Prakash Sakharam Sangaonkar, Kolhapur V. Assistant Commissioner of Income-tax, Circle - 2, Kolhapur

ITA 1244/PUN/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0185 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-03-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Wrong claim; Capital Gains
• Section: 143(3); 48; 148; 28

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE (THROUGH VIRTUAL COURT) . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.1244/PUN/2019 ! '#! / ASSESSMENT YEAR : 2009-10 PRAKASH SAKAHRAM SANGOANKAR, 768/A, E WARD, SHOP NO.1, 2, 3, SWASTIK HOUSE, SHAHUPURI, KOLHAPUR. PAN : ADXPS7976F. . / APPELLANT V/S THE ASST.COMMISSIONER OF INCOME TAX , CIRCLE 2, KOLHAPUR. . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK. REVENUE BY : SHRI PRASHANT GADEKAR. / ORDER PER SHRI D. KARUNAKARA RAO THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) 2, KOLHAPUR, DATED 10 .06.2019 FOR THE ASSESSMENT YEAR 2009-10. 2. ASSESSEE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR A.Y. 2009-10 DECLARING TOTAL INCOME AT RS.8,12,220/- ON 29.03.2 010. ORIGINALLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. THE CASE / DATE OF HEARING : 2 4. 06.2020 / DATE OF PRONOUNCEMENT : 24 .06.2020 2 WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT DATED 16.04.2013. IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT, ASSESSEE FI LED RETURN ON 29.03.2010 AND ALSO FILED VARIOUS DOCUMENTS AS REQUIRED BY THE AO DURING THE RE-ASSESSMENT PROCEEDINGS. THEREAFTER, THE RE-ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT RE-COMPUTING THE TOTAL IN COME OF THE ASSESSEE AT RS.18,34,720/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DT.10.06.2019 GRAN TED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), AS SESSEE IS NOW IN APPEAL BEFORE ME AND R AISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW , T H E LEARNED CIT(APPEALS) 2, KOLHAPUR FAILED TO APPRECIATE THAT NO CAPITAL GAIN IS ATTRACTED ON THE TRANSFER OF PROPERTY TO THE JOINT DEVELOPMEN T AGREEMENT OR SALE OF THE SAME ONCE IT IS LIABLE TO TAX AS BUSINESS INCOME OF THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW , T H E LEARNED CIT(APPEALS) 2, KOLHAPUR ERRED IN HOLDING THAT THE TRANSACTION OF SALE OF PROPERTY IS LIABLE TO TAX AS BUSINESS INCOME AS WEL L AS INCOME FROM CAPITAL GAIN. 3. THE CORE ISSUE FOR ADJUDICATION IN THIS APPEAL RELATES T O THE APPLICATION OF THE CORRECT HEAD OF INCOME FOR TAXING THE GAINS / PROFITS EARNED IN CONNECTION WITH THE TRANSACTION OF THE JOINT DE VELOPMENT AGREEMENT DATED 20.12.2003 AND THE SALE OF THE SAME. TH IS IS THE DATE OF ACQUIRING THE RIGHTS ON THE LAND FOR DEVELOPMENT. ASSES SEE PAID RS.10,53,500/- TO THE LAND OWNER I.E., ASHOK S. PATIL FOR ACQUIRING THE RIGHT . SUBSEQUENTLY, IN 2008, ASSESSEE SOLD THE SAID RIGHTS FOR C ONSIDERATION OF RS. 25,00,000/- AND EARNED PROFITS. THE TAXATION OF THIS INCOME IS NOT DISPUTED AND HOWEVER, THE HEAD OF INCOME FOR TAXING THE SAME IS DISPUTED DURING THE ASSESSMENT PROCEEDINGS. WHILE, THE A SSESSEE CONSIDERED THE SAID TRANSACTION OF PURCHASE AND SALE OF D EVELOPMENT RIGHTS AS THE BUSINESS TRANSACTION TAXABLE UNDER SEC.28 OF TH E INCOME TAX ACT, 3 ON THE OTHER HAND, THE AO CONSIDERED THE SAME AS THE TRANSACTION ATTRACTING THE CAPITAL GAIN U/S 45 OF THE ACT. THE AO DETERMINED THE ASSESSEES INCOME AFTER RE-ASSESSMENT PROCEEDINGS AT R S.18,34,720/- AGAINST THE RETURNED INCOME OF RS.8,12,220/-. BEFORE THE LD.CIT(A), ASSESSEE SUBMITTED VEHEMENTLY STATING THAT IT IS CERT AINLY A CASE OF BUSINESS TRANSACTION AS ASSESSEE HAS ACQUIRED THE D EVELOPMENT AGREEMENT, ASSESSEE INTENDED TO DEVELOP THE PROPERTY INTO STOCK-IN-TRADE AND SOLD THE STOCKS AND EARNED THE BUSINESS INCOME. L D.CIT(A) CONSIDERED THE SAME AND ON ONE SIDE HE WAS WITH THE ASSESSEE AN D ON THE OTHER SIDE HE REMANDED THE MATTER TO THE AO WITH CERTAIN DIRECTION S (I.E., DVOS VALUATION ETC.,) AND DIRECTED THE AO TO CALCULATE THE CAPIT AL GAINS FOR TAXATION. BEFORE THE TRIBUNAL. 4. SHRI NIKHIL PATHAK, LEARNED COUNSEL FOR THE ASSESSEE NA RRATED THE ABOVE FACTS OF THE CASE AND BROUGHT MY ATTENTION TO TH E CONTENTS OF PARA 5.3.1 AT PAGE NO.5 OF THE ORDER OF THE LD.CIT(A) AND ALSO BR OUGHT MY ATTENTION TO CERTAIN RELATED FINDINGS, WHICH ARE NOT IN SYN C WITH OTHER. HE SUMMED UP BY STATING THAT IN CERTAIN LINES OF THE SAID PAR AGRAPH, THE COMMISSIONER OF INCOME TAX (APPEALS) GAVE CONTRADICTING FIND ING WHICH DOES NOT GET WITH ONE ANOTHER, SO FAR AS THE TAXABILITY U/S 28 OF THE ACT IS CONCERNED. IN CERTAIN OTHER PARTS OF THE SAME PARAGRA PH, CIT(A) DIRECTED THE AO TO COMPUTE THE LONG TERM CAPITAL GAINS WHILE THE RE IS A FINDING THAT THE PROVISIONS OF SECTION 28 OF THE ACT APPLY. THUS, CIT (A) SUFFERED FROM AMBIGUITY IN HIS MIND. 4 5. ON THE OTHER HAND, MR. PRASHANT GADEKAR, LEARNED CO UNSEL FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ALTHOUGH, HE ALSO FOUND SOME AMBIGUITY IN SOME OF THE LINES MENTIONED IN PARA 5.3.1. 6. I HEARD BOTH SIDES ON THIS ASPECT OF AMBIGUITY IN THE MIND OF CIT(A) ON THE HEAD OF INCOME AND FIND IT RELEVANT TO EXTRACT SOME FEW LINES FROM THE PARAGRAPHS 5.3.1 AND 5.3.2 HEREUNDER : 5.3.1. THEREFORE , THE CONTENTION OF THE AO TH A T THE DEVELOPMENT AGREEMENT WAS NOT EXECUTED IS FACTU A LL Y INCORRE C T . ACCORDIN G L Y , AS THE PROPERTY WAS PUT TO THE DEVELOPMENT AGREEMENT , SUBSEQU E NT DEVELOPM E NT OF THE SAME AND SALE PROCEEDS OF THE SAID PROPERTY IS LI A BLE TO TAX AS BUSIN E SS INCOME OF THE ASSESSEE AND NOT INCOME FROM CAPITAL GA INS. I FIND THAT THERE W A S NO WRONG CLAIM HAS BEEN MADE BY THE APPELLANT . HA V ING S A ID S O , ON THE D A T E OF TRANSFER OF THE PROPERTY TO THE JOINT DEVELOPMENT A G R E EMENT OR S A L E OF TH E S A ME , THE APPELLANT IN RESPECT OF THE IMPUGNED PROPERT Y TR A NSFERR E D SH O ULD HA VE P A I D CAPITAL GAINS TAX AS PER LAW. I FIND THAT THE ISSUE OF DISPUTE IS TREATING THE SA L E C ONSIDERATION OF THE LAND AT RS . 48 , 24 , 600 / - BEING TH E ST A MP DUT Y VAL U A TION A N D THE SALE CONSIDERATION SHOWN B Y THE APPELLANT MUCH L E SS IN THE S A L E DEED AT R S . 25 , 00 , 000 / -. THIS ASPECT HAS NEITHER B E EN DEA L T W ITH PR O P E RL Y B Y T H E AO I N T H E ASSESSMENT ORDER , NOR B Y THE APPELL A NT IN THE W RI T T E N S UBMI SS ION . TH E S A L E CONSIDERATION OF THE PROPERTY HAS BEEN TAKEN B Y T HE A O A T RS . 48 , 24 , 600 / - F OR THE REASON THAT THE STAMP DUTY OF TH E PROPERTY IS SU C H A M O UN T . AS THER E WA S A WIDE GAP BETWEEN THE SALE PRICE SHOWN BY THE APP E LL A NT A T RS. 25 , 00,000 / - T O THAT OF THE STAMP DUTY VALUATION AT RS . 48 , 24,600 / - . IT WAS, TH E R E FOR E, NEC E S SA R Y ON THE PART OF THE AO TO REFER THE V A LUATION OF THE PR O P E RT Y T O THE DEPARTM E NT A L VA L UA TI O N O FF ICER (D V O) A N D T H E R EA FT E R O BT A IN I NG R E P O RT FROM HIM , CO MPUT ATI O N CO ULD H AVE B EE N DO NE F O R DE T E RMINING THE LON G TERM C APIT A L G AI N S I N RES PE CT OF SA L E OF PROPERT Y F O R E QUIT Y A ND JUSTIC E. 5.3.2 I N VIEW OF ABOVE FACTS OF THE CASE OF THE APPELLANT AND THE JUDI C I A L D ECIS I ONS CI T ED B Y M E, I D IREC T T HE A O TO R EFER THE VALU A TION OF THE PROPERTY TO THE D VO WHIC H H AS ALSO BEEN RAISED I N GROUND NO . 2 BY THE APPELLANT . AFT E R OBTAINING THE VA L UATION REPORT , THE AO SHALL COMPUT E TH E I NCOME FROM LONG TERM CAPITAL G A I N S O N SALE OF THE I MP UG N ED P L OT OF L AN D AS ON DATE OF SALE AFTER GI V ING N ECESSARY EFFECT TO TH E VA LU A TION REPORT. THE A PP EA L OF TH E APPELLANT IS ACCORDINGLY ALLOWED PARTLY THEREBY DISMISSING TH E APPELLANT ' S CLAIM OF INCOME FROM BUSINESS IN RESPECT OF SALE OF THE PROPERTY BUT ALLOWING THE CLAIM OF THE REFERRING TO THE DVO FOR VALUATION OF THE PROPERTY FOR DETERMINATION OF INCO ME FROM LONG TERM CAPITAL GAINS ON ACCOUNT OF SALE OF THE IMPUGNED PL OT OF LAND . GRO U N D NOS. 1 & 2 RAISED BY THE APPELLANT ARE ACCORDI N G L Y PARTLY ALLOWED. 5 7. FROM THE ABOVE, I FIND THAT THE ARGUMENTS MADE BY T HE LEARNED COUNSEL ARE CORRECT. THERE IS SOME AMOUNT OF AMBIGUITY IN THE ORDER OF CIT(A) AND REQUIRES PASSING OF A SPEAKING ORDER CLEARLY M AKING OUT WHAT EXACTLY, THE COMMISSIONER OF INCOME TAX (APPEALS) OPINES ON THIS ISSUE OF THE HEAD OF INCOME. FOR THIS REASON, I FIND IT MORE A PPROPRIATE TO REMAND THIS ISSUE TO THE FILE OF COMMISSIONER OF INCOME TAX (APPEALS) FOR REMOVAL OF ANOMALY AND PASSING OF A SPEAKING ORDER. FUR THER, I FIND IT IS RELEVANT TO REMARK THAT THE DEVELOPMENT AGREEMENT PER SE IMPLIES CERTAIN DEVELOPMENTS OF THE LAND. THE EXPRESSION DEVELOPMENT IS NO WAY IMPLYING THE CAPITAL GAINS. LD.CIT(A) IS DIRECTED TO APPLY HIS MIND AND GO THROUGH BOTH THE DEVELOPMENT AGREEMENTS ENTERED BY T HE ASSESSEE AT THE TIME OF ACQUISITION OF RIGHTS AND ALSO AT THE TIME OF TRANSFE R OF SUCH RIGHTS. THE LD.CIT(A) SHALL DECIDE THE ISSUE AFTER GRANTING REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE S ET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 24 TH DAY OF JUNE, 2020. SD/- ( D. KARNUKARA RAO) ACCOUNTANT MEMBER PUNE; DATED : 24 TH JUNE, 2020. YAMINI 6 % &'() *)#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-2, KOLHAPUR. PR.CIT-2, KOLHAPUR. 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