Sri Sharad B. Pitti, Hyderabad V. ACIT, Circle-16(3), Hyderabad

ITA 1375/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66243 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 25-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Business income; Depreciation; Revised return
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1375/HYD/2011 ASSESSMENT YEAR: 2005-06 SRI SHARAD B. PITTI, ... APPELLANT HYDERABAD. (PAN ADFPP2418K) VS. ASSTT. COMMISSIONER OF INCOME-TAX, RESPONDE NT CIRCLE 16(3), HYDERABAD. APPELLANT BY : SHRI LAXMINIWAS SHARMA RESPONDENT BY : SMT. AMISHA S. GUPT DATE OF HEARING : 25/07/2012 DATE OF PRONOUNCEMENT : 14/09/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 19/05/2011 F OR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE A DIRECTOR OF M/S PITTI LAMINATIONS LTD., FILED HIS RETURN OF INC OME FOR THE AY 2005-06 ON 26/07/2005 ADMITTING TOTAL INCOME OF RS. 70,60,379/-, WHICH WAS PROCESSED U/S 143(1) ON 21/07/2006. A NOT ICE U/S 148 OF THE ACT WAS ISSUED ON 29/12/2009 RECORDING THE FOLL OWING REASONS: THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 26/0 7/2005 DECLARING AN INCOME OF RS. 70,60,379/- INCLUDING LT CG OF RS. 35,53,405/-. ITA NO. 1375/HYD/11 SRI SHARAD B. PITTI. 2 THE ASSESSEE WAS A PARTNER IN THE PARTNERSHIP FIRM M/S SRI LAKSHMI NARSING ASSOCIATES WHICH WAS DISSOLVED ON 24/09/2004, THE ASSESSEE RECEIVED 4496.28 SFT. BUIL T UP AREA COMPRISING OF SECOND AND THIRD FLOOR TOGETHER WITH 15,550 SQ.YDS OF UNDIVIDED LAND IN THE PROPERTY SITUATED A T 4-5-103 TO 107 AND 4-5-114, SULTAN BAZAR, HYDERABAD. THE ASSES SEE OFFERED LTCG ON SALE OF THIS PROPERTY. BUT THE SAID ASSET WAS UTILIZED BY THE PARTNERSHIP FIRM FOR BUSINESS PURPO SE AS THE ASSET SOLD WAS OF DEPRICABLE NATURE, CAPITAL GAIN A RISING OUT OF SALE OF SUCH ASSET HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN AS AGAINST ASSESSEES CLAIM OF LTCG. IN RESPONSE TO THE ABOVE NOTICE, THE ASSESSEE HAD F ILED A LETTER ON 22/01/2010 STATING THAT THE RETURN FILED ON 26/0 7/2005 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 1 48. SUBSEQUENTLY, THE ASSESSEE FILED A LETTER ON 04/02/2010 ENCLOSING REVISED RETURN OF INCOME FOR THE AY 2005-06. THE ASSESSEE EXPLAINED T HAT THE ASSET IN QUESTION IS A CO-OWNED PROPERTY, THE INCOME FROM WH ICH WAS ASSESSED UNDER INCOME FROM HOUSE PROPERTY AND NO DEPRECIATION ON THE SAME WAS CLAIMED/ALLOWED. AS THE PROPERTY IS SO LD BUT HIS INDIVIDUAL SHARE WAS GIVEN BACK, THERE IS NO CAPITA L GAIN IN THE SAME. IN RESPONSE TO THE NOTICES U/S 143(2) AND 142 (1) ALONG WITH QUESTIONNAIRE ISSUED, ASSESSEES AR ATTENDED AND FU RNISHED THE INFORMATION CALLED FOR. 3. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT D ETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 82,17,510/- . 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. DURING THE COURSE OF APPEAL PROCEEDINGS, THE ASS ESSEE FILED ADDITIONAL GROUND OF APPEAL: ITA NO. 1375/HYD/11 SRI SHARAD B. PITTI. 3 LEARNED ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 16(3) ERRED IN NOT CONSIDERING THE REVISED RETURN FILED I N RESPONSE TO NOTICE U/S 148 OF IT ACT. THOUGH HAS REFERRED IN PA RA 4 OF HIS ORDER BUT DID NOT GIVE ANY REASON FOR NOT ACCEPTING THE SAME. 5. THE CIT(A) ADMITTED THE ADDITIONAL GROUND. 6. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED AS FOL LOWS: 1. ASSESSEE FILED RETURN OF INCOME ON 26/07/2005 IN COME RETURNED 70,60,379/- INCLUDING LONG TERM CAPITAL GA IN. 2. ASSESSMENTS WAS COMPLETED U/S 143 ON 21/07/2006. 3. AO ISSUED NOTICE U/S 148 OF IT ACT FOR SULTAN BA ZAR PROPERTY TO TAX SHORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL GAIN. 4. ASSESSEE FILED THE REVISED RETURN ON 04/02/2010 STATING THAT IN THE ORIGINAL RETURN, ASSESSEE WRONGLY INCLUDED L ONG TERM CAPITAL GAIN - GIVEN REASONS. 5. ASSESSEE WAS OWNER OF PROPERTY AT SULTAN BAZAR A LONG WITH HIS FATHER BADRIVISHAL PITTI SINCE MORE THAN 70 YEA RS. HE HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH SHRI RADHE SHYAM LOYA, SHRI MADANLAL SHYAM LOYA & GOVINDRAM LOYA IN 1985. PROPERTY DEVELOPED AND ASSESSEE SHARAD B. PITTI GOT 40% OF SHARE OF PROPERTY (4496.285FT BUILT UP AREA ALONG W ITH UNDIVIDED SHARE IN LAND) IN 1985 ITSELF. 6. SINCE THE PROPERTY WAS FULLY LEASED OUT AND ASSE SSEE USED TO GET 40% OF INCOME FROM PROPERTY AND OFFERED FOR INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY RIGHT FRO M BEGINNING (COPIES OF IT RETURNS ENCLOSED WITH APPEA L FILED). 7. THE PROPERTY WAS NEVER ASSESSED AS BUSINESS INCO ME, NOR THE FIRM WAS ASSESSED. THE NAME OF THE PROPERTY WAS SHREE LAXMI NARSING ASSOCIATES. 8. SINCE THE PROPERTY WAS UNDER COOWNERSHIP IT WAS DIVIDED IN MEATS AND BOUNDS BETWEEN ASSESSEE & DEVELOPER, THOU GH THE OWNERSHIP OF THE SHARE OF DEVELOPER AND ASSESSEE IS OFFERED AS INDEPENDENT INCOME W.E.F. 1987-88 ITSELF. THERE WAS NO SALE/ NO TRANSFERS WHICH ATTRACT CAPITAL GAIN. 9. IN THE ABOVE SAID CIRCUMSTANCES, ASSESSEE HAS WI THDRAWN THE LONG TERM CAPITAL GAIN IN THE REVISED RETURN. 10. THE AO THOUGH MENTIONED IN PARA 4 OF HIS ORDER THAT REVISED RETURN FILED ON 04/02/10 BUT HAS NOT CONSID ERED THE SAME. IT IS REQUESTED THAT INCOME BE ASSESSED AS PE R REVISED RETURN. ITA NO. 1375/HYD/11 SRI SHARAD B. PITTI. 4 7. THE CIT(A) AFTER GOING THROUGH THE WRITTEN SUBMI SSIONS AS WELL AS THE REVISED RETURN FILED, HELD THAT NONE OF THE FACTS STATED BY THE ASSESSEE IS ACCOMPANIED BY ANY EVIDENCE. THE CIT(A ) POINTED OUT THAT AS PER THE ORIGINAL RETURN, IN ANNEXURE III THE ASSESSEE HIMSELF HAS CERTIFIED THAT M/S SHREELAKSHMI NARSING ASSOCIATES WAS A PARTNERSHIP FIRM, IN WHICH THE ASSESSEE WAS A PAR TNER AND THE FIRM WAS DISSOLVED VIDE DISSOLUTION DEED DATED 24/09/200 4. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT IT WAS MENTIONE D THAT THE ASSESSEE RECEIVED 4496.28 SQ.FT OF BUILT UP AREA CO NSISTING OF 2 ND AND 3 RD FLOOR AND A PORTION OF THE LAND. THE CIT(A) HELD T HAT THE ASSESSEE WAS ASKED TO FURNISH THE DOCUMENTARY EVIDE NCE IN SUPPORT OF HIS CONTENTIONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH HE FAILED TO COMPLY. HENCE, THE CIT(A) CONCLU DED THAT THE NEW PLEA HAD BEEN TAKEN BY THE ASSESSEE TO AVOID TAXATI ON AND WITHOUT SUBSTANTIATING HIS CLAIM WITH EVIDENCE, THEREFORE, CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 8. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US RA ISING THE FOLLOWING GROUNDS OF APPEAL:- 2. CIT(A) FAILED TO APPRECIATE THAT THERE IS NO CAP ITAL GAIN EITHER LONG TERM OR SHORT TERM SINCE THERE IS NO SA LE OF ASSETS. 3. THE CIT(A) FAILED TO APPRECIATE THAT THERE IS NO PARTNERSHIP BUSINESS CARRIED BY THE ASSESSEE. LAKSHMI NARSING A SSOCIATES WAS NEVER ASSESSED AS PARTNERSHIP BUSINESS. 4. THE CIT(A) FAILED TO TAKE ON RECORD THE INCOME T AX RETURNS FILED BY THE ASSESSEE AS EVIDENCE FROM AY 1995-06 T O AY 2004- 05 (10 YEARS) WHERE IN THE INCOME WAS SHOWN AS HOUS E PROPERTY INCOME AND CO-OWNER SHARE WAS RETURNED/ASS ESSED. 5. CIT(A) FAILED TO APPRECIATE THE PARTITION OF CO- OWNERSHIP NAMED BY ASSESSEE THAT PARTNERSHIP WAS DISSOLVED DO ES NOT MAKE IT AS BUSINESS ASSET TO ATTRACT ANY CAPITAL GA IN. ITA NO. 1375/HYD/11 SRI SHARAD B. PITTI. 5 9. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI LAKSHM INIWAS SHARMA SUBMITTED BEFORE US THAT THE ASSESSEE WAS TH E OWNER OF THE PROPERTY AT SULTAN BAZAR ALONG WITH HIS FATHER SHRI BADRIVISHAL PITTI SINCE MORE THAN 70 YEARS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD ENTERED INTO DEVELOPMENT AGREEMENT WIT H SHRI RADHE SHYAM LOYA, SHRI MADANLAL LOYA & GOVINDRAM LOYA IN 1985. IN THE DEVELOPED PROPERTY, THE ASSESSEE GOT 40% OF THE SHA RE OF PROPERTY ALONG WITH UNDIVIDED SHARE IN LAND. IT WAS ALSO POI NTED OUT THAT SINCE THE PROPERTY WAS FULLY LEASED OUT AND ASSESSE E USED TO GET 40% INCOME FROM PROPERTY AND OFFERED FOR INCOME UND ER THE HEAD INCOME FROM HOUSE PROPERTY RIGHT FROM THE BEGINNI NG AND THE PROPERTY WAS NEVER ASSESSED AS BUSINESS INCOME, NOR THE FIRM WAS ASSESSED. THE NAME OF THE PROPERTY WAS SHREE LAXMI NARSING ASSOCIATES. THE LEARNED COUNSEL FURTHER CONTENDED THAT THE ASSESSEE HAD WITHDRAWN LONG TERM CAPITAL GAIN BY WA Y OF REVISED RETURN AS IT WAS A FACT THAT THE PROPERTY WAS UNDER COOWNERSHIP, WHICH WAS DIVIDED IN MEATS AND BOUNDS BETWEEN THE A SSESSEE AND DEVELOPER. IT WAS SUBMITTED THAT THE ASSESSEE HAS O FFERED AS INDEPENDENT INCOME WITH EFFECT FROM 1987-88 ITSELF. IT WAS POINTED OUT THAT THERE HAS BEEN NO SALE OR TRANSFER WHICH A TTRACT CAPITAL GAINS. 10. THE LEARNED DR SMT. AMISHA S. GUPT RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD. THE DEPARTMENT HAS NOT PRODUCED THE DIS SOLUTION DEED, WHICH WAS CALLED FOR AT THE TIME OF HEARING BEFORE US. ITA NO. 1375/HYD/11 SRI SHARAD B. PITTI. 6 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS BEFORE THE CIT(A) THE ASSESSEE WAS ASKED TO FURNISH DOCUME NTARY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE ASSESSEE IS HOLDIN G THE PROPERTY WITH OTHER CO-OWNERS, BUT, HE FAILED TO DO SO. THE ASSES SEE ALSO FAILED TO CLARIFY AS TO THE ACTUAL STATUS OF ENTITY M/S SRI LAKSHMI NARSING ASSOCIATES. HOWEVER, WE FIND THAT THE COPIES OF IN COME TAX RETURNS HAVE BEEN FILED BY THE ASSESSEE FROM AY 1995-96 TO AY 2004-05 (10 YEARS) WHERE THE INCOME WAS SHOWN AS HOUSE PROPERTY INCOME AND CO-OWNER SHARE HAS BEEN ASSESSED. WE FIND THAT THE ASSESSEE HAS STATED THAT HE HAD WRONGLY CLAIMED IN THE ORIGINAL RETURN THAT SRI LAKSHMI NARSING ASSOCIATES IS A PARTNERSHIP FIRM I N WHICH THE ASSESSEE WAS A PARTNER AND THE FIRM WAS DISSOLVED O N 24/09/2004. IN THESE CIRCUMSTANCES, SINCE THE ASSESSEE HAS FILE D A REVISED RETURN STATING THAT THE PROPERTY IS UNDER CO-OWNERSHIP AND THE ASSESSEE HAS OFFERED INDEPENDENT INCOME UNDER THE HEAD INCO ME FROM HOUSE PROPERTY FOR THE PAST 10 YEARS, WE ARE REMITTING T HE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER ANY RETU RN HAS BEEN FILED BY THE FIRM I.E. SHRI LAKSHMI NARSING ASSOCIATES AND THE SAME HAS BEEN ASSESSED TO TAX AND ALSO TO VERIFY THE VERY EX ISTENCE OF THE FIRM. THE ASSESSING OFFICER SHALL GIVE REASONABLE O PPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE THAT THE PROPERTY WAS F ULLY LEASED OUT AND THE ASSESSEE IS GETTING 40% OF THE INCOME FROM PROPERTY AND THE BUILDING HAS NOT BEEN UTILIZED BY THE PARTNERSH IP FIRM FOR THE BUSINESS PURPOSES AND ALSO CLARIFY AS TO THE ACTUAL STATUS OF THE ENTITY M/S SHRI LAKSHMI NARSING ASSOCIATES. ITA NO. 1375/HYD/11 SRI SHARAD B. PITTI. 7 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 14/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 14 TH SEPTEMBER, 2012. KV COPY TO:- 1) SHRI SHARAD B. PITTI, H.NO. 6-3-648, MOTI BHAVAN, SOMAJIGUDA, HYDERABAD 500 082. 2) ACIT, CIRCLE-16(3), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEER BAGH, HYDERABAD. 3) THE CIT (A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D.