SMT. SANGEETA NAYAR, New Delhi V. THE ITO 1(2), Bhopal

ITA 568/IND/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1200 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-08-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 25-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: N D PATWA A RS
• Keywords: Capital asset; Business income; Question of law
• Section: 45(2); 40A(3); 143(3)

Judgement Text

[ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.568/IND/2016 ASSESSMENT YEAR: 2011-12 / VS. SMT. SA NGEETA NAYAR R/O J-46, UPPER GROUND FLOOR SAKET, NEW DELHI (APPELLANT) ITO 1(2) BHOPAL (REVENUE ) P.A. NO. AAKPN3103B APPELLANT BY SHRI ASHISH GOYAL & SHRI N.D. PATWA, A.RS RESPONDENT BY SHRI P.K. MISHRA, DR DATE OF HEARING: 03.10.2018 DATE OF PRONOUNCEMENT: 27.11.2018 / O R D E R PER KUL BHARAT, J.M: APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF TH E CIT(A)-1, BHOPAL DATED 29.2.2016 PERTAINING TO THE [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 2 ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS ERRE D IN ARBITRARILY CONFIRMING THE ADDITION OF RS.3,91,250/- MADE BY TH E LEARNED ASSESSING AUTHORITY BY TREATING THE SAME AS UNDISCL OSED SHORT TERM CAPITAL GAIN WHICH IS NEITHER CORRECT NOR JUSTIFIED THEREFORE SAME IS LIABLE TO BE DELETED. 2. THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS ERRE D IN ARBITRATRILY CONFIRMING THE ADDITION OF RS.42,30,092/- MADE ON A CCOUNT OF SALE PROCEED OF THE FLATS AS BUSINESS INCOME BY APPLYING THE PROVISION U/S 45(2) OF THE I.T. ACT 1961 AND IMPOSING THE TAX ON THE SAME WHICH IS NEITHER CORRECT NOR JUSTIFIED THEREFORE SA ME IS LIABLE TO BE DELETED. 3. THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS ERRE D IN ARBITRARILY CONFIRMING THE ADDITION OF RS.20,43,000/- MADE BY T HE LEARNED ASSESSING AUTHORITY BY DISALLOWING THE EXPENSES U/S 40A(3) OF THE I.T. ACT, 1961 WHICH IS NEITHER CORRECT NOR JUSTIFI ED THEREFORE SAME IS LIABLE TO BE DELETED.. 2. BRIEFLY STATED FACTS ARE THAT CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLE D AS THE ACT) VIDE ORDER DATED 11.2.2014. THE ASSESSEE DERIVED ITS INCOME FROM LAND, INTEREST ON SAVINGS. WHILE FRAM ING THE ASSESSMENT, THE A.O. MADE ADDITION ON ACCOUNT OF UNDISCLOSED SHORT TERM CAPITAL GAIN OF RS.3,91,250/- UNDISCLOSED PROFIT FROM SALE OF FLATS OF RS.42,30,092 /- AND DISALLOWANCE U/S 40A(3) OF THE ACT OF RS.20,43,000/-. [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 3 3. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSI ONS, DISMISSED THE APPEAL OF THE ASSESSEE. NOW THE ASSESSE E IS IN APPEAL BEFORE THIS TRIBUNAL. GROUND NOS.1 TO 3 OF THIS APPEAL ARE INTER CONNECTED. LD. COUNSEL FOR THE ASSESS EE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. FOR THE SAKE OF CLARITY, SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED AS UNDER: [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 4 [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 5 [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 6 [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 7 4. HE SUBMITTED THAT AUTHORITIES BELOW HAVE FAILED TO APPRECIATED THE FACT THAT ASSESSEE IS NOT ENGAGED INTO ANY BUSINESS OF CONSTRUCTION/SALE/PURCHASE OF HOUSE PROPE RTY. THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGGESTING THAT THE ASSESSEE WAS ENGAGED IN ANY KIND OF BUSINESS. IN FACT, INITIALLY, THE ASSESSEE WANTED TO CONSTRUCT HOUSE FOR SELF-OCCUPATION AND THE CONSTRUCT ION PLAN WAS DULY FILED FOR APPROVAL OF LOCAL AUTHORITY. B UT DUE TO CHANGE IN CIRCUMSTANCES AND COMPELLING NEEDS, ASSESS EE DECIDED TO DISPOSE OF THE PROPERTY. OWING TO THE F ACT THAT NO SINGLE BUYER WAS AVAILABLE AND ALSO TO FETCH A BETTER PRICE, THE PROPERTY WAS SOLD BY CONSTRUCTING FLATS/UN ITS. THIS ACT FROM NO STRETCH OF IMAGINATION CAN BE TREATED AS ADVENTURE IN NATURE OF TRADE AND COMMERCE AND PROVISIONS OF SECTION 45(2) OF THE INCOME TAX ACT, 1961 (HEREI NAFTER CALLED AS THE ACT) HAVE BEEN WRONGLY INVOKED BY THE A.O. SAME CANNOT BE APPLIED UNDER THE FACTS OF THE PRESENT [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 8 CASE. IN SUPPORT OF THIS, LD. COUNSEL RELIED UPON T HE CASE LAWS AS MENTIONED IN THE WRITTEN SUBMISSIONS. PER CONTRA, LD. D.R. VEHEMENTLY OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT EVEN A SINGLE TRANSACTION CAN BE TREATED AS ADVENTURE IN THE NATURE OF TRADE AND COMMERCE. HE SUBMITTED THAT THE FACTS AND CIRCUMSTANCES SURROUNDING THE IMPUGNED TRANSACTION CLEARLY PROVE IT BEING AN ACT OF ADVENTURE IN THE NATUR E OF TRADE AND COMMERCE. HOWEVER, LD. A.R. IN THE REJOIND ER SUBMITTED THAT IF THIS YARDSTICK IS TO BE APPLIED, THE N EVERY TRANSACTION WOULD BE TREATED AS ADVENTURE IN THE NATURE OF TRADE AND COMMERCE. LD. COUNSEL SUBMITTED THAT IT WAS PURELY FOR THE PURPOSE OF GETTING BETTER PRICE OF T HE CAPITAL ASSET. HE FURTHER CONTENDED THAT FROM THE MATERIAL PLAC ED ON RECORD, THE INTENTION OF THE ASSESSEE CAN BE VERY WELL INFERRED THAT THE ASSESSEE INTENDED FOR SELF-USE AND [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 9 OCCUPATION OF THE PROPERTY. BUT DUE TO CHANGE IN THE CIRCUMSTANCES AND COMPELLING REASON, THE ASSESSEE HAD TO DISPOSE IT OFF. THIS DOES NOT MEAN THAT ASSESSEE WAS ENGAGED IN THE BUSINESS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE GERMANE TO DISPUTE IS WHETHER THE TRANSACTION IN QUESTION IS IN THE NATURE OF ADVENTURE IN TRADE AND COMMERCE AS TREATED BY THE A.O. THE CASE OF THE ASSESSEE IS THAT SHE WANTED TO CONSTRUC T HOUSE FOR SELF-OCCUPATION BUT DUE TO CHANGE IN THE CIRCUMSTANCES, SHE HAD TO DISPOSE OF THE PROPERTY AS N O SINGLE BUYER WAS AVAILABLE AND IN ORDER TO FETCH HIGHER CONSIDERATION, THE PROPERTY WAS CONSTRUCTED INTO FLATS AND SOLD TO DIFFERENT INDIVIDUALS. IT IS AVERRED THE ASSE SSEE IS NOT INVOLVED AT ANY POINT OF TIME IN THE BUSINESS OF BUILDING CONSTRUCTION, EXCEPT THIS TRANSACTION, NO SUCH OTHER [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 10 TRANSACTION IS MADE PREVIOUSLY OR SUBSEQUENTLY. UNDER THESE UNDISPUTED FACTS, REVENUE WAS NOT JUSTIFIED TO TREAT THE SAME AS ADVENTURE IN THE NATURE OF TRADE AND COMMERCE. WHETHER A PARTICULAR TRANSACTION IS ADVENTURE IN THE NATURE OF TRADE AND COMMERCE IS TO BE DECIDED O N THE PRINCIPLES LAID DOWN BY VARIOUS JUDICIAL PRONOUNCEMENTS, THE HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. SURESH CHAND GOYAL 298 ITR 277 (MP) HAS DECIDED THE ISSUE THAT WHETHER AN AGRICULTURAL LAND CONVERTED TO NON-AGRICULTURAL LAND SOLD AFTER DEVELOPIN G 40 PLOTS WAS BUSINESS ACTIVITY OR SALE OF CAPITAL ASSET. TH E HON'BLE HIGH COURT AFTER CONSIDERING THE VARIOUS CASE LAWS HELD AS UNDER: [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 11 [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 12 6. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON JUDGEMEN T OF HON'BLE HIGH COURT OF PUNJAB & HARYANA RENDERED IN THE CASE OF CIT VS. SUSHILA DEVI JAIN (2003) 259 ITR 671, WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER: 2. WE HAVE HEARD THE LEARNED SENIOR COUNSEL FOR THE DEPARTMENT AND FIND NO GROUND TO ENTERTAIN THE APPEAL. THE TR IBUNAL AND THE COMMISSIONER (APPEALS) HAVE BOTH RIGHTLY HELD THAT THE SALE OF LAND BY THE ASSESSEE WAS NOT IN THE NATURE OF BUSINESS B ECAUSE THERE IS NO CONTINUOUS ACTIVITY. IT IS TRUE THAT EVEN A SIN GLE VENTURE COULD BE REGARDED AS A TRADE OR BUSINESS BUT THERE HAVE T O BE CIRCUMSTANCES WHICH SHOULD GIVE RISE TO SUCH A CONC LUSION. THERE ARE NO SUCH CIRCUMSTANCES EXISTING IN THE PRESENT C ASE. WHAT IS NECESSARY IS TO FIND OUT THE INTENTION OF THE ASSES SEE AT THE TIME OF THE PURCHASE OF LAND. IN THE CASE BEFORE US, THE L AND WAS NEVER PURCHASED BY HER. SHE ACQUIRED THE SAME ON THE BAS IS OF A WILL ON THE DEATH OF HER HUSBAND. SHE SOLD THE SAME IN PAR CELS BECAUSE THE HUGE AREA COULD NOT BE SOLD IN ONE GO. SUCH AN ACTIVITY, IN OUR OPINION, CANNOT AMOUNT TO TRADE OR BUSINESS WITHIN THE MEANING OF THE ACT. BOTH THE COMMISSIONER AND THE TRIBUNAL HA VE FOLLOWED THE CORRECT PRINCIPLES OF LAW AND NO FACTUAL OR LEG AL ERROR COULD BE POINTED OUT BY THE DEPARTMENT. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL SO AS TO WARRANT THE ENTERTAI NMENT OF THIS APPEAL. 7. IN THE WRITTEN SYNOPSIS BY THE ASSESSEE, IT IS TR EATED THAT THE INCOME FROM SALE OF ALL THE 9 FLATS WAS RS.39,62,290/- ONLY. THE FIGURES AT PAPER BOOK PAGE 5 ARE UNDISPUTED BY THE REVENUE. THE INCOME OF RS.6 LAKH S ON WHICH REGISTRY WAS DONE DURING THE YEAR, EVEN IF TAKEN AS PER THE COMPUTATION OF THE ASSESSING OFFICER SHOULD B E [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 13 RS.26,66,597/-. THE A.O. HAS COME AT THE FIGURE OF RS.66,66,852/-. IT IS ALSO STATED THAT IF THE CONTENT ION OF THE A.O. THAT LAND WAS CONVERTED INTO STOCK ENTRY IS ADOPTED, THE PROJECT WOULD BE COMPLETE ONLY WHEN THE POSSESSION WAS HANDED OVER. COMPLETION CONTRACT METH OD IS A WELL RECOGNISED METHOD FOR COMPUTATION OF PROFIT . IT IS ALSO STATED THAT THE AUTHORITIES BELOW ASSUMED THAT POSSESSION IS INVARIABLY HANDED OVER AT THE TIME OF THE SALE DEED. IT IS STATED THAT THE POSSESSION WAS HANDED OV ER SUBSEQUENTLY. IT IS ALSO STATED THAT THE CALCULATION IS BASED ON PURE GUESS WORK. WE FIND SOME MERIT IN THE CONT ENTION OF THE LD. COUNSEL FOR THE ASSESSEE IN VIEW OF THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT AND THE FAC TS PLACED BEFORE US, WE DEEM IT PROPER THAT THE ASSESSING OFFICER SHOULD GIVE A SPECIFIC FINDING WITH REGARD TO THE CONTENTIONS OF THE ASSESSEE AFTER CONDUCTING PROPER ENQUIRY. THE IMPUGNED ORDER IS SET ASIDE. THE A.O. IS [ITA NO.568/IND/2016] [SMT. SANGEETA NAYAR, NEW DELHI] 14 HEREBY DIRECTED TO FRAME DE-NOVO ASSESSMENT. THE GR OUNDS RAISED IN THIS APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 . 11.2018. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 27/11/2018 VG/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE