakhs and confirmed disallowance of ₹ 5 53 400/- Both the parties contested the respective aggrieved action of CIT appeal. We have already set aside Ground No. 1, 2 and 3 of the appeal of the assessee to the file of assessing officer f .....

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account of purchase of property in cash. 28. Learned departmental representative submitted that during the year, assessee has purchased the property of ₹ 19,62,400/- in cash and the assessee before the assessing officer did not substantiate the source of which. It was further submitted that the CIT (A) has deleted this addition holding that that appellant has received part of the cash from sale of plot and deleted the addition. 29. Learned AR relied on the orders of CIT appeal and submitt .....

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purpose of purchase of the property. Hence, he submitted that the addition made by the assessing officer because of purchase of property in cash may be deleted. 30. We have carefully considered the rival contentions. It is an admitted fact that assessee has purchased residential flat on 08/02/2010 for an investment of ₹ 1962400 in cash. For the purpose of availability of the cash assessee has shown that it is received ₹ 3863905/-as its source, which has derived from sale of plot bef .....

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in the bank account of the assessee. The brief facts of the cases that assessee has deposited ₹ 29,25,000/- in his account with IDBI bank Meerut. Before the assessing officer a chart was submitted but before the CIT (A) assessee submitted that the deposit has never exceeded ₹ 8 Lacs rupees, and, therefore, CIT (A) deleted the addition of ₹ 19,48,985/- and confirmed the addition of ₹ 9,76,805/-. 32. Rival parties stated that the above ground is interlinked with the ground .....

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on loans and advances givenby the assessee. The brief facts of the case of this disallowance are that during the course of assessment proceedings it was seen that the assessee has given loan to Sahil distributors of ₹ 1324500/- however, no interest has been charged on these loans. As per the record assessee has given interest on unsecured loan to various parties therefore the amount of ₹ 47,135/- was disallowed by the assessing officeron proportionate basis. On appeal before the CIT .....

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um of ₹ 13,24, 500/- to others without charging any interest and assessee is paying interest on other loans. Assessee has submittedstatement of affairs as on 31/03/2010where assessee has own fund of ₹ 49,51,036/-. Therefore, a presumption can be drawn that the amount that has been invested by the assessee in the interest-free advances given to some parties is out of the capital of the assessee, which is free of interest. Therefore, in view of the above, we confirm the action of the C .....

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