Shri Kishanchand Belaram Advani, Baroda V. The ACIT.,Circle-5m, Baroda

ITA 1185/AHD/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8191 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUNKUND BAKSHI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Question of law; Cost of acquisition
• Section: 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.1185/AHD/2012 ( / ASSESSMENT YEAR : 2008-09) SHRI KISHANCHAND BELARAM ADVANI, PROP. HARIOM ENTERPRISE, 17, NAINA SOCIETY, OPP : ONGC GATE, MAKARPURA, BARODA - 390010 # VS. THE ACIT, CIRCLE 5, AYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA $ # % & # PAN/GIR NO. : ACHPA 8588 Q ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI MUNKUND BAKSHI, A.R. ($'*) / RESPONDENT BY : SHRI K. MADHUSUDAN, SR.D.R. + ,*-. / DATE OF HEARING 23/10/2017 /012*-. / DATE OF PRONOUNCEMENT 27/10/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA, DATE D 26/03/2012 FOR THE ASSESSMENT YEAR (AY) 2008-09, ON THE FOLLOWING GROUNDS: I. THE LD. CIT (A)-V, BARODA HAS ERRED IN LAW AND IN F ACTS IN CONFIRMING THE ACTION OF LD.AO IN CHARGING TO TAX T HE INCOME FROM SALE OF LAND HELD AS INVESTMENT AND CONSISTENT LY TREATED AS CAPITAL ASSET, AS BUSINESS INCOME AS AGAINST THE AP PELLANT'S OFFER OF SUCH INCOME AS CAPITAL GAIN. ITA NO.1185/AHD /2012 SHRI KISHANCHAND BELARAM ADVANI VS. ACIT ASST.YEAR 2008-09 - 2 - II. THE LD. CIT(A)-V, BARODA HAS FURTHER ERRED IN LAW A ND IN FACTS IN HOLDING THAT THE APPELLANT IS A BUILDING CONTRAC TOR AND THAT THE ACTIVITIES OF PURCHASE AND SALE OF LAND ARE CONDUCT ED ON A LARGE SCALE FOR WHICH SUBSTANTIAL BORROWINGS ARE MADE AND THAT MERE CLASSIFICATION OF THE PURCHASE OF LAND AS INVESTMEN T IN THE BALANCE SHEET IS OF NO CONSEQUENCE. THIS FINDING OF THE LD. CIT(A) IS IN COMPLETE DISREGARD OF FACTS AND ALSO I N CONTRADICTION TO SUCH INCOME BEING TAXED AS CAPITAL GAINS IN THE PAST ASSESSMENTS. III. COROLLARY TO THE GROUND NO.3 ABOVE, THE LD. COMMISS IONER OF INCOME TAX (A)-V, BARODA HAS ERRED IN LAW AND IN FA CTS IN CONFIRMING THE ACTION OF LD. AO IN ASSESSING THE SH ORT TERM CAPITAL GAIN ARISING FROM SALE OF LANDS AS BUSINESS INCOME AS AGAINST THE APPELLANT'S OFFER OF SUCH INCOME AS CAP ITAL GAIN. THE IMPUGNED TREATMENT OF CAPITAL GAINS AS BUSINESS INC OME BEING BAD IN LAW AS WELL AS ON FACTS, IT IS, THEREFORE, P RAYED THAT THE SAME MAY BE TREATED AS INCOME FROM SHORT TERM CAPIT AL GAINS. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, THE ASSESSEE'S BUSINESS IS THAT A BUI LDING CONTRACTOR WHOSE BUSINESS IS VERY MUCH ALIGNED TO THE PURCHASE AND SALE OF LAND. IN THIS RESPECT THE BALANCE SHEET OF THE ASSESSEE FOR A.Y. 2006-07, 2007-08 AND 2008-09 WERE ANALYSED. THE FOLLOWING CHART REPR ESENTS THE NATURE OF TRANSACTION OF THE ASSESSEE. ITEMS OF THE BALANCE SHEET F. Y. 2005- 06 F. Y. 2006- 07 F. Y. 2007-08 CAPITAL : 1882542 2179866 10716611.05 LOANS: 34862038 28276898 27043651 ADVANCE FROM CUSTOMERS: 4968338 2526849 3700223 ITA NO.1185/AHD /2012 SHRI KISHANCHAND BELARAM ADVANI VS. ACIT ASST.YEAR 2008-09 - 3 - BOOKING ADVANCE: 14685447 12708297 10108454 SUNDRY CREDITORS 6681782 9041825 6077173 LAND INVESTMENTS 56928359 52672513 45016634 ON THE ANALYSIS OF THE BALANCE SHEET FOR LAST THREE FINANCIAL YEARS IT IS OBSERVED THAT IN THE F.Y. 2005-06 THE ASSESSEE DID NOT HAVE MUCH OF CAPITAL HENCE FOR THE PURCHASE OF LAND THE ASSESSEE WAS DEPENDENT ON LOANS. THEREFORE THE AUGMENTATION IN THE STOCK OF L AND WAS PRIMARILY BASED ON BORROWINGS. EVERY YEAR THERE HAS BEEN ADDI TION TO THE STOCK OF THE LAND AS WELL AS SALE OF THE LAND. THIS HAS RESU LTED IN ADVANCES FROM CUSTOMERS BECOMING NEGATIVE I.E. TO SAY THAT THE LI ABILITY IN THE FORM OF ADVANCE FROM CUSTOMERS HAS TURNED INTO A NEGATIVE F IGURE BECAUSE THE ASSESSEE HAS SOLD THE LAND BUT HAS NOT RECOVERED TH E AMOUNT AGAINST THE SALE OF LAND. THIS IS MAINLY BECAUSE THE ASSESSEE H AS ENTERED INTO DEVELOPMENT AGREEMENTS WITH OTHER PARTIES OR HAS GI VEN POSSESSION TO THE OTHER PARTIES WHO ARE STILL SUPPOSED TO MAKE PA YMENT TO THE ASSESSEE. FROM THE ANALYSIS OF LAND INVESTMENT IT IS AMPLY CL EAR THAT THE ASSESSEE HAS BEEN SELLING LAND ON A FREQUENT BASIS YEAR AFTE R YEAR. AS FAR AS BOOKING ADVANCE IS CONCERNED IT HAS BEEN PROVED AS BOGUS LIABILITY DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT FOR THE A.Y. 2007-08. ON THIS BASIS THE ASSESSEE WAS SHOW CAUSED THROUGH SHOW CAUSED NOTICE DATED 20/12/2010. ITA NO.1185/AHD /2012 SHRI KISHANCHAND BELARAM ADVANI VS. ACIT ASST.YEAR 2008-09 - 4 - ASSESSEE REPLIED VIDE HIS LETTER DATED 22/12/2010 T HAT DURING THE YEAR UNDER CONSIDERATION AND AS PER THE CONSISTENTL Y ACCEPTED TREATMENT BY THE DEPARTMENT, THE APPELLANT HAS OFFERED FOR TA X AS CAPITAL GAINS, THE INCOME REALIZED BY HIM ON SALE OF LAND. THE ASSESSE E SUBMITS TO YOUR GOOD OFFICE THAT THE LAND SOLD BY THE APPELLANT IS HELD BY HIM FOR SEVERAL YEARS AND FROM THE TIME OF PURCHASE, THE INTENTION OF THE ASSESSEE HAS ALWAYS BEEN TO HOLD IT AS INVESTMENT. SUCH INTENTIO N IS REFLECTED IN THE CLASSIFICATION OF SUCH HOLDING AS 'INVESTMENT' IN A CCOUNTS AND THE BALANCE SHEETS PREPARED AND FILED WITH THE RETURN OF INCOME FROM YEAR TO YEAR. THE ASSESSEE'S CONTENTION WITH RESPECT TO THE TAXAT ION OF SUCH INCOME AS CAPITAL GAINS HAS BEEN ACCEPTED BY DEPARTMENT FOR A SSESSMENT YEAR 07-08. 2.2 THE ASSESSEES SUBMISSIONS CONSIDERED BUT NOT F OUND TO BE TENABLE BY THE LEARNED AO AND MADE ADDITION OF RS.85,27,060 /-. 3. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LEARNED AR FILED AN APPELLATE ORDER IN ASSESSEES O WN CASE, PASSED BY THE LEARNED CIT(A)-V, BARODA DATED 09/04/2010 FOR T HE A.Y.2007-08. LEARNED CIT(A) HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. CONSIDERING THE NATURE OF EXPENSES AND THE FACT THE EXPENSES WERE MOSTLY INCURRED IN C ASH, THE DISALLOWANCE BY THE AO TO ACCOUNT FOR NON BUSINESS ELEMENT IS REASONABLE AND IS CONFIRMED. ITA NO.1185/AHD /2012 SHRI KISHANCHAND BELARAM ADVANI VS. ACIT ASST.YEAR 2008-09 - 5 - 4.2 LD. AR ALSO FILED A COPY OF ASSESSMENT ORDER PA SSED U/S.143(3) OF THE ACT DATED 22/03/2016 FOR THE A.Y. 2013-14. IN T HIS CASE, LEARNED AO HELD THAT THE ASSET IS CERTAINLY A CAPITAL ASSET AND NOT A BU SINESS ASSET. ASSESSEES CLAIM THAT THE SAME IS BUSINESS ASSET IS NOT ACCEPTED. AS PER PROVISIONS OF SECTION 50C OF THE ACT, FULL VALUE OF CONSIDERATION IS TAKEN. 4.3 LD. AR ALSO FILED A COPY OF ASSESSMENT ORDER PA SSED U/S.143(3) OF THE ACT DATED 16/11/2016 FOR THE A.Y. 2014-15. IN T HIS CASE, IT IS HELD THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND REAL ESTATE I.E. PURCHASE AND SALE OF LAND AND INVESTMENT. THE ASSES SEE HAS ALSO DERIVED INCOME FROM REMUNERATIVE, INTEREST AND SHARES OF PR OFIT FROM PARTNERSHIP FIRM IN WHICH HE IS A PARTNER. HE HAS ALSO SHOWN IN COME FROM HOUSE PROPERTY AND INTEREST. NET INCOME FROM BUSINESS ACT IVITIES HAVE BEEN SHOWN AT RS.73,89,975/-. INCOME FROM LONG TERM CAPI TAL GAIN HAS BEEN SHOWN AT RS.37,42,370/-. AS IT HAS BEEN HELD IN THE CASE OF RADHASOAMI SATSANG VS. CIT(SUPRA). 4.4 LD. AR ALSO FILED A JUDGMENT OF JURISDICTIONAL HIGH COURT IN TAX APPEAL NO.716 OF 2010, CIT VS. JAYANTILAL D. PANCHAL , IN THIS APPEAL FOLLOWING QUESTION OF LAW WAS FRAMED: WHETHER IN THE FACT AND CIRCUMSTANCES OF THE CASE THAT THE APPELLATE TRIBUNAL HAS RIGHTLY HELD THAT THE ASSESSEE WAS NOT CARRYING ON BUSINESS BUT WAS HOLDING ASSETS AS CAPITAL ASSETS AND PROFIT EARNED IS NOT BUSINESS PROFIT BUT IS A CAPITAL GAIN ? ITA NO.1185/AHD /2012 SHRI KISHANCHAND BELARAM ADVANI VS. ACIT ASST.YEAR 2008-09 - 6 - IN THIS CASE, ISSUE INVOLVED IN THE RESPECT OF TAX ABILITY OF INCOME ARISING ON SALE OF THE LAND. THE ASSESSEE TREATED T HE PROFIT ON SALE OF LAND AS LONG TERM CAPITAL GAIN AFTER CLAIMING INDEXATION OF COST OF ACQUISITION, WHEREAS, THE ASSESSING OFFICER TREATED SUCH PROFIT AS BUSINESS PROFIT, RELYING ON CERTAIN FACTUAL ASPECTS. WHEN C HALLENGED, THE CIT(A) UPHELD THE FINDINGS OF ASSESSING OFFICER. IN AN APP EAL PREFERRED BY THE ASSESSEE-RESPONDENT BEFORE THE TRIBUNAL, THE TRIBUN AL REVERSED THE FINDINGS ON CIT(A) BY FOLLOWING ITS OWN ORDER IN IT A NO.289/AHD/2005 DTD. 24 TH OCTOBER 2008 RENDERED ON THIS VERY ISSUE IN THE AS SESSEES CASE FOR ASSESSMENT YEAR 2001-02 AND HONBLE TRIBUNAL HA S HELD AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND TH AT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE ITAT, A BENC H, AHMEDABAD IN ASSESSEES OWN CASE FOR A.Y.2001-02 IN ITA NO.289/A HD/2015. THE TRIBUNAL VIDE ITS ORDER DATED 24/10/2008 HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE OBSERVING A S UNDER: '20. IN THE TOTALITY OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN VIEW OF THE VARIOUS DECISIONS DISCUSSED HERE IN BEFORE, WE ARE OF THE OPINION THAT THE ASSESSEE WAS NOT CARRYI NG ON ANY BUSINESS OR ANY ADVENTURE IN THE NATURE OF TRADE IN LANDS AND HAD BEEN PURCHASING THE LANDS WITH THE INTENTION TO MAK E INVESTMENT I.E. TO KEEP THE SAME AS CAPITAL ASSET AND, THEREFO RE, ANY SURPLUS ARISING AS A RESULT OF SALE OF TRANSFER OF SUCH ASS ETS WAS TAXABLE AS LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN D EPENDING ON THE NATURE OF ASSETS I.E., WHETHER THE ASSETS WAS S HORT TERM CAPITAL GAIN/LONG TERM CAPITAL GAIN. ASSESSEES GRO UND IS ALLOWED. 5. WITH THE ABOVE OBSERVATION AS IN THE ASST. YEARS 2007-08, 2013-14 AND 2014-05, THE PLEA OF CAPITAL GAIN WAS ACCEPTED BY THE DEPARTMENT AND ITA NO.1185/AHD /2012 SHRI KISHANCHAND BELARAM ADVANI VS. ACIT ASST.YEAR 2008-09 - 7 - AFTER GOING THROUGH THE AFORESAID HIGH COURT JUDGME NTS WE ALLOW THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27 / 10 /201 7 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/10/2017 PRITI YADAV, SR.PS !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-V, BARODA. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. & ' / BY ORDER, (9-- //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD