RAMJEET FEKU YADAV, MUMBAI V. ITO 24(1)(2), MUMBAI

ITA 3424/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83752 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Keywords: Sale consideration of property below Jantri Value; Business income; Cost of acquisition
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 3424/MUM/2013 ASSESSMENT YEAR: 2009-10 SHRI RAMJEET FEKU YADAV B.F. MOTORS, VISHAL NAGAR, NEW LINK ROAD, JOGESHWARI (W), MUMBAI- 400 102 VS. ITO, 24(1)(2) MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAMPY 3582 H ASSESSEE BY : SHRI MANISH AGARWAL REVENUE BY : SMT. C. TRIPURA SUNDARI DATE OF HEARING : 07.08.2014 DATE OF PRONOUNCEMENT : 10.09.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-34, MUMBAI DATED 25.03.2014 FOR THE ASSES SMENT YEAR 2009-10. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING ACTIO N OF THE AO IN TREATING INCOME FROM SALE TRANSACTION OF PLOTS UNDER THE HE AD CAPITAL GAINS INSTEAD OF INCOME FROM BUSINESS OR PROFESSION AS DECLARED BY THE APPELLANT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW S APPLICABLE THERETO. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE AC TION OF THE AO TO HOLD THE APPELLANT AS AN INVESTOR INSTEAD OF A TRADER IN RESPECT OF SALE OF PLOTS WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAWS APPLICABLE THERETO. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE A CTION OF THE AO IN INVOKING PROVISIONS OF SECTION 50C OF THE INCOME TA X ACT, 1961. THE LEARNED CIT (APPEALS) ERRED IN ENHANCING THE AD DITION TO RS.68,01,252/- AS AGAINST THE ADDITION MADE BY THE AO OF RS.37,25, 519/-. THE LEARNED CIT (APPEALS) ERRED IN NOT ALLOWING EXP ENDITURE INCURRED ON VARIOUS DEVELOPMENT AND OTHER RELATED EXPENDITURE I NCURRED BY THE APPELLANT ITA NO. 3424/MUM/2013 SHRI RAMJEET FEKU YADAV ASSESSMENT YEAR: 2009-10 2 WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. THE APPELLANT PRAYS THAT INCOME EARNED FROM TRANSAC TIONS OF SALE OF PLOTS OF LAND MAY BE DIRECTED TO BE TAXED AS BUSINESS INCOM E INSTEAD OF CAPITAL GAIN AND THE TRANSACTION MAY BE CONSIDERED AS OUTS IDE THE PURVIEW OF SECTION 50C. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AFO REMENTIONED BASICALLY RELATE TO THE DECISION OF THE LD.CIT(A) TREATING THE INCOM E FROM SALE TRANSACTION OF PLOTS UNDER THE HEAD CAPITAL GAINS INSTEAD OF INCOME F ROM BUSINESS OR PROFESSION & INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT T O THE SAID TRANSACTION AND THE CONSEQUENT ENHANCEMENT MADE BY THE LD.CIT(A) ON ACC OUNT OF REWORKING OF THE CALCULATION WHEN APPLYING SECTION 50C OF THE ACT. 4. THE RELEVANT FACTS ARE THAT THE ASSESSEE, AN IND IVIDUAL, HAD SOLD TWO PLOTS OF LAND DURING THE YEAR UNDER CONSIDERATION. THE FIRST PLOT OF LAND WAS SOLD FOR A CONSIDERATION OF RS.1,38,25,920/- IN WHICH THE ASSE SSEE WAS 20% CO-OWNER HAVING THE SHARE OF SALE CONSIDERATION OF RS.27,65,154/-. THE SECOND PLOT OF LAND WAS SOLD FOR RS.69 LAKHS IN WHICH THE ASSESSEE WAS 25% CO-OW NER AND THE SHARE OF SALE CONSIDERATION WAS RS.9,39,335/-. THE ASSESSEE HAD C LAIMED THE INCOME FROM THE SAID TRANSACTION UNDER THE HEAD BUSINESS INCOME. HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3), THE AO TREATED THE SALE CONSIDER ATION AS SHORT TERM CAPITAL GAIN AND ACCORDINGLY BASED ON THE MARKET VALUE ADOPTED B Y THE STAMP DUTY AUTHORITIES, ARRIVED THE PURCHASE COST. IN THE PROCESS, THE AO W ORKED OUT THE CAPITAL GAINS TO AN AMOUNT OF RS.37,24,519/- AND THEREBY ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAINS. ON APPEAL, THE LD.CIT(A) WHILE CONFIRMING THE ACTION OF THE AO, HAS ENHANCED THE S HORT TERM CAPITAL GAINS TO RS.68,01,252/-. AGGRIEVED BY THE IMPUGNED DECISION, THE ASSESSEE IS IN APPEAL BEFORE US. 5. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS THE CONTENTION OF THE LD.AR THAT THE ASSESSEE IS INTO T HE BUSINESS OF BUYING, DEVELOPING AND SELLING LAND. THE PLOTS OF LAND PURCHASED HAVE BEEN HELD AS CURRENT ASSETS AND NOT AS INVESTMENTS AND THEREFORE ACCORDING TO THE A SSESSEE, THE PROVISIONS OF CAPITAL GAINS ARE NOT ATTRACTED. IN THIS CONNECTION, IT IS RELEVANT TO STATE THAT THE LD.CIT(A) ITA NO. 3424/MUM/2013 SHRI RAMJEET FEKU YADAV ASSESSMENT YEAR: 2009-10 3 HAS OBSERVED THAT DURING THE PREVIOUS A.YS. 2006-07 AND 2008-09, THERE HAS BEEN NO INSTANCES OF SALE. SIMILARLY, IN THE SUBSEQUENT A.Y. 2010-2011 ALSO THERE HAS BEEN NO SALE. IT IS NOTEWORTHY THAT FOR THE FIRST T IME DURING THIS ASSESSMENT YEAR ONLY, TWO PLOTS HAVE BEEN SOLD, WHICH IS THE SOLITA RY INSTANCES OF SALE IN FIVE YEARS. FURTHER, FROM THE PERUSAL OF THE BALANCE SHEET FILE D FOR A.Y. 2008-09 TO 2010-11, THE LD.CIT(A) HAS FOUND THAT THERE WERE NO FREQUENT BU YING AND SELLING. THE PURCHASED LAND IS HELD FOR A CONSIDERABLE PERIOD OF TIME TO M AKE SOME IMPROVEMENT. THESE FINDINGS OF THE LD.CIT(A) ARE DISPUTED BY THE LD.AR OF THE ASSESSEE. THUS, THE HOLDING PERIOD IS LONG WHICH CLEARLY SHOWS THAT THE INTENTION IS TO MAKE INVESTMENT IN THE LAND. HENCE, THE ACTIVITY OF THE ASSESSEE, T HOUGH PROFITABLE, CANNOT BE CONSIDERED AS BUSINESS ACTIVITY. THE INTENTION OF T HE ASSESSEE AT THE TIME OF PURCHASE CLEARLY SHOWS IT IS FOR INVESTMENT PURPOSE S AND HENCE IT IS A CLEAR CASE OF CAPITAL ACCRETION. THE PURCHASE AND SALE OF PLOT OF LAND, THOUGH RESULTED IN A PROFIT, BUT SUCH PROFIT CAN ONLY BE ASSESSED AS CAPITAL GAI N AND AT NO STRETCH OF IMAGINATION IT CAN RESULT IN BUSINESS INCOME. IF A PERSON INVES TS MONEY IN LAND INTENDING TO HOLD IT AND THEN SELLS IT AT A PROFIT, IT WOULD BE A CLE AR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERIVED FROM BUSINESS. CASES OF REALIZATION OF INVESTMENTS CONSISTING OF PURCHASE AND RESALE, THOUGH PROFITABLE, ARE CLEARLY OUTSIDE THE DOMAIN OF ADVENTURES IN THE NATURE OF TRADE ALSO. CONSIDERING THE ABOVE FACTS, WE ARE OF THE CONSIDER ED OPINION THAT LD.CIT(A) HAS CORRECTLY HELD THAT THE SALE TRANSACTIONS OF PLOT UNDER THE HEAD CAPITAL GAINS. IN VIEW OF THE FACT THAT THE ASSETS PROCURED IS TREATED AS INVESTMENT IN THE CAPITAL FIELD AND THEREBY THE INC OME ARISING ON SALE OF SUCH PLOTS FALLS UNDER THE HEAD CAPITAL GAINS, AUTOMATICALLY SECTION 50C OF THE ACT IS APPLICABLE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD.CIT(A) CONFIRMING THE ACTION OF THE AO IN THIS REGARD. 5.1 AS REGARDS THE ENHANCEMENT OF THE ADDITION TO R S.68,01,252/- AS AGAINST THE ADDITION MADE BY THE AO OF RS.37,25,519/-, IT IS PE RTINENT TO MENTION THAT THE AO IN THE ASSESSMENT ORDER HAS COMPLETED THE ASSESSMENT I N THE CASE OF OTHER CO-OWNERS AND COMPUTED THE SHORT TERM CAPITAL GAIN OF RS.37,2 4,519/- WHEREAS THE LD.CIT(A) BASED ON THE VALUE ADOPTED BY THE STAMP DUTY AUTHOR ITY WORKED OUT THE CORRECT CAPITAL GAINS, IN ACCORDANCE WITH THE SHARE OF THE ASSESSEE AND DETERMINED THE SHORT ITA NO. 3424/MUM/2013 SHRI RAMJEET FEKU YADAV ASSESSMENT YEAR: 2009-10 4 TERM CAPITAL GAIN AT RS.68,01,252/-. IN THE SAID PR OCESS THE LD.CIT(A) HAS ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 251(2) OF THE INCOME-TAX ACT. SINCE, THE LD.CIT(A) HAS ENHANCED THE INCOME IN ACCORDANCE WITH THE CORRECT WORKING TO BE ADOPTED I N THE CASE OF THE ASSESSEE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD .CIT(A) ENHANCING THE SHORT TERM CAPITAL GAINS DURING THE FIRST APPELLATE PROCEEDING S. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER OF THE LD.CIT(A) DESERVES TO BE UPHELD AND WE FIND NO MERIT IN THE APPEAL FIL ED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (RAJENDRA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.09.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.