Shri Piyushkumar Ravjibhai Dedania, Rajkot V. The Pr. CIT-1, Rajkot, Rajkot

ITA 5/RJT/2021

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8376 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-02-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 14-02-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Capital Gains
• Section: 263; 2; 2(14); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o .0 5 / R j t/2 0 2 1 ( A s se ss m e nt Y e a r : 20 16- 17 ) Pi yu s h ku m a r R a vj i bh a i D e d a n i a, C / o. R . K . Sh uk la & C o ., 20 1, O p e r a To w e r, J a w a h a r R o a d , O p p. Ga la x y H ot el, R a j k ot -3 60 0 0 1 V s . Pr i nc ip al C o mm i ss i on e r of I nc o me Ta x - 1 , R aj ko t [ P A N N o. AA K P D9 71 4 C ] (Appellant) .. (Respondent) Appellant by : None Respondent by: Shri Shramdeep Sinha, CIT DR D a t e of H ea r i ng 28.02.2024 D a t e of P r o no u n ce me nt 06.03.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: This appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (in short “Ld. PCIT”), Rajkot-1 in DIN & Order No. ITBA/REV/F/REV5/2020-21/1030295644(1) vide order dated 03.02.2021. 2. The assessee has taken the following grounds of appeals:- “1. The honorable Pr. Commissioner of Income Tax, Rajkot – 1 erred in passing order under Section. 263 of the Act holding Assessment order passed by the Assessing officer as erroneous in so far as it is prejudicial to the interest of revenue and accordingly, as per the provisions of sub Section 1 of Section 263 of the I. T. Act, directed the AO to enhance the assessed income by Rs.9,86,871/-.” 3. The brief facts of the case are that during the consideration, the assessee sold and claimed capital loss of Rs. 9.86 lakhs on sale of car by ITA No.05/Rjt/2021 Piyushkumar Ravjibhai Dedania vs. PCIT Asst.Year –2016-17 - 2 - indexing the purchase price of car and adjusting the loss against long-term capital gain. The PCIT initiated 263 proceedings by observing that according to Section 2(14) of the Act, a car is a “personal asset/effect” and capital loss by the assessee on sale of car was required to be added by the assessing officer, at the time of finalizing the assessment. 4. During the course of 263 proceedings, the assessee submitted that firstly, the aforesaid claim of capital loss was allowed by the assessing officer after due verification. The assessee submitted that the AO had issued show-cause noted dated 27.10.2018 and the assessee had furnished detailed reply with evidence on 05.11.2018. Secondly, the assessee submitted that according to Section 2 (14), a capital asset means “property of any kind held by the assessee, whether or not connected with his business or profession“. Further, the assessee submitted that the car is also not covered under definitions provided for exclusions from “personal assets”. Accordingly, the assessee submitted that the 263 proceedings were unsustainable in law for the aforesaid reason. 5. However, PCIT did not accept the contention of the assessee and set aside the order with the following observations : “7. As per section 2(14) personal effects are not to be treated as capital asset and the car was a personal asset outside the purview of section 2(14) of I. T. Act. There is nothing on record which may-indicate that the car against which capital loss was claimed was even used for business purposes. It is also fact that during assessment proceedings the AO has not at all examined this issue. This facts will indicates that allowing of capital loss against sale of car treating the same as capital asset was the contravention of section 2(14) of I. T. Act, has rendered the assessment order passed by the AO erroneous. Due to allowing of such wrong claim, the tax liability was reduced and therefore this order was also prejudicial to the interest of Revenue. ITA No.05/Rjt/2021 Piyushkumar Ravjibhai Dedania vs. PCIT Asst.Year –2016-17 - 3 - As regards the assessee’s reliance oil the decision of Hon'ble Gujarat High Court in the case of CIT v/s Akshar Jewellers (2003) 259 ITR 502, wherein it has been held that when on the basis of available material the AO has taken particular view, the mere fact that different view cannot be a basis for invoking of provisions of section 263 of Act, it may be mentioned that the facts of the case relied upon by the assessee are entirely different and not similar to the facts to the assessee's case. In fact the assessee's case is that the personal affects / items used for personal use cannot be treated as capital asset as per section 2(14) of I. T. Act, whereas the assessee has treated the personal car as capital asset is contravention of section 2(14) of the I. T. Act. Therefore this is a case where there cannot be two opinions on his issue. In this regard reliance is made on the decision of Hon'ble jurisdictional ITAT in ITA No.2493/Ahd/2016 dated 04-09-2016 in the case of Shri Babulal Solanki v/s Income-tax Officer, wherein it has been held that when the AO has adopted and accepted assessee's claim which was clearly unsustainable in law, such cases will be within the purview of 263 of I. T. Act even if the AO has examined such issue at the time of assessment proceedings.” 6. The assessee in appeal before us against the order passed by PCIT holding the assessment order as erroneous and prejudice to the interest of the Revenue. Before us, none appeared on behalf of the assessee. 7. Before us, the DR placed reliance on the case of H H. Maharaj Rana. V CIT, 1976 AIR, 662, which has held that Section 2(4A) of Income Tax Act, 1922 provides that “personal effects “that is to say movable property (including wearing apparel, jewellery and furniture) held for personal use by the assessee or any member of his family, dependent on him shall not be included in the “capital assets” of the assessee. Accordingly, the DR submitted that the assessing officer had clearly erred in fact and in law in allowing the claim of set off of capital loss on sale of car, which is the personal asset of the assessee against other long-term capital gain. 8. We have heard the contentions of Ld. D.R. and perused the material on record. The issue for consideration before us is whether a motorcar, which has been used by the assessee for his personal use, would qualify as a ITA No.05/Rjt/2021 Piyushkumar Ravjibhai Dedania vs. PCIT Asst.Year –2016-17 - 4 - capital asset and the assessee would be eligible to claim benefit of set off of loss on sale of motor car against other capital gains made by the assessee. We observe that in the case of H.H. Maharaja Rana Hemant Singhji 103 ITR 61 (SC), the Hon'ble Supreme Court made the following observations: “The expression "personal use" occurring in Section 2(4A)(ii ) of the 1922 Act is very significant. A close scrutiny of the context in which the expression occurs showed that only those effects can legitimately be said to be personal which pertain to the assessee's person. In other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them "personal effects". The enumeration of articles like wearing apparel, jewellery, and furniture mentioned by way of illustrations in the above-quoted definition of "personal effects" also showed that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the assessee. The meaning assigned to the expression "personal effects" in various dictionaries also lends support to this view.” 9. In the case of Narendra I. Bhuva 90 ITD 174 (Mumbai), the ITAT held that test, which is to be applied for ascertaining whether a particular asset is ‘personal effect’, would be whether particular asset was intimately and commonly used by assessee. In this case, Assessee, a salaried employee, purchased a Ford Tourer 1931 Model car sometime in 1983. He never used that car and parked it at his family resident. Subsequently, he sold that car and claimed that income therefrom was not taxable as he had purchased said antique car as a ‘pride of possession’ and, thus, it was a ‘personal effect’. The ITAT held that ‘pride of possession’ cannot be characterized as ‘personal use’ and thus, antique car held, but never used by assessee was not a ‘personal effect’ as occurring in Section 2(14)(ii), rather it was a capital asset. Therefore, surplus realized on sale of car was chargeable to capital gain under Section 45 of the Act. ITA No.05/Rjt/2021 Piyushkumar Ravjibhai Dedania vs. PCIT Asst.Year –2016-17 - 5 - 10. Therefore, in our considered view, whether a motor car is a capital asset or not, or would qualify as a “personal effect” and hence falling outside, the purview of a capital asset would depend upon the use to which the motor car has been put by the assessee. In case, as held in the aforesaid decision by Mumbai ITAT, the motor car is not at all used for personal purposes, but has been held as an asset i.e. possession of pride as a collector’s item, then the sale thereof would attract capital gains. Similarly, if it is found that the motor car is for business purposes, then the assessee would be eligible to claim depreciation on such asset and sale would be exigible to capital gains tax provisions. However, if it is seen that the motor car has been used by the assessee for purely personal purposes/usage on regular basis, then, in our considered view, the same would not come within the purview of the capital asset and would fall within the exclusion of “personal effect”. In the instant facts, the PCIT has correctly observed that the assessee has not been able to demonstrate that the car was used by the assessee for its business purposes so asked to be eligible for capital gains/losses on sale thereof. Further, clearly the asset was not held as an antique item or “possession of pride” and again would not qualify as a “capital asset” for this reason as well. In this case, the PCIT has correctly observed that the assessee was using the car for his daily/personal purposes and hence qualified as personal effects i.e. movable property held for personal use by the assessee. Therefore, in the instant facts, the PCIT has correctly observed that from the facts apparent on the face of record, the motor car qualified as a personal effect of the assessee, and was falling outside, the purview of capital asset and was coming under the definition of exclusions to Section 2(14) of the Act. Further, it is well settled law that ITA No.05/Rjt/2021 Piyushkumar Ravjibhai Dedania vs. PCIT Asst.Year –2016-17 - 6 - even if the issue has been examined by the assessing officer, but a view has been taken, which is apparently an incorrect position of law as evident from the facts of the case, then as held by Ahmedabad ITAT, in the case of Shri Babula Solanki vs. ITO in ITA No. 2493/Ahd/2016, such cases will come within the review of Section 263 of the Act. 11. Accordingly, we find no infirmity in the order of PCIT so as to call for any interference. 12. In the result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 06/03/2024 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 06/03/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/ Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation 04.03.2024(Dictation given by Hon’ble Member on his Dragon Software) 2. Date on which the typed draft is placed before the Dictating Member 04.03.2024 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 05.03.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement .03.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 06.03.2024 7. Date on which the file goes to the Bench Clerk 06.03.2024 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Dispatch of the Order.......................................