Deputy Commissioner of Income-tax, V. Pawan R. Wadhwani, Pune

ITA 292/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7072 (ITAT-PUNE)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Capital asset; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! , $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURV EDI, AM . / ITA NO.292/PUN/2014 & & / ASSESSMENT YEAR : 2007-08 THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 8, PUNE . / APPELLANT VS. PAWAN R. WADHWANI, PLOT NO.156, NEAR KALEWADI BRIDGE, PIMPRI, PUNE - 411017 . RESPONDENT PAN: AAHPW5645C / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : S/SHRI NIKHIL PATHAK AND DEEPAK SHARMA DATE OF HEARING : 30.01.2017 / DATE OF PRONOUNCEMENT: 15.02.2017 / ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-V, PUNE, DATED 22.11.2013 RELATING TO ASSESSMENT YEAR 2007-0 8 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.292/PUN/2014 PAWAN R. WADHWANI 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO TREAT T HE TRANSACTION OF SALE OF PLOTS AS LONG TERM CAPITAL GAIN AS AGAINST 'BUSINESS INCOME', WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE WAS IN THE BUSINESS OF EARNING BROKERAGE AND COMMISSION ON SAL E OF PROPERTIES? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO TREA T THE TRANSACTION OF SALE OF PLOTS AS LONG TERM CAPITAL GAIN, WHEN THE A O HAS RIGHTLY HELD THAT THE PROFITS ARISING OUT OF SALE OF SAID P ROPERTIES AS RECEIPTS ARISING OUT OF ADVENTURE IN THE NATURE OF TRADE ALB EIT SINGLE TRANSACTION AND TAXABLE AS INCOME UNDER THE HEAD PR OFIT AND GAINS OF BUSINESS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO TREA T THE TRANSACTION OF SALE OF PLOTS AS LONG TERM CAPITAL GAIN, WHEN THE A O WHEN THE ASSESSEE HAS NOT FILED ANY WEALTH TAX RETURNS UP TO A.Y. 2007-08 CLAIMING THE SAID PROPERTIES AS CAPITAL ASSETS. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS NOT ERRED IN APPRECIATING THE FACT THAT THE DECISIONS OF SUPREME COURT IN THE CASES OF CIT VS. PRABHU DAYAL 82 ITR 804 AND SAROJ KUMAR MAZUMDAR VS CIT 37 ITR 242, IS SQUA RELY APPLICABLE TO THE CASE OF ASSESSEE? 3. THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST TREATMENT OF TRANSACTION OF SALE OF PLOTS WHETHER T O BE ASSESSED AS LONG TERM CAPITAL GAINS OR BUSINESS INCOME. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BROKERAGE AND COMMISSION IN RESPECT OF SALE OF PLOTS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ALSO DECLARED INCOME FROM CAPITAL GAINS. THE ASSESSEE HAD SHOWN INCOME FROM SHORT TE RM CAPITAL GAINS ON TRANSFER OF DEVELOPMENT RIGHTS OF RS.15 LAKHS. FUR THER, THE ASSESSEE HAD SHOWN INCOME FROM LONG TERM CAPITAL GAINS ON SALE O F ONE PLOT AT PIMPRI AND THE SECOND PLOT AT CHIKHALI. THE ASSESSING OFFICER ACCEPTED THE DECLARATION OF SHORT TERM CAPITAL GAINS SINCE THE RATE OF SHORT TE RM CAPITAL GAINS WAS THE SAME AS BUSINESS INCOME. AS FAR AS THE LONG TERM CAPITA L GAINS DECLARED BY THE ASSESSEE WAS CONCERNED, THE ASSESSING OFFICER OBSER VED THAT SINCE THE ITA NO.292/PUN/2014 PAWAN R. WADHWANI 3 ASSESSEES LINE OF BUSINESS WAS EARNING BROKERAGE A ND COMMISSION ON SALE OF PROPERTY, THE LONG TERM CAPITAL GAINS ON SALE OF TH E SAID PROPERTY SHOULD BE ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. ANOTH ER ISSUE RAISED BY THE ASSESSING OFFICER WAS THAT WHERE THE SAID ASSETS WE RE NOT DECLARED BY THE ASSESSEE AS CAPITAL ASSETS AND NO WEALTH TAX RETURN WAS FILED, THE TRANSACTION UNDERTAKEN BY THE ASSESSEE WAS AN ADVENTURE IN THE NATURE OF TRADE AND WAS TO BE ASSESSED AS BUSINESS INCOME. 5. THE CIT(A) WHILE DECIDING THE ISSUE OBSERVED THA T BEFORE TREATING THE SALE OF PROPERTY AS LONG TERM CAPITAL GAINS, THE BA SIC FACT WHICH HAS TO BE SEEN WAS THE INTENTION OF ASSESSEE WHILE PURCHASING THE LAND. THE ASSESSEE HAD PURCHASED THE SAID PROPERTY IN THE YEARS 1997 AND 1 999 RESPECTIVELY AND THE PLOT OF LAND AT VASTU UDYOG, PIMPRI WAS REGISTERED IN THE NAME OF ASSESSEE AND EVEN STAMP DUTY WAS PAID ON THE SAME. SINCE THE AS SESSEE HAD KEPT THE SAID PLOTS OF LAND FOR MORE THAN 7-8 YEARS AND HAD ALSO GOT THE PROPERTY TRANSFERRED IN HIS NAME AND PAID STAMP DUTIES, THE CIT(A) HELD THAT THE SAME PROVES THAT BOTH THE PLOTS WERE PURCHASED WITH AN INTENTION TO HOLD THEM AS CAPITAL ASSETS AND NOT AS STOCK IN TRADE. FURTHER, THE CIT(A) NOT ED THAT FROM ASSESSMENT YEARS 2001-02 TO 2006-07, THE ASSESSEE HAD NOT SHOW N ANY INCOME IN RESPECT OF TRANSFER OF ANY KIND OF PROPERTY, THOUGH HE WAS EARNING BROKERAGE AND COMMISSION INCOME IN RESPECT OF TRANSFER OF SAID PR OPERTIES. THE CIT(A) HELD THE SAME TO BE CAPITAL ASSETS AND DIRECTED THE ASSE SSING OFFICER TO ASSESS THE INCOME UNDER THE HEAD INCOME FROM LONG TERM CAPITA L GAINS. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CI T(A) AND HAS POINTED OUT THAT WHERE THE MAIN AND ONLY BUSINESS OF ASSESS EE WAS PURCHASING AND SELLING OF LAND AND RECEIVING BROKERAGE AND COMMISS ION, THE TWO ASSETS SOLD BY ITA NO.292/PUN/2014 PAWAN R. WADHWANI 4 THE ASSESSEE WERE ADVENTURE IN THE NATURE OF TRADE, THOUGH IT WAS SINGLE TRANSACTION AND WHERE THE ASSESSEE HAS FAILED TO FU RNISH ANY WEALTH TAX RETURNS, THE SAID PLOTS COULD NOT BE TREATED AS CAP ITAL ASSETS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE STATEMENT OF FACTS FILED ALONG WITH MEMO OF APPEAL AND THE OR DER OF ASSESSING OFFICER. 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE PLACING RELIANCE ON THE ORDER OF CIT(A) POINTED OUT THAT THE PLOTS W ERE PURCHASED IN FINANCIAL YEARS 1996-97 AND 1999-2000 AND WERE SOLD DURING TH E YEAR UNDER CONSIDERATION AND THE INCOME WAS DECLARED UNDER THE HEAD LONG TERM CAPITAL GAINS. IN RESPECT OF GAIN ARISING ON SALE OF TDS, THE SAME WAS OFFERED AS SHORT TERM CAPITAL GAINS. HE FURTHER POINTED OUT T HAT THE SAID PLOTS WERE HELD FOR MORE THAN 7-8 YEARS AND HENCE, THE INCOME ARISING T HEREFROM WAS DECLARED AS LONG TERM CAPITAL GAINS. THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT FROM FINANCIAL YEAR 2004- 05, THE ASSESSEE HAS MADE CERTAIN OTHER INVESTMENTS WHICH ASSETS WERE TREATED AS STOCK IN TRADE AND INCOME FROM THE SAID TRANSACTIONS WAS TREATED AS B USINESS INCOME, BECAUSE OF SHORT PERIOD OF HOLDING. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE ADMITTEDLY, WAS ENGAGED IN EARNING INCOME FROM BROKERAGE AND COMMISSION ON SALE OF PROPERTIES. THE INCOME EARNE D BY THE ASSESSEE WAS FOR FACILITATING THE TRANSACTIONS BETWEEN TWO PARTIES, WHEREIN HE EARNS ONLY HIS BROKERAGE AND COMMISSION. HE WAS NOT ENGAGED IN PU RCHASE AND SALE OF PROPERTIES FOR THE YEAR UNDER CONSIDERATION. HOWEV ER, THE ASSESSEE HAD MADE INVESTMENT IN PURCHASE OF PLOT AT VASTU UDYOG, PIMP RI IN FINANCIAL YEAR 1999- 2000 AND PLOT AT CHIKHALI IN FINANCIAL YEAR 1996-97 . BOTH THESE PLOTS WERE HELD ITA NO.292/PUN/2014 PAWAN R. WADHWANI 5 BY THE ASSESSEE FOR THE SLATED PERIOD AND COULD BE SOLD IN 2007-08 I.E. THE YEAR UNDER APPEAL. THE CLAIM OF ASSESSEE WAS THAT IT HA D PURCHASED THE PLOTS AND HAD ALSO GOT THE SAME REGISTERED IN HIS NAME AND WE RE HOLDING FOR LONG PERIOD OF TIME FOR APPRECIATION AND HAD SOLD THE SAME IN T HE YEAR UNDER APPEAL, THE GAIN ARISING THEREFROM, WHERE THE ASSESSEE HAD BEEN HOLDING THE PROPERTY AS CAPITAL ASSET IS TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAINS. WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN HOLDING THE SAME TO BE INCOME FROM BUSINESS. THE INTENTION AT THE TIME OF PURCHA SE OF ASSET IS TO BE LOOKED INTO TO DETERMINE WHETHER THE ASSET HELD BY THE ASS ESSEE IS CAPITAL ASSET OR BUSINESS ASSET. IN THE FACTS OF THE ASSESSEE, WHER E THE ASSESSEE WAS NOT INDULGING IN REGULAR SALE AND PURCHASE OF PROPERTY, THE TRANSACTION CANNOT BE HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE AND WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN THIS REGARD. THE ASSESSEE HIMSELF HAS POINTED OUT THAT FOR THE TRANSACTION WHERE THE ASSETS WERE HELD FOR SHORTER PERIOD, THE SAME WERE TREATED AS STOCK IN TRADE AND THE GAIN ARISING THEREFROM WAS OFFERED AS BUSINESS INCOME IN SUCCEEDING YEARS. WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE . 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 15 TH DAY OF FEBRUARY, 2017. SD/- SD/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 15 TH FEBRUARY, 2017 . GCVSR ITA NO.292/PUN/2014 PAWAN R. WADHWANI 6 ( )*+ ,+ / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; ' () THE CIT(A)-V, PUNE; ' / THE CIT-V, PUNE; * --., ., / DR A, ITAT, PUNE; 3 / GUARD FILE. / BY ORDER, * - // TRUE COPY // / ASSISTANT REGISTRAR, . , / ITAT, PUNE