ITO 25(3)(4), MUMBAI V. SHIVPUJAN R. YADAV, MUMBAI

ITA 4663/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83572 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 12-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SAMI
• Assessee Lawyers: K SHIVARAMSHRI RAHUL HAKANI
• Keywords: Unexplained cash credit; Sale consideration of property below Jantri Value; Capital asset; Business income; Business expenditure; Cost of acquisition
• Section: 50C; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI , ! '# $ $ $ $ , % && , , '# ' BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUICIAL MEMBER ./ I.T.A. NO.4663/MUM/2012 ( ( ( ( ( / ASSESSMENT YEAR :2009-10 THE ITO-25(3)(4), C-10, R. NO. 307, PRATYAKSH KAR BHAVAN, BANDCRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 / VS. SHRI SHIVPUJAN R. YADAV, SAVDHAN SEVA SOCIETY, 60 FT ROAD, GANDHI NAGAR, OPP KD COMPOUND, KANDIVALI (W), MUMBAI-400 067 #) ! ./ %* ./ PAN/GIR NO. : AAAPY 2227R ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . / APPELLANT BY: SHRI VIJAY KUMAR SAMI ,-)+ / . / RESPONDENT BY: SHRI K. SHIVARAM SHRI RAHUL HAKANI / 01! / DATE OF HEARING :12.08.2014 23( / 01! / DATE OF PRONOUNCEMENT :20.08.2014 '4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-35, MUMBAI DT.30.4.2012 PERTAINING TO A. Y.2009-10. 2. THE GRIEVANCES OF THE REVENUE READ AS UNDER: ITA NO. 4663/M/2012 2 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN LAW AND IN FACT IN HOL DING THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF PURCHASE AN D SALE OF LAND FOR LAST MANY YEARS AND THE SAME WAS ASSESSED AS BU SINESS INCOME IN ALL THE EARLIER ASSESSMENT YEARS. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE ASSESS EE IS IN THE BUSINESS OF PURCHASE AND SALE OF PLOT ALTHOUGH NO C ORRESPONDING DETAIL IS FIELD IN RETURN OF INCOME. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN LAW AND IN FACT IN HOLD ING THAT PROVISIONS OF SECTION 5OC OF THE ACT IS NOT APPLICA BLE IN THE FACTS OF THE ASSESSEES CASE. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW. THE LD. CIT(A) ERRED SIN LAW AND IN FACT IN HO LDING THAT TOTAL EXPENSES OF RS. 29,14,090/- WERE SOLELY ATTRIBUTABL E TO THE PURCHASE AND SALE AND DEVELOPMENT OF PLOTS/JHOPADAS WITHOUT ANY VERIFICATION AND ALLOWING BUSINESS EXPENDITURE OF R S. 29,14,090/- ON THIS ACCOUNT. (5) (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD. CIT(A) ERRED IN LAW AND IN FACT IN HOLDING THAT ADVANCES AND DEPOSITS OF RS 26.10,000 - ARE PROPERL Y EXPLAINED BY THE ASSESSEE AND NO ADDITION IS CALLED FOR ON THIS GROUND. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD. CIT (A) ERRED IN HOLDING THAT ADVANCES AND DEPOSITS OF RS 26.10.000 - ARE PROPERLY EXPLAINED O N THE BASIS OF PROBABILITIES & POSSIBILITIES AND WITHOUT GIVING ANY COGENT REASON. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FIELD OF CHAWLS, LABOUR JOBS AND PURCHASE AND SALE OF PLOTS. RETURN OF INC OME DECLARING TOTAL INCOME AT RS. 2,07,9943/- WAS FILED ON 16.9.2009. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY ST ATUTORY NOTICES WERE SERVED UPON THE ASSESSEE. ITA NO. 4663/M/2012 3 3.1. TAKING A LEAF OUT OF THE AIR INFORMATION, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SOLD TWO PLOTS FOR RS. 60,00,000/- AND RS. 1.38 CRORES ON 6.1.2009 AND 13.9.2009 RESPECTIVELY. THE AO ALSO NOTICED THAT THE ASSESSEE HAS PURCHASED ONE PROPERTY FOR RS . 1.38 CRORES ON 12.9.2008. DURING THE COURSE OF THE SCRUTINY ASSES SMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO GIVE DETAILS OF THE SALE OF P ROPERTY AND THE CORRESPONDING INCOME EARNED AND ALSO DETAILS OF THE PURCHASE OF PROPERTY. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DT. 4.8.2011 WHICH READS AS UNDER: AS REQUIRED DETAILS OF PURCHASE & SALE OF PLOT ARE ENCLOSED WITH RESPECT TO STAMP VALUE OF RS. 1,38,25,920/-. I T MAY BE APPRECIATED THIS PLOT WAS PURCHASED JOINTLY MR. LAL MAN ARNARDEV YADAV (30%), MR SHIVPUJAN YADAV (25%), MR. SAHABAL RAMLAGN YADAV (25%), MR. RAMJEET FEKU YADAV (20%), FROM THE DETAILS ENCLOSED IT MAY BE SEEN THAT THE PROPERTY HAS BEEN SOLD FOR RS.60,00,000/- AGAINST WHICH COST INCURRED IS RS. 3 6,77,837/ - & ACCORDINGLY NET PROFIT COMES TO RS. 23,22,163/ - OF WHICH 25% PROFIT IS TO THE CREDIT OF MR. SHIUPUJAN R YADAV AN D THE BALANCE TO THE CREDIT OF OTHER CO-SELLERS. IT MAY ALSO BE APPRECIATED THAT THIS IS A BUSINESS TRANSACTION & NOT A CAPITAL GAIN. TRANSACTION. THIS PLOT WAS PU RCHASED FOR RS. 14,40,000/- IN SEPTEMBER 2008 AND THE STAMP DUTY VA LUE OF THIS PURCHASE WAS ALSO STATED AT RS.1,38,25,920/-, AND A FTER DIRECT EXPENDITURES TOTAL COST CAME AT RS.36,77,837/-. THE SALE AND CONVEYANCE HAS HAPPENED IN JANUARY 200 9, FOR RS.60,00,000/- BUT AGAIN THE STAMP DUTY VALUE IS SH OWN AT RS. 1,38,25,920/- BECAUSE THE PLOT WAS A KHADHI AND CRZ PLOT, ENCROACHMENT, DISPUTED AND UNIDENTIFIABLE PLOT. THE DIFFERENCE IN VALUE HAS HAPPEN BECAUSE OF THE AREA CIRCLE RATE FO R THE STAMP DUTY. ITA NO. 4663/M/2012 4 3.2. THE ASSESSEE FURTHER EXPLAINED THAT PLOT NO. S -11/6,7,8 AND S- 12/9A WERE PURCHASED JOINTLY WITH HIS ASSOCIATES AN D THE SHARES OF THE ASSESSEE AND HIS ASSOCIATES ARE AS UNDER: PLOT DETAILS: SURVEY NO. 11 HISSA NO. 6,7,8 NAME SHARING RATIO 1. LALMAN AMARDEV YADAV 30% 2. SHIVPUJAN RAMDEV YADAV 25% 3. SAHABAL RAMLAGAN YADAV 25% 4. RAMJEET FEKU YADAV 20% PLOT DETAILS: SURVEY NO. 12 HISSA NO. 9A NAME SHARING RATIO 1. LALMAN AMARDEV YADAV 30% 2. SHIVPUJAN RAMDEV YADAV 25% 3. SAHABAL RAMLAGAN YADAV 25% 4. RAMJEET FEKU YADAV 20% 3.3. IN RESPECT OF SALE OF PLOT NO. S-12/9A, THE AS SESSEE STATED THAT IT WAS SOLD FOR RS. 60 LAKHS AND HIS SHARE @ 25% CAME TO RS. 15 LAKHS. IN RESPECT OF PLOT NO. S-11/ 6,7 & 8, IT WAS MENTIONED THAT THE PLOT WAS SOLD FOR RS. 1.40 CRORES AND ASSESSEES SHARE @ 25% WAS AT RS. 34,99,499/-. THE PROFIT FROM THE SALE OF PLOT WAS DETERMINED AFT ER DEDUCTING THE PURCHASE COST AND THE DEVELOPMENT EXPENSES. THE AS SESSEE WAS ASKED TO FURNISH THE DETAILS OF DEVELOPMENT EXPENSES. THE A SSESSEE SUBMITTED THE ITA NO. 4663/M/2012 5 DETAILS OF EXPENDITURE AMOUNTING TO RS. 26,29,673/- AND FOR THE BALANCE EXPENDITURE OF RS. 2,84,417/-. NO DETAILS WERE FUR NISHED. 3.4. IN SO FAR AS THE APPLICABILITY OF THE PROVISIO NS OF SEC. 50C IS CONCERNED, THE ASSESSEE STATED THAT HE IS IN THE BU SINESS OF PURCHASE AND SALE OF PLOT AND THEREFORE PROVISIONS OF SEC. 50C D O NOT APPLY ON THE BUSINESS PROFIT OF THE ASSESSEE. THE SUBMISSIONS M ADE BY THE ASSESSEE WERE CONSIDERED BY THE AO VIDE PARA-12 ON PAGE-6 OF HIS ORDER AND AFTER CONSIDERING THE SUBMISSIONS, THE AO WAS OF THE OPIN ION THAT THE PROFIT DERIVED ON THE SALE OF THE PLOT IS TO BE TAXED AS I NCOME FROM CAPITAL GAINS. THE AO PROCEEDED BY COMPUTING THE CAPITAL GAINS TAK ING THE STAMP DUTY VALUE AS THE FULL VALUE OF SALE CONSIDERATION. THE AO COMPUTED THE SHORT TERM CAPITAL GAIN (STCG) AT RS. 85,01,565/- AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAIN S. THE AO FURTHER DISALLOWED THE CLAIM OF DEVELOPMENT EXPENSES AMOUNT ING TO RS. 29,14,090/- AS HE DID NOT TREAT THE INCOME UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE AO FURTHER A DDED THE ADVANCES RECEIVED BY THE ASSESSEE AGAINST PLOTS, CHAWLS AMOU NTING TO RS. 26,10,000/-. 4. THE ASSESSEE CHALLENGED THE ASSESSMENT BEFORE TH E LD. CIT(A) AND REITERATED HIS CLAIM THAT HE IS IN THE BUSINESS OF PURCHASE AND SALE OF PLOT AND THEREFORE PROVISIONS OF SEC. 50C ARE NOT APPLIC ABLE . THE ASSESSEE ALSO FURNISHED THE COMPLETE DETAILS OF DEVELOPMENT EXPENSES AND THE DETAILS OF ADVANCES RECEIVED IN RESPECT OF PLOTS, C HAWLS. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) AT PARA-5.3 OF HIS ORDER OBSERVED THAT THE ASSESSEE TOGETHER WITH ONE OTHER PERSON HAS BEEN CARRYING ON THE BUSINESS IN THE FIELD OF LAND DEVELOPMENT, CONSTRUCTION, LABOUR JOBS RELATED TO CHAWLS/JHOPADA S FOR LAST QUITE A FEW ITA NO. 4663/M/2012 6 YEARS. THE LD. CIT(A) FURTHER OBSERVED THAT IN EAR LIER YEARS THE ASSESSEES INCOME HAS BEEN ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THERE IS NO CHANGE IN T HE BUSINESS ACTIVITIES DURING THE YEAR. RELYING UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF THIRUVENGADAM INVESTMENT PVT. LTD. 320 ITR 345 AND THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN TH E CASE OF ATUL G. PURANIK VS ITO 11 ITR 120, THE LD. CIT(A) CONCLUDED BY HOLDING THAT THE ASSESSEE HAS EARNED INCOME FROM SALE OF BUSINES S ASSETS WHICH IS ASSESSABLE AS BUSINESS INCOME ONLY. THEREFORE, SEC TION 50C IS NOT APPLICABLE TO THE FACTS OF THE CASE AND DIRECTED TH E AO ACCORDINGLY. 4.1. IN SO FAR AS THE ADDITION OF PLOT DEVELOPMENT EXPENSE IS CONCERNED, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS FILED COMPLETE DETAILS SEPARATELY IN RESPECT OF ALL THE THREE SET OF PLOTS AND THE EXPENSES TALLIED WITH THE BANK PASSBOOKS. THE LD. CIT(A) WAS CONVIN CED THAT THE EXPENSES ARE FULLY ALLOWABLE AS BUSINESS EXPENDITU RE AND DIRECTED THE AO TO ALLOW THE DEDUCTION FOR FULL BUSINESS EXPENDITUR E OF RS. 29,14,090/-. 4.2. IN RESPECT OF ADVANCES RECEIVED AGAINST PLOTS/ CHAWLS, THE LD. CIT(A) AT PARA-7.2 OF HIS ORDER OBSERVED THAT THESE ADVANCES ARE RECEIVED FROM ABOUT 52 PARTIES ON ACCOUNT OF ADVANCES AND DE POSITS AGAINST SALE OF PLOTS AND CHAWLS. THE LD. CIT(A) FURTHER OBSERVED THAT COMPLETE DETAILS WITH FULL NAME, ADDRESS AND AMOUNT OF ADVANCES AND CONFIRMATIONS OF THE PARTIES WITH I.T. PAN ARE SUBMITTED IN THE ASSESSME NT PROCEEDINGS. THE LD. CIT(A) CONVINCED THAT ADVANCES AND DEPOSITS AGA INST SALE OF PLOTS/CHAWLS ARE DULY CONFIRMED AND CANNOT BE ADDED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. THE ADDITION OF RS. 26, 10,000/- WAS DELETED. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. ITA NO. 4663/M/2012 7 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF PLOT FOR PAST MANY YEARS. IT IS ALSO AN UNDISPUTED FACT THAT INCOME OUT OF THE AFORESAID TRANSACTIONS WAS ALWAYS TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON IN EARLIER YEARS. THE HONBLE MADRAS HIGH COURT IN THE CASE OF THIRUV ENGADAM INVESTMENT PVT. LTD.(SUPRA) HAS HELD THAT SINCE THE PROPERTY IN THE HANDS OF THE ASSESSEE WAS TREATED AS A BUSINESS ASSET AND NOT AS A CAPITAL ASSET, THERE WAS NO QUESTION OF INVOKING THE PROVISIONS OF SEC. 50C WHICH PERTAINS TO DETERMINING THE FULL VALUE OF THE CAPIT AL ASSET. A SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF ATUL G. PURANIK (SUPRA) WHEREIN IT HAS BEEN HELD THAT SEC. 50C IS A DEEMING PROVISION WHICH EXTENDS ONLY TO CAPITAL ASSET. CON SIDERING THE PAST HISTORY, IN THE LIGHT OF THE FACTS OF THE CASE IN H AND, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). GROUND NO. 1, 2 & 3 ARE ACCORDINGLY DISMISSED. 9. IN SO FAR AS DISALLOWANCE OF BUSINESS EXPENDITUR ES ARE CONCERNED, WE FIND THAT THE AO HAS DISALLOWED THE CLAIM OF DEV ELOPMENT EXPENDITURES BECAUSE HE HAS NOT ACCEPTED THE SALE A ND PURCHASE ACTIVITIES AS A BUSINESS TRANSACTION. A PERUSAL OF THE DETAIL S OF THE DEVELOPMENT EXPENDITURE SHOWS THAT RS. 2,70,000/- HAS BEEN PAID TO FOUR PARTIES FOR VACATING THE ENCROACHED PLOT RS. 4,70,824/- HAS BEE N INCURRED AS SECURITY ITA NO. 4663/M/2012 8 CHARGES AND RS. 18,88,849/- ON BOUNDARY WORKS AND T HE BALANCE AMOUNT OF RS. 2,84,417/- HAS BEEN INCURRED IN RESPECT OF S TAMP DUTY, REGISTRATION CHARGES AND PROFESSIONAL FEES. AS ALL THE EXPENDIT URES HAVE BEEN FOUND TO BE VERIFIABLE WITH NECESSARY DETAILS ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). GROUN D NO. 4 IS ACCORDINGLY DISMISSED. 10. GROUND NO. 5 RELATES TO THE DELETION OF ADDITIO N MADE ON ACCOUNT OF ADVANCE AND DEPOSITS OF RS. 26,10,000/-. 10.1. A PERUSAL OF THE ORDER SHOWS THAT DETAILS IN RESPECT OF 52 PARTIES WERE FILED WITH FULL NAME AND ADDRESSES AND THE AMO UNT RANGES FROM RS. 20,000/- TO RS. 70,000/- FROM EACH CUSTOMER WHO COM E FROM LOWER STRATA OF SOCIETY HAVING LOWER INCOME. THE SOLE REASON FO R MAKING THIS ADDITION BY THE AO IS THAT THE AMOUNTS HAVE BEEN RECEIVED IN CASH. CONSIDERING THE LOCALITY WHERE THE ASSESSEE IS DOING BUSINESS O F PURCHASE AND SALE OF PLOT, THE TRANSACTION IN CASH APPEARS TO BE JUSTIFI ABLE EVEN OTHERWISE THERE ARE SEPARATE PROVISIONS IN THE ACT TO DEAL WITH TRA NSACTIONS DONE IN CASH OVER AND ABOVE RS. 20,000/-. MERELY BECAUSE THE TR ANSACTIONS HAVE BEEN DONE IN CASH, THE ADDITIONS CANNOT BE JUSTIFIED. W E, ACCORDINGLY CONFIRM THE FINDINGS OF THE LD. CIT(A). GROUND NO. 5 IS AC CORDINGLY DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST, 2014 SD/- SD/- (SANJAY GARG ) (N.K. BILLAIYA) '# / JUDICIAL MEMBER ! '# / ACCOUNTANT MEMBER MUMBAI; 5' DATED : 20 TH AUGUST, 2014 . . ./ RJ , SR. PS ITA NO. 4663/M/2012 9 '4 '4 '4 '4 / // / ,0 ,0 ,0 ,0 6(0 6(0 6(0 6(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 8& ,0 , , / DR, ITAT, MUMBAI 6. &9 : / GUARD FILE. '4 '4 '4 '4 / BY ORDER, -0 ,0 //TRUE COPY// ; ;; ; / < < < < % % % % (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI