ITO, Coimbatore V. Shri B. Anwar Basha, Coimbatore

ITA 2263/CHNY/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8122 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: MRS LAKSHMI SRIRAM
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2263/MDS/2013 ' (' / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, WARD III(4), 63, RACE COURSE ROAD, COIMBATORE 641 018. V. SHRI B. ANWAR BASHA, 174, KARUPPA GOUNDER STREET, COIMBATORE 641 001. PAN : ACZPA 0264 F (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT ,-*+ . / / RESPONDENT BY : MRS. LAKSHMI SRIRAM, ADVOCATE 0 . 1$ / DATE OF HEARING : 21.12.2015 2!( . 1$ / DATE OF PRONOUNCEMENT : 05.02.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COIMBAT ORE, DATED 28.10.2013 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2 I.T.A. NO.2263/MDS/13 2. SHRI A.V. SREEKANTH, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD TO ASSESSMENT OF CAPITAL GAIN. ACCORDING TO THE LD . D.R., THE ASSESSEE PURCHASED IMMOVABLE PROPERTY IN HIS INDIVI DUAL CAPACITY AND THE SALE CONSIDERATION IS ALSO PAID BY THE ASSE SSEE IN HIS INDIVIDUAL CAPACITY. SUBSEQUENTLY, THE ASSESSEE CL AIMED THAT THE PROPERTY PURCHASED IN HIS INDIVIDUAL NAME WAS TRANS FERRED TO PARTNERSHIP FIRM AS CAPITAL CONTRIBUTION. REFERRIN G TO THE JUDGMENT OF APEX COURT IN KARTHIKEYA V. SARABHAI V. CIT (1985) 49 CTR 172, THE LD. D.R. SUBMITTED THAT WHEN A PARTNER CONTRIBU TES TO PARTNERSHIP FIRM, THERE WAS TRANSFER OF PROPERTY AN D THE PARTNER IS LIABLE TO PAY THE CAPITAL GAIN. IN THIS CASE, THE PARTNER HAS NOT PAID ANY CAPITAL GAIN TAX WHEN THE PROPERTY WAS SAID TO BE TRANSFERRED TO THE PARTNERSHIP FIRM. SUBSEQUENTLY, THE PROPERTY W AS SOLD BY THE ASSESSEE. HOWEVER, NO CAPITAL GAIN WAS DISCLOSED T O THE DEPARTMENT. THE ASSESSEE CONTENDED BEFORE THE ASSE SSING OFFICER THAT THE PROPERTY BELONGED TO PARTNERSHIP FIRM AND THE PARTNERSHIP FIRM HAS ALREADY PAID TAXES BY TREATING THE PROFIT ON SALE OF LAND AS BUSINESS INCOME. THE LD. D.R. FURTHER SUBMITTED TH AT THE SALE PROCEEDS OF THE LAND WERE DEPOSITED IN THE BANK ACC OUNT OF THE 3 I.T.A. NO.2263/MDS/13 ASSESSEE, THEREFORE, IT CANNOT BE TREATED AS INCOME OF THE PARTNERSHIP FIRM. 3. ON THE CONTRARY, MRS. LAKSHMI SRIRAM, THE LD.COU NSEL FOR THE ASSESSEE, SUBMITTED THAT THE PROPERTY WAS CONTRIBUT ED TO THE PARTNERSHIP FIRM AS CAPITAL BY THE ASSESSEE. THERE FORE, IT BECOMES THE PROPERTY OF THE PARTNERSHIP FIRM. ACCORDING TO THE LD. COUNSEL, FOR THE FINANCIAL YEAR 2008-09, BUSINESS INCOME WAS OFFERED IN THE HANDS OF THE PARTNERSHIP FIRM M/S BABA & COMPANY ON SALE OF THE VERY SAME PROPERTY. WHEN THE BUSINESS INCOME WAS O FFERED BY THE PARTNERSHIP FIRM M/S BABA & COMPANY, ACCORDING TO T HE LD. COUNSEL, THE SAME CANNOT BE TREATED AS INCOME IN THE HANDS O F THE PRESENT ASSESSEE. THE ASSESSING OFFICER WITHOUT CONSIDERIN G THE FACT THAT THE INCOME WAS ALREADY OFFERED IN THE HANDS OF THE PARTNERSHIP FIRM, ASSESSED THE SAME AS SHORT TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. ON A QUERY FROM THE BENCH IF THE PROPER TY BELONGS TO PARTNERSHIP FIRM, WHY THE SALE PROCEEDS WERE DEPOSI TED IN THE BANK ACCOUNT MAINTAINED BY THE ASSESSEE? THE LD.COUNSEL CLARIFIED THAT THE ASSESSEE IS ILLITERATE. HE DOES NOT KNOW THE A RT OF BOOK KEEPING. DUE TO HIS LACK OF EDUCATION AND PROPER GUIDANCE, T HE ENTIRE SALE PROCEEDS WERE DEPOSITED IN THE INDIVIDUAL BANK ACCO UNT OF THE 4 I.T.A. NO.2263/MDS/13 ASSESSEE. HOWEVER, THE ENTIRE TRANSACTION WAS RECO RDED IN THE BOOKS OF THE FIRM. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE A SSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE PROPERTY WAS PURCHASED BY THE ASSESSEE IN HIS INDIV IDUAL CAPACITY FROM HIS OWN FUNDS. SUBSEQUENTLY, THE ASSESSEE CLA IMED THAT THE PROPERTY WAS TRANSFERRED TO PARTNERSHIP FIRM M/S BA BA & COMPANY. THEREFORE, IT HAS TO BE VERIFIED HOW THE PROPERTY W AS TRANSFERRED TO THE PARTNERSHIP FIRM AS CAPITAL CONTRIBUTION OF THE ASSESSEE. THE ASSESSEE CLAIMED BEFORE THE CIT(APPEALS) THAT THE E NTIRE TRANSACTION OF THE SALE OF PROPERTY WAS RECORDED IN THE BOOKS OF THE PARTNERSHIP FIRM. THE ASSESSEE FURTHER CLAIMED THA T THE PROFIT ON SALE OF THE PROPERTY WAS OFFERED IN THE HANDS OF TH E PARTNERSHIP FIRM AS BUSINESS INCOME. THE FACT REMAINS THAT THE ASSE SSING OFFICER HAD NO OCCASION TO EXAMINE THE MATERIAL TO INDICATE HOW THE PROPERTY WAS TRANSFERRED TO PARTNERSHIP FIRM. THE OBSERVATION MADE BY THE CIT(APPEALS) SHOWS THAT EVEN THE SALE DEED W AS EXECUTED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AND NOT ON BEHALF OF THE PARTNERSHIP FIRM. IF THE PROPERTY WAS TRANSFERRED TO PARTNERSHIP FIRM, 5 I.T.A. NO.2263/MDS/13 IT IS NOT KNOWN HOW THE SALE DEED EXECUTED BY THE A SSESSEE IN HIS CAPACITY WOULD BE VALID IN LAW. THE ASSESSING OFFI CER HAD NO OCCASION TO EXAMINE THE BOOKS OF THE ASSESSEE AND T HE PARTNERSHIP FIRM. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHO RITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE ISSUE AFRESH AND FIND OUT WHETHER THE PROPERTY PURC HASED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY WAS TRANSFERRED TO THE PARTNERSHIP FIRM AND WHETHER THE PARTNERSHIP FIRM S UBSEQUENTLY SOLD THE PROPERTY IN THE COURSE OF ITS BUSINESS ACTIVITY . IT HAS ALSO TO BE VERIFIED WHETHER THE PARTNERSHIP FIRM HAS ALREADY O FFERED THE PROFIT ON SALE OF THE LAND AS BUSINESS INCOME. THE ASSESS ING OFFICER SHALL VERIFY ALL THE FACTS AND THEREAFTER DECIDE THE ISSU E IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. 6 I.T.A. NO.2263/MDS/13 ORDER PRONOUNCED ON 5 TH FEBRUARY, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 5 TH FEBRUARY, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-I, COIMBATORE 4. 0 81 /CIT-I, COIMBATORE 5. 69 ,1 /DR 6. :' ; /GF.