The Income tax Ofifcer, Ward-7(4), Ahmedabad V. Savvy Homes Co., Ahmedabad

ITA 2708/AHD/2011

• Counselvise Citation: 270820514 RSA 2011
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: P M MEHTAAR
• Keywords: Capital asset; Business income; Additional evidence; Cost of acquisition; Fair market value; Assessment record
• Section: 45(2); 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2708/AHD/2011 ( / ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER WARD-7(4) AHMEDABAD / VS. SAVVY HOMES CO ( EARLIER KNOWN AS DESAI & CO. ) SANSKAR APARTMENT OPP. KARNAVATI CLUG VEJALPUR, AHMEDABAD % & ./ ./ PAN/GIR NO. : AABFD 4205 B ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) AND CO NO.11/AHD/2012 AY 2008-09 (IN ITA NO.2708/AHD/2011 AY 2008-09) SAVVY HOMES CO. VS. THE INCOME TAX OFFICER ( EARLIER KNOWN AS DESAI & CO. ) WARD-7(4), AHMEDABAD AHMEDABAD (CROSS OBJECTOR) .. (RESPON DENT) REVENUE BY : SHRI RAHUL KUMAR, SR.DR ASSESSEE BY : SHRI P.M. MEHTA, AR +, - .& / DATE OF HEARING 01/07/2015 /012 - .& / DATE OF PRONOUNCEMENT 09/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL AND CROSS-OBJECTION BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST THE ORDER OF THE LD.COMMISSION ER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD (CIT(A) IN SHORT) DATED 24/08/2011 ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 2 - PERTAINING TO ASSESSMENT YEAR (AY) 2008-09. THE APP EAL AND THE CROSS OBJECTION ARE TAKEN UP TOGETHER AND ARE BEING DISPO SED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E, I.E. ITA NO.2708/AHD/2011 FOR AY 2008-09. THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.61,01,210/- AS LONG TERM CAPITAL GAIN, AND IN TREATING THE INCOME AS INCOME FROM BUS INESS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.COMMISSIONER OF INCOME TAX(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 3. BRIEFLY STATED FACTS ARE THAT A SEARCH ACTION WA S CONDUCTED IN THE CASE OF SAVVY GROUP OF CONCERNED ON 14/02/2007. SU BSEQUENTLY, A NOTICE U/S.143(2) OF THE INCOME TAX ACT,1961 (HEREI NAFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE AND THE ASSES SMENT U/S.143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 28/12/2010. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER (AO IN SHORT) COM PUTED THE LONG TERM CAPITAL GAIN PERTAINING TO THE AY 2008-09 AT R S.57,06,622/-. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE FIL ED AN APPEAL BEFORE THE ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 3 - LD.CIT(A), WHO AFTER FOLLOWING THE ORDER OF HIS PRE DECESSOR PASSED IN AYS 2006-07 & 2007-08 ALLOWED THE APPEAL OF THE ASS ESSEE. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS I N APPEAL BEFORE US. 4. APROPOS TO GROUND NO.1, THE LD.SR.DR SUBMITTED T HAT THE LD.CIT(A) HAS FOLLOWED THE ORDER OF HIS PREDECESSOR PASSED IN APPEAL NO.CIT(A)-I/CC.1(1)/535&534/2008-09 DATED 12/11/200 9 PERTAINING TO AYS 2006-07 & 2007-08. 4.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE H AS NOT CONTROVERTED THE SUBMISSION OF THE LD.SR.DR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO COMPUTED THE CAPITAL GAIN BY OB SERVING AS UNDER:- THE PRICE OF LAND IS RS.44,190/-. THE LAND HAS CO ME IN TO THE BOOKS OF ACCOUNT (BALANCE SHEET OF THE ASSESSEE) IN THE YEAR 1984 AS CLAIMED BY THE ASSESSEE. INDEX COST OF LAND AS ON 31.03.2005 WOULD ACCORDINGLY BE RS.1,65,130/- (RS.44,190/-* 497/133). LONG TERM CAPITAL GAINS = FULL VALUE OF CONSIDERAT ION - INDEXED COST OF ACQUISITION (FAIR MARKET VALUE AT THE TIME (AS COMPUTED ABO VE) OF CONVERSION OF CAPITAL ASSET IN TO STOCK IN TRADE) = R.5,20,43,513-RS.165130 = RS.5,18,78,380 ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 4 - THE YEAR WISE BREAKUP OF LONG TERM CAPITAL GAINS IS AS UNDER:- A.Y. % OF REVENUE RECOGNIZED BY THE ASSESSEE INCIDENCE OF CAPITAL GAINS TAX ON LONG TERM CAPITAL GAINS 20%) 2006-07 40% 20751353 8300541 2007-08 49% 25420406 12456000 2008-09 11% 5706622 1141324 THE CAPITAL GAINS ARISING IN A.Y. 2008-09 HAS ACCOR DINGLY TO BE ASSESSED IN THE ASSESSMENT PROCEEDINGS OF A.Y. 2008 -09. THIS LONG TERM CAPITAL GAIN WOULD NOT BE ELIGIBLE TOWARDS CLAIM OF DEDUCTION U/S.80IB 5.1. HOWEVER, THE LD.CIT(A) ALLOWED THE APPEAL BY O BSERVING AS UNDER:- DECISION: I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE LD.AR. THE A.O. HAS MADE T HE ADDITION AS HE CONSIDERED THAT THE LAND WHICH WAS PART OF THE CONS TRUCTION PROJECT WAS NOT A BUSINESS ASSET BUT HELD BY THE FIRM AS AN IMM OVABLE PROPERTY IN THE NATURE OF LONG TERM INVESTMENT. HE, THEREFORE, HELD THAT THE FIRM M/S.DESAI & CO., WHO IS A PARTNER IN THE APPELLANT FIRM WAS NOT IN THE ACTIVITY OF BUSINESS. HE FURTHER HELD THAT THERE W OULD BE TAXABILITY OF CAPITAL GAIN IN THE YEAR IN WHICH STOCK IN TRADE IS SOLD/TRANSFERRED AND, THEREFORE, THE CAPITAL GAIN THAT HAS ARISEN ON CONV ERSION OF INVESTMENT INTO STOCK IN TRADE IS TO BE TAXED WHEN THE LAND IS SOLD. SINCE THE LAND WAS BROUGHT INTO THE BOOKS OF ACCOUNT IN THE YEAR 1 984, HE CALCULATED THE TOTAL CAPITAL GAIN AND DISTRIBUTED THE CAPITAL GAIN ON THE BASIS OF THE COMPLETION OF THE PROJECT. HE ACCORDINGLY HELD THA T 11% OF THE CAPITAL GAIN WILL BE TAXED IN THE PRESENT ASSESSMENT YEAR. THE CAPITAL GAIN OF 40% AND 49% HAS BEEN TAXED IN A.Y. 06-07 & 07-08 RE SPECTIVELY. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT HAS BEEN POINTED OUT BY THE APPELLANT THAT CIT(A)-I, AHMEDABAD VIDE THE ORD ER DATED 12/11/2009, IN RESPECT OF A.Y. 2006-07 & 2007-08 HA S ALLOWED THE ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 5 - APPEAL OF THE APPELLANT AND HELD THAT THE ENTIRE BU SINESS INCOME WAS TO BE TAXED AND NO PART THEREOF SHOULD BE TAXED AS CAP ITAL GAIN. I HAVE PERUSED THE ORDER OF LD.CIT(A)-I, AHMEDABAD PASSED BY HIM IN THE CASE OF THE APPELLANT VIDE APPEAL NO.CIT(A)- I/CC.1(1)/535&534/2008-09 DATED 12/11/2009 FOR A.YS .06-07 & 07-08, WHEREIN SAME ISSUE HAS BEEN DECIDED BY HIM. THE AD DITION MADE BY THE A.O. WAS IN A SIMILAR MANNER. THE SHARE OF CAPITAL GAIN OF 40% & 49% FOR A.Y. 06-07 & 07-08 RESPECTIVELY HAS BEEN CONSID ERED BY HIM AND AFTER CONSIDERING THE SUBMISSION OF THE APPELLANT, HE HAS GIVEN HIS FINDING AND HAS DIRECTED THE A.O. TO DELETE THE WO RKING OF CAPITAL GAIN AND TAX ENTIRE BUSINESS INCOME AND NOT TO TREAT ANY PART THEREOF AS CAPITAL GAIN. RESPECTFULLY FOLLOWING THE DECISION OF LD.CIT(A)-I, AHMEDABAD IN THE CASE OF THE APPELLANT, THE A.O. IS DIRECTED TO DELETE THE WORKING OF THE CAPITAL GAIN AND TAX THE ENTIRE BUSINESS INCOME AND NOT TO TREAT ANY PART THEREOF AS CAPITAL GAIN. THE GROUND OF APPEAL IS, THEREFORE, ALLOWED. 5.2. THERE IS NO DISPUTE WITH REGARD TO THE FACT T HAT THE LD.CIT(A) HAS FOLLOWED THE ORDER OF HIS PREDECESSOR PASSED IN AYS 2006-07 & 2007-08. THE MATTER WAS TRAVELLED UPTO THE STAGE OF TRIBUNAL (ITAT AHMEDABAD C BENCH) BY WAY OF IT(SS)A NOS.30 & 31/AHD/2010 F OR AYS 2006-07 & 2007-08 RESPECTIVELY, WHEREIN THE TRIBUNAL VIDE I TS ORDER DATED 29/11/2013 WAS PLEASED TO RESTORE THE ISSUE BACK TO THE FILE OF LD.CIT(A) FOR FRESH ADJUDICATION BY OBSERVING AS UNDER:- 4. DURING THE APPELLATE PROCEEDINGS BEFORE US, ASS ESSEE FILED THREE COMPILATIONS. IN REPLY TO THE QUERY OF THE BENCH, IT WAS STATED THAT ALL THE DOCUMENTS FILED IN COMPILATIONS WERE BEFORE AO AS WELL AS LD.CIT(A). TO VERIFY THE SAME, ASSESSMENT RECORDS WERE CALLED FOR AND IT WAS FOUND THAT CERTAIN DOCUMENTS CLAIMED TO HAVE BEEN FILED BEFORE ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 6 - AO WERE NOT PART OF THE ASSESSMENT RECORD. LEARNED COUNSEL OF THE ASSESSEE WAS FAIR ENOUGH TO CONCEDE THAT THE PAPERS WHICH ARE NOT PART OF ASSESSMENT RECORDS MAY BE TREATED AS ADDITIONAL EVIDENCE BEFORE LD.CIT(A) AND THEREFORE MATTER MAY BE SENT BACK TO THE FILE OF LD.CIT(A) FOR FRESH ADJUDICATION AFTER OBTAINING RE MAND REPORT FROM THE AO ON THIS ADDITIONAL EVIDENCE. LD.DR DID NOT OBJE CT TO THIS SUBMISSION OF THE ASSESSEES COUNSEL. THEREFORE, THE MATTER I S HEREBY RESTORED BACK TO THE FILE OF LD.CIT(A) ACCORDINGLY. 5.3. UNDER THESE CIRCUMSTANCES, WE DEEM IT PROPER THAT THE PRESENT APPEAL BE ALSO RESTORED TO THE FILE OF LD.CIT(A) FO R FRESH ADJUDICATION AFTER OBTAINING A REMAND REPORT FROM THE AO. THUS, THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NOS.2 & 3 OF REVENUES APPEAL ARE GENERA L IN NATURE WHICH REQUIRE NO INDEPENDENT ADJUDICATION. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. 8. NOW, WE TAKE UP THE ASSESSEES CROSS OBJECTION NO.11/AHD/2012 FOR AY 2008-09 (ARISING OUT OF ITA NO.2708/AHD/2011 FOR AY 2008-09), WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS GROSSLY ERRED IN NOT ADJUDICATING UPON THE RESPONDE NTS ALTERNATIVE PLEA BEFORE HIM REGARDING VALUE TO BE ADOPTED FOR T HE PURPOSE OF ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 7 - SECTION 45(2) OF THE I.T.ACT, ON THE GROUND THAT HE HAD ORDERED FOR THE DELETION OF THE ADDITION ITSELF AND DIRECTED TO DELETE THE WORKING OF CAPITAL GAIN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT ACCEPTING THE ASSESSEES PLEA THAT IT WAS NOT AT ALL A FIT CASE FOR LEVY OF INTEREST U/S.234A, 234B AND 234C O F THE I.T.ACT. 3. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AN D/OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTIONS EITHER BE FORE OR DURING THE COURSE OF HEARING OF THE SAME. 9. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT UNDER THE INSTRUCTIONS OF HIS CLIENT, HE DOES NOT WISH TO PRESS THE CROSS- OBJECTION. LD.DEPARTMENTAL REPRESENTATIVE HAS NO O BJECTION. IN VIEW OF THE STATEMENT OF LD.COUNSEL FOR THE ASSESSEE, THE C .O. IS DISMISSED AS NOT PRESSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 9 TH DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 09/ 07 /2015 5...+, .+../ T.C. NAIR, SR. PS ITA NO.2708/AHD/11 (BY REVENUE) AND CO NO.11/AHD/2012 (BY ASSESSEE) ITO VS. SAVVY HOMES CO. ASST.YEAR 2008-09 - 8 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 678 9 / CONCERNED CIT 4. 9 ( ) / THE CIT(A)-XIV, AHMEDABAD 5. :; )+78 , . 782 , 6 / DR, ITAT, AHMEDABAD 6. ;< =, / GUARD FILE. / BY ORDER, *: ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 02.07.15(DICTATION-PAD 5 +PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..03.07.2015 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.9.7.15P 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9.7.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER