ACIT 18(2), MUMBAI V. VRINDA SHARAD BAL, MUMBAI

ITA 3923/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8833 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard

Judgement Text

ITA NO;3923 OF 2011 MRS. VRINDA SHARAD BAL MUMBAI PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.3923/MUM/2011 (ASSESSMENT YEAR: 2006-07) ACIT 18(2), 105 PIRAMAL CHAMBERS, LAL BAUG, MUMBAI 400012 VS. MRS. VRINDA SHARAD BAL, A-7 KAMDAR BUILDING, GOKHALE ROAD (S), DADAR, MUMBAI 400028 PAN: AEZPB 8307 E (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI RAJARSHI DWIVEDY, DR ASSESSEE BY: SHRI MANDAR VAIDYA DATE OF HEARING: 17/09/2012 DATE OF PRONOUNCEMENT: 26/09/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE C IT (A)-29 MUMBAI DATED 10/02/2011. REVENUE HAS RAISED THE FOL LOWING TWO GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, CIT (A) HAS ERRED IN TREATING THE VARDAL PROJE CT ACTIVITY AS LONG TERM CAPITAL ASSET AND HAS ERRED I N ALLWING LONG TERM CAPITAL LOSS OF ` .75,99,591/- TO BE CARRIED FORWARD AS PER THE WORKING SUBMITTED BY ASSESSEE, WITHOUT APPRECIATING THE FACT THAT ASSESS EE HAD SHOWN THE COST AS WORK IN PROGRESS AT THE BEGIN NING AND HAD HERSELF SHOWN PROFIT FROM THIS TRANSACTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, CIT (A) HAS ERRED IN ACCEPTING THE CONTENTION OF ASSESSEE TO TREAT THE VARDAL PROJECT ACTIITY AS LON G TERM CAPITAL ASSET WITHOUT TAKING INTO CONSIDERATION HON 'BLE SUPREME COURTS DECISION IN THE CASE OF GOETZ (INDI A) LTD VS. CIT 157 TAXMAN 1(2005). ITA NO;3923 OF 2011 MRS. VRINDA SHARAD BAL MUMBAI PAGE 2 OF 5 2. BRIEFLY STATED ASSESSEE IS IN THE BUSINESS OF PROMO TER AND DEVELOPER OF REAL ESTATE. ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF ` .8,87,720/-. ASSESSEE OWNS TWO PROPRIETARY CONCERNS M/S. SHREE BAL LAND DEVELOPERS AND M/S SHR EE BAL DEVELOPERS AND HAS UNDERTAKEN VARIOUS PROJECTS. ASS ESSEE OFFERED THE GAINS ON TRANSFER OF CERTAIN PROPERTIES AS BUSI NESS PROFIT, MORE SO DECLARING A PROFIT OF ` .35,49,092/- FROM VARDAL PROJECT. VIDE LETTER DATED 11/12/2008 IT WAS INFORMED TO AO THAT THE PRO FITS ON THE PROJECT WAS OFFERED INADVERTENTLY AS BUSINESS INCOM E BUT IT WAS A CAPITAL ASSET AND REVISED LOSS OF ` .75,99,581/- WAS OFFERED IN THE COMPUTATION. AO DID NOT ACCEPT ASSESSEES EXPLANATI ON FOR THE FOLLOWING REASONS: I. VALUE OF THE PROJECT HAS BEEN SHOWN BY ASSESSEE AT THE BEGINNING OF THE YEAR AS OPENING WIP AND AFTER CAPITALIZING ALL OF THE EXPENSES IN THIS CONNECTION THE SAME WAS SHOWN AS CLOSING WIP FROM YEAR TO YEAR. II. THE FACTS AS ABOVE CAN BE SEEN FROM THE PROFIT & LOSS A/C OF THE PROJECT FURNISHED ALONG WITH THE RETURN OF INCOME. III. THE SUDDEN TWIST OF ASSESSEE TO CLAIM AS LTCG/ LOSS IN THIS REGARD IS NOTHING BUT TO AVOID OR REDUCE TH E TAX LIABILITY. 3. THE LEARNED CIT (A) FOLLOWING HIS ORDER IN ASSESSME NT YEAR 2005-06 ON SOME OTHER PROJECTS OF SIMILAR NATURE AL LOWED ASSESSEES CLAIM. HENCE REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET THE LEARNED COUNSEL SUBMITTED THAT SI MILAR ISSUE HAS COME UP IN ITA NO.2968/MUM/2008 IN ASSESS EES OWN CASE ON VARDAL PROJECT WHEREIN THE MATTER WAS RESTO RED TO THE FILE OF AO FOR FRESH CONSIDERATION VIDE PARA 24 TO 26 AS UN DER: 24. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS AS PROMOTERS, DEVELOPERS AND LAND DEVELOPERS. IT IS ALSO NOT IN D ISPUTE THAT THE LAND OF WANWORIE PROJECT WAS SHOWN BY THE ITA NO;3923 OF 2011 MRS. VRINDA SHARAD BAL MUMBAI PAGE 3 OF 5 ASSESSEE IN ITS BOOKS OF ACCOUNT UNDER THE HEAD CLO SING WIP ALONG WITH WIP OF OTHER PROJECTS. DURING THE YE AR UNDER CONSIDERATION, THE SAID LAND WAS TRANSFERRED TO M/S BAL AND JHALA ASSOCIATES FOR A TOTAL CONSIDERAT ION OF RS.3,16,35,600/-.THE ASSESSEE VIDE REVISED COMPUTAT ION OF INCOME CLAIMED THAT THE DIFFERENCE BETWEEN PURCH ASE PRICE AND SALE PRICE OF LAND SHOULD BE TREATED AS L ONG TERM CAPITAL GAIN AND ACCORDINGLY THE ASSESSEE AFTE R APPLYING INDEXATION COST WORKED OUT/CLAIMED LONG TE RM CAPITAL LOSS OF ` .74,16,287/-.HOWEVER, THE A.O. OBSERVED THAT SINCE THE COMMENCEMENT OF THE PROJECT THE ASSE SSEE IS SHOWING SAID PROJECT UNDER CURRENT ASSET AND WIP IS CARRIED FORWARD TO NEXT YEAR ON THE BASIS OF COMPLE TION CONTRACT METHOD, HELD THAT IT IS THE BUSINESS OF TH E ASSESSEE TO CONSTRUCT DWELLING UNIT AND HENCE HE WORKED OUT PROFIT FROM THIS PROJECT AT ` 30,94,425/- VIDE CALCULATION APPEARING AT PAGE 3 OF THE ASSESSMENT O RDER. ON APPEAL, THE LD. CIT(A) WHILE AGREEING WITH THE APPELLANT'S PLEA THAT IN RESPECT OF THE PROJECT IN QUESTION, THE APPELLANT IS A HOLDER OF THE CAPITAL ASSET PART ICULARLY BECAUSE THE APPELLANT IS NOT A DEALER IN THE REAL E STATE AS SUCH I.E. HE IS NOT IN THE BUSINESS OF BUYING AN D SELLING PLOT OF LAND BUT IN THE BUSINESS OF DEVELOP ING OF REAL ESTATE, HELD THAT SINCE THE PLOT WAS NOT DEVEL OPED, IT IS CLEAR THAT IT WAS BEING HELD AS A CAPITAL ASSET FROM THE VERY BEGINNING, FOLLOWED THE RATIO OF THE DECISION IN THE CASE OF FORT PROPERTIES PVT. LTD. VS. CIT (1994) 20 8 ITR 232 (BOM), DIRECTED THE A.O. TO ACCEPT THE DECLARAT ION OF CAPITAL LOSS IN CONNECTION WITH THIS TRANSACTION AN D ACCORDINGLY DELETED THE DISALLOWANCE OF LONG TERM C APITAL LOSS OF RS.74,16,287/-. 25. DURING THE COURSE OF HEARING, THE LEARNED COUNS EL FOR THE ASSESSEE DRAWS OUR ATTENTION TO PAGE 61 OF THE ASSESSEE'S PAPER BOOK TO SHOW THE COMPUTATION OF LO NG TERM CAPITAL GAINS/LOSS. AFTER CONSIDERING THE SAME , WE OBSERVE THAT (I) THE LAND WAS PURCHASED IN TWO FINA NCIAL YEARS I.E. IN F/Y 1995-96 FOR RS.68,68,388/- AND IN F/Y 1997-98 FOR `30,72,833/- AGGREGATING TO RS.99,41,22 1/-, WHEREAS AS PER THE ASSESSEE'S LETTER DATED 11/12/20 07 THE ASSESSEE HAD PURCHASED RIGHTS IN RESPECT OF LAN D AT WANWORIE PROJECT AT SURVEY NO. 58/3 OF 17400 SQ. MT R. FROM SHELAR FAMILY DURING F/Y 1995-96, (II) IN THE BALANCE SHEETS FOR THE EARLIER YEARS 16 THE WANWORI E PROJECT WAS SHOWN AS WIP AND IN THE BALANCE SHEET F OR THE YEAR UNDER CONSIDERATION, THE CLOSING OF WIP OF WANWORIE PROJECT HAS BEEN SHOWN AT RS.4,77,684/- ITA NO;3923 OF 2011 MRS. VRINDA SHARAD BAL MUMBAI PAGE 4 OF 5 UNDER SCHEDULE K OF THE BALANCE SHEET AS ON 31.3.20 05 OF M/S SHREE BAL DEVELOPERS, (III) THE ASSESSEE APA RT FROM INTEREST EXPENSES HAS ALSO INCURRED OTHER EXPE NSES AGGREGATING TO RS.12,06,209/- DURING THE F/YS 1995- 96 TO 2003-04, THE DETAILS OF WHICH ARE NOT ON RECORD AND HAVE NOT BEEN EXAMINED EITHER BY THE A.O. OR BY THE LD. CIT(A), (IV) IN THE BALANCE SHEET FOR THE YEAR UNDE R CONSIDERATION, WE FIND THAT THIS WAS NOT AN ISOLATE D TRANSACTION OF PURCHASE OF PLOT OF LAND. THERE ARE VARIOUS PLOTS OF LAND IN BOTH THE BALANCE SHEETS OF HIS PROPRIETORSHIP CONCERNS AND THERE IS NO MATERIAL ON RECORD TO SHOW THE NATURE OF TRANSACTION OF ALL THE SE PLOTS I.E. WHETHER THEY WERE ACQUIRED BY THE ASSESSEE AS A CAPITAL ASSET OR AS A STOCK-IN-TRADE. 26. IN THE ABSENCE OF ANY RELEVANT MATERIAL AVAILAB LE ON RECORD AND IN THE INTEREST OF JUSTICE, WE CONSIDER IT FAIR AND REASONABLE THAT THE MATTER SHOULD GO BACK TO TH E FILE OF THE A.O. AND ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT A ND SEND BACK THE MATTER TO THE FILE OF THE A.O. TO DEC IDE THE SAME AFRESH IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND ACCORDING TO LAW INCLUDING THE DECISIONS RELIED ON BY BOTH THE PARTIES (SUPRA) AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GRO UNDS TAKEN BY THE REVENUE ARE THEREFORE PARTLY ALLOWED F OR STATISTICAL PURPOSES. 5. THE LEARNED DR WHILE ADMITTING THAT THE ISSUE IS SE T ASIDE TO THE FILE OF AO SUBMITTED THAT ASSESSEE ITSELF HAS O FFERED THE INCOME AS PROFIT WHEREAS THE LEARNED COUNSEL SUBMITTED THA T FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE BOMBAY HIGH COU RT IN THE CASE OF FORT PROPERTIES PVT. LTD VS. CIT 208 ITR 233 THE ENTRIES MADE IN THE BOOKS OF ACCOUNT BY ASSESSEE IS NOT DETERMINATI VE OF THE QUESTION WHETHER THE ASSET WAS HELD AS CAPITAL ASSE T OR STOCK IN TRADE. 6. WITHOUT GOING INTO THE MERITS OF THE ARGUMENTS, WE RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N IN THE EARLIER YEAR RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION KEEPING IN MIND THE DIRECTIONS GIVEN IN AY 2005-06 AND THE FACTS OF THE CASE OVER A PERIOD OF TIME I.E. FROM THE TIME O F PURCHASE TO THE ITA NO;3923 OF 2011 MRS. VRINDA SHARAD BAL MUMBAI PAGE 5 OF 5 TIME OF SALE ABOUT TREATMENT GIVEN IN BOOKS AND IN INCOME TAX PROCEEDINGS. 7. WITH THESE DIRECTIONS, THE REVENUE APPEAL IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2012. SD/- SD/- (I.P. BANSAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 26 TH SEPTEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI