Shri Arjundev Kishanchand Khanna,HUF, Ahmedabad V. The Income tax Officer, Ward-10(2), Ahmedabad

ITA 1308/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1901 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2000-2001
• Appeal Filed On: 10-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Valuation report; Reason to believe; Capital Gains
• Section: 195; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.1308/AHD/2008 (ASSESSMENT YEAR:-2000-01) ARJUNDEV K KHANNA HUF, 610/611, GANESH PLAZA, NR. NAVRANGPURA POST OFFICE, AHMEDABAD V/S INCOME-TAX OFFICER, WARD- 10(2),AHMEDABAD PAN: AABHM 8193 H [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI SUNIL TALATI, AR REVENUE BY:- SHRI ANIL KUMAR, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 25- 1-2008 OF THE LD. CIT(APPEALS)-XVI, AHMEDABAD FOR T HE ASSESSMENT YEAR (AY) 2000-01, RAISES THE FOLLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE VALIDITY OF REASSESSMENT AND THEREBY REJECTING THE GROUND OF APPEAL THAT THE REOPENING OF THE ASSESSMENT PROCEEDINGS IS BAD IN LAW. IT BE SO HEL D NOW THAT THERE IS NO REASON TO BELIEVE AND HENCE THE REASSESSMENT IS BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION O F THE LEARNED INCOME TAX OFFICER THAT TRANSACTION OF SALE OF PLOT OF LAND ACQUIRED BEFORE MORE THAN 30 YEARS WAS TOWARDS ADVENTURE IN THE NATURE OF TRADE AND THAT THE PROFIT FROM SALE THEREOF WAS CHA RGEABLE AS BUSINESS INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE LEGAL POSITION SETTLED BY VARIOUS JU DICIAL PRONOUNCEMENTS, THE LAND BEING HELD AS CAPITAL ASSE TS, THE PROFIT/LOSS THEREOF WAS RIGHTLY COMPUTED BY THE ASS ESSEE AS CHARGEABLE UNDER THE HEAD 'CAPITAL GAIN'. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE EXCESS AMOUNT RECEIVED ON SALE OF PLO T OF LAND, WHICH WAS THE SOLE PLOT OF LAND, WAS NOT CHARGEABLE AS BU SINESS INCOME. THE SAME BE SO HELD NOW. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN ACCEPTING THE DECISION OF THE ASSESSING OFFICER HOLDING THAT THE APPELLANT HAD TAKEN STEPS TO IMPROVE THE ITA N O.1308/AHD/2008 2 LAND. ON THE FACTS OF THE CASE AND AS POINTED OUT T O THE AUTHORITIES BELOW, NO STEPS WERE TAKEN FOR IMPROVEMENT OF THE L AND AS SUCH AND HENCE THE PLOT IN QUESTION WAS MERELY RETAINED AS INVESTMENT. !T BE SO HELD NOW. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN LAW AND ON FACTS IN SIMPLY FOLLOWING THE DECISION F OR ASST, YEAR 2002-03 WHEN IT WAS CLEARLY POINTED OUT THAT THE FA CTUAL ASPECT IN THAT ASSESSMENT YEAR WERE WRONGLY DECIDED AND AS A MATTER OF FACT THE SUBMISSIONS IN THIS REGARD WERE MADE BEFORE THE M FOR THE YEAR UNDER APPEAL OUGHT TO HAVE BEEN PROPERLY CONSIDERED . 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE BEEN ACCEPTED THE APPEAL IN TOTO. 7. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AND CONTRARY TO THE PROVISI ONS OF LAW AND FACTS. IT IS SUBMITTED THAT THE SAME BE HELD SO NOW . 8. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER AND/OR TO AMEND ALL OR ANY OF THE GROUNDS BEFORE THE FINAL HEARING. 2 AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE AS SESSEE DID NOT PRESS GROUND NO.1 RELATING TO THE VALIDITY OF REOPE NING OF THE ASSESSMENT. THEREFORE, GROUND NO.1 IN THE APPEAL IS DISMISSED AS SUCH. 3. ADVERTING NOW TO GROUND NOS.2 TO 7 IN THE APPEAL , FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECL ARING INCOME OF RS.1,82,630/- FILED ON 25-10-2000 BY THE ASSESSEE-H UF, WAS PROCESSED U/S 143(1)OF THE INCOME-TAX ACT, 1961 [HE REINAFTER REFERRED TO AS THE ACT]. SUBSEQUENTLY, ASSESSMENT WAS REOPENED U/S 147 WITH THE SERVICE A NOTICE U/S 148 OF THE AC T ON 4.8.2005. IN RESPONSE, THE ASSESSEE SUBMITTED VIDE LETTER DATED 26.9.2006 THAT RETURN FILED ON 25.10.2000 MAY BE TREATED AS RETUR N IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF REA SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOT ICED THAT THE ASSESSEE PURCHASED TWO CONTIGUOUS PLOTS OF LAND AT RAKHIAL BEARING SURVEY NO.339/1-2, T.P. SCHEME NO.10, FINAL PLOT NO .83 SUB PLOT NO.1 ADMEASURING 2662 SQ. YARDS UNDER SALE DEEDS EXECUTE D ON 30-11- ITA N O.1308/AHD/2008 3 1971 FOR A TOTAL CONSIDERATION OF RS.6,65,500/- FRO M M/S THE AJIT MILLS LTD. THESE PROPERTIES WERE SOLD BY THE ASSESS EE IN TWO PLOTS TO ALKURESH LAND TRADING CORPORATION, A NON-TRADING CO RPORATION. THE FIRST PLOT WAS SOLD ON 27-1-2000 AND THE SECOND ON 8-6-2001. THE TOTAL CONSIDERATION ON SALE OF THESE PLOTS WAS RS. 30,61,300/-. THUS, THE ASSESSEE RECEIVED A SUM OF RS.23,95,800/- IN EX CESS OF PURCHASE PRICE. THE AMOUNT OF EXCESS SUM OF RS.11,9 7,900/- RELEVANT TO THE AY 2000-01 WAS SHOWN UNDER THE HEAD , 'CAPITAL-GAIN' IN THE STATEMENT OF INCOME. HOWEVER, THE AO BROUGH T THE AMOUNT TO TAX UNDER THE HEAD BUSINESS INCOME, TREATING THE SA LE AS ADVENTURE IN THE NATURE OF TRADE WHILE RELYING UPON DECISIONS IN C.I.T. VS. VENKATRAMAN NAIDU & CO., 35 ITR 594(SC), INDIAN HUM E PIPES CO. LTD. VS. C.I.T., 195 ITR 396 (MUM.), VITTA KRISTAPP A VS. ITO,92 ITD 1 (HYD)AND KANWARLAL MANOHARLAL VS. C.I.T., 101 IT R 439 (MAD.), THE ASSESSEE HAVING TAKEN THE STEPS FOR DEVELOPMEN T OF THE LAND AND INCURRING EXPENDITURE OF RS.1,18,910/- TOWARD S IMPROVING THE SAID LAND. 4. ON APPEAL, THE LEARNED CIT(A) UPHELD THE FINDING S OF THE AO WHILE FOLLOWING THE DECISION OF THE ITAT FOR THE AY 2002-03, IN THE FOLLOWING TERMS:- 3.2. DURING APPEAL, IT HAS BEEN SUBMITTED THAT THE RE WAS ONLY ONE PLOT WHICH WAS SOLD IN TWO PARTS TO THE SAME PARTY IN TW O DIFFERENT YEARS AND THE APPELLANT HAS NOT TAKEN ANY STEPS FOR PROVIDING THE STREETS AND BIFURCATING THE PLOT. NO STEPS WERE TAKEN TO MAKE T HE LAND SUITABLE FOR HOUSING SOCIETY. THESE CONTENTIONS WERE MADE IN ADD ITION TO THE CONTENTIONS MADE BY THE APPELLANT DURING THE ASSESS MENT STAGE WHICH HAVE ALREADY BEEN MENTIONED ABOVE. THE APPELLANT RE LIED ON THE DECISION IN THE CASE OF CLT VS. SURESHCHAND GOEL, 163 TAXMAN , 54 (MP). 3.3 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE APPELLANT AND THE ORDER. BASICALLY, THE APPELLANT HAS PURCHASED THE L AND OF 2662 SQ. YDS IN 1971 AND THIS PROPERTY WAS SOLD AS TWO PLOTS TO M/S ALKURESH LAND TRADING CORPORATION. THE FIRST PLOT WAS SOLD ON 27-01-2000 WHICH IS PERTINENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND SECOND PLOT LAYING TOWARDS EAST WITH REGARD TO FINAL PLOT NO.83 OF SUB-PLOT NO . L OUT OF LAND MEASURING 2662 SQ. YDS. WAS SOLD ON 08-06-2001. THE SALE DEED AND VALUATION REPORTS HAVE BEEN CALLED FOR BY THE AO AND IT WAS F OUND THAT APPELLANT HAS ITA N O.1308/AHD/2008 4 SOLD THE FIRST PLOT DURING THE YEAR UNDER CONSIDERA TION AND THE SECOND PLOT ON 08-06-2001. AS PER THE AO, THE ASSESSEE HAS TAKE N ALL THE STEPS TO IMPROVE THE LAND BY TAKING THE CASE UNDER LAND CEIL ING ACT UP TO GUJARAT HIGH COURT FOR VACATING THE LAND FROM ULC AND SELLI NG THE SAME IN TWO PARTS. THE AO HAS CLEARLY MADE OUT THE CASE THAT TH E LAND WAS NOT HELD AS INVESTMENT AS IT WAS IN THE DENSELY POPULATED AREA AND WAS SOLD TO HOUSING CO-OPERATIVE SOCIETY. IT HAD ALL THE ELEMEN TS OF BEING THE NATURE OF ADVENTURE IN TRADE AND IS COVERED BY SECTION 2(13) OF THE ACT AS PER THE CRITERIA LAID DOWN IN THE CASE OF INDIAN HUME PIPES CO. LTD., 195 ITR 394(MUM.) AS IN THIS CASE, THE HON'BLE HIGH COURT H AS SPECIFIED THE CRITERIA FOR TREATING THE TRANSACTION AS ADVENTURE IN THE NATURE OF TRADE. THE CASE OF C.I.T. VS. RAJASTHAN MINES LTD., 78 ITR 45 RELIED UPON BY THE APPELLANT IS DISTINGUISHABLE AS IN THE SAID CASE TH E FACTS FOUND BY THE TRIBUNAL INDIVIDUALLY AND COLLECTIVELY DO NOT AFFOR D ANY BASIS TO COME TO THE CONCLUSION THAT THE PURCHASES AND SALES WERE MADE A MOUNTING TO ADVENTURE IN THE NATURE OF TRADE WHILE IN THE CURRE NT CASE, THE HON'BLE ITAT, A-BENCH, AHMEDABAD IN THEIR DECISION VIDE ITA NO.2031/AHD/2000 FOR ASSTT. YEAR 2002-03 HAS ALREADY DECIDED THE CAS E TREATING THE SAME AS ADVENTURE IN THE NATURE OF TRADE ON THE FACTS FOUND . AS FAR AS THE CASE OF SAROJKUMAR MAZUMDAR VS. C.I.T ., 37 ITR 242 IS CONCERNED, IT WAS MERELY HELD THAT ONUS LIES ON THE DEPARTMENT TO PROVE THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE AND THE INTENTION OF THE ASSESSEE IS RELEVANT. IN THE PRESE NT CASE, THE AO HAS ALREADY BROUGHT OUT THE FACT AND DISCHARGED THE ONU S REGARDING THE INTENTION OF THE ASSESSEE AND THE TRANSACTION BEING OF ADVENTURE IN THE NATURE OF TRADE. AS FAR AS THE DECISION IN THE CASE OF CIT VS. SURESHCHAND GOEL. 163 TAXMAN 54(MP) IS CONCERNED, THE SAME IS D ISTINGUISHABLE AS IN ABOVE CASE, THE HON. TRIBUNAL AFTER CONSIDERING ALL CIRCUMSTANCES HAS GIVEN THE FINDINGS OF THE FACT THAT THE INCOME IS F ROM CAPITAL GAINS WHILE IN THE PRESENT CASE, THE HON. TRIBUNAL HAS HELD THE IN COME FROM TRANSACTIONS TO BE 'BUSINESS INCOME' IN A.Y. 2002-03. IT MAY BE MENTIONED HERE THAT ON THE SIMILAR FACTS, THE APPEAL WAS FILED FOR THE ASSTT. YEAR 2002-03 AND THE APPEAL WAS DECIDED BY MY PREDECESSOR AS UNDER: 'I HAVE GONE THROUGH THE ASSESSMENT ORDER OF THE A. O. AND ALSO IN SUBMISSIONS OF THE LD. COUNSEL ON BEHALF OF THE APP ELLANT. IT IS QUITE INTRIGUING TO NOTE THAT THE APPELLANT SHOULD NOT HA VE VOLUNTARILY DISCLOSED THE SAID TRANSACTION IN QUESTION IN THE RETURN OF I NCOME BY SHOWING IT UNDER THE HEAD CAPITAL GAIN/LOSS. IT IS ONLY WHEN H IS CASE WAS SCRUTINIZED BY THE A.O. THAT THE FULL FACTS CAME TO LIGHT REGAR DING THE SALE OF THE AFORESAID LAND TO M/S. ALKURESH LAND TRADING CORPOR ATION IN THE RELEVANT ASSTT. YEAR 2001-02. THE LAND WAS PURCHASED LONG BA CK IN 1971 AND AFTER THAT, NECESSARY STEPS HAVE BEEN TAKEN AS POINTED OU T BY THE A.O. LIKE GETTING THE ORDER OF THE COLLECTOR UNDER URBAN LAND CEILING ACT THROUGH HON. GUJARAT HIGH CURT. SUBSEQUENT TO THIS, NECESSA RY STEPS IN THE NATURE ITA N O.1308/AHD/2008 5 OF APPROACHING THE LAND WELFARE, NAMELY M/S. ALKURE SH LAND TRADING CORPN. ALL THE FURTHER NECESSARY STEPS AS SEEN IN T HE AFORESAID PARAGRAPHS LAID DOWN BY THE HON. SUPREME COURT IN THE CASE OF G. VENKATSWAMI NAIDU & CO. VS. C.I.T. (1959) 35 ITR 594(SC) WHICH HAVE BEEN FOLLOWED BY THE HON. BOMBAY HIGH COURT IN THE CASE OF INDIAN HUME PIPE CO. LTD. VS. CIT 195 ITR 386 (BOM.) CLEARLY DEMONSTRATE THAT THE APPELLANT WAS ENGAGED IN THE SERIES OF TRANSACTIONS WHICH ARE IN THE NATURE OF PROFIT ARISING FROM THE ADVENTURE IN THE NATURE OF TRADE. THIS CLEARLY FALLS WITHIN THE AMBIT AND SCOPE OF PROVISIONS OF SEC.2(13) OF T HE I.T. ACT, 1961 WHICH IS AN INCLUSIVE DEFINITION WHICH DEFINES BUSINESS I NCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. THE SAID TRANSACTIO N IN LAND CANNOT BE CALLED AN INVESTMENT AND BE TREATED UNDER THE HEAD, 'CAPITAL LOSS' OF RS.5,775/- AS DISCLOSED BY THE ASSESSEE BEFORE THE A.O. THE A.O. HAS RIGHTLY TREATED THE PROFIT FROM SALE OF LAND UNDER THE HEAD, 'INCOME FROM BUSINESS' FOR AN AMOUNT OF RS.15.30,650/-. THE A.O. HAS RIGHTLY ALLOWED BENEFIT OF OTHER EXPENSE INCURRED FOR AN AMOUNT OF RS.1,18,910/- AND COST OF LAND AS PER DEED AT RS.87,846/- THEREBY REDUCING IT BY AN AMOUNT OF RS.2,06,756/- AND THEREBY THE NET INCOME AT RS.13,2 3,894/-.' THIS DECISION HAS BEEN UPHELD BY THE HON. I.T.A.T. VIDE ORDER IN 1TA NO.2031/AHD/2000 FOR ASSESSMENT YEAR 2002-03 HOLDIN G THAT THE ASSESSEE BEING INVOLVED IN SALE OF DIFFERENT PLOTS OF LAND, THE PROFIT ON SUCH SALE WAS ALLOWABLE TO BE TAXED AS BUSINESS INCOME. MORE SO, WHEN THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE TO SHOW THAT THE LAND IN QUESTION WAS SOLD BY THE ASSESSEE AS CAPITAL INVESTMENT. KEEPING ABOVE DISCUSSION IN VIEW AND FACTS OF THE C ASE AND RESPECTFULLY FOLLOWING THE DECISIONS OF HON. TRIBUNAL AND MY PRE DECESSOR IN THIS CASE, THE DECISION OF THE A.O. TO HOLD THE INCOME AS BUSI NESS INCOME IS UPHELD AND THIS GROUND OF APPEAL IS REJECTED. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). AT THE OUTSET, THE LD. AR ADMITTED THAT ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION DATED 23.12.2005 IN THE ASSESSEES OWN CASE IN ITA NO.2031/AHD./2005 FOR THE AY 2002-03. THE LEARNED D R, ON THE OTHER HAND, SUPPORTED THE FINDINGS OF THE LEARNED CIT(A) . 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT WHILE ADJUDICATING A SIMILAR ISSUE IN THE AY 2002-03, THE ITAT IN THE ASSESSEES OWN CASE IN IT A ITA N O.1308/AHD/2008 6 NO.2031/AHD/2005, CONCLUDED IN THEIR ORDER DATED 23 -12-2005, AS UNDER:- 6 IT WAS, IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE PR OFIT ON SALE OF CONCERNED LAND WAS TAXABLE AS LONG-TERM CAPITAL GAIN AND NOT BUSINESS INCOME. ACCORDING TO HIM, SINCE THE ASSESSEE HAS SOLD A PAR T OF LAND AND HAD SUFFERED LOSS, IT WAS NOT SHOWN IN THE RETURN FOR A SST YEAR 2002-03 WITH THE INTENTION THAT THE NET RESULT, I.E. PROFIT OR LOSS WILL BE DECLARED LATER ON. 7. ON THE OTHER HAND, THE ID. DR HAS SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. 8. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMISS IONS AND FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE ASSESSEE BEING INVOLVED IN SALE OF DIFFERENT PLOTS OF THE LAND, TH E PROFIT ON SUCH SALES WAS ALLOWABLE TO BE TAXED AS BUSINESS INCOME - MORE SO, WHEN THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE TO SHOW THAT THE LAND IN QUESTION WAS SOLD BY THE ASSESSEE AS CAPITAL INVESTMENT. 8.1. IN VIEW OF THE TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE CASE AND FOR THE REASONS STATED BY THE CIT(APPEALS), WE DO N OT FIND ANY MERIT IN ASSESSEE'S APPEAL. 7. SINCE THE FACTS OBTAINING IN THE YEAR UNDER C ONSIDERATION ARE ADMITTEDLY SIMILAR TO THE FACTS & CIRCUMSTANCES IN THE AY 2002-03, FOLLOWING THE VIEW TAKEN BY THE ITAT IN THEIR AFORE SAID DECISION IN THE ASSESSEES OWN CASE, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A) THAT THE PROFIT ON SALE OF PLOT HAS TO BE TAXED AS BUSINESS INCOME, ESPECIALLY WHEN THE LD. AR DID N OT PLACE ANY MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN T HE MATTER NOR MADE ANY SUBMISSIONS. THEREFORE, GROUND NOS. 2 TO 7 IN THIS APPEAL ARE REJECTED. 8. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TE RMS OF THE RESIDUARY GROUND NO.8 IN THE APPEAL , ACCORDINGLY, THIS GROUND IS DISMISSED. ITA N O.1308/AHD/2008 7 9. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 1-3-2011 (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 1 -3-2011 COPY OF THE ORDER FORWARDED TO: 1. ARJUNDEV K KHANNA HUF, 610/611, GANESH PLAZA, NR . NAVRANGPURA POST OFFICE, AHMEDABAD 2. ITO, WARD-10(2), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XVI, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD