ACIT, CHENNAI V. Shri Aashish Gupta, CHENNAI

ITA 1898/CHNY/2010

• Counselvise Citation: 189821714 RSA 2010
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR JT
• Assessee Lawyers: J C PRAKASH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Capital Gains
• Section: 143(3); 50C; 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 1897 AND 1898/MDS/2010 ASSESSMENT YEARS : 2005-06 & 2006-07 THE ACIT CIRCLE XIII CHENNAI VS SHRI AASHISH GUPTA NO.6-B, CALVE CHATEAU NO.808, POONAMALLEE HIGH ROAD KILPAUK CHENNAI 600 010 [PAN AAGPG9637F ] (APPELLANT) (RESPONDENT) I.T.A NO. 1899/MDS/2010 ASSESSMENT YEARS : 2005-06 THE ACIT CIRCLE XIII CHENNAI VS SHRI ANUJ GUPTA NO.6-B, CALVE CHATEAU NO.808, POONAMALLEE HIGH ROAD KILPAUK CHENNAI 600 010 [PAN AAEPA3948H] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P.GOPAKUMAR, JT. CIT RESPONDENTS BY : SHRI J.C.PRAKASH, FCA O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE ABOVE CAPTIONED APPEALS, FILED BY THE REVEN UE, ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVE NIENCE AND BREVITY. ITA 1897,1898 & 1899/10 :- 2 -: I.T.A.NOS.1897 & 1898/MDS/2010 2. THESE ARE TWO APPEALS, FOR ASSESSMENT YEARS 2005 -06 AND 2006-07, FILED BY THE REVENUE. FOR THE SAKE OF CON VENIENCE, WE NARRATE THE FACTS OF ASSESSMENT YEAR 2005-06. 3. THE ASSESSEE, NAMELY, SHRI AASHISH GUPTA, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06, ADMITTING TOTAL INCOME OF ` 2,47,361/- ON 5.9.2005. THE ASSESSEE WAS DOING COM MISSION BUSINESS. A SURVEY U/S 133A WAS CONDUCTED IN THE C ASE OF ONE DR.G.LOGANATHAN BY ITO, WARD I(4), SALEM, IN WHICH IT WAS FOUND THAT TWO PROPERTIES WERE PURCHASED BY HIM. THE DETAILS OF THE TWO PURCHASES ARE AS UNDER: SL. NO. DOCUMENT NO. DATE OF PURCHASE SELLER NAME PROPERTY DETAILS PURCHASE PRICE GUIDELINE VALUE 1. 52/05 19.1.05 ANUJ GUPTA B/O ASSESSEE 24397 SQ FT ` 18.5 LAKHS 8347000 2. 785/05 11.5.05 ASHISH GUPTA 24400 SQ FT ` 18.5 LAKHS 8344800 4. IT WAS ALSO FOUND THAT DR.G.LOGANATHAN HAD PAID ADD ITIONAL STAMP DUTY ON THE MARKET VALUE OF THE ABOVE PROPERT IES FIXED AT ` 83,47,000/- AND `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` 18.5 LAKHS, BUT THE BUYER, DR.G.LOGANATHAN SOLD THE PROPERTY ON 1.12.2006 FOR ` 82.94 LAKHS. ACCORDING TO THE ASSESSING OFFICER, THE HUGE DIFFERENCE IN VALUE WITHIN A SHORT SPAN OF TIM E AND CONSEQUENT SALE PROCEEDS BEING TREATED AS BUSINESS RECEIPT SHO WS THAT THE ASSESSEE HAS TRIED TO AVOID PAYMENT OF CAPITAL GAIN S. THUS, HE TREATED THIS AS A COLOURABLE DEVICE. HE, THEREFORE, COMPUT ED THE SHORT TERM CAPITAL GAINS AND TAXED THE SAME. ON THE CONTRARY, THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS BY TRE ATING THIS ITA 1897,1898 & 1899/10 :- 5 -: TRANSACTION AS A BUSINESS TRANSACTION NOT ATTRACTIN G THE PROVISIONS OF SECTION 50C OF THE ACT. NOW, THE REVENUE IS AGGRIE VED. 6. THE CASE OF THE REVENUE IS THAT THERE IS NO MATERI AL ON RECORD TO SUPPORT THE CONTENTION OF THE ASSESSEE THAT THE ASSET IN QUESTION IS NOT A CAPITAL ASSET AND IS A BUSINESS ASSET. ON THE CONTRARY, THE LD.AR HAS RELIED ON THE ORDER OF THE LD. CIT(A). 7. AFTER HEARING BOTH SIDES, WE ARE OF THE CONSIDERED OPINION THAT THE INTENTION OF THE ASSESSEE HAS TO BE GIVEN DUE W EIGHTAGE TO ARRIVE AT THE EXACT CHARACTER OF THE TRANSACTION. IN THI S CASE, WHEN THE ENTIRE FACTS ARE VISUALIZED AND CAPTURED IN ONE GO, THE ONLY CONCLUSION CAN BE DRAWN IS THAT THIS IS A SIMPLE TRANSACTION O F PURCHASE AND SALE OF LAND IN THE NORMAL COURSE OF BUSINESS ACTIVITY. IT IS TRUE THAT THIS WAS THE FIRST TRANSACTION OF PURCHASE AND SALE BY T HE ASSESSEE. ANY WAY, WHENEVER THE ASSESSEE STARTS HIS BUSINESS HE HAS TO UNDERTAKE FIRST TRANSACTION AND BY TREATING IT AS THE FIRST I NSTANCE, THE NATURE OF ASSET CANNOT CHANGE. THE MERE FACT THAT THE ASSESS EE HAD PURCHASED LAND TODAY AND SOLD IT TOMORROW RATHER SPEAKS VOLUM ES IN FAVOUR OF THE CHARACTER OF ASSESSEES TRANSACTION WHICH CAN BE TR EATED AS A BUSINESS TRANSACTION ONLY. THE DECISION OF HON'BLE MADRAS H IGH COURT RENDERED IN THE CASE OF CIT VS THIRUVENGADAM INVESTMENTS P. LTD, 320 ITR 345, ITA 1897,1898 & 1899/10 :- 6 -: IS DIRECTLY APPLICABLE TO THE FACTS OF THIS CASE. IN THIS CASE, IT HAS BEEN HELD AS UNDER: THE TRIBUNAL HELD THAT THE INVOCATION OF THE PROVISIONS OF SECTION 50C WAS NOT WARRANTED AS THE PROPERTY WAS NEVER HELD BY THE ASSESSEE AS CAPITAL ASSET AND AS PER THE ACCOUNTS ALSO, THE AMOUNT GIVEN TO THE OWNER OF THE PROPERTY HAD BEEN SHOWN AS LOANS AND ADVANCES THEREBY THE PROPERTY HAD BEEN TREATED AS BUSINESS ASSET AND NOT AS A CAPITAL ASSET. 8. THEREFORE, BY FOLLOWING THE ABOVE DECISION, WE DECI DE THIS APPEAL IN FAVOUR OF THE ASSESSEE AND CANNOT ALLOW T HE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005-06. 9. IN ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED HI S RETURN ADMITTING TOTAL TAXABLE INCOME OF ` 4,16,408/-. ASSESSMENT WAS COMPLETED U/S 143(3) ON 31.12.2008 AT A TOTAL INCO ME OF ` 70,16,270/-. ON SIMILAR FACTS, TO BE DOUBLY SURE, THAT THIS TRANSACTION, HAS TAKEN PLACE AND ALSO ASSESSED IN ASSESSMENT YEA R 2005-06, MAY BE REQUIRED TO BE ASSESSED IN ASSESSMENT YEAR 2006- 07 TREATING THE TRANSACTION TO BE RELEVANT TO THE ASSESSMENT YEAR 2 006-07, SO TO SAY ON PROTECTIVE BASIS. AS WE HAVE TAKEN A VIEW IN AS SESSMENT YEAR 2005-06 THAT THIS TRANSACTION IS A BUSINESS TRANSAC TION AND CANNOT BE TREATED AS A TRANSFER OF PROPERTY ATTRACTING THE PR OVISIONS OF SECTION 50C OF THE ACT. THEREFORE, THIS APPEAL ALSO STANDS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE STAN D DISMISSED. ITA 1897,1898 & 1899/10 :- 7 -: I.T.A.NO. 1899/MDS/2010 11. THIS APPEAL OF THE REVENUE, FOR ASSESSMENT YEAR 2 005-06, IN THE CASE OF SHRI ANUJ GUPTA, BROTHER OF ABOVE ASS ESSEE, SHRI AASHISH GUPTA, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT (A), CHENNAI, DATED 30.8.2010. 12. FOR ASSESSMENT YEAR 2005-06, THE ASSESSEE FILED HI S RETURN OF INCOME ADMITTING TAXABLE INCOME OF ` 2,00,490/- AND ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 147 AT A TOTAL INCOME OF ` 67,28,213/- ON 31.12.2008. THE FACTS OF THIS CASE ARE COMMON AS D ISCUSSED ABOVE IN THE CASE OF SHRI AASHISH GUPTA. WITH SIMILAR REASO NING, WE DISMISS THIS APPEAL OF THE REVENUE ALSO, THE FACTS AND ISSUES BE ING MUTATIS MUTANDIS IDENTICAL. 13. TO SUMMARIZE THE RESULT, ALL THE THREE APPEALS OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.08 .11. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 2 ND AUGUST, 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR