MUKESH KUMAR AGARWAL, KARAULI V. ITO, NEEMKATHANA

ITA 547/JPR/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6539 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 24-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA JCIT DHK
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Reason to believe; Bonafide mistake; Reassessment proceedings; Capital Gains
• Section: 69C; 43CA; 50C; 147; 131; 69; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA , ACCOUNTANT MEMBER VK;DJ VIHY LA -@ ITA NO. 547/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2010-11 SH. MUKESH KUMAR AGARWAL, IN FRONT OF PHED, CHHAVANI, NEEM KA THANA, RAJASTHAN. CUKE VS. I.T.O., WARD-NEEM KA THANA. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: ACGPA 2323 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI SATISH GUPTA (CA) JKTLO DH VKSJ LS @ REVENUE BY : MS. CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/07/2020 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 10/09/2020 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-III, JAIPUR DATED 21/03/2016 FOR THE A.Y. 2010-11 IN THE MATTER OF ORDER PASSED U/S 143(3)/148 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE HEARING OF THE APPEAL WAS CONCLUDED THROUGH VIDEO CONFERENCE IN VIEW OF THE PREVAILING SITUATION OF COVID-19 PANDEMIC. 3. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED REOPENING OF ASSESSMENT AND ALSO MERIT OF ADDITION BY INVOKING PROVISIONS OF SECTION 50C OF THE ACT ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 2 AMOUNTING TO RS. 26,37,537/- AND ADDITION U/S 69C AND 69 OF THE ACT OF RS. 6.34 LACS. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. IN THIS CASE, THE A.O. RECORDED FOLLOWING REASONS BEFORE INITIATION OF REASSESSMENT PROCEEDINGS: - ' AS PER THE INFORMATION AVAILABLE UNDER MY POSSESSION , IT IS SEEN THAT SHRI MUKESH KUMAR AGARWAL RESIDENT OF CHHAVANI, NEEM KA THANA HAS SOLD AN IMMOVABLE PROPERTY(BASEMENT) SITUATED AT SUBHAS MANDI, NEEM KA THANA ON 04/06/2009 FOR A SALE CONSIDERATION OF RS 7,00,000/- TO SMT PARMESHWARI DEVI RESIDENT OF JODHPURA SUNARI, TEHSIL- UDAIPURWATTI, DISTT- JHUNJHUNU. HOWEVER, THE DLC VALUE OF THE PROPERTY SOLD WAS TAKEN AT RS 26,36,573/- BY THE COLLECTOR (STAMPS), JAIPUR. AS SUCH THE ASSESSEE IS LIABLE TO PAY CAPITAL GAIN TAX ON THE VALUE OF RS 26,37,537/- FOR A.Y. 2010-11 AS PER THE PROVISIONS OF SECTION 50C OF THE IT ACT 1961. FURTHER IT SEEN THAT THE ASSESSEE HAS NOT DECLARED INCOME FROM CAPITAL GAIN FROM THE SALE OF SAID PROPERTY IN ACCORDANCE TO SECTION 50C OF THE IT ACT 1961 FOR THE A.Y. 2010-11. BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE IN NOT DECLARING CAPITAL GAIN IN ACCORDANCE TO SECTION 50C IN THE RETURN OF INCOME FOR A.Y. 2010-11, THE INCOME TO THE EXTENT OF RS 26,37,537/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. I THEREFORE HAVE REASON TO BELIEVE THAT AN INCOME TO THE EXTENT OF RS 26,37,537/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE IT ACT 1961. AS SUCH NOTICE U/S 148 OF THE IT ACT, 1961 IS BEING ISSUED. ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 3 I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE A.O. IN SO FAR AS THERE WAS SUFFICIENT REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME TO THE EXTENT OF DLC VALUE NOT CONSIDERED BY THE ASSESSEE WHILE OFFERING INCOME FROM SALE OF LAND/BUILDING. ACCORDINGLY, I DISMISS GROUND OF REOPENING SO RAISED BY THE ASSESSEE. 5. THE ASSESSEE IS ALSO AGGRIEVED FOR THE ADDITION MADE BY THE A.O. BY INVOKING PROVISIONS OF SECTION 50C OF THE ACT. IN THIS REGARD, I FOUND THAT THE ASSESSEE HAD PURCHASED 115.55 SQ YARD RESIDENTIAL PLOT LAND (1/3 RD SHARE OF TOTAL LAND) ON 23/04/2008. IMMEDIATELY AFTER THE PURCHASES, CONSTRUCTION OF BASEMENT & SHOPS WAS STARTED ON THE SAID PLOT. THE ASSESSEE CONSTRUCTED HALL IN BASEMENT AND EIGHT SHOPS ON THE GROUND FLOOR. ONE OF THE SHOP WAS SOLD IN F.Y. 2008-09 AND BASEMENT, ROOF RIGHTS & BALANCE SHOPS WERE SOLD DURING THE YEAR UNDER CONSIDERATION. ANOTHER PLOT OF 81.66 SQ. YARDS WAS PURCHASED ON 29/06/2009 AND WAS SOLD IN THE SAME YEAR I.E. ON 12/11/2009. 6. IT IS CLEAR FROM THE ABOVE SEQUENCE OF TRANSACTION, THAT THE INTENTION OF THE ASSESSEE IN MAKING ABOVE REFERRED TRANSACTION OF SALE PURCHASE WAS OF BUSINESS NATURE AND WAS THEREFORE ASSESSABLE UNDER HEAD INCOME FROM BUSINESS. ALTHOUGH IN THE RETURN OF INCOME, ASSESSEE MADE A BONAFIDE MISTAKE BY SHOWING ALL SUCH TRANSACTIONS UNDER THE HEAD INCOME FROM CAPITAL GAIN INSTEAD OF INCOME FROM BUSINESS. LATER ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 4 DURING ASSESSMENT PROCEEDINGS ASSESSEE CLAIMED THE TRANSACTION AS BUSINESS/ ADVENTURE IN THE NATURE OF TRADE ON THIS LOGIC THAT HIS NATURE OF TRANSACTIONS ARE OF BUSINESS. ASSESSEE MADE A REQUEST THAT PROVISIONS OF SECTION 50C ARE NOT APPLICABLE ON HIM AS THE SAID SECTION IS APPLICABLE ON CAPITAL ASSETS ONLY. 7. I ALSO OBSERVE THAT EVEN THOUGH THE STATUTE HAS COVERED THE NON- CAPITAL ASSET TRANSACTIONS ALSO UNDER DLC BASED MARKET VALUE DETERMINATION U/S 43CA BUT THE SAID PROVISION IS APPLICABLE FROM A.Y. 2014-15 AND NOT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2010-11. 8. FROM THE RECORD, I ALSO FOUND THAT THE ASSESSEE VIDE HIS SUBMISSION DATED 05/12/2014 MADE A REQUEST THAT SINCE THE SALE & PURCHASE TRANSACTIONS IS IN THE NATURE OF TRADE THE SAME SHOULD BE TREATED AS INCOME FROM BUSINESS ONLY. THE ASSESSEE ALSO SUBMITTED THE DETAILS OF YEAR-WISE SALE IN A CHART IN THE SAME LETTER. ASSESSEE VIDE HIS LETTER DATED 05/12/2014 ALSO SUBMITTED THAT THE ASSESSEE IS ENGAGED IN REAL ESTATE ACTIVITIES SINCE F.Y. 2008-09. DUE TO IGNORANCE AND INTERPRETATION ERROR THE ASSESSEE DECLARED THE SAID INCOME AS INCOME FROM CAPITAL GAIN. ACTUALLY, IT WAS AN INCOME FROM BUSINESS. THE OTHER SUBMISSIONS AND FACTS PROVING THAT THE ALLEGED INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS WERE ALSO MADE. ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 5 9. I ALSO OBSERVE THAT THE A.O. TOOK THE STATEMENTS OF ASSESSEE U/S 131 ON DATED 01/01/2015. ASSESSEE IN HIS STATEMENTS HAS CATEGORICALLY STATED (WHILE ANSWERING Q.NO. 3& 4) THAT THE INVESTMENT WAS MADE TO EARN IN THE REAL ESTATE BUSINESS. EVEN OTHERWISE THE TRANSACTION WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS BECAUSE:- 1. THE CONSTRUCTION OF SHOPS & BASEMENT WERE MADE IMMEDIATELY AFTER THE PURCHASES. 2. THE EFFORTS WERE MADE TO FIND THE BUYER QUICKLY AND SHOPS, BASEMENT & ROOF WERE SOLD DURING THE CONSTRUCTION STAGE I.E SALE WAS MADE WITHIN A SHORT PERIOD OF TIME. 3. THE LAND COULD NOT HAVE PRODUCED THE PERSONAL INCOME OR ENJOYMENT IF SHOPS WERE NOT CONSTRUCTED OVER THE LAND. 4. INTENTION WAS TO DO BUSINESS OF REAL ESTATE & ALSO TO SALE THE PROPERTY AFTER CONSTRUCTION IMMEDIATELY I.E ON THE FIRST OPPORTUNITY. 5. THE INTENTION WAS TO EARN PROFITS AFTER IMMEDIATE SALE AND THERE WAS NO INTENTION TO KEEP THE PROPERTY FOR APPRECIATION. THE A.O. NOT RELYING ON THE FACTS & SUBMISSIONS OF THE ASSESSEE SIMPLY FOR THE REASONS THAT:- I. THE ASSESSEE HIMSELF HAS SHOWN THE INCOME UNDER THE HEAD INCOME FROM CAPITAL GAIN. II. NO STOCK/WIP WAS SHOWN IN THE ROI FOR A.Y. 2009-10. ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 6 III. ASSESSEE WAS NEVER ENGAGED IN REAL ESTATE BUSINESS. 10. WHILE REACHING TO THE CONCLUSION THAT THE ASSESSEE HAS EARNED CAPITAL GAINS, THE A.O. HAS REOPENED THE ASSESSMENT BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS REWA SHANKAR A KOTHARI 283 ITR 338. THE CASE LAW RELIED UPON BY THE A.O. IS NOT APPLICABLE ON THE FACTS OF CASE OF THE ASSESSEE AS THE ASSESSEE SOLD THE PROPERTY AFTER CONSTRUCTION IMMEDIATELY WHEREAS IN THE CASE RELIED UPON BY THE A.O, THERE WAS A LONG GAP BETWEEN THE DATE OF ACQUISITION OF SHARES & THEIR SALE. MOREOVER, THE CASE OF ASSESSEE IS OF LAND & BUILDING. IN THE CASE RELIED UPON BY THE A.O. THE HOLDING OF SHARES WAS FROM A.Y. 1957-58 AND THE YEAR OF SALE WAS 1987-88 I.E. HOLDING OF 30 YEARS. 11. IT IS A SETTLED LAW THAT THE INCOME SHOULD BE ASSESSED UNDER THE CORRECT HEAD OF INCOME. IF THIS WOULD NOT HAVE BEEN INTENTIONS OF THE STATUTE MAKERS THERE WAS NO NEED TO HAVE FIVE HEADS OF INCOME AND MOREOVER EVERY HEAD OF INCOME IS COMPUTED ON THE BASIS OF PROVISIONS THEREIN. THE LAWS TO COMPUTE INCOME FOR EVERY HEAD IS DIFFERENT AND THEREFORE THE INCOME SHOULD BE ASSESSED IN THE CORRECT HEAD OF INCOME. HON'BLE ITAT MUMBAI 'C' BENCH IN THE CASE OF SH. CHANDRE SHAKHAR BAHIRWANI IN ITA NO. 7810/M/2010 VIDE THEIR ORDER DATED ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 7 17/06/2015 HAS HELD 'MOREOVER, IF THE ASSESSEE IS, OTHERWISE, ENTITLED TO A CLAIM OF DEDUCTION BUT DUE TO HIS IGNORANCE OR FOR SOME OTHER REASON COULD NOT CLAIM THE SAME IN THE RETURN OF INCOME, BUT HAS RAISED HIS CLAIM BEFORE THE APPELLATE AUTHORITY ,THE APPELLATE SHRI CHANDRASHEKHAR J. BAHIRWANI AUTHORITY SHOULD HAVE LOOKED INTO THE SAME. THE ASSESSEE CANNOT BE BURDENED WITH THE TAXES WHICH HE OTHERWISE IS NOT LIABLE TO PAY UNDER THE LAW. EVEN A DUTY HAS ALSO BEEN CAST UPON THE INCOME TAX AUTHORITIES TO CHARGE THE LEGITIMATE TAX FROM THE TAX PAYERS. THEY ARE NOT THERE TO PUNISH THE TAX PAYERS FOR THEIR BONAFIDE MISTAKES. 12. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE ASSESSEE IS NOT LIABLE TO PAY CAPITAL GAIN TAX. INCOME FROM SALE OF LAND BUILDING IS TAXABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION WHERE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE IN SO FAR AS THE SHOPS WERE SOLD ON AGREEMENT BASIS PRIOR TO 1 ST OCTOBER, 2009 WHEN THE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE. THUS, THE A.O. WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 50C OF THE ACT. ACCORDINGLY, THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE U/S 50C OF THE ACT. ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 8 13. THE ASSESSEE IS ALSO AGGRIEVED FOR ADDITION U/S 69C AND 69 OF THE ACT FOR RS. 6.34 LACS. IN THIS RESPECT, I FOUND THAT THE A.O. HAS MADE ADDITION OF RS. 6.34 LACS U/S 69 OF THE ACT. AS PER THE A.O. THE INVESTMENT IN CONSTRUCTION WAS MADE DURING THE FINANCIAL YEAR 2009- 10 FOR RS 1,93,315/- AND INVESTMENT OF RS 6,34000/- WAS MADE ON 29/06/2009. FROM THE RECORD, I FOUND THAT ASSESSEE HAS RECEIVED FOLLOWING RECEIPTS FROM THE SALE OF BASEMENT & SHOPS DURING THE YEAR PERIOD TO 29/06/2009. THE DETAILS OF SUCH SALES ARE AS UNDER- S.N. PROPERTY DATE SALE VALUE DLC VALUE 1. SHOP NO SB-2 10/02/2009 1,00,000/- 1,00,000/- 2. BASEMENT 04/06/2009 2,33,334/- 8,78,845/- 3. SHOP NO SB-5 29/05/2009 1,00,000/- 1,95,000/ - 4. ROOF RIGHTS 04/06/2009 1,33,330/- 3,60,666/- 5,66,664/- 15,34,511/- FOLLOWING SHOPS WERE ALSO SOLD BY THE ASSESSEE DURING THE YEAR:- S.N. PROPERTY DATE SALE VALUE DLC VALUE 1. SHOP NO SB-7 27/07/2009 71,000/- 1,11,000/ - 2. SHOP NO SB-1 & SB-4 07/09/2009 1,60,000/- 2,74,000/- 3 SHOP NO SB-6 07/09/2009 1,10,000/- 2,17,000/- 4. SHOP NO SB-8 27/09/2009 71,000/- 1,11,000/- 5. SHOP NO SB-9 07/09/2009 70,000/- 70,000/- 4,82,000/- 7,83,000/- ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 9 A SUM OF RS 1,00,000/- WAS WITHDRAWN FROM BANK ON 29/06/2009. COPY OF BANK ACCOUNT WAS ALSO PRODUCED BEFORE THE A.O.. APART FROM THIS THE ASSESSEE HAS MADE INVESTMENT FOR RS 1,60,651/- OUT OF ADVANCE RECEIVED FROM THE SALE OF OTHER SHOPS I.E. OUT OF RS 4,82,000/- AND OUT OF HIS OWN CAPITAL. IT IS WORTH TO MENTION THAT THE ASSESSEE HAS DECLARED OTHER INCOME OF RS 1,54,000/- FROM PARTNERSHIP BUSINESS DURING THE YEAR AND IS AN OLD INCOME TAX ASSESSEE. LD CIT(A) ACCEPTED THE CLAIM OF RS. 1,93,315/- ONLY AND REJECTED THE APPEAL FOR RS. 6,34,000/-. LD CIT(A) DID NOT CONSIDER THAT THE ASSESSEE WAS HAVING RS. 5,66,664/- PRIOR TO 29/06/2009 AND HAS ALSO WITHDRAWN A SUM OF RS. 1,00,000/- FROM SAVING BANK A/C ON 29/06/2009 ITSELF. BOTH THESE AMOUNTS ARE MORE THAN RS. 6,34,000/-. ACCORDINGLY, I DO NOT FIND ANY JUSTIFICATION FOR THE ADDITION OF RS. 6.34 LACS UPHELD BY THE LD. CIT(A). HENCE, THE A.O. IS DIRECTED TO DELETE THE SAME. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART, IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH SEPTEMBER, 2020. SD/- JES'K LH 'KEKZ ( RAMESH C SHARMA ) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 10/09/2020 ITA 547/JP/2016 MUKESH KR. AGARWAL VS ITO 10 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI MUKESH KUMAR AGARWAL, NEEM KA THANA. 2. IZR;FKHZ @ THE RESPONDENT- THE I.T.O., WARD- NEEM KA THANA. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 547/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR