Jajant S.Sanghvi(HUF), Baroda V. Income Tax Officer, Ward-2(4), Baroda

ITA 3470/AHD/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4985 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: SANKET A BAKSHI
• Keywords: Capital asset; Business income; Cost of acquisition
• Section: 271(1)(c); 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER JAYANT S. SANGHVI (HUF), GROUND FLOOR, PRATHAM , ISKCON TEMPE ROAD, GOTRI ROAD, BARODA - 390007 PAN: AAEHJ2524A (APPELLANT) VS THE IT O , WARD - 2(4) , BARODA (RESPONDENT) REVENUE BY : S H RI LALIT P. JA IN , SR. D . R. ASSESSEE BY: SHRI SANKET A BAKSHI. A.R. DATE OF HEARING : 10 - 12 - 2 018 DATE OF PRONOUNCEMENT : 29 - 01 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNT ANT MEMBER : - THESE TWO APPEALS FILED BY ASSESSEE FOR A.Y. 2011 - 12 & 2013 - 14 , ARI SE FROM ORDER OF THE CIT(A) - II, BARODA DATED 22 - 09 - 2 014 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. AS THE FACTS IN BOTH THE APPEALS ARE SIMILAR, SO, WE TAKE ITA NO. 3470/AHD/2014 FOR ASSESSMENT YEAR 2011 - 12 AS THE LEAD CASE AND ITS FINDINGS I T A NO S . 3470 / A HD/20 14 & 116/AHD/2017 A SS ESSMENT YEAR 2011 - 12 & 2013 - 14 I.T.A NO S . 3470 /AHD/20 14 & 116/AHD/2017 A.Y. 2011 - 12 & 2013 - 14 PAGE NO JAYANT S. SANGHVI (HUF) VS. IT O 2 WILL BE APPLICABLE TO ITA NO. 116/AHD/2017 FOR ASSESSMENT YEAR 2013 - 14 FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUND S OF APPEAL: - ITA NO. 3470/AHD/2014 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II, BARODA, ['THE CIT(A)] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER, WARD - 2(4) ['THE AO'] IN TREATING THE PROFITS DERIVED F ROM SALE OF CAPITAL ASSETS AMOUNTING TO RS. 49,74,824/ - AS 'BUSINESS INCOME' INSTEAD OF CAPITAL GAIN. 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING THE SET OFF OF CAPITAL GAINS AGAINST CAPITAL LOSS AND THEREBY COMPUTING THE INCOME OF THE ASSESSEE AT RS. 49,74,824/ - . 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST U/S. 234B OF THE ACT. 4. THE LEARNED ASSESSING OFFICER ERRED IN FACT AND IN LAW IN INITIATING PENALTY PROCEEDING U/S 271(L)(C) OF THE ACT. 4. THE RETURN OF INCOME DECLARING INCOME OF RS. NIL WAS FILED ON 28 TH SEP, 2011. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143 (2) OF THE ACT ON 7 TH SEP, 2012. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED SET OFF OF CAPITAL GAIN OF RS. 49 , 74 , 824/ - ON SALE OF FOUR RESIDENTIAL UNITS FROM THE SHORT TERM CAPITAL LOSS OF R S. 59 , 04 , 213/ - ON SALE OF SHAR ES. THE DETAIL S OF PROFIT GAIN MADE DURING THE YEAR O N SALE OF FOUR RESIDENTIAL UNITS ARE GIVEN AS UNDER: - UNIT NO. PURCHASE COST SALE VALUE GAIN/PROFIT UNIT MO. 17 IN PRATHAM VATIKA RS.27,65,259/ - DT. 28.03.2008 RS.40,01,000/ - DT.17.08.2010 RS.12,3 5,741/ - UNIT NO. 56 IN PRATHAM VATIKA RS.13,85,977/ - DT.27 .03.2008 RS.30,14,000/ - DT.05.08.2010 RS.16,28,023/ - UNIT NO. 57 IN PRATHAM VATIKA RS.13,85,977/ - DT.27.03.2008 RS.30,14,000/ - DT.05.08.2010 RS.16,80,023/ - UNIT NO. 80 IN PRATHAM VATIKA RS .28,66,963/ - OT31.03.2008 RS.33,50,000/ - 02.06.2010 RS.4,83,037/ - I.T.A NO S . 3470 /AHD/20 14 & 116/AHD/2017 A.Y. 2011 - 12 & 2013 - 14 PAGE NO JAYANT S. SANGHVI (HUF) VS. IT O 3 TOTAL RS.84,04,176/ - RS.1,33,79,000/ - 49,74,824/ - ON QU E RY THE ASSESSEE EXPLAINED THAT ALL THESE PROPERTIES WERE ALWAYS HELD AS INVESTMENT IN THE BOOKS OF ACCOUNTS AS BUSINESS ASS ETS . HE HAS ALSO STATED THAT THESE ASSETS WERE INCLUDED IN THE WEALTH TAX RETURNS. HOWEVER , THE ASSESSING OFFICER WAS OF THE VIEW THAT ALL THE RESIDENTIAL UNITS SOLD DURING THE YEAR UNDER WERE ACQUIRED FOR THE S O LE MOTIVE OF EARNING PROFIT. THE ASS ESSING OFFICER ALSO OBSERVED THAT PURCHASE OF RESIDENTIAL UNI TS IN SUCH LARGE NUMBERS TEND TO ELIMINATE THE POSSIBILITY OF INVESTMENT FOR PERSONAL USE , PO SS ESS ION OR ENJOYMENT. HE ALSO STATED T H AT ASSESSEE HAS NOT ACQUIRED THE RESIDENTIAL UNITS FOR ITS OWN RESIDENTIAL PURPOSE. CONSEQUENTLY PROFIT/GAIN OF RS. 49 , 74 , 824/ - ON SALE OF FOUR RESIDENTIAL UNITS WAS TREATED AS PROFIT/GAIN FROM ITS BUSINESS ACTIVITIES HOLDING THAT SUCH PROFIT WAS ASSESSABLE UNDER THE HEAD BUSINESS FROM PROFESSION AND NOT UNDER T HE HEAD CAPITAL GAIN. 5. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE HE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER BY OBSERVING AS UNDER: - 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE, ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED SET OFF OF CAPITAL GAINS/OF RS,49,74,824/ - ON, SAFE OF FOUR 'RESIDENTIAL, UNITS FROM SHORT TERM CA PITAL LOSS OF RS,59,04 , 213/ -- ON SALE OF SHARES. THE ASSESSEE WAS REQUESTED TO GIVE DETAILS OF PROFIT/GAIN EARNED ON SALE OF RESIDENTIAL UNITS AND LOSS MADE ON SALE OF SHARES. THE ASSESSES WAS ALSO REQUESTED TO JUSTIFY ITS CLAIMS OF SUCH SET - OFF. THE ASSESS ING OFFICER CONTENDED THAT THE UNITS ARE RESIDENTIAL ONES BUT THESE UNITS HAVE BEEN ACQUIRED FOR SELLING THEM WITH THE SOLE MOTIVE OF EARNING THE PROFIT. THE APPELLANT HAS CLAIMED THAT HE HAS NOT TREATED THE THE ACQUIRED RESIDENTIAL UNITS IN STOCK - IN - TR ADE IN ITS BOOKS OF ACCOUNTS AND THE INTENTION WAS TO MAKE INVESTMENT AND NOT TO EARN PROFIT. HOWEVER, THE MAIN INTENTION OF THE APPELLANT WAS TO SET OFF THE LOSSES FROM THE SHARES WHICH IS EVIDENT FROM THE CLAIM MADE BY HIM. THOUGH THE APPELLANT HAS CLAIM ED THAT INVESTMENT IN THE RESIDENTIAL PROPERTIES WAS MADE WITH AN INTENTION TO EARN RENTAL I.T.A NO S . 3470 /AHD/20 14 & 116/AHD/2017 A.Y. 2011 - 12 & 2013 - 14 PAGE NO JAYANT S. SANGHVI (HUF) VS. IT O 4 INCOME SINCE THE BUILDER ENJO YS GOOD REPUTATION IN THE MARKE T, THE FACTS ARE ENTIRELY DIFFERENT. THE INVESTMENTS WERE CLEARLY MADE W ITH AN INTENTION TO : EARN PROFITS AS THE APPELLANT HAS SOLD 4 FLATS ON A SUBSTANTIAL PREMIUM WITH IN 2 YEARS A ND WITHOUT PAYING ANY TAX WANTED TO SET OFF THE CAPITAL GAINS AGAINST THE CAPITAL LOSS FROM THE SALE OF SHARES. HENCE, IT IS HELD THAT THE ACQUISITION O F THE SAID RESIDENTIAL UNIT S WAS MADE WITH CLEAR INTENTION TO EARN PROFIT AS THE APPELLANT HAS SOLD 4 FLATS ON A SUBSTANTIAL PREMIUM WITHIN 2 YEARS AND WITHOUT PAYING ANY TAX WANTED TO SET OFF THE CAPITAL GAINS AGAINST THE CAPITAL LOSS FROM THE SALE OF SH A RES. HENCE, IT IS HELD THAT THE ACQUISITION OF THE SAID RESIDENTIAL UN ITS WAS MADE WITH CLEAR INTENTION NOT TO EARN PROFITS AS HELD BY THE ASSESSING OFFICER AND THE PROFIT/G AIN OF RS.49,74,824/ - MADE BY THE ASSESSEE ON SALE OF FOUR RESIDENTIAL UNITS IS RIGHTLY TREATED - AS PROFIT/GA INS FROM ARISING FROM BUSINESS ACTIVITIES. SUCH PROFIT IS ASSESSABLE UNDER THE HEAD 'BUSINESS OR PROFESSION' AND NOT UNDER THE HEAD 'CAPITAL GAINS''. THEREFORE, THE PROFIT/GAIN, OF RS.49,74,824/ - ARISING IN THE HANDS OF THE ASSESSEE ON SALE OF RESIDENTIAL UNITS WAS RIGHTLY BROUGHT TO TAX UNDER THE HEAD 'PROFITS & GAINS OF BUSINESS OR PROFESSION' AND NOT UNDER THE HEAD 'CAPITAL GAINS', THE CLAIM OF SET - OFF OF SHORT TERM CAPITAL LOSS OF RS.59,04,213/ - ON SALE OF SHARES WAS RIGHTLY' NOT ALLOWED IN VIEW OF P ROVISIONS OF SECTION 71 OF THE ACT THUS, ADDITION OF R S.49,74,824/ - MADE TO THE TOTAL INCOME OF THE ASSESSEE IS CONFIRMED. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAIL OF SUBMISSION M ADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. HE HAS CONTENDED THAT ASSESSEE HAS DULY SHOWN THE INVESTMENT IN THE FOUR PROPERTIES AS INVESTMENT WITH COMPLETE DETAILS REFLECTED IN THE SCHEDULE D OF THE BALANCE SHEET. HE HAS FURTHER CONTENDED THAT ASSESSEE HAS SHOWN SUCH INVESTMENT IN THE WEALTH TAX RETURN DULY FILED SHOWING THE PROPERTIES AS INVESTMENT ON WHICH THE WEALTH TAX WAS ALSO PAID. ON THE OTHER HAND, LD. DEPARTMENTAL R EPRESENTATIVE HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED SET OFF OF CAPITAL GAINS OF RS. 49,74,824/ - ON SALE OF FOUR RESIDENTIAL UNITS FROM SHORTER TERM CAPITAL LOSS OF RS. 59 , 0 4213/ - ON SALE OF SHARES. T H E ASSESSEE HAS SHOWN THE IMPUGNED PROPERTIES UNDER THE HEAD I NVESTMENT IN HIS BOO K S OF ACCOUNTS. THE PURCHASE S OF RESIDENTIAL UNITS WERE REFLECT ED I.T.A NO S . 3470 /AHD/20 14 & 116/AHD/2017 A.Y. 2011 - 12 & 2013 - 14 PAGE NO JAYANT S. SANGHVI (HUF) VS. IT O 5 AS INVESTMENTS F ROM ASSESSMENT YEAR 2008 - 09 AND CONTINU ALLY TREATED AS INVESTMENT IN 2011 - 12 . T HESE INVESTMENTS WERE ALSO REFLECTED IN T HE WEALTH TAX RETURN AND DULY PAID THE WEALTH TAXES T H ER E ON. WE OBSERVE THAT THE ASSESSING OFFICER HAS NOT DIS PROVED THE AFORESAID MATERIAL FACTS DEMONSTRATED WITH THE COPIES OF WEALTH TAX RETURNS FILED IN THE PAPER BOOK FURNISHED DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US. IN THE LIGHT OF THE ABOVE FACTS, WE CONSIDER THAT THE ASSESSING OFFICER HAS FAI LED TO SUBSTANTIATE HOW THE INCOME ARISEN TO THE ASSESSEE OUT OF THE SALE OF HOUSE PROPERTY WAS ASSESSABLE UNDER T HE H E AD PROFIT AND GAIN OF BUSINESS OR PROFESSION . AFTER CONSIDERING THE AB O V E FACTS, WE ARE OF T HE VIEW THAT THE ASSESSEE HAS MADE INVESTMEN T IN HOUSE PROPERTY AS INVESTOR AND THEREFORE, THE INCOME ARISEN TO THE ASSESSEE OUT OF THE SALE OF HOUSE PROPERTY IS ASSESSABLE UNDER THE H E AD CAPITAL GAIN AND NOT PROFIT AND GAIN OF BUSINESS OR PROFESSION. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSES SEE IS ALLOWED. GROUND NO. 3 FOR CHARGING OF INTEREST U/S. 234B AND GROUND NO. 4 FOR INITIATING OF PENALTY PROCEEDING S U/S. 271(1)(C) ARE OF GENERAL AND CONSEQUENTIAL IN NATURE WHICH DO NOT REQUIRE ANY ADJUDICATION AT THIS STAGE, THEREFORE, THE SAME ARE DISMISSED. 8. IN TH E RESULT, GROUND NOS. 1 & 2 OF BOTH THE APPEALS ARE ALLOWED AND GROUND NOS. 3 & 4 OF BOTH THE APPEALS ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 29 - 01 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 29 /01/2019 I.T.A NO S . 3470 /AHD/20 14 & 116/AHD/2017 A.Y. 2011 - 12 & 2013 - 14 PAGE NO JAYANT S. SANGHVI (HUF) VS. IT O 6 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,