Ranjit Shivram Raut Vs ITO (ITAT Mumbai)
ITAT Mumbai held that mere presumption that plots are intended for further sale and hence plots were stock-in-trade doesn’t make the claim satisfying as the assessee failed to prove the same by way of evidences.
Facts- During assessment proceeding, AO observed that as per the Annual Information Return (AIR) the assessee purchased three plots of land for total consideration of ₹9 lakh (₹3 lakh for each plot) against the fair market value of ₹1,70,91,000/-(₹56,97,000/- for each plot).
According to AO, the difference amount of ₹1,61,91,000/- was taxable u/s. 56(2)(vii)(b) of the Act . The contention of the assessee that Section 56(2)(vii)(b) of the Act was not applicable being plots purchased were not capital asset, was rejected by AO.
AO made reference to Departmental Valuation Officer for ascertaining the FMV of the properties as per proviso to section 56(2)(vii)(b) of the Act. Till the finalization of the assessment, valuation report was not received from the Departmental Valuation Officer and therefore AO assessed the difference between the value of the properties as per stamp duty authorities and value declared by the assessee in the registered agreement, amounting to ₹1,61,91,000/- in assessment order.
CIT(A) considered the fair market value of the plots determined by the Departmental Valuation Officer (DVO) at ₹1,25,51,000/- and after subtracting the value of ₹ 9 lakh declared by the assessee in the registered agreement, sustained the difference amount of ₹1,16,51,000/- as addition u/s 56(2)(vii)(b) of the Act. The contention of giving credit of ₹66 lakhs while determining addition u/s. 56(2)(vii)(b) was also rejected by the Ld. CIT(A). Aggrieved, the assessee has preferred the present appeal.
Conclusion- Whether any transaction of sale (purchase) will fall under the head ‘profit and gains’ of the business of profession or under the head ‘capital gain’, depends on overall appreciation of multiple factors including intention of holding, frequency of transactions, volume of transactions, treatment in books of accounts etc. The Hon’ble Supreme Court in the case of CIT (Central), Calcutta v. Associated Industrial Development Company (P) Ltd. (82 ITR 586) observed that whether a particular holding of shares is by way of investment or forms part of the stock-in-trade, is a matter within the knowledge of the assessee, when holds the share and it should, in normal circumstances, be in position to produce evidence from its record as to whether it has maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment. The assessee has not demonstrated before us that whether he fulfils the criteria for treating the purchase of three plots as a stock in trade of his business. Merely presumption by the assessee that those three plots were intended for further sale and therefore those were stock in trade, is not sufficient and it has to be proved by way of evidences, which the assessee has failed, therefore, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute in upholding the applicability of section 56(2)(vii)(b) of the Act in the case of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by assessee is directed against order dated 02/03/2020 passed by the Learned Commissioner of Income-tax (Appeals)-3, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds:
