Income Tax Appellate Tribunal - Chandigarh
Ashok Kumar Aggarwal, Panchkula vs Dy.Commissioner Of Income Tax, ... on 29 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No.1225/Chd/2016
Assessment Year: 2012-13
Sh. Ashok Kumar Aggarwal Vs. The DCI T
House No. 931, Sector-8, Panchkula
Panchkula
PAN No. ABKPA9671N
(Assessee) (Respondent)
Assessee By : Sh. Amitoj Kamboj
Revenue By : Sm t. Chandrakanta
Date of hearing : 27/11/2017
Date of Pronouncement : 29/11/2017
ORDER
PER Dr. B.R.R. KUMAR A.M. This appeal has been filed by the assessee against the order of Ld. CIT(A), Panchkula dt. 26/09/2016.
2. The assessee has raised the following grounds of appeal:
1. That the Ld. CIT(A) has wrongly confirmed the addition of Rs. 47,41,133/- in the Sale Consideration shown in the Computation of capital gain of Land, ignoring the fact that the said transfer was of both land and building and the assessee have claimed the said consideration separately in the Building under the Block of Assets.
2. That the Ld. CIT(A) is wrong in directing the Ld. AO to recalculate the transfer expenses only based on Stamp duty charges paid and disallowing the other expenses claimed i.e. Land development charges being on account of cost of improvement and commission charges.
3. Brief facts of the case are that the assessee having income from proprietary business, capital gains and other sources, filed its return of income on 30.08.2012 declaring income of Rs.36,77,270/-. The AO completed the assessment u/s 143(3) at an income of Rs.85,95,740/- after making additions to the income on various accounts.
4. Ground No. 1 relates to the addition of Rs.47,41,133/- on account of sale consideration of land along with brick kiln.
5. The AO noted that the assessee had sold his land situated at Basma & Kheri on 13.09.2011 and 14.09.2011 and shown sale consideration in his 2 computation of income of Rs.28,10,031/-, Rs.24,66,336/- and Rs.5.83.500/-.
The AO asked the assessee to produce the copies of registered deeds.
6. The assessee could not produce the same. Thereafter, the copies of sale deeds were obtained from the office of Sub Registrar, Rajpura, Derabassi and Banur u/s 131 of the Act. The AO observed that the assessee had sold land at Kheri for Rs.61,31,000/- but the sale consideration was shown for Rs. 30,49,836/- (Rs. 24,66,336 + Rs. 5,83,500/-) only in his computation of income.
Another land at Basma was sold for Rs.44,700,000/- but the sale consideration was shown of Rs.28,10,031/-. In view of lower considerations shown for computation of income from capital gains, i.e. Rs.30,81,164/- for land of Kheri and Rs. 16,59,969/- for land at Basma, the AO asked the assessee to explain the discrepancies and produce evidences.
7. The assessee replied that the land sold consists of the brick kiln, tube well and tunnel kiln attached to it. AO noted that in none of the deeds, there was any mention of building on the said land.
8. After considering the reply filed by the assessee and on perusal of the sale deeds, the Assessing Officer held that, the sale deed specifically mentions the amount being paid for land and building separately. Moreover, the sale deed in which land and building are sold as a composite unit, clearly gives the description of the land and building separately. In the instant case, the sale deed had only description of the land, also the total amount of the -consideration tallied with the value of land as per collector rate. Therefore, the considerations in the sale deeds were only for the lands. The AO observed that the whole submission by the assessee was a device to evade payment of taxes. Accordingly, an addition of Rs.47,41,133/- was made to the returned income on account of difference in value of sale deeds and for computation of long term capital gains.
9. During the proceedings before the Ld. CIT(A) the assessee submitted that the addition was made due to the fact that the copies of the registries were not produced before the AO and computation of capital gain on the same was not provided. Whereas, the reason for not producing the copies of registries was of the fact that the assessee was not available in the city due to the loss of his mother in Ludhiana; at the time request for copies of registries were made i.e. around 20.03.2015.
3Even after mental and physical pressure of losing his mother, the assessee was able to provide the response of the discrepancies raised by the AO. The Ld. AO did not consider the agreement for computation of capital gain but gave emphasis on registry of land only. Further, the Ld. AO disapproved the computation of capital gain on the basis that there was no mention of sale of building under registry of land whereas the actual transfer of asset was through agreement between the parties.
10. Before the Ld. CIT(A) the assessee submitted that an agreement was made between AA Infra Developers (P) Ltd. (Buyer) and Sh. Ashok Kumar Aggarwal (Seller). Sh. AshokKumar Aggarwal was running business of manufacturing of bricks and sewerage pipe at Village Kheri Gurna, Punjab under the name and style of M/s A.A. Brick Company. On 05.09.2011, an agreement was made for transfer of industrial unit of M/s AA Brick co. consisting of building, plant & machinery and furniture alongwith land at Village Kheri Gurna and Basma to the buyer i.e. M/s A.A. Infra Developers Pvt. Ltd. The consideration of the industrial unit was fixed for Rs. 1,36,53,914/- for land, building, plant & machinery and furniture of the unit. The full value of consideration received to the assessee was Rs. 1,36,53,914/-. The total opening written down value of the industrial unit of M/s A. A. Brick Co. was Rs.77,94,047/- which was transferred and asset was reduced to zero. The total cost of purchase of land after indexation was Rs.45.78.281/-. Since the assets were reduced to zero, capital gain was computed as per section 50 and section 56 of the Act.
11. Before the Ld. CIT(A) the assessee further submitted that the AO gave preference to the sale deed between M/s AA Infra Developer (P) Ltd. and Sh. Ashok Kumar Aggarwal instead of the agreement. As per the Ld. AO the sale deed gives description of the land in question only. Since no information or description of building or machinery was provided in the sale deed; the same was assumed to be sold separately. The Ld. AO had thoroughly checked the consideration received and the same was of Rs. 1,36.54,914/- for the industrial unit by M/s AA Infra Developers (P) Ltd. as per the agreement between the parties.
12. The assessee contended that the land and building are part of each other, the same should be considered while computing income. Further, there will be no difference in computation of capital gain, had the amount of Rs. 1.06,01,000/- may be considered for only land, since the loss 4 on building will be set off with the gain on sale of land. The assessee contended that the AO was not justified in taking the option of the sale deed, but not considering the loss on sale of building was not justified.
13. The Ld. CIT(A) in his adjudication held that the copies of sale deeds for land at Village Kheri and Basma were not produced and the assessee has not declared the actual sale consideration as per the deeds. The sale considerations for land at Kheri was Rs.61,31,000/- and for land at Basma for Rs.44,70,000/- instead of the sale considerations of Rs.30,49,836/- (24,66,336 + 5,83,500) and Rs.28,10,031/-respectively as shown in the computation of income. The Ld. CIT(A) held that the assessee has submitted that the industrial unit owned as proprietary business, M/s A.A. Brick Company was sold to A.A. Infra Developers Pvt. Ltd. where the assessee himself is promoter of the company.
14. The order of the Ld. CIT(A) while confirming the order of the Assessing Officer states as under:
The assets including building, machinery, furniture as per written down value (WDV) were sold as per agreement for a full value of consideration of Rs. 1,36,53,914/-. The assessee has computed a capital gain on such sale by taking the value of consideration as per agreement. However, the sale of blocks of assets does not fall under capital gain rather any profit derived on such sale is considered as taxable profit and added to the income. Moreover, there are separate registrations for sale deed of land where the amount of sale considerations are mentioned. The assessee himself has shown capital gains on sale of such lands in its computation of income separately for sale of each piece of land. So, it is clear that the sale of land will not fall in sale of assets as per block of assets shown in the balance sheet. There is liability of capital gain on sale of lands which has also been considered in the . computation of income filed alongwith the return. However, the assessee has wrongly shown the sale consideration for the computation of capital gain. Before the AO. the plea was taken that the sale consideration including land and building which the AO has clearly found that as per sale deed there is no sale of building. The AO's observation is also correct that land and building are sold as composite unit whereas the sale deeds depict only sale of land. Since, the assessee has not shown the entire value of sale considerations on sale of such lands, therefore, I do not find any reason to differ with the finding of the AO.
Hence, the addition of Rs.47,41,133/- made by the AO is confirmed.
15. Before us the Ld. AR relied on the arguments taken before the Ld. CIT(A) while the Ld. DR relied heavily on the order of the lower authorities.
16. We have gone through the entire material placed before us. There has been a difference in the stand taken by the Assessing Officer in determining the capital gain. The capital gain was calculated solely based on the value of the land as per the collector rate. Similarly, the emphasis given on the sale deed only without taking into consideration the plant and machinery, brick kiln situated in the land. Hence, the matter is being referred back to the file of the Assessing Officer for 5 verification and computation of capital gains after taking the valuation of land & building together as a composite unit. Therefore, this ground of appeal is treated as set aside.
17. In the result, appeal of the assessee is allowed for statistical purposes.
18. Ground No. 2 relates to addition of Rs.18,19,128/- on account of transfer expenditure.
19. During assessment proceedings, the AO noted that the assessee had claimed transfer expenses in the cost of acquisition of the properties sold by him during the year under consideration. The AO asked the assessee to justify the transfer expenses claimed that were incurred at the time of purchase of property. The assessee filed its reply which is reproduced in para 3 of the assessment order. After considering the submission filed by the assessee. the AO observed that the assessee has not given any detail of the expenses alongwith the documentary evidences. The expenses claimed by the assessee were found to be on the higher side i.e. the land at Kheri was purchased on 12.12.2000 for Rs.3.25,000/- on which assessee claims to have incurred sum of Rs.2.10.000/- as transfer expenses similarly the land at Basma was purchased on 16.08.2005 for Rs. 1,50,000/- on which the assessee claims to have incurred of Rs. 1,45.000/- as transfer expenses. As the assessee failed to give any documentary evidence, the expenses claimed by the assessee were restricted to 30% of the expenses claimed and rest 70% were disallowed.
20. During appellate proceedings, before the Ld. CIT(A) the assessee submitted that the documentary evidence on the transfer expenses was asked vide order sheet entry dated 20.03.2015. The documentary evidences were not provided as the assessee was out of city. The details of expenses alongwith copies of two receipts were submitted at the appellate stage. The expenses of purchase in land included stamp duty charges, commission payment, land leveling/maintenance charges. The expenses at Village Gharaunda were paid to Sh. Raj beer Singh and the expenses at Village Kheri Gurna and Village Basma were paid to Sh. Swarn Singh. The assessee further submitted that these expenses were related to acquisition of capital asset and the same were part of cost of acquisition.
621. The Ld. CIT(A) has directed to re-compute the disallowance after giving benefit only on claim of stamp duty charges and not on any estimation basis.
22. Before us the Ld. AR relied on the arguments taken before the Ld. CIT(A) while the Ld. DR relied on the order of the lower authorities.
23. We have gone through the material placed before us. The assessee has submitted details of transfer expenses in the form of stamp duty, commission, land development and misc. expenses from the periods from 1999 to 2011. Since the stamp duty is statutory expense and a certain percentage of commission varying from 1% to 2% on land deals is also a normal trend in the land deals, the same may be given benefit of. Regarding the land development and other misc. expenses the matter is being sent back to the file of the Assessing Officer to give an opportunity to the assessee to submit any documentary evidences or proof thereof and allow reasonable expenditure based on the evidences submitted.
24. In the result appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court.
Sd/- Sd/- (SANJAY GARG) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 29/11/2017 AG
Copy to: The Assessee, The Respondent, The CIT, The CIT(A), The DR