The ACIT, Circle-6, Surat V. M/s. R.B. Developers, Surat

ITA 523/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9047 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 05-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K N BHAT
• Keywords: Business income; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.523/AHD/2007 A. Y.: 2003-04 THE A. C. I. T., CIRCLE-6, SURAT, ROOM NO.218, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS M/S. R. B. DEVELOPERS, PUSPA NAGAR SOCIETY, ANJANA, TALUKA CHORYASI, DIST SURAT, PA NO. AAFFR 9133E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SANJEEV KASHYAP, DR RESPONDENT BY SHRI K. N. BHAT, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, SURAT DATED 27- 11-2006 FOR ASSESSMENT YEAR 2003-04, CHALLENGING THE DELETION O F ADDITION OF RS.51 LACS IN THE CASE OF THE ASSESSEE. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT A SURVEY U/S 133 OF THE IT ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE ASS ESSEE ON 18-02-2003, DURING WHICH ONE OF THE MEMBER OF THE AOP, SHRI RAM ESHBHAI AHIR DECLARED AN AMOUNT OF RS.1.51 CRORES AS INCOME OF T HE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL. HOWEVER, IN THE NOTE APPENDED TO THE RETURN OF INCOME, THE ASSESSEE STATED THAT IT HAD B OOKED THE ENTIRE PROJECT AND THE NET PROFIT FROM THE ENTIRE PROJECT WAS OFFERED FOR TAXATION ON RECEIPT BASIS. THE BOOKING PRICE WOULD BE ADJUST ED AGAINST THE COST OF THE PROJECT AS AND WHEN INCURRED. HOWEVER, THE INCO ME DECLARED STATED TO BE RS.150 LACS WAS BEING BIFURCATED AND OFFERED FOR TAXATION PARTLY IN THE FIRM AND PARTLY IN THE CASE OF THE OWNER OF THE LAND, BHALABHAI AHIR ((HUF) AS CAPITAL GAIN ON SALE OF LAND. THE AO HELD THAT THIS NOTE APPEARS ITA NO.523/AHD/2007 M/S. R. B. DEVELOPERS 2 TO BE AFTERTHOUGHT BECAUSE IT WAS NOT MENTIONED AT THE TIME OF SURVEY. THE AO RELIED ON THE STATEMENT OF RAMESHBHAI AHIR R ECORDED DURING THE COURSE OF SURVEY WHEREIN IT WAS STATED THAT LAND IN WHICH THE HOUSING PROJECT WAS CONSTRUCTED WAS INHERITED LAND IN THE N AME OF HIMSELF AND TWO OF HIS BROTHERS AND THAT THEY HAVE NOT KEPT ANY BOOKS OF ACCOUNT. THEREFORE, RS.1.51 CRORES BEING INCOME EARNED FROM THE PROJECT WAS BEING OFFERED FOR TAXATION. THE AO, THEREFORE, HELD THAT THE ASSESSEE COULD NOT DENY THE SAME. HE, THEREFORE, TREATED THE ENTIR E INCOME OF RS.1.51 CRORES AS BUSINESS INCOME OF THE ASSESSEE. 3. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE LAND ORIGINALLY WAS AGRICULTURAL LAND AND BELONGED TO HUF. DURING T HE COURSE OF SURVEY, ALTHOUGH THERE WAS NOT EVEN SALE OF A SINGLE RAW HO USE, THE DEPARTMENT FORCED THE ASSESSEE TO DECLARE PROFIT ON THE ENTIRE PROJECT. THE PROFIT WAS CALCULATED BUT THE ASSESSEE WAS NOT AWARE OF THE IT ACT WHICH COULD HAVE FORCED IT TO BIFURCATE THE PROFIT INTO THE BUSINESS PROFIT AND CAPITAL GAIN. THE ASSESSEE IMMEDIATELY INFORMED THE REVENUE DEPAR TMENT THAT THE LAND BELONGS TO HUF AND IT WOULD BE CAPITAL GAIN ON SALE OF SUCH LAND AMOUNTING TO RS.50 LACS AND IT WOULD BE THE INCOME OF THE ASSESSEE AND BALANCE WOULD BE OFFERED AS BUSINESS INCOME OF THE ASSESSEE FIRM. IT WAS SUBMITTED THAT AGREEMENT WAS ENTERED INTO BETWEEN B HALABHAI AHIR (HUF) AND M/S. R. B. DEVELOPERS ON 16-08-2002 MUCH PRIOR TO THE DATE OF SURVEY IN WHICH IT WAS AGREED THAT THE OWNERSHIP OF THE LAND WILL REMAIN WITH THE HUF AND THE FIRM WILL MAKE CONSTRUC TION ON THE SAID PLOTS AND THAT PAYMENT OF THE PLOT PRICE RECOVERED FROM THE BUYERS WILL BE PAID TO THE HUF. IT WAS, THEREFORE, SUBMITTED THAT THE AGREEMENT WAS SUFFICIENT PROOF OF THE FACT THAT THE LAND WAS ACTU ALLY BELONGING TO HUF AND THE SALE OF SUCH LAND WAS CORRECTLY TAKEN AS IN COME FROM LONG TERM CAPITAL GAINS. ITA NO.523/AHD/2007 M/S. R. B. DEVELOPERS 3 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD NOTED THAT THE ASSESSEE AOP IS NOT OWNER OF THE LAND BUT IT BELONGS TO THE HUF. THEREF ORE, THE SAME IS TO BE CONSIDERED IN THE CASE OF THE HUF. THE APPEAL OF TH E ASSESSEE WAS ACCORDINGLY ALLOWED. HIS FINDINGS ARE REPRODUCED AS UNDER: I HAVE PERUSED THE DETAILS AND HAVE GONE THROUGH T HE AGREEMENT BETWEEN THE HUF AND THE APPELLANT. IT IS AMPLY CLEAR THAT THE LAND IN QUESTION BELONG TO THE HUF A ND THEREFORE, THE SALE PROCEEDS OF THIS LAND WHICH WAS ANCESTRAL IN CHARACTER HAS RIGHTLY BEEN DECLARED AS LONG TERM CAPITAL GAINS. THE APPELLANT AOP WAS NOT THE OWNER OF THE L AND AND SINCE ALL THE SALE PROCEEDS FROM SALE OF THIS LAND WERE TO BE HANDED OVER TO THE HUF, THE PROFITS THERE FROM DID NOT BELONG TO THE APPELLANT FIRM AND THEREFORE, COULD NOT BE T ERMED AS BUSINESS PROFITS. I AM OF THE CONSIDERED VIEW THAT THE PROFITS ON SALE OF THE LAND WHICH BELONG TO THE HUF HAVE BE EN RIGHTLY DECLARED AS LONG TERM CAPITAL GAIN BY THE HUF IN WH OSE CASE THE DECLARED INCOME FROM CAPITAL GAINS HAS BEEN ASS ESSED ON A PROTECTIVE BASIS. IN VIEW OF THIS, ADDITION OF RS .51 LAKHS MADE IN THE CASE OF THE APPELLANT IS HEREBY DIRECTE D TO BE DELETED TO BE ASSESSED AS LONG TERM CAPITAL GAINS I N THE HANDS OF THE HUF. IN THE RESULT, THE APPEAL IS ALLOWED. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION OF RS. 51 LACS. AS PER THE AGREEMENT PRODUCED ON RECORD BEFORE THE AUT HORITIES BELOW THE SAME WAS FOUND TO BE EXECUTED BETWEEN THE HUF AND T HE ASSESSEE AOP. THE LAND IN QUESTION BELONGED TO HUF. THEREFORE, TH E SALE PROCEEDS OF THE LAND WERE TO BE HANDED OVER TO THE HUF. THE PROFITS , THEREFORE, COULD NOT BE TREATED AS INCOME OF THE ASSESSEE AOP. THE LEARN ED CIT(A) WAS, THEREFORE, JUSTIFIED IN HOLDING THAT THE ADDITION I S TO BE MADE IN THE CASE OF THE HUF. NO MATERIAL IS PRODUCED BEFORE US TO CO NTRADICT THE FINDINGS OF THE LEARNED CIT(A). WE ACCORDINGLY DO NOT FIND A NY JUSTIFICATION TO ITA NO.523/AHD/2007 M/S. R. B. DEVELOPERS 4 INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). WE CONFIRM HIS FINDING AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 6. AS A RESULT, DEPARTMENTAL APPEAL STANDS DISMISSE D. ORDER PRONOUNCED ON 05-02-2010 SD/- SD/ (A. N. PAHUJA) ACOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 05-02-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD