Rangnathappa Govindappa Zharkhande, Jalna V. Income-tax Officer, Jalna

ITA 1209/PUN/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0410 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 27-09-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 14-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Capital asset; Business income; Cost of acquisition; Date of conversion; Fair market value; Capital Gains
• Section: 45(2); 251; 271B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1209/PUN/2017 िनधाᭅरण वषᭅ / Assessment Year: 2012-13 Rangnathappa Govindappa Zharkhande, Nal Galli, Kaderabad, Jalna- 431203. PAN : AASHR4543M Vs. ITO, Ward- 3, Jalna. Appellant Respondent आदेश / ORDER PER S. S. GODARA, JM: This assessee’s appeal for assessment year 2012-13 arises against the CIT(A)-1, Aurangabad’s order dated 27.02.2017 passed in case no. ABD/CIT(A)-1/317/2015-16, involving proceedings u/s 144 r.w.s. 147 of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case file perused. 2. Coming to the assessee’s first and foremost legal argument that both the learned lower authorities have erred in law and on facts in taking recourse to section 148/147 proceedings, we find no merit therein since it has come on record that this taxpayer had indeed Assessee by : Shri M. K. Kulkarani Revenue by : Shri M. G. Jasnani Date of hearing : 28.09.2022 Date of pronouncement : 18.10.2022 ITA No.1209/PUN/2017 2 sold its capital/business asset in the relevant previous year and did not file any return. 3. Next comes the assessee’s latter substantive grievance on merits challenging the learned lower authorities’ action adding the entire sale consideration of Rs.74,55,088/- as his “long term capital gains” which stands modified in the CIT(A)’s order as follows :- “i.) The appellant has not disclosed the value at which he had transferred his capital asset into stock-in-trade as on 07.04.2007. The appellant has also not disclosed the fair market value of land as on the date of conversion. ii.) The 37 plots bearing Nos. 76 to 83, 84 to 93, 94 to 98, 158 to 164, 175, 177 to 182 & 184 admeasuring 4580.77 sq. mtr./ 49,288 sq. ft. at Survey No. 186 in question have been sold for a consideration of Rs.74,42,563/- on 15.04.2011. However the stamp duty valuation of the same was taken at Rs.12,60,000/- by the State Government Authorities. The same will represent the fair market value of the land as on 15.04.2011. Applying the cost inflation index of 785 in 2011-12 and 551 in 2007-08, the fair market value of the land admeasuring 4580.77 sq. mtr. is worked out at Rs.8,84,407/-. In the absence of bills/vouchers for the improvement expenses/development expenses, such expenses cannot be allowed to the appellant. The business profits are accordingly worked out at Rs.65,58,156/- (Rs.74,42,563/- less Rs.8,84,407/-) in the hands of the appellant. iii.) The capital gain on the conversion of asset into stock-in-trade is also taxable in the year in which such stock is sold. The fair market value of land admeasuring 4580.77 sq. mtr. is adopted at Rs.8,84,407/- as detailed in para ii above. The cost of acquisition as on 01.04.1981 is worked out on the basis of sale instance. The AO has gathered one sale instance from the Joint Sub- Registrar, Class-2, Jalna wherein land admeasuring 3 acres 1 guntha at Survey No.43, Village Kharpudi was sold for Rs.6,000/- vide sale deed No.138 dated 15.01.1981 by Lalubhai, son of Ramjan to Amenabee, wife of Kale Khan of Jalna. The cost of acquisition of land measuring 4580.77 sq. mtr. (1 acre 30 gunthas) is worked out at Rs.2591/- and same is indexed to Rs.20,339/-. The long term capital gain in the hands of the appellant is worked out at Rs.8,64,068/- (Rs.8,84,407/- less Rs.20,339/-). The AO is directed to take business profits of Rs.65,58,156/- and capital gain of Rs.8,64,068/- in the hands of the appellant instead of capital gains of Rs.74,55,088/-. The AO should take remedial action for earlier years and work out business profits/capital gains on similar lines. The AO is also directed to launch prosecution proceeding U/s ITA No.1209/PUN/2017 3 276C, 276CC and penalty proceedings U/s 271B of the Income Tax Act against the appellant. This ground of appeal is dismissed.” 4. Learned counsel vehemently argued that the impugned capital gains ought not to have been assessed in the year when the assessee had converted his capital asset(s) to stock-in-trade. This assessee’s argument also fails to inspire any acceptance as section 45(2) is a specific provision wherein capital gains arising from such a conversion are assessed in the year of actual transfer of the stock-in- trade. We thus uphold the learned lower authorities’ action; more, particularly the CIT(A)’s action assessing the impugned long term capital gains in assessee’s hand to the tune of Rs.8,64,068/- than the entire sale consideration amounting to Rs.74,55,088/- (supra). 5. Next comes equally important legal question that the CIT(A) has bifurcated the Assessing Officer’s long term capital gains’ computation of Rs.74,55,088/- to business income to the extent of business profits of Rs.65,58,156/-. Mr. Jasnani strong supported the same on the ground that the CIT(A)’s jurisdiction is co-terminus with that of the Assessing Officer in arriving at the correct computation of an assessee’s taxable income. We find no merit in the Revenue’s instant arguments in light of CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC), CIT vs. Union Tyers (1990) 240 ITR 556 (Delhi) and CIT vs. M/s. Sardari Lal & Company (2001) 251 ITR 864 (Delhi) that the CIT(A)’s jurisdiction ITA No.1209/PUN/2017 4 does not extend to introducing an altogether new source of income as it has been done in the facts of the instant case. Faced with this situation, we accept the assessee’s vehement arguments challenging business profits addition of Rs.65,58,156/-. Necessary computation shall follow as per law. No other ground or argument has been raised before us. 6. This assessee’s appeal is partly allowed in above terms. Order pronounced on this 18 th day of October, 2022. Sd/- Sd/- (G. D. PADMAHSHALI) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 18 th October, 2022. Sujeet (DOC) आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-1, Aurangabad. 4. The Pr. CIT-1, Aurangabad. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.