J.Seethalakshmi, Aruppukottai V. ITO, Virudhunagar

ITA 1270/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8060 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYRAM RAIPURA
• Assessee Lawyers: V.SRIKRISHNAN
• Keywords: Capital asset converted into stock in trade; Capital asset; Audit objection; Fair market value; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 143(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1270/MDS./2016 / ASSESSMENT YEAR : 2011-12 SMT.J.SEETHALAKSHMI, 51,PILLAIMAR STREET, ARUPPUKOTTAI 626 101. VS. THE ITO, WARD 1(2), VIRUDHUNAGAR. [PAN AJGPS 1003 E ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI V.SRIKRISHNAN,C.A /RESPONDENT BY : SHRI JAYRAM RAIPURA, CIT D.R / DATE OF HEARING : 2 7 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX, MADURAI DATED 15.3 .2016 PERTAINING TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE PCIT, MADURAI IS AGAINST LAW, F ACT AND PROBABILITY OF THE CASE. ITA NO.1270/16 :- 2 -: 2. THE PCIT IS NOT JUSTIFIED IN RE-OPENING THE ASSE SSMENT WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. THE ASSESSEE OWNS EXTENSIVE IMMOVABLE PROPERTY A ND HOLDING AND ENJOYING THE SAME FOR MANY YEARS WITHOUT ANY INTENT ION OF IDEA OF CARRYING ON REAL ESTATE BUSINESS. 4. THE LAND THAT WAS DISPOSED OFF DURING THE PREVIO US YEAR ENDING 31.3.2011, WAS EVENTHOUGH, SITUATED IN CENTRE OF AR UPPUKOTTAI TOWN, WAS UNDER ILLEGAL OCCUPATION AND ENCROACHMENT AND THE ASSESSEE COULD NOT EVICT THEM AND PUT THE SAID PROP ERTY TO ANY USE. HENCE SHE GAVE A POWER OF ATTORNEY TO A LOCAL BIGWI G, WHO UNDERTOOK TO SELL OFF THE LAND. THUS THE LAND WAS M ADE INTO PIECES AND WERE SOLD. THE CAPITAL GAIN ARISING OUT OF SUCH SALE WAS OFFERED AS INCOME UNDER LTCG. THERE WAS NO INTENTION BY THE ASSESSEE TO DO REAL ESTATE BUSINESS. THESE FACTS HAD BEEN OVERL OOKED BY THE PCIT. 5. THE OBSERVATION OF THE PCIT THAT THE DECISION RE LIED UPON BY THE ASSESSEE WERE NEITHER FROM THE APEX COURT NOR FROM THE JURISDICTIONAL HIGH COURT, IS NOT CORRECT SINCE IN THE ABSENCE OF ANY DECISION OF THE LOCAL HIGH COURT, THE ORDERS OF THE OTHER HIGH COURTS, ON THE IDENTICAL ISSUE, SHOULD BE FOLLOWED. 6. THERE WAS NO FRESH MATERIAL AVAILABLE ON RECORD TO DRAW THE CONCLUSION BY THE PCIT THAT THIS IS NOT A LTCG. A M ERE AUDIT OBJECTION CANNOT JUSTIFY THE RE-OPENING OF THE ASSE TS AS HAD BEEN PROPOSED BY THE APEX COURT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL HAVING A PASSENGER TRANSPORT OPERATING BUSINESS. SH E OWNS EXTENSIVE IMMOVABLE PROPERTIES. FOR THE ASSESSMENT YEAR 2011- 12, A RETURN OF INCOME DECLARING A TOTAL OF ` 83,30,056/- WHICH INCLUDED LONG TERM CAPITAL GAIN ON SALE OF LAND OF ` 49,30,593/- WAS FILED. THE ITA NO.1270/16 :- 3 -: ASSESSMENT WAS TAKEN UP FOR SCRUTINY AND THE INCOME -TAX OFFICER, WARD I (2), VIRUDHUNAGAR COMPLETED THE ASSESSMENT U /S 143(3) DETERMING THE TOTAL INCOME OF ` 83,71,510/-. THE ASSESSING OFFICER ACCEPTED THE ASSESSEES OFFERING OF LTCG AS SUCH. S UBSEQUENTLY, THE PCIT, MADURAL INITIATED PROCEEDINGS U/S.263 TO TREA T THE LTCG AS INCOME ARISING FROM BUSINESS ACTIVITIES. THE ASSESS EE SUBMITTED A DETAILED NOTE OBJECTING TO THE SAME AND IN SPITE OF IT, THE PCIT ISSUED AN ORDER U/S.263 TO REOPEN THE ASSESSMENT. 3.1 ACCORDING TO PCIT, IN THE STATEMENT OF TOTAL I NCOME ANNEXED TO THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-1 2, IN THE COMPUTATION OF CAPITAL GAINS III. INCOME FROM CAPI TAL GAINS, IT IS STATED AS SALE VALUE OF LANDS AT ARUPPUKOTTAI CONV ERTED INTO PLOTS FOR 120938.2 SQ.FT AS PER DETAILS ENCLOSED. ALSO, IN TH E RETURNS OF INCOME FOR THE PREVIOUS AND SUBSEQUENT ASSESSMENT YEARS VI Z. 2010-11 & 2012-13, THE ASSESSEE HAD OFFERED INCOME FROM CAPI TAL GAINS ON SALE OF PLOTS. DURING THE PROCEEDINGS, THE AR HAS STATED THAT THE ASSESSEE HAD GIVEN A POWER OF ATTORNEY TO A BROKER TO SELL THE LANDS AND THE LAND WAS PARCELED-OUT INTO SMALLER PORTIONS OR PLOT S BY THE BROKER AND WAS SOLD ACROSS TWO OR THREE YEARS. IN SUPPORT OF T HE SAID CONTENTION, THE AR HAS CITED THE DECISIONS IN VIJAY CONSTRUCTIO N COMPANY VS. DCIT RANGE 12(3) [2005 3 SOT 840 MUM.) AND ITAT MUMBAI ( F BENCH) IN VINOD D MOTIWALA VS. ITO [ITA.NO.1063/MUM/2014) AND THE DECISIONS ITA NO.1270/16 :- 4 -: QUOTED BY THE AR IN THIS REGARD ARE NEITHER PRONOUN CED BY THE APEX COURT NOR THE JURISDICTIONAL HIGH COURT. FROM THESE FACTS, IT IS EVIDENT THAT THE ASSESSEE HAD CONVERTED THE CAPITAL ASSET ( LAND) INTO PLOTS (STOCK-IN-TRADE) AND THIS STOCK-IN-TRADE WAS SOLD I N PARTS IN DIFFERENT YEARS, WHICH ATTRACTS THE PROVISIONS OF S.45(2) OF THE ACT AND THE INCOME BEING THE DIFFERENCE BETWEEN THE SALE PRICE OF THE PLOTS AND THE FAIR MARKET VALUE OF THE CAPITAL ASSET PREVAILI NG ON THE DATE WHEN THE LAND WAS CONVERTED INTO STOCK-IN-TRADE, IS TO B E TREATED AS BUSINESS PROFIT AND BROUGHT TO TAX UNDER THE HEAD INCOME FR OM BUSINESS OR PROFESSION. HENCE, THE PCIT DIRECTED THE AO TO RE- DO THE ASSESSMENT AFTER CAUSING NECESSARY ENQUIRIES TO BE MADE IN ACC ORDANCE WITH LAW. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE ASSESSMENT OR DER. FOR BREVITY, WE PRODUCE THE CONCERNED PAGE NO.2 OF THE ASSESSME NT ORDER AS FOLLOWS :- ASSESSMENT ORDER THE ASSESSEE IS DOING BUSINESS OF BUS TRANSPORT FIL ED RETURN OF INCOME VOLUNTARILY ON 11.3.2014 ADMITTING TOTAL INC OME OF RS.83,30,056/-. THIS CASE IS SELECTED FOR SCRUTINY THROUGH CASS. NOTICE U/S 143(2) DT.7.8.2012 WAS ISSUED AND SERVED ON 17.8.2014. THE CASE IS REPOSTED FOR HEARING ON VARIOUS DATES. ASSESSEES REPRESENTATIVE SHRI.K.V.RAMAN,CA WAS APPEARED AND P RODUCED THE ITA NO.1270/16 :- 5 -: MATERIALS AND EVIDENCES ALONG WITH BOOKS OF ACCOUNT S AND DOCUMENTS CALLED FOR. AFTER VERIFICATION OF ALL THESE, AND AFTER DISCUSSI ON WITH ASSESSEES REPRESENTATIVE IT WAS FOUND THAT DISALLOWANCE IN SP ARES & UP KEEP EXPENSES FOR RS.10,950/- AND DISALLOWANCE IN LABOUR WELFARE EXPENSES TO THE TUNE OF RS.30,500/- WERE TO BE MADE . ASSESSEES REPRESENTATIVE ACCEPTED THESE ADDITIONS AND OFFERED FOR ASSESSMENT. ASSESSMENT IS COMPLETED U/S143 (3) AS UNDER. TOTAL INCOME RETURNED RS.83,30,060 ADD ADDITION AS DISCUSSED ABOVE RS. 41,450 ASSESSED TOTAL INCOME RS.83,71,510 THE ASSESSMENT IS COMPLETED U/S 143(3) OF INCOME TA X ACT WITH THE ADDITIONS OF RS.41,450/-.ADDITIONAL DEMAND RAIS ED RS.24,620/-. DEMAND SHOULD BE PAID AS PER COMPUTATION FORM ENCLO SED. PENALTY U/S 271(1)(C) IS INITIATED SEPARATELY. 4.1 AS SEEN FROM THE ABOVE ASSESSMENT ORDER, WHICH IS V ERY CRYPTIC AND NO DISCUSSION ON THE ISSUE RAISED BY THE PCIT. MORE SO, THERE IS NO MENTIONING OF WHAT SHORT ENQUIRY CAUSED BY THE AO A ND EXPLANATION GIVEN BY THE ASSESSEE ON THE DISPUTED ISSUE. NO ENQ UIRY BY THE AO ITSELF WARRANTS THE REVISION OF THE ASSESSMENT ORD ER BY THE PCIT. THE AO BEING A QUASI JUDICIAL AUTHORITY CANNOT TAKE A V IEW, EITHER AGAINST OR IN FAVOUR OF THE ASSESSEE, WITHOUT MAKING A PROP ER ENQUIRY AND ITA NO.1270/16 :- 6 -: WITHOUT PROPER EXAMINATION OF THE CLAIM MADE BY THE ASSESSEE IN THE LIGHT OF THE LAW APPLICABLE. THE PCIT IS EMPOWERED TO INITIATE THE PROCEEDINGS U/S.263 OF THE ACT EITHER WHERE THE AO TAKES A WRONG DECISION WITHOUT CONSIDERING MATERIALS AVAILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATER IALS WHERE SUCH ENQUIRY PRIMA FACIE WARRANTED. THE ASSESSEE RELIED ON THE JUDGEMENT OF APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT IN [2000] 243 ITR 83 (SC), WHICH CANNOT BE APPLIED TO THE FACTS OF THE CASE. IN THE PRESENT CASE, THERE IS NO ENQUIRY WHAT SOEVER BY THE AO. BEING SO, WE ARE INCLINED TO DISMISS THE APPEAL OF THE ASSESSEE HOLDING THAT THERE IS NO MERIT ON THE PLEA OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF