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TMI Blog2024 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Revenue loss in the profit and loss account. The loss claimed by the assessee is a business loss incurred by the assessee during execution of a contract, therefore, by considering the above facts on record, CIT(A) has allowed the claim made by the assessee as Revenue loss u/s 37 of the Act. After considering the detailed findings of the Ld. CIT(A), we do not see any reason to disturb the same. Accordingly, the grounds raised by the Revenue is dismissed. Non-referral of property valuation to the District Valuation Officer (DVO) under Section 43CA - CIT(A) deleted the additions made by the AO for not referring the matter to the DVO even though assessee has made specific objections - HELD THAT:- As we observed that the assessee has sold the property for the sale consideration of Rs. 17.93 Crs. whereas the stamp valuation of the property was 19.73 Crs. In issue before us, assessee itself submitted that the assessee sold the only plot reserved for making the Hotel in township measuring 10545.46 sq. mtr. to First Choice Hotels (P) Ltd. at the then prevailing market price in the area for Rs. 17.93 Crs. The stamp valuation for this plot was enhanced by 10% for preferential location ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loss account by issue of questionnaire dated 10/10/2016. In response, the assessee has submitted as under:- "The assessee company has entered into agreement with M/s R.K. Associates and Hoteliers Pvt. Ltd., A-25, Hospital Road, Near Rama Tent House, Bhogal, New Delhi for the purchase of a Hotel Fortune in Grazia, Sanjay Nagar, District Centre, Sec-23, Ghaziabad, Uttar Pradesh for the purchase consideration of Rs. 95 crores as per the terms of agreement to sell dated 09.12.2013 an amount of Rs. 50 Lacs was paid to the vendors and amount of Rs. 16 crores was paid by the Assessee Company to the vendors on 08.01.2014 and the balance consideration of Rs. 7850 Lacs was to be paid by 08.02.2014. As per the terms of agreement, the assessee company has paid total amount of Rs. 1450 Lacs by payee account cheques as per detail enclosed herewith. The assessee company has deducted TDS amounting to Rs. 1450 Lacs on such advance payment and same was deposited with the Income tax Department. The copy of the TDS Returns showing the deduction on such TDS is enclosed. It may be mentioned here that due to the depressive conditions in the real estate market, the assessee could not raise the funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of Rs. 1225 Lacs in the profit and Loss account. The copy of the agreement, award, legal notice and copy of resolution and other relevant documents are enclosed for your perusal and reference." 5. After considering the above submissions, the Assessing Officer further asked to explain and submit the details of loss of Rs. 12.25 Crs. due to default in payment to M/s R.K. Associates and Hoteliers Pvt. Ltd. Further, the assessee was asked to explain specific efforts to raise advances for the payment to above said party and he observed that the assessee had reserves and surpluses at the day of default with cash and bank balances, then why the payment due was not made. In this regard, the assessee has submitted as under:- "In the course of last hearing, the assessee was required to show cause as to why the business loss of Rs. 1225 Lacs should not be allowed in this year. In this connection, it is submitted that the assessee has entered into agreement for the purchase of Hotel Building Property situated at Sanjay Nagar, Ghaziabad for the value of Rs. 9500 Lacs. The assessee has paid Rs. 1650 Lacs as advance and the balance payment was required to be paid on or before 08.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for cancellation of the deal is a business loss in the real estate business line, therefore, the same is allowable u/s 37 of the Income Tax Act. In view of this fact it is requested that the proposed disallowance of the business loss of Rs. 12.5 crores is not tenable in law." 6. After considering the above submissions, the Assessing Officer dismissed the contention of the assessee and proceeded to make the addition of Rs. 12.25 Crores by observing as under:- "1) The assessee company has not submitted the details of the broker on assurance of whom the assessee has entered into the deal. Any prudent businessman will not enter into an agreement merely on the basis of verbal assurance by some broker and will enter into a business deal which can result in such a huge loss to him. 2) The assessee speaks of Authority letter in favour of this broker which does not hold any force as the same cannot be accepted as a proof of the deal with any potential customer. 3) The assessee company is claiming that the potential customer backed out which is without any basis and unfounded. These kind of replies are vague and general and not sustainable. 4) The assessee company has not sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pay the purchase price in the following manner: a) An amount of Rs. 50,00,000/-(Rupees Fifty Lacs only) must be paid by the BUYER to the SELLER upon execution of this Agreement by the BUYER to the SELLER, accordingly BUYER has paid a sum of Rs. 50 lacs after deduction of Tax @1% vide cheque no.849983 dated 09.12.2013 drawn on IDBI Bank KG Marg, New Delhi for Rs. 49,50,000/- the receipt of sum, the SELLER does hereby acknowledge. b) An amount of Rs. 16,00,00,000/- shall be paid by the BUYER to the SELLER within one month of this Agreement i.e. by 08.01.2014. c) An amount of Rs. 78,50,00,000/- shall be paid by the BUYER to the SELLER within two months of this agreement i.e. by 08.02.2014. d) If the BUYER fails to pay the balance of the purchase price on or before the scheduled dates set out in sub clause b and c of clause 2, the amount paid by the BUYER shall be forfeited by the SELLER, and the interest of the BUYER in the property as created by this agreement shall terminate without any legal proceedings being taken or any other act being performed and the property shall revert to and re-vest in the SELLER. The BUYER shall promptly discharge any caveat, encumbrance, li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 12.25 crore occurred to the appellant out of the impugned deal of the property and the same was claimed by the appellant as business loss. On the perusal of the facts/details filed by the appellant, I find that the appellant was engaged in the real estate business, therefore, the deal entered into by the appellant for purchase of the property was in accordance with their business activity and the loss of Rs. 12.25 crore was incurred during the course of their business activity. In view of the above discussion and the case laws Appeal No. 545/16-17/CIT(A)-29 A.Y.2014-15 relied upon by the appellant in their submission as mentioned on para 6 above, I m of the considered view that since the loss was occurred to the appellant in the normal course of business, therefore, the same is found to be allowable as business loss. Therefore, the AO is directed to allow the same." 9. Aggrieved with the above order, the Revenue is in appeal before us. 10. At the time of hearing, the Ld. DR submitted that assessee has claimed huge loss due to not meeting the commitment in the agreement made with M/s R.K. Associates and Hoteliers Pvt. Ltd. He brought to our notice findings of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92 crores as determined by the stamp Authorities. Further the stamping authorities have taken 10% additional value being the preferential location charges and have determined the circle rate at Rs. 19.73 crores (17.92+1.79). The assessee company had admittedly acquired 1002 acres of land alongwith its associate company at Agra for development of Integrated Township and had the licence issued by the Agra Development Authority, Agra. The approval by the Agra Development Authority was for the following projects:- (i) Residential Projects (ii) Hotel Project (iii) School (iv) Commercial Shop (v) Group Housing The assessee had sold the hotel plot for Rs. 17.93 cr. as approved by the Agra Development Authority. Since there was only one hotel plot in the entire Integrated Township, there is no question of having preferential location of plot like corner. The preferential location charges are paid in respect of a plot having preferential location amongst the identical units. There was only one hotel plot, there is no identical plot or hotel owned by the assessee company in the Project. The assessee has not received any preferential charges of Rs. 1.8 crores from the vendor. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking into consideration all the factors i.e. preferential location of the plot and other determining factors. Therefore, the assessee's contention that the hotel plot, not being located prudentially to attract the 10% extra stamp duty to the circle rate is contradictory to the circle rate of Rs. 18,700/- applied by the stamp duty authorities of the state government for preferential location, the plot being corner plot. 14. With the above order, the assessee preferred an appeal before the Ld. CIT(A) and made detailed submissions before him. 15. After considering the detailed submissions, the Ld. CIT(A) deleted the additions made by the Assessing Officer for not referring the matter to the DVO even though assessee has made specific objections. The Ld. CIT(A) by relying on the decisions of various Courts/ITAT, he find the merit in the argument of the assessee for not referring the matter to DVO. Accordingly, the ground raised by the assessee is allowed. 16. Aggrieve with the above order, the Revenue is in appeal before us. 17. At the time of hearing, the Ld. DR submitted that the addition made by the Assessing Officer is relating to Sec.43CA and submitted that Ld. CIT(A) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 50C(2) and in the absence of any such reference being made the addition made on account of higher stamp duty value should be deleted. 19. In regard thereof, relied on the following case law and submitted that the Hon'ble ITAT deleted the addition u/s 43CA without remand back where the assessee had objected to the valuation adopted by stamp valuation authority even though no valuation report had been submitted by the assessee: • ACIT vs. Tarun Agarwal 173 ITD 107 (Agra- Trib.) • 57 ITR (Trib) 449 (Del) ITO v. Aditya Narain Verma (HUF • ITA No.228/Agra/2018 ITO-1(3) Mathura Vs. Ramesh Chandra Kulshreshth 20. Further he submitted that the above may kindly be taken on record and the appeal of the department may kindly be dismissed without allowing the Ld. Assessing Officer a second inning, by sending the matter back to Assessing Officer, enabling it to fill the lacunae and shortcomings and putting the assessee virtually to face a re-trial for no fault of his and to again prove before the Assessing Officer that the sale consideration was the "fair market value" of the property sold by him which has not been disputed by the Id. Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. Similar view has been expressed by the other decisions cited by the learned authorised representative in this regard hereinabove. The first appellate order on the issue is thus upheld. The grounds are accordingly rejected." 22. Similarly, in the case of ITO vs. Ramesh Chandra Kulshresth in ITA No.228/Agr/2018 decided as under:- "28. In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. The AO has also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we do not find any infirmity in the order of the CIT(A) in quashing the addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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