Sheetal Natwarlal Lakhia, Ahmedabad V. The Income tax Officer,Ward-3(4), Ahmedabad

ITA 3017/AHD/2016

AI Insights

The case revolves around the assessment of long-term capital gains on the sale of a property, which was initially owned by a partnership firm, M/s. Lakhia Brothers, and later sold. The Assessing Officer treated the transaction as if it were conducted by Sheetal Natwarlal Lakhia in her individual capacity, leading to an addition of Rs. 51,87,460 to her income for the assessment year 2009-10. The CIT(A) upheld this decision. However, the Tribunal found that the property was sold by the partnership firm and not by the assessee individually, thus reversing the lower authorities' decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300008 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-03-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 16-11-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 6; 2; 234B; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I. T .A . N o .3 01 7 / Ah d/2 0 1 6 ( A s se ss m e nt Y e a r : 20 09- 1 0 ) Sh e et a l N a t w ar la l La k h i a Lah ia P e t r o l Pu m p , O p p . L uc k y R e s ta u r a n t, N e a r C i t y C o ll e g e, Lal d a r w aj a , Ah me d a ba d - 3 8 00 09 V s . I T O, War d - 3 ( 4) , A h me da ba d [P AN N o.A J SP K 5 2 5 2 H] (Appellant) .. (Respondent) Appellant by : Shri P. F. Jain, A.R. Respondent by: Shri R. R. Makwana, Sr. D.R. D a t e of H ea r i ng 15.03.2023 D a t e of P r o no u n ce me nt 29.03.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-4, Ahmedabad on 19.09.2016 for A.Y. 2009-10. 2. The grounds of appeal raised by the assessee are as under: “1. The Ld. CIT(appeals) has erred in law and on facts in upholding the order of A.O. determining income of the appellant at Rs.44,32,320/- as against returned income of Rs.1,35,820/- without properly appreciating the facts of the appellant and without considering the directions given by the CIT(appeals) while granting appeal effect and by simply re-producing the facts mentioned in the original assessment order. 2. He has erred in law and on facts in observing that the A.O. has complied with the directions of CIT(appeals) before passing the order and the appellant was given sufficient opportunity to produce the evidence to prove that the property did not belong to him in as much as that no sufficient opportunity was granted and the assessee has furnished the evidence in support of the claim but not considered by the A.O. 3. He has wrongly described the assessee as she and wrongly mentioned the assessed income at Rs. 93,14,200/-. 4. He has erred in law and on facts in holding that the property for which capital gain has been computed though purchased by the firm M/s. Lakhia Brothers belonged to the assessee as sole proprietor of the said firm without properly ITA No. 3017/Ahd/2016 Sheetal Natwarlal Lakhia vs. ITO Asst.Year–2009-10 - 2 - considering and appreciating the facts of the appellant and ignoring the vital evidence regarding ownership of property placed on record. 5. He has also erred in law and on facts in not appreciating the facts that the so called letter dated 28/12/2011 submitted by the purchaser Shri Subhash B. Soni claiming to have received the possession of the property without confronting and furnishing the said letter to the assessee and ignoring the contrary evidence regarding possession of the property on record of the Department. 6. He has erred in not considering the vital fact that as per partnership deed on record, the assessee was not the partner in the said firm in his individual capacity as also noted by the CIT(appeals) in the findings recorded in Para 4.7 of the appeal order dated 30/06/2014. 7. He has erred in law and on facts in confirming the observation of the A.O. that the partnership firm was converted into proprietary concern of the assessee and all the assets and liabilities have been taken over by the appellant. 8. He has also erred in law and on facts in not appreciating the facts that the A.O. completely disregarded the evidence placed on record earlier and also by submission dated 16/08/2014 consequent to order of CIT(appeals) and making no independent inquiries required as per Law. 9. Without prejudice to the above grounds, he has erred in law and facts in not considering the facts of adopting cost of indexation by taking valuation as on 01/04/1981. 10. On the facts of the appellant the long term capital gain of Rs.42,97,000/- erroneously computed ought not to have been treated as income of the appellant. 11. On the facts no interest u/s. 234A, 234B and 234C of the Act ought to have been levied. 12. On the facts the returned income of Rs. 1,35,820/- ought to have been accepted in toto. 13. The appellant craves leave to add to alter and/or to modify any ground of appeal.” 3. Return of Income declaring total income of Rs. 1,35,820/- was filed on 25.09.2009. Subsequently the case was selected for scrutiny and a notice under Section 143(2) dated 29.09.2010 was issued and served. The Assessing Officer observed that the assessee is a proprietary for M/s. Lakhia Brothers who is engaged in the business of trading petrol and ITA No. 3017/Ahd/2016 Sheetal Natwarlal Lakhia vs. ITO Asst.Year–2009-10 - 3 - diesels. The Assessing Officer further observed that as per the AIR information the assessee sold the land for sale consideration of Rs. 54,61,000/-. The sale deed was registered with sub-Registrar Officer. However, on verification of the report of income, the capital gain arising out of sale of said land was not shown by the assessee. The sale deed was executed by Sheetal Natvarlal Lakhia as sole proprietor of M/s. Lakhia Brothers and PAN mentioned in the sale deed is AACPL7679Q which pertain to assessee. The property in question was mortgaged with Punjab National Bank as security. However, Lakhia Brothers failed to pay the loan, therefore, the bank initiated recovery proceedings. The Debt Recovery Tribunal (in short “DRT”) has ordered to cancel the auction and allow the property to sale with the condition that the entire amount received in respect of the sale of the property will be deposited in the Punjab National Bank. After taking cognizance of the assessee’s reply the Assessing Officer made addition of Rs. 51,87,460/-. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee. 5. The Ld. A.R. submitted that the status of the assessee that the assessee is a sole proprietor of M/s. Lakhai Brothers was wrongly taken by the Assessing Officer. The assessee has not dealt with the said property in the individual capacity and therefore, the addition can be made in assessee’s hand. The Ld. A.R. further submitted that the Assessing Officer has not taken cognizance that the property does not belong to assessee and no opportunity to produce the evidences were ITA No. 3017/Ahd/2016 Sheetal Natwarlal Lakhia vs. ITO Asst.Year–2009-10 - 4 - granted to the assessee. The Ld. A.R. further submitted that the property for which capital gain has been computed was purchased from M/s. Lakhia Brothers which was a partnership firm. The Ld. A.R. further submitted that the Assessing Officer totally ignored the evidences filed by the assessee especially the sale deed wherein M/s. Lakhia Brothers has taken the sole land and not the assessee in her individual capacity. 6. The Ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that in assessee’s return of income for A.Y. 2009-10 the assets of the assessee is individual but in verification the assessee has signed in the capacity of proprietor of M/s. Lakhia Brothers. From the perusal of the sale deed it appears that M/s. Lakhia Brothers was a partnership firm and therefore, the land was sold by the partnership firm and not by the assessee in his individual capacity or as the proprietor of M/s. Lakhia Brothers. In fact, debt recovery proceedings also give the direction was given against the partnership firm M/s. Lakhia Brothers by the Debt Recovery Tribunal. Thus, the contention of the assessee that the status of the assessee was not correctly taken into account by the Assessing Officer while making the addition appears to be correct. Besides this the assessee has rightly not indicated Long Term Capital Gain as it was not in assessee’s individual capacity or in the capacity of proprietary firm that the assessee has made sale consideration of Rs. 54,61,000/- in respect of sale of the property. ITA No. 3017/Ahd/2016 Sheetal Natwarlal Lakhia vs. ITO Asst.Year–2009-10 - 5 - Therefore, the Assessing Officer as well as the CIT(A) has not taken cognizance of the same and not taken a proper facts on record. Hence, the appeal of the assessee is allowed. 8. In result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 29/03/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 29/03/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 24.03.2023 2. Date on which the type draft is placed before the Dictating Member 24.03.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 24.03.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .03.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 29.03.2023 7. Date on which the file goes to the Bench Clerk 29.03.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................