Royal Bengal Industries Pvt. Ltd., ... vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA

[Before Hon'ble Shri Mahavir Singh, JM & Hon'ble Shri B.P.Jain, AM ]

I.T.A No.374/Kol/2012 Assessment Year: 2007-08

Royal Bengal Industries Pvt.Ltd. Vs. C.I.T.- IV, Kolkata Kolkata Kolkata (Appellant) (Respondent) (PAN:AABCR 2484 D)

For the Appellant : Shri V.N.Dutta, Advocate For the Respondent : Shri Ravi Jain, CIT (DR)

Date of hearing : 08.04.2015. Date of pronouncement: 20.04.2015. ORDER

Per Shri B.P.Jain, AM :

This appeal of the assessee arises out of the order of ld.CIT-Kolkata-IV, Kolkata dated 24.01.2012 for Assessment Year 2007-08 passed u/s 263 of the Act.

2. The assessee has raised the following grounds of appeal :-

"1. For that the notice u/s 263 of the Act is without jurisdiction, opposed to requirement of law and bad in law.

2. For that the order u/s 263 of the Act is an arbitrary, opposed to requirement of law and bad in law.

3. For that the order u/s 263 of the Act is neither tenable in law nor in facts.

4. For that the appellant craves leave to amend, alter, add, delete or substitute any other grounds of appeal before or at the time of hearing of the appeal."

3. The brief facts of the case arising from the order of ld. Commissioner of Income Tax -IV, Kolkata reproduced for the sake of convenience as under :-

"The brief facts of the first issue that the assessee was allotted two flats 2E & 2F at Sunny Park, Kolkata-700019 on 06-10-2003 and the same was transferred on '/ 19-07-2006. The assessee thereby made a profit of Rs. 10,40,000/-. This receipt was shown in the P&L a/ c but was subsequently removed from the computation of taxable income. On being confronted, the assessee submitted to the AO that the date of allotn1.ent should be counted from 22-04-2002 i.e. the date on which possession of the flats was given to the assessee, The AO accepted this submission and computed the income as arising from LTCG but did not allow indexation. On this issue of indexation, 2 ITA No.374/Kol/2012 Royal Bengal Industries Pvt. Ltd.

A.Yr.2007-08 the assessee is in appeal before the Ld.CIT(A). It was however noticed on inspection that allotment of the flats by the builders to the assessee was 06- 10-2003 and not 22-04-2002 as claimed by the assessee. This fact was recorded (at page 2,A) in the Memorandum of the purchase agreement dated 19-07-2006 when the assessee sold the allotment to one Mls Bilienum Advisory Services Private Ltd._

2.1 It is the case of the assessee that it had received possession of the flats on 22- 04-2002 and that the transfer of the property should be affected from the date of possession as per section 2(47)-of the I-T Act. For this purpose, it produced a confirmation letter from -the builder M/ s Techleg dt. 20-02- 2002 to confirm that the property was handed over on 22-04-2002. It was also stated that an advance of Rs. 11 lakhs was paid to the builder on 20-04-

2002 for the said flats. As advance of Rs.

11 lakhs was paid and as the property was taken over on 22-04-2002, it was submitted that proper transfer of the flats had taken place on 22-04-2002 and hence the receipts from the sale of the flats was a LTCG and not STCG. It was accordingly submitted that the proposed review ought to be dropped. 2.2. The confirmation of M/s Techleg the builder is dated 20-04-2002 On this date the builder states that the possession to the 2 flats were handed over to the assessee On 22-04-2002 i.e. a date in the future. The assessee states that it had paid Rs. 11 lakhs to the builder as Advance on 20-02-2002. However, in the balance sheet as on 31-.03-2003, the advance was Rs. 9,00,371/- and only Rs. 6,00,000/- was shown to be an Advance to the builder M/s Techleg. The letter dated 06-10-2003 addressed by M/s Teehleg to the assessee states that possession of the flats were handed over on 22-04- 2002 to the assessee and that the assessee had to pay the statutory obligation of paying CMC taxes, maintenance charges, etc. The assessee was therefore asked to produce proof of such payments of CMC taxes, maintenance charges, etc. so as to confirm the fact of the possession of the flats. Though the requirement was served on . the assessee the same could not be produced. From the above facts, three things stands out. The confirmation letter of the builder M j s Techleg cannot be taken as genuine and correct as flats cannot be confirmed to be handed over on 20-02~2002 in a future date on 22-04-2002. The submission that it may be a typing error is over simplistic and therefore unacceptable. Secondly, the advance shown in the balance sheet is only Rs. 6 lakhs and not Rs.11 lakhs as claimed. This indicates that the facts are not fully correct. Lastly, the inability of the assessee to produce proof of payment of CMC taxes,· maintenance charges to CMC/builder/society, other outgoings, electricity bills, etc. appears to confirm that the assessee had not taken over possession of the flat on 22-04- 2002. The action of the AO taking decisions based on wrong and incorrect facts, is therefore erroneous and prejudicial to the interest of revenue. Based on facts alone, all the judicial rulings cited by the assessee would not apply. According, the order of the AO on this issue is reviewed. The AO should look into the issue afresh and decide the same as per law."

3 ITA No.374/Kol/2012 Royal Bengal Industries Pvt. Ltd.

A.Yr.2007-08

4. The ld. Counsel for the assessee argued that the possession was taken on 22.04.2002 and therefore for calculation of capital gains the date should be taken as 22.04.2002 being the date of the possession as the date of purchase. Since the flat was transferred on 19.07.2006 therefore the long term capital gain arises and the AO has rightly worked out the long term capital gain. The ld. Counsel for the assessee relied upon the confirmatory letter of the builder M/s.Techleg placed in the paper book and prayed to cancel the order of ld.Commissioner of Income Tax passed u/s 263 of the Act.

5. The ld. DR, on the other hand, relied upon the order of the ld. C.I.T.

6. We have heard the rival contentions and perused the facts of the case. The undisputed facts in the present case are that assessee was allotted two flats 2E and 2F at Sunny Park, Kolkata on 06.10.2003 which was transferred on 19.07.2006 thereby making a profit of Rs.10,40,000/-. Initially the assessee declared the said profit of Rs.10,40,000/- in the profit and loss account but the same was not taken in the computation of taxable income. The assessee relied upon the confirmatory letter of the builder M/s.Techleg which is dated 20.02.2002 in which the said builder has stated that the possession of the said flats has been handed over to the assessee on 22.04.2002 i.e. the date which is a future date. Therefore at the outset this confirmatory letter produced before the AO and relied upon by the Authorised representative before us is not at all reliable and cannot be given cognizance. Secondly the assessee had stated that it had paid Rs.11 lakhs to the builder on 20.02.2002 whereas in the balance sheet as at 31.03.2003 the advance was Rs.9,00,371/- and only Rs.6 lakhs were shown as advance to the builder M/s.Techleg. The assessee was required to pay certain statutory obligations of paying taxes etc and necessary proof for such payments of taxes etc. was not produced by the assessee, who confirmed the fact of possession of flats. In such circumstances and facts of the case the ld. C.I.T. has rightly observed that assessee has not taken the possession of the flat on 22.04.2002 and the action of the AO taking the decision is based on wrong and 4 ITA No.374/Kol/2012 Royal Bengal Industries Pvt. Ltd.

A.Yr.2007-08

incorrect facts which is erroneous and prejudicial to the interest of the revenue. Accordingly we find no infirmity in the order of the ld. CIT in holding the order of the AO as erroneous and prejudicial to the interest of the revenue which has rightly been sent to the AO to decide the issue afresh in accordance with law. All the grounds of appeal of the assessee are dismissed.

7. In the result the appeal of the assessee is dismissed.

Order pronounced in the court on 20.04.2015.

Sd/- Sd/- [ Mahavir Singh ] [B.P.Jain] Judicial Member Accountant Member

Date: 20.04.2015.

R.G.(.P.S.)

Copy of the order forwarded to:

1. Royal Bengal Industries Pvt.Ltd., Juthike apartment, 11/1, Sunny Park, Ballygunj Phari, Kolkata-700019.

2 C.I.T.- Kolkata-IV, Kolkata.

3. CIT(DR), Kolkata Benches, Kolkata.

True Copy, By order,

Asst. Registrar, ITAT, Kolkata Benches