2014 (2) TMI 417 - AT - Income Tax

Applicability of section 50C of the Act Deletion made u/s 50C of the Act - Nature of income Business OR capital gain Sale of flat Held that - The decision for the same assessee in earlier years followed - No addition can be sustained in the case, as neither there is any investigation whatsoever made by the assessing officer nor was any evidence gathered by him - Merely because the market value as per the stamp valuation authorities and the said price are at variance, no addition can be made to the business income - The AO neither found any defects in the books of account nor has rejected the same - provisions of section 50C are not applicable to cases where income is computed under the heads Profits and Gains under business or Profession Decided against Revenue.

Summary

Issues:
1. Whether the CIT(A) was justified in directing the AO to delete the addition of Rs.26,18,410/- holding that the sale of the flats is treated as business income and not as capital gain?
2. Whether the CIT(A) was justified in directing the AO to delete the addition without appreciating the application of section 50C of the IT Act?

Analysis:

Issue 1:
The Department appealed against the order of the ld. CIT(A)-IX, Mumbai for the assessment year 2009-10, concerning the addition of Rs.26,18,410/- to the total income of the assessee. The AO contended that the sale price of the flats should not be less than the Stamp Duty Valuation due to the prime location in Mumbai. The AO treated the difference between the sale value and the Stamp Duty Valuation as concealed income. The assessee argued that Section 50C of the Income Tax Act, which deals with capital gains computation, should not be applied to business income earned from selling flats. The ld. CIT(A) allowed the appeal, citing precedents and the absence of evidence supporting the addition.

Issue 2:
The Department challenged the CIT(A)'s decision, arguing that the AO used Section 50C as the basis for determining the sale consideration price. The ld. CIT(A) relied on the Tribunal's previous decisions in the assessee's cases for the assessment years 2006-07 and 2007-08, where it was held that no addition could be made without proper investigation or evidence supporting a higher sale consideration. The Tribunal confirmed the ld. CIT(A)'s order, emphasizing the similarity of facts and decisions in the present case with the previous rulings.

In conclusion, the Tribunal dismissed the Department's appeal, upholding the ld. CIT(A)'s decision to delete the addition of Rs.26,18,410/- as business income from the sale of flats, not subject to Section 50C. The Tribunal found the issue covered by previous decisions and affirmed the order based on consistent legal interpretations.