TaxTMI 
TaxTMI 
2021 (3) TMI 517
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 41,80,000/-, thus, in making and sustaining addition of Rs. 88,97,000/- (1,30,77,000 - 41,80,000) U/s. 68 as investment in purchase of property from undisclosed sources. 3. That under the facts and circumstances, both the lower authorities erred in law and on merits in not accepting that the assessee has been into real estate business also and in rejecting the books of accounts for real estate business. Consequently, erred in not accepting the real estate P & L a/c. showing sale of Indirapuram property at Rs. 1,31,00,000/- as a business receipt and further erred in treating the Indirapuram property as Capital Asset and consequently calculating Short Term Capital Gain (STCG) at Rs. 80,04,500/- (1,31,00,000 - 50,95,500). 4. That under the facts and circumstances, both the lower authorities erred in law as well as on merits in not allowing the loss of Rs. 70 lacs suffered on account of forfeiture of advance given against Panipat property and also erred in not treating it as business loss. 5. That without prejudice to G.N. 4, alternatively, the loss of Rs. 70 lacs should have been allowed as short term capital loss eligible for setting off against any sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e year. There is overwriting also in respect of telephone number. Thus the overwriting cannot be by any departmental person. This shows that the cause of overwriting is not manipulation or due to shaking of hand of the writer but due to some problem with the pen or lack of proper base or due to nervousness at the time of receipt of notice Without prejudice to above provisions of Section 292BB was introduced w.e.f. 1-4-2008 , according to which, where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. Where the assessee has raised objection regarding issue of notice before the completion of such assessment or reassessment, the provisions contained u/s 292BB will not be applied. Sinc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee himself Now, if we see this notice, the date of "01.10.11" has been interpolated as "30.09.11" There is no dispute that signatures, the time as 2 PM and the telephone no. are in the handwriting of assessee himself The numericals "0", "1" & "9" are common in the date and telephone no. It will be noticed that the manuscript of these 03 numericals in the date and in the telephone no. are clearly not of the same person being interpolated / overwritten subsequently with shaken hands There is no shivering in the hands of the assessee while writing as is apparent from his signatures, the time put and the telephone no. put by assessee himself There was no reason for the assessee to do overwriting on the date of service while there existed a strong reason for the A.O. for overwriting, for showing the service in time Even in the complete order sheet taken through RTI there is no mention of any service of notice on 30.09.11 Had the service being there on 30.09.11, there was no reason for the assessee to put the time of receipt of notice as "2 PM" Had the service took place on 30.09.11 by hand, there was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In the notice, the date of receiving is clearly mentioned below the signature of the assessee which is 30.09.2011, though there is overwriting. But to allege that it was done by AO or any staff and to establish it as matter a fact that any interpolation or mischief has been done is difficult to accept. If the assessee is making any charge of interpolation then he should have then asked for forensic examination. Under these circumstances, the benefit of doubt cannot be given to the assessee. Accordingly, we hold that notice was served on to the assessee on 30.9.2011. Accordingly ground No. 1 is dismissed. 6. Now coming to issue of addition of Rs. 88,97,333/- made u/s 68 and also other grounds, the facts in brief are that as per AIR details, it was found that assessee has purchased property bearing Hall No.3 & 4 Ground floor, under Block No. A & B, Gaur Gravity, Gaur Green city, Plot No. 8, Vaibhav Khand, Indrapuram, Ghaziabad. Information was also sought by the AO u/s 133(6) from the Sub Registrar, Ghaziabad, wherein it was intimated that the sale consideration of the said property was Rs. 41,80,000/- and the value as per Stamp Valuation Authority was Rs. 1,30,77,000/. The assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hereafter, the AO rejected the assessee's revised claim of doing the property business and net loss claim in such property business. After detailed reasoning, AO held that there was a short term capital gain on the sale of property, because the assessee has shown purchase at Rs. 50,95,500/- and sold the property at Rs. 1,31,00,000/- and therefore, the difference of Rs. 80,04,500/- is a short term capital gain and not business income. Since he had already made the addition of Rs. 88,97,000/- on account of addition u/s 68 being a difference amount in purchase and sale consideration, therefore, he did not added separately the short term capital gain of Rs. 88,04,500/- as it relate to the same transaction. 9. AO again disallowed the loss of Rs. 70,00,000/- claimed on the forfeited advance given for purchase of property at Panipat on the ground that the agreement with these two ladies was made on Rs. 100 stamp paper, because, neither the date was mentioned on which these stamp papers were purchased nor the date on which these two agreements were executed were made available. He had also sent notices u/s 133(6) from both the ladies. In response the two ladies have confirmed to have re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ginder Pal as bayana 2. Original copy of agreement with Sh. Joginder Pal as he was the buyer. 3. No formal cancelation deed was executed. It was treated as canceled as on 31.03.2010, as it was written in the Agreement itself. The bayana amount of Rs. 35 lacs was forfeited, as Sh. Joginder Pal did not make further payments, and did not appear for getting land registered in his name on the due date. 4. The said property is still, in our possession as it is owned by us. Copy of the ownership documents are filed. 5. Copy of lTR of A. Y. 2010 -2011 & 2011 - 2012 are filed 6. As the summons dtd. 30.09.2014 for 09.10.2014 have been received on 08.10.2014 and there are already some pre - engagements, therefore, appearance cannot be made on 09.10.2014. We had filed letter earlier and now we are sending details as required by your goodself." 12. In sums and substance the Ld. CIT(A) after considering the entire facts has disallowed the adjustment of loss of Rs. 70,00,000/- and the claim of business loss in the following manner :- "The property transaction entered into by the appellant during the year in respect of Indrapuram property an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y by the seller is a capital loss. In CIT vs. Jaipur Mineral Develop Syndicate (1995) 216 ITR 469 (Raj), it was held that if the payment is made for the purpose of acquiring a capital asset, the amount lost upon forfeiture will not be considered as revenue loss though the amount may not have the same consequence or character in the hands of the recipient or beneficiary. Thus even in that case the amount of difference between the purchase and sale price of the Indrapuram Property would be taxable income in the hands of the appellant. The Assessing Officer has further made an addition of Rs. 88,97,000/- under section 68, without prejudice to the above addition by invoking section 68 in respect of cash payment made in purchase of Indrapuram property on the basis of Circle Rate applicable for the area. The perusal of the facts of the case show that the appellant has himself shown a rise of 300% in the value of the property from a purchase price of Rs. 41,80,000/-. to a sale price of Rs. Rs. 1,31,00,000/- within the same year. In any market in any area under any conditions this is impossible. Though the provisions of Section 50C are not applicable in case of a purchaser however....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e business in this year. - Indirapuram property was purchased on 11.08.09 for Rs. 50,95,500/-, expenditure of Rs. 7,63,000/- incurred on alterations and constructions and thereafter sold on 27.01.10 for Rs. 1,31,000/- vide registered sale deed. - One more real estate business transaction also took place in this year for which G. No.4 & 5 have been taken separately. - The A.O., however noted that no tax audit report was furnished in respect of this business and no P&L was filed alongwith the return. - The ITR was filed on 29.09.10, however after filing the ITR, the counsel was informed of this independent business activity started in this year. - On advice of counsel, the A/c of real estate business were audited vide audit report Dtd.30.09.10 and audit report, audited financial A/c and computation of income were filed to the A.O. during asstt. However, since the net result of this business was Rs.(-)1695/-, therefore it was not creating any tax liability, hence as per the advice of counsel, no revised return was filed. - During asstt., audited bal. sheet, audited report and computation of income of real estate business were filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The assessee might have incurred expenditure on the improvement of the property before the sale of Rs. 7,63,000/-, but that does not mean it is some kind of business expenditure related to the property business. At the most it could be treated as an improvement after the acquisition of the capital asset for which benefit of indexation can be given while computing the capital gain. Accordingly, we confirm the finding of the AO and Ld. CIT (A) that the purchase and sale of property has to be treated as short term capital gain. 17. However, as pointed out by the Ld. Counsel the benefit of improvement of Rs. 7,63,000/- has not been given. This issue has not been discussed by the AO. Therefore, AO needs to verify and examine the cost of improvement. Accordingly, we hold that sale of Indirapuram property is to be taxed under the head short term capital gain and not under the head business income. However, the computation of short term capital gain would be done by the AO after taking in to consideration any cost of improvement if the assessee provides the details. 18. Lastly, coming to the claim of loss of Rs. 70,00,000/- of forfeiture of advance given for purchase of property of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loss as we have already held above that assessee was not into the business of dealing in property. But certainly this loss is on account of capital loss, because the money was advanced for purchase of a capital asset and as per the agreement, the assessee got a vested right on the said property after the payment of advance. Further, there was a stipulation that if the entire amount is not paid then the advance amount would be forfeited. Right to acquire property is a capital asset and when the said right got extinguished due to cancellation of agreement and amount got forfeited, and then certainly it is a capital loss. In such a case, short term capital loss is to be set off against short term capital gain within the same year in terms of section 70(2) of the Act and accordingly, we direct the AO to allow the loss of Rs. 70,00,000/- from short term capital gain as directed above. 21. Accordingly ground No. 2 is allowed; ground No. 3 is partly allowed as we have treated the gain as short term capital gain; ground No. 4 is dismissed; whereas ground No. 5 which is alternative ground which is allowed. 22. Now coming to the presumption of net profit of Rs. 54,291/- by presuming th....