The ITO, Ward-15(2), Ahmedabad V. Shri Ramanlal M.Parmar, Ahmedabad

ITA 4203/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5670 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-06-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 26-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: NIMISH VAYAWALA
• Keywords: Business income; Salary income

Judgement Text

IITA 4203-07 A.Y.99-00 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI AND SHRI D.C. AGRAWA L. ITA. NO.4203 /AHD/2007 (ASSESSMENT YEAR: 1999 -2000 ) INCOME TAX OFFICER, WARD 15(2), 7 TH FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD. VS SHRI RAMANLAL M. PARMAR, 6 SUKHSAGAR SOCIETY, NR. MUNICIPAL ZONAL OFFICE, DANILIMDA, AHMEDABAD-380 015. (APPELLANT) (RESPONDENT) PAN: AHZPP 1654 P APPELLANT BY : SHRI K.M. MAHESH, SR. D.R. RESPONDENT BY : SHRI NIMISH VAYAWALA. ( (( ( )/ )/)/ )/ ORDER PER SHRI D.C. AGRAWAL. THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOLLOW ING GROUNDS: 1. THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.6,68,030/- DIRECTING IT TO BE ASSESS ED IN THE STATUS OF A.O.P. 2. THE LD. C.I.T. (A) ALSO ERRED IN LAW AND ON FACT S IN NOT APPRECIATING THE FACTS ON FILE BY WHICH THE INCOME HAD BEEN ASSESSED IN THE STATUS OF INDIVIDUAL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED C.I.T. (A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER. IITA 4203-07 A.Y.99-00 2 2. THE ONLY ISSUE INVOLVED IN THE APPEAL IS THAT LD . C.I.T.(A) HAS DIRECTED THE A.O. TO TAX THE INCOME IN THE HANDS OF A.O.P. R ATHER THAN IN THE HANDS OF INDIVIDUAL. THE FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME DECLARING SALARY INCOME OF RS.72,630/-. LATER A.O. NOTICED THAT ASSESSEE IS ENGAGED IN CONSTRUCTION ACTIVITIES ALSO WHOSE INCOM E WAS NOT DECLARED IN THE RETURN. THE A.O. RECORDED THE STATEMENT OF THE ASS ESSEE AND IN THIS STATEMENT HE ADMITTED THAT HE ALONG WITH HIS PARTNE R SHRI BIJALBHAI PANABHAI PARMAR HAD STARTED CONSTRUCTION BUSINESS IN THE PRO FIT SHARING RATIO OF 2:1, IN A PLOT BEARING SURVEY NO.357 SITUATED IN DANILIMDA AR EA OF AHMEDABAD. IN SUPPORT OF HIS CONTENTION THE ASSESSEE FILED FOLLOW ING DOCUMENTS :- (1) COPY OF SIGNED RECEIPT BY ASSESSEE DT.26-11-98 ACKNOWLEDGING RECEIPT FOR RS.20,000/- TOWARDS SALE PRICE OF SHOP NO.7 FOR RS.75,000/-; (2) COPY OF SALE AGREEMENT ON STAMP PAPER OF RS.10/ - WITH SAVITABEN S. PARIKH FOR SHOP NO.10 ON FINAL PLOT NO .115 OF SURVEY NO.357 SITUATED IN DANILIMDA (KNOWN AS BHIMR AO NI CHALI) FOR A PRICE OF RS.50,000/-; (3) COPY OF SALE AGREEMENT FOR SALE OF SHOP NO.6 TO SHRI JIVABHAI NAGARBHAI PARMAR; (4) COPY OF AGREEMENT TO SELL WITH SMT. MANIBEN KES HAVLAL PARMAR FOR RESIDENTIAL UNIT NO. 47 FOR A PRICE OF RS.1,28, 000/-. 3. THEREAFTER, THE A.O. CARRIED OUT INQUIRIES THROU GH HIS INSPECTOR AND FOUND THAT ASSESSEE HAS CARRIED OUT FOLLOWING BUSIN ESS ACTIVITIES :- (1) SHOP NO.22 HAS BEEN SOLD TO JIVABHAI N. PARMAR FOR RS.81,000/- (THIS SHOP IS NO.6 AS PER COPY OF AGREEMENT FILED W ITH THE REPORT). (2) SHOP NO.7 IS SOLD TO SHRI DAHYABHAI S. PARMAR FOR RS.60,000/- (3) SHOP NO.8 IS SOLD TO SHRI MAHENDRA P. SOLANKI FOR RS.70,000/- (4) SHOP NO.9 IS SOLD TO SHRI PURUSHOTTAM SOLANKI FOR RS.70,000/- (5) SHOP NO.10 IS SOLD TOSHRI RATILAL M. JADHAV FO R RS.75,000/- 4. ON THE FACTS OF THE INQUIRY THE A.O. WORKED OUT THAT THE ASSESSEE HAS CARRIED OUT CONSTRUCTION TO THE EXTENT OF RS.1,00,2 0,000/-. BEING SALE PROCEEDS. HE ESTIMATED THE PROFITS AT 10% WHICH WAS WORKED OU T AT RS.10,02,000/-. IN THE FINAL CONCLUSION THE A.O. OBSERVED AS UNDER :- IITA 4203-07 A.Y.99-00 3 YOUR SHARE IN THE ORAL PARTNERSHIP VENTURE WITH SH RI BIJALBHAI PARMAR IS 66.67% AS ADMITTED BEFORE THE UNDERSIGNED WHILE REC ORDING STATEMENT ON13-12-2006. THEREFORE, YOUR INCOME FROM BUSINESS OF CONSTRUCTIO N ACTIVITY COMES TO RS.6,68,030/- (66.67% OF RS.10,02,000/- WHICH IS P ROPOSED TO BE ADDED TO YOUR TOTAL INCOME UNDER THE HEAD BUSINESS AND PROFESSION. YOU ARE ALSO REQUESTED TO SHOW-CAUSE AS TO WHY PENA LTY PROCEEDINGS U/S. 271B SHOULD NOT BE INITIATED AS YOU HAVE NOT F ILED AUDIT REPORT U/S. 44AB AS YOUR TURNOVER HAS EXCEEDED RS.40 LAKHS DURI NG THE YEAR UNDER CONSIDERATION. HE ACCORDINGLY, ASSESSED 2/3 RD OF THE INCOME OF THE ASSESSEE AT RS.6,68,030/- . 5. THE LD. C.I.T. (A) HELD THAT ONCE TWO PERSONS AR E INVOLVED IN THE BUSINESS ACTIVITIES THEN INCOME THERE-FROM SHOULD H AVE BEEN ASSESSED AS BUSINESS INCOME. HE OBSERVED AS UNDER :- I HAVE CONSIDERED THIS POINT IN THE LIGHT OF THE C ASE AND MATERIAL AVAILABLE TILL DATE OF PASSING OF THIS ORDER. BEFOR E ME ALSO, THE APPELLANT COULD NOT SUBSTANTIATE THE CLAIM OF STATUS OF A VAL ID PARTNERSHIP FIRM. I HOLD THAT THERE DID NOT EXIST A FIRM BECAUSE IT IS NOT EVIDENCED BY A PARTNERSHIP DEED OR A LEGAL INSTRUMENT TO THIS EFFE CT. IN ABSENCE OF SUCH DEED, NATURE OF BUSINESS, PLACE OF BUSINESS, DATE O F COMMENCEMENT OF PARTNERSHIP BUSINESS, DURATION OF PARTNERSHIP, CAPI TAL SUBSCRIBED BY THE PARTNERS, DUTIES AND RIGHTS OF PARTNERS, SPECIFIC S HARES OF PARTNERS ARE NOT KNOWN. THUS, IT DOES NOT SATISFY THE BASIC COND ITIONS OF SECTION 184 OF THE I.T. ACT. HOWEVER, IT IS SEEN THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT BY ACCEPTING THE FACT THAT THE CONSTRUCT ION BUSINESS WAS CARRIED ON BY THE APPELLANT WITH ONE OTHER PERSON N AMED SHRI BIJALBHAI PANABHAI PARMAR, AND ON THE BASIS OF STATEMENT OF T HE APPELLANT, HER HAS ASSESSED THE INCOME OF THE APPELLANT TAKING HIS SHARE IN INCOME AT 66.67%.THIS ACTION OF THE ASSESSING OFFICER IS NOT LEGALLU JUSTIFIED. IN ABSENCE OF ANY EVIDENCE IN RESPECT OF LEGAL PARTNER SHIP, ASSESSING OFFICER SHOULD HAVE ASSESSED THE INCOME IN RIGHT HA NDS AND UNDER THE FACTS AND CIRCUMSTANCES; HE WAS REQUIRED TO ASSESS THE INCOME IN THE HANDS OF AOP. IN VIEW OF THESE FACTS, THE ADDITION OF RS.6,68,030/- MADE BY THE ASSESSING OFFICER TO THE INCOME OF THE APPELLANT IS DELETED. IITA 4203-07 A.Y.99-00 4 6. WE HAVE HEARD THE LD. D.R. AND LD. A.R. IN OUR C ONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER PASSED BY THE LD. C.I.T.(A).THE REASONS ARE THAT A.O. HAS HIMSELF GIVEN A FINDING T HAT TWO PERSONS NAMELY ASSESSEE AND SHRI BIJALBHAI PANABHAI PARMAR HAD JOI NED TOGETHER TO CARRY ON THE BUSINESS AND SHARE THE PROFITS THEREFROM. AS T HERE IS NO PARTNERSHIP DEED VALIDLY EXECUTED BETWEEN THEM THE STATUS OF SUCH VE NTURE WOULD BE AOP. ALL THE INGREDIENTS OF AOP ARE SATISFIED I.E. THE TWO P ERSONS HAVE JOINED TOGETHER TO CARRY ON THE BUSINESS, THEY HAVE COMMON INTEREST IN EARNING INCOME AND SHARING THE PROFITS, THEY HAVE DEFINITE SHARE FOR S HARING SUCH PROFIT AND THEY HAVE MADE INVESTMENT FOR CARRYING OUT THEIR BUSINES S. ACCORDINGLY LD. C.I.T.(A) WAS JUSTIFIED IN HOLDING THAT INCOME FROM CONSTRUCTION ACTIVITIES SHOULD BE ASSESSED IN THE STATUS OF A.O.P. 7. AS A RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 09 / 07/2010. SD/- SD/- (BHAVNESH SAINI) (D. C. AGRAWAL) JUDICIAL MEMBER ACCOUNT ANT MEMBER. AHMEDABAD. DATED: 09 /07 2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGIST RAR ITAT,AHMEDABAD.