Shri Rakesh Jain, Meerut V. ITO, Meerut

ITA 2141/DEL/2011

• Counselvise Citation: 214120114 RSA 2011
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 02-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: O P SAPRA
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI .A.D JAIN, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2141/DEL/2011 ASSESSMENT YEAR : 2005-06 SHRI RAKESH JAIN, ITO, 68/3, KAMLA NAGAR, WARD-2 (2), BHAGPAT ROAD, MEERUT. V. MEERUT. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.ABFPJ ABFPJ ABFPJ ABFPJ- -- -4214 4214 4214 4214- -- -M MM M APPELLANT BY : SHRI O.P. SAPRA, ADVOCATE. RESPONDENT BY : SHRI SUDESH GARG, CIT-DR. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT, MEERUT DATED 28.3.2011 UNDER SECTION 263 OF THE INCO ME TAX ACT, 1961. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT THE LD CIT HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY INVOKING PROVISIONS OF SEC. 263 OF THE INCOME T AX ACT, 1961 AND THE ORDER U/S 263 AS PASSED IS ARBITRARY, UNJUST & I LLEGAL ON VARIOUS LEGAL & FACTUAL GROUONDS INCLUDING THE FOLLOW ING:- ITA NO2141/DEL/2011 2 I) THE LD ASSESSING OFFICER HAS PROPERLY APPLIED MIND BEFOR E COMPLETING THE ASSESSMENT OF THE ASSESSEE AND HAS TAKEN ONE OF THE POSSIBLE VIEW ON THE FACTS OF THE CASE. II) THAT THE ASSESSMENT ORDER U/S 143(3)/147 DATED 15.4.2008 AS PASSED BY THE LD ASSESSING OFFICER AFTER THE DIRECTIONS OF THE LD ADDL. CIT, RANGE U/S 144A WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. III) VARIOUS OBSERVATIONS MADE BY THE LD CIT IN HER SEC. 263 ORDER ARE EITHER INCORRECT OR ARE UNTENABLE IN LAW. IV) VARIOUS DIRECTIONS ISSUED IN SEC. 263 ORDER ARE CONTRA DICTORY AND OVERLAPPING TO EACH OTHER AND THEREFORE ARE LEG ALLY UNTENABLE IN LAW. 2. THAT THE IMPUGNED ORDER OF THE LD CIT U/S 263 DESE RVES TO BE CANCELLED/ANNULLED. 3. THAT WITHOUT PREJUDICE TO ABOVE, THE FINDINGS OF THE LD CIT THAT THERE WAS A SHORT COMPUTATION OF CAPITAL GAIN AT `.33 ,20,000/- IS BASED ON WRONG APPRECIATION OF THE FACTS ON RECORD AN D HAS INCORRECTLY BEEN REACHED AT VERY HIGHLY EXCESSIVE FIG URE. 4. THAT THE APPELLANT CRAVES TO ADD, MODIFY AND/OR D ELETE ANY GROUND OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOLE PROPRIETOR WHO HAD FILED HIS RETURN OF INCOME ON 20. 3.2006 DECLARING TOTAL INCOME OF `.1,42,559/-. THE ASSESSMENT PROCEEDIN GS WERE COMPLETED U/S 148/143(3) OF THE INCOME TAX ACT, 1961 . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ALONG WITH TWO OT HER PARTNERS HAD SOLD A COMMERCIAL PLOT SITUATED AT PALLAV PURAM, MEERUT FOR ITA NO2141/DEL/2011 3 `.92,,80,000/- AND HAD NOT SHOWN ANY CAPITAL GAIN OR CAPITAL LOSS ON THE TRANSACTION. THE ASSESSING OFFICER FURTHER OBSERVED THAT CIRCLE RATE FOR THE PLOT WAS `.1,26,00,000/- AND THEREFORE IN HI S OPINION PROVISIONS OF SECTION 50C WERE ATTRACTED. ACCORDINGLY, HE PROC EEDED U/S 147/148 OF THE ACT AND ASSESSEE IN RESPONSE THERETO REITERATED T HAT ORIGINAL RETURN FILED BY HIM BE TREATED AS RETURN FILED IN R ESPONSE TO ABOVE NOTICE. THE ASSESSEE IN THE MEANWHILE MOVED A PETITION BEFORE ADDL. CIT, RANGE2, MEERUT FOR ISSUING DIRECTIONS U/S 144A AND SUBMITTED THE FOLLOWING SUBMISSIONS:- I) THAT ASSESSEE HAD PURCHASED COMMERCIAL PLOT FROM M.D.A. WITH AN INTENTION TO CARRY ON BUSINESS OF SALE & PURCHA SE OF PROPERTY AS CO-OWNERSHIP WITH OTHER TWO PERSONS NAMELY SHRI RAJESH KUMAR AND SHRI JAI PRAKASH AGARWAL. II) THAT SHARE OF THE ASSESSEE, SHRI RAJESH KUMAR AND SHRI JA I PRAKASH AGARWAL WERE 50%, 25% & 25% EACH RESPECTIVELY . III) THAT SHRI JAI PRAKASH AGARWAL IS A PROPRIETOR OF M/S AGARWAL PROMOTERS AND SALE OF HIS SHARE OF PLOT HAS BEEN SHOWN IN THE TRADING ACCOUNT FOR THE RELEVANT PERIOD. THAT SHRI RAJESH KUMAR HAD ALSO SHOWN HIS SHARE OF PROPERTY AS A BUSINESS TRANSACTION AND HAS SHOWN IT AS LOSS ON SALE OF HIS SHARE OF PLOT. ON THE BASIS OF SUBMISSIONS GIVEN BY THE ASSESSEE, THE ADDL. CIT, RANGE-2, MEERUT ARRIVED AT THE CONCLUSION THAT THE SA ID PLOT IS NOT A CAPITAL ASSET AND CONSEQUENTLY DIRECTED THE ASSESSI NG OFFICER TO CALCULATE THE PROFIT & LOSS CONSIDERING THE PLOT AS STOCK- IN-TRADE WITHOUT APPLYING THE PROVISIONS OF SECTION 50 C OF THEACT. THE ASSESSING OFFICER THEN ON THE BASIS OF DIRECTION GIVE N BY THE ADDL. CIT COMPLETED THE ASSESSMENT TREATING THE SALE & P URCHASE OF PLOT AS STOCK-IN-TRADE. ITA NO2141/DEL/2011 4 3. ON EXAMINATION OF RECORDS OF RETURN FILED BY THE ASSESSEE AND CONSEQUENT ASSESSMENT ORDER THE CIT, MEERUT OBSERVED THA T ASSESSING OFFICER HAD NOT MADE PROPER ENQUIRY IN SO FAR AS THAT THE ASSESSEE SOLD A PROPERTY UNDER JOINT OWNERSHIP FOR `.92,80,000/ WH EREAS THE STAMP VALUE OF THE PROPERTY WAS AT `.1,26,00,000/- AND IN VIEW OF THIS, THE ASSESSEE WAS CONFRONTED AND WAS ASKED AS TO WHY TRANSACTION WAS NOT ASSESSABLE IN THE STATUS OF AOP AND WHY SHORT TERM CAPITAL GAIN BE NOT CALCULATED ON THE BASIS OF PROVISIONS OF SECTION 50C. D URING ASSESSMENT PROCEEDINGS, HE REJECTED THE CONTENTION OF TH E ASSESSEE THAT PLOT WAS PURCHASED FOR BUSINESS PURPOSES AND WAS NOT A CAPITAL ASSET. THE RELEVANT PORTION OF CIT(A) ORDER IS REPRODU CED BELOW:- 1. IN THE TERMS AND CONDITIONS OF PURCHASE FROM MEERU T DEVELOPMENT AUTHORITY POINT NO.8 CLEARLY STIPULATES T HAT THE COMPLEX WILL BE ERECTED OVER THE LAND. IT IS APPAREN T AND EVIDENT THAT THE ASSESSEE HAS PURCHASED THE LAND IN THE JOINT OWN ERSHIP WITH THE TERMS OF CONSTRUCTING A COMMERCIAL COMPLEX OVER THE LAND. 2. THEREFORE, THE LAND WAS NOT PURCHASED WITH THE INT ENTION OF SELLING IT AS SUCH WHICH WAS EVIDENT FROM THE TERMS OF P URCHASE FROM THE MEERUT DEVELOPMENT AUTHORITY. THE LAND WAS NOT BEING PURCHASED WITH THE INTENTION TO RESALE. FOR THE SAME R EASONS, THE PLOT CANNOT BE TREATED AS STOCK IN TRADE. THE SHORT CO MPUTATION OF CAPITAL GAINS CLEARLY COME TO `.33,20,000/- BEING THE DIFFERENCE OF STAMP VALUE AND THE SELLING PRICE. THE ORDER IS ACCORDINGLY MODIFIED AND THE ASSESSING OFFICER IS DIRECT ED TO ADD ITA NO2141/DEL/2011 5 THE SHARE OF THE ASSESSEE IN THE CAPITAL GAIN DERIVED O UT OF THE SAID SALE AND ISSUE FRESH DEMAND NOTICE AND CHALLAN. 4. AT PARA 4 OF THE ORDER, THE ASSESSING OFFICER WAS AL SO DIRECTED TO TREAT THE SHORT TERM CAPITAL GAIN IN THE HANDS OF AO P AS THE PROPERTY WAS IN THE JOINT HANDS OF THREE PERSONS INCLUDING THE A SSESSEE. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD AR OF THE ASSESSEE CHALLENGED THE APPLICATION OF SECTION 263 OF THE ACT. HOWEVER, THE MAIN ARGUMENT WAS AGAI NST COMPUTATION OF CAPITAL GAIN OF `.33,20,000/-. THE LD AR ALSO BRO UGHT TO OUR NOTICE THAT THE TOTAL CAPITAL GAIN ON THE PROPERTY IN QUEST ION HAS ALREADY BEEN ASSESSED IN THE HANDS OF THE AOP CONSISTING OF SHRI RAKESH JAIN I.E. THE ASSESSEE AND TWO OTHER CO-OWNERS NAMELY S/SHRI RAJESH KUMA R AND JAI PRAKASH AGARWAL. HE TOOK US THROUGH THE WRITTEN SYNOP SIS FILED BY HIM WHEREIN THE COPY OF ASSESSMENT ORDER DATED 26.12.2011 W AS PLACED AS APPENDIX-B AT PAGE -6. 6. THE LD DR ARGUED THAT ASSESSEE DID NOT FILE ANY PART ICULAR OF SALE & PURCHASE OF PROPERTY AND THERE IS NOTHING IN THE RE TURN TO SHOW IF THERE IS ANY BUSINESS AND THERE IS NOTHING ON RECORD TO SUBSTANTIATE THAT THERE WAS AN AOP AND HENCE RELIED UPON THE ORDE RS U/S 263 OF THE ACT. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THR OUGH THE MATERIAL PLACED ON RECORD AND WE HAVE FIRST CONSIDERE D AS TO WHETHER CIT(A) HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 1961. IN THE PRESENT CASE, THE PROCEEDINGS U /S 263 WERE INITIATED ON THE BASIS OF EXAMINATION OF RECORD BY C IT WHEREIN HE HAD OBSERVED THAT THE ASSESSING OFFICER HAD NOT TAKEN THE CI RCLE RATE U/S ITA NO2141/DEL/2011 6 50C OF THE ACT AND THEREFORE THERE WAS A SHORT COMPUT ATION OF SHORT TERM CAPITAL GAINS. FROM THE EXAMINATION OF ASSESSMENT ORDER AND DIRECTION PASSED U/S 144A OF THE ACT, IT IS OBSERVED TH AT FACT OF CIRCLE RATE WAS CONSIDERED BY THE ASSESSING OFFICER AND HE ALSO I NTENDED TO TAX THE ASSESSEE ON SHORT TERM CAPITAL GAIN AFTER APPLYI NG THE PROVISIONS OF SECTION 50C. HOWEVER, IN VIEW OF FINDIN G IN THE DIRECTIONS PASSED U/.S 144A OF THE ACT IT WAS HELD THAT PURCHASE O F PLOT WAS DONE WITH AN INTENTION TO SELL IT AND HENCE IT WAS TO BE SU BJECTED TO TAX AS A BUSINESS TRANSACTION AND WAS NOT TO BE SUBJECTED TO CAPIT AL GAIN TAX AND IN CONSEQUENCE PROVISIONS OF SECTION 50C WERE NOT APPLIED. KEEPING IN VIEW THE ABOVE FACT, WE HOLD THAT ASSESSING OFFICER WHILE MAKING ASSESSMENT HAD PROPERLY APPLIED HIS MIND. ALL T HE INFORMATION REGARDING TRANSACTION AND CIRCLE RATE AND DIRECTION S U/S 144A WERE AVAILABLE WITH HIM. HE COMPLETED THE ASSESSMENT ON THE BASIS OF THESE RECORDS AND TOOK ONE OF THE POSSIBLE VIEWS AS PER FINDIN GS GIVEN IN DIRECTIONS U/S 144A OF THE ACT AND THE ORDER PASSED BY HIM WAS BASED UPON FACTS OF THE CASE AND HENCE WAS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDE RED OPINION THAT APPLICATION OF PROVISIONS OF SECTION 263 WERE UN-CALLE D FOR. GROUND NO.1 & 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. 8. REGARDING MERITS OF THE CASE, WE HAVE GONE THROUGH THE ASSESSMENT ORDER DATED 26.12.2011 PLACED AT APPENDIX-B AT PAGE 6 OF WRITTEN SYNOPSIS FILED BY LD AR. ON CAREFUL STUDY OF A SSESSMENT ORDER,. WE HAVE OBSERVED THAT THE ENTIRE SALE CONSIDERATION OF PLOT HAS BEEN CONSIDERED FOR CALCULATION OF TAXABLE PROFIT IN THE HANDS OF AOP CONSISTING OF SHRI RAKESH JAIN I.E. ASSESSEE, SHRI RAJESH KUMAR AND SHRI JAI PRAKASH AGGARWAL, THE OTHER TWO CO-OWNERS. AS PER ASSESSMENT ORDER, THE TRANSACTION HAS ALREADY BEEN SUBJECTED TO T AX AND SAME CANNOT BE TAXED TWICE ONCE IN THE HANDS OF AOP AND T HEN RELEVANT PORTION IN THE HANDS OF CO-OWNER. ITA NO2141/DEL/2011 7 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE AP PELLANT IS ALLOWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH DAY OF MAY, 2012. SD/- SD/- (A.D. JAIN ) (T.S. KAP OOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 11.5.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO2141/DEL/2011 8