Sagar Jeevanrao Patil, Kolhapur V. Income tax officer,

ITA 2661/PUN/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5093 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED
• Keywords: Capital asset; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO. 2661/PUN/2016 / ASSESSMENT YEAR : 2011-12 SHRI SAGAR JEEVANRAO PATIL, B-2, GOVIND PARK, 1005/1A, RADHANAGARI ROAD, NEAR SANE, GURUJI VASAHAT, KOLHAPUR 416012 PAN : BCHPP5660F VS. ITO, WARD-2(2), KOLHAPUR (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 27-09-2016 IN RELATION TO THE ASS ESSMENT YEAR 2011-12. 2. THE ONLY EFFECTIVE ISSUE RAISED THROUGH SEVERAL GROUNDS IS AGAINST THE CONFIRMATION OF ADDITION OF RS.1,60,86,800/- AS SHORT TERM CAPITAL GAIN. APPELLANT BY SHRI M.K. KULKARNI RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 05-11-2019 DATE OF PRONOUNCEMENT 06-11-2019 ITA NO. 2661/PUN/2016 SAGAR J. PATIL 2 3. SUCCINCTLY, THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESS EE FILED HIS RETURN DECLARING TOTAL INCOME OF RS.2,56,570/- INCLUS IVE OF RS.1,20,000/- SHOWN AS OTHER INCOME. ON VERIFICATION OF THE INFORMATION, THE ASSESSING OFFICER (AO) OBSERVED THAT THE A SSESSEE ACQUIRED AGRICULTURAL PROPERTY ADMEASURING 288585 SQ.FT. BE ARING R.S.NO.18A/2A, 18A/2B, 18A/2C, 18A/2D SITUATED AT NIPANI, TALUKA CHIKODI, DIST. BELGAUM, KARNATAKA AS PER THE SALE DEE D DATED 22-01-2010 FOR A TOTAL CONSIDERATION OF RS.68,80,000 /- PLUS STAMP DUTY OF RS.4,66,700/-. PAYMENT TOWARDS PURCHASE O F THE SAID PROPERTY WAS MADE THROUGH CHEQUES. ON BEING CALLED UPON TO EXPLAIN THE SOURCE OF FUNDS INVESTED IN THE ACQUISITION OF THE PROPERTY, THE ASSESSEE SUBMITTED THAT HIS OWN SOURCE OF IN COME WAS SALARY FROM HIS EMPLOYMENT WITH M/S. TESSITURA MONTI INDIA PVT. LTD. HE FURTHER SUBMITTED THAT PAYMENT TOWARDS ACQUISITION OF PROPERTY WAS MADE BY M/S. AURORA APPAREL PVT. LTD. (AAP L) WHICH WAS A COLLABORATING COMPANY OF HIS EMPLOYER COMPANY M/S. TESSITURA MONTI INDIA PVT. LTD. IT WAS STATED THAT ALL THE EXPENSE S CONCERNING THE ACQUISITION OF PROPERTY, ITS CONVERSION INTO NO N- AGRICULTURAL LAND ETC. WERE BORNE BY AAPL ALONE. THE ASSES SEE STILL FURTHER SUBMITTED THAT AFTER GETTING THE AGRICULTURAL LAND CONVERTED INTO NON-AGRICULTURAL ONE, THE SAME WAS APPARENTLY SOLD ITA NO. 2661/PUN/2016 SAGAR J. PATIL 3 BY HIM TO AAPL FOR RS.70.00 LAKH ON 18-10-2010. IT W AS, THEREFORE, STATED THAT THE ASSESSEE RECEIVED ONLY A SUM OF RS.1,20,000/- AS INCOME FROM THE TRANSACTION WHICH WAS OFFERED FOR TAXATION AND THAT THE ACQUISITION OF PROPERTY WAS DONE FOR AND ON BEHALF OF AAPL, WHICH TRANSACTION WAS FULLY FINANCED BY THAT COMPANY ONLY. THE AO OBSERVED THAT THE PROPERTY WAS PUR CHASED BY THE ASSESSEE IN HIS OWN NAME AND THEREAFTER SOLD TO AA PL AGAIN, AS A SELLER FOR A TOTAL CONSIDERATION OF RS.70.00 LAKH . HE FOUND OUT THE STAMP VALUE OF THE PROPERTY AT RS.2,30,86,800 /-. TAKING SUCH STAMP VALUE AS SALE CONSIDERATION UNDER SECTION 5 0C AT RS.2,30,86,800/, THE AO, AFTER REDUCING PURCHASE PRICE OF RS.68,80,000/-, COMPUTED SHORT TERM CAPITAL GAIN ON TRANSF ER OF SUCH PROPERTY AT RS.1,62,06,800/-. THE ASSESSEES CO NTENTIONS BEFORE THE LD. CIT(A) IN THIS REGARD THAT THE PROPERTY WAS N OT PURCHASED AS HIS OWN OR IN THE ALTERNATIVE IT WAS CONVERTED IN TO STOCK IN TRADE OR IN ANOTHER ALTERNATIVE, THE INTENTION AT THE TI ME OF PURCHASE OF LAND WAS TO RESELL THE LAND AND HENCE, THE PRO VISIONS OF SECTION 45 SHOULD NOT BE APPLIED, DID NOT FIND FAVOUR WITH TH E LD. CIT(A), WHO ECHOED THE ASSESSMENT ORDER ON THIS POINT. TH E ASSESSEE IS AGGRIEVED BY THE ADDITION OF RS.1.60 CRORE AN D ODD. ITA NO. 2661/PUN/2016 SAGAR J. PATIL 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH TH E RELEVANT MATERIAL ON RECORD. THERE IS NO DOUBT ON THE FACT THAT IT WAS THE ASSESSEE WHO ACQUIRED THE AGRICULTURAL PROPERTY BEA RING R.S.NO.18A/2A TO 18A/2D FROM FOUR PERSONS AS PER SALE DE ED DATED 22-01-2010 FOR A TOTAL CONSIDERATION OF RS.68,80,000 /-. THERE IS EQUALLY NO DOUBT THAT IT WAS THE ASSESSEE, WHO EX FACIE TRANSFERRED THIS PROPERTY TO AAPL ON 18-10-2010 FOR A CONSIDERATION OF RS.70,00,000/-. IN SUCH A SCENARIO, IT IS DIFFICULT TO ACCEPT THE CONTENTION OF THE LD. AR THAT THE ASSESSEE SHOULD NOT BE TAKEN AS AN OWNER AND HENCE THE TRANSACTION SHOULD B E TREATED AS DONE ON BEHALF OF AAPL. ONCE THE PROPERTY WAS PURCHAS ED BY THE ASSESSEE THROUGH A LEGAL PROCESS UNDER WHICH HE BECAME ITS OWNER, THERE CAN BE NO QUESTION OF DENTING HIS CHARACTER AS A LEGA L OWNER BY PUTTING ACROSS AN ARGUMENT THAT THE SAME WAS PURCHASED ON BEHALF OF AAPL, MORE SO WHEN THE SALE DEED DOES NOT RECO GNIZE THIS FACT. IT IS MANIFEST FROM THE FACTUAL PANORAMA DISCUSSE D SUPRA THAT THE ENTIRE PURCHASE CONSIDERATION OF RS.68,80,000/- PLU S STAMP DUTY OF RS.4,66,700/- AT THE TIME OF PURCHASE OF THE PRO PERTY WAS PAID BY AAPL. AAPL HAS CONFIRMED IN WRITING THROUGH PAGE 1 OF THE PAPER BOOK THAT THE ASSESSEE UNDERTOOK THE TRADING OF LA NDS AND IT WAS AAPL WHICH COLLABORATED WITH THE ASSESSEE FOR PURCHASIN G ITA NO. 2661/PUN/2016 SAGAR J. PATIL 5 THE LAND FOR SETTING UP ITS FACTORY. AAPL PASSED A RESOLUTION ON 09-11-2009, WHOSE COPY IS AVAILABLE AT PAGE 2 OF THE PAPE R BOOK INDICATING THAT THE ASSESSEE WOULD BE PURCHASING PROPERTY ON BEHALF OF THE COMPANY. EVEN THOUGH AN APPLICATION FOR CONVERSION OF AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND WAS MOVED BY THE ASSESSEE BUT ALL THE FINANCIAL BURDEN IN THIS RESPECT WAS BORN E BY AAPL. IN THE ULTIMATE ANALYSIS, WHEN THE LAND WAS GOT CONVE RTED INTO NON-AGRICULTURAL LAND, THE ASSESSEE TRANSFERRED IT TO AAP L. THUS, IT CAN BE SEEN THAT THE PURCHASE TRANSACTION WAS DON E IN JANUARY, 2010 BY THE ASSESSEE AND AFTER CONVERTING, THE NON- AGRICULTURAL LAND IN QUESTION WAS TRANSFERRED TO AAPL IN OCTOB ER, 2010, JUST WITHIN A SHORT SPAN OF 10 MONTHS. THUS, THE FA CTS AMPLY INDICATE THAT THE AB INITIO INTENTION OF THE ASSESSEE WAS TO PURCHASE THE PROPERTY FOR RE-SALE TO AAPL WHICH GOT FRUCTIFIED AS WELL ACCORDINGLY. IN SUCH CIRCUMSTANCES, THE PROPERTY PURCHA SED BY THE ASSESSEE CANNOT BE CONSTRUED AS A `CAPITAL ASSET SO AS TO FALL FOR CONSIDERATION WITHIN CHAPTER IV-E OF THE ACT. SINCE THE LAND W AS PURCHASED WITH INTENTION OF RE-SELLING THE SAME AT A SHORT SPA N OF TIME, SUCH TRANSACTION CAN BE CHARACTERIZED ONLY AS AN AD VENTURE IN THE NATURE OF TRADE SO AS TO FALL UNDER CHAPTER IV-D OF THE ACT, BEING, INCOME CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS ITA NO. 2661/PUN/2016 SAGAR J. PATIL 6 FROM BUSINESS OR PROFESSION. GOING BY THIS, THE PURCHAS E WAS MADE AT RS.68.80 LAKH AND THE SALE WAS MADE AT RS.70.00 LAKH RESULTING INTO INCOME OF RS.1.20 LAKH, WHICH THE ASSESSEE H AD VOLUNTARILY DECLARED IN THE RETURN. WE, THEREFORE, HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING AND CONFIRMING THE ADDITION OF RS.1,60,86,800/- IN THE HANDS OF THE ASSESSE E. THE ADDITION IS DIRECTED TO BE DELETED. 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH NOVEMBER, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S. SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE; DATED : 06 TH NOVEMBER, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-1, KOLHAPUR 4. THE CIT-1, KOLHAPUR 5. , , / DR A, ITAT, PUNE 6. / GUARD FILE / BY ORDER, / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO. 2661/PUN/2016 SAGAR J. PATIL 7 DATE 1. DRAFT DICTATED ON 05-11-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 05-11-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *