Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (7) TMI 39 - AT - Income TaxIssues Involved: 1. Deletion of addition of Rs. 5,39,15,000/- made under section 28(iv) of the Income Tax Act. 2. Deletion of addition of Rs. 10,32,40,650/- for alleged unexplained investment in Rupam Tower. 3. Allowance of deduction under section 54F of the Income Tax Act. 4. Allowance of deduction under section 54 of the Income Tax Act. 5. Jurisdiction of the Assessing Officer over the assessee's case. Detailed Analysis: 1. Deletion of Addition of Rs. 5,39,15,000/- under Section 28(iv): The Assessing Officer (AO) treated the assessee's receipt of seven flats from a development agreement as business income under section 28(iv) of the Income Tax Act, valuing them at Rs. 5,39,15,000/- based on the circle rate. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the assessee was not engaged in a business activity but merely transferred land to a developer in exchange for flats, thus attracting capital gains tax rather than business income. The CIT(A) found that the original agreement dated 28/04/2010 was not acted upon, and the subsequent agreement dated 09/06/2011 with M/s. KHPL was the operative one. The CIT(A) concluded that the transaction was not a business venture but a capital asset transfer, entitling the assessee to capital gains treatment. The Tribunal upheld this finding, confirming that the transaction should be taxed under capital gains provisions. 2. Deletion of Addition of Rs. 10,32,40,650/- for Alleged Unexplained Investment in Rupam Tower: The AO added Rs. 10,32,40,650/- as unexplained investment in Rupam Tower, valuing the construction cost at the circle rate. The CIT(A) deleted this addition, accepting the assessee's valuation report from a registered valuer, which estimated the construction cost at Rs. 1,66,25,000/-. The CIT(A) noted that the AO did not conduct any inquiry or refer the valuation to the District Valuation Officer (DVO) and relied solely on the circle rate, which is not a basis for determining construction costs. The Tribunal upheld the CIT(A)'s decision, finding that the AO's valuation was speculative and unsupported by evidence. The Tribunal accepted the registered valuer's report and the assessee's financial records, which showed the source of funds for the construction. 3. Allowance of Deduction under Section 54F: The AO denied the assessee's claim for deduction under section 54F, treating the transaction as business income. The CIT(A) allowed the deduction, holding that the assessee was entitled to exemption for the long-term capital gains arising from the transfer of land in exchange for flats. The CIT(A) relied on the Delhi High Court's judgment in Geeta Duggal (357 ITR 153), which interpreted "a residential house" to include multiple units received as part of a single residential property. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was entitled to the deduction under section 54F for the investment in the residential flats received from the developer. 4. Allowance of Deduction under Section 54: The AO denied the deduction under section 54 for the investment in the residential portion of Rupam Tower. The CIT(A) allowed the deduction, accepting the assessee's claim that the investment in the fifth floor of Rupam Tower was for residential purposes. The CIT(A) relied on the registered valuer's report and the assessee's financial records to determine the cost of construction. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was entitled to the deduction under section 54 for the investment in the residential portion of Rupam Tower. 5. Jurisdiction of the Assessing Officer: The assessee challenged the jurisdiction of the AO, claiming that the AO did not have authority over the case. The Tribunal found no merit in this ground, noting that the AO acted within the limited scrutiny criteria, and the additions made were related to the reasons for selecting the case for scrutiny. Conclusion: The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s findings on all issues. The cross-objection filed by the assessee was partly allowed, with the Tribunal dismissing the challenge to the AO's jurisdiction. The Tribunal's decision emphasized the importance of proper valuation and adherence to capital gains provisions in property development transactions.
|