ITO, Chickmagalur V. Sri. T.D. Sathyan (HUF), Kadur

ITA 619/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1441 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Business income; Revision of order; Assessment record
• Section: 45(2); 143(3); 54F; 133A; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI GEORGE GEORGE. K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NOS.619 TO 624(BANG) 2015 (ASSESSMENT YEARS : 2007-08 TO 2009-10) THE INCOME-TAX OFFICER, WARD-1, CHIKMAGALUR APPELLANT VS SHRI T.D.SATYAN (HUF), PAN NO.AABHT 8587J SHRI T.D.RAJAN (HUF) PAN NO.AABHT 8586J TDS RESIDENCY, BH ROAD, KADUR, CHICKMAGALUR DT. RESPONDENT AND ITYA NOS.479 TO 484(BANG)/2015 (ASSESSMENT YEARS : 2007-08 TO 2009-10) SHRI T.D.SATYAN (HUF), PAN NO.AABHT 8587J SHRI T.D.RAJAN (HUF) PAN NO.AABHT 8586J TDS RESIDENCY, BH ROAD, KADUR, CHICKMAGALUR DT. APPELLANT VS THE INCOME-TAX OFFICER, WARD-1, CHIKMAGALUR RESPONDENT REVENUE BY : DR.P.K.SRIHARI, ADDL.CIT ASSESSEE BY : SHRI RAVISH RAO, CA DATE OF HEARING : 10-08-2015 DATE OF PRONOUNCEMENT : 12 -08-2015 O R D E R PER BENCH THESE SIX APPEALS BY TWO ASSESSEES AND SIX CROSS A PPEALS BY THE REVENUE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT(A) DATED 20- 01-2015. THE RELEVANT ASSESSMENT YEARS ARE : 2007- 08 TO 2009-2010. ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 2 2. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEAL S THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. IN THE ASSESSEES APPEAL GROUNDS RAISED ARE IDEN TICAL. SIMILARLY IN THE SIX APPEALS FILED BY THE REVENUE ALL THE GROUND S ARE IDENTICAL. HOWEVER, WE NEED NOT GIVE MUCH IMPORTANCE TO THE GR OUNDS RAISED, SINCE ADJUDICATION OF THE SAME ARE NOT REQUIRED ON FACTS AND CIRCUMSTANCES OF THE CASE. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOL LOWS; A SURVEY U/S 133A OF THE IT ACT WAS CONDUCTED IN TH E CASES OF THE ASSESSEE ON 20-10-2010. DURING THE COURSE OF SURVE Y IT WAS NOTICED THAT THE ASSESSEES HAVE CONVERTED THEIR ANCESTRAL AGRIC ULTURAL LAND INTO RESIDENTIAL PLOTS AND THE SAME WERE BEING SOLD TO V ARIOUS PERSONS. IT WAS FURTHER FOUND THAT THE ACTIVITY OF SALE OF SITES WA S BEING CARRIED OUT BY THE ASSESSES SINCE FINANCIAL YEAR 2006-07, HOWEVER, ASS ESSEES HAVE NOT FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08. ACCORDINGLY, THE AO ISSUED A NOTICE U/S 148 OF 22-12-2010 CALLING FOR R ETURN OF INCOME. THE ASSESSEES FILED THEIR RETURN OF INCOME ON 04-07-20 11 FOR THE ASSESSMENT YEAR 2007-08 DECLARING A TOTAL INCOME OF RS.1,24,99 0/- AND RS.17,94,849/- RESPECTIVELY BEING CAPITAL GAINS ON SALE OF SITES A ND AGRICULTURAL INCOME OF RS.34,62,376/- EACH. THE CASE WAS SELECTED FOR SCR UTINY AND ASSESSMENT U/S 143(3) R.W.S.147 WAS COMPLETED ON 30-12-2011, W HEREBY THE AO ACCEPTED THE LONG TERM CAPITAL GAINS ON SALE OF SIT ES OFFERED BY THE ASSESSEES. SIMILARLY, FOR AY: 2008-09 AND 2009-10, THE AO ASSESSED THE ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 3 LONG TERM CAPITAL GAIN FROM SALE OF PLOTS BY THE AS SESSES. SUBSEQUENTLY, ON PERUSAL OF THE ASSESSMENT RECORD THE CIT NOTED THAT THE INCOME FROM ACTIVITY OF SALE OF SITE HAS BEEN WRONGLY ASSESSED UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAINS ( LTCG) INSTEAD OF INCOME FROM BUSINESS AND CONSEQUENTLY, THE DEDUCTION U/S 54F CLAIMED AGAINST THE LTCG HAS BEEN ERRONEOUSLY ALLOWED BY THE AO. THE CIT FURTHER NOT ED THAT PERUSAL OF ASSESSMENT ORDER AND RELEVANT RECORD INDICATE THAT NO ENQUIRY WHATSOEVER NOT ANY EXAMINATION OF THE ISSUE INVOLVED IN THE MA TTER WAS MADE BY THE AO AT THE TIME OF ASSESSMENT. ACCORDINGLY, THE CIT CO NSIDERED THE ASSESSMENT ORDERS DATED 30-12-2011 HAS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE AND ISSUED A SHOW CAUSE NOTICE TO THE ASSES SEES ON 14-08-2012 REQUIRING THE ASSESSEES TO STATE AS TO WHY THE ABOV E ORDERS PASSED BY THE AO SHOULD NOT BE REVISED U/S 263 OF THE ACT. IN RE SPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE MADE THE SUBMISSION BEFORE THE CIT AND OBJECTED TO THE PROPOSED REVISION OF ASSESSMENT ORDERS. THE MAIN C ONTENTION OF THE ASSESEE BEFORE THE CIT WAS THAT THE THESE TWO ASSES SEES ARE BROTHERS RESIDING AT KADUR TOWN, HAVING COFFEE ESTATES APART FROM WHICH THEY HAD AGRICULTURAL LAND AT KADUR TOWN WHICH THEY GOT BY W AY OF PARTITION DEED DATED 11-09-2003. THEREAFTER, BOTH THE BROTHERS C ONVERTED THE AGRICULTURAL LAND INTO RESIDENTIAL SITES BY ORDER OF DC ON 25-09 -2004 AND SOLD THE SAME. THE LAND WAS ACQUIRED BY THE ASSESSEES AS AN ANCES TRAL PROPERTY AND WITH A VIEW TO SECURE A BETTER PRICE. IT WAS CONVERTED IN TO PLOTS THEREFORE, THIS ACTIVITY OF SELLING LAND BY CONVERTING INTO PLOTS D O NOT FALL WITHIN THE PURVIEW ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 4 OF ADVENTURE OF TRADE, BUT WAS ASSESSABLE AS CAPITA L GAIN. IN SUPPORT OF THEIR CONTENTION, THE ASSESSEE RELIED UPON THE FOLL OWING JUDGMENTS; I) CIT VS SURESH CHAND GOYAL (MP)(298 ITR 277) II) CIT VS SUSHEELA DEVI (P&H)(259 ITR 617) III) CIT VS SOHAN KHAN (304 ITR 194) IV) CIT VS GAJANANA ENTERPRISES (314 ITR 247) PLACING RELIANCE ON VARIOUS JUDGMENTS, THE ASSESSEE CONTENDED BEFORE THE CIT THAT THE ISOLATED TRANSACTION LIKE THIS CANNOT BE TREATED AS BUSINESS AND HENCE THE PROCEEDINGS INITIATED MAY BE DROPPED. THE CIT DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEES APPLIED TO THE DC FOR CONVERTING THE AGRICULTURAL L ANDS FOR RESIDENTIAL AND COMMERCIAL PURPOSES. THE LAYOUT PLAN WAS FORMED IN WHICH AROUND 102 SITES WERE FORMED OUT OF WHICH 89 SITES SOLD TO DIF FERENT PERSONS. FROM THE SALE OF THESE SITES BOTH THE ASSESSEES EARNED TOTA L REVENUE OF RS.3.68 CRORE STILL THE DATE OF SURVEY. THUS, THE CIT WAS OF THE VIEW THAT THE ENTIRE GAMUT OF SUCH ACTIVITIES OF CONVERTING THE AGRICULTURAL L AND INTO NON-AGRICULTURAL LAND FOR THE PURPOSE OF CONVERTING THE SAME INTO RE SIDENTIAL AND COMMERCIAL LAYOUTS, DEVELOPING THE SAME AND THEN SE LLING THEM WERE ALL DONE OVER A PERIOD OF FOUR LONG YEARS WITH THE INTE NTION TO VENTURE INTO COMMERCIAL ACTIVITY. ACCORDINGLY, THE CIT HELD THA T THE INCOME EARNED BY THE ASSESSEES FROM THE SALE OF THESE SITES IS IN TH E NATURE OF BUSINESS INCOME TO BE ASSESSED UNDER THE HEAD INCOME FROM B USINESS. IN SUPPORT OF HIS FINDING, THE CIT PLACED RELIANCE ON THE DECI SION OF THE HONBLE ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 5 SUPREME COURT IN THE CASE OF INDIRAMANI BAI & OTHER S VS ADDL.CIT (200 ITR 594) AS WELL AS THE HONBLE KARNATAKA HIGH COUR T IN THE CASE OF CIT VS R. RAMAIAH & OTHERS (146 ITR 39). THUS, THE CIT HEL D THAT THE AO PASSED THE ASSESSMENT ORDER MECHANICALLY WITHOUT APPLYING HIS MIND AND ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT MAKING A N IOTA OF EXAMINATION OR ENQUIRY. CONSEQUENTLY, THE ASSESSMENT ORDER PASS ED BY THE AO WAS HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE WITHIN THE MEANING OF SEC.263 OF THE ACT AND THE SAME WAS SET ASIDE WI TH THE DIRECTION TO PASS FRESH ASSESSMENT ORDER AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. PURSUANT TO THE ORDER PASSED U/S 263, FRESH ASS ESSMENT ORDERS WERE PASSED ON 13-12-2013 BY TREATING THE INCOME FR OM THE ACTIVITIES OF SALE OF SITES AS INCOME FROM BUSINESS AS PER THE DIRECTI ONS CONTAINED IN COMMISSIONERS ORDER PASSED U/S 263 OF THE ACT (ORD ER DATED 31-01-02013). ON FURTHER APPEAL, THE CIT(A) CONFIRMED THE ASSESSM ENT ORDER AND HELD THAT THE INCOME FROM SALE OF SITES IS TO BE ASSESSED AS BUSINESS INCOME. THE CIT(A) FURTHER DIRECTED THE AO TO ADOPT THE FAIR MA RKET VALUE U/S 45(2) OF THE IT ACT, INSTEAD OF GUIDELINES VALUE. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) BOTH REVEN UE AND THE ASSESSEE ARE IN APPEAL BEFORE US. 7. THE LEARNED AR SUBMITTED THAT THE PRESENT APPEA LS ARISE OUT OF THE ASSESSMENT ORDER PASSED PURSUANT TO THE ORDER OF TH E CIT PASSED U/S 263 OF THE ACT. IT WAS SUBMITTED THAT THE REVISIONARY ORD ER PASSED BY THE CIT U/S ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 6 263 OF THE ACT, WAS THE SUBJECT MATTER OF APPEAL BE FORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 31-07-2015 IN ITA NOS.148 2 TO 1484(B)/14 QUASHED THE ORDER PASSED U/S 263 OF THE IT ACT. T HEREFORE, IT WAS PLEADED THAT THE PRESENT APPEALS HAVE BECOME INFRUCTUOUS. 8. THE LEARNED DR IS ALSO AWARE OF THE TRIBUNALS ORDER DATED 31-07- 2015, QUASHING THE ORDER OF THE CIT PASSED U/S 263 OF THE ACT. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE PRESENT APPEALS SPRINGS FR OM THE ASSESSMENT ORDER PASSED PURSUANT TO REVISIONARY ORDER OF THE CIT PAS SED U/S 263 OF THE IT ACT. THE TRIBUNAL VIDE ORDER DATED 31-07-2015 IN IT A NOS.1482 TO 1484(B)/2014 HAS QUASHED THE ORDER OF THE CIT PASSE D U/S 263 OF THE ACT. THE RELEVANT FINDINGS OF THE TRIBUNAL READS AS FOLL OWS: 14. FROM THE FACTS OF THE CASE AS WELL AS THE FROM THE JUDGMENT AS DISCUSSED ABOVE, IT IS CLEAR THAT THE V IEW TAKEN BY THE AO IS CERTAINLY A POSSIBLE VIEW AND RATHER A MORE PLAUSIBLE VIEW. THE CIT PLACED RELIANCE ON THE DEC ISION OF THE HONBLE SUPREME COURT IN CASE OF INDIRAMANI BAI & OTHERS VS ADDL.CIT (SUPRA) WHEREIN THE GLARING FACT NOTED BY THE AUTHORITIES AS WELL AS BY THE HONBLE SUPREM E COURT AND HIGH COURT WAS THAT SOON AFTER THE PURCHASE OF LAND THE ASSESSEE CARVED OUT INTO PLOTS AND SOLD THEM WI THIN A FEW MONTHS. THEREFORE, BY CONSIDERING THIS PECULIA R FACT COUPLED WITH OTHER FACTS AND CIRCUMSTANCES OF THE C ASE, IT WAS FOUND THAT THE INTENTION OF THE ASSESSEE EVEN W HEN THEY PURCHASED THE LAND WAS TO RESELL THE SAME AND NOT ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 7 MAKE ANY INVESTMENT. IN THE CASE IN HAND, THE LAND IN QUESTION WAS AN ANCESTRAL AGRICULTURAL LAND THEREFO RE, THERE WAS NO QUESTION OF ANY INTENTION OF THE ASSESSEE WH ILE HOLDING THE AGRICULTURAL LAND OR PURCHASED THE SAME FOR THE PURPOSE OF RESALE. THEREFORE, WHEN THERE IS NO PUR CHASE OF LAND BY THE ASSESSES BEFORE US, THEN DECISIONS RELI ED UPON BY THE LEARNED CIT WOULD NOT RENDER THE VIEW TAKEN BY THE AO A ABSOLUTELY ILLEGAL OR IMPERMISSIBLE UNDER LAW. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, A S WELL AS THE ABOVE DISCUSSION, WHEN THE VIEW OF THE AO IS A PERMISSIBLE AND ONE OF THE POSSIBLE VIEW TAKEN AFTE R A DUE INVESTIGATION AND EXAMINATION OF THE ISSUE THEN, TH E CIT HAS NO POWER TO REVISE SUCH AN ORDER OF AO MERELY, BECA USE HE DID NOT AGREE WITH THE VIEW TAKEN BY THE AO. THERE FORE, THE IMPUGNED REVISION ORDERS ARE NOT SUSTAINABLE AND AR E LIABLE TO BE SET ASIDE. ACCORDINGLY, WE SET ASIDE THE IMP UGNED REVISION ORDERS PASSED BY THE CIT U/S 263 OF THE IT ACT, 1961. 10. WHEN THE TRIBUNAL HAS QUASHED THE ORDER OF THE CIT PASSED U/S 263 OF THE ACT, ANY PROCEEDINGS THERE FROM HAS LOST ITS FOUNDATION/SUBSTRATUM. THEREFORE, THE ASSESSMENT OR DERS AND ITS SUBSEQUENT APPELLATE PROCEEDINGS IN PURSUANCE TO TH E ORDER PASSED BY THE CIT U/S 263 OF THE ACT IS TO BE RENDERED INFRUCTUO US, UNLESS AND UNTIL THE TRIBUNALS ORDER DATED 31-07-2015 IS SET ASIDE BY A HIGHER JUDICIAL FORUM. THE REVENUE HAS NOT BROUGHT ON RECORD ANY JUDGMENT OF HIGHER JUDICIAL FORUM, WHICH HAS SET ASIDE/STAYED THE TRIBUNAL ORDE R DATED 31-07-2015. ITA NOS.619 TO 624(B)15 & 479 TO 484(B)/2015 8 THEREFORE, WE HOLD ALL THE APPEALS FILED BY TWO ASS ESSEES AND THE REVENUE, WHICH ARISE OUT OF ASSESSMENT ORDERS PASSED PURSUAN T TO THE REVISIONARY ORDER U/S 263 OF THE ACT, HAVE BECOME INFRUCTUOUS A ND WE DISMISS THE SAME. IT IS ORDERED ACCORDINGLY. 11. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EES AND THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE 12 TH AUGUST, 2015. SD/- (JASON P BOAZ ) SD/- (GEORGE GEORGE, K) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE D A T E D : 12-08-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE