Smt. Siji Jose, Cochin V. ITo, Cochin

ITA 213/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68925 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2013
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: A GOPALAKRISHNAN
• Keywords: Capital asset; Business income; Principle of natural justice
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 213/COCH/2013 ASSESSMENT YEAR : 2008-09 SMT. SIJI JOSE, FLAT NO. 12A, EXPRESS ESTATE, KALOOR, KOCHI-17. [PAN: AAZPT 3718R] VS. THE INCOME TAX OFFICER, WARD- 2(1), RANGE-2, KOCHI-18. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI A. GOPALAKRISHNAN, FCA REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 22/08/2013 DATE OF PRONOUNCEMENT 23/08/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 13-03-2013 PASSED BY LD CIT-II, KOCHI U/S 263 OF THE ACT FOR T HE ASSESSMENT YEAR 2008-09. 2. THOUGH THE ASSESSEE HAS URGED AS MANY AS 23 GROU NDS IN THE GROUNDS OF APPEAL, ALL OF THEM ARE DIRECTED AGAINST A SINGLE I SSUE, VIZ., ABOUT THE VALIDITY OF REVISION ORDER PASSED BY LD CIT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WA S COMPLETED BY THE ASSESSING OFFICER ON 31.12.2010 U/S 143(3) OF THE ACT. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD A LAND FOR A CONSIDERATION OF RS. 6.28 CRORES, WHICH SHE CLAIMED TO BE AN AGRICULTURAL LAND AND HENCE CLAIMED THAT THE PRO FIT ARISING THERE FROM WAS EXEMPT. IN THE ASSESSMENT PROCEEDINGS, THE AO DID NOT ACCEP T THE SAID CLAIM OF THE ASSESSEE, I.T.A. NO.213/COCH/2013 2 I.E., THE AO HELD THAT THE LAND SOLD BY THE ASSESSE E WAS A CAPITAL ASSET AND ACCORDINGLY ASSESSED THE PROFIT ARISING ON ITS SALE AS LONG TERM CAPITAL GAIN. SUBSEQUENTLY, THE AO NOTICED THAT THE ASSESSEE WAS A PARTNER IN A FIRM NAMED M/S TRANVEST PROPERTIES AND THE SAID FIRM ALSO SOLD A L AND, WHICH WAS ADJACENT TO THE ONE WAS SOLD BY THE ASSESSEE HEREIN. THE ASSESSING OFF ICER IN THE CASE OF M/S TRANVEST PROPERTIES HAD ASSESSED THE PROFIT ARISING ON SALE OF LAND UNDER THE HEAD INCOME FROM BUSINESS. SIMILARLY, IN THE CASE OF ASSESSEES HU SBAND NAMED SHRI TONO ALSO, THE PROFIT FROM SALE OF LAND WAS ASSESSED UNDER THE HEAD INCO ME FROM BUSINESS. SINCE THE AO HAD ASSESSED THE PROFIT FROM SALE OF LAND UNDER THE HEAD LONG TERM CAPITAL GAIN, WHICH IS SUBJECT TO CONCESSIONAL RATE OF TAX, THE AO BROU GHT THESE FACTS TO THE NOTICE OF THE LD ADMINISTRATIVE COMMISSIONER. ON EXAMINATION OF THE SE FACTUAL ASPECTS, THE LD CIT ISSUED NOTICE U/S 263 OF THE ACT PROPOSING TO REVIS E THE ASSESSMENT ORDER PASSED IN THE HANDS OF THE ASSESSEE. AFTER HEARING THE ASSESSEE, THE LD CIT HELD THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND ACCORDINGLY SET ASIDE THE SAME AND ALSO DIRECTED THE AO TO DO THE ASSESSMENT, DE-NOVA. AGGRIEVED BY THE REVISION ORD ER PASSED BY LD CIT, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE ASSESSEE HAS ALREADY PREFERRED APPEAL BEFORE LD CIT(A) CHALLENGING THE A SSESSMENT ORDER, REFERRED ABOVE AND HENCE THE LD CIT WAS NOT JUSTIFIED IN INVOKING REVISION PROCEEDINGS U/S 263 OF THE ACT ON THE VERY SAME ASSESSMENT ORDER. HE FURTHER SUBMITTED THAT THE AO HAS EXAMINED THE ISSUE OF SALE OF LAND IN A DETAILED MA NNER AND AFTER APPLICATION OF HIS MIND; HE HAS TAKEN A CONSCIOUS DECISION TO ASSESS T HE PROFIT ARISING ON SALE OF AGRICULTURAL LAND UNDER THE HEAD INCOME FROM CAPIT AL GAINS. HENCE, THE VIEW TAKEN BY THE AO WAS ONE OF THE POSSIBLE VIEWS AND HENCE T HE REVISION PROCEEDING INITIATED BY LD CIT WAS NOT IN ACCORDANCE WITH THE LAW. HE FURT HER SUBMITTED THAT THE ASSESSEE DID NOT ENGAGE IN ANY BUSINESS ACTIVITY OF PURCHASE AND SALE OF LAND AND THE LD CIT HAS ENTERTAINED SUCH A VIEW ONLY ON SUSPICION. ACCORDI NGLY, HE CONTENDED THAT MERE SUSPICION WOULD NOT SUPPORT THE REVISION PROCEEDING S. THE LD COUNSEL SUBMITTED THAT THE CONCEPT OF BUSINESS INCOME WAS BEEN ELABORATELY DISCUSSED BY HONBLE MADRAS HIGH I.T.A. NO.213/COCH/2013 3 COURT IN THE CASE OF CIT VS. KASTHURI ESTATES (P) LT D (1966)(62 ITR 578) AND THE CONCEPT OF ADVENTURE IN THE NATURE OF TRADE IS DISC USSED BY HONBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. VS. CIT (19 59)(35 ITR 594). HE SUBMITTED THAT NONE OF THE PARAMETERS LAID DOWN BY THE COURTS IN THE ABOVE CITED CASES APPLY TO THE FACTS OF THE INSTANT CASE. ACCORDINGLY, HE SUB MITTED THAT THE MERITS OF THE CASE ALSO WILL NOT JUSTIFY THE REVISION ORDER PASSED BY LD CI T. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAD CLAIMED THE LAND SOLD BY HER AS AN AGRICULTURAL LAND NOT COMING WITHIN TH E DEFINITION OF CAPITAL ASSET, AS DEFINED UNDER THE ACT. IN THE ASSESSMENT ORDER, TH E AO EXAMINED THE MATTER WITH REGARD TO THE DEFINITION OF CAPITAL ASSET AND HAS HELD THAT THE IMPUGNED LAND WOULD FALL WITHIN THE CATEGORY OF CAPITAL ASSET AND ACCOR DINGLY ASSESSED THE PROFIT ARISING THERE FROM UNDER THE HEAD INCOME FROM CAPITAL GAINS. T HE ASSESSEE, HER HUSBAND AND THE PARTNERSHIP FIRM, IN WHICH SHE WAS A PARTNER, HAD P URCHASED LANDS IN THE SAME LOCALITY AND THEY HAVE SOLD THEM JOINTLY TO THE VERY SAME BU YER. THE PROFIT ON SALE OF LAND WAS ASSESSED AS BUSINESS INCOME IN THE HANDS OF THE P ARTNERSHIP FIRM (REFERRED SUPRA) AND ALSO IN THE HANDS OF THE HUSBAND OF THE ASSESSEE. HOWEVER, IN THE INSTANT CASE, THE AO DID NOT MAKE ANY ENQUIRY ABOUT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF LAND AND ALSO DID NOT APPLY HIS MIND ON THE ISSUE O F ASSESSING THE PROFIT UNDER THE HEAD INCOME FROM BUSINESS. HENCE, THERE IS TOTAL LACK OF APPLICATION OF MIND IN RESPECT OF THIS ISSUE, WHICH THE AO HIMSELF HAS AGREED TO BY S ENDING A LETTER TO THE LD CIT. HENCE, THE LD CIT WAS JUSTIFIED IN INITIATING THE R EVISION PROCEEDINGS. THE LD D.R FURTHER SUBMITTED THAT THE LD CIT CAN INVOKE THE PR OVISIONS OF SECTION 263 PURSUANT TO A PROPOSAL TO THAT EFFECT RECEIVED FROM THE ASSESSING OFFICER AND IT WAS SO HELD BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF APOLLO TYRES LTD VS. ACIT (65 ITD 263(DELHI)(TRIB). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE ASSESSMENT ORDE R WOULD BE RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF THE RE IS LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER ON ANY OF THE ISSUES HAVING TAX I MPACT. FOR THIS PROPOSITION, A GAINFUL I.T.A. NO.213/COCH/2013 4 REFERENCE MAY BE MADE TO THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT (243 ITR 83). WE FE EL IT PERTINENT TO REFER TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92), WHEREIN THE COURT HAS DISC USSED ABOUT THE SCOPE OF PROVISIONS OF SECTION 263 AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERE D BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APP LICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR W ITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY . THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. W HAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE O F THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE I N LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT I.T.A. NO.213/COCH/2013 5 JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA L TD. [2007] 295 ITR 282. THERE MAY NOT BE ANY DISPUTE THAT THE REVISION PROC EEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TAKEN A PLAUSIBLE V IEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IF THE AO DID NOT MAKE ANY ENQUIRY ON ANY OF THE PERTINENT ISSUE, IT WILL RESULT IN LACK OF APPLICATION OF MIND. 7. IN THE INSTANT CASE, THE ASSESSEE HAD SOLD A LAND AND CLAIMED THE SAME AS AN AGRICULTURAL LAND. HENCE SHE CLAIMED THE PROFIT AR ISING FROM THE SALE OF LAND AS EXEMPT. HOWEVER, THE AO DID NOT ACCEPT WITH THE CONTENTION OF THE ASSESSEE AND HELD THAT THE SAID LAND IS NOT AN AGRICULTURAL LAND. ACCORDINGLY , HE ASSESSED THE PROFIT ARISING ON ITS SALE AS INCOME FROM LONG TERM CAPITAL GAIN. THUS, IT IS SEEN THAT THE AO HAS ONLY CONSIDERED THE ISSUE, VIZ, WHETHER THE LAND SOLD BY THE ASSESSEE IS AN AGRICULTURAL LAND OR NOT?. AFTER CARRYING OUT DETAILED EXAMINATION, THE AO HAS TAKEN THE VIEW THAT THE IMPUGNED LAND IS NOT AN AGRICULTURAL LAND AND HENCE THE SAME WOULD FALL UNDER THE CATEGORY OF CAPITAL ASSET AS DEFINED UNDER THE AC T. HENCE, HE HAS PROCEEDED TO ASSESS THE PROFIT FROM SALE OF LAND UNDER THE HEAD INCOME FROM CAPITAL GAINS. THE ASSESSEE HAS CHALLENGED THE SAID DECISION BY FILING APPEAL BEFORE LD CIT(A). 8. THE ISSUE THAT WAS CONSIDERED BY LD CIT IN TH E REVISION PROCEEDING IS NOT WHETHER THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND OR NOT. ACCORDING TO LD CIT, THE AO SHOULD HAVE EXAMINED WHETHER THE PROFIT ARISING ON SALE OF LAND IS ASSESSABLE UNDER THE HEAD INCOME FROM CAPITAL GAIN OR INCOME FROM BUS INESS, BY ASCERTAINING THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F LAND. THUS, ACCORDING TO THE LD CIT, THE AO SHOULD HAVE CONSIDERED TWO QUESTIONS VI Z., (A) WHETHER THE CLAIM OF THE ASSESSEE THAT THE IMP UGNED LAND IS AN AGRICULTURAL LAND IS CORRECT? (B) WHETHER THE PURCHASE AND SALE OF LAND CAN BE C LASSIFIED AS A BUSINESS ACTIVITY, WHICH WOULD RESULT IN ASSESSING THE PROFI T AS BUSINESS INCOME, IF HELD AS A BUSINESS ACTIVITY. I.T.A. NO.213/COCH/2013 6 ADMITTEDLY, THE AO EXAMINED THE FIRST QUESTION ONLY AND HE DID NOT EXAMINE THE SECOND QUESTION. 9. THE LD COUNSEL CONTENDED THAT THE AO HAS TAK EN A POSSIBLE VIEW IN THIS MATTER BY ASSESSING THE PROFIT ON SALE OF LAND UNDER THE HEAD INCOME FROM CAPITAL GAIN. WE ARE UNABLE TO AGREE WITH THE SAID CONTENTION OF THE ASS ESSEE. THE QUESTION WHETHER THE AO HAS TAKEN A POSSIBLE VIEW OR NOT? WOULD ARISE ONLY IF THE AO HAS ADDRESSED THE QUESTION (B) STATED IN THE PRECEDING PARAGRAPH. WE HAVE ALR EADY NOTICED THAT THE AO HAS EXAMINED THE QUESTION (A) (SUPRA) ONLY AND DID NOT CONSIDER QUESTION (B) (SUPRA). HENCE, THE VIEW TAKEN BY THE AO CANNOT BE CONSIDERE D AS A POSSIBLE VIEW. 10. THE LD COUNSEL ALSO ARGUED THAT THE ASSESSE E HAS FILED APPEAL BEFORE LD CIT(A) CHALLENGING THE ASSESSMENT ORDER AND HENCE THE REVI SION ORDER WOULD NOT LIE ON IT. AGAIN, WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE LD A.R. THE ASSESSEE HAS ONLY CHALLENGED THE VIEW TAKEN BY THE AO WITH REGAR D TO THE NATURE OF THE LAND, I.E., WHETHER IT WOULD FALL UNDER THE DEFINITION OF CAPIT AL ASSET OR NOT. THE ISSUE BEFORE LD CIT IN THE REVISION PROCEEDING WAS WHETHER THE PURC HASE AND SALE OF LAND WAS A BUSINESS ACTIVITY OF THE ASSESSEE OR NOT. THIS ISS UE IS NOT THE SUBJECT MATTER OF APPEAL FILED BEFORE LD CIT(A). AS PER CLAUSE (C) OF EXPLAN ATION UNDER SEC. 263(1), THE LD CIT IS EMPOWERED TO PASS REVISION ORDER ON SUCH MATTERS WH ICH HAD NOT BEEN CONSIDERED AND DECIDED IN ANY APPEAL. 11. THE LD COUNSEL ALSO ARGUED THAT, ON MERITS ALSO, THE ASSESSEE CANNOT BE CONSIDERED AS HAVING ENGAGED IN ANY BUSINESS ACTIVI TY OF PURCHASE AND SALE OF LAND. HOWEVER, SINCE THE ASSESSEE HAS CHALLENGED THE VALI DITY OF REVISION ORDER, WE RESTRICT OURSELVES IN EXAMINING THE MATTER WITHIN THE PARAME TERS PRESCRIBED BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COM PANY (SUPRA). ADMITTEDLY, THERE IS LACK OF ENQUIRY ON THE PART OF THE AO, WHICH HE HIM SELF HAS ADMITTED, IN RESPECT OF THE ISSUE WHETHER THE PROFIT ARISING ON SALE OF LAND IS ASSESSABLE AS BUSINESS INCOME OR NOT. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR IN DUSTRIAL COMPANY HAS HELD THAT THE LACK OF ENQUIRY ON THE PART OF THE AO OR THE OR DER PASSED WITHOUT APPLICATION OF I.T.A. NO.213/COCH/2013 7 MIND WOULD RENDER THE ASSESSMENT ORDER ERRONEOUS. IN THE INSTANT CASE, THE AO DID NOT APPLY HIS MIND ABOUT THE NATURE OF ACTIVITY OF THE ASSESSEE AND HENCE THE IMPUGNED ASSESSMENT ORDER, IN OUR VIEW, IS RENDERED ERRONEOU S AND IF IT IS FOUND THAT THE SAID INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM BU SINESS; THEN IT WOULD ALSO BE PREJUDICIAL TO THE INTERESTS OF REVENUE. 12. IN VIEW OF THE FOREGOING DISCUSSIONS, WE AR E OF THE VIEW THAT THE LD CIT WAS JUSTIFIED IN PASSING THE IMPUGNED REVISION ORDER. 13. IN THE RESULT, THE APPEAL FILED BY THE A SSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 23-08-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 23RD AUGUST, 2013 GJ COPY TO: 1. SMT. SIJI JOSE, FLAT NO. 12A, EXPRESS ESTATE, KAL OOR, KOCHI-17. 2. THE INCOME TAX OFFICER, WARD-2(1), RANGE-2, KOCH I-18. 3. THE COMMISSIONER OF INCOME-TAX-II, KOCHI 4.THE COMMISSIONER OF INCOME-TAX, KOCHI 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN I.T.A. NO.213/COCH/2013 8