ITO, Jaipur V. SMT. SNEH GUPTA, Jaipur

ITA 226/JPR/2012

• Counselvise Citation: 22623114 RSA 2012
• Duration Of Justice: 2 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Depreciation; Fair market value
• Section: 50C; 133A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 226/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE I.T.O. WARD 4(2), JAIPUR CUKE VS. SMT. SNEH GUPTA E-46, ROAD NO. 1-B, VKI AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACIPG 4373 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SMT. NEENA JEPH (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 30/12/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 27/02/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. 1 THIS APPEAL BY THE REVENUE ARISE FROM ORDER DT. 12 .12.2011 OF LD. CIT(A)-II, JAIPUR FOR A.Y. 2008-09. THE GROUNDS O F APPEAL ARE AS UNDER:- (I) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN HOLDING THE INCOME EARNED ON THE TRANSACTION OF SALE OF IMMOVABLE PROPERTY AS BUSINE SS ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 2 INCOME AGAINST THE SAME BEING TREATED AS SHORT TERM CAPITAL GAIN BY THE AO. (II) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS FAILED TO APPRECIATE:- A. THE ASSESSEE HAS NEVER SHOWN INCOME FROM BUSINESS OF PROPERTY IN THE EARLIER YEARS. EVEN IN THE CURRENT YEAR INCOME FROM PROPERTY BUSINESS IS NOT SHOWN IN THE RETURN OF INCOME FILED ON 30.09.2008 I.E. MUCH AFTE R THE DATE OF SURVEY. THE ASSESSEE IS THE PROPRIETOR OF TWO BUSINESS ENTITIES I.E. M/S CARPENTER CRAFT AND M/S CONTINENTAL INTERIORS FOR WHICH AUDITED BOOKS OF ACCOUNTS ARE MAINTAINED. IF THE ASSESSEE WAS DOING PROPERTY BUSINESS THERE SHOULD ALSO BE BOOKS OF ACCOUNTS MAINTAINED IN RESPECT OF THIS BUSINESS AND SHOULD ALSO BE AUDITED AS THE TURNOVER WAS RS. 1,11,00,000/- (50,00,000 + 61,00,000), WHICH IS NOT IN THE CASE OF ASSESSEE. MOREOVER NO PROPERTY HAS BEEN SHOWN AS STOCK IN HAND IN IT RETURNS. B. THE CIT(A) RELIED ON THE STATEMENT OF SHRI SUDHIR GUP TA IN REPLY TO QUESTION NO. 27 OF HIS STATEMENT RECORD ED DURING SURVEY BUT NOT APPRECIATED THE REPLY TO QUES TION NO. 36 OF SHRI SUDHIR GUPTA WHERE HE ADMITTED TO PAY TAX IN RESPECT OF INCOME OF HIS WIFE FROM SHORT TERM CAPITAL GAIN OF RS. 98,23,707/-. C. THE ASSESSEE SMT. SNEH GUPTA ALSO CATEGORICALLY ADMITTED IN THE REPLY TO QUESTION NO. 30 OF HER ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 3 STATEMENT RECORDED DURING SURVEY ABOUT HER INCOME FROM SHORT TERM CAPITAL GAIN AND AGREED TO PAY TAX ON INCOME OF RS. 98,23,707/-. 2. IN THIS CASE A SURVEY U/S 133A WAS CARRIED OUT ON 12.09.2008. THE ASSESSEE ENJOYS INCOME FROM MANUFACTURING AND TR ADING OF FURNITURE. IN SURVEY IT IS FOUND THAT ASSESSEE HAS SOLD PROPERTIES DURING THE YEAR AT A CONSIDERATION WHICH IS LOWER THAN THE D LC RATE AS APPLIED BY THE SUB-REGISTRAR. ON VERIFICATION IT WAS FOUND T HAT ASSESSEE HAS NOT SHOWN THESE TRANSACTIONS IN HER RETURN. WHEN CONFRON TED, THE ASSESSEE IN ITS REPLY DT. 15.12.2010 STATED THAT IT HAS SOLD PROPERTY AT A-4, CENTRAL SPINE SCHEME, VIDYADHAR NAGAR, JAIPUR BY TWO REGISTERED DOCUMENTS FOR A CONSIDERATION OF RS. 1,11,00,000/- BUT THE DLC RATE APPLIED BY THE SUB-REGISTRAR IS OF RS. 1,50,11,346/ -. THE ASSESSEE IS DOING PROPERTY BUSINESS AND AS PER THE PROFIT AND L OSS ACCOUNT THE NET PROFIT IS RS. 28,81,546/-. THE ASSESSEE REQUESTED TO ADD THIS AMOUNT IN THIS INCOME AND CONTENDED THAT IN BUSINESS INCOME A CTUAL SALE CONSIDERATION IS TO BE CONSIDERED FOR CALCULATION O F PROFIT AND NOT THE DLC RATE AS IN THIS AREA THE DLC RATE ARE MORE THAN THE MARKET RATE. THE ASSESSEE IN HER REPLY DT. 20.12.2010 FURTHER STA TED THAT THE BUSINESS OF THE PROPERTY WAS STARTED IN THIS YEAR ON LY. ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 4 2.1 THE ASSESSING OFFICER FOUND THAT THE TRANSACTION IN PROPERTY IS SOLITARY AND THE ASSESSEE HAS NOT DONE BUSINESS IN PROPERTY IN THE PAST OR IN THE SUBSEQUENT YEAR. HE CONSIDERED THE SAME A S A TRANSACTION OF CAPITAL GAIN. ACCORDINGLY HE CONSIDERED THE SALE CO NSIDERATION U/S 50C AT RS. 1,50,11,346/- AND AFTER ALLOWING DEDUCTION TOWARD S PURCHASE PRICE, REGISTRY EXPENSES AND MAINTENANCE CHARGES OF RS. 67 ,28,963/-, ASSESSED THE DIFFERENCE OF RS. 82,82,383/- AS SHORT TERM, CAPITAL GAIN. 3. AGGRIEVED BY THE ORDER OF THE AO ASSESSEE FILED APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A) THE ASSESSEE MADE DETAILED SUBMISSION. THE SUMMARY OF THE SUBMISSION MADE BY THE ASSESSEE IS A S UNDER:- (I) THE ASSESSEE, APART FROM DOING THE BUSINESS OF FURNITURE, ALSO PURCHASES THE PROPERTY AND DISPOSES OFF THE SAME IN A SHORT PERIOD. THE POSITION OF THE PURCHASE OF THE PROPERTY AND DISPOSAL OF THE SAME IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS IS AS UNDER:- DETAILS OF THE PROPERTY AMOUNT PAID YEAR OF PAYMENT REMARKS SEVEN FLATS BOOKED IN NARAYAN BUILDERS AND DEVELOPERS 3500000 2004 TO 2006 FLATS ARE UNDER CONSTRUCTION AND POSSESSION NOT RECEIVED TILL DATE ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 5 BOOKING OF VILLA AT KHATUSHYAM JI IN KUSHI PRAMOTERS 151000 2008-09 VILLA IS UNDER CONSTRUCTION STAGE LAND AT SIKAR ROAD 2000000 3100000 2008-09 2009-10 THIS LAND SOLD IN THE YEAR 2011 16 SHOPS AT VIDHYADHAR NAGAR IN TIME SQUARE CINEPLEX PRIVATE LIMITED 5187641 1541322 2004 TO 2007 2007-08 THESE SHOPS WERE SOLD TO TWO PARTIES DURING THE YEAR. (II) THE ASSESSEE HAS PURCHASED THESE PROPERTIES BY TAKING THE LOAN. THE PURCHASES ARE NOT OF ONE OR TWO FLATS/SHOPS/PROPERTY BUT NUMBER OF FLATS/SHOPS/PROP ERTIES. THEY ARE SOLD IN A SHORT DURATION AFTER GETTING THE POSSESSION OF THE PROPERTIES. THESE FACTS SHOW THAT ASSESSEE PUR CHASES THE PROPERTY WITH AN INTENTION TO SALE. (III) IN SURVEY U/S 133A THE HUSBAND OF THE ASSESSE E SHRI SUDHIR GUPTA IN REPLY TO Q.NO.27 HAS ALSO STATED THAT HER WIFE HAS PURCHASED SOME AREA IN TIME SQUARE CINEPLEX PRIVATE LIMITED WHICH HAS BEEN SOLD AND THIS IS THE BUSINESS OF HER WIFE. (IV) THE ASSESSEE HAS MADE PAYMENT FOR PURCHASE OF T HESE 16 SHOPS NUMBERING F-1 TO F-10 AND F-13 TO F-18 TO M/S TIMES SQUARE CINE PRIVATE LIMITED BETWEEN APRIL 2004 TO JU LY 2007 ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 6 AMOUNTING TO RS.51,87,641/-. THE SALE DEED WAS EXECUT ED ON 25-07-2007. HE FURTHER PAID MAINTENANCE CHARGES OF RS.6,20,182/- AND REGISTRATION EXPENSES OF RS.9,21, 140/-. THUS THE TOTAL DIRECT COST OF THESE SHOPS TO THE ASS ESSEE WAS OF RS.67,28,963/-. THESE SHOPS WERE SOLD BY THE ASS ESSEE VIDE TWO SALE DEED DATED 8-08-2007 FOR RS.61,00,000/ - AND DATED 12-09-2007 FOR RS.50,00,000/-. THUS THESE SHOP S WERE SOLD WITHIN FEW DAYS OF ITS PURCHASE. IN THE RETURN A SSESSEE BY OVERSIGHT DID NOT INCLUDE THE INCOME FROM SALE OF T HESE SHOPS BUT IN COURSE OF ASSESSMENT PROCEEDING ASSESSEE VID E LETTER DATED 15-12-2010 SUBMITTED THE TRADING ACCOUNT OF T HIS TRANSACTION AND REQUESTED TO INCLUDE BUSINESS PROFI T OF RS.28,81,546/-. (V) THE AO OBSERVED THAT THE TRANSACTION IS THE SOLI TARY TRANSACTION. THE ASSESSEE HAS NEITHER DONE ANY BUSIN ESS IN PAST OR IN SUBSEQUENT YEAR. THEREFORE, RELYING ON CE RTAIN DECISION AS MENTIONED AT PAGE 5 & 6 OF THE ORDER HE HELD THAT PROFIT ON SALE OF SHOPS IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. BY INVOKING SECTION 50C HE TOOK THE D EEMED CONSIDERATION ON SALE OF THE PROPERTY AT RS.1,53,22 ,146/- AS ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 7 AGAINST ACTUAL CONSIDERATION OF RS.1,11,00,000/- AN D THUS WORKED OUT SHORT TERM CAPITAL GAIN AT RS.82,82,383/- . HE FURTHER DID NOT ALLOW THE CLAIM OF INTEREST, FINANCE CHARGES, BANK COMMISSION AND DEPRECIATION WHILE COMPUTING TH E CAPITAL GAIN. (VI) THE BASIC ISSUE INVOLVED IN THIS GROUND IS WHETH ER PROFIT ON SALE OF THE PROPERTY IS TO BE ASSESSED AS BUSINESS INCOME OR ASSESSED AS CAPITAL GAIN. THE CHARGEABILITY OF SUCH PROFIT AS BUSINESS INCOME OR CAPITAL GAIN WOULD DEPEND ON THE INTENTION OF THE ASSESSEE AT THE TIME OF THE PURCHA SE OF THE PROPERTY. THE INTENTION TO RESALE WOULD, IN CONJUNCTI ON WITH THE CONDUCT OF THE ASSESSEE AND OTHER CIRCUMSTANCES WOULD POINT TO THE BUSINESS CHARACTER OF THE TRANSACTION. SUPREME COURT IN CASE OF G. VENKTASWANI NAIDU & COMPANY V. C IT 35 ITR 594, 609 HAS LAID DOWN SOME OF THE INDICIA FOR TE STING WHETHER THE TRANSACTION WAS A TRANSACTION IN THE NATU RE OF INVESTMENT OR OF AN ADVENTURE IN THE NATURE OF TRAD E. THESE ARE:- (A) WHAT IS THE NATURE OF THE COMMODITY PURCHASED AND RESOLD AND IN WHAT QUANTITY WAS IT PURCHASED AND RESO LD ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 8 (B) IF THE COMMODITY PURCHASED IS GENERALLY THE SUBJECT - MATTER OF TRADE, AND IF IT IS PURCHASED IN VERY LAR GE QUANTITIES, IT WOULD TEND TO ELIMINATE THE POSSIBILI TY OF INVESTMENT FOR PERSONAL USE, POSSESSION OR ENJOYMEN T. DID THE PURCHASER BY AN ACT SUBSEQUENT TO THE PURCH ASE IMPROVE THE QUALITY OF THE COMMODITY PURCHASED AND THEREBY MADE IT MORE READILY RESALABLE. (C) WHAT WERE THE INCIDENTS ASSOCIATED WITH THE PURCHASE AND RESALE. (D) WERE THEY SIMILAR TO THE OPERATIONS USUALLY ASSOCIA TED WITH TRADE OR BUSINESS. (E) ARE THE TRANSACTIONS OF PURCHASE AND SALE REPEATED. (F) IN REGARD TO THE PURCHASE OF THE COMMODITY AND ITS SUBSEQUENT POSSESSION BY THE PURCHASER, DOES THE ELEMENT OF PRIDE OF POSSESSION COME INTO THE PICTUR E. (G) A PERSON MAY PURCHASER A PIECE OF ART, HOLD IT FOR SOME TIME AND IF A PROFITABLE OFFER IS RECEIVED MAY SELL IT. DURING THE TIME THAT THE PURCHASER HAD ITS POSSESSI ON HE MAY BE ABLE TO CLAIM PRIDE OF POSSESSION AND AESTHE TIC SATISFACTION; AND IF SUCH A CLAIM IS UPHELD THAT WOU LD BE A ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 9 FACTOR AGAINST THE CONTENTION THAT THE TRANSACTION IS IN THE NATURE OF TRADE. (VII) THE ASSESSEE FURTHER RELIED ON THE FOLLOWING DE CISIONS :- - RAJPUTANA TEXTILES (AGENCIES) LIMITED 42 ITR 743 (SC ) - ITO V. RANI RATNESH KUMARI 123 ITR 343 (ALL.) - P.M.MOHAMMED MEERAKHAN V. CIT 73 ITR 735 (SC) (VIII) IN THE ALTERNATE IT WAS SUBMITTED THAT EVEN THE COM PUTATION MADE BY THE AO BY ASSESSING THE PROFIT ON SALE OF S HOPS AS SHORT TERM CAPITAL GAIN IS INCORRECT. FROM THE SALE DEED OF SHOPS DATED 25-07-2007 IT IS CLEAR THAT THE BUILDER ALLOTTED THE SHOPS/OFFICE TO THE ASSESSEE IN THE SAID PROPERTY O N 25-04- 2004 WHEN THE 1 ST INSTALLMENT PAYMENT WAS MADE BY THE ASSESSEE. THE SUBSEQUENT INSTALLMENT PAYMENT WAS MADE BY THE ASSESSEE FROM TIME TO TIME AS MENTIONED IN THE SALE DEED. THUS ASSESSEE ACQUIRED THE RIGHT TO ALLOTMENT OF SAI D SHOPS ON 25-04-2004 AND THE SUBSEQUENT SALE DEED DATED 25 -07- 2007 WOULD RELATE BACK TO DATE OF SUCH ALLOTMENT. THE SHOPS SO SOLD ON 8-08-2007 AND 12-09-2007 ARE THUS LONG T ERM ASSETS AND NOT SHORT TERM ASSETS AS TAKEN BY THE AO . THEREFORE IN CASE IT IS HELD THAT PROFIT ON SALE OF THE SHOP IS ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 10 TAXABLE UNDER THE HEAD CAPITAL GAIN, THE AO BE DIRE CTED TO ASSESS THE SAME AS LONG TERM CAPITAL GAIN AFTER ALLO WING THE INDEXATION BENEFIT AND ALSO TO ALLOW THE BROKERAGE A ND FINANCE CHARGES OF RS.12,41,516/-. FOR THIS ASSESSEE PLACED RELIANCE ON THE CASE OF CIT VS. VIJAY FLEXIBLE CONTAINERS 186 ITR 693 (BOM.). (IX) IT WAS FURTHER CONTENDED THAT AO HAS ADOPTED THE STA MP DUTY VALUE FOR ASSESSING THE CAPITAL GAIN IGNORING THAT ASSESSEE HAS CLAIMED THAT THE SAME SHOULD BE ASSESSED AS BUSINES S INCOME. IN SUCH CIRCUMSTANCES, AO IS UNDER OBLIGATI ON TO REFER THE VALUATION OF THE PROPERTY TO THE VALUATION OFFI CER UNDER SUB SECTION (2) OF SECTION 50C. HAVING NOT DONE SO, THE SUBSTITUTION OF FAIR MARKET VALUE OF THE PROPERTY B Y THE VALUE ADOPTED FOR STAMP DUTY PURPOSE IS ILLEGAL AND BAD I N LAW AND THEREFORE THE AO BE DIRECTED TO WORKOUT THE CAPITAL GAIN BY TAKING THE ACTUAL SALE CONSIDERATION. 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE NOTED THAT THE ASSESSEE APART FROM DOING BUSINESS O F FURNITURE ALSO PURCHASE THE PROPERTY AND SOLD IT AFTER MAKING PROF IT. HE PURCHASED 7 FLATS FROM NARAIN BUILDERS AND DEVELOPERS AND THESE WERE PURCHASED ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 11 WITH AN INTENTION TO SALE AS NO PRUDENT PERSON WOULD BUY SEVEN FLATS FOR THE PURPOSE OF RESIDENCE OR INVESTMENT. SIMILARLY H E HAS PURCHASED 16 SHOPS IN TIME SQUARE CINEPLEX PVT. LTD., VIDYADHAR N AGAR, JAIPUR. HE REFERRED TO THE STATEMENT OF SH. SUDHIR GUPTA, HUSB AND OF THE ASSESSEE RECORDED IN SURVEY WHERE IN REPLY TO Q. NO. 27 HE ST ATED THAT ON PURCHASE AND SALE OF SHOPS AT TIME SQUARE CINEPLEX P VT. LTD. IS THE BUSINESS OF THE ASSESSEE AND THEREFORE THE PROFIT E ARNED ON IT IS BUSINESS INCOME AND NOT CAPITAL GAIN. THE LD. CIT(A) FURTHER HELD THAT THE AO HAS FAILED TO CONSIDER THAT THE ASSESSEE HAS PURCHASED THESE SHOPS/FLATS/LAND NOT OUT OF SURPLUS FUND BUT BORROWI NG FUNDS FROM OPEN MARKET. IN RESPECT OF THE SHOPS PURCHASED FOR RS. 5 1.87 LACS THE ASSESSEE HAS PAID INTEREST OF RS. 11,66,866/- IN F. Y. 2004-05 TO 2006- 07 AND THEREFORE THE PURCHASE OF SHOPS CANNOT BE CO NSIDERED AS INVESTMENT. THE LD. CIT(A) ALSO REFERRED TO THE PRI NCIPLE LAID DOWN IN VARIOUS CASES I.E. IN CASE OF G. VENKATASWAMI NAIDU VS. CIT 35 ITR 594, TETRON COMMERCIAL LTD VS. CIT 261 ITR 422 AND CIT VS. S. P. BALASUBRAMANIUM 250 ITR 127 WHERE IT IS HELD THAT A SINGLE TRANSACTION MAY ALSO CONSTITUTE AN ADVENTURE IN THE NATURE OF T RADE, THERE NEED NOT BE A REGULARITY OR REPETITIVENESS IN THE ACTIVITY A ND WHETHER A TRANSACTION IS IN THE NATURE OF TRADE OR COMMERCE M UST BE DECIDED ON ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 12 THE FACTS AND CIRCUMSTANCES OF EACH CASE AND THE SA ME NEED NOT BE ALLIED TO THE ALREADY EXISTING ACTIVITIES OF THE AS SESSEE. IN THIS CONNECTION THE LD. CIT(A) HIGHLIGHTED THE FOLLOWING F ACTS RELATING TO THE TRANSACTION UNDER CONSIDERATION:- A) THE ASSESSEE HAS PURCHASED 7 FLATS AND 16 SHOPS STAR TING FROM 2004 TO 2008. THE ASSESSEE HAD PURCHASED SUBSTA NTIAL NUMBER OF SHOPS AND FLATS. THE SHEER NUMBER OF FLAT S AND SHOPS WOULD ELIMINATE THE POSSIBILITY OF AN INVESTME NT OR PERSONAL USE, POSSESSION OR ENJOYMENT. THE TRANSACTI ONS OF PURCHASE AND SALE WERE REPEATED. B) THE APPELLANT HAD PURCHASED THESE SHOPS/FLATS/LAND N OT OUT OF SURPLUS FUNDS BUT BY BORROWING FUNDS FROM THE OPEN M ARKET. THE APPELLANT HAD TAKEN LOANS FROM HDFC BANK LTD., I CICI BANK, ABN AMRO BANK, M/S K.Y. CONTINENTAL, SH. VK MAHESHWARI, SMT. PUSHPA KANDOI AND M/S RUSHI TRADING. THESE FUNDS WERE BORROWED IN F.Y. 2004-05, 2005-06 AND 2006-07. THE APPELLANT HAD PAID INTEREST OF RS. 11, 66,886/- ON BORROWED FUNDS OF RS. 51.87 LACS. C) THE ASSESSEE DID NOT ATTEMPT TO EARN ANY INCOME OUT OF THESE FLATS & SHOPS. IT IS A CLEAR INDICATION THAT THESE WERE ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 13 PURCHASED WITH AN INTENTION TO RESELL. NO PRIDE OF P OSSESSION OR AESTHETIC SATISFACTION COULD BE ASSOCIATED WITH T HESE SHOPS OR FLATS. EVEN AFTER PURCHASE, THERE WAS NO IMPROVEM ENT AND THESE WERE NOT UTILIZED IN ANY MANNER. THUS THE APPE LLANT HAD DOMINANT INTENTION TO RESELL. D) THE SUBSEQUENT CONDUCT OF THE APPELLANT HAS TO BE BO RNE IN MIND. AFTER GETTING POSSESSION OF THESE SHOPS, THES E WERE IMMEDIATELY DISPOSED OFF. THUS THE INTENTION OF THE APPELLANT RIGHT FROM THE BEGINNING WAS TO RESELL THE LAND. E) THE QUANTUM OF PROFIT THERE FROM IS NOT AN IMPORTANT CRITERION. THE WHOLE ACTIVITY OF PURCHASE OF FLATS & SHOPS WITH DOMINANT INTENTION TO RESELL AND SUBSEQUENT CONDUCT OF THE APPELLANT POINTS OUT TOWARDS THE BUSINESS CHARACTER OF THE TRANSACTION. F) WITHOUT PREJUDICE TO THE ABOVE, IN A CASE, THERE MI GHT BE NO INITIAL INTENTION TO RESELL AT A PROFIT. BUT THE AS SESSEE MIGHT MAKE IMPROVEMENTS AND SELL THE PLOTS AT PROFIT. THUS ABSENCE OF INITIAL INTENTION TO RESELL IS NOT CONCLUSIVE AN D SUBSEQUENT EVENTS AND CONDUCT OF THE ASSESSEE SHOULD BE TAKEN INTO ACCOUNT. ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 14 ON THE BASIS OF THESE FACTS OF THE TRANSACTION THE LD. CIT(A) AFTER DISTINGUISHING THE DECISION RELIED BY THE LD. AO CO NCLUDED THAT PROFIT ON SALE OF SHOPS CONSTITUTE BUSINESS INCOME AND THEREF ORE PROVISIONS OF SECTION 50C WOULD NOT APPLY FOR SUBSTITUTING THE ACT UAL SALE CONSIDERATION WITH THE DLC RATE ADOPTED BY THE SUB-R EGISTRAR. HE FURTHER OBSERVED THAT OTHERWISE ALSO THE AO IS NOT C ORRECT IN HOLDING THAT ON SALE OF SHOPS, SHORT TERM CAPITAL GAIN HAS ARISEN AS THE HOLDING PERIOD OF SHOPS IS LONG TERM IN AS MUCH AS THE SAME WERE ALLOTTED ON 25.04.2004 WHICH WOULD ENTITLE TO THE ASSESSEE INDEX ATION BENEFIT AND ALSO THE CLAIM OF INTEREST AND BROKERAGE OF RS. 12, 41,516/- ACCORDINGLY THE LD. CIT(A) DIRECTED TO THE AO TO CONSIDER THE PR OFIT ON SALE OF SHOPS AMOUNTING TO RS. 28,81,546/- AS BUSINESS INCOME INS TEAD OF SHORT TERM CAPITAL GAIN ASSESSED BY THE AO. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) TH E REVENUE HAS FILED THIS APPEAL. THE LD. DR VEHEMENTLY ARGUED THAT TRANSACTION ON SALE OF IMMOVABLE PROPERTY SHOULD BE TREATED AS SHO RT TERM CAPITAL GAIN AS IF THE ASSESSEE WAS DOING THE PROPERTY BUSINESS T HERE SHOULD BE BOOKS OF ACCOUNTS IN RESPECT OF THESE BUSINESS AND THE SAME IS REQUIRED TO BE AUDITED, WHICH IS NOT THE CASE OF THE ASSESSEE . MOREOVER NO PROPERTY HAS BEEN SHOWN AS STOCK IN HAND IN THE INCO ME TAX RETURN. THE ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 15 LD CIT(A) HAS FAILED TO APPRECIATE THE REPLY TO Q. N O. 36 OF SH. SUDHIR GUPTA WHERE HE ADMITTED TO PAY THE TAX IN RESPECT O F THE INCOME OF HIS WIFE FROM SHORT TERM CAPITAL GAIN OF RS. 98,23,707/- AND THE ASSESSEE HAS ALSO ADMITTED IN Q. NO. 30 OF HER STATEMENT ABO UT HER INCOME FROM SHORT TERM CAPITAL GAIN. IT WAS THEREFORE PRAYED TO REVERSE THE ORDER OF THE LD. CIT(A). 6. THE LD.AR ON THE OTHER HAND HEAVILY RELIED UPON T HE ORDER OF THE LD. CIT(A). IT WAS FURTHER CONTENDED THAT IN COURSE O F ASSESSMENT PROCEEDINGS ASSESSEE HAS FILED TRADING AND PROFIT A ND LOSS ACCOUNT OF THE SHOPS SOLD DURING THE YEAR. THE NET PROFIT DECL ARED THEREIN IS NOT DISPUTED BY THE AO. ONLY BECAUSE SEPARATE BOOKS OF THE PROPERTY BUSINESS ARE NOT MAINTAINED OR THAT THE AUDIT IS NO T CONDUCTED OF THIS BUSINESS OR THAT STOCK OF PROPERTY IS NOT DECLARED IN THE INCOME TAX RETURN CANNOT BE A RELEVANT FACTOR TO TREAT A BUSIN ESS INCOME AS INCOME FROM CAPITAL GAIN. THE LD. AR WITH REFERENCE TO Q. NO . 36 OF SH. SUDHIR GUPTA STATED THAT IN REPLY TO THIS QUESTION HE ONLY STATED THAT HIS WIFE HAS NOT FILED THE RETURN FOR A.Y. 2008-09 FOR WHICH THE DUE DATE IS STILL AVAILABLE AND THEREFORE ON THE TRANSACTION OF SALE OF SHOPS SHE WOULD FILE THE RETURN AND PAY THE TAX. IN THIS QUESTION H E HAS NOT STATED THAT THE INCOME FROM SALE OF SHOP IS A CAPITAL GAIN WHER EAS IN REPLY TO ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 16 QUESTION NO. 27 HE HAS SPECIFICALLY STATED THAT IT IS THE BUSINESS INCOME OF HIS WIFE. FURTHER IN REPLY TO Q. NO. 30 WHICH IS S IMILAR TO Q. NO. 36 PUT BEFORE SH. SUDHIR GUPTA, ASSESSEE ONLY STATED T HAT SHE HAS NOT FILED THE RETURN FOR A.Y. 2008-09 WHICH IS REQUIRED TO BE FILED BEFORE 30.09.2008 AND SHE WOULD DISCLOSE THE PROFIT ON SALE OF PLOT IN HER RETURN OF INCOME. THE LD. AR FURTHER CONTENTED THAT IN CASE THE PROFIT ON SALE OF SHOPS AS RESULTING INTO CAPITAL GAIN, IT WOULD BE A LONG TERM CAPITAL GAIN AS ALLOTMENT OF SHOPS WERE MADE TO THE ASSESSEE ON 25.04.2004 WHEREAS THE SAME IS SOLD ON 08.08.2007 AN D 12.09.2007 WHICH WOULD ENTITLE THE ASSESSEE FOR INDEXATION BENEF IT, DEDUCTION ON ACCOUNT OF INTEREST AND BROKERAGE AT RS. 12,41,516/ - AND ALSO THE LOWER RATE OF TAX OF 20% AS AGAINST 30% AT WHICH ASSESSEE HAS PAID THE TAX. IT WAS FURTHER STATED THAT IF THE AO HAS CONSIDERED IT AS A CAPITAL ASSET HE OUGHT TO HAVE REFERRED THE VALUATION OF THESE SH OPS TO THE VALUATION OFFICER U/S 50C(2). HAVING NOT DONE SO THE AO HAS N OT FOLLOWED THE LAW BUT IN ANY CASE THE FACTS AND CIRCUMSTANCES OF THE CASE CLEARLY PROVES THAT PROFIT ON SALE OF SHOPS CAN ONLY BE ASSESSED A S BUSINESS INCOME. THEREFORE THE LD. AR PRAYED TO UPHOLD THE ORDER OF T HE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AS SESSEE HAS ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 17 PURCHASED/BOOKED NUMBER OF FLATS/SHOPS/LAND IN EARL IER YEARS OR IN SUBSEQUENT WHICH WERE SOLD DURING THE YEAR OR IN SUB SEQUENT YEAR. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SOLD 16 SHOPS IN A COMPLEX WHICH WAS ALLOTTED ON 25.04.2004 WHEN THE FIRS T INSTALLMENT PAYMENT WAS MADE WHICH CONTINUES UPTO JULY, 2007. THE SALE DEED OF THESE SHOPS WAS EXECUTED IN FAVOUR OF THE ASSESSEE O N 25.07.2007 AND IMMEDIATELY THEREAFTER ALL THESE SHOPS WERE SOLD ON 08.08.2007 AND 12.09.2007. THE NUMBER OF SHOPS PURCHASED BY THE ASS ESSEE FROM THE BORROWED FUNDS AND SELLING ALL OF THEM IMMEDIATELY A FTER THE SALE DEED WAS EXECUTED IN THE FAVOUR OF THE ASSESSEE SHOWS THAT THE INTENTION OF THE ASSESSEE TO PURCHASE THESE SHOPS WAS NOT TO HAVE A PRIDE OF POSSESSION OR TO EARN RENTAL INCOME OR TO HOLD IT F OR CAPITAL APPRECIATION. THE VARIOUS FACTS AND CIRCUMSTANCES MENTIONED BY LD. CIT(A) IN HIS ORDER WHEN TESTED ON THE PRINCIPLES LAID DOWN BY SUPR EME COURT IN CASE OF G. VENKATASWAMI NAIDU AND CO. VS. CIT 35 ITR 594, 6 09 ONLY LEADS TO A CONCLUSION THAT THE TRANSACTION UNDER CONSIDER ATION IS NOT A TRANSACTION OF INVESTMENT BUT ONLY AN ADVENTURE IN THE NATURE OF TRADE. THIS IS ALSO SUPPORTED BY THE STATEMENT OF SH. SUDHI R GUPTA IN REPLY TO Q. NO. 27 WHERE HE STATED THAT PROFIT ON SALE OF SHO PS WOULD BE DECLARED BY HIS WIFE IN THE RETURN AS BUSINESS INCOM E. IN Q. NO. 36 OF ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 18 SH. SUDHIR GUPTA AND Q. NO. 30 OF THE ASSESSEE AS M ENTIONED IN THE GROUND OF APPEAL, NOWHERE IT IS STATED BY THE ASSESS EE OR SH. SUDHIR GUPTA THAT THE SHOPS WERE PURCHASED AS AN INVESTMENT . FURTHER THE CONTENTION OF LD. DR THAT THE ASSESSEE HAS NOT MAIN TAINED THE BOOKS OF THE PROPERTY BUSINESS AND HAS NOT GOT THE SAME AUDI TED ARE NOT GERMANE TO THE ISSUE UNDER CONSIDERATION, AS FOR S UCH DEFAULT, SEPARATE PENAL PROVISIONS ARE PROVIDED IN THE ACT. THEREFORE CONSIDERING THE ENTIRETY AND THE CIRCUMSTANCES OF THE CASE AND THE ELABORATE FINDING GIVEN BY THE LD. CIT(A), WHICH WE FOR THE SAKE OF BRE VITY DO NOT INTEND TO REPEAT, UPHOLD HIS ORDER. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/02/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 27 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE I.T.O., WARD 4(2), JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- SMT. SNEH GUPTA, JAIPUR. ITA 226/JP/2012_ ITO VS. SMT. SHEH GUPTA 19 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 226/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR