DCIT, Hyderabad v. M/s M.K.F. Constructions (P) Ltd, Hyderabad

ITA 361/HYD/2009 | 2005-2006
Pronouncement Date: 29-01-2010 | Result: Dismissed

Appeal Details

RSA Number 36122514 RSA 2009
Assessee PAN AACCM3861E
Bench Hyderabad
Appeal Number ITA 361/HYD/2009
Duration Of Justice 10 month(s) 18 day(s)
Appellant DCIT, Hyderabad
Respondent M/s M.K.F. Constructions (P) Ltd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-01-2010
Date Of Final Hearing 20-01-2010
Next Hearing Date 20-01-2010
Assessment Year 2005-2006
Appeal Filed On 12-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMEBR ITA NO.361/HYD/09 : AS STT. YEAR 2005-06 DY. COMMISSIONER OF INCOME- TAX CIRCLE 16(2) HYDERABAD. V/S. M/S. M.K.F. CONSTRUCTIONS (P)LTD. HYDERABAD ( PAN AACCM 3861 E ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.PHANI RAJU RESPONDENT BY : SHRI B.SATYANARAYANA MURTHY O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A) V HYDERABAD DATED 28.1.2009 FOR THE ASS ESSMENT YEAR 2005-06. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS- '1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND ON F ACTS OF THE CASE. 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT SALE PRICE WAS NOT AT ARMS LENGTH AND OUGHT TO HAVE INVOKED SECTION 145. 3. THE LEARNED CIT(A) OUGHT TO HAVE SUSTAINED THE ADDIT ION MADE TOWARDS DIFFERENCE OF VALUE IN SALE OF FLATS TO DIRECTORS AS THERE IS BASIS FOR TAXING THE DIFFERENCE IN VALUE ADOPTED IN THE FLATS SOLD TO ITS DIRECTORS. 4' ITANO.361/HYD/09 M/S. M.K.F.CONSTRUCTIONS (P)LTD. HYDERABAD 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONSTRU CTION OF FLATS. A SURVEY UNDER S.133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 7.11.2005. LATER THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 20. 12.2005 SHOWING AN INCOME OF RS.43 20 177. DURING THE ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER NOTICED THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAS PAID AN AMOUNT OF RS.60 000 TOWARDS ARCHITECT'S FEES. HOWEVER SINCE ON THAT PAYMENT THE ASSESSEE HAS NOT MADE ANY TDS UNDER S.194J OF THE ACT THE ASSESSING OFFICER HELD THAT THE SAME CANNOT BE ALLOWED AS DEDUCTION UNDER S.40(A)(IA) OF THE ACT. HE THUS DISALLOWED THE SAID AMOUNT. HE FURTHER NOTICED THA T DURING THE PREVIOUS YEAR THE ASSESSEE HAS SOLD TO ITS DIRECTO RS TWO FLATS ADMEASURING 1635 SQ. FT. AND 985 SQ. FT FOR CONSID ERATIONS OF RS.9 50 000 AND RS.5 65 000 RESPECTIVELY. FROM THE DETAILS FURNISHED BY THE ASSESSEE THE ASSESSING OFFICER NOTICED THAT THOSE FLATS HAVE BEEN SOLD TO THE DIRECTORS AT A RATE LOWER THAN THE PREVAILING MARKET RATE. ON A QUERY RAISED BY THE ASSESSING OFFICER O N THIS ASPECT ASSESSEE SUBMITTED THAT AS ITS DIRECTORS WERE SERV ING THE COMPANY FOR A LONG TIME AND HENCE THE FLATS HAVE BEEN SOLD TO THEM AT A LESSER RATE. HOWEVER THE ASSESSING OFFICER WAS NOT SATIS FIED WITH SUCH EXPLANATION. HE NOTED THAT AS PER THE SALE PRICE IN RESPECT OF OTHER FLATS THE AVERAGE SELLING RATE WAS RS.1 320 PER SQ . FT. HE FURTHER NOTED THAT AT THAT RATE THE SALE PRICE RECEIVABLE IN RESPECT OF THE TWO FLATS SOLD TO DIRECTORS CAME TO RS.34 58 400 (262 0 X RS.1320). SINCE THE ASSESSEE HAS SHOWN RECEIPT OF RS.15 15 000 FRO M THE SALE OF THE TWO FLATS TO DIRECTORS THE ASSESSING OFFICER ADDED THE DIFFERENCE OF RS.19 43 400 (RS.34 58 400 RS.15 15 000) TO THE R ETURNED INCOME TREATING THE SAME AS DEEMED INCOME OF THE ASSESSEE. WITH THE ABOVE ITANO.361/HYD/09 M/S. M.K.F.CONSTRUCTIONS (P)LTD. HYDERABAD 3 TWO ADDITIONS THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.63 23 577 VIDE ORDER OF ASSESSM ENT DATED 13.12.2007 PASSED UNDER S.143(3) OF THE ACT. 4. AGGRIEVED BY THE ADDITION OF RS.19 43 400 MADE BY THE ASSESSING OFFICER ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) OBSERVING THAT BOTH THE FLATS HAVE BEEN SOLD TO THE DIRECTORS ADMITTEDLY FOR A CONSIDERATION OF RS.9 50 000 AND R S.5 65 000 RESPECTIVELY; AND THAT ANY ADDITION TOWARDS UNACCOU NTED./SUPPRESSED SALE CONSIDERATION CAN BE MADE ONLY WHEN THERE IS E VIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED MORE THAN THE AMOUNT DISCLOSED BY THE ASSESSEE AND SHOWN IN THE RETURN OF INCOME DELETED THE SAID ADDITION OF RS.19 43 000 MADE BY THE ASSESSING OFFICER AND ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) IN THIS B EHALF REVENUE PREFERRED THE PRESENT APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES. IN THIS CASE REVE NUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HA S INDEED RECEIVED AMOUNT OVER AND ABOVE THE CONSIDERATION DISCLOSED B Y THE ASSESSEE FROM THE SALE OF THE PROPERTY. UNLESS THE REVENUE BRINGS ON RECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS RECEIVED ANYTHING OVER AND ABOVE THE VALUE DISCLOSED IN THE SALE DEED WE ARE OF THE OPINION THAT NO DEEMED INCOME CAN BE BROUGHT TOT AX. WE ARE FOR TIFIED IN THIS BEHALF BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF K.P.VARGHESE V/S. ITO (131 ITR 597) WHEREIN IT IS HELD AS FOLLOWS- ITANO.361/HYD/09 M/S. M.K.F.CONSTRUCTIONS (P)LTD. HYDERABAD 4 'SUB-SECTION (2) OF S.52 OF THE I.T. ACT 19061 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER OF A CAPITA L ASSET HAS BEEN UNDERSTATED BY THE ASSESSEE OR IN OTHER WORD S THE FULL VALUE OF THE CONSIDERATION IN RESPECT OF THE TRANSF ER IS SHOWN AT A LESSER FIGURE THAN THAT ACTUALLY RECEIVED BY THE ASSESSEE AND THE BURDEN OF PROVING SUCH UNDERSTATEMENT OR CONCEALM ENT IS ON THE REVENUE. THE SUB-SECTION HAS NO APPLICATION IN THE CASE OF AN HONEST AND BONA FIDE TRANS ACTION WHERE THE CONSIDERATION RECEIVED BY THE ASSESSEE HAS BE EN CORRECTLY6 DECLARED OR DISCLOSED BY HIM. ONCE IT IS ESTABLISHED THAT THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT I S DECLARED OR DISCLOSED BY HIM THE REVENUE IS NOT REQUIRED TO SHOW WHAT IS THE PRECISE EXTENT OF THE UNDERSTATEMENT OR IN OTHER WORDS WHAT IS THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSE SSEE. THAT WOULD IN MOST CASES BE DIFFICULT IF NOT IMPOSSIBLE TO SHOW AND HENCE SUB-S.(2) RELIEVES THE REVENUE OF ALL BURDEN OF PROOF REGARDING THE EXTENT OF UNDERSTATEMENT OR CONCEALMENT. IT DOES NOT CREATE ANY FICTIONAL RECEIPT. IT DOES NOT DEEM AS RECEIPT SOMETHING WHICH IS NOT IN FACT RECEI VED. IT MERELY PROVIDES A STATUTORY BEST JUDGMENT ASSESSMENT O F THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE AND BRI NGS TO TAX CAPITAL GAINS ON THE FOOTING THAT THE FAIR MARKET VALUE OF THE CAPITAL ASSET REPRESENTS THE ACTUAL CONSIDERATION RECEI VED BY THE ASSESSEE AS AGAINST THE CONSIDERATION UNTRULY DECLARE D OR DISCLOSED BY HIM. THE OBJECT OF IMPOSING THE CONDITION OF DIFFERENCE OF 15 PER CENT OR MORE BETWEEN THE FAIR MARK ET VALUE OF THE CAPITAL ASSET AND THE CONSIDERATION DECLARED IN R ESPECT OF THE TRANSFER CLEARLY IS TO SAVE THE ASSESSEE FROM THE REIGOUR OF SUB-S.(2) IN MARGINAL CASES WHERE THE DIFFERENCE IN SUBJ ECTIVE VALUATION BY DIFFERENT INDIVIDUALS MAY RESULT IN AN APP ARENT DISPARITY BETWEEN THE FAIR MARKET VALUE AND THE DECLA RED CONSIDERATION. THE WORD 'DECLARED' IN SUB-S.(2) OF S.52 IS VERY ELOQUENT AND REVEALING. IT CLEARLY INDICATES THAT THE FO CUS OF SUB-S.(2) IS ON THE CONSIDERATION DECLARED OR DISCLOSED BY THE ASSESSEE AS DISTINGUISHED FROM THE CONSIDERATION ACTUAL LY RECEIVED BY HIM AND IT CONTEMPLATES A CASE WHERE CONSIDERATION RECEIVED BY THE ASSESSEE IN RESPECT OF TH E TRANSACTION IS NOT TRULY DECLARED OR DISCLOSED BY HIM BUT IS SHOWN AT A DIFFERENT FIGURE. THE TWO CIRCULARS OF THE CENTRAL BOARD ISSUED ON JULY 7 1964 AND JANUARY 14 1974 EXPLAINING THE SCOP E AND OBJECT OF S.52(2) ARE BINDING ON THE DEPARTMENT IN THE ADMINISTRATION OR IMPLEMENTATION OF S.52(2).' 7. IN THE LIGHT OF THE ABOVE DISCUSSION WE FIND NO MERIT IN THE GROUNDS OF THE REVENUE IN THIS APPEAL. WE ACCORDIN GLY UPHOLD THE ITANO.361/HYD/09 M/S. M.K.F.CONSTRUCTIONS (P)LTD. HYDERABAD 5 IMPUGNED ORDER OF THE CIT(A) AND REJECT THE GROUND S OF THE REVENUE IN THIS APPEAL. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 29.1.2010 SD/- SD/- (G.C.GUPTA) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER DT/- 29TH JANUARY 2010 COPY FORWARDED TO: 1. M/S. MKF CONSTRUCTIONS (P)LTD. 6-3-883/A/1 501 IMPERIAL PLAZA SOMAJIGUDA HYDERABAD 2. DY. COMMISSIONER OF INCOME TAX CIRCLE 16(2) H YDERABAD. 3. COMMISSIONER OF INCOME-TAX(APPEALS) V HYDERABAD . 4. COMMISSIONER OF INCOME-TAX IV HYDERABAD. 5. THE DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD . B.V.S.