2010 (8) TMI 669 - AT - Income Tax

Addition - Capital gain - Agricultural land or capital assets - Assessment u/s 143(3) - Delivery of notice u/s 143(2) - service of notice - The Assessing Officer is expected only to serve notice on the address given in the return of income as the assessment proceedings, if initiated, are to be initiated only at the address given in the return of income unless it is shown that any application for change of address later on was filed. There is no such application filed by the assessee intimating that there was any change of address at the relevant time. - Notice were delivered at address mentioned in the ITR were in time through returned - Assessment u/s 143(3) valid. Sale and purchase of plot - CIT(A) has deleted the addition of Rs. 15,50,000 on the ground that the said transaction was in the nature of purchase and transfer of capital asset by Shri K.S. Gupta and not by the assessee. - Held that - The transaction was owned by the assessee which was entered into by her through her power of attorney holder. The payments were made by the assessee and the resultant profit was also declared by her in her return of income. The questions which were to be decided by ld. CIT(A) were whether the said income which has been shown by the assessee of a sum of Rs. 50,000 was assessable as business income or it was liable for tax under the head Capital gain . Secondly, whether the provisions of section 50C were applicable or not? ld. CIT(A) has also held that provisions of section 50C are not applicable on the assessee as the name of the assessee did not appear in the revenue record. Applicability of section 50C - Held that - if the assessee claims that the value adopted for stamp valuation purposes is in excess of fair market value of the property, then, he may request to the Assessing Officer for the valuation of the said land from the valuation officer and the procedure laid down in section 50C is required to be adopted. In our considered opinion, the case of the assessee falls within the purview of section 50C as the consideration received by the assessee as a result of transfer of the said land is less than the value adopted or assessed by the stamp valuation authority. Business income or short term capital gain - held that - it has never been shown that the sale and purchase of the property carried on by the assessee was in the nature of business. Therefore, we hold that the said transaction is liable for capital gain.

Summary

Issues Involved:
1. Non-service of notice under section 143(2) of the Income-tax Act, 1961.
2. Classification of income from the sale of a plot as business income or short-term capital gain.
3. Applicability of section 50C of the Income-tax Act, 1961.

Detailed Analysis:

1. Non-service of Notice under Section 143(2):
The assessee claimed that no notice under section 143(2) was served within the prescribed period, rendering the assessment order invalid. The assessee supported this claim with an affidavit stating that the notice was never received. The revenue contended that the notice was served by affixture, which is a proper service method. The Tribunal examined the assessment records and found that the notice was sent to the address provided by the assessee in her tax return and was served by affixture within the prescribed time. The Tribunal concluded that the Assessing Officer took timely steps to serve the notice and rejected the assessee's claim of non-service.

2. Classification of Income:
The assessee argued that the profit from the sale of the plot should be classified as business income, not short-term capital gain. The revenue contended that the land was an urban land, thus a capital asset, and the profit should be taxed as short-term capital gain. The Tribunal noted that the assessee had treated the transaction as a business transaction in her return of income. However, the Tribunal held that the transaction was liable for capital gain as it was not shown that the sale and purchase of the property were in the nature of business.

3. Applicability of Section 50C:
The revenue argued that section 50C was applicable as the land was an urban land, and the sale consideration was less than the value adopted for stamp duty purposes. The assessee contended that section 50C was not applicable because she was not the direct owner of the land. The Tribunal found that the assessee had made the payment for the land and received the sale consideration, thus treating herself as the owner. The Tribunal held that section 50C was applicable as the consideration received was less than the value adopted by the stamp valuation authority. The Tribunal also noted that the assessee could request a valuation from the valuation officer if she believed the stamp valuation exceeded the fair market value.

Conclusion:
The Tribunal allowed the revenue's appeal for statistical purposes, permitting the assessee to show that the stamp valuation exceeded the fair market value. The Cross Objection filed by the assessee was dismissed. The Tribunal directed the Assessing Officer to refer the issue to the valuation officer if the assessee raised objections and to assess the capital gain accordingly.