Kiran Kumar Jain, Mysore V. Addl.C.I.T., Mysore

ITA 274/BANG/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80645 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR
• Assessee Lawyers: S VENKATESAN
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition; Revised return
• Section: 143(3); 50C; 133A; 139(5); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NOS.274 & 275(BANG) 2011 ASSESSMENT YEARS : 2007-08) 1. SHRI KIRAN KUMAR JAIN & 2. SHRI RAMU JAIN, NO.719, WEST 3 RD CROSS, ASHOKA ROAD, MYSORE. APPELLAN TS PAN NO.AALPJ 8332R PAN NO.ABEPJ7312D VS. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-2, MYSORE. RESPONDENT ASSESSEE BY : SHRI S. VENKATESAN, CA REVENUE BY : SHRI BIJOY KUMAR PANDA, ADDL.CIT DATE OF HEARING : 17-07-2 014 DATE OF PRONOUNCEMENT : 14.08.2014 O R D E R PER BENCH; THESE ARE APPEALS BY THE ASSESSEES AGAINST TWO ORD ERS BOTH DATED 29- 12-2010 OF THE CIT(A) MYSORE RELATING TO ASSESSMEN T YEARS 2007-08. 2. THE ASSESSEE IN ITA NO.274(B)/11 IS SHRI KIRAN KUMAR JAIN AND THE ASSESSEE IN ITA NO.275(B)/11 IS SHRI RAMU JAIN. BO TH THE ASSESSEES ARE ITA NOS.274 & 275(B)/2011 2 BROTHERS. SHRI KIRAN KUMARS WIFE RUNS A BUSINESS UNDER THE NAME AND STYLE OF M/S DARSHAN AUTOMOBILES, DEALING IN AUTOMO BILE SPARE PARTS. SHRI KIRAN KUMAR JAIN, IS THE POWER OF ATTORNEY HOLDER O F HIS WIFE SMT.PREETI KUMARI, PROPRIETRIX OF M/S DARSHAN AUTOMOBILES AND ALSO AN EMPLOYEE OF THE SAID BUSINESS. 3. SHRI RAMU JAIN, IS RUNNING A SHOP BY NAME M/S K OTHARI AUTOMOBILES, DEALING IS AUTOMOBILES SPARE PARTS. BOTH BUSINESS REFERRED TO ABOVE HAVE A COMMON OFFICE NAMELY NO.719, WEST 3 RD CROSS, ASHOKA ROAD, MYSORE. 4. SHRI KIRAN KUMAR JAIN, FILED HIS RETURN OF INC OME FOR THE ASSESSMENT YEAR 2007-08 IN FORM NO.ITR-4 ON 22-08-2007. SHRI RAMU JAIN LIKEWISE FILED HIS RETURN OF INCOME IN FORM NO.ITR-4 ON 14-0 7-2007. IN THE RETURN SO FILED SHRI KIRAN KUMAR JAIN AND SHRI RAMU JAIN OFF ERED TO TAX INCOME OF RS.1,28,925/- AND RS.1,20,167/- RESPECTIVELY. 5. THERE WAS A SURVEY CARRIED OUT IN THE BUSINESS PREMISES OF M/S DARSHAN AUTOMOBILES U/S.133A OF THE ACT. IN THE COURSE OF SEARCH IT TRANSPIRED THAT SHRI KIRAN KUMAR JAIN & SHRI RAMU JAIN JOINTLY PURC HASED A PROPERTY TO THE EXTENT OF 1 ACRE 39 GUNTAS IN SURVEY NO.71/3, VARU NA HOBLI, VAJAMANGALA VILLAGE, MYSORE TALUK, HEREIN AFTER REFERRED TO AS PROPERTY. THE SAID PROPERTY HAD BEEN PURCHASED BY THEM UNDER A REGISTE RED SALE DEED DATED 21- 11-2005 FOR A CONSIDERATION OF RS.1,97,500/-. THE P ROPERTY WAS SOLD BY THEM ITA NOS.274 & 275(B)/2011 3 UNDER A REGISTERED SALE DEED DATED 17-10-2006 FOR A CONSIDERATION OF RS.3.00 LAKHS. THE VALUATION OF THE PROPERTY FOR THE PURPOS E OF STAMP DUTY AND REGISTRATION BY THE REGISTRATION DEPARTMENT WAS ADO PTED AT A SUM OF RS.19.75 LAKHS. BOTH SHRI KIRAN KUMAR AS WELL AS SHRI RAMU JAIN IN THEIR RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2007-08, HAD N OT DECLARED ANY INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS ON THE SA LE OF THE PROPERTY. 6. IN THE COURSE OF SURVEY, THE STATEMENT OF SHRI KIRAN KUMAR AND RAMU JAIN WAS RECORDED. IN THE STATEMENT SO RECORDED, NO QUESTIONS WHATSOEVER WERE PUT REGARDING THE PROPERTY. IN THE FINAL SURVE Y REPORT PREPARED IN THE CASE OF SMT PREETI KUMARI, PROPRIETRIX OF M/S DARSH AN AUTOMOBILES, THE ITO, WARD-2(1), MYSORE HAS OBSERVED AS FOLLOWS; THE MODUS OPERANDI ADOPTED BY THE ASSESSEE FOR SUPPRESSION OF INCOME; THE DIFFERENCE IN STOCK WAS SMALL. THE ASSESSEES HAS NOT OFFERED CAPITAL GAINS ARISING FROM SALE OF LAND JOINTLY OWNED BY HIM AND HIS BROTHER SRI RAMU JAIN, LOCATED WITHIN 8 KMS FROM THE LIMITS OF MYSORE CITY. THE S ALE WAS REGISTERED FOR RS.19,75,000/- RESULTING IN CAPITAL GAINS OF RS.8.78 LAKHSA IN THE HANDS OF THE ASSESSEE U/S 50C OF THE IT ACT, 19161. BASIS WHICH PROMPTED THE AO TO SELECT THE CASE FOR SURVEY; SURVEY IN THIS CASE WAS CARRIED OUT ALONGWITH THE SURVEY U/S 133A IN THE CASED OF SRI JASWANT KUMAR KOTHARI, WHO IS THE BROTHER OF THE ASSESSEE. THE MAIN ITA NOS.274 & 275(B)/2011 4 AIM OF THE SURVEY WAS TO LOOK INTO REAL ESTATE TRANSACTIONS ENTERED INTO BY VARIOUS MEMBERS OF THE FAMILY. (EMPHASIS SUPPLIED) 7. BOTH SHRI KIRAN KUMAR JAIN & SHRI RAMU JAIN, AFT ER THE SURVEY FILED A LETTER DATED NIL IN WHICH THEY SUBMITTED THAT IN TH E ORIGINAL RETURNS OF INCOME FOR THE ASSESSMENT YEAR : 2007-08 THEY DID N OT OFFER SHORT TERM CAPITAL GAIN ON SALE OF THE PROPERTY TO TAX UNDER T HE IMPRESSION THAT THE SAID PROPERTY WAS AN AGRICULTURAL LAND AND NOT A CA PITAL ASSET. THEY HAVE FURTHER MENTIONED THAT THE LAND IS LOCATED WITHIN 8 KMS OF THE MUNICIPAL LIMITS OF THE MYSORE CITY AND THEREFORE, THE CAPITA L GAINS ON SALE OF PROPERTY HAD TO BE OFFERED TO TAX. ACCORDINGLY, TH EY FILED A COMPUTATION OF SHORT TERM CAPITAL GAINS AS FOLLOWS; WORKING OF CAPITAL GAIN: REGISTERED VALUE 19,75,000 LESS: COST OF ACQUISITION 2,17,625 (197500 [phone] ) 17,57,375 RAMU JAIN KIRAN KR JAIN INCOME AS PER RETURN FILED 1,20,167 1,28,925 ADD: CAPITAL GAIN 8,78,688 8,78,688 TOTAL INCOME 9,98,855 10,07,613 INCOME TAX THEREON 2,49,656 2,52,284 ADD: SC 24,965 25,229 2,74,621 2,77,513 ADD: EDUCATION CESS 5,492 5,551 TOTAL TAX RS. 2,80,11 3 2,83,064 8. BOTH SHRI KIRAN KUMAR JAIN & SHRI RAMU JAIN FIL ED REVISED RETURN OF INCOME ON 31-03-2008 IN WHICH THEY OFFERED SHORT TE RM CAPITAL GAINS AS COMPUTED ABOVE TO TAX. IN THE COURSE OF THEIR ASS ESSMENT PROCEEDINGS SHRI ITA NOS.274 & 275(B)/2011 5 KIRAN KUMAR JAIN AND SHRI RAMU JAIN FILED AFFIDAVIT IN WHICH THEY TOOK A STAND THAT SINCE THE ORIGINAL RETURN OF INCOME FILE D BY BOTH THE ASSESSEES WERE NOT FILED WITHIN THE TIME LIMIT PRESCRIBED U/S 139(1) OF THE IT ACT, 1961 NAMELY 31-07-2007, THEY WERE NOT ENTITLED TO FILE A REVISED RETURN. THE REVISED RETURN OF INCOME FILED WAS THEREFORE NON-ES T IN LAW. FURTHER, THEY ALSO TOOK A STAND THAT THE PROVISIONS OF SECTION 50 C OF THE IT ACT, 1961 WERE NOT APPLICABLE, BECAUSE THE AGRICULTURAL LAND PURCH ASED AND SOLD BY THEM WAS NOT HELD BY THEM AS CAPITAL ASSET, BUT AS STOCK IN TRADE OF BUSINESS. CONSEQUENTLY, THE PROVISIONS OF SECTION 50C OF THE ACT, COULD NOT BE APPLIED TO THE TRANSACTION IN QUESTION AND SHORT TERM CAPIT AL AGAIN COMPUTED IN ACCORDANCE WITH THE SAID PROVISIONS. THE ASSESSEE ALSO STATED THAT THE REVISED RETURN IS WITHDRAWN, AS IT WAS FILED UNDER A MISAPPREHENSION. 9. THE AO DID NOT AGREE WITH THE STAND TAKEN BY TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. HE CALLED UPON THE ASSES SEES TO SUBSTANTIATE AS TO WHY THE TRANSACTION OF SALE OF THE PROPERTY IS A BUSINESS TRANSACTION AND NOT A TRANSACTION OF A SALE OF CAPITAL ASSET GIVING RISE TO CAPITAL GAINS. THE ASSESSEES REITERATED THE SUBMISSIONS, AS WERE MADE IN THEIR AFFIDAVIT REFERRED TO IN THE EARLIER PARAGRAPHS. THE AO REJECTED THE CLAIM OF THE ASSESSEE AND BROUGHT TO TAX THE SHORT TERM CAPITAL GAINS DECLARE D IN THE REVISED RETURN OF INCOME FOR THE FOLLOWING REASONS; A) THE ASSESSEE HAS NOT ADDUCED ANY EVENTS WHICH GI VES THE BELIEF THAT HE IS INDEED DOING REAL ESTATE BUSI NESS ITA NOS.274 & 275(B)/2011 6 EXCEPT STATING IN THE AFFIDAVIT THAT IT SHOULD BE T REATED AS BUSINESS TRANSACTION. B) THE TRANSACTION UNDER QUESTION IS AN ISOLATED A ND SOLITARY TRANSACTION FALLING WITHIN THE MUNICIPAL L IMIT THEREBY ACQUIRING THE NATURE OF COMMERCIAL PROPERTY AS AD MITTED BY THE ASSESSEE IN HIS LETTER DATED NIL. C) THAT THE PROPERTY BEING LAND PURCHASED AND SOLD AS A SINGLE UNIT WITHOUT DING ANY ACTIVITY IN THE PROPER TY SO AS TO GIVE AN IMPRESSION THAT IT IS A BUSINESS ASSET. D) THE REVISED RETURN, THOUGH NOT VALID AS CLAIMED BY THE ASSESSEE, WAS FILED VOLUNTARILY BY THE ASSESSEE . THIS CONFIRMS THE CONVICTION THAT THE TRANSACTION IS A C APITAL GAINS BUT NOT A BUSINESS PROPOSITION. E) FILING OF AN AFFIDAVIT WITHDRAWING THE CLAIMS M ADE EARLIER DOES NOT ALTER THE FACTS OF THE CASE. ASSU MING FOR A WHILE THAT THE REVISED RETURN IS IGNORED, BUT NOT A CCEPTED, THE FACTS OF THE CASE THAT THE ASSESSEE HAS PURCHASED T HE LAND AND SOLD THE LAND AS A COMPACT UNIT IS NOT GOING TO CHANGE. EVEN OTHERWISE, THE AO IS NOT PRECLUDED TO GIVE COG NIZANCE TO THE FACTS AVAILABLE WITH THE REVISED RETURN. F) THE CONSIDERATION RECORDED IN THE RECORDS OF TH E SUB- REGISTRAR AND THE STAMP DUTY PAID CLEARLY ESTABLISH ES THE ANOMALY WHICH CONFIRMS THAT THE ASSESSEE INDEED PAI D THE STAMP DUTY ON THE VALUE OF RS.19.75 LAKHS THOUGH TH E PROPERTY WAS REGISTERED FOR RS.3.00 LAKHS ONLY. TH US, SEC.50C IS RIGHTLY INVOKED IN THIS CASE. THEREFORE, THE ASSESSEES CLAIM THAT IT IS A BUSINESS PROPOSITION IS NOT ACCEPTABLE. G) MERE GPA TO A DEVELOPER IS NOT A SUFFICIENT REA SON TO BE CONSIDERED AS A BUSINESS PROPOSITION. H) THE CONDUCT OF THE ASSESSEE DOES NOT ESTABLISH THAT HE HAS PERFORMED ANY ACTIVITIES IN THE LAND TO SHOW THAT HE IS INDEED DOING THE REAL ESTATE BUSINESS. 10. AGGRIEVED BY THE AFORESAID ORDERS, BOTH THE AS SESSEES FILED APPEAL BEFORE THE CIT(A). BOTH THE ASSESSEES TOOK A STAND THAT TO DECIDE THE QUESTION WHETHER THE PROPERTY WAS HELD AS INVESTMEN T OR TRADING ASSET SEVERAL FACTORS HAVE TO BE SEEN NAMELY, USE TO WHIC H THE LAND WAS PUT TO, PERIOD OF HOLDING, THE PURPOSE BEHIND THE PURCHASE. THE ASSESSEES ITA NOS.274 & 275(B)/2011 7 SUBMITTED THAT EVEN A SINGLE PLUNGE IN THE WATERS O F TRADE IS POSSIBLE AND THAT A SINGLE OR ISOLATED TRANSACTION CAN ALSO TO B E REGARDED AS BUSINESS. THE ASSESSEES IN THIS REGARD PLACED RELIANCE ON THE DECISION IN THE CASE OF SHRI G.VENKATASWAMI NAIDU VS CIT, 35 ITR 594 (SC). THE ASSESSEES ALSO POINTED OUT THAT HE PROPERTY PURCHASED WAS A DRY AG RICULTURAL LAND SURROUNDED BY FORMATION OF LAYOUTS AND DEVELOPED IN TO PROMINENT RESIDENTIAL LOCALITY. THE ASSESSEES POINTED OUT TH AT THEIR OWN BROTHER WAS IN REAL ESTATE BUSINESS IN A BIG WAY AND THE ASSESE ES ALSO PLUNGED INTO WATERS OF TRADE IN LAND. THE ASSESSEES DID NOT CON VERT THE DRY LAND INTO WET LAND OR INTENT TO CARRY ANY AGRICULTURAL OPERATION BY MAKING THE LAND ARABLE BY DIGGING BORE WELLS. THERE WAS NO FARMING ACTIVI TY, AS THE ENTIRE AREA WAS TARGETED FOR FORMATION OF LAYOUT, CONVERSION OF LAN D INTO SITES AND SALE OF THE SAME AS BUSINESS VENTURE. EVEN PRIVATE DEVELOPERS AND MUDA WERE DOING SUCH ACTIVITY IN THE VICINITY OF THE PROPERTY. THE ASSESSEES SUBMITTED THEY HAD SWORN TO AN AFFIDAVIT THAT THEIR INTENTION AT T HE TIME OF PURCHASE OF THE PROPERTY WAS TO HOLD IT AS STOCK IN TRADE OF THE BU SINESS AND SELL THEM AT A PROFIT. THE ASSESSEES ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SHRI THIPPAIAH SHETTY(SUPRA) WHEREIN IT WAS HELD THAT THE STATEMENT WITHDRAWN CA NNOT BE MADE USE OF WITHOUT INDEPENDENT MATERIAL FOR MAKING AN ASSESSME NT. 11. IN THE CASE OF SHRI KIRAN KUMAR JAIN, APART FR OM THE ABOVE SUBMISSION, THE ASSESSEE TOOK A STAND THAT NOTICE U /S 143(2) OF THE IT ACT ITA NOS.274 & 275(B)/2011 8 HAD BEEN ISSUED BY THE AO BEYOND A PERIOD OF 12 MON THS FROM THE END OF THE MONTH IN WHICH THE ORIGINAL RETURN OF INCOME WA S FILED AND THEREFORE, THE ORDER OF ASSESSMENT FRAMED BY THE AO HAS TO BE HELD AS INVALID AND ANNULLED. IN THIS REGARD, IT WAS POINTED OUT BY SHRI KIRAN KUMAR JAIN, HE FILED THE ORIGINAL RETURN OF INCOME ON 212-08-2007 WHEREAS THE DUE DATE FOR FILING OF THE RETURN OF INCOME U/S 139(1) WAS ON 31 -07-2007. THE REVISED RETURN WAS FILED ON 31-03-2008. SINCE THE ORIGINA L RETURN FILED WAS BEYOND THE DUE DATE PRESCRIBED U/S 139(1) OF THE IT ACT, 1 961, THE SAME COULD NOT BE REVISED U/S.139(5) OF THE ACT AS LAID DOWN IN TH E SAID PROVISIONS. THEREFORE, THE REVISED RETURN IS NON-EST IN LAW. THEREFORE, THE AO OUGHT TO HAVE ISSUED NOTICE U/S 143(2) OF THE IT ACT, 1961 O N OR BEFORE 31-08-2008. SINCE THE NOTICE U/S 143(2) WAS ISSUED BY THE AO ON LY ON 12-09-2008, IT IS BEYOND THE TIME PRESCRIBED UNDER THE PROVISO TO SEC .143(2) OF THE IT ACT, 1961. THEREFORE, THE ASSESSMENT FRAMED HAS TO BE H ELD TO BE INVALID IN LAW. 12. THE CIT(A) REJECTED THE COMMON CONTENTION RAIS ED BY BOTH THE ASSESSEES THAT THE INCOME ON SALE OF THE LAND WAS A BUSINESS INCOME. HE WAS OF THE VIEW THAT THERE WAS NO EVIDENCE ON RECOR D BROUGHT BY THE ASSESSEES TO SHOW THAT THEY HAD PURCHASED THE LAND WITH AN INTENTION TO DEVELOP AND SELLING IT AS A BUSINESS PROPOSITION. T HE CIT(A) THEREFORE, CONCURRED WITH THE VIEW OF THE AO. ITA NOS.274 & 275(B)/2011 9 13. WITH REGARD TO THE CONTENTION RAISED BY SHRI K IRAN KUMAR JAIN, THAT THE ASSESSMENT FRAMED IN HIS CASE WAS INVALID FOR T HE REASON THAT NOTICE U/S 143(2) OF THE IT ACT, 1961 WAS SERVED AFTER A P ERIOD OF 12 MONTHS AND THEREFORE, THE ASSESSMENT IS INVALID IN LAW. THE C IT(A) HELD AS FOLLOWS; 5.1. I HAVE CONSIDERED THE FACTS OF THE CASE. I F IND THAT THE LAST DATE FOR FILING OF RETURNS FOR ASSESSMENT YEAR 2007- 08 WAS EXTENDED UPTO 29-02-2008 VIDE CBDT ORDER NO.142/34/2007 TPL DATED 14-12-2007. THE ORIGINAL R ETURN FILED BY THE APPELLANT MAY BE CONSIDERED IN TIME, I N VIEW OF THE EXTENDED TIME. THUS, THE REVISED RETURN WOULD A VALID RETURN AND THE 143(2) NOTICE CAN BE HELD TO HAVE BE EN ISSUED IN TIME. I DO NOT AGREE WITH THE APPELLANT T HAT THE ASSESSMENT IS REQUIRED TO BE CANCELLED ON THIS GROU ND. THIS GROUND OF APPEAL IS ALSO DISMISSED. 14. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEES HAVE FILED THE PRESENT THE APPEALS BEFORE THE TRIBUNAL. BEFORE TH E TRIBUNAL BOTH THE ASSESSES HAVE RAISED COMMON GROUND WHICH THEY RAISE D BEFORE THE CIT(A). SHRI KIRAN KUMAR JAIN HAS ALSO RAISED THE ISSUE WIT H REGARD TO NON-SERVICE OF NOTICE U/S 143(2) OF THE IT ACT WITHIN THE TIME LIMIT. BESIDES, THE ABOVE BOTH THE ASSESSEES HAVE FILED AN APPLICATION FOR AD MISSION OF ADDITIONAL GROUND. IN THE ADDITIONAL GROUND BOTH THE ASSESSEE S HAVE TAKEN A STAND THAT BOTH OF THEM HAVE JOINTLY PURCHASED THE AGRICU LTURAL LAND WITH A VIEW TO SELL THE SAME AND MAKE GAINS, AS AN ADVENTURE IN THE NATURE OF TRADE AND THEREFORE, THE ASSESSMENT OUGHT TO HAVE BEEN FR AMED AS AN AOP CONSISTING OF BOTH THE ASSESSEES IN ONE ASSESSMENT. TWO SEPARATE ASSESSMENTS IN THE NAME OF INDIVIDUALS WERE MADE BY THE AO, WAS ITA NOS.274 & 275(B)/2011 10 IMPROPER. BESIDES THE ABOVE, THE LEARNED COUNSEL A LSO MADE SUBMISSIONS BEFORE US THAT THE VALUATION ADOPTED BY THE REGISTE RING AUTHORITIES FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION IS NOT CONCL USIVE AND THAT THE AO ON HIS OWN MOTION OUGHT TO HAVE REFERRED TO THE DVO FOR DETERMINATION OF THE PROPERTY VALUE OF THE PROPERTY. IN SUPPORT OF THE ABOVE CONTENTION, THE ASSESSEES RELIED ON THE DECISION OF THE HONBLE KOL KATA HIGH COURT IN THE CASE OF SUNIL KUMAR AGARWAL VS CIT IN GA NO.3686 OF 2013 ITAT NO.221 OF 2013 DATED 13-03-2014. THE LEARNED COUNSEL FOR THE ASSESSEES BESIDES REITERATING THE SUBMISSIONS, AS MADE BEFORE THE LOW ER AUTHORITIES RELIED ON SEVERAL JUDICIAL PRONOUNCEMENT TO WHICH WE WILL MAK E A REFERENCE AT THE APPROPRIATE PLACE, IF NECESSARY. 15. WITH REGARD TO THE SUBMISSIONS OF SHRI KIRAN K UMAR JAIN THAT THE NOTICE U/S 143(2) OF THE IT ACT, 1961 WAS SERVED BE YOND THE PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETUR N OF INCOME WAS FILED, THE LEARNED COUNSEL FOR THE ASSESSEES DREW OUR ATTE NTION TO THE ORDER U/S 119 OF THE ACT DATED 14-12-2007 ON WHICH THE CIT(A) PLACED RELIANCE TO REJECT THE CLAIM OF SHRI.KIRAN KUMAR, WHICH READS A S FOLLOWS: ORDER U/S 119 OF THE IT ACT, 1961 EXTENSION OF DUE DATE FOR FILING RETURN OF INCOME FOR ALL CATEGORIES OF ASSES SEES IN CERTAIN CASES. ORDER NO.142/34/2007 TPL DATED 14-12-2007 THE CENTRAL BOARD OF DIRECT TAXES, VIDE NOTIFICATI ON S.O.NO.762(E) DATED 14 TH MAY, 2007, FOR ASSESSMENT YEAR 2007-08, SUBSTITUTED TH OLD RETURN FORMS BY NOTIFYI NG EIGHT NEW RETURN FORMS AND NEW SERIES (ITR-1 TO ITR-8). T HE RETURNS OF INCOME, THEREFORE, FILED ON OR AFTER 14 TH MAY, ITA NOS.274 & 275(B)/2011 11 2007REQUIRED TO BE FILED IN THE SPECIFIED FORMS PRE SCRIBED FOR THE ASSESSMENT YEAR 2007-08. HOWEVER, PURSUANCE O F THE INTERIM ORDERS OF THE HONBLE HIGH COURTS OF ALLAHA BAD (LUCKNOW BENCH), RAJASTHAN (JODHPUR BENCH) AND GAUH ATI, ASSESSES RESIDING WITHIN THE JURISDICTION OF THE HO NBLE COURTS ALLOWED TO EXERCISE THE OPTION OF FILING RET URNS IN FORM NO.2D (SARAL) OR ANY OTHER OLD FORMS. IN SOME OTHE R STATES ALSO, ASSESSEES MAY HAVE FILED RETURNS IN FORM NO.2 D OR IN ANY OTHER OLD FORMS. IN SOME OTHER STATES ALSO, ASS ESSES MAY HAVE FILED RETURNS IN FORM 2D (SARAL) OR IN ANY OTHER OLD FORMS UNDER THE MISTAKEN IMPRESSION THAT THEY ARE P ERMITTED TO DO SO. 2. WITH A VIEW TO ENABLE SUCH ASSESSEES TO FILE RE TURNS IN THE SPECIFIED FORMS PRESCRIBED FOR THE ASSESSMEN T YEAR 2007-08, THE CENTRAL BOARD OF DIRECT TAXES, IN EXER CISE OF POWERS CONFERRED U/S 119 OF IT ACT, 1961, HEREBY EX TENDS THE DUE DATE FOR FILING RETURNS OF INCOME FOR ALL C ATEGORIES OF ASSESSES TO 29-02-2008, IF THE ASSESSEE HAS;- I) FILED THE RETURN ON OR AFTER 14 TH MAY, 2007 AND II) FILED THE RETURN IN A FORM OTHER THAN ONE OF TH E FORMS NOTIFIED FOR ASSESSMENT YEAR 2007-08. 16. HIS SUBMISSIONS WAS THAT THE ABOVE CIRCULAR ON WHICH THE CIT(A) PLACED RELIANCE FOR REJECTING THE CONTENTION OF THE ASSESSEES WAS NOT PROPER. IN THIS REGARD, HE DREW OUR ATTENTION TO THE FACT T HAT SHRI KIRAN KUMAR JAIN, HAD FILED THE RETURN OF INCOME FOR THE ASSESS MENT YEAR 2007-08 ON 22-08-2007 IN FORM NO.ITR-4 WHICH IS THE CORRECT FO RM AS PER THE CBDT NOTIFICATION DATED 14-05-2007 FOR ASSESSMENT YEAR 2 007-08, NOTIFYING NEW RETURN OF FORM TO BE USED BY ASSESSEES. HIS SUBMISS ION WAS THAT THE CBDTS ORDER RELIED UPON BY THE CIT(A) EXTENDING TH E TIME FOR FILING OF RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 UPTO 2 9-12-2008 IS APPLICABLE ONLY TO CATEGORIES OF ASSESSES, WHO HAD NOT FILED THE RETURN OF ITA NOS.274 & 275(B)/2011 12 INCOME IN ACCORDANCE WITH NEW FORMS TO BE USED. IN VIEW OF THE FACT THAT THE ASSESSEES HAVE FILED THEIR RETURN OF INCOME IN THE PROPER FORM, THE AFORESAID ORDER OF THE CBDT DATED 14-12-2007 WILL N OT BE APPLICABLE TO THE ASSESSEES AND THEREFORE, THE RETURN FILED BY THE AS SESSEES ON 22-08-2007 HAS ALONE TO BE RECKONED FOR THE PURPOSE OF ISSUING NOTICE U/S 143(2) OF THE IT ACT, 1961. 17. THE LEARNED DR, ON THE OTHER HAND, WHILE RELYI NG ON THE ORDERS OF CIT(A), SUBMITTED THAT THE NOTIFICATION RELIED UPO N BY THE CIT(A) APPLIES TO ALL ASSESSEES INCLUDING THE ASSESSEE SHRI KIRAN KUM AR JAIN. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR VIEW, PARA-2 OF THE CBDT CIRCULAR ORDER DATED 14-12-2007 VERY CLEARLY S AYS THAT THE EXTENSION OF DUE DATE FOR FILING THE RETURN OF INCOME IS APPL ICABLE, IF THE ASSESSEE HAS FILED THE RETURN OF INCOME ON OR AFTER 14-05-2007 A ND FILED THE RETURN IN FORM OTHER THAN THE ONE OF FORM NOTIFYING FOR AS SESSMENT YEAR 2007-08 . IT IS CLEAR FROM THE ORDER OF CBDT, THAT IF AN ASSESSEE HAD FILED THE RETURN OF INCOME IN A FORM NOTIFIED FOR ASSESSM ENT YEAR 2007-08 WHICH SHRI KIRAN KUMAR JAIN, HAD DULY DONE, THE AFORESAID NOTIFICATION EXTENDING THE TIME LIMIT FOR FILING RETURN OF INCOME IS NOT A PPLICABLE. WE ARE OF THE VIEW THAT THE ORIGINAL RETURN FILED BY THE ASSESSES FOR ASSESSMENT YEAR 2007-08 ON 22-08-2007 WAS BELATED RETURN U/S 139(1) OF THE IT ACT, 1961 ITA NOS.274 & 275(B)/2011 13 AND THEREFORE, THE SAID RETURN COULD NOT BE VALIDLY REVISED BY THE ASSESSES U/S 139(5) OF THE IT ACT, 1961. IF THAT BE SO, THE N THE PERIOD FOR ISSUE OF NOTICE U/S 143(2) PROVISO WOULD BE 12 MONTHS FROM 3 1-08-2007. THE NOTICE U/S 143(2) OF THE IT ACT HAD BEEN ISSUED BY THE AO ONLY ON 12-09- 2008 WHICH IS CLEARLY BEYOND THE PERIOD CONTEMPLATE D U/S 143(2) OF THE IT ACT, 1961. THE NOTICE IS ISSUED BEYOND THE PERIO D CONTEMPLATED UNDER THE PROVISO TO SEC.143(2) OF THE IT ACT, 1961. THE ORDER OF ASSESSMENT FRAMED HAS TO BE HELD TO BE BAD IN LAW AND ANNULLED . SECTION 143(2) OF THE INCOME-TAX ACT WHICH MANDATORILY REQUIRES NOTICE TO BE ISSUED FOR MAKING A REGULAR ASSESSMENT ON THE ASSESSEE STIPULATES THA T THE ASSESSING OFFICER MUST NOT ONLY ISSUE BUT ALSO SERVE THE NOTICE ON TH E ASSESSEE BEFORE THE EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WH ICH THE RETURN WAS FILED BY HIM. THE PROVISO TO SECTION 143(2)(II) MAK ES IT OBLIGATORY ON THE ASSESSING OFFICER TO SECURE THAT NO NOTICE IS SERVE D AFTER THE EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETUR N WAS FILED. THE PROVISO IS MANDATORY AND THE TIME-LIMIT STIPULATED CANNOT BE IGNORED NOR EXTENDED BY THE REVENUE OFFICERS. CONSEQUENTLY, ANY ASSESSMENT UNDER SECTION 143(3) MADE BY THE OFFICER AFTER SERVING A NOTICE UNDER SECTION 143(2)(II) SUBSEQUENT TO THE EXPIRY OF 12 MONTHS FR OM THE END OF THE MONTH IN WHICH RETURN WAS FILED, IS LIABLE TO BE DECLARED AS ILLEGAL, UNAUTHORISED BY LAW AND UNSUSTAINABLE. THE MADRAS HIGH COURT HAS HELD IN CIT VS. M. CHELLAPPAN & ANR. (2005) 198 CTR (MAD) 490 : (2006) 281 ITR 444 (MAD) THAT THE ORDER OF ASSESSMENT MADE BY THE INCOME-TAX OFFICER PURSUANT TO A ITA NOS.274 & 275(B)/2011 14 NOTICE UNDER SECTION 143(2) SERVED AFTER THE EXPIRY OF 12 MONTHS AFORESAID, CANNOT BE PERMITTED IN LAW AND THE ORDER OF ASSESSM ENT PASSED AS WELL AS THE ACTION FOR REOPENING OF ASSESSMENT UNDER SECTIO N 147 WERE HELD TO BE UNSUSTAINABLE IN LAW. THE ORDER OF THE TRIBUNAL VAC ATING THE ASSESSMENT MADE WAS UPHELD AS CORRECT WHILE DISMISSING THE APP EAL OF THE REVENUE AS UNTENABLE. THE SPECIAL BENCH OF TRIBUNAL IN RAJ KUM AR CHAWLA VS. ITO (2005) 92 TTJ (DEL)(SB) 1245 : (2005) 94 ITD 1 (DEL )(SB) HAS HELD THAT NOTICE ISSUED AFTER THE BAR OF LIMITATION BEING FAT AL TO THE ACTION FOR ASSESSMENT/REASSESSMENT AND HELD THAT THE NOTICE NO T HAVING BEEN SERVED WITHIN 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED, INCLUDING A RETURN FILED UNDER SECTION 148 READ WIT H SECTION 139 AFTER RECEIPT OF REASSESSMENT NOTICE, THE ACTION FOR ASSE SSMENT/REASSESSMENT IS TOTALLY INVALID AND LIABLE TO BE HELD AS UNSUSTAINA BLE IN LAW. THE SPECIAL BENCH OF TRIBUNAL IN MOTOROLA INC. VS. DY. CIT (200 5) 96 TTJ (DEL)(SB) 1 : (2005) 95 ITD 269 (DEL)(SB) HAS ALSO HELD THAT THE REVENUE CANNOT PROCEED TO MAKE A REASSESSMENT AGAINST THE ASSESSEE WHEREVE R NOTICE UNDER SECTION 143(2) HAD NOT BEEN ISSUED AND SERVED WITHI N 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED BY T HE ASSESSEE PURSUANT TO NOTICE UNDER SECTION 148 AS THE TIME-LIMIT FOR ISSU E AND SERVICE OF NOTICE CANNOT BE DISREGARDED NOR CAN THE REVENUE BE ALLOWE D TO TAKE ADVANTAGE OF ITS OWN WRONG/NEGLIGENCE. THE NOTICE UNDER SECTION 142(1)(I) HAVING BEEN ISSUED AND SERVED AFTER THE END OF THE RELEVANT ASS ESSMENT YEAR, THE PROCEEDINGS FOR ASSESSMENT MADE IN PURSUANCE THEREO F WERE HELD ITA NOS.274 & 275(B)/2011 15 UNSUSTAINABLE. FOLLOWING THE DECISIONS REFERRED TO ABOVE, WE HOLD THAT THE ORDER OF ASSESSMENT PASSED IN THE CASE OF MR.KIRAN KUMAR JAIN IS NOT VALID IN LAW AND THE SAME IS ANNULLED. THE APPEAL OF SH RI KIRAN KUMAR JAIN, ON THIS ISSUE IN ITA NO.274(B)/2011 IS ACCORDINGLY ACC EPTED. 19. WITH REGARD TO THE CONTENTION OF SHRI RAMU JAI N AND KIRAN KUMAR JAIN, THAT THE SALE OF THE PROPERTY WAS AN ADVENTUR E IN THE NATURE OF TRADE. THE QUESTION NECESSARILY HAS TO BE DECIDED KEEPING IN VIEW, THE PRINCIPALS LAID DOWN IN SEVERAL DECIDED CASES. THE PRINCIPAL CASE AMONG THEM BEING THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF SHRI VENKATASWAMI NAIDU (SUPRA). WE HAVE TO CLARIFY HER E THAT IF THE INCOME FROM SALE OF THE PROPERTY IS HELD TO BE AN INCOME A RISING OUT OF BUSINESS VENTURE THEN PROVISIONS OF SEC.50C OF THE IT ACT, 1 961 WOULD NOT BE APPLICABLE AND THEREFORE, INCOME FROM THE SALE OF T HE PROPERTY HAVE TO BE COMPUTED BY TAKING THE PURCHASE PRICE AND SALE PRIC E AS REFLECTED IN THE REGISTERED DOCUMENTS AND THE STAMP DUTY VALUATION O F THE PROPERTY AT THE TIME OF SALE HAS TO BE IGNORED. WITH THIS BACKGROU ND, IN MIND, LET US NOW ANALYZE THE PRINCIPLES LAID DOWN IN VARIOUS DECIDED CASES ON THE QUESTION WHEN A SINGLE OR AN ISOLATED TRANSACTION CAN BE REG ARDED AN ADVENTURE OF THE NATURE OF TRADE. 20. THE DEFINITION OF BUSINESS INCLUDES WITHIN ITS SCOPE SPECIFICALLY AND EXPLICITLY EVERY ADVENTURE IN THE NATURE OF TRADE, COMMERCE OR ITA NOS.274 & 275(B)/2011 16 MANUFACTURE. EVEN AN ISOLATED TRANSACTION MAY CONST ITUTE AN ADVENTURE IN THE NATURE OF TRADE AND WOULD BE LIABLE TO BE CONST RUED AS BUSINESS CARRIED ON. TO CONSTITUTE BUSINESS OR AN ADVENTURE IN THE N ATURE OF TRADE IT IS NOT, THEREFORE, ESSENTIAL THAT IN EVERY CASE THERE MUST BE A SERIES OF TRANSACTIONS ALL MOTIVATED BY COMMERCIAL AND PROFIT MAKING CONSI DERATIONS NOR IS IT ESSENTIAL THAT THE TRANSACTIONS MUST FRUCTIFY AND M ATERIALISE IN EVERY CASE INTO A FULL FLEDGED BUSINESS THROUGH THE RUNNING OF AN ESTABLISHMENT FOR CARRYING ON BUSINESS OR INDUSTRY. IN SAROJ KUMAR M AZUMDAR VS. CIT 37 ITR 242 (SC) THE SUPREME COURT BY MAJORITY HELD THA T THE SOLITARY TRANSACTION OF PURCHASE AND SALE OF LAND COULD NOT, ON FACTS, BE REGARDED AS AN ADVENTURE IN THE NATURE OF TRADE. A REFERENCE TO THIS DECISION WOULD SHOW THAT AFTER ANALYSING A NUMBER OF ENGLISH CASES AND THE PRINCIPLES LAID DOWN THEREIN AS ALSO THE DECISIONS OF THE SUPREME C OURT RENDERED EARLIER, A VIEW HAS BEEN TAKEN THAT THE DECISION OF THE TRIB UNAL TO THE EFFECT THAT LAND WAS PURCHASED BY THE ASSESSEE WITH THE SOLE IN TENTION OF SELLING IT LATER FOR A GAIN WAS NOT SUPPORTED BY ANY EVIDENCE AND, THEREFORE, THE DECISION OF THE TRIBUNAL WAS LIABLE TO BE REVERSED. THE LINE OF DEMARCATION BETWEEN THE CASES OF ISOLATED TRANSACTIONS OF PURCH ASE AND SALE BEING AN ADVENTURE IN THE NATURE OF TRADE OR NOT WAS ALSO HE LD TO BE VERY THIN AND, THEREFORE, IN EVERY CASE, THE FACTS OF THE CASE MUS T BE GONE INTO IN DEPTH TO ARRIVE AT A DECISION ON THE LINES OF THE PRINCIPLES OF LAW ENUNCIATED BY THE COURTS. IN CONTRAST, THE HONBLE SUPREME COURT IN R AJA J.RAMESHWAR RAO VS. CIT 42 ITR 179 (SC) HELD, ON FACTS, THAT THE PU RCHASE OF LAND AND RESALE ITA NOS.274 & 275(B)/2011 17 THEREOF SUBSEQUENTLY AS BUILDING SITES WOULD CLEARL Y CONSTITUTE AN ADVENTURE IN THE NATURE OF TRADE. SOME OF THE RELE VANT CIRCUMSTANCES TO BE SEEN IN THIS REGARD WOULD BE THE CIRCUMSTANCES THAT PROMPTED SALE OF LAND. THERE MAY BE SOME EXPLANATION, SUCH AS A SUDDEN EME RGENCY OR OPPORTUNITY CALLING FOR READY MONEY, THAT NEGATIVES THE IDEA THAT ANY PLAN OF DEALING PROMPTED THE ORIGINAL PURCHASE. THERE A RE CASES IN WHICH THE PURPOSE OF THE TRANSACTION OF PURCHASE AND SALE IS CLEARLY DISCERNIBLE. MOTIVE IS NEVER IRRELEVANT IN ANY OF THESE CASES. W HAT IS DESIRABLE IS THAT IT SHOULD BE REALISED CLEARLY; THAT IT CAN BE INFERRED FROM SURROUNDING CIRCUMSTANCES, IN THE ABSENCE OF DIRECT EVIDENCE OF THE SELLER'S INTENTIONS, AND EVEN, IF NECESSARY, IN THE FACE OF HIS OWN EVID ENCE. 21. IN THE PRESENT CASE, AS WE HAVE ALREADY SEEN T HE ASSESSEE HAS BROUGHT TO THE NOTICE OF CIT(A)SEVERAL CIRCUMSTANCES WHICH CAN LEAD TO AN INFERENCE THAT THE PROPERTY IN QUESTION WOULD NOT HAVE BEEN P URCHASED TO BE HELD AS A CAPITAL ASSET. MOREOVER, THE ASSESSEE HAS FILE D AN AFFIDAVIT IN WHICH HE HAS AFFIRMED THAT HIS INTENTION AT THE TIME OF PURC HASE OF THE PROPERTY WAS TO BE HELD AS STOCK IN TRADE OF BUSINESS AND NOT AS A CAPITAL ASSET. WE HAVE ALSO IN THE COURSE OF HEARING CALLED UPON THE ASSESSEE TO SHOW THE TREATMENT IN THE BOOKS OF ACCOUNTS ADOPTED BY THE A SSESSEE. IT TRANSPIRED THAT THE ASSESSEE DOES NOT PREPARE A BALANCE SHEET FROM WHICH IT WOULD BE ASCERTAINED AS TO THE TREATMENT GIVEN BY THE ASSESS EE IN ITS BOOKS OF ACCOUNTS WITH REFERENCE TO THE PROPERTY. IN THIS STATE OF AFFAIRS, WE HAVE TO ITA NOS.274 & 275(B)/2011 18 ASCERTAIN THE INTENTION OF THE ASSESSEE AT THE TIME OF ACQUISITION OF PROPERTY AND THEREAFTER. 22. THE FACTS AS STATED BY THE ASSESSEE BEFORE THE CIT(A) ARE NOT DISPUTED BY THE REVENUE. FURTHER, IT IS ALSO SEEN FROM THE FINAL SURVEY REPORT IN THE CASE OF SMT PREETI KUMARI, OF M/S DARSHAN AUTOMOBIL ES THAT THE PURPOSE OF THE SURVEY WAS TO LOOK INTO THE REAL ESTATE TRAN SACTION ENTERED INTO BY VARIOUS PERSONS OF THE FAMILY. THIS CLEARLY CORROBO RATES THE STAND OF THE ASSESSEES THAT THEIR OWN BROTHERS WERE IN REAL ESTA TE BUSINESS AND THE ASSESSEE ALSO WANTED TO VENTURE INTO REAL ESTATE BU SINESS. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE PLEA RAISED BY THE ASSESSEE IN THIS REGARD DESERVES TO BE ACCEP TED. IN THIS REGARD, WE MAY ALSO OBSERVE THAT THE FILING OF THE REVISED RET URN OF INCOME CANNOT BE THE BASIS TO HOLD THAT THE GAIN ON SALE OF THE PROP ERTY HAS TO BE TREATED ONLY AS CAPITAL GAINS. IN THIS REGARD, WE ARE ALSO OF T HE VIEW THAT THE REVISED RETURN FILED BY BOTH THE ASSESSEES WAS NOT VALID U/ S 139(1) OF THE IT ACT, 1961. AS BOTH THE ASSESSEES HAD FILED THEIR INCOM E FOR THE ASSESSMENT YEAR 2007-08 BEYOND 31-07-2008 AND HAD FILED THEIR RETURN IN THE PROPER FORM ITR-4 APPLICABLE FOR ASSESSMENT YEAR 2007-08. THEREFORE, THE CBDTS ORDER DATED 14-12-2007 CANNOT COME TO THE RESCUE OF THE REVENUE TO TREAT THE ORIGINAL RETURNS FILED BY THE ASSESSEES AS VALI D. IN THIS REGARD, WE HAVE ALSO HELD IN THE CASE OF SHRI KIRAN KUMAR JAIN THA T THE CBDTS ORDER DATED 14-12-2007 WILL NOT BE APPLICABLE TO SHRI KIR AN KUMAR JAIN AND TO ITA NOS.274 & 275(B)/2011 19 THIS ASSESSEEE SHRI RAMU JAIN, AS THE FACTS IN THE CASE OF SHRI RAMU JAIN ARE ALSO IDENTICAL. FOR THE REASONS STATED ABOVE, W E ACCEPT THE CLAIM OF THE ASSESSEES AND HOLD THAT THE GAIN ON SALE OF PROPERT Y HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. CONSEQUENT LY, PROVISIONS OF SEC.50C WILL NOT BE ATTRACTED. WE HOLD AND DIRECT ACCORDINGLY. 23. IN VIEW OF THE ABOVE CONCLUSIONS, WE ARE OF TH E VIEW THAT THE REFERENCE TO DVO AND ADMISSION OF THE ADDITIONAL GROUND AND A DJUDICATION OF THE OTHER GROUND AND ADDITIONAL GROUND IS NOT NECESSARY , ACCORDINGLY, THEY ARE DISMISSED. 24. IN THE RESULT, BOTH THE APPEALS FILED BY THE A SSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 14 TH AUGUST, 2014. SD/- SD/- (RAJENDRA ) (N.V.VASUDEVAN ) ACCOUNTANT MEMBER JUDICAL MEMBER BANGALORE: D A T E D : 14/8/2014. ITA NOS.274 & 275(B)/2011 20 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE