Topaz Trading Co. P. Ltd, Mumbai vs Assessee

This is an appeal filed by the assessee against the order of CIT(A),

dated 30-7-2010 for assessment year 2004-05, in the matter of order

passed under Section 143(3) of the I.T. Act, wherein following grounds

have been taken by assessee :-

1.1 The Commissioner of Income - tax (Appeals) - 1, Thane, ["the ld. CIT (A)"] erred in confirming the action of the Income Tax Officer, Ward - 3(2), Thane, ["the AO"] whereby the A.O. taxed Rs. 11,92,890/- as alleged short term capital gain earned by the Appellant.

1.2 The Ld. CIT (A) failed to appreciate that the action of the A.O in so taxing the short term capital gain was bad, illegal and void and beyond the purview of sec. 45 read with 48 of the Act.

2 ITA No.7527/10 1.3 It is submitted that in the facts and circumstance of the case, and in law, no such action on the part of the A.O. was called for. .

WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNATIVE:

2 It is submitted that, assuming - but not admitting - that any such capital gain tax liability arose in the hands of the Appellant, the calculation of the capital gain tax at Rs.

11,92,890/- is erroneous and is not in accordance with law.

2. Rival contentions have been heard and record perused. Facts in

brief are that Smt Savita Rathi and Shri Chandrakant Rathi , Ex-Directors

of the assessee company had purchased a flat No 201 at Hariniwas

Circle, Thane from Soham Builders for a consideration of Rs 9.35 Lacs

vide an agreement dated 15/10/91. Thereafter, the assessee company

acquired the flat from the directors for a consideration of Rs 12 Lacs

including parking charges of Rs 1 Lacs. The flat was subsequently shown

in the books of account of the assessee company and depreciation was

also claimed thereon in the books of accounts. Later on, the flat was

allegedly let out for a monthly rent of Rs 10,000/-. The Directors, Smt.

Savita Rathi & Chandrakant Rathi resigned from the company on

25/02/03 and sold off their shares. During the period relevant to the AY

04-05 , shares of the assessee company were sold to one Shri Bhavesh

Patel and Suresh Shah. The assessee company alleged to have gifted

the flat to Mrs and Mr Rathi. Accordingly, gift deed was executed. The gift

deed was not registered. After gift, the said flat was sold to Mrs. & Mr.

Narsana. On gift of flat, block of assets ceased to exist in assessee's

books and the resultant loss was claimed as STCG. The AO rejected the

theory of gift and proceeded to treat the gift as sale transaction and 3 ITA No.7527/10

worked out the STCG adopting the market value of the property. He has

worked out the STCG at Rs 11,92,890/- and it was added to the returned

Income.

3. By the impugned order, CIT(A) confirmed the action of the AO,

against which assessee is in further appeal before us.

4. It was argued by learned AR that there can be no capital gain

arising out of null and void transfer and for this purpose reliance was

placed on the decisions reported at 236 ITR 1001 & 41 TTJ 83.

5. On the other hand, learned DR relied on the orders of the

authorities below.

6. We have considered rival contentions, carefully gone through the

orders of the authorities below and also deliberated on the judicial

pronouncements cited at bar by the learned AR. From the record we

found that the AO himself has recorded a finding to the fact that the

original Gift Deed was also called for verification. On verification of the

same, it was noticed clearly from the back side impression of the stamp

paper that the original words were 'Deed of Sale' and not 'Deed of Gift'.

Thus, there was no gift or donation of flat by the assessee company.

Assessee company was an artificial person and there was no love and

affection for gifting the flat to the ex-director of the assessee company.

Thus, the theory of gift of flat was not genuine and was only paper

transaction to give different colour.

7. In view of the above, when the finding of fact recorded by both the

lower authorities could not be controverted by learned AR by bringing any 4 ITA No.7527/10

positive material on record, we do not find any reason to interfere in the

findings recorded by lower authorities regarding sale of flat by assessee

resulting into taxing capital gain of Rs.11,92,890/- in assessee's hands.

8. In the result, appeal of the assessee is dismissed.

Order pronounced in the open court on this 01/01/2015.

/01/2015

Sd/- Sd/- ( ) ( ) (I.P.BANSAL) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER Mumbai; Dated 01/01/2015 /pkm, PS

Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. / The CIT(A), Mumbai. 4. / CIT 5. / DR, ITAT, Mumbai

6. Guard file.

//True Copy//

/ BY ORDER,

(Asstt. Registrar) / ITAT, Mumbai