Smt.M.Lakshmi, Bangalore V. Income Tax Officer, Bangalore

ITA 539/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5335 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS JT BENGALURU
• Assessee Lawyers: PRATIBHA
• Keywords: Reopening of assessment
• Section: 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NOS.539 & 542/BANG/2017 ASSESSMENT YEARS : 2007-08 & 2008-09 SMT. M. LAKSHMI, NO.11, 1 ST FLOOR, HANUMAGIRI NAGAR, SUBRAMANYAPURA POST, CHIKKALASANDRA POST, BANGALORE 560 061. PAN: AAEPL 1657L VS. THE INCOME TAX OFFICER, WARD 10(2), BENGALURU. APPELLANT RESPONDENT ITA NOS.575, 540 & 541/BANG/2017 ASSESSMENT YEARS : 2006-07, 2007-08 & 2008- 09 SMT. H. GAYATHRI, NO.196, 24 TH CROSS, 16 TH MAIN, BANASHANKARI II STAGE, BANGALORE 560 062. PAN: ACCPG 6182H VS. THE INCOME TAX OFFICER, WARD 10(2), BENGALURU. APPELLANT RESPONDENT APPELLANTS BY : SMT. PRATIBHA, ADVOCATE RESPONDENT BY : SMT. SWAPNA DAS, JT.CIT(DR)(ITAT)-2, BENGALURU DATE OF HEARING : 17.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 ITA NO.539 TO 542 & 575/B/2017 PAGE 2 OF 7 O R D E R THESE APPEALS ARE PREFERRED BY THE ASSESSES AGAINS T THE RESPECTIVE ORDER OF CIT(APPEALS) ON COMMON GROUNDS AND FOR THE SAKE OF REFERENCE, I EXTRACT THE GROUNDS OF ITA NO.539/BANG/2017 HEREUND ER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT BY ISSUING THE NOTICE U/S.148 WAS OPPOSED TO LAW AND ACCORDINGLY T HE ASSESSMENT AS MADE IS LIABLE TO BE CANCELLED. 2. THE CONDITIONS PRECEDENT BEING ABSENT, THE REOP ENING OF THE ASSESSMENT U/S.147 IS BAD IN LAW. 3. THERE BEING NO OMISSION MUCH LESS AN OMISSION O F DECLARATION OF INCOME IN THE RELEVANT ASSESSMENT YE AR IN THE RETURN OF INCOME FILED BY THE APPELLANT, THE REOPEN ING OF THE ASSESSMENT U/S. 147 WAS WITHOUT JURISDICTION AND CO NSEQUENTLY THE REASSESSMENT IS LIABLE TO BE ANNULLED. 4. THE LEARNED CIT(A) ERRED CONFIRMING THE ADDITIO N MADE UNDER THE HEAD SHORT TERM CAPITAL GAINS AND MAKING ADDITION OF RS.22,75,757/- IN THE HANDS OF THE APPELLANT. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT THE TRANSACTION DID NOT BELONG TO THE APPELLANT INDIVID UALLY AND THE TRANSACTIONS WERE REQUIRED TO BE CONSIDERED IN THE HANDS OF AOP IN WHICH THE APPELLANT WAS A MEMBER WITH 1/7 TH SHARE. 6. THE LEARNED CIT(A) HAVING PERUSED THE AGREEMENT OF AOP OUGHT TO HAVE APPRECIATED THAT THERE WAS A VALID AO P IN EXISTENCE WHICH CARRIED ON THE TRANSACTION AS BUSINESS TRANSA CTION/ ADVENTURE IN THE NATURE OF TRADE AND ACCORDINGLY TH E AOP ALONE WAS LIABLE TO TAX AND NO PART OF THE INCOME IF ANY OF THE AOP WAS LIABLE TO BE CONFIRMED IN THE HANDS OF THE APPELLAN T. 7. ON THE FACTS THE LEARNED CIT(A) OUGHT TO HAVE A PPRECIATED THAT THE TRANSACTION DID NOT YIELD INCOME WHICH HAD ENDED UP IN LOSS AND EVEN IF THE APPELLANT WAS LIABLE TO BE ASS ESSED ON HIS ITA NO.539 TO 542 & 575/B/2017 PAGE 3 OF 7 SHARE IT WAS LOSS, WHICH WAS REQUIRED TO BE CONSIDE RED FOR SET OFF AGAINST HIS OTHER INCOME. 8. THE LEARNED CIT(A) OUGHT TO HAVE GIVEN ADEQUATE OPPORTUNITY TO THE APPELLANT FOR PROVIDING THE DETA ILS WITH REGARD TO VARIOUS INCOME INCURRED IN CONNECTION WITH THE S AME PURCHASE WHICH HAD DIRECT BEARING AND WAS LIABLE TO BE DEDUC TED FOR COMPUTING THE PROFIT/ LOSS OF THE TRANSACTION. 9. THE ID CIT(A) OUGHT TO HAVE CONSIDERED THE DOCU MENTARY EVIDENCES FILED WITH REGARD TO THE EXPENDITURE INCU RRED FOR DEVELOPMENT OF LAND, OR GIVEN AN ONE MORE OPPORTUNI TY BEFORE THE AO FOR EXPLANATION. THUS, THE ID CIT(A) OUGHT TO HA VE ALLOWED THE EXPENDITURE INCURRED IN FULL 10. WITHOUT PREJUDICE, THE IMPUGNED ADDITIONS CONF IRMED ARE OPPOSED TO LAW IN THAT NO ADEQUATE OPPORTUNITY WAS GIVEN TO THE APPELLANT TO PROVE THE GENUINENESS OF THE TRANSACTI ON AND THE FINANCIAL RESULTS THERE FROM BESIDES THE SOURCE OF INVESTMENT. 11. WITHOUT PREJUDICE, THE ADDITIONS/DISALLOWANCES WERE EXCESSIVE, ARBITRARY AND UNREASONABLE AND OUGHT TO BE REDUCED SUBSTANTIALLY. 12. THE LEARNED CIT(A) ERRED IN CONFIRMING THE INT EREST U/S. 234A, 234B AND 234C OF THE ACT. 13. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT T HE APPEAL MAY BE ALLOWED. 2. THROUGH THE FIRST 3 GROUNDS IN THESE APPEALS, RE OPENING OF ASSESSMENT IS CHALLENGED BY THE ASSESSES ON THE GRO UND THAT THERE WAS NO MATERIAL INFORMATION BEFORE THE AO TO REOPEN THE AS SESSMENT IN THE HANDS OF ASSESSEE; WHEREAS THE ACTIVITIES OF SALE/PURCHAS E OF LAND WAS UNDERTAKEN BY THE AOP OF WHICH THE ASSESSES ARE MEM BERS. IT WAS FURTHER CONTENDED THAT ASSESSMENT OUGHT TO HAVE BEEN FRAMED IN THE HANDS OF ITA NO.539 TO 542 & 575/B/2017 PAGE 4 OF 7 AOP AND NOT THE INDIVIDUALS. THEREFORE, REOPENING OF THE ASSESSMENT FRAMED IN THE HANDS OF ASSESSES IS NOT PROPER AND D ESERVES TO BE QUASHED. 3. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED THA T AS PER INFORMATION GATHERED IT WAS FOUND THAT ASSESSEES ALONG WITH 6 O THER PERSONS HAVE PURCHASED TWO PLOTS OF CONVERTED LAND MEASURING 1 A CRE 9.5 GUNTAS AND 2 ACRES 35 GUNTAS IN SEE. NO.8, VADDARAPALYA VILLAGE, UTTARAHALLI HOBLI, BANGALORE SOUTH. THESE PLOTS WERE PURCHASED ON 01. 07.2004 AND 30.10.2004 RESPECTIVELY WITH A TOTAL INVESTMENT OF RS.30,50,610. THE LAND WAS DIVIDED INTO SMALLER PLOTS WHICH WERE SOLD OVER A PERIOD OF TIME DURING THE FY 2004-05 TO 2012-13. IN THIS REGARD, IT WAS FOUND THAT DURING THE YEAR UNDER CONSIDERATION SOME PLOTS WERE SOLD TO DIFFERE NT PERSONS AND ON VERIFICATION OF RETURN OF INCOME, IT WAS ASCERTAINE D BY THE AO THAT NO INCOME ARISING FROM LAND TRANSACTION HAS BEEN OFFER ED TO TAX BY THE ASSESSEE. THE AO WAS OF THE VIEW THAT INCOME ARIS ING FROM SALE OF PLOTS HAD ESCAPED ASSESSMENT AND THAT IS WHY HE HAS REOPE NED THE ASSESSMENT U/S. 147 OF THE ACT BY ISSUING A NOTICE U/S. 148 OF THE ACT. THEREFORE, THERE IS NO ILLEGALITY IN REOPENING THE ASSESSMENT. WITH REGARD TO ASSESSMENT IN THE HANDS OF AOP, THE LD. DR HAS SUBMITTED THAT NO RETURN OF INCOME WAS FILED IN THE NAME OF AOP, THEREFORE THERE WAS NO QU ESTION OF REOPENING THE ASSESSMENT IN THE HANDS OF AOP. 4. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT UNDISPUTEDLY THE RETURNS WERE REGULARLY FILED ITA NO.539 TO 542 & 575/B/2017 PAGE 5 OF 7 BY THE INDIVIDUALS AND NOTHING HAS BEEN PLACED ON R ECORD WITH REGARD TO FILING OF RETURNS BY THE AOP. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED MY ATTENTION TO ONE RE TURN OF AOP I.E., GRIHA DEVELOPERS, APPEARING AT PAGE 6 OF THE COMPILATION OF ASSESSEE, BUT NO EVIDENCE IS FILED WITH REGARD TO DATE OF FILING OF THIS RETURN. IT WAS STATED THAT RETURN WAS SENT THROUGH REGISTERED A.D., BUT NO EVI DENCE IS PLACED ON RECORD. IN THE ABSENCE OF MATERIAL EVIDENCE, IT IS VERY DIFFICULT TO ACCEPT THE CONTENTION OF ASSESSEE THAT RETURN WAS FILED BY THE AOP DECLARING SHORT TERM CAPITAL GAIN ACCRUED ON SALE OF PLOTS. MOREOV ER, THE AO HAS GOT THE INFORMATION WITH REGARD TO SALE OF PLOTS BY THE ASS ESSES AND ON THE BASIS OF THAT INFORMATION, ASSESSMENT WAS REOPENED. THEREFO RE, I DO NOT FIND ANY IRREGULARITY IN REOPENING OF ASSESSMENT. MOREOVER, I HAVE ALSO CAREFULLY EXAMINED THE ORDER OF CIT(APPEALS) IN THIS REGARD A ND I FIND MYSELF IN AGREEMENT WITH IT. ACCORDINGLY, I CONFIRM HIS ORDE R IN THIS REGARD. 5. ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WHILE COMPUTING THE SHORT TERM CAPITAL GAIN IN THE HANDS OF ASSESSEE, THE CIT(APPEALS) HAS NOT ALLOWED THE COST OF IMPROVEMEN T INCURRED ON LEVELING OF PLOTS FOR ITS CARVING OUT. ASSESSEE HAS CLAIMED THE COST OF IMPROVEMENT IN THE FORM OF EXPENDITURE INCURRED IN LEVELLING AN D MARKETING, BUT THE SAME WAS NOT ALLOWED BY THE CIT(APPEALS) ON THE GROUND T HAT THIS EXPENDITURE CAN ONLY BE INCURRED IN THE FIRST YEAR WHEN THE 42 PLOTS WERE SOLD. THE LD. COUNSEL FURTHER CONTENDED THAT IT IS NOT THE AGGREG ATE OF THE EXPENDITURE ITA NO.539 TO 542 & 575/B/2017 PAGE 6 OF 7 INCURRED IN LEVELLING THE PLOTS ETC. THEREFORE, TH E CLAIM RAISED BY THE ASSESSEE SHOULD BE ALLOWED WHILE COMPUTING THE SHOR T TERM CAPITAL GAIN. 6. THE LD. DR, ON THE OTHER HAND, PLACED RELIANCE O N THE ORDER OF CIT(APPEALS). 7. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES, I FIND THAT THE AO HAS COMPUTED THE SHORT TERM CAPITAL GAIN, BU T WHILE DOING SO, HE HAS NOT TAKEN INTO ACCOUNT THE EXPENDITURE INCURRED IN LEVELLING THE PLOT. UNDISPUTEDLY THE ASSESSEE HAS CARVED OUT 90 PLOTS O UT OF THE TOTAL LANDS PURCHASED AND FOR ITS CARVING OUT, SOME EXPENDITURE IS BOUND TO BE INCURRED. BUT THE AO DID NOT TAKEN INTO ACCOUNT TH E EXPENDITURE INCURRED IN THIS REGARD AND HE HAS COMPUTED THE SHORT TERM CAPI TAL GAIN WITHOUT TAKING INTO ACCOUNT THE EXPENDITURE INCURRED AFTER THE PUR CHASE OF PLOT. THIS APPROACH OF AO IS INCORRECT AS FOR DEVELOPING A PLO T, SOME EXPENDITURE IS BOUND TO BE INCURRED. THEREFORE, I AM OF THE VIEW THAT THIS ISSUE REQUIRES READJUDICATION BY THE AO AND I ACCORDINGLY SET ASID E THE ORDER OF CIT(APPEALS) AND RESTORE THE MATTER TO THE FILE OF AO WITH A DIRECTION TO RE- EXAMINE THE CLAIM OF EXPENDITURE INCURRED IN LEVELL ING OF THE PLOT OR OTHERWISE RELEVANT FOR THE PURPOSE OF COMPUTATION O F SHORT TERM CAPITAL GAIN. ITA NO.539 TO 542 & 575/B/2017 PAGE 7 OF 7 8. IN THE RESULT, THE APPEALS OF THE ASSESSES ARE A LLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MAY, 2017. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE, DATED, THE 26 TH MAY, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.