Commissioner of Income Tax-III V. Sri Rao Shiva Kumar

ITTA/215/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax-III, Hyderabad against the decision of the Tribunal regarding the tax treatment of income from the sale of land by Sri Rao Shiva Kumar. The Tribunal had classified the income as business income for the assessment year 2006-07, estimating the income at 25% of the turnover and allowing 75% of the sale price as costs, despite the respondent not maintaining books of account or claiming such expenditures. The main legal questions revolved around the correctness of these estimations and classifications under the Income Tax Act.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 679465 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 26-03-2014
• Assessment Year: misc
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Business income; Estimated Income; Sale of land; Undisclosed income; Unclaimed expenditure

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.215 of 2014 Date: 26.03.2014 Between: Commissioner of Income Tax-III, Hyderabad .....Appellant AND Sri Rao Shiva Kumar, Hyderabad ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.215 of 2014 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is directed against the judgment and order of the learned Tribunal dated 31st January 2013 in relation to the assessment year 2006-07 and sought to be admitted on the following suggested questions of law: i. In the facts and circumstances of the case, the Hon’ble Tribunal having held that the amount on sale of land by the respondent-assessee is to be treated as business income, whether correct in law in holding that the income on the said transaction is to be estimated at the rate of 25% of the turn over as against the total turnover, when the respondent- assessee did not maintain its books of account nor claimed or recorded any such expenditure in the subject proceedings? ii. In the facts and circumstances of the case and in law, whether the Hon’ble Tribunal while agreeing that sale of land has to be treated as business income, is correct in law in allowing 75% of the sale price as costs incurred on establishment, salaries, phone etc., without any evidence of such expenditure having been incurred by the respondent- assessee and without any claim regarding the same being made by it? iii. In the facts and circumstances of the case, whether the Hon’ble Tribunal was correct in law in allowing the deduction of 75% from sale consideration of land on account of unclaimed and unrecorded expenditure without taking into account that such expenditure being outside the regular books of account will reflect undisclosed income? The aforesaid questions clearly indicate that the appeal is preferred in relation to a portion of the judgment. It appears, the learned Tribunal, while upholding the fact-finding as to the nature of the business being carried out by the assessee, held on fact that the dominant or the sole intention to resell is a relevant factor and raises a strong presumption though it is not a conclusive proof of trade. Meaning thereby, the lands, which were purchased, are treated to be stock-in-trade. Under these circumstances, it is held to be a business income and not the income from the investment and when no books of account were maintained, the learned Tribunal legitimately estimated the income. Estimation of income is permissible in law, as the assessee does not maintain any books of account. Taking into consideration of the expenditure, the income is estimated. In this case, the learned Tribunal has done so. We do not find any illegality or infirmity in the judgment and order of the learned Tribunal. Moreover, on the aforesaid question of law, the affirmed decision of the Tribunal has been relied on. Accordingly, the appeal is dismissed. No order as to costs. ___________________ K.J. SENGUPTA, CJ __________________ SANJAY KUMAR, J 26-03-2014 Gsn "