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| The Tax Publishers2020 TaxPub(DT) 5130 (Bang-Trib) INCOME TAX ACT, 1961
Section 45
Where assessee showed advance towards purchase of land by an agreement entered into between assessee and a company (S) towards proposed sale of property, wherein assessee was also the owner of said property and was director in said company (S) and AO made addition by holding that capital gains was chargeable as per provisions of section 2(47) read with section 45, considering that it was an arranged transaction which could not be ignored, matter was remanded back to AO for reconsideration.
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Capital gains - Assessee showed advance towards purchase of land by an agreement entered into between assessee and a company (S) towards proposed sale of property - Assessee being an owner and director in said company (S) - Possibility of arranged transaction
Pursuant to scrutiny assessment proceedings in case of assessee, AO noted that assessee disclosed loss in his return of income. It was found that balance sheet of assessee had shown current liabilities as advance for purchase of land. Assessee, when asked, filed MOU and ledger account of S, depicting the advance received for land. AO observed that assessee entered into MOU with its sister concern being S, in which assessee was a director holding 50% share. AO further observed that assessee was sole and absolute owner of the said property. S was not paying any rent to assessee. AO held that capital gains was chargeable as per provisions of section 2(47) read with section 45. Held: Assessee submitted that there was a loan transaction between him and S. Amount was shown as advance towards purchase of land by an agreement entered into between assessee and S towards proposed sale of property. Admittedly, assessee was also the owner of said property and was director in S. A transaction of loan or proposed sale does not depend merely on the terms of the document, but has got to be judged from the intention of the parties and all the circumstances of the case. It was unbelievable that, the advance received was adjusted towards cost of said property in a proposed sale, which did not materialise till date. This argument did not hold waters in the eyes of law. This was an arranged transaction which could not be ignored. In a matter of such description, the authorities are entitled to pierce the veil of corporate entity and look at the reality of the transaction. Issue was remanded to AO to consider it afresh.
REFERRED : CIT v. Balbir Singh Maini (2017) 398 ITR 531 (SC) : 2017 TaxPub(DT) 4346 (SC), CIT and JCIT v. TK. Dayalu (2011) 202 Taxman 531 (Karn) : 2011 TaxPub(DT) 1642 (Karn-HC) and Chaturbhuj Dwarkadas Kapadia v. CIT. (2003) 180 CTR 107 (Bom) : 2003 TaxPub(DT) 1029 (Bom-HC).
FAVOUR : Matter remanded.
A.Y. : 2012-13
IN THE ITAT, BANGALORE BENCH BENCH
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