ITO Vs Narne Constructions Private Limited (ITAT Hyderabad)
ITAT: CIT(A) Cannot Bypass Rule 46A; If Property Is Stock-in-Trade, Section 43CA Must Also Be Examined
The Hyderabad ITAT set aside the order of the CIT(A) after holding that he had admitted additional evidence behind the back of the Assessing Officer and granted relief without following the mandatory procedure prescribed under Rule 46A. The Tribunal observed that annual reports and financial statements relied upon by the CIT(A) to conclude that the land was held as stock-in-trade were filed for the first time in appellate proceedings and ought to have been confronted to the AO for comments before being admitted.
The dispute arose when the AO invoked section 50C and computed capital gains by adopting the stamp duty value of land transferred by the assessee-company to its group concerns. The CIT(A), however, held that the land constituted business inventory (stock-in-trade) and therefore section 50C, which applies only to capital assets, was not attracted.
While the Tribunal did not express any final view on the merits, it observed that if the CIT(A) was of the opinion that the land was indeed stock-in-trade, then he could not simply stop after holding section 50C inapplicable. Being vested with co-terminus powers with the Assessing Officer, he was required to examine the applicability of section 43CA, the specific provision dealing with transfer of land or building held as stock-in-trade.
Accordingly, the ITAT restored the matter to the file of the CIT(A) for fresh adjudication after complying with Rule 46A and after examining all relevant provisions, including section 43CA wherever applicable.
FULL TEXT OF THE ORDER OF ITAT HYDERBAD
