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TMI Blog2023 (3) TMI 1139X X X X Extracts X X X X X X X X Extracts X X X X ..... Observations of the AO is nothing but suspicion and surmise, but not backed by any evidence. On the other hand, the evidences filed by the assessee clearly suggests that the impugned property sold for the assessment year is a stock in trade and profit derived from transfer of property is assessable under the head profit and gains from business or profession. AO and the CIT(A) completely erred in assessing profit derived from transfer of property under the head capital gains. Application of provisions of section 50C - In this case, what was transferred by the assessee is a stock in trade, but not a capital asset. Therefore, we are of the considered view that provisions of section 50C cannot be applied when asset transferred is not a capital asset. Thus, we are of the considered view that the AO and CIT(A) erred in applying provisions of section 50C of the Act and determination of full value consideration to compute short term capital gains from transfer of property. Thus, we direct the AO to delete additions made towards computation of short term capital gains from transfer of property. Appeal filed by the assessee is allowed. - ITA No.: 1634/Chny/2019 - - - Dated:- 8-3-2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, during the course of hearings, it is prayed that the Honourable Commissioner of Income Tax (Appeals) may be pleased to grant suitable relief after considering all the evidences and explanations that the Assessee could produce before the Honourable Commissioner of Income Tax (Appeals), during the course of hearing.on appeals, on the issues raised in the Assessment Order concerned. 3. The brief facts of the case are that, the assessee did not file his return of income for the assessment year 2007-08, u/s. 139(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). The assessment has been reopened u/s. 147 of the Act, for the reasons recorded as per which income chargeable to tax has been escaped assessment on account of nondisclosure of capital gains from sale of property and thus, notice u/s. 148 of the Act, dated 05.03.2013 was issued. In response to the notice, the assessee filed return of income on 07.02.2014, declaring total income of Rs. 1,39,420/-. The case was selected for scrutiny and during the course of assessment proceedings, the AO noted that the assessee has sold a property in financial year relevant to assessment year 2007-08, for a consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Sub-registrar. The property conveyed does not include any building. It is only a vacant land. Having accepted the valuation determined by the Sub-registrar at the time of registering the property and agitating before the Assessing Officer for adopting the value u/s.50C is not proper and fair. In view of this the contention of the A.R. that the matter should be referred to the Valuation Officer does not hold good and as such the plea of the A.R.to refer the matter to the Valuation Officer is rejected. As the property conveyed is only a vacant land, the decision of the SRO determining the value of the property will hold good. TREATMENT OF CAPITAL ASSET INTO STOCK IN TRADE 7. The assessee has not done any development on the land which was purchased on 12/10/2004.and sold a part of the land on 23/01/2007 with out any development even after a period of 27 months from the date of purchase. If he is in the business of real estate he would have carried out some developments on the land to foster his real estate business. It is observed that the assessee invested in the land with the intention of getting good returns within a short period. It is because of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al exploitation and has also shown as stock in trade in the books of accounts. The assessee further contended that, the assessee could not develop the property because of civil dispute and this fact has been brought to the notice of the AO. But, the AO ignored all evidences filed by the assessee and computed profit derived from transfer of property under the head capital gains. 6. The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of relevant facts opined that, there is no error in the reasons given by the AO to assess consideration received for transfer of property under the head capital gains, because the assessee could not justify claim of stock in trade in the books of accounts with any evidence. The ld. CIT(A), further observed that the assessee has filed his return of income by deriving income from manpower agency and except said source, the assessee does not have any income from real estate business. Therefore, he opined that profit derived from sale of property is assessable under the head capital gains and thus, the AO has rightly computed as short term capital gains, because period of holding the impugned property is less than 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts since the time it was purchased- Therefore, the AO has rightly assessed the Property as capital asset and assessed the Short Term Capital Gains. 7.4. Vide Grounds 5 and 6, the appellant has argued that the AO has erred in invoking section soc of the IT Act. Section SOC is mandatory and the appellant's transaction is covered by the provisions concerned. As per section soc, where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority ) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted Or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result' of such transfer. AO has invoked the provisions correctly and adopted the value of Rs. 3,00,00,000/- as notified by Sub-Registrar. Assessee has not agitated against the value adopted by the SRO at the time of registration. He noted that no appeal was filed aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income on or before due date prescribed u/s. 139(1) of the Act. Further, the assessee has filed return of income in response to notice u/s. 148 of the Act, on 05.02.2014 and claimed that impugned property is a stock in trade, but the AO has given various reasons to allege that it is an afterthought. Therefore, he submitted that there is no error in the reasons given by the AO and the ld. CIT(A) to compute short term capital gains from transfer of property and their order should be uphold. 9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts with regard to the impugned dispute are that the assessee has purchased a property in Devanahalli, Bangalore on 14.10.2004, for a consideration of Rs. 79,21,500/-. The assessee has sold said property in the financial year relevant to assessment year 2007-08 for a consideration of Rs. 95 lakhs and guideline value of the said property as per stamp duty authority was at Rs. 3 crores. The assessee has declared consideration received from transfer of property on cash system and actual consideration received in the impugned assessment year amounting to Rs. 47 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial statement for the relevant assessment years to prove its claim that property has been shown as stock in trade in the books of accounts of the assessee. The assessee had also filed relevant details including case particulars of OS No. 615/2005 pending before Devanahalli Civil Court, to prove that there was a pending litigation on the property and thus, he could not invest any amount for development of property in absence of clear title. The assessee had also filed necessary financial statements including tax audit report to prove that amount received from transfer of property has been treated as business receipts. From the above, it is very clear that the intent of the assessee when the property has been purchased was to commercially exploit the property keeping in mind the locational advantage of the property. Further, the assessee had also made clear its intention by recording purchase of property as stock in trade in the books of accounts for the relevant assessment years. Therefore, we are of the considered view that the assessee has rightly declared profit derived from transfer of property under the head profit and gains of business and profession. It was only the AO by wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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