TaxTMI 
TaxTMI 
2020 (8) TMI 94
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....fore AO and that the assessee has also shown land/plots as investments and there are no developmental expenses as such debited/claimed in the year." "The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing." 2. Due to the prevailing situation of COVID 19 pandemic, the hearing of the appeal was concluded through Video Conference. The assessee is a HUF engaged in the business of real estate and developers. The assessee filed its return of income on 27.08.2015 declaring loss of Rs. 51,44,443/-. During the course of assessment proceedings, the AO noted that the assessee has purchased some immovable properties during the year under consideration and the consideration shown by the assessee is less than the value for stamp duty purpose. Therefore, the AO proposed to make the addition under section 56(2)(vii) of the IT Act on account of difference between the purchase price shown by the assessee and the DLC rate of the land in the area. The AO finally made an addition of Rs. 3,15,70,809/- under section 56(2)(vii) of the Act, apart from disallowance of interest expenses which is the issue involved in the Cross Objection filed by the ass....
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....sset. Thus the LD. CIT D/R has contended that this is an after-thought stand taken by the assessee that the lands in question are stock-in-trade and not capital asset. He has further submitted that even otherwise in the subsequent year the assessee has returned these lands to the seller and claimed that the transaction is cancelled. Therefore, these are not a genuine transaction but only a paper transaction to divert the fund to the sellers who are related party. Thus the LD. CIT D/R has submitted that once the assessee has not disputed the applicability of provisions of section 56(2)(vii) during the assessment proceedings, then the said objection raised before the LD. CIT (A) cannot be accepted. Hence the LD. CIT (A) has committed an error while deleting the addition by accepting the objection raised by the assessee. He has relied upon the order of the A.O. 4. On the other hand, the ld. A/R of the assessee has submitted that the assessee has filed all the documents before the AO including the books of account, copy of purchase account which tallies with the figures shown in the trading account. In Schedule-G of the Balance Sheet, these plots of lands are shown as part of the cl....
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....nt. Thus the ld. A/R has submitted that the legal proposition on this issue is even accepted by the department as clarified by the CBDT in the said circular and, therefore, the LD. CIT (A) has rightly deleted the addition made by the AO under section 56(2)(vii) of the Act. In support of the contention, he has relied upon the following decisions :- 1. Shri Satendra Koushik C/o M/s. S.S. Properties vs. ITO in ITA No. 392/JP/2019 order dated 23.04.2019. 2. Mubarak Gafur Korabu Malewadi-Akluj Tal Malshiras vs. ITO In ITA No. 752/PUN/2018 order dated 05/04/2019. 3. Shri Prem Chand Jain vs. ACIT in ITA No. 98/JP/2019 order dated 08.06.2020. 5. We have considered the rival submissions as well as the relevant material on record. The dispute in the revenue's appeal is regarding the addition made by the AO under section 56(2)(vii) on account of difference of purchase price shown by the assessee and the DLC rate of the land in the respective area. In the assessment order, the AO has simply applied the DLC rate without even examining the issue whether the provisions of section 56(2)(vii) of the Act are applicable or not in respect of the property which is in th....
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....oceedings due opportunity was provided to the assessee for filing reply/explanation which was not availed. However, without prejudice to the above, considering the submissions filed during appellate proceedings, it is seen that: 1. The addition u/s 56(2) of the IT Act, 1961 was made in the assessment order after verification of DLC rate of the area of the land in question which is situated at GH-6, GH-7, GH-9 & GH-10 Shri Ram Vatika, Rampura Bass, Sanganer, Jaipur having total area of 20,239.65 Sq. Yards from the Sub-registrar, Sanganer vide its report dated 28.11.2017(copy enclosed). Thus the assessee's contention that no such verification of DLC rate was made is not a matter of fact and even not supported with evidence. Thus as per the provisions of section 56(2)(vii)(b)(ii) of the IT Act, 1961, the property in question was purchased in less than the stamp duty value of the property, thus the difference amount of Rs. 3,03,50,970/- was considered as deemed gift/ income from other sources in the hand of the assessee. 2. The assessee vide his letter dated 08.04.2019 has claimed the property in question is a part of stock in trade, thus as per ....
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....ng incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- ^65[(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 ^66[but before the 1st day of April, 2017],- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; ^67[(b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a....
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....s may be prescribed^69; (c) "jewellery" shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2; (d) "property" ^70[means the following capital asset of the assessee, namely:-] (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; ^71[***] (viii) any work of art; ^72[or] ^72[(ix) bullion;] ^73[(e) "relative" means,- (i) in case of an individual- (A) spouse of the individual; (B) brother or sister of the individual; (C) brother or sister of the spouse of the individual; (D) brother or sister of either of the parents of the individual; (E) any lineal ascendant or descendant of the individual; (F) any lineal ascendant or descendant of the spouse of the individual; (G) spouse of the person referred to in items (B) to (F); and (ii) in case of a Hindu undivided family, any member thereof;] (f) "stamp duty value" means the....
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....Current Assets, the assessee has shown the inventories/closing stock of Rs. 5,58,06,126/- which included the cost of acquisition of these 4 (four) Group Housing Plots. This Tribunal has considered this issue in various decisions as relied upon by the ld. A/R of the assessee and this Bench in the case of Shri Prem Chand Jain vs. ACIT (supra), the Tribunal has again considered this issue as under :- " 16. We have heard the rival contentions and perused the material available on record. The relevant provisions of section 56(2)(vii)(b) which are under consideration read as under: "(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty va....
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.... or (h) by way of transaction not regarded as transfer under clause (vicb) or clause (vid) or clause (vii) of section 47. Explanation.-For the purposes of this clause,- (a) "assessable" shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C; (b) "fair market value" of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed; (c) "jewellery" shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2; (d) "property" means the following capital asset of the assessee, namely:- (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; or (ix) bullion; (e) "relative" means,- (i) in case of an individual- (A) spouse of the individual; (B) brother or sister of the individual; (C) brother or sister of the spouse of the individual; ....
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....oveable property. Further, provisions of section 56(2)(vii)(c) refers to any property, other than an immovable property. The meaning of the term "property" has been provided in Explanation (d) to section 56(2)(vii) where the term "property" has been defined to mean capital asset of the assessee namely immoveable property being land or building or both. It has been contended by the ld AR that all immovable properties of any nature are not covered in the definition of property. Only those immovable properties which are held as capital assets and is in nature of land or building or both are only covered u/s 56(2)(vii). We agree with the contention of the ld AR that where the term "property" has been defined to mean a capital asset as so specified and where an immoveable property as so specified being land, building or both is not held as an capital asset, it will not be subject to the provisions of section 56(2)(vii)(b) of the Act. In the instant case, therefore, where the agricultural land doesn't qualify as falling in the definition of capital asset, provisions of section 56(2)(vii)(b) cannot be invoked. 20. In the instant case, whether agriculture land so acquired falls in....
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....) of the Act, the matter should have been referred by the Assessing Officer to the DVO for determination of fair market value. Therefore, in the instant case, where it is so determined by the Assessing officer that the agricultural land so acquired falls in the definition of capital asset, he has to refer the matter to DVO to further determine the fair market value of the two plots of agricultural land and thereafter, decide the matter afresh. 23. The matter is accordingly set-aside to the file of the AO who shall decide the same as per the aforesaid directions after providing reasonable opportunity to the assessee." Therefore, in the facts and circumstances of the case when the properties in question are undisputedly shown in the books of account of the assessee as stock-in-trade and part of the closing stock, then the same would not fall in the ambit of the property as defined in explanation to section 56(2)(vii) of the Act and consequently the provisions of section 56(2)(vii) will not be applicable in the case of the assessee. Hence we do not find any error or illegality in the impugned order of the ld. LD. CIT (A). 5.1. As regards the contention of the L....
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....Pvt. Ltd. and these two parties are covered under section 40A(2)(b) of the Act, therefore, assessee was in a position to make arrangement with them and hence it is only a device to divert the interest bearing funds to the related party. 8. Before us, the ld. A/R of the assessee has submitted that as regards the advance given to M/s. Triveni Land Mark Pvt. Ltd., the said amount was given in the month of March, 2015 itself and that too for the purpose of purchase of Group Housing Plots in the Scheme Shree Ram Vatika. The ld. A/R has referred to the agreement and submitted that the assessee deducted TDS of Rs. 4,20,000/- under section 194 IA of the Act on this advance payment. The subsequent cancellation of the deal in the next year subject to the compensation of Rs. 10,00,000/- cannot be doubted. Thus the ld. A/R has submitted that the assessee was compensated Rs. 10,00,000/- on account of cancellation. He has referred to the ledger copy at page 73 of the paper book and submitted that this amount of Rs. 10,00,000/- received on account of cancellation of agreement was duly offered to tax in the next year. Since the advance was given for purchase of the property which is stock-in-tr....
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....ef was granted by the LD. CIT (A) to the assessee. 10. We have considered the rival submissions as well as the relevant material on record. Though the AO and LD. CIT (A) has considered M/s. Taj Raj Cold Storage Pvt. Ltd. as a related party covered under section 40A(2)(b) of the Act, however, the assessee has pointed out that this is not a related party and covered under section 40A(2)(b) as none of the conditions provided for related party or specified person are satisfied. Without going into the controversy of commercial transaction as well as the related party transaction, at the outset we note that the interest expenditure debited by the assessee in the Profit & Loss account is towards the secured loans and, therefore, it is unlikely to use the secured loans other than the purposes for which the loan was taken. Further, as per the Balance Sheet, assessee is having Rs. 7.66 crores as interest free loans under the head Unsecured Loan from the Karta of the HUF and member of the HUF, the details of which are as under :- Name of creditor Amount Ashok Agarwal 7,64,88,029.50 Renu Agarwal 1,26,702.50 Total : 7,66,14,732.00 Once the unsecured interest free l....