ACIT, New Delhi V. M/s. Rajshree Builders Pvt. Ltd, New Delhi

ITA 1520/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3592 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.1520/DEL/2009 ASSESSMENT YEAR : 2006-07 ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-15(1), NEW DELHI. VS. M/S RAJSHREE BUILDERS PVT.LTD., FLAT NO.A-3/71, J.K.APARTMENTS, PASCHIM VIHAR, NEW DELHI. PAN NO.AAACR4754R. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K.LAL, SR.DR. RESPONDENT BY : NONE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 30.1.2009 FOR THE AY 2006-07, IN THE MATTER OF ORDE R PASSED U/S 143(3) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO TRE ATING THE PROFIT ON SALE OF LAND TO THE TUNE OF RS.49.61 LAKHS AS CAPITAL GAIN, IN PLACE OF SAME BEING TREATED AS BUSINESS INCOME BY THE AO. NOBODY APPEARED ON BEHA LF OF THE ASSESSEE INSPITE OF GIVING THE OPPORTUNITY, THE BENCH THEREFORE DECIDED TO DISPOSE THE APPEAL AFTER HEARING THE LEARNED DR AND CONSIDERING THE MATERIAL PLACED ON RECORD. 3. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FOUND THAT ASSESSEE WAS ENGAGED IN BUSINESS OF SALE AND PURCHA SE OF REAL ESTATE. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO ASKED THE ASS ESSEE TO EXPLAIN THE INCOME OF ITA-1520/D/2009 2 RS.49.60 LAKHS SHOWN AS LONG TERM CAPITAL GAIN, IN RESPECT OF LAND SOLD DURING THE YEAR. THE AO OBSERVED THAT ASSESSEE HIMSELF WAS TR EATING THE SALE AND PURCHASE OF REAL ESTATE AS ITS BUSINESS INCOME IN THE PAST AND TREATED THE LAND AS STOCK IN TRADE RATHER THAN INVESTMENT. HE FURTHER FOUND THAT DURI NG THE YEAR, THE ASSESSEE HAS TRANSFERRED LAND OF RS.5,39,991/- FROM OPENING BALA NCE OF STOCK TO THE INVESTMENT ACCOUNT. FURTHER, THE ASSESSEE HAD SHOWN THE SAME LAND IN CLOSING STOCK IN THE PROFIT & LOSS ACCOUNT AS WELL AS INVESTMENT IN THE BALANCE SHEET IN EARLIER YEARS. AFTER RECORDING FOLLOWING FINDINGS, THE AO TREATED THE PROFIT ON SALE OF LAND AS BUSINESS INCOME:- FIRSTLY, ASSESSEE HIMSELF IS SHOWING THE LAND AS C LOSING STOCK IN THE PROFIT AND LOSS ACCOUNT OVER THE YEARS AND ONLY DUR ING THE YEAR UNDER CONSIDERATION, HE TRANSFERRED THE SAME FROM CLOSING STOCK TO INVESTMENT. SECONDLY THE ASSESSEE DID NOT FILE ANY EVIDENCE AS TO HOW HE IS MAINTAINING TWO DIFFERENT PORTFOLIOS OF LAND I.E. S TOCK AND INVESTMENT. THIRDLY THE ASSESSEE HAS NOT CONSIDERED THE IMPROVE MENTS IN LAND MADE DURING THE YEAR UNDER CONSIDERATION FOR COMPUT ATION OF SHORT TERM CAPITAL GAIN BUT CALCULATED LTCG TAXABLE @ 20% ON THE WHOLE AMOUNT. FOURTHLY ASSESSEE IS ENGAGED IN THE BUSINESS OF SAL E AND PURCHASE OF REAL ESTATE WHICH IS CLEARLY EVIDENT FROM THE MEMOR ANDUM AND ARTICLE OF ASSOCIATION. 4. BY THE IMPUGNED ORDER, CIT(A) DIRECTED THE AO TO TREAT THE PROFIT ON SALE OF LAND AS LONG TERM CAPITAL GAIN BY OBSERVING THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS PRODUCED COPIES OF TH E BALANCE SHEET AS ON 31.3.2005 AND 31.3.2004 INDICATING INVESTMENT IN LA ND. AGGRIEVED BY THIS ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. ITA-1520/D/2009 3 5. WE HAVE CONSIDERED THE CONTENTION OF LEARNED DR AND FOUND FROM THE RECORD THAT CLEAR FINDING HAS BEEN RECORDED BY THE AO WITH REGARD TO NATURE OF THE ASSESSEES BUSINESS BEING ENGAGED IN SALE AND PURCH ASE OF REAL ESTATE. THE LAND PURCHASED BY THE ASSESSEE WAS SHOWN AS STOCK IN TRA DE. AS PER THE FINDING RECORDED BY THE AO, ONLY DURING THE YEAR UNDER CONS IDERATION, THE ASSESSEE HAS TRANSFERRED LAND HELD AS STOCK IN TRADE TO THE INVE STMENT ACCOUNT. THE PROFIT ARISING OUT OF ITS SALE WAS TREATED BY THE ASSESSEE AS LONG TERM CAPITAL GAIN. WITHOUT BRINGING ANY CORROBORATIVE MATERIAL ON RECO RD, THE CIT(A) HAS STATED THAT THE LAND WAS SHOWN AS INVESTMENT IN THE BALANCE SHE ET OF THE EARLIER YEAR FOR REACHING TO THE CONCLUSION THAT PROFIT ARISING OUT OF ITS SALE IS REQUIRED TO BE TREATED AS LONG TERM CAPITAL GAIN, RATHER THAN BUSINESS INC OME AS HELD BY THE AO. FURTHERMORE, THE CIT(A) HIMSELF HAS OBSERVED IN PAR A 6 THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS PRODUCED BA LANCE SHEET AS ON 31.3.2005 AND 31.3.2004 INDICATING INVESTMENT IN LAND. THESE BALANCE SHEETS WERE NOT CONFRONTED BY THE AO, NOR ANY REMAND REPORT WAS CAL LED FOR. THE OBSERVATION OF THE CIT(A) IS CLEARLY IN CONTRADICTION WITH THE FIN DINGS RECORDED BY HIM AND THE REASONING GIVEN BY THE AO AT PAGE 2 OF HIS ORDER. THERE APPEARS TO BE CLEAR CONTRAVENTION OF RULE 46A AND THE FINDINGS RECORDED BY THE AO HAVE NOT BEEN CONTROVERTED BY THE CIT(A). SINCE THE ASSESSEE WAS IN THE BUSINESS OF PURCHASE AND SALE OF LAND WHICH IS SHOWN AS STOCK IN TRADE, ANY PROFIT ARISING ON ITS SALE IS REQUIRED TO BE TREATED AS BUSINESS INCOME. ONLY IN CASE THE ASSESSEE IS ABLE TO DEMONSTRATE THAT LAND SO PURCHASED WAS WITH AN INTE NTION TO HOLD AS INVESTMENT AND WHICH IS CLEARLY EXHIBITED BY THE TREATMENT GIV EN IN THE BALANCE SHEET OF THE EARLIER YEARS, THEN ONLY IT CAN BE SAID THAT ASSESS EE WAS HAVING INTENTION OF HOLDING THOSE LANDS AS INVESTMENT. EVEN IN SUCH CASE, ANY F URTHER AMOUNT SPENT ON SUCH LAND WHICH IS NOT MORE THAN 36 MONTHS OLD, CANNOT B E TREATED AS SUCH FOR TAKING BENEFIT OF LONG TERM CAPITAL GAIN ON ITS SALE. EVE N THE AMOUNT SPENT BY ASSESSEE DURING THE YEAR WAS ALSO TAKEN BENEFIT OF LONG TERM INVESTMENT, WHICH IS NOT CORRECT. AS THERE IS CLEAR CONTRADICTION IN THE FI NDING OF THE AO VIS--VIS CIT(A) ITA-1520/D/2009 4 AND SINCE CIT(A) HAS CLEARLY CONTRAVENED PROVISIONS OF RULE 46A, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AND ASSESSEE IS DIRECTED TO PLACE BEFORE THE AO THE RELEVANT BALANCE SHEETS WHICH WERE STATED BY THE CIT(A) AS HAVING BEEN PROD UCED BEFORE HIM DURING THE APPELLATE PROCEEDINGS AND ON THE BASIS OF WHICH CIT (A) HAS DIRECTED THE AO TREAT THE PROFIT ARISING ON SALE OF SUCH LAND AS CAPITAL GAINS. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON CONCLUSION OF HEARING ON 19 TH JULY, 2010. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19.06.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-1520/D/2009 5