The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) confirmed an Income tax addition of Rs. 1.45 crore as short-term capital gain from the taxpayer’s sale of non-agricultural land.
The assessee Dhan Bahadur Gagan Chand filed his return of income for A.Y. 2016-17 on 29.07.2016 declaring his total income as ₹26,33,430/-. The case of the assessee was selected for scrutiny under CASS. In response to the statutory notices, the assessee submitted before the Assessing Officer [AO] that he entered into a development agreement with M/s. Indo Asian Buildcon Pvt. Ltd on 23.03.2016 with respect to the land (Gut No. 274) at Dhakne as plot Nos. 1 to 39, admeasuring 14,000 Sq.mtr & delivered possession for development and construction over the land for the consideration (compensation) of ₹2,51,000/-. The said land was earlier purchased by the appellant assessee vide purchase agreement dated 29.11.2013 for the consideration of ₹20,00,000/- .
The AO found that the government valuation/stamp duty valuation was stated to be ₹1,66,60,000/- and stamp duty of ₹ 5,00,000/- along with registration fee of ₹30,000/- was paid for this transaction by the appellant assessee, hence, added short-term capital gain of ₹1,45,60,000/- in his total income for the relevant AY 2016-17.
On being aggrieved by the impugned order, the assessee preferred an appeal before the CIT(A). The CIT(A), vide order dated 02.08.2023, confirmed the aforesaid additions made under the assessment order, hence this appeal.
Mr. Bhadresh Doshi representing the appellant has argued that he was director of the company submitting that the land, at which the capital gain arose, was purchased by the appellant assessee on behalf of the company. Entire consideration at the time of purchase of the said land was paid by the company itself.
A “development agreement” was executed on 23.03.2016 between appellant assessee and the company. According to the terms of the agreement, the possession of the land was handed over to the company for development and construction work etc. The capital gain could not have been added in the total income of the appellant for the relevant AY. Further submitted that Section 50C of the Income Tax Act was not applicable in the facts of the present case. Prayed to delete the addition of capital gain from the income of the appellant assessee for the relevant A.Y. 2016-17 and to set aside the impugned order.
Mr. Mahita Nair representing the revenue has argued that the appellant assessee has purchased the said land on 19.11.2013 on his own name and has entered into said „development agreement‟ with the company on 23.03.2016. The land was handed over to the company along with the possession along with all rights in the land for the consideration of Rs. 2, 51,000/- vide cheque No. 9062 of Kotak Mahindra Bank. There is no MOU between the assessee and the company to infer that the said land was purchased by the assessee on behalf of the company. The consideration was far less than the government valuation of Rs. 1,66,60,000/-. AO has rightly applied Section 50C of the Income Tax Act.
The two member bench of the tribunal comprising Narendra Kumar Billaiya (Accountant Member) and Sunil Kumar Singh (Judicial Member) does not find any error of fact or law in the impugned order passed by the CIT(A) in confirming the addition of Rs. 1,45,60,000/- as short-term capital gain, arising out of the transfer of non-agricultural land by the appellant assessee. The impugned order dated 02.08.2023 is accordingly confirmed. Accordingly, the appeal filed by the assessee was dismissed.
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