Ranmal Bhansali, JODHPUR V. ACIT, JODHPUR

ITA 239/JODH/2008

• Counselvise Citation: 23923314 RSA 2008
• Duration Of Justice: 3 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N R MERTIA
• Keywords: Sale consideration of property below Jantri Value; Business income; Business expenditure
• Section: 50C

Judgement Text

1 ITA 239-08 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 239/JODH/2008 ASSTT. YEAR : 2004-05. SHRI RAN MAL BHANSALI, VS. THE ACIT, CIRCLE-1, A-222, SHASTRI NAGAR, JODHPUR. JODHPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.R. MERTIA RESPONDENT BY : SHRI MAHESH KUMAR DATE OF HEARING : 30.11.2011 DATE OF PRONOUNCEMENT : 09.12.2011. ORDER DATED : 09.12.2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED AS MANY AS 7 GROUNDS IN HIS APPEAL IN FORM NO. 36 ORIGINALLY. THEREAFTER, THE LD. COUNSEL OF THE ASS ESSEE HAS FILED CONCISE GROUNDS WHICH ARE FOUR IN NUMBER. 3. FIRST GROUND IS AGAINST SUSTAINING THE LONG TERM CAPITAL GAIN AMOUNTING TO RS. 5,13,171/- BY VIRTUE OF SECTION 50C OF THE IT ACT. 4. THE FACTS OF THE CASE ARE THAT ASSESSEE SOLD A P LOT FOR RS. 4.25 LACS AND CAPITAL GAIN OF RS. 3,76,338/- WAS SHOWN. THE PLOT WAS SOLD THRO UGH AN AGREEMENT ONLY. THE SUB REGISTRAR WAS REQUESTED TO CONVEY THE DLC RATE OF T HE PLOT ON THE DATE OF SALE. THE SUB 2 REGISTRAR VIDE HIS LETTER DATED 31.8.2006 INFORMED THAT THE DLC RATE OF THE RESIDENTIAL PLOT WAS RS. 225/- PER SQ. FT. ACCORDINGLY THE VALUE WA S COMPUTED AT RS. 5,60,250/- AS AGAINST DECLARED VALUE OF RS. 4.25 LACS ONLY RESULTING IN D IFFERENCE OF RS. 1,35,250/-. THE ASSESSEE WAS REQUIRED TO SHOW CAUSE WHY THE SALE VA LUE AT RS. 5,60,250/- SHOULD NOT BE ADOPTED. AS PER CONSENT OF ASSESSEE TELEPHONICALLY GIVEN TO ADOPT THE VALUE AT RS. 5,60,250/-, THE ASSESSING OFFICER ASSESSED THE VALU E AT RS. 5,60,250/- AND DIFFERENCE OF RS. 1,35,250/- WAS ADDED. ACCORDINGLY, INDEXATION COST WAS ALSO CHANGED AND IN THIS WAY THE TOTAL CAPITAL GAIN WAS COMPUTED AT RS. 5,13 ,171/- AGAINST CAPITAL GAIN SHOWN BY ASSESSEE AT RS. 3,76,338/-. THE LD. CIT (A) HAS AL SO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND. THE BENCHES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE THE SALE TOOK PLACE TH ROUGH AGREEMENT THEN PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. IN CASE OF CARLTON HOTEL PVT. LTD., 35 SOT 26, THE LUCKNOW BENCH OF THE TRIBUNAL HAS TAKEN A VIEW THAT WHERE SUCH REGISTRATION DOES NOT TAKE PLACE BY PAYING STAMP DUTY, THAT CASE WOULD BE COVERED UNDER SECTION 45(3) AND NOT UNDER SECTION 50C. ACCORDINGLY IT WAS HELD THAT TH E VALUE RECORDED BY FIRM IN ITS BOOKS WOULD ONLY BE FULL VALUE OF CONSIDERATION FOR PURPO SE OF COMPUTING CAPITAL GAINS. 5.1. SIMILAR VIEW HAS BEEN EXPRESSED BY JODHPUR BEN CH OF THE TRIBUNAL IN CASE OF NAVNEET KUMAR THAKKAR, 112 TTJ 76 (JODH). THIS IS UNDISPUTED FACT THAT NO REGISTRATION WAS DONE AND THE PLOT WAS SOLD ONLY AN AGREEMENT BA SIS. THEREFORE, PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND 3 THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE CA PITAL GAIN ON THE BASIS OF VALUE AS PER SALE AGREEMENT. 6. GROUND NO. 2 IS AGAINST TREATING THE GAIN AND LO SS ON PURCHASE AND SALE OF SHARE AS BUSINESS INCOME AGAINST CAPITAL GAIN SHOWN BY ASSES SEE. 7. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE DECLARED SHORT TERM CAPITAL GAIN ON SHARE AT RS. 2, 85,959/- AND LONG TERM CAPITAL LOSS OF RS. 82,621/- WITH INDEXATION AND LONG TERM PROFIT O F RS. 13,856/- WITHOUT INDEXATION FROM SHARES. THE ASSESSING OFFICER FOUND THAT ASSESSEE IS A LIC AGENT AND ENGAGED IN HEAVY PURCHASE AND SALE OF SHARES. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SHOWN TOTAL 263 TRANSACTIONS DURING THE RELEVANT ASSESSMENT YEA R, OUT OF WHICH209 TRANSACTIONS WERE SHOWN AS SHORT TERM AND THE REMAINING 54 AS LONG TE RM. IN OTHER WORDS, THE ASSESSEE TRADED IN SHARE TRANSACTIONS VERY FREQUENTLY. THE ASSESSEE DEALT WITH AS MANY AS 107 COMPANIES. THE TOTAL SALES TURNOVER CAME TO RS. 37 .19 LACS FOR SHORT TERM AND RS. 10.68 LACS FOR LONG TERM TRANSACTION. THE ASSESSING OFF ICER FURTHER NOTED THAT ASSESSEE MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR DEALING IN SHARES, SEPARATE LEDGERS ARE KEPT FOR EACH SCRIPT PURCHASED AND SOLD. THE ASSESSEE HAS D EBITED BROKERAGES PAID ALSO. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE WAS INVOLVED IN SPECULATION OF SHARES ALSO. THE ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAS TAKEN LOAN OF RS. 1,49,000/- DURING THE YEAR. AFTER NOTING ALL THESE FACTS, A SHOW CAUSE N OTICE WAS GIVEN TO THE ASSESSEE THAT WHY INCOME ARISING FROM SHARE TRANSACTION SHOULD NOT BE TREATED AS BUSINESS INCOME ON THE GIVEN FACTS. AFTER CONSIDERING THE SUBMISSIONS A ND PERUSING THE MATERIAL ON RECORD, THE ASSESSING OFFICER HELD THAT THESE ARE BUSINESS TRAN SACTIONS. ACCORDINGLY HE DENIED THE BENEFIT OF LONG TERM CAPITAL GAIN AND LOSS CLAIMED ON ACCOUNT OF LONG TERM CAPITAL LOSS 4 AGAINST PROFIT ON ACCOUNT OF SALE OF PLOT. THE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 8. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT THIS MATTER SHOULD GO BACK TO THE FILE OF ASSESSING OFFICER TO ASCERTAIN THE FACTUAL ASPECTS. THERE IS NO BAR TO MAKE INVESTMENT IN SHARES OR DEAL IN SHARE TRANSACTIONS. IF THE ASSESSEE IS PURCHASING SHARES AND CREDITED IN THE INVESTMENT PORTFOLIO THEN IT HA S TO BE TREATED ON ACCOUNT OF INVESTMENT OF LONG TERM CAPITAL / SHORT TERM CAPITAL AS THE CA SE MAY BE, AND IF THE SHARE TRANSACTIONS ARE SHOWN IN TRADING PORTFOLIO, THEN OF COURSE THE TRANSACTION HAS TO BE TREATED AS IN THE NATURE OF BUSINESS AND ADVENTURE. IN SOME CASES I T HAS ALSO BEEN HELD THAT IF THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES ARE MAD E ON THE SAME DAY OR WITHIN 30 DAYS, THEN OF COURSE, THESE TRANSACTIONS HAVE TO BE TREAT ED AS BUSINESS TRANSACTION. SINCE ALL THESE FACTS HAS NOT BEEN EXAMINED, THEREFORE, WE AR E OF THE VIEW THAT MATTER SHOULD GO BACK TO THE FILE OF ASSESSING OFFICER TO EXAMINE TH IS ASPECT. IF IT IS FOUND THAT SALE OF SHARES HAS BEEN MADE WITHIN 30 DAYS, THEN OF COURSE ASSESSING OFFICER MAY TREAT THIS TRANSACTION AS BUSINESS TRANSACTION. 8.1. REGARDING THE LOAN, WE WOULD LIKE TO MENTION T HAT THIS IS A SMALL LOAN TAKEN FROM FAMILY CANNOT CHANGE THE NATURE OF TRANSACTION OF A BOUT RS. 50 LACS WHEREAS LOAN HAS BEEN TAKEN OF RS. 1,49,000/-. THEREFORE, ON THIS ACCOUN T NO ADVERSE INFERENCE SHOULD BE DRAWN AGAINST THE ASSESSEE. HOWEVER, THE ASSESSING OFFICE R SHALL ASCERTAIN BY CALLING THE ASSESSEE THAT HOW THE TRANSACTIONS ARE DONE. AS ST ATED ABOVE, IF THE TRANSACTIONS ARE MADE WITHIN 30 DAYS THEN THESE MAY BE TREATED AS BUSINES S TRANSACTION AND OTHER TRANSACTIONS MAY BE TREATED AS ON ACCOUNT OF INVESTMENT. 5 8.1. IF THERE IS ANY LOSS ON ACCOUNT OF INVESTMENT IN SHARES THEN OF COURSE THE LOSS IF ANY HAS TO BE SET OFF AGAINST THE CAPITAL GAIN SHOW N ON ACCOUNT OF SALE OF PLOT AS PER PROVISIONS OF LAW. WE ORDER ACCORDINGLY. 9. NEXT ISSUE IS AGAINST CONFIRMING 20% OF ADHOC DI SALLOWANCE OUT OF VARIOUS BUSINESS EXPENSES. 10. THE ASSESSING OFFICER DISALLOWED 20% OF EXPENSE S FOR WANT OF PROPER VOUCHERS. THE LD. CIT (A) CONFIRMED THE SAME. 11. AFTER CONSIDERING THE SUBMISSIONS, WE ARE OF TH E VIEW THAT THESE DISALLOWANCES ARE ON HIGHER SIDE. THEREFORE, WE FEEL THAT IF 10% DISA LLOWANCE IS SUSTAINED, THEN IT WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 12. GROUND NO. 4 WAS NOT PRESSED. THEREFORE, THE SA ME IS DISMISSED AS NOT PRESSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART FOR STATISTICAL PURPOSES. 14. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- SHRI RAN MAL BHANSALI, JODHPUR. THE ACIT, CIRCLE-1, JODHPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 239/JODH/2008)) BY ORDER, AR ITAT JODHPUR.