Appeal details
Counselvise Citation
[2017] 126 COUNSELVISE.COM (IT) 9602 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 4 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-09-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
24-07-2017
Assessment Year
2008-2009
Appeal Filed On
17-04-2013
Judgement Text
1 ITA NO.2951/MUM/2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.2951/MUM/2013 (ASSESSMENT YEAR 2008-09) SHRI KUMAR U AILANI GROUND FLOOR, SACHDEV COMPLEX, NEAR NEW TELEPHONE EXCHANGE, GOAL MAIDAN, ULHASNAGAR 421 001 PAN : ACKPA3312R VS COMMISSIONER OF INCOME-TAX-III, THANE APPELLANT RESPONDENT APPELLANT BY SHRI ANUJ KISNADWALA RESPONDENT BY SHRI R.P. MEENA DATE OF HEARING 24-07-2017 DATE OF PRONOUNCEMENT 13-09-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-III, THANE PASSED U/S 26 3 OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF HIRING OF CARS AND DERIVES INCOM E FROM BUSINESS AND ALSO INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SO URCES. HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 31-03-2009 DECLARING 2 ITA NO.2951/MUM/2013 TOTAL INCOME AT RS.23,63,450. THE ASSESSMENT WAS C OMPLETED U/S 143(3) ON 27-12-2010 DETERMINING TOTAL INCOME AT RS.23,90,735 INTERALIA MAKING ADDITIONS TOWARDS RE-WORKING OF LONG TERM CAPITAL G AIN DECLARED BY THE ASSESSEE FROM SALE OF PROPERTY. 3. THEREAFTER, THE COMMISSIONER OF INCOME-TAX, THANE I SSUED A SHOW CAUSE NOTICE U/S 263 OF THE INCOME-TAX ACT, 1961 DATED 20 -11-2012 AND ASKED THE ASSESSEE AS TO WHY ASSESSMENT ORDER PASSED BY THE A O SHALL NOT BE REVISED U/S 263 OF THE INCOME-TAX ACT, 1961 FOR THE REASONS DIS CUSSED IN THE SHOW CAUSE NOTICE. THE CIT PROPOSED TO REVISE THE ASSESSMENT ORDER ON THE GROUND THAT THE AO HAS NOT CARRIED OUT REQUIRED ENQUIRIES IN RE SPECT OF INCOME DECLARED BY THE ASSESSEE TOWARDS SALE OF PROPERTY UNDER THE HEA D INCOME FROM LONG TERM CAPITAL GAIN (LTCG) AS THE ASSESSEE HAS HELD THE PR OPERTY AS CAPITAL ASSET BUT NOT AS STOCK IN TRADE. THE AO, WITHOUT EXAMINING T HE ISSUE OF TAXABILITY OF SURPLUS AROSE FROM SALE OF PROPERTY UNDER APPROPRIA TE HEAD OF INCOME, HAS MERELY ACCEPTED THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS WHICH CAUSED PREJUDICE TO THE INTERE ST OF THE REVENUE AND HENCE HE OPINED THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE, VID E HIS LETTER DATED 10- 12-2010 SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE AO NEITHER 3 ITA NO.2951/MUM/2013 ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE AS THE ISSUE OF SALE OF THE PROPERTY HAS BEEN SUBJECT MATTER OF VERIFICATIO N BY THE AO WHICH IS EVIDENT FROM THE FACT THAT THE AO HAS DISCUSSED THE ISSUE I N THE BODY OF THE ASSESSMENT ORDER AND ALSO RE-WORKED THE PROFIT DERI VED FROM SALE OF PROPERTY. THE ASSESSEE FURTHER SUBMITTED THAT THE SHOPS IN QU ESTION ARE LOCATED IN BUILDING WHICH WAS CONSTRUCTED FOR THE PURPOSE OF R UNNING A HOTEL. HOWEVER, BECAUSE OF CERTAIN REASONS, THE SAME HAS BEEN SOLD. THEREFORE, THE PROFIT AROSE FROM SUCH SALE IS RIGHTLY ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND NOT INCOME FROM SALE OF PROPERTY. THE FACT HAS BEEN EXAMINED BY THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND HE HAS TA KEN A PLAUSIBLE VIEW. THEREFORE, THE CIT HAS NO JURISDICTION TO REVISE TH E ASSESSMENT ORDER ON THE SAME ISSUE ON WHICH HE AO HAS CONDUCTED NECESSARY E NQUIRY AND APPLIED HIS MIND. THE ASSESSEE FURTHER CONTENDED THAT THE RENT AL INCOME FROM THE IMPUGNED PROPERTY HAS BEEN TREATED AS BUSINESS INCO ME FOR THE ASSESSMENT YEAR 2006-07 WHICH WAS ACCEPTED BY THE DEPARTMENT. HOWEVER, FOR THE ASSESSMENT YEAR 2007-08, THE SAME HAS BEEN TREATED AS INCOME FROM HOUSE PROPERTY IN THE LIGHT OF SUPREME COURT JUDGEMENT I N THE CASE OF SHAMBU INVESTMENTS PVT LTD VS CIT 263 ITR 143 (SC). THERE FORE, MERE DECLARATION OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN ONE PARTICULAR YEAR CANNOT BE THE BASIS FOR TREATING THE ASSET AS CAPIT AL ASSET FOR THE PURPOSE OF 4 ITA NO.2951/MUM/2013 DETERMINATION OF INCOME ON SALE OF HOUSE PROPERTY. 5. THE CIT, AFTER CONSIDERING THE ASSESSMENT ORDER PAS SED BY THE AO HELD THE ASSESSMENT ORDER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE AO HAS FAILED TO APPRECIATE THE FACTS IN THE RIGHT PERSPECTIVE IN THE LIGHT OF THE CLEAR PROVISIONS OF THE ACT. T HE CIT FURTHER OBSERVED THAT THE ASSESSEE HIMSELF HAS ADMITTED INCOME FROM THE IMPUG NED PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH CLEARLY SHOW S THAT THE ASSESSEE HAS TREATED THE SAID PROPERTY AS HIS CAPITAL ASSET. TH E AO, IGNORING ALL THE FACTS SIMPLY ACCEPTED INCOME DECLARED BY THE ASSESSEE FRO M SALE OF PROPERTY UNDER THE HEAD INCOME FROM BUSINESS WHICH CAUSED PREJUD ICE TO THE INTEREST OF THE REVENUE. THE AO BEING A QUASI JUDICIAL AUTHORITY I S EXPECTED TO EXERCISE HIS POWERS IN A JUDICIAL MANNER TO TAX A PARTICULAR INC OME UNDER APPROPRIATE HEAD OF INCOME; HOWEVER, THE AO HAS FAILED TO BRING TO T AX THE SAID INCOME UNDER APPROPRIATE HEAD OF INCOME, THEREFORE, HE OPINED TH AT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. THE CIT FURTHER OBSERVED THAT THE AO HAS COMMITTED ERROR IN NOT APPLYING APPROPRIATE HEAD OF INCOME AND NOT APPLYIN G THE PROVISIONS OF SECTION 50C EVEN THOUGH THE SALE CONSIDERATION SHOWN BY THE ASSESSEE IS LESS THAN THE GUIDANCE VALUE PRESCRIBED FOR THE PURPOSE OF PAYMEN T OF STAMP DUTY AS PER THE PROVISIONS OF SECTION 50C OF THE ACT. THE ASSE SSEE OUGHT TO HAVE 5 ITA NO.2951/MUM/2013 CONSIDERED GUIDANCE VALUE FOR THE PURPOSE OF COMPUT ATION OF INCOME. EVEN THOUGH THE ASSESSEE HAS NOT TAKEN THE PROPER CONSID ERATION FOR COMPUTATION OF INCOME, THE AO HAS NOT VERIFIED THE ISSUE AND AL SO NOT APPLIED HIS MIND WHICH CAUSED PREJUDICE TO THE INTEREST OF THE REVE NUE. WITH THESE OBSERVATIONS, HE SET ASIDE THE ASSESSMENT ORDER PAS SED BY THE AO AND DIRECTED HIM TO REDO THE ASSESSMENT DENOVO, AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT, THE ASSES SEE IS IN APPEAL BEFORE US. 6. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE CIT E RRED IN INVOKING JURISDICTION U/S 263 TO REVISE THE ASSESSMENT ORDER BASED ON THE PROPOSAL SENT BY THE AO. THE CIT HAS TO INDEPENDENTLY EXAMINE TH E RECORD AND APPLY HIS MIND BEFORE BEING TAKEN UP THE CASE FOR REVISION. SINCE THE CIT HAS REVISED THE ASSESSMENT AS PER THE PROPOSAL SUBMITTED BY THE AO, THE REVISIONARY PROCEEDINGS ARE INVALID. THE LD.AR FURTHER SUBMITT ED THAT THE ASSESSMENT ORDER PASSED BY THE AO IS NEITHER ERRONEOUS NOR PRE JUDICIAL TO THE INTEREST OF THE REVENUE AS THE ISSUE OF TAXATION ON SALE OF PRO PERTY HAS BEEN EXAMINED BY THE AO IN THE ASSESSMENT PROCEEDINGS AND AFTER APPL ICATION OF MIND HAS TAKEN ONE OF THE POSSIBLE VIEWS, THEREFORE, THE SAME CANN OT BE TERMED AS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD.AR FURTHER SUBMITTED THAT ONCE THE ISSUES ON WHICH THE CIT REV ISED THE ASSESSMENT ORDER WAS SUBJECT MATTER OF VERIFICATION BY AO IN THE ASS ESSMENT PROCEEDINGS, THE 6 ITA NO.2951/MUM/2013 SAME CANNOT BE REVISED BY HOLDING THAT THE ENQUIRIE S CONDUCTED BY THE AO ARE INSUFFICIENT OR INADEQUATE. IN SUPPORT OF HIS ARGU MENTS, HE RELIED UPON THE FOLLOWING JUDICIAL PRECEDENTS:- 1. CIT VS NIRAV MODI [390 ITR 292 (BOM)] 2. SLP DISMISSED BY THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS NIRAV MODI [389 ITR (ST) 42] 3. CIT VS GABRIEL INDIA LTD [203 ITR 108 (BOM)] 4. CIT VS SUNBEAM AUTO [227 CTR 133 (DEL)] 5. DIT VS JYOTI FOUNDATION [357 ITR 388 (DEL)] 6. CIT VS HERO AUTO LTD [343 ITR 342 (DEL)] 7. CIT VS VIKAS POLYMERS [341 ITR 537 (DEL)] 8. CIT VS ANIL KUMAR SHARMA [335 ITR 83 (DEL)] 9. B.S. SANGWAN VS ITO [67 SOT 447 (DEL)] 10. NARAIN SINGH VS CIT [156 ITD 275 (CHD)] 7. THE LD.DR, ON THE OTHER HAND, STRONGLY SUPPORTED TH E ORDER OF CIT AND SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A O IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE AO HAS FILED TO APPLY HIS MIND ON THE ISSUES AT THE TIME OF ASSESSMENT WHICH IS EVIDENT FROM THE FACT THAT THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THE AO HAS NOT CONDUCTED REQUIRED 7 ITA NO.2951/MUM/2013 ENQUIRIES ON THE ISSUE WHICH CAUSED PREJUDICE TO TH E INTEREST OF THE REVENUE. THE ASSESSEE HAS SOLD THE PROPERTY AND THE CONSIDER ATION SHOWN IN THE SALE DEED IS LESS THAN THE GUIDANCE VALUE FIXED FOR PAYM ENT OF STAMP DUTY. AS PER THE PROVISIONS OF SECTION 50C, IF THE CONSIDERATION SHOWN IN THE SALE DEED IS LESS THAN THE GUIDANCE VALUE, THEN THE GUIDANCE VAL UE SHOULD BE TAKEN AS FULL VALUE OF CONSIDERATION FOR PURPOSE OF COMPUTATION O F CAPITAL GAIN. THE ASSESSEE HAS TAKEN THE CONSIDERATION AS PER THE SAL E DEED AND ALSO ASSESSED THE SAME UNDER THE HEAD INCOME FROM BUSINESS EVEN THOUGH THE RENTAL INCOME FROM THE SAID PROPERTY HAS BEEN TREATED AS INCOME FROM HOUSE PROPERTY. THESE ASPECTS HAVE NOT BEEN EXAMINED BY THE AO. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE, THE CIT WAS RIGHT IN REVISING THE ASSESSMENT ORDER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THE ASSESSEE HAS SOLD PROPERTY AND INCOME FROM SALE HAS BEEN TREATED AS BUSINESS PROFITS. ACCORDING TO THE ASSESSEE, TH E PROPERTY IN QUESTION WAS A BUSINESS ASSET. THEREFORE, THE SURPLUS FROM SALE O F SUCH PROPERTY HAS BEEN RIGHTLY CONSIDERED UNDER THE HEAD INCOME FROM BUSI NESS. THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN THE ASSESSMEN T PROCEEDINGS. THE CIT REVISED THE ASSESSMENT ORDER ON THE GROUND THAT INC OME FROM SALE OF PROPERTY 8 ITA NO.2951/MUM/2013 SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM CAPI TAL GAINS AND NOT UNDER THE HEAD INCOME FROM BUSINESS. THE CIT FURTHER O BSERVED THAT THE ASSESSEE HIMSELF ADMITTED RENTAL RECEIPTS FROM THE IMPUGNED PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH CLEARLY PROVES T HAT THE SAID PROPERTY IS A CAPITAL ASSET AND HENCE, ANY SURPLUS ON SALE OF CAP ITAL ASSET SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS. THE CI T ALSO OBSERVED THAT THE SALE CONSIDERATION SHOWN BY THE ASSESSEE IS LESS TH AN THE GUIDANCE VALUE FIXED FOR PAYMENT OF STAMP DUTY AND AS PER THE PROVISIONS OF SECTION 50C THE ASSESSEE OUGHT TO HAVE TAKEN SECTION 50C VALUE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THOUGH THE ASSESSEE H AS NOT CONSIDERED THE PROPER CONSIDERATION AS PER THE PROVISIONS OF SECTI ON 50C, THE AO FAILED TO EXAMINE THE ISSUE IN THE LIGHT OF THE PROVISIONS OF THE ACT, WHICH CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. 9. THERE IS NO DISPUTE WITH REGARD TO THE NATURE OF PR OPERTY. THE ASSESSEE, THOUGH CLAIMS THE IMPUGNED PROPERTY IS A BUSINESS A SSET, THE RENTAL INCOME FROM THE SAID PROPERTY HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSET HAS BEEN CONSIDERED AS CAPITA L ASSET IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ONCE THE PROPERTY HAS BEE N TREATED AS CAPITAL ASSET, ANY SURPLUS FROM SALE OF SUCH PROPERTY SHOULD BE AS SESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS. FURTHER, WHILE COMPUT ING CAPITAL GAINS, IF THE SALE 9 ITA NO.2951/MUM/2013 CONSIDERATION IS LESS THAN THE GUIDANCE VALUE, AS P ER THE PROVISIONS OF SECTION 50C, GUIDANCE VALUE SHALL BE THE FULL VALUE OF CONS IDERATION FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN. THE LAW IS VERY CLEAR. THE AO, IGNORING ALL THE FACTS, HAS SIMPLY ACCEPTED THE INCOME DECLA RED BY THE ASSESSEE TOWARDS SALE OF PROPERTY UNDER THE HEAD INCOME FROM BUSINE SS. THOUGH THE AO HAS CONDUCTED CERTAIN ENQUIRIES, BUT FAILED TO APPLY HI S MIND TO THE FACTS OF THE PRESENT CASE IN THE LIGHT OF PROVISIONS OF THE ACT. THE AO OUGHT TO HAVE ASSESSED THE SURPLUS UNDER THE HEAD INCOME FROM CA PITAL GAINS. HOWEVER, HE ACCEPTED INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. THEREFORE, IT CANNOT BE HELD THAT THE A O HAS CONDUCTED NECESSARY ENQUIRIES AT THE TIME OF COMPLETION OF ASSESSMENT O N THE ISSUES. THEREFORE, THE CIT WAS RIGHT IN REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT. 10. THE ASSESSEE HAS RELIED UPON A PLETHORA OF JUDGMENT S INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS NIRAV MODI (SUPRA). WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD.AR FOR THE ASSESSEE AND FIND THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US AS IN THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT, THE AO HAS CONDUCTED NECESSARY E NQUIRIES ON WHICH CIT TAKEN UP FOR REVISION. INSOFAR AS OTHER CASE LAWS CONCERNED, ALL ARE RENDERED UNDER DIFFERENT FACTS OF THE CASE AND HENCE NOT APP LICABLE TO THE FACTS OF THE 10 ITA NO.2951/MUM/2013 PRESENT CASE. 11. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERE D VIEW THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS INSO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE CIT WA S RIGHT IN REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT AND HIS ORDER I S HEREBY UPHELD. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2017. SD/- SD/- (MAHAVIR SINGH ) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 13 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI
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