M/s. Bal Kishan Mohta, HUF, Kolkata V. DCIT, Circle - 43, Kolkata, Kolkata

ITA 1472/KOL/2011

• Counselvise Citation: 147223514 RSA 2011
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: S L KOCHAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Rule of consistency; Fair market value
• Section: 50C

Judgement Text

I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER) I.T.A. NO.: 1472/KOL./ 2011 ASSESSMENT YEAR : 2007-2008 M/S. BAL KISHAN MEHTA, HUF,........................ ..................APPELLANT C/O. S.L. KOCHAR, ADVOCATE, 86, CANNING STREET, KOLKATA-700 001 [PAN : ADDHB 7042 N] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ..............RESPONDENT CIRCLE-43, KOLKATA, 3, GOVT. PLACE WEST, KOLKATA-700 001 & I.T.A. NO.: 1617/KOL./ 2011 ASSESSMENT YEAR : 2007-2008 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..............APPELLANT CIRCLE-43, KOLKATA, 3, GOVT. PLACE WEST, KOLKATA-700 001 -VS.- M/S. BAL KISHAN MEHTA, HUF,........................ ......................RESPONDENT C/O. S.L. KOCHAR, ADVOCATE, 86, CANNING STREET, KOLKATA-700 001 [PAN : ADDHB 7042 N] APPEARANCES BY: SHRI P.K. CHAKRABORTY, JCIT, SR. D.R., FOR THE DEPA RTMENT SHRI S.L. KOCHAR, A.R. FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : DECEMBER 24, 2013 DATE OF PRONOUNCING THE ORDER : DECEMBER 27, 2013 O R D E R PER SHAMIM YAHYA: 1. THESE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA DATED 30.08.2011 AND PERTAINED TO ASSESSMEN T YEAR 2007-08. I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 2 2. ITA 1472/KOL/2011 (ASSESSEES APPEAL) THE GROUNDS OF APPEAL READ AS UNDER :- (1) FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DETERMINATION OF CAPITAL GAINS WORKED OUT BY THE ASSESSING OFFICER OF THE PAGEYA PATTY STREET PROPER TY AT RS.16,39,979/-. (2) FOR THAT THE LD. CIT(A) SHOULD HAVE HELD THAT THE ASSESSING OFFICER OUGHT TO HAVE REFERRED THE MATTER OF VALUATION OF SAID PROPERTY TO THE DISTRICT VALUATIO N OFFICER AS PER PROVISIONS CONTAINED IN SECTION 50C( 2) OF THE INCOME TAX ACT, 1961. (3) FOR THAT THE LD. CIT(A) SHOULD HAVE DIRECTED THE AO TO REFER THE MATTER OF VALUATION TO THE DVO AS PROVIDE D U/S 50C(2) OF THE INCOME TAX ACT, 1961. 3. IN THIS CASE, ASSESSEE SHOWED LONG TERM CAPITAL LOSS ON SALE OF HOUSE PROPERTY SITUATED P-9, PAGAYA PATTY STREET, K OLKATA-700 007 AND 30/31, KALAKAR STREET, KOLKATA-700 007. THE ASSESSI NG OFFICER NOTED THAT COMPUTATION OF LONG-TERM CAPITAL LOSS IN RESPECT OF ABOVE TWO PROPERTIES AS MADE BY THE ASSESSEE WAS NOT CORRECT. HE OBSERVE D THAT ASSESSEE HAS NOT TAKEN INTO ACCOUNT THE PROVISION OF SECTION 50C OF THE INCOME TAX ACT WHILE COMPUTING LONG-TERM CAPITAL GAIN/LOSS. HE OBS ERVED THAT VALUE ADOPTED BY THE REGISTERING AUTHORITY FOR THE PURPOS E OF STAMP DUTY PURPOSE IN RESPECT OF PAGAYA PATTY HOUSE PROPERTY W AS RS.64,24,357/-, WHEREAS THE SALE CONSIDERATION AS SHOWN BY THE ASSE SSEE WAS RS.15,51,000/-. AS REGARDS KALAKAR STREET HOUSE PRO PERTY, THE ASSESSEE COULD NOT FURNISH THE VALUE ADOPTED BY THE REGISTER ING AUTHORITY FOR STAMP DUTY PURPOSE. HENCE, HE PROCEEDED TO ESTIMATE THE VALUE OF THIS PROPERTY. ACCORDINGLY, HE PROCEEDED TO COMPUTE LONG -TERM CAPITAL GAIN IN RESPECT OF PAGAYA PATTY PROPERTY AT RS.16,39,979/- AND KALAKAR STREET PROPERTY AT RS.16,18,397/-. UPON ASSESSEES APPEAL LD. CIT(APPEALS) DELETED THE ADDITION IN THE CASE OF KALAKAR STREET PROPERTY BUT SUSTAINED THE ADDITION IN THE CASE OF PAGAYA PATTY PROPERTY. I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 3 4. AGAINST THE ORDER OF LD. CIT(APPEALS) SUSTAINING THE ADDITION IN THE CASE OF PAGAYA PATTY PROPERTY, THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE LD. COUNSELS AND PERUSED THE R ECORDS. WE FIND THAT BEFORE THE LD. CIT(APPEALS) THE ASSESSEE HAS P LEADED THAT VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDED T HE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND ACCO RDINGLY, IT WAS NECESSARY ON THE PART OF THE ASSESSING OFFICER TO R EFER THE VALUATION OF THE CAPITAL ASSET TO THE VALUATION OFFICER. HOWEVER, LD . CIT(APPEALS) NOTED THAT ACT HAS GIVEN DISCRETION OF REFERRING THE MATT ER TO THE VALUATION OFFICER BASED ON SUCH REQUEST OF THE ASSESSEE. HE N OTED THAT IT IS NOT MANDATORY FOR THE ASSESSING OFFICER TO DO SO. HOWEV ER, WE FIND THAT SECTION 50C DOES POSTULATE REFERENCE TO THE VALUATI ON OFFICER WHERE ASSESSEE OBJECTED TO THE VALUATION AS PER STAMP DUT Y RATE. LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD HAS ALSO REQUESTED THAT THE ISSUE MAY BE REMITTED TO THE FILE OF ASSESSING OFFICER TO REFER THE MATTER TO THE VALUATION OFFICER. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORDS. IN OUR CONSIDERED OPINION, INTEREST OF JUSTICE IN THIS CASE WILL BE SERVED IF THE MATTER IS REMITTED TO THE FILE OF ASSESSING OFFICER AS ASSESSEE HAS OBJECTED TO THE VALUE ADOPT ED BY THE STAMP DUTY AUTHORITIES. AS PER SECTION 50C(2) THE MATTER OF VA LUATION IS TO BE REFERRED TO THE VALUATION OFFICER. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER. ASSESSING OFFICER SHALL CONSIDER THE ISSUE AFRESH AND REFER THE MATTER TO THE VALUATION OFFICER. 7. IN THE RESULT, THE APPEAL FILED BY ASSESSEE STAN DS ALLOWED FOR STATISTICAL PURPOSES. 8. ITA NO. 1617/KOL/2011(REVENUES APPEAL) I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 4 THE ISSUE RAISED IN THIS APPEAL IS THAT LD. CIT(AP PEALS) HAS ERRED IN DIRECTING TO TREAT THE AMOUNT OF RS.33,08,168/- AS SHORT-TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. 9. IN THIS CASE, ASSESSEE DERIVED LONG-TERM CAPITAL GAIN OF RS.24,62,602/- IN RESPECT OF SHARES AND RS.2,20,837 /- IN RESPECT OF UNITS OF MUTUAL FUND. THE ASSESSEE ALSO SHOWED SHORT-TERM CAPITAL GAIN WHICH AMOUNTED TO RS.33,08,168/-. HOWEVER, THE ASSESSING OFFICER CONCLUDED THAT THE SHORT-TERM CAPITAL GAIN DERIVED BY THE ASS ESSEE WAS TO BE ASSESSED AS INCOME FROM BUSINESS. ASSESSING OFFICER HAS BASED HIS DECISION ON THE FOLLOWING OBSERVATIONS :- (I) THAT THE MAIN OBJECTIVE OF THE APPELLANT FOR PU RCHASING HUGE SHARES IS TO GET PROFIT BUT NOT HELD THESE SHA RES FOR DIVIDEND INCOME. (II) NO DIVIDEND HAS BEEN RECEIVED IN RESPECT OF SH ARES WHICH YIELDED PROFIT IN THE SHORT TERM PERIOD. (III) THE AO HAS ALSO HELD THAT SINCE THE MAIN OBJE CTIVE OF THE APPELLANT WAS TO EARN PROFIT WITHIN A SHORT PERIOD BY TAKING RISK AND BY NOT HOLDING THE SHARES FOR EARNING DIVI DEND OF SUCH ACTIVITY WOULD BE CONSIDERED AS TRADING ACTIVITY AN D THE INCOME AS BUSINESS INCOME IN VIEW OF CBDT CIRCULAR NO. 4 O F 2007. HE HAS ALSO HELD THAT THE PURCHASE AND SALE RATIO OF S HARES IS 1:1 I.E. NOT A SINGLE SHARE HAS BEEN HELD ON 31.03.2007 AND THEREFORE, THIS ACTIVITY WAS IN THE NATURE OF TRADI NG. CONSIDERING ALL THE ABOVE, THE AO HAS TREATED THESE AMOUNT OF RS.33,08,168/- AS BUSINESS INCOME. 10. LD. CIT(APPEALS) DELETED THE ADDITION HOLDING A S UNDER :- IT HAS BEEN CLEARLY BROUGHT OUT IN APPEAL PROCEEDI NGS THAT THE APPELLANT HAS BEEN AN INVESTOR IN SHARES S INCE PAST SEVERAL YEARS. IT IS MAINTAINING A SHARE INVES TMENTS ACCOUNT WHICH RECORDS ALL THE INVESTMENTS AND DISINVESTMENTS. THERE IS A FURTHER CONTRADICTION IN THE APPROACH OF THE ASSESSING OFFICER SINCE ON THE ONE HAND HE HAS TREATED THE LONG-TERM CAPITAL GAIN AS SUCH WITHOUT CLASSIFYING IT AS BUSINESS INCOME AND ONLY TREATED SHORT-TERM CAPITAL GAIN AS BUSINESS INCOME. THIS APPROACH IS TOTALLY INCONSISTENT AS ONE PART OF THE SAME ACTIVITY HAS BEEN SPLIT UP BY THE ASSESSING OFFICER I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 5 WITHOUT ANY BASIS AND TREATED AS A DIFFERENT ACTIVI TY, I.E. THE ASSESSING OFFICER HAS ONLY TREATED THE SHORT-TE RM CAPITAL GAIN AS BUSINESS INCOME, WHEREAS IT IS PART OF A SINGLE ACTIVITY OUT OF WHICH BOTH LONG-TERM CAPITAL GAIN AND SHORT-TERM CAPITAL GAIN HAVE ARISEN. HE FURTHER ESTABLISHED BEFORE THE LD. CIT(APPEALS) THAT THE INTENTION OF THE ASSESSEE TO CONDUCT ITS ACTIVITY A S INVESTMENT HAS TO BE SEEN ON THE BASIS OF ITS OWN R ECORD WHICH CANNOT BE IGNORED OR OVERTURNED BY THE ASSESS ING OFFICER WITHOUT ANY BASIS. ALTHOUGH RES JUDICATA IS NOT STRICTLY APPLICABLE IN INCOME-TAX PROCEEDINGS, HOWE VER, PRINCIPLE OF CONSISTENCY HAS TO BE RESPECTED. IN IT S OWN CASE FOR ASSESSMENT YEAR 2004-05, ASSESSING OFFICER HAS ACCEPTED THE ASSESSEES CLAIM OF SHORT-TERM CAPITAL GAIN AND NO FACTS TO THE CONTRARY HAS BEEN BROUGHT ON RE CORD BY THE ASSESSING OFFICER IN THE CURRENT YEAR TO JUS TIFY HIS TREATMENT OF SHORT-TERM CAPITAL GAIN AS BUSINESS IN COME. THE APPELLANT HAS PLACED SUFFICIENT DETAILS ON RECO RD INCLUDING DETAILS OF SHARES, PURCHASE AND SOLD TO ESTABLISH ITS CLAIM REGARDING STCGS. THE DECISION C ITED BY THE APPELLANT I.E. CIT VS.- GOPAL PUROHIT 228 C TR 582 (BOM.) IS APPLICABLE IN THE CASE OF THE APPELLANT. IT HAS ALSO BEEN HELD BY HONBLE ITAT, KOLKATA, B BENCH IN THE CASE OF DCIT, CIRCLE-10, KOLKATA VS.- ETERNA STEEL & INVESTMENTS PVT. LTD. IN ITA NO. 817/2000 AS WELL A S THAT OF DCIT, CIRCLE-10 VS.- ASTREX ENTERPRISES PV T. LTD. IN ITA NO. 818/2010 THAT THE INTENTION OF THE ASSES SEE TO HOLD ITS SHARES AS INVESTMENT IS TO BE CONSIDERED A S PARAMOUNT. IN THE PRESENT CASE, NO EVIDENCE HAS BEE N BROUGHT ON RECORD BYU THE AO TO JUSTIFY HIS TRADING AS OTHERWISE. CONSIDERING ALL THE ABOVE, IT IS HELD TH AT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TRADING RS.33,08,168/- AS BUSINESS INCOME. HE IS THEREFORE DIRECTED TO TREAT THIS AMOUNT AS SHOWN BY APPELLANT AS SHORT-TERM CAPITAL GAINS. 11. AGAINST THE ABOVE ORDER OF LD. CIT(APPEALS), RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THIS CASE, ASSESSEE HAS BEEN AN INVESTOR IN SHARES SINCE PAST SEVERAL YEARS. IT IS MAINTAINING A SHARE INVESTMENTS ACCOUNT WHICH RECORDS ALL THE INVESTMENTS AND DISIN VESTMENTS. WE FIND I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 6 THAT THAT THERE IS A CONTRADICTION IN THE APPROACH OF THE ASSESSING OFFICER SINCE ON THE ONE HAND HE HAS TREATED THE LONG-TERM CAPITAL GAIN AS SUCH WITHOUT CLASSIFYING IT AS BUSINESS INCOME AND ONLY TREATED SHORT-TERM CAPITAL GAIN AS BUSINESS INCOME. THAT THIS APPROACH WAS TOTALLY INCONSISTENT AS ONE PART OF THE SAME ACTIVITY HAS B EEN SPLIT UP BY THE ASSESSING OFFICER WITHOUT ANY BASIS AND TREATED AS A DIFFERENT ACTIVITY. ASSESSING OFFICER HAS ONLY TREATED THE SHORT-TERM C APITAL GAIN AS BUSINESS INCOME, WHEREAS IT IS PART OF A SINGLE ACTIVITY OUT OF WHICH BOTH LONG-TERM CAPITAL GAIN AND SHORT-TERM CAPITAL GAIN HAVE ARISE N. WE FURTHER AGREE WITH THE LD. CIT(APPEALS) THAT THE INTENTION OF THE ASSESESE TO CONDUCT ITS ACTIVITY AS INVESTMENT HAS TO BE SEEN ON THE BASIS OF ITS OWN RECORD WHICH CANNOT BE IGNORED OR OVERTURNED BY THE ASSESSING OF FICER WITHOUT ANY BASIS. ALTHOUGH RES JUDICATE IS NOT STRICTLY APPLIC ABLE IN INCOME-TAX PROCEEDINGS, HOWEVER, PRINCIPLE OF CONSISTENCY CANN OT BE GIVEN A COMPLETE GO-BYE. IN ITS OWN CASE FOR ASSESSMENT YEA R 2004-05, ASSESSING OFFICER HAS ACCEPTED THE ASSESSEES CLAIM OF SHORT- TERM CAPITAL GAIN AND NO FACTS TO THE CONTRARY HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER IN THE CURRENT YEAR TO JUSTIFY HIS TREATMEN T OF SHORT-TERM CAPITAL GAIN AS BUSINESS INCOME. THE CASE LAWS REFERRED TO BY THE LD. CIT(APPEALS) SUPPORT THE CASE OF ASSESSEE. UNDER THE CIRCUMSTANC ES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(APPEA LS). ACCORDINGLY, WE CONFIRM THE SAME. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 14. TO SUM UP, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES, AND THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF DECEMBER, 2013. SD/- SD/- MAHAVIR SINGH SHAMIM YAHYA (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 27 TH DAY OF DECEMBER, 2013 I.T.A. NO.: 1472/KOL./2011 ASSESSMENT YEAR : 2007-2008 & ITA NO. 1617/KOL/2011 ASSESSMENT Y EAR : 2007-2008 PAGE 1 TO 7 7 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.