Sangam Builders & Promoters, Pune V. ITO, Pune

ITA 1644/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0583 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-12-2015
• Assessment Year: 1993-1994
• Appeal Filed On: 06-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Capital asset; Business income; Onus to prove
• Section: 143(3); 260A

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1644/PN/2012 ASSESSMENT YEAR : 1993-94 SANGAM BUILDERS & PROMOTERS, 747, GURUWAR PETH, PUNE 411 042. PAN : AASFS6193A . APPELLANT VS. THE INCOME TAX OFFICER, WARD 3(1), PUNE. . RESPONDENT / APPELLANT BY : SHRI SUNIL PATHAK / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 09.12.2015 / DATE OF PRONOUNCEMENT: 30.12.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A)-II, PUNE DATED 23.03.2012 RELATING TO ASSESS MENT YEAR 1993-94 PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME-TAX A CT, 1961 (IN SHORT THE ACT). 2. BRIEFLY STATED, THE ASSESSEE IS A PARTNERSHIP FI RM ESTABLISHED TO DEVELOP THE ANCESTRAL PROPERTY OF THE PARTNERS AT GURUWAR P ETH, PUNE. THE DEVELOPMENT WAS COMMENCED IN PHASES AND COULD NOT BE COMPLETED OWING TO DIFFERENCE IN THE PARTNERS. IN THE FINANCIAL YEAR 1992-93 RELEVAN T TO ASSESSMENT YEAR 1993-94, THE PARTNERS DIVIDED UNDER-CONSTRUCTED PRO PERTY I.E. WORK IN PROGRESS (WIP) IN THEIR RESPECTIVE PROFIT SHARING RATIO. THE COST OF UNFINISHED CONSTRUCTION PROJECT STANDS AT RS.14,63,500/-. THE PROJECT WAS SOLD TO ONE M/S 2 ITA NO.1644/PN/2012 FAME CONSTRUCTIONS FOR A CONSIDERATION OF RS. 75 LA CS RESULTING IN INCOME OF RS. 60,36,500/-. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, TWO ISS UES WERE RAISED. FIRST ISSUE WAS ABOUT THE NATURE OF INCOME ARISING ON SAL E OF UNDER CONSTRUCTION PROJECT. THE ASSESSING OFFICER CONCLUDED THAT INCOM E ARISING ON SALE OF THE PROJECT IS IN THE NATURE OF BUSINESS INCOME AS AG AINST CAPITAL GAINS CLAIMED BY THE ASSESSEE. SECOND ISSUE WAS ABOUT THE TAXABIL ITY OF THE IMPUGNED INCOME OF RS.60,36,500/- IN THE CORRECT HANDS. IT W AS THE CASE OF THE AO THAT THE INCOME IS CHARGEABLE TO TAX IN THE HANDS OF THE PARTNERSHIP FIRM I.E. ASSESSEE. ON THE OTHER HAND, THE ASSESSEE CLAIMED T HAT THE PARTNERS HAVE OFFERED THE INCOME FOR TAXATION IN THEIR HANDS. 4. THE DISPUTE WAS CARRIED TO THE ITAT. THE ITAT IN ITS COMBINED ORDER DATED 28/11/2008 IN ITA NO.278/PN/2001 AND OTHERS, AFTER ANALYSING THE FACTS CONCERNING THE ABOVE ISSUES DECIDED IN THE FIRST IS SUE IN FAVOUR OF THE ASSESSEE. THE ITAT HELD THAT THE UNDER-CONSTRUCTION WORK IS A CAPITAL ASSET IN THE FACTS OF THE CASE AND ACCORDINGLY CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS ON ITS TRANSFER. AS REGARDS THE SECOND ISSUE, THE MATT ER WAS KEPT OPEN AND REMANDED BACK BY THE ITAT TO THE FILE OF THE AO FOR ITS FRESH CONSIDERATION IN THE LIGHT OF S. 2(47) AND S. 45(4) IN ACCORDANCE WI TH LAW AND HAVING REGARD TO THE FACTS INVOLVED. 5. THE ASSESSING OFFICER HOWEVER DID NOT GIVE RELIE F TO THE ASSESSEE IN TERMS OF THE ORDER OF ITAT ON THE GROUND THAT THE A PPEAL UNDER S. 260A HAS BEEN PREFERRED AGAINST THE ORDER OF ITAT WHICH IS P ENDING ADJUDICATION BEFORE THE HIGH COURT. THE ASSESSEE HOWEVER FOUND FAVOUR W ITH THE CIT(A) ON THE FIRST ISSUE. THE CIT(A) AFTER TAKING NOTE OF THE OR DER OF THE ITAT ACCEPTED THAT INCOME ARISING FROM SALE OF UNFINISHED CONSTRUCTION PROJECT IS REQUIRED TO ASSESSED AS CAPITAL GAINS AND NOT AS BUSINESS IN COME. 6. ON THE SECOND ISSUE HOWEVER, THE CIT(A) HELD THA T INCOME IS REQUIRED TO TAXED IN THE HANDS OF THE PARTNERSHIP FIRM AND NOT IN THE HANDS OF INDIVIDUAL 3 ITA NO.1644/PN/2012 PARTNERS IN VIEW OF THE EXPRESS PROVISIONS OF THE S TATUTE. THE RELEVANT PARAS OF THE ORDER OF CIT(A) CONCERNING THE ISSUE ARE REPROD UCED HEREUNDER FOR READY REFERENCE :- 4.9 DURING THE COURSE OF ASSESSMENT PROCEEDINGS WI TH RESPECT TO THE SET ASIDE ASSESSMENT BY THE CIT(A)-I VIDE HIS ORDER DATED 11. 11.2000, THE A.O. IN VIEW OF THE DIRECTIONS OF THE LD. CIT(A)-I, PUNE SOUGHT THE DET AILS FROM THE APPELLANT AND IN COMPLIANCE ONE OF THE PARTNERS NAMELY UDAY NAIK HAD ATTENDED BEFORE THE A.O. AND HAD FURNISHED A WRITTEN SUBMISSION DATED 11-02-2002 WHEREIN IT WAS STATED AS UNDER : (1) THE WORK IN PROGRESS WAS TAKEN OVER BY THE PAR TNERS OF THE FIRM AFTER DISSOLUTION OF THE FIRM. (2) THE INFORMATION AS REQUIRED U/S 176(3) OF THE I T ACT, 1961 WAS NOT FILED. (3) NO TRANSFER DEED IN RESPECT OF THE UNFINISHED W ORK IN PROGRESSED WAS MADE BY THE FIRM. (4) THE OWNERSHIP OF THE WORK IN PROGRESS WAS TRANS FERRED TO THE PARTNERS IN THEIR PROFIT SHARING RATIO. THE AO HAD ALSO REMARKED THAT NO DOCUMENTARY EVIDEN CES WERE PRODUCED BY THE APPELLANT ALONG WITH THE AFORESAID SUBMISSION DATED 11-02-2002. DURING THE PRESENT ASSESSMENT PROCEEDINGS ALSO, THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY SUCH EVIDENCES AS CONTENDED AND THE SAME PARTNER UD AY NAIK HAD ATTENDED BEFORE THE A.O. THAT TOO FOR SEEKING ADJOURNMENT, THOUGH N O DETAILS OR ANY SUBMISSION ESPECIALLY WITH RESPECT TO THE DETAIL AS DIRECTED B Y THE HON. ITAT WAS FURNISHED. THE APPELLANT HAS BEEN ONLY TAKING THE PLEA OF NOT PROV IDING ADEQUATE OPPORTUNITY TO FURNISH/EXPLAIN VARIOUS POINTS BUT DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS WHICH INCIDENTALLY TOOK ON THREE DIFFERENT OCCASION S AND DIFFERENT DATES STILL THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY SUCH DET AILS WHICH COULD JUSTIFY THE CLAIM MADE. THE FIRST ASSESSMENT U/S 143(3) WAS COMPLETED ON 28.03.2000 AND THE LAST SET ASIDE ASSESSMENT U/S 143(3) WAS COMPLETED ON 24.12. 2009 AND FOR THE PAST NINE YEARS THE APPELLANT HAS BEEN SEEKING AN OPPORTUNITY TO PRESENT THEIR VIEW POINT AND EXPLANATION WHICH AS CONTENDED HAS NOT BEEN PROVIDE D. THE APPELLANT HAS BEEN HARPING ON THE ISSUE OF TAXABILITY OF THE INCOME IN THE HAND OF THE PARTNERS, BUT THE DETAILS AND EVIDENCES BROUGHT ON RECORD DO NOT SUPP ORT THE STAND TAKEN BY THE APPELLANT. THE APPELLANT HAS NOT BEEN ABLE TO CONCL USIVELY PROVE AS TO WHETHER THE FIRM WAS DISSOLVED OR NOT AND EVEN THE SALE DEED DE SPITE INDICATING THAT THE NAIKS WERE OWNERS OF THE WORK-IN-PROGRESS ALSO INDICATE T HAT THEY WERE PARTNERS OF THE FIRM WHICH HAD DEVELOPED THE PROJECT. IN THE APPELL ANT'S SUBMISSION BEFORE THE ITAT WHICH HAS BEEN INCLUDED AND FILED DURING THE PRESEN T APPELLATE PROCEEDINGS, IT HAS BEEN MENTIONED THAT IN A.Y. 1993-94 THE INVESTM ENT WAS DISTRIBUTED AMONG THE PARTNERS BY CREDITING INVESTMENT ACCOUNT AND DE BITING THE PARTNERS' CAPITAL ACCOUNT AND THAT UNSOLD PART OF THE PROPERTY WAS SO LD TO ANOTHER DEVELOPER M/S FAME CONSTRUCTION AND A POWER OF ATTORNEY WAS EXECU TED IN FAVOR OF THE PARTNER OF THE FIRM, FAME CONSTRUCTION, SHRI. M.Y. SHAIKH A ND THUS AROSE THE CAPITAL GAIN TO THE VARIOUS PARTNERS. THE APPELLANT HAS NOT FURN ISHED ANY DETAIL OF THE LEGAL FORMALITY ENTERED INTO BEFORE APPORTIONING THE ASSE TS OF THE FIRM BY THE PARTNERS. THE APPELLANT HAS ONLY MADE BOOK ENTRIES AS IS EVID ENT FROM THE SUBMISSION MADE FOR THE TRANSFER OF PROPERTY, AND A MERE ASSER TION THAT PARTNERS TOOK OVER THE ASSETS OF THE FIRM WITHOUT COMPLETING THE LEGAL FORMALITIES WOULD HAVE TO BE REJECTED. 4 ITA NO.1644/PN/2012 4.10 RIGHTS IN IMMOVABLE PROPERTY ARE NEITHER CREAT ED NOR EXTINGUISHED MERELY BY ADJUSTMENT ENTRIES IN THE ACCOUNT BOOKS. THE LAW REQUIRES THE FORMALITIES OF REGISTRATION WHEN THE RELEVANT LAW M AKES SUCH FORMALITIES A CATEGORICAL IMPERATIVE. THE WHOLE CONCEPT OF PARTNE RSHIP IS TO EMBARK UPON A JOINT VENTURE AND, FOR THAT PURPOSE, TO BRING THEM AS CAPITAL MONEY OR EVEN PROPERTY INCLUDING IMMOVABLE PROPERTY. ONCE THAT IS DONE, WHATEVER IS BROUGHT IN WOULD CEASE TO BE THE EXCLUSIVE PROPERTY OF THE PERSON WHO BROUGHT IT IN AND IT WOULD BE THE TRADING ASSET OF THE PARTNERSHIP IN WH ICH ALL THE PARTNERS WOULD HAVE INTEREST IN PROPORTION TO THEIR SHARE IN THE JOINT VENTURE OF THE BUSINESS OF PARTNERSHIP. THE PERSON WHO BROUGHT IT IN WOULD, T HEREFORE NOT BE ABLE TO CLAIM OR EXERCISE ANY EXCLUSIVE RIGHT OVER ANY PROPERTY WHIC H HE HAS BROUGHT IN, MUCH LESS OVER ANY OTHER PARTNERSHIP PROPERTY. BUT, THE TRAN SFER OF PROPERTY BY THE FIRM TO AN EXISTING PARTNER BY MERE ADJUSTMENT OF BOOKS ENTRIE S OTHERWISE THAN IN CONNECTION WITH THE DISSOLUTION OF THE PARTNERSHIP OR RETIREME NT OF THE PARTNER FROM THE PARTNERSHIP, NOT ACCOMPANIED BY A DULY REGISTERED D EED OF CONVEYANCE CONSTITUTES NO TRANSFER. IT WAS SO HELD IN THE CASE OF CIT VS K EDARNATH PODDAR & CO (1993) 2001 ITR 639 (CAL) AND ALSO BY THE BOMBAY HIGH COUR T IN THE CASE OF J M MEHTA & BRAS 214 ITR 716 (BOM) CITED SUPRA. 4.10.1 IN THE CASE OF J M MEHTA CITED SUPRA THE HON . BOMBAY HIGH COURT HELD THAT THERE CANNOT BE A DIVISION OF THE PROPERT IES PURCHASED IN THE NAME OF THE FIRM BETWEEN THE PARTNERS BY MERE ENTRIES IN TH E BOOKS DURING SUBSISTENCE OF PARTNERSHIP AND WHEN PROPERTY IS SOLD CAPITAL GAINS ARE ASSESSABLE IN THE HANDS OF THE FIRM DESPITE ANY SUCH DIVISION. 4.11 IN THE CASE OF GANDAMAL & SONS VS ACIT (2007) 101 ITD 368 ITAT PUNE, THE AO. APPLYING SEC. 45(4) ADOPTED THE MARKE T VALUE OF HOUSE PROPERTY AND AFTER ALLOWING DEDUCTION FOR COST OF BUILDING A ND DEDUCTION U/S 48 DETERMINING THE LTCG, THE ASSESSEE CASE WAS THAT, S INCE PARTNERS CONTINUED TO HOLD THE BUILDING AS JOINT OWNERS, THERE WAS NO TRA NSFER AND SECTION 45(4) WAS NOT APPLICABLE, THE ITAT PUNE HELD THAT CAPITAL GAI N ARISES TO FIRM U/S 45(4). THE HON. ITAT HELD THAT THE LAND WAS PURCHASED WITH THE FUNDS OF THE FIRM AND IT WAS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE YEAR TO YEAR TILL IT WAS DISTRIBUTED IN CONNECTION WITH THE DISSOLUTION OF THE FIRM. SECTIO N 14 OF THE PARTNERSHIP ACT, CLEARLY PROVIDES THAT ANY PROPERTY OBTAINED BY THE MEANS OF PARTNERSHIP FROM TIME TO TIME DURING ITS CONTINUATION WHETHER BY WAY OF PURCHASE OR BY EMPLOYMENT IN THE BUSINESS, IS THE PARTNERSHIP PROP ERTY UNLESS CONTRARY IS ESTABLISHED. LAND WAS USED FOR THE PURPOSE OF THE F IRM AND, THEREFORE, THE ONUS TO PROVE THAT IT BELONGED TO THE PARTNERS LIED ON T HE ASSESSEE. THUS THE ONUS DOES NOT GET DISCHARGED BY MERELY MENTIONING THAT L AND BELONGED TO PARTNERS AND DISTRIBUTED IN THEIR RESPECTIVE PROFIT SHARING RATIO. SUCH ONUS COULD BE DISCHARGED ONLY BY SOME FIRM EVIDENCE SHOWING THAT SINCE ITS ACQUISITION THE LAND WAS TREATED BY ALL THE PARTNERS AS THEIR SEPAR ATE PROPERTY. NO SUCH EVIDENCE HAS BEEN PRODUCED AND THEREFORE, IT IS HELD THAT TH E LAND BELONGED TO THE FIRM. 4.12 SEC. 45(4) INTRODUCED W.E.F. AY. 1988-89, PROV IDES THAT PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY A FIRM TO A PARTNER ON DISSOLUTION OR OTHERWISE SHALL BE CHARGEABLE BY THE FIRM'S INCOME IN THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THE A.O. HAS NOT TAKEN INTO ACCOUNT THIS SPECIFIC PROVISION WHILE DECIDING THE ISSUE AS THE INCOME HAS BEEN ASSESSED AS BUSINESS INCOME AND, HOLDING THE PROPERTY AS STOCK- IN-TRADE THEREFORE, THERE WAS NO OCCASION FOR THE A.O. TO EXAMINE THE ISSUE, BUT AS THE SAME COULD NOT BE OVERLOOKED WHILE DECIDING THE ISSUE AT HAND. SEC. 4 5(4) WOULD IMPOSE LIABILITY FOR CAPITAL GAIN ON DISTRIBUTION OF ASSETS TO ITS P ARTNERS. THE BOMBAY HIGH COURT IN THE CASE OF CIT VS A N NAIK ASSOCIATES 265 ITR 3 46 (BOM) HAS HELD THAT TRANSFER ASSETS BY THE FIRM TO PARTNERS AS WELL AS PARTNER TO FIRM CAPITAL GAIN ARISES. 5 ITA NO.1644/PN/2012 4.13 THE HON. BOMBAY HIGH COURT IN THE CASE OF CIT VS A.N. NAIK ASSOCIATES (2004) 265 ITR 346 (BOM) HELD THAT IF THE OBJECT OF THE ACT IS SEEN AND THE MISCHIEF IT SEEKS TO AVOID, IT WOULD BE CLEAR THAT THE INTENTIO N OF PARLIAMENT WAS TO BRING INTO THE TAX NET TRANSACTIONS WHEREBY ASSETS WERE BROUGH T INTO A FIRM OR TAKEN OUT OF THE FIRM. THE EXPRESSION OTHERWISE HAS NOT TO BE REA D EJUSDEM GENERIS WITH THE EXPRESSION DISSOLUTION OF A FIRM OF BODY OR AOP'. THE EXPRESSION 'OTHERWISE' HAS TO BE READ WITH WORDS 'TRANSFER OF CAPITAL ASSETS' BY WAY OF DISTRIBUTION OF CAPITAL ASSETS. IF SO READ IT BECOMES CLEAR THAT EVEN WHEN A FIRM IS IN EXISTENCE AND THERE IS A TRANSFER OF CAPITAL ASSETS IT COMES WITHIN THE EXPR ESSION 'OTHERWISE' AS THE OBJECT OF THE AMENDING ACT WAS TO REMOVE THE LOOPHOLE WHICH E XISTED WHEREBY CAPITAL GAINS TAX WAS NOT CHARGEABLE. IT WAS FURTHER OBSERVED THA T CONTENTION THAT SEC. 2(47) HAS NOT BEEN AMENDED AND CONSEQUENTLY EVEN IF SEC. 45(4 ) HAS BEEN BROUGHT IN BY THE AMENDMENT YET THERE IS NO TRANSFER, IS NOT SUSTAINA BLE. FIRSTLY, THE DEFINITION OF TRANSFER ITSELF IS INCLUSIVE. BEFORE THE INTRODUCTI ON OF 45(4), THERE WAS CLAUSE (II) OF SECTION 47. CLAUSE (II) CONTAINED EARLIER IN SEC. 4 7 MEANT THAT THE DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF THE FIRM ETC, WERE NOT REGARDED AS 'TRANSFER'. THE FINANCE ACT, 1987 W.E.F. 1ST APRIL 1988 OMITTED THIS CLAUSE, THE EFFECT OF WHICH IS THAT DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF A FIRM WOULD HENCEFORTH BE REGARDED AS TRANSFER. THEREFORE, INST EAD OF AMENDING SEC. 2(47) THE AMENDMENT WAS CARRIED OUT BY THE FINANCE ACT BY OMITTING SEC. 47(II), THE RESULT OF WHICH IS THAT DISTRIBUTION OF CAPITAL ASS ETS ON THE DISSOLUTION OF A FIRM WOULD BE REGARDED AS 'TRANSFER'. 4.14 THUS, IN VIEW OF THE ABOVE MENTIONED FACTS AND MATERIAL ON RECORD IT CAN BE SEEN THAT THE APPELLANT HAS NOT BEEN ABLE TO FURNIS H ANY FURTHER EVIDENCE OR PROOF IN SUPPORT OF THE CLAIM MADE AND THE GROUNDS OF APPEAL RAISED. EVEN THE DETAILS WITH RESPECT TO THE ISSUES RAISED BY THE ITAT FOR WHICH SPECIFIC DIRECTIONS WERE ISSUED HAS NOT BEEN COMPLIED WITH BY THE APPELLANT. THE APPELL ANT HAS NOT FILED ANY FURTHER DETAILS WITH RESPECT TO EITHER THE DISCONTINUATION OF BUSINESS, TRANSFER OF ASSETS FROM THE FIRM TO PARTNERS AND ALSO WITH RESPECT TO ANY A GREEMENT ENTERED INTO BETWEEN THE PARTIES. THUS, IN THE ABSENCE OF ANY DETAILS WITH R ESPECT TO THE ABOVE THE POSITION REMAINS AS IT WAS EARLIER BEFORE THE CIT(A)-II DURI NG THE APPELLATE PROCEEDING FOR THE SET ASIDE APPEAL OF THE ORIGINAL ORDER. THUS, I HAVE NO OTHER OPTION BUT TO DECIDE THE APPEAL ON THE BASIS OF THE MATERIAL ON RECORD S O FAR GATHERED IN THE CASE AND I AGREE WITH THE FINDINGS OF THE CIT(A)-II AS RECORDE D IN PARA 6 OF THE APPELLATE ORDER DATED 17-02-2004 WHO HELD AS UNDER : THE ISSUE LEFT FOR CONSIDERATION IS WHETHER THE SA ID INCOME WAS TO BE ASSESSED IN THE HANDS OF THE FIRM OR AS CLAIMED BY THE APPELLANT IN THE HANDS OF THE PARTNERS. THERE IS A DISPUTE AS TO WHE THER THE FIRM WAS DISSOLVED OR NOT DISSOLVED. ONE OF THE PARTNERS WHO HAD ATTENDED BEFORE THE A.O. HAD CONFIRMED THAT THE PARTNERS HAD TAKEN OVER THE WORK IN PROGRESS ON DISSOLUTION OF THE FIRM, OTHER PARTNERS OF THE FIRM CONTEND OTHERWISE. THE FACT OF THE CASE ARE THEREFO RE NOT VERY CLEAR. BUT THE SALE DEED DESPITE INDICATING THAT THE NAIKS WERE OWNERS OF THE WORK IN PROGRESS ALSO INDICATE THAT THEY WERE PARTN ERS OF THE FIRM WHICH HAD DEVELOPED THIS PROJECT. IT IS NOT UNDERSTOOD AS TO HOW THE PARTNERS COULD APPORTION THE ASSETS HELD BY THE FIRM WITHOUT COMPLETING THE LEGAL FORMALITIES. IF THE FIRM HAD DEVELOPED THE PROPERTY THEN IT IS THE FIRM, WHICH IS THE OWNER OF THE PROPERTY AND THE EFFECT O F TRANSFER OF THIS PROPERTY TO THE PARTNERS BY THE FIRM COULD NOT BE G IVEN BY PASSING MERE ENTRIES IN THE BOOKS OF ACCOUNT OF THE FIRM. FOR IN COME-TAX PURPOSES A FIRM IS A SEPARATE ENTITY HAVING SEPARATE RIGHTS AN D DISTINCT FROM THE RIGHTS OF THE PARTNERS. A MERE ASSERTION THAT THE P ARTNERS TOOK OVER THE ASSETS OF THE FIRM WITHOUT COMPLETING THE LEGAL FOR MALITIES WOULD HAVE TO BE REJECTED OUTRIGHT. IN THE CASE OF CIT VS J.M. MEHTA & BROS (1995) 214 ITR 716 (BOM), THE BOMBAY HIGH COURT HAVE ALSO HELD THAT THE CAPITAL GAIN ARISING ON THE SALE OF THE IMMOVABLE P ROPERTY OF A FIRM WAS 6 ITA NO.1644/PN/2012 ASSESSABLE IN THE HANDS OF THE FIRM EVEN IF THERE W AS TRANSFER OF THE PROPERTY BELONGING TO THE FIRM TO ITS PARTNERS BY M EANS OF BOOK ENTRIES. UNDER THE CIRCUMSTANCES, I WOULD HOLD THAT THE CAPI TAL GAINS WHICH AROSE FROM THE SALE OF THE WORK IN PROGRESS OF THE FIRM, WOULD HAVE TO BE ASSESSED IN THE HANDS OF THE FIRM UNDER THE HEAD INCOME FROM CAPITAL GAINS AND NOT UNDER THE HEAD INCOME FROM BUSINESS A S WORKED BY THE ASSESSING OFFICER. 4.15 IN VIEW OF THE ABOVE FACT AND THE RATIO OF THE JUDICIAL CITATIONS MENTIONED ABOVE, AND THE EXPRESS PROVISIONS OF THE STATUTE, L HOLD THAT THE CAPITAL GAINS WHICH AROSE FROM THE SALE OF THE WIP OF THE FIRM WOULD HAVE TO BE ASSESSED IN THE HANDS OF THE FIRM AND NOT IN HANDS OF THE INDIVIDUAL PARTNERS AS CLAIMED BY THE APPELLANT UNDER THE HEAD INCOME FROM CAPITAL GAINS AND NOT UNDER THE HEAD 'INCOME FROM BUSINESS' AS WORKED OUT BY THE A.O. THE GROUNDS OF APPEAL NO.1, 2 AND 3 RAISED BY THE APPELLANT ARE AC CORDINGLY DECIDED AND THE APPEAL IS PARTLY ALLOWED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL REPRODUC ED HEREUNDER :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE CAPI TAL GAIN WAS ASSESSABLE IN THE HANDS OF THE APPELLANT/ASSESSEE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE PARTNERS IN INDIVIDUAL CAPACITY HAD PAID THE CAPITAL GAIN TA XES. BY TAXING THE SAME TRANSACTION IN THE HANDS OF THE APPELLANT FIRM AMOU NTS TO TAXATION OF THE SAME INCOME TWICE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THERE CANNOT BE VALID TRANSFER FROM A FIRM TO A PAR TNER WITHOUT A REGISTERED DEED. THE LEARNED CIT (APPEALS) FAILED T O NOTE THAT IN VIEW OF THE DECISION OF THE HON'BLE APEX COURT IN CASE OF C HANDRA PANDIAN VS. SHIVLINGA NADAR (1993) 1 SSC 589, NO REGISTRATION I S NECESSARY. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FELL IN ERROR OF LAW IN NOT APPRECIATING THAT TRANSFER FROM A FIRM TO ITS' PARTNER(S) CAN BE MADE IN A MANNER OTHER THAN BY WAY OF A REGISTERED DEED. 5. THE APPELLANT REQUESTS FOR ADMISSION OF ADDITION AL EVIDENCES, IF ANY, REQUIRED IN RESPECT OF THE GROUNDS OF APPEAL. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY ANY OF THE ABOVE STATED GROUNDS OF APPEAL. 8. THE PERTINENT QUESTION BEFORE US FOR ADJUDICATIO N IS ABOUT THE TAXABILITY OF CAPITAL GAINS ARISING ON TRANSFER OF THE CONSTRU CTION WIP IN THE RIGHT HANDS. 9. THE LEARNED AR FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE FOR THE CIT(A) AND CONTENDED THAT THE PARTNERS HAVE ALR EADY PAID TAXES IN THEIR 7 ITA NO.1644/PN/2012 INDIVIDUAL HANDS AND TAXATION ON THE FIRM FOR THE S AME CAPITAL GAINS WOULD AMOUNT TO DOUBLE TAXATION. 10. WE NOTICE THAT THE ISSUE IS SQUARELY COVERED AG AINST THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. A N NAIK ASSOCIATES, 265 ITR 346 (BOM.) DISCUSSED BY THE CIT (A) IN PARA 4.13 OF ITS ORDER. THE CONSIDERATION RECEIVED ON TRANSFER OF T HE PROPERTY BY THE PARTNERSHIP IS TAXABLE IN THE HANDS OF THE PARTNERS HIP FIRM IN VIEW OF THE EXPRESSION OTHERWISE EMPLOYED IN S. 45(4) OF THE ACT. ACCORDINGLY, WE ARE IN AGREEMENT WITH THE VIEW OF THE CIT(A) THAT THE I MPUGNED CAPITAL GAINS ARE TAXABLE IN THE HANDS OF THE PARTNERSHIP FIRM. 11. WE ALSO DO NOT FIND ANY MERIT SEEKING RELIEF ON THE GROUND THAT THE PARTNERS HAVE ALREADY PAID TAXES IN THE INDIVIDUAL CAPACITY. THE HONBLE SUPREME COURT IN THE CASE OF ITO VS. CH. ATCHAIAH, 218 ITR 239 (SC) HAS HELD THAT THE REVENUE HAS NO OPTION BUT TO TAX THE INCOME IN THE RIGHT HANDS IRRESPECTIVE OF THE FACT THAT WRONG PERSON HAS ALRE ADY BEEN TAXED FOR THE PARTICULAR INCOME. HENCE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) APPEALED AGAINST. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF DECEMBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 30 TH DECEMBER, 2015. 8 ITA NO.1644/PN/2012 & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE