M/s Daatha Builders Pvt. Ltd., Bangalore V. CIT, Bangalore

ITA 586/BANG/2011

• Counselvise Citation: 58621114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR
• Assessee Lawyers: S SUKUMAR
• Keywords: Capital asset; Business income
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.586/BANG/2011 ASSESSMENT YEAR : 2006-07 M/S. DAATHA BUILDERS PVT. LTD., BREWERY HOUSE, 7 TH MILE, KANAKAPURA ROAD, BANGALORE 560 062. PAN : AAACD 5275H VS. THE COMMISSIONER OF INCOME-TAX, BANGALORE-I, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. SUKUMAR, ADVOCATE RESPONDENT BY : SHRI BIJOY KUMAR PANDA, ADDL.CIT(DR) DATE OF HEARING : 29.01.2014 DATE OF PRONOUNCEMENT : 07.02.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 28.03.2011 OF THE COMMISSIONER OF INCOME-TAX, BANGALORE-I, BAN GALORE, [CIT FOR SHORT] PASSED U/S. 263 OF THE INCOME-TAX ACT, 1961 [THE ACT FOR SHORT]. ITA NO.586/BANG/2011 PAGE 2 OF 9 2. THE ASSESSEE IS A COMPANY. FOR THE A.Y. 2006-07 , THE ASSESSEE FILED A RETURN OF INCOME ON 17.03.2007 DECLARING A TOTAL INCOME OF RS.15,53,33,004. IN THE COMPUTATION OF INCOME FILE D ALONG WITH THE RETURN OF INCOME, THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN ON SALE OF PROPERTY OF THE ASSESSEE AT KENSINGTON ROAD, ULSOOR, BANGALO RE [HEREINAFTER REFERRED TO AS THE PROPERTY]. THE PROPERTY WAS S OLD BY THE ASSESSEE UNDER A SALE DEED DATED 08.06.2005. THE ASSESSEE C OMPUTED LONG TERM CAPITAL GAIN ON SALE OF THE PROPERTY AT RS.17,00,33 ,992. THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE IS AT PAGES 36 T O 38 OF THE ASSESSEES PAPERBOOK. 3. THE PROPERTY WAS SOLD BY THE ASSESSEE TO M/S. PR ESTIGE ESTATES PROJECTS PVT. LTD. [PRESTIGE FOR SHORT]. ORIGINA LLY, THE ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT DATED 22 .09.2004 WITH PRESTIGE, WHEREBY THE ASSESSEE WAS TO GET 27.5% AND PRESTIGE WAS TO GET 72.5% OF THE CONSTRUCTIONS TO BE PUT UP OVER THE PR OPERTY, BESIDES THE INTEREST FREE REFUNDABLE DEPOSIT OF RS.24 CRORES. UNDER THE SALE DEED DATED 08.06.2005, THE PARTIES CANCELLED THE EARLIER JOINT DEVELOPMENT AGREEMENT AND THE ASSESSEE SOLD THE PROPERTY TO PRE STIGE INSTEAD OF JOINT DEVELOPMENT. THE ASSESSEE HAD, PRIOR TO THE SALE O F PROPERTY, RECEIVED A SUM OF RS.24 CRORES ON VARIOUS DATES BETWEEN THE PE RIOD 22.09.04 TO 30.09.04. ON THE DATE OF EXECUTION OF SALE DEED, T HE ASSESSEE RECEIVED A ITA NO.586/BANG/2011 PAGE 3 OF 9 FURTHER SUM OF RS.ONE CRORE. THE STAMP DUTY AND OT HER CHARGES PAYABLE WERE RS.4,95,040 AND RS.50 LAKHS RESPECTIVELY. THU S, IN ALL, THE ASSESSEE RECEIVED FROM PRESTIGE RS.25,54,95,040. AFTER DEDU CTING A SUM OF RS.1,15,63,000 WHICH WAS REIMBURSEMENT OF ADVANCE P AID, THE ASSESSEE DECLARED TOTAL SALE CONSIDERATION RECEIVED ON SALE OF PROPERTY AT RS.24,39,32,040. THE BREAK-UP OF THE CONSIDERATION RECEIVED IS GIVEN AS ANNEXURE-I TO THIS ORDER . 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSEE ADDRESSED A LETTER DATED 16.12.2008 IN WHICH THE ASSESSEE GAV E A COPY OF THE SALE DEED DATED 8.6.2005 AND ALSO THE DETAILS OF EXPENSE S INCURRED FOR IMPROVEMENT OF THE PROPERTY/VACATING THE TENANTS AL ONG WITH BANK PASSBOOK/ORIGINAL VOUCHERS. 5. THE AO PASSED THE ORDER DATED 16.12.2008 U/S. 14 3(3) OF THE ACT ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. 6. THE CIT, IN EXERCISE OF HIS POWERS U/S. 263 OF T HE ACT, ISSUED A SHOW CAUSE NOTICE DATED 8.3.2011. HE WAS OF THE VIEW TH AT THE AFORESAID ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. ACCORDING TO HIM, UNDER THE SALE DEED DATED 8.6.200 5, APART FROM THE SUM OF RS.24 CRORES RECEIVED UNDER THE JOINT DEVELOPMEN T AGREEMENT, THE ASSESSEE HAD RECEIVED A SUM OF RS.ONE CRORE. ACCOR DING TO THE CIT, THE AO DID NOT MAKE ENQUIRIES FOR ASCERTAINING THE TRUE NATURE OF THE RECEIPT IN THE HANDS OF THE ASSESSEE. ACCORDING TO HIM, THE S UM OF RS.ONE CRORE ITA NO.586/BANG/2011 PAGE 4 OF 9 OUGHT TO HAVE BEEN ASSESSED AS BUSINESS RECEIPT. H E THEREFORE PROPOSED TO REVISE THE ORDER OF THE AO U/S. 263 OF THE ACT. 7. THE ASSESSEE IN ITS REPLY DATED 21.03.2011 TO TH E SHOW CAUSE NOTICE U/S. 263 OF THE ACT, POINTED OUT THAT THE SUM OF RS .ONE CRORE RECEIVED UNDER SALE DEED DATED 8.6.2005 IS DULY REFLECTED IN THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. THE ASSESSEE ALSO P OINTED OUT THAT THE COPY OF SALE DEED WAS FURNISHED TO THE AO BEFORE CO MPLETION OF THE ASSESSMENT. THE ASSESSEE ALSO SUBMITTED THAT THE P ROPERTY IN QUESTION WAS HELD BY THE ASSESSEE AS A CAPITAL ASSET AND THE REFORE ANY INCOME ARISING ON TRANSFER OF CAPITAL ASSET OUGHT TO BE AS SESSED ONLY UNDER THE HEAD LONG TERM CAPITAL GAIN. THE ASSESSEE ALSO P OINTED OUT THAT THE SUM OF RS.ONE CRORE CANNOT BE ASSESSED AS INCOME FROM B USINESS AS IT WAS NOT STOCK-IN-TRADE OF ANY BUSINESS OF THE ASSESSEE. TH E ASSESSEE ALSO POINTED OUT THAT THE PROPERTY WAS ACQUIRED BY THE ASSESSEE RIGHT FROM THE YEAR 1988 AND AT THE TIME OF ACQUISITION OF THE PROPERTY , THERE WAS NO INTENTION OF HOLDING THE PROPERTY AS STOCK-IN-TRADE. THE ASSESS EE SUBMITTED THAT THE INTENTION AT THE TIME OF ACQUISITION IS A RELEVANT CRITERION FOR DECIDING THE QUESTION AS TO WHETHER THE ASSESSEE IS HELD AS A CA PITAL ASSET OR STOCK-IN- TRADE, AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. V. CIT, 35 ITR 594 (SC) . THE ASSESSEE SUBMITTED THAT THE VIEW TAKEN BY THE AO CA NNOT BE SAID TO BE ERRONEOUS AND IN THIS REGARD RELIED ON SEVERAL JUDI CIAL PRONOUNCEMENTS ITA NO.586/BANG/2011 PAGE 5 OF 9 INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. MAX INDIA LTD., 295 ITR 292 (SC) . 8. THE CIT, ON A CONSIDERATION OF THE ABOVE SUBMISS IONS, WAS OF THE VIEW THAT THE AO HAS NOT RECORDED IN THE ORDER OF A SSESSMENT ANY FINDING ON THE SUM OF RS.ONE CRORE AND THEREFORE THERE WAS A FAILURE ON THE PART OF THE AO TO APPLY HIS MIND TO THE QUESTION AS TO WHET HER THE SAME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR CAPITAL GAIN. HE THEREFORE HELD THAT THE ORDER OF THE AO WAS ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREAFTER THE CIT SET ASIDE THE ORDER OF THE AO AND DIRECTED THE AO TO MAKE A FRESH ASSESSMENT ON T HE ISSUE CONSIDERED IN THE ORDER U/S. 263 AFRESH, AFTER GIVING OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 9. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE, WHO DREW OUR ATTENTION TO THE FACTUAL POSITION THAT THE SUM OF RS.ONE CRORE HAS BEEN DULY INCLUDED IN THE COMPUTATION OF CAPITA L GAIN FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME. ACCORDIN G TO HIM, IN THE LIGHT OF THE LETTER FILED BY THE ASSESSEE BEFORE THE AO DATE D 16.12.08 GIVING A COPY OF THE SALE DEED WHICH CONTAINS ALL THE DETAILS WIT H REGARD TO THE CONSIDERATION RECEIVED ON THE SALE OF PROPERTY, IT CANNOT BE SAID THAT THE AO HAS NOT APPLIED HIS MIND TO THE TAXABILITY OF THE S UM OF RS.ONE CRORE UNDER ITA NO.586/BANG/2011 PAGE 6 OF 9 THE HEAD INCOME FROM CAPITAL GAIN. OUR ATTENTIO N WAS DRAWN TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT V. DEVELOPMENT CREDIT BANK LTD., 323 ITR 206 (BOM) , WHEREIN THE HONBLE BOMBAY HIGH COURT TOOK THE VIEW THAT WHEN T HE DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE AO, BUT THE OR DER OF ASSESSMENT IS SILENT ON A PARTICULAR ISSUE, IT CANNOT BE SAID THA T THERE WAS LACK OF PROPER ENQUIRY ON THE PART OF THE AO WHILE COMPLETING THE ASSESSMENT. IF THE ASSESSEE HAS FURNISHED INFORMATION BEFORE COMPLETIO N OF ASSESSMENT TO THE AO AND IF THERE IS DUE DISCLOSURE BY THE ASSESS EE, THEN IT CANNOT BE SAID THAT THE AO FAILED TO MAKE PROPER ENQUIRIES ON THE ISSUE. REFERENCE WAS ALSO MADE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SUNBEAM AUTO LTD., 332 ITR 167 (DEL) , WHEREIN THE HONBLE DELHI HIGH COURT EXPLAINED THE DIFFERENCE BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. THE HONBLE HIGH COURT HELD TH AT IF THERE IS AN ENQUIRY WHICH IS IN ADEQUATE, THAT BY ITSELF WOULD NOT GIVE OCCASION TO THE CIT TO PASS ORDER U/S. 263, MERELY BECAUSE HE HAS A DIFFER ENCE OF OPINION IN THE MATTER. IT IS ONLY IN CASES WHERE THERE IS LACK OF ENQUIRY, THE CIT CAN RESORT TO POWERS U/S. 263 OF THE ACT. IT WAS THUS SUBMITT ED THAT THE ORDER U/S. 263 CANNOT BE SUSTAINED AND THE SAME HAS TO BE QUASHED. 11. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT T HERE WAS NO PROPER APPLICATION OF MIND ON THE PART OF THE AO AND THE C IT HAD RIGHTLY INVOKED THE JURISDICTION U/S. 263 OF THE ACT. ACCORDING T O HIM, THE QUESTION AS TO ITA NO.586/BANG/2011 PAGE 7 OF 9 WHETHER THE SUM OF RS.ONE CRORE HAS TO BE ASSESSED AS CAPITAL GAIN OR BUSINESS INCOME, OUGHT TO HAVE BEEN INVESTIGATED BY THE AO AND HIS FAILURE TO DO SO HAS RESULTED IN A PREJUDICE TO THE INTERES T OF REVENUE AND THEREFORE JURISDICTION U/S. 263 OF THE ACT WAS RIGHTLY INVOKE D. FOR THE PROPOSITION THAT FAILURE TO MAKE ENQUIRY WILL GIVEN RIGHT TO CIT TO INVOKE POWERS U/S. 263, THE LD. DR RELIED ON THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF RAM PYARI DEVI SAROAGI V. CIT, 67 ITR 84 (SC) . 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS N ARRATED IN THE EARLIER PART OF THIS ORDER, THE LONG TERM CAPITAL G AINS DECLARED BY THE ASSESSEE IN THE COMPUTATION OF INCOME INCLUDED THE SUM OF RS.ONE CRORE WHICH THE ASSESSEE RECEIVED UNDER THE SALE DEED DAT ED 8.6.2005. A COPY OF THE AFORESAID SALE DEED HAD BEEN FILED BEFORE TH E AO PRIOR TO COMPLETION OF THE ASSESSMENT PROCEEDING U/S. 143(3) OF THE ACT . THE LETTER DATED 16.12.08 ADDRESSED BY THE ASSESSEE TO THE AO ENCLOS ING A COPY OF THE SALE DEED DATED 8.6.2005 REFERS TO THE DISCUSSION W HICH THE ASSESSEES REPRESENTATIVE HAD WITH THE AO AND THEREAFTER A COP Y WAS FURNISHED TO THE AO. IT IS THUS CLEAR THAT THE AO WAS APPRISED OF T HE MONIES RECEIVED UNDER THE SALE DEED. THERE IS NOTHING ON RECORD TO SUGGE ST THAT THE SUM OF RS.ONE CRORE OUGHT TO BE TREATED AS INCOME FROM BUS INESS. AS WE HAVE ALREADY SEEN, THE PROPERTY IN QUESTION WAS ADMITTED LY HELD BY THE ASSESSEE AS A CAPITAL ASSET AND ANY INCOME FROM TRANSFER OF THE SAID PROPERTY WOULD GIVE RISE TO INCOME UNDER THE HEAD CAPITAL GAINS. AS RIGHTLY SUBMITTED ON BEHALF OF THE ASSESSEE, WHEN THE SUM OF RS.24 CRORE S RECEIVED UNDER THE ITA NO.586/BANG/2011 PAGE 8 OF 9 JOINT DEVELOPMENT AGREEMENT WAS TREATED AS CAPITAL GAIN, THERE IS NO REASON WHY THE SUM OF RS.ONE CRORE RECEIVED OVER AN D ABOVE THE SUM OF RS.24 CRORES RECEIVED UNDER THE JOINT DEVELOPMENT A GREEMENT AT THE TIME OF SALE ON THE VERY SAME PROPERTY SHOULD BE TREATED AS INCOME FROM BUSINESS. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, SALE CONSIDERATION RECEIVED ON SALE OF PROPERTY CANNOT B E BIFURCATED AS PARTLY GIVING RISE TO INCOME FROM BUSINESS AND PARTLY GIVI NG RISE TO INCOME FROM CAPITAL GAIN. AS WE HAVE ALREADY OBSERVED, THERE I S NOTHING ON RECORD TO INDICATE THE BASIS ON WHICH THE CIT COMES TO THE CO NCLUSION IN THE ORDER U/S. 263 OF THE ACT THAT THE SUM OF RS.ONE CRORE IS TO BE ASSESSED AS INCOME FROM BUSINESS. THE ORDER OF THE AO WAS THER EFORE WAS NOT ERRONEOUS. 13. WE ARE ALSO OF THE VIEW THAT JURISDICTION U/S. 263 OF THE ACT CANNOT BE SUSTAINED ON THE BASIS THAT THERE WAS NO ENQUIRY MA DE BY THE AO ON THE ISSUE CONSIDERED IN THE ORDER U/S. 263 OF THE ACT. IN THIS REGARD, WE HAVE ALREADY SEEN THAT IN THE COURSE OF ASSESSMENT PROCE EDINGS NECESSARY DETAILS HAD BEEN FURNISHED BY THE ASSESSEE. IT IS A CASE WHERE THE CIT IS OF THE VIEW THAT AN ENQUIRY MADE BY THE AO IS INADE QUATE. AS HELD IN THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE , JURISDICTION U/S. 263 OF THE ACT CANNOT BE INVOKED FOR INADEQUATE ENQUIRY. WE ARE, THEREFORE, OF THE VIEW THAT THE JURISDICTION U/S. 263 WAS NOT PROPERL Y INVOKED IN THE PRESENT CASE. THE ORDER OF THE CIT U/S. 263 OF THE ACT IS ACCORDINGLY QUASHED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.586/BANG/2011 PAGE 9 OF 9 14. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF FEBRUARY, 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R ENCL: ANNEXURE-I BANGALORE, DATED, THE 07 TH FEBRUARY, 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.