Sh. Pragya Arya, Delhi V. ACIT, New Delhi

CO 159/DEL/2014

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0004 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 22-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAMEER SHARMA
• Assessee Lawyers: PRAKASH YADAV
• Keywords: Capital asset; Gift; Business income; Salary income; Additional evidence; Cost of acquisition; Difference of opinion; Corroborative evidences; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 2(14); 147; 11

Judgement Text

ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A. N O S . 4139 /DEL/201 1 AND I.T.A. NOS. 4188 & 4189/DEL/ 2013 A.Y RS . : 200 8 - 0 9 AND 2006 - 07 & 2007 - 08 ACIT, CIRCLE 32(1), ROOM NO. 376 - A, CR BUILDING, IP ESTATE, NEW DELHI VS. SH. PRAGY ARYA, D - 25, DEFENCE COLONY, NEW DELHI (PAN:ADQPA1878D) (APPELLANT) (RESPONDENT) AND C.O. NOS. 158 & 159/DEL/201 4 (IN I.T.A. NOS. 4188 & 4189/DEL/2013) A.Y RS. : 2006 - 07 & 2007 - 08 SH. PRAGY ARYA, D - 25, DEFENCE COLONY, NEW DELHI (PAN:ADQPA1878D) VS. ACIT, CIRCLE 32(1), ROOM NO. 376 - A, CR BUILDING, IP ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. SHAMEER SHARMA, SR. DR ASSESSEE BY : SH. RAJIV SAXENA & PRAKASH YADAV, ADVOCATES DATE OF HEARING : 22 - 10 - 2014 DATE OF ORDER : 30 - 10 - 2014 ORDER PER H.S. SIDHU : J M ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 2 THESE ARE THE THREE APPEALS FILED BY THE DEPARTMENT AND CROSS OBJECTIONS FILED BY THE ASSESSEE EMANUATE FROM SEPARATE ORDERS OF LD. CIT(A), NEW DELHI. THE APPEALS OF THE REVENUE ARE RELEVANT TO ASSTT YEARS 2006 - 07 TO 2008 - 09 AND CROSS OBJECTIONS OF THE ASSESEE ARE RELEVANT TO ASSTT. YEARS 2006 - 07 TO 2007 - 08. SINCE THE ISSUES INVOLVED ARE COMMON AND IDENTICAL, T HEREFORE, FOR THE SAKE CONVENIENCE WE ARE ADJUDICATED THE SAME BY THIS CONSOLIDATED ORDER. 2. THE GROUNDS RAISED BY THE REVENUE FOR THE ASSTT. YEAR 2006 - 07 READ AS UNDER: - 1. 'WHETHER THE CIT(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN HOLDING THAT PAINTINGS SOLD BY ASSESSEE WERE PERSONAL EFFECTS IN SPITE OF THE VITAL OBSERVATION OF THE A O THAT PAINTINGS WERE NOT PERSONAL EFFECTS.' 2. 'WHETHER THE CIT(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN IGNORING THE VITAL ADMITTED FACT THAT THE TWO PAINTINGS WERE SOLD AT A PRICE HIGHER THAN THE PURCHASE PRICE BY THE COMPANY OF THE SAME DAY OF PURCHASE DESPITE OF THE FACT THAT THE ASSESSEE HIMSELF WAS CONTROLLING THE SAME COMPANY I.E P ARYAN ART GALLERY (P) LTD AND BY DOING THIS MAD E COLLUSIVE ARRANGEMENT TO AVOID TAX ON A MAJOR PART OF THE PROFIT.' 3. 'WHETHER THE CIT(A) HAS ERRED IN FACTS & CIRCUMSTANCES OF THE CASE IN GRANTING RELIEF TO ASSESSEE ON THE BASIS' OF A COPY OF AFFIDAVIT FILED BY ASSESSEE STATED TO BE NOT EXAMINED BY T HE AA DESPITE THE FACT THAT THE ASSESSEE HAS NOT FURNISHED EVENT THE BASIC ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 3 DETAILS/BANK ACCOUNT ETC DURING 31 OPPORTUNITIES ALLOWED TO HIM.' 4. 'WHETHER THE CIT(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN IGNORING THE OBSERVATION AND ALSO COR ROBORATIVE EVIDENCES BROUGHT ON RECORD BY THE A O DURING ASSESSMENT AS WELL AS THE REMAND PROCEEDINGS WHICH PROVES THAT ASSESSEE IS ACTIVELY ENGAGED IN THE BUSINESS OF SALE & PURCHASE OF PAINTINGS.' 5. 'WHETHER THE CIT(A) HAS ERRED IN THE FACTS & CIRCUMSTA NCES OF THE CASE IN DELETING THE ADDITION OF RS.1,14,7 5 , 5 OO/ - MADE AS BUSINESS INCOME AND IN HOLDING THAT PAINTINGS WERE PERSONAL EFFECTS OF ASSESSEE.' 6. 'THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. THE GROUNDS RAISED BY THE REVENUE FOR THE ASSTT. YEAR 2007 - 08 READ AS UNDER: - 1. 'WHETHER THE CIT(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN HOLDING THAT PAINTINGS SOLD BY ASSESSEE WERE PERSONAL EFFECTS IN SPITE OF THE VITAL OBSERVATION OF THE A O THAT PAINTINGS WERE NOT PERSONAL EFFECTS.' 2. 'WHETHER THE C!T(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN IGNORING THE VITAL ADMITTED FACT THAT THE TWO PAINTINGS WERE SOLD AT A PRICE HIGHER THAN THE PURCHASE PRICE BY THE COMPANY OF THE SAME DAY OF PURCHASE DESPITE OF THE FACT THAT THE ASSESSEE HIMSELF WAS CONTROLLING THE SAME COMPANY I.E P ARYAN ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 4 ART GALLERY ( P ) LTD AND BY DOING THIS MADE COLLUSIVE ARRANGEMENT TO AVOID TAX ON A MAJOR PART O F THE PROFIT.' 3. 'WHETHER THE C!T(A) HAS ERRED IN FACTS & CIRCUMSTANCES OF THE CASE IN GRANTING RELIEF TO ASSESSEE ON THE BASIS OF A COPY OF AFFIDAVIT FILED BY ASSESSEE STATED TO BE NOT EXAMINED BY THE A O DESPITE THE FACT THAT THE ASSESSEE HAS. NOT FURNI SHED EVENT THE BASIC DETAILS/BANK ACCOUNT ETC DURING 31 OPPORTUNITIES ALLOWED TO HIM.' 4. 'WHETHER THE C I T(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN IGNORING THE OBSERVATION AND ALSO CORROBORATIVE EVIDENCES BROUGHT ON RECORD BY THE A O DURIN G. ASSESSMENT AS WELL AS THE REMAND PROCEEDINGS WHICH PROVES THAT ASSESSEE IS ACTIVELY ENGAGED IN THE BUSINESS OF SALE & PURCHASE OF PAINTINGS.' 5. 'WHETHER THE C I T(A) HAS ERRED IN THE FACTS & CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.3,20,56,480/ - MADE AS BUSINESS INCOME AND IN HOLDING THAT PAINTINGS WERE PERSONAL EFFECTS OF ASSESSEE.' 6. 'THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE G ROUNDS OF APPEAL BE FORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 4. THE GROUNDS RAISED BY THE REVENUE FOR THE ASSTT. YEAR 2008 - 09 READ AS UNDER: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER ID.CIT(A) WAS CORRECT IN HOLDING THAT INCOME FROM ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 5 SALE OF' PAINTI NGS WAS ASSESSABLE UNDER THE HEAD : 'CAPITAL GAIN' AS AGAINST ASSESSED BY THE A.O. UNDER THE HEAD 'BUSINESS' WHEN PRIOR TO INTRODUCTION OF AMENDMENT BY FINANCE ACT,2007 W.E.F. 01.04.2008 THE SAME WAS NOT SHOWN AS CAPITAL GAIN IN THE GUISE OF PERSONAL EFFEC T VIS - A - VIS CAPITAL ASSETS.' 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE ID CIT(A) WAS CORRECT IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE PAINTINGS SOLD BY HIM WERE ANCESTRAL PROPERTIES WHEN THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM WITH ANY EVIDENTIARY DOCUMENTS IN THE FORM OF WILL/INHERITANCE DEED ETC. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE ID CIT(A) WAS CORRECT IN HOLDING THE INCOME FROM SALE OF PAINTINGS UNDER THE HEAD 'CAPITAL GAIN' WHEN SERIES OF TRA NSACTIONS INCURRED BY THE ASSESSEE SHOWS THAT THE ASSESSEE HELD THE VARIOUS PAINTING AS STOCK IN TRADE AND THE SOLD THEM WHEN A GOOD OPPORTUNITY FOR THE SAME WAS AVAILABLE AND THE ASSESSEE HAD BEEN CONTINUOUSLY AND HABITUALLY ENGAGED IN SUBSTANTIVE AND SYS TEMATIC COURSE OF ACTIVITY WITH THE SET PURPOSE OF MAKING PROFIT ASSESSABLE UNDER THE HEAD 'INCOME FROM BUSINESS'. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE ID,.CIT(A) WAS CORRECT IN ADMITTING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A BY RELYING ON A LETTER DATED 19.1.2008 FROM 'M/S OSIAN'S CONNOISSEURS OF ART PVT LTD WHICH WAS NEVER SUBJECT MATTER DURING THE COURSE ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 6 OF ASSESSMENT PROCEEDINGS U/S 143(3) AND WAS ALSO NOT ASKED BY THE ID.CIT(A) TO BE COMMENTED UPON BY THE A.O. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR A M END ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL.' 5. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION FOR THE ASSTT. YEAR 2006 - 07 READ AS UNDER: - 1. THAT THE CIT (A ) HAS ERRED IN LAW AS WELL AS ON FACTS IN JUSTIFYING THE REOPENING OF THE ASSESSMENT BECAUSE SHE FAILED TO APPRECIATE THAT: (A) AO HAS NO REASON TO BELIEVE THAT ASSESSE IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE TRANSACTIONS OF PAINTINGS. (B) AO H AD NO FRESH MATERIAL ON RECORD, WHICH LED HIM TO BELIEVE FOR REOPENING THE ASSESSMENT AS PROVIDED U/S 147 EVEN IF THE SAME WAS COMPLETED U/S 143 (1) OF THE IT ACT, 1961. ( C ) THE PAINTINGS WERE KEPT AS PERSONAL AFFECT WHICH WERE TREATED AS CAPITAL ASSET W.E.F. 01.04.2008 ONLY BUT NOT IN EARLIER YEARS. (D) THERE WAS NO ESCAPED INCOME AS ALL THE RECEIPTS WERE DULY BEEN DECLARED BEING RECEIVED THROUGH A/ C PAYEE CHEQUES IN THE BANK STATEMENTS. (E) ASSESSEE HAS NOT KEPT PAINTINGS AS STOCK - IN - TRADE OR MAINTA INED ANY BOOKS OF ACCOUNT FOR CLAIMING EXPENDITURE AGAINST ANY SUCH BUSINESS. ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 7 (F) VIEW OF THE ASSESSEE WAS HELD TO BE JUSTFIED BY THE CIT(A) IN AY 2008 - 09 IN ASSESSEE'S OWN CASE WHICH WAS ACCEPTED BY HER ALSO. (G) ASSESSMENT CAN'T BE REOPENED WHEN THERE ARE TWO POSSIBLE VIEWS OF DECLARING INCOME OR MERELY ON CHANGE OF OPINION. (H) CLAUSE (B) TO THE EXPLANATION 11 OF SECTION 147 CAN BE APPLIED WHEN THERE IS UNDER STATEMENT OF INCOME WHILE SHE HERSELF ALLOWED THE APPEAL ON MERITS AS THERE WAS NO UNDERSTAT EMENT. 6 . THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION FOR THE ASSTT. YEAR 2007 - 08 READ AS UNDER: - 1. THAT THE CIT (A) HAS ERRED IN LAW AS WELL AS ON FACTS IN JUSTIFYING THE REOPENING OF THE ASSESSMENT BECAUSE SHE FAILED TO APPRECIATE THAT: (A) AO HAS NO REASON TO BELIEVE THAT ASSESSE IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE TRANSACTIONS OF PAINTINGS. (B) AO HAD NO FRESH MATERIAL ON RECORD, WHICH LED HIM TO BELIEVE FOR REOPENING THE ASSESSMENT AS PROVIDED U / S 147 EVEN IF THE SAME WAS COMPLETED U/S 143 (1) OF THE IT ACT, 1961. (C) THE PAINTINGS WERE KEPT AS PERSONAL AFFECT WHICH WERE TREATED AS CAPITAL ASSET W.E.F. 01.04.2008 ONLY BUT NOT IN EARLIER YEARS. ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 8 (D) THERE WAS NO ESCAPED INCOME AS ALL THE RECEIPTS WERE DULY BEEN DECLARED BEING RECEIVED THROUGH A / C PAYEE CHEQUES IN THE BANK STATEMENTS. (E) ASSESSEE HAS NOT KEPT PAINTINGS AS STOCK - IN - TRADE OR MAINTAINED ANY BOOKS OF ACCOUNT FOR CLAIMING EXPENDITURE AGAINST ANY SUCH BUSINESS. (F) VIEW OF THE ASSESSE E WAS HELD TO BE JUST I FIED BY THE CIT (A) IN AY 2008 - 09 IN ASSESSEE'S OWN CASE WHICH WAS ACCEPTED BY HER ALSO. (G) ASSESSMENT CAN'T BE REOPENED WHEN THERE ARE TWO POSSIBLE VIEWS OF DECLARING INCOME OR MERELY ON CHANGE OF OPINION. (H) CLAUSE (B) TO THE EX PLANATION 11 OF SECTION 147 CAN BE APPLIED WHEN THERE IS UNDER STATEMENT OF INCOME WHILE SHE HERSELF ALLOWED THE APPEAL ON MERITS AS THERE WAS NO UNDERSTATEMENT. REVENUE S APPEALS (ASSTT. YEARS 2006 - 07 TO 2007 - 08) 7 . THE FACTS OF THE CASE ARE NOT IN DISPUTE BY BOTH THE PARTIES, THEREFORE, NEED NOT REPEATED HERE FOR THE SAKE OF CONVENIENCE. 8 . AGAINST THE ASSESMENT ORDER , THE ASSESSEE APPEALED BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER HAS HELD AS UNDER: - IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT IN THE YEAR UNDER CONSIDERATION THE PAINTINGS SOLD WERE PERSONAL EFFECT O F THE ASSESSEE AND THEY ARE NOT ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 9 LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX, 1961 AS PREVALENT IN THIS ASSESSMENT YEAR UNDER CONSIDERATIO N . THI S GROUND OF APPEAL IS ALLOWED. THE APPELLANT GETS A RELIEF OF RS. 1,14,75,500/ - . 9 . AGAINST THE AFORESAID ORDER PAS SED BY THE LD. FIRST APPELLATE AUTHORITY , THE REVENUE IS IN APPEAL BEFORE US. 10 . LD. COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAI NING PAGES 1 TO 125 HAVING THE ASSESSMENT RECORDS AND COPIES OF VARIOUS DECISIONS OF THE HON BLE HIGH COURT AND HON BLE SUPREME COURT OF INDIA. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE STATED THAT THE ISSUE IN DISPUTE HAS BEEN SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF FAIZ MURTAZA ALI VS. C OMMISSIONER OF INCOME TAX [2014] (3 6 0 ITR 200 ) {DELHI} AND HE REQUESTED THE SAME MAY BE FOLLOWED IN THE PRESENT CASE ALSO. 10 .1 ON THE CONTRARY, LD. DR RELIED UPON THE ORDER S OF THE LOWER AUTHORITIES. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RELEVANT RECORDS, THE PAPER BOOK FILED BY THE LD. COUNSEL OF THE ASSESSEE AND ESPECIALLY THE ORDERS PASSED BY THE REVENUE AU THORITIES ALONGWITH THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT S IN THE CASE OF FAIZ MURTAZA ALI VS. COMMISSIONER OF INCOME TAX (360 ITR 200) (SUPRA) . WE FIND THAT THE HON BLE HIGH COURT OF DELHI IN THE AFORESAID CASE HAS HELD AS UNDER: - IF ARTICLES FALL WITHIN THE EXPRESSION PERSONAL EFFECTS THEY ARE NOT TO BE INCLUDED AS PART OF CAPITAL ASSETS. NOW, THE EXPRESSION PERSONAL EFFECTS HAS BEEN DEFINED AS MOVABLE PROPERTY ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 10 (INCLUDING WEARING APPAREL AND FURNITURE, BU EXCLUDING JEWELLERY) HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM. SECTION 2(14) OF THE INCOME TAX ACT, 1961, WAS AMENDED WITH EFFECT FROM APRIL 1, 2008. WITH EFFECT FROM APRIL 1, 2008, EVEN PAINTINGS, SCULPTURES, WORKS OF ART, ARCHEOLOG ICAL COLLECTIONS AND DRAWINGS, IN ADDITION TO. JEWELLERY, HAVE BEEN EXCLUDED FROM THE EXPRESSION 'PERSONAL EFFECTS'. IN THE RETURN FILED BY THE ASSESSEE FAR THE ASSESSMENT YEAR 2002 - 03 HE DECLARED INCOME AF RS. 31,71,656. THE ASSESSING OFFICER NOTICED THA T IN THE BANK ACCOUNT AF THE ASSESSEE THERE WAS A DEPOSIT AGGREGATING TO RS. 39.47 LAKHS WHICH ACCORDING TO. THE ASSESSEE WAS THE AMOUNT REALISED BY HIM FROM THE SALE AF CERTAIN 'PERSONAI EFFECTS'. ACCORDING TO HIM, THE SUMS REALISED FROM THE SALE WERE EXE MPT UNDER SECTION 2(14). THE ASSESSEE EXPLAINED THAT HE HAD RECEIVED VARIOUS HOUSEHOLD ITEMS, PAINTINGS, CARPETS, COLLECTOR ITEMS, FURNITURE ITEMS, ETC., OWNED BY HIS GRANDFATHER, FATHER, UNCLE AND AUNT. THESE MOVABLE PROPERTIES WERE HELD FOR PERSONAL USE BY THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THESE ITEMS COULD NOT BE TREATED AS PERSONAL EFFECTS AND WERE IN FACT CAPITAL ASSETS WITHIN THE MEANING AF SECTION 2(14). THE CAM MISSIONER (APPEALS) HELD THAT THE ITEMS SOLD WERE ARTICLES MEANT F OR PERSONAL USE AND WERE, THEREFORE, PERSONAL EFFECTS. THIS ORDER WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO. THE HIGH COURT : ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 11 HELD, ALLOWING THE APPEAL, THAT THE ASSESSEE HAD BEEN ABLE TO SHOW THAT THE ARTICLES WERE INHERITED OR RECEIVED BY HIM BY WAY OF GIFT. THOSE ARTICLES WERE MOVABLE PROPERTIES. THEY DID NOT INCLUDE ANY JEWELLERY AND THEY HAD BEEN HELD FOR PERSONAL USE BY THE ASSESSEE AND THEY WERE SUBSEQUENTLY SOLD BY HIM TO VARIOUS BUYERS. THE FACT THAT THESE ARTICLES WERE HELD BY HIM FOR PERSONAL US E HAD BEEN INDICATED IN THE AFFIDAVIT FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. NO MATERIAL HAD BEEN BROUGHT OUT BY THE ASSESSING OFFICER OR THE REVENUE TO INDICATE THAT THE AFFIDAVIT WAS FALSE. THE AMENDMENT AF SECTION 2(14) WITH EFFECT FROM APR IL 1, 2008, WAS PRASPECTIVE IN OPERATION. THE ASSESSEE WAS ENTITLED TO EXEMPTION FROM TAX AN THE SALE AF PERSONAL EFFECTS. 12. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT RELIED UPON BY THE LD. COUSNEL OF THE ASSESSEE, WE FIND CONSIDE RABLE COGENCY IN THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ISSUE IN DISPUTE IN THE PRESENT CASES HAVE BEEN SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION OF THE HON BLE DELHI HIGH COURT IN FAIZ MURTAZA ALI VS. C OMMISSIONER OF IN COME TAX [2014] (3 6 0 ITR 200 ) {DELHI}, THEREFORE, RESPECTFULLY FOLLOWING THE PRECEDENT AS AFORESAID, WE DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE AND DISMISS THE APPEALS OF THE REVENUE RELEVANT TO ASSTT. YEAR 2006 - 07 TO 2007 - 08. REVENUE S APPEAL ( ASSTT. YEAR 2008 - 09 ) 13. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS FILED ORIGINAL RETURN OF INCOME FOR THE ASSTT. YEAR 2008 - 09 ON 6.1.2009 DISCLOSING A ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 12 TOTAL INCOME OF RS. 29,17,060/ - . DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2008 - 09, T HE ASSESEE HAS DERIVED INCOME FROM SALARY FROM M/S P. ARYAN ART GALLERY PVT. LTD. (IN WHICH ASSESSEE HAS 25% SHAREHOLDING), INCOME FROM SHORT TERM CAPITAL GAINS AND INCOME FROM LONG TERM CAPITAL GAINS ON THE SALE OF PAINTINGS, BESIDES INCOME FROM OTHER SO URCES (INTEREST INCOME). THE ASSESSING OFFICER, CONCLUDED THAT THE CAPITAL GAINS, (INCLUDING THE LONG TERM AND SHORT TERM) SHOWN BY THE ASSESSEE AMOUNTING TO RS. 2,56,86,0547/ - IS TREATED AS THE BUSINESS INCOME OF THE ASSESSEE DERIVED FROM THE TRADING OF PAINTING AND ADDED TO HIS INCOME ACCORDINGLY. 14 . A GAINST THE ORDER DATED 30.12.2010 PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE I.T. ACT, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 17.6.2011 HAS ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE, INCOME FROM SALE OF PAINTINGS IS REQUIRED TO BE ASSESSED UNDER THE HEAD CAPITA GAINS , AND NOT AS INCOME FROM BUSINESS. THE ASSESSING OFFICER IS, ACCORDINGLY, DIRECTED TO RECOMPUTED THE TOTAL INCOME OF THE ASSESSEE BY TAKING THE INCOME FROM SALE OF PAINTINGS UNDER THE HEAD CAPITAL GAINS. THE REVISED TWO PAINTINGS TO OSIAN S BY TAKING THE INDEXED COST OF ACQUISITION FOR FINANCIAL YEAR 1997 - 98 SHOULD ALSO BE TAKEN INTO ACCOU NT. 1 5 . AGAINST THE ABOVE ORDER DATED 17.6.2011 PASSED BY THE LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 13 16. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT LD. CIT(A) HAS ADJUDICATED THE ISSUE IN RESPECT OF THE ASSTT. YEAR 200 8 - 09 AS UNDER : - I AGREE WITH THE VIEW TAKEN BY THE ASSESSEE THAT IN THE PRESENT CASE, THE APPELLANT AS ARGUED BY THE LD. COUSNEL THAT IN PRESENT CASE, THE APPELLANT WAS NOT ENGAGED IN THE BUSINESS OF TRADING OF PAINTINGS. A LETTER ISSUED BY MIS OSIAN' S - CONNOISSEURS OF ART PVT. LTD. CLEARLY SHOWS THAT IT WAS ADDRESSED TO SH. PRAGY ARYA. THIS SHOWS THAT THE ASSESSEE WAS NOT REPRESENTING HIMSELF AS A BUSINESS CONCERN BUT WAS REPRESENTING HIMSELF IN THE INDIVIDUAL CAPACITY AS THE OWNER OF THE PAINTINGS AND NOT AS A PAINTER OR AS AN ARTIST. IN THE BUSINESS OF TRADING OF PAINTINGS OR ANY OTHER BUSINESS, NORMALLY TRADE NAMES ARE USED SO THAT BUSINESS PEOPLE COULD TREAT THEM AS BUSINESSMAN. THERE IS NO PROPRIETORSHIP CONCERN NAMED EITHER WHICH IS NORMALLY THERE IN THE CASE OF INDIVIDUAL BUSINESSMAN. IN THE PRESENT CASE, THE APPELLANT DID NOT MAINTAIN ANY SHOP OR OFFICE FROM WHERE HE WAS DISPLAYING THE PAINTINGS. IN FACT, THE PAINTINGS WERE SOLD EITHER BY DISPLAYING THEM IN THE GALLERY OF M/S OSIAN'S - CONNOISSEURS OF ART PVT. LTD. OR THROUGH THE COMPANY WHO ULTIMATELY DISPLAYED AND SOLD THEM FOR PROFITS DECLARED IN THEIR HANDS. THIS SHOWS THAT THE APPELLANT HAS BROUGHT THE PAINTINGS FROM HIS PERSONAL ASSETS AND SOLD THEM WHENEVER NEEDED BUT NOT TRADED BY HIM THROUG H HIS OFFICE OR GALLERY MAINTAINED BY HIM. FURTHER, THERE ARE HARDLY THREE TO FOUR TRANSACTIONS OF SALE IN A YEAR AND THERE IS NO INCOME DECLARED EITHER OF THE COMMISSION EARNED EN THE SALE OF PAINTINGS OR ON ACCOUNT OF RENTAL ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 14 INCOME OF THE PAINTINGS OR AN Y EXPENDITURE INCURRED ON THE EMPLOYEES WHICH IS A VERY COMMON FEATURE OF HANDLING ANY BUSINESS IN THIS TRADE. THERE IS NO EXPENDITURE CLAIMED FOR FRAMING OR UPKEEP OF THE PAINTINGS ALSO WHICH IS A NORMAL FEATURE FOR SALE OF ANY PAINTINGS. THE APPELLANT H AS NOT CLAIMED ANY SUCH EXPENDITURE EVEN UNDER THE HEAD CAPITAL GAINS SUCH AS TRAVELING AND CONVEYANCE EXPENSES FOR MUMBAI WHERE THESE PAINTINGS WERE SOLD OR EXPENDITURE INCURRED FOR TRANSFERRING THESE PAINTING TO MUMBAI AT TAJ MAHAL HOTEL. THESE EXPENSES ARE BOUND TO HAPPEN BUT THE APPELLANT DID NOT CLAIM THEM, PROBABLY AS SUCH EXPENDITURE IS DISPUTABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS. IN CASE THE ASSESSEE WAS ENGAGED IN BUSINESS, THERE WAS NO REASON FOR HIM TO DEPOSIT THE SUM EARNED BY HIM IN THE CAPITAL GAINS ACCOUNT EITHER. HIS ACTION OF RECTIFYING HIS MISTAKE IN CALCULATING THE INDEXED COST WRONGLY ALSO SHOWS HIS INTENTION TO DECLARE THE PROFITS TRULY AND CORRECTLY. IN MY VIEW, THE APPELLANT HAS, THUS, RIGHTLY SHOWN THE PROFITS AND GAINS ON SALE OF PAINTINGS UNDER THE HEAD 'CAPITAL GAINS'. MOREOVER, THE ASSESSING OFFICER IS ALSO NOT CORRECT IN COMPUTING THE PROFITS UNDER THE HEAD INCOME FROM BUSINESS BY REDUCING TH E INDEXED COST AS AGAINST MARKET PRICE OF THE PAINTINGS ON THE DATE WHEN SHE WAS HAVING OPINION THAT THEY WERE INTRODUCED AS STOCK - IN - TRADE, SPECIFICALLY IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT DISCUSSED EARLIER. IN THAT CASE, THERE WOULD BE H ARDLY ANY BUSINESS PROFITS TO BE TAXED. THERE IS ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 15 NO PROVISION UNDER CHAPTER IV, PART D OF THE INCOME - TAX ACT DEALING WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION, TO REDUCE THE INDEXED COST FOR CALCULATING THE BUSINESS PROFITS. SINCE I AM OF THE VIEW THAT THE APPELLANT WAS NOT ENGAGED IN THE BUSINESS, I DO NOT FIND ANY REASON TO GO INTO THE DEPTH OF TAKING MARKET PRICE OF THE PAINTINGS OR TO GO INTO THE DEPTH ON THE DATE ON WHICH THE PAINTINGS WERE INTRODUCED IN THE BUSINESS AS STOCK IN TRADE. SINCE ALL THE GROUNDS OF APPEAL TAKEN ORIGINALLY OR ADDITIONALLY REVOLVE ON THE ONE ISSUE 'WHETHER THE PROFITS ARE REQUIRED TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR CAPITAL GAINS', I DO NOT FIND IT NECESSARY TO DISPOSE THEM SEPARATELY AND SO ALL THE SE GROUNDS ARE DISPOSED OF BY ME COLLECTIVELY BY HOLDING THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, INCOME FROM SALE OF PAINTINGS IS REQUIRED TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS, AND NOT AS INCOME FROM BUSINESS. THE ASSESSING OFFICER IS, ACCO RDINGLY, DIRECTED TO RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE BY TAKING THE INCOME FROM SALE OF PAINTINGS UNDER THE HEAD CAPITAL GAINS. THE REVISED WORKING OF THE CAPITAL GAINS ON SALE OF TWO PAINTINGS TO OSIAN'S BY TAKING THE INDEXED COST OF ACQUISITION FOR FINANCIAL YEAR 1997 - 98 SHOULD ALSO BE TAKEN INTO ACCOUNT. IT MAY ALSO BE MENTIOEND HERE THAT DURING THE COUFRSE OF THE APPEAL, A REPORT DATED 18.05.2011 WAS RECEIVED FROM THE ASSESSING OFFICER ENCLOSING THEREWITH AN. AFFIDAVIT FROM THE APPELLANT'S FATHER SUBMITTED DURING THE COURSE ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 16 OF THE REASSESSMENT PROCEEDINGS FOR AY 2006 - 07 AND AY 2007 - 08 IN THE CASE OF THE ASSESSEE. IN BRIEF, IT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER THAT THE PAINTINGS SOLD IN THE AY 2008 - 09 DO NOT APPEAR IN THE AFFIDAV IT AND, THEREFORE, THEY ARE NOT ANCESTRAL. IT HAS, HOWEVER, BEEN SUBMITTED BY THE LD. COUNSEL OF THE APPELLANT IN THIS REGARD THAT THE AFORESAID AFFIDAVIT WAS GIVEN SPECIFICALLY FOR THE PURPOSES OF THE REASSESSMENT PROCEEDINGS FOR THE AY 2006 - 07 AND AY 200 7 - 08 AND SO IT CONTAINS ONLY THE LIST OF SEVEN PAINTINGS PERTAINING TO THOSE TWO YEARS AND NATURALLY DOES NOT MENTION ANYTHING ABOUT THE PAINTINGS PERTAINING TO THE YEAR UNDER CONSIDERATION, I.E., AY 2008 - 09. ON EXAMINATION OF THE FACTS OF THE CASE, THE SU BMISSIONS ARE FOUND TO BE IN ORDER. NO FURTHER COMMENTS ARE, THEREFORE, CALLED FOR IN THE MATTER. 17. IN VIEW OF THE AFORESAID ELABORATE DISCUSSIONS MADE BY THE LD. CIT(A), WE FIND THAT THE ORDER OF THE LD. CIT(A) IS A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND ACCORDINGLY, DISMISS THE APPEAL OF THE REVENUE. ASSESSEE S CROSS OBJECTIONS 1 8 . SINCE THE APPEALS FILED BY THE REVENUE HAVE BEEN DISMISSED BY US AS AFORESAID, THEREF O RE, BOTH THE CROSS OB JE C TIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND DISMISSED AS SUCH. 1 9 . IN THE RESULT, THE THREE APPEALS FILED BY THE REVENUE AND TWO CROSS OBJECTIONS FILED BY THE ASSESSEE STAND DISMISSED . ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 17 ORDER PRONOUNCED IN THE O PEN C OURT ON 30 / 10 /20 1 4 . SD/ - SD/ - [ J.S. REDDY] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 30 / 10 /201 4 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO S . 4139/DEL/2011 & 4188 & 4189 /DEL/2013 AND CO NOS. 158 & 159/DEL/201 4 18