Assistant Commissioner of Income tax, circle-2, Jammu V. Sh. Raju Chowdhary, , Jammu

ITA 648/ASR/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2192 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 09-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Additional evidence; Cost of acquisition; Corroborative evidences; Valuation report; Assessment record; Capital receipt; Capital Gains
• Section: 50C; 2(14); 133A; 153A; 69A; 64; 43; 48; 13; 22; 69

Judgement Text

ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 1 OF 63 IN THE INCOME TAX APPELLATE TRIBUNAL AMNRITSAR BENCH, AMRITSAR BEFORE SHRI N.K. CHOUDHRY, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . .. . . .. . ./ ././ ./ I.T.A NO.648/ASR/2017 / // / A.Y.:2014-15 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, RAIL HEAD, COMPLEX, PANAMA CHOCK, JAMMU. V S . SHRI RAJU CHOUDHARY, 56-A/D, GANDHI NAGAR, JAMMU. [PAN:ABSPK 3429 J] APPELLANT /RESPONDENT /ASSESSEE BY SHRI P . N. ARORA , ADVOCATE /REVENUE BY SHRI ALOK KUMAR, CIT (D.R.) / DATE OF HEARING: 19.12.2019 /PRONOUNCEMENT ON: 16.03.2020 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-J & K, JAMMU (IN SHORT THE CIT(A)) DATED 29.06.2017 PERTAINING TO ASSESS MENT YEAR 2014- 15, WHICH IN TURN HAS ARISEN FROM THE ASSESSMENT OR DER PASSED UNDER SECTION 143 (3) DATED 30.12.2016 OF INCOME TAX ACT, 1961 (IN SHORT THE ACT) BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, JAMMU (IN SHORT THE AO). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 2 OF 63 I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.43,64,994/- ON ACCOUNT OF UNVERIFIED CREDITORS, ON THE BASIS OF FURNISHING OF CONFIRMATIONS FROM THE CREDI TORS BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS IN VIOLAT ION OF RULE 46A OF INCOME TAX RULES, 1962 . II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,3 2,985 OUT OF MANUFACTURING EXPENSES, RS.84,659 OUT OF ADMIN EXPENSES, AND RS.4,22,587 OUT OF OTHER EXPENSES CLA IMED BY THE ASSESSEE, BY RELYING ON THE BOOKS OF ACCOUNTS F URNISHED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS, T HAT TOO IN THE FORM OF MERELY PEN DRIVE, WHEN THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND ORIGINAL BILLS IN SUPPORT OF THE CLAIM, DURING THE COURSE OF ASSESSMENT PROCE EDINGS TO JUSTIFY THESE EXPENSES, WHICH WERE PARTLY INCURRED IN CASH. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.8,75,03,317 ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN CONSTRUCTION OF COMMERCIAL COMPL EX AT GULAB SINGH MARG, JAMMU ON THE BASIS THAT, IF AT AL L ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT HAD TO BE MADE , IT HAD TO BE MADE IN THE HANDS OF THIRD PARTY AND NOT THE ASSESSEE, WHEN, DESPITE VARIOUS OPPORTUNITIES PROVIDED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAI LED TO ESTABLISH THAT THE CONSTRUCTION WAS BEING DONE BY T HE THIRD PARTY AND NOT BY THE ASSESSEE. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 3 OF 63 IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.8,7 3,465 ON ACCOUNT OF MUNICIPAL FEES PAID OUT OF UNEXPLAINED S OURCES, BY ADMITTING ADDITIONAL EVIDENCE PRODUCED BY THE AS SESSEE IN VIOLATION OF RULE 46A OF INCOME TAX RULES. WHEN, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DESPITE VARIO US OPPORTUNITIES PROVIDED TO THE ASSESSEE, THE ASSESSE E FAILED TO GIVE DETAILS OF SOURCE OF PAYMENT OF MUNICIPAL F EES. V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF CAPITAL GA INS OF RS.2,21,49,975/- ACCRUING TO THE ASSESSEE ON THE LE ASE OF LAND TO M/S. K. C. SPORTS CLUB AND CAPITAL GAINS O F RS.21,73,33,352 ON THE LEASE OF LAND TO M/S. K. C. CITY CENTRE PVT. LTD. BY HOLDING THAT THIS IS NOT A TRANSFER O F CAPITAL ASSET WITHIN THE MEANING OF SECTION 2 (47) OF INCOM E TAX ACT AND HENCE, THE QUESTION OF CHARGING CAPITAL GAIN WO ULD NOT ARISE. THE LEASE DEEDS FOR THE PROPERTIES WERE EXE CUTED BY THE ASSESSEE FOR A PERIOD OF 20 YEARS AND 25 YEARS (WHICH IS MORE THAN 12 YEARS AMOUNTING TO TRANSFER OF PROPERT Y UNDER THE PROPERTY UNDER THE TRANSFER OF PROPERTY ACT). R ELIANCE IS PLACED ON THE FOLLOWING JUDICIAL DECISIONS: I. CIT V. C. F. THOMAS [2007] 158 TAXMAN 310 (KER) OF HON`BLE KERALA HIGH COURT II. CIT V. SUJATHA JEWELLERS [2007] 290 ITR 631 (MA D) OF HON`BLE MADRAS HIGH COURT. 3. THE ASSESSEE IS AN INDIVIDUAL AND IS DOING BUSINESS OF MANUFACTURING OF FERROCHROME AND STEEL INGOTS IN TH E NAME OF TWO ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 4 OF 63 INDUSTRIAL UNITS NAMELY M/S. TAWI CHEMICAL INDUSTRI ES LANE- 4, SIDCO INDUSTRIAL COMPLEX, BARI BRAHMANA JAMMU AND M/S. TA WI CHEMICAL INDUSTRIES UNIT- I & UNIT -II , LANE -4 SIDCO. HE HAS ALSO GIVEN IN HIS TWO BUSES ON HIRE TO M/S. LUCKY TRAVELS AND IS DERI VING INCOME FROM HOUSE PROPERTY FROM RENT FROM K.C. EDUCATION SOCIET Y, SAAR ESTATE PVT. LTD. PINNACLE PROPERTY AND MANGOLIAS AND INCOM E FROM OTHER SOURCES. THE ASSESSEE HAS FILED RETURN OF INCOME ON 02.01.2015 DECLARING TOTAL INCOME OF RS.1,02,44,600. A SURVEY UNDER SECTION 133A WAS CARRIED OUT ON 27.07.2016 AT VARIOUS BUSINESS C ONCERNS PERTAINING TO M/S. K. C. GROUP OF CASES IN WHICH THE ASSESSEE AND HIS FAMILY MEMBERS WERE HAVING SUBSTANTIAL INTEREST. THE ASSES SMENT WAS MADE UNDER SECTION 143 (3) OF THE ACT ON 30.12.2016 AFTE R MAKING ADDITION OF RS.33,45,63,200 AGAINST WHICH THE ASSESSEE HAS F ILED AN APPEAL BEFORE CIT(A), WHO ALLOWED SUBSTANTIAL RELIEF AGAIN ST WHICH THE REVENUE HAS AGITATED BEFORE THIS TRIBUNAL, WHICH AR E BEING DISCUSSED AS PER GROUNDS OF APPEAL IN SUCCEEDING PARAS. 4. GROUND NO.1 RELATES TO ADDITION OF RS.43,64,494 ON ACCOUNT OF UNVERIFIABLE SUNDRY CREDITORS. 5. SUCCINCT FACTS ARE THAT THE ASSESSEE HAS SHOWN SUND RY CREDITORS AT RS.1,39,41,202 IN SCHEDULE OF ACCOUNTS OF M/S. T AWI CHEMICAL INDUSTRIES, UNIT-I, JAMMU AND RS.1,49,23,543 IN SCH EDULE OF ACCOUNTS ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 5 OF 63 OF M/S. BARI BRAHMA, UNIT-II, JAMMU. IN ORDER TO VE RIFY GENUINENESS OF CREDITORS, THE AO ISSUED NOTICE UNDER SECTION 13 3(6) OF THE ACT IN SOME OF THE CREDITORS IN WHOSE CASES, THE ASSESSEE HAS PROVIDED THE ADDRESS FOR COMMUNICATION. HOWEVER, IN RESPECT OF P ARTIES, NAMELY M/S. NASEEB SINGH & SONS, RS.13,32,500, M/S. CALCUT TA CARBIDE (P) LTD. RS.6,30,340, M/S. MAHAJAN & CO. BISHNA RS.10,0 1,438, M/S. S.V. TRADERS, RS.5,57,569 AND M/S. DURGA TRADERS, RS.8,4 2,647 AGGREGATING TO RS.43,64,494. THE VERIFICATION LETTE RS WERE RECEIVED BACK UNDELIVERED. THE AO, THEREFORE, ADDED A SUM OF RS.43,64,494, TO TOTAL INCOME OF THE ASSESSEE FOR WANT OF CONFIRM ATION FROM THESE PARTIES. 6. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD.CIT(A). WHEREIN IT WAS SUBMITTED THAT THE AO SOU GHT EXPLANATION OF THE ASSESSEE SEEKING CONFIRMATION OF THE PARTIES ON 27.12.2016 AND THE SAME WAS PRODUCED BEFORE THE AO ON 30.12.2016 A T 10 AM, BUT THE AO DID NOT CONSIDER THAT AND MADE THE ADDITION. THE APPELLANT HAS ALSO SUBMITTED A COPY OF THE SAME AS ANNEXURE-C OF THE SUBMISSIONS. THE CONFIRMATIONS RECEIVED AS ABOVE WE RE REMANDED TO THE AO FOR HIS COMMENTS VIDE LETTER DATED 27.03.201 7. THE AO BY HIS LETTER DATED 13.06.2017 DULY FORWARDED BY THE ADDL. CIT RANGE-2, JAMMU, SUBMITTED A REMAND REPORT AND HE STATED THER EIN THAT ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 6 OF 63 AS A MATTER OF TEST CHECK, CERTAIN CREDITORS FROM THE JAMMU WERE ISSUED LETTERS UNDER SECTION 133 (6) OF THE AC T, 1961 IN ORDER TO VOUCHSAFE THE CREDITS SHOWN BY THE ASSESSE E AGAINST THEIR NAMES. THE LETTERS WERE ISSUED ON THE COMMUNI CABLE ADDRESS GIVEN BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, BUT THESE WERE RETURNED BY THE POSTAL AUTHORITIES UNDELIVERED, AS MENTIONED IN THE ASSESSMENT ORDER U NDER APPEAL. HOWEVER, THE FINAL OPPORTUNITY WAS GIVEN TO THE ASSESSEE ON 27.12. 2016, TO PRODUCE ALL THE ABOVE C REDITORS ALONG WITH THE BOOKS OF ACCOUNTS FOR EXAMINATION OF THE CREDITS FIXING THE CASE FOR 30.12.2016 AT 11 AM, BUT NONE A TTENDED ON THE DATE PHYSICALLY. HOWEVER, THE CONFIRMATION FROM THE PARTIES HAVE BEE N PROVIDED BY THE ASSESSEE NOW, AND KEPT ON RECORD, B UT DURING ASSESSMENT PROCEEDINGS ASSESSEE HAS FAILED TO PROVI DE SUCH VALID CONFIRMATIONS. 7. IN VIEW OF THESE FACTS, THE LD. CIT(A) OBSERVED THA T SINCE, THE AO, IN HIS REMAND REPORT HAS ADMITTED THAT THE CONF IRMATIONS FROM THE CREDITORS WHICH WERE PROVIDED BY THE ASSESSEE A ND HAVE BEEN PLACED ON RECORD, THERE IS NO REASON TO SUSTAIN THE ADDITION OF RS.43,64,494/- AND HENCE, IT WAS DELETED. 8. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. CIT (DR) SUBMITTED THAT THE CIT(A ) HAS ADMITTED THE ADDITIONAL EVIDENCE UNDER RULE 46A AND ALLOWED THE RELIEF OF THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 7 OF 63 ASSESSEE, WHEREAS THE ASSESSEE HAS FAILED TO FURNIS H CONFIRMATIONS BEFORE THE AO INSPITE OF GIVING FINAL OPPORTUNITY. 9. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED A REPLY BEFORE THE AO, AND P RODUCED THE BOOKS OF ACCOUNTS. IT WAS FURTHER SUBMITTED THAT THE LD.C IT(A) HAS MENTIONING ORDER THAT THE CONFIRMATION WAS PRODUCED BEFORE THE AO ON 13-12-2016 AT 10 AM BUT THE AO DID NOT CONSI DER THE SAME AND MADE THE ADDITION. THE APPELLANT`S COUNSEL HAS ALSO FILED A COPY OF ANNEXURE-C WITH HIS SUBMISSION. THE LD. A. R. OF TH E ASSESSEE SUBMITTED THE LD.CIT(A) HAS CALLED FOR A REMAND REP ORT FROM THE AO. THE AO VIDE HIS REMAND REPORT DATED 13-06-2017 SUBMITTED THAT T HE CONFIRMATION FROM THE PARTIES HAVE BEEN PROVIDED BY THE ASSESSEE NOW A COPY ON RECORD BUT DURING ASSESSMENT PROCEEDI NGS ASSESSEE HAS FAILED TO PROVIDE OF SUCH CONFIRMATIONS. THUS, THE CIT(A) HAS DULY ALLOWED OPPORTUNITY TO THE AO BY OBTAINING REMAND R EPORT; THEREFORE, THERE IS NO VIOLATION OF RULE 46A OF THE I.T. RULES . FURTHER, THE ASSESSEE HAS FILED THE DETAILS, CONFIRMATIONS, WHIC H ARE PLACED AT PAPER BOOK AT PAGE NO. 111 TO 116 WHICH HAVE BEEN D ULY EXAMINED BY THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE REL IED IN THE CASE OF SHAHRUKH KHAN V. DCIT [2007] 13 SOT 61 (MUM-TRIB) / [2006] 25 CCH 506 (MUM-TRIB) WHEREIN IT WAS HELD THAT AFTER CAL LING OF REMAND ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 8 OF 63 REPORT FROM AO ON MERIT AS ENVISAGED IN SUB- RULE(3 ) OF RULE 46A, CIT(A) HAD NO DISCRETION TO REFUSE TO ADMIT ADDITIO NAL EVIDENCE. IT WAS FURTHER RELIED IN THE CASE OF M/S. SARASWATI BU ILDERS V. ACIT- CENTRAL CIRCLE- AMRITSAR [I.T.A.NO. 252(ASR) 2013/A .Y. 2009-10 DATED 20.05.2016] IN WHICH IT WAS HELD THAT THE LD.CIT(A) HAS RIGHTLY ADMITTED ADDITIONAL EVIDENCES WHICH WERE NECESSARY FORM ARRIVING AT THE JUSTICE, THEREFORE, THE CONTENTIONS OF LEARNED D.R. THAT LEARNED CIT(A) SHOULD NOT HAVE ACCEPTED, DO NOT CARRY ANY F ORCE. THE LEARNED CIT(A) HAS PASSED A REASONED AND SPEAKING ORDER AND HAS PASSED THE ORDER AFTER OBTAINING REMAND REPORT FROM THE ASSESS ING OFFICER THEREFORE, WE DO NOT FIND ANY CONFORMITY IN THE SAM E AND THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE, THE ASSESSEE HAS CLAIME D THAT HE HAS FILED CONFIRMATION BEFORE THE CIT(A) ON 13-12-2016 AT 10 AM, BUT SAME APPEARS TO HAVE NOT BEEN ACCEPTED BY THE AO. THEREF ORE, THE ASSESSEE HAS FURNISHED THE SAID CONFIRMATIONS DURIN G THE APPELLATE PROCEEDINGS ALSO WHICH WERE REMANDED, TO THE AO FOR HIS COMMENTS AND EXAMINATIONS. THE AO IN HIS REMAND REPORT MADE COMMENT THAT THE ASSESSEE HAS NOW FILED CONFIRMATION FROM THE PA RTIES, WHICH ARE PLACED ON RECORD. THUS, THE AO HAS EXAMINED THE CO NFIRMATION AND ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 9 OF 63 DID NOT MAKE ANY ADVERSE COMMENTS THEREON. IN VIEW OF THIS FACT, WE FIND THAT THE LD.CIT(A) HAS RIGHTLY ADMITTED ADD ITIONAL EVIDENCES WHICH WERE NECESSARY FOR ARRIVING AT THE JUSTICE. T HE LEARNED COUNSEL FOR THE ASSESSEE RELIED IN THE CASE OF SHAHRUKH KHA N V. DCIT [2007] 13 SOT 61 (MUM-TRIB) / [2006] 25 CCH 506 (MUM-TRIB) WHEREIN IT WAS HELD THAT AFTER CALLING OF REMAND REPORT FROM AO O N MERIT AS ENVISAGED IN SUB-RULE(3) OF RULE 46A, THEN THE LD.C IT(A) HAD NO DISCRETION TO REFUSE TO ADMIT ADDITIONAL EVIDENCE. IT WAS FURTHER RELIED IN THE CASE OF M/S.SARASWATI BUILDERS V. ACI T- CENTRAL CIRCLE- AMRITSAR [I.T.A.NO. 252(ASR) 2013/A.Y. 2009-10 DATE D 20.05.2016] WHEREIN IT WAS HELD THAT THE LD.CIT(A) HAS RIGHTLY ADMITTED ADDITIONAL EVIDENCES WHICH WERE NECESSARY FOR ARRIVING AT THE JUSTICE, THEREFORE, THE CONTENTIONS OF LEARNED D.R. THAT LEARNED CIT(A) SHOULD NOT HAVE ACCEPTED DO NOT CARRY ANY FORCE. THE LEARNED CIT(A) HAS PASSED A REASONED AND SPEAKING ORDER AND HAS PASSED THE ORDE R AFTER OBTAINING REMAND REPORT FROM THE ASSESSING OFFICER THEREFORE, WE DO NOT FIND ANY CONFORMITY IN THE SAME AND THEREFORE, THE APPEA L OF THE REVENUE IS DISMISSED. WE FIND THAT THE LD. CIT(A) AFTER CON SIDERING THE FACTS AND PASSED THE ORDER AFTER OBTAINING REMAND REPORT. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 10 OF 63 THEREFORE, THE SAME IS UPHELD. ACCORDINGLY, THIS GR OUND OF APPEAL OF THE REVENUE IS DISMISSED. 11. GROUND NO. II: RELATES TO DELETING THE ADDITION OF RS.4,32,985/- OUT OF MANUFACTURING/ADMIN AND OTHER EXPENSES. 12. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E AO DURING THE ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSE E HAS CLAIMED MANUFACTURING EXPENSES IN THE TRADING ACCOUNT AS WE LL AS ADMINISTRATIVE EXPENSES IN THE PROFIT AND LOSS ACCO UNT IN TAWI CHEMICAL INDUSTRIES, UNIT-1. THE AO, THEREFORE, AS KED THE ASSESSEE TO PRODUCE BILLS/VOUCHERS OF THESE EXPENSES TO EXPL AIN THE MODE OF EXPENSES ETC. HOWEVER, THE ASSESSEE COULD NOT PRODU CE SUCH DOCUMENTS FOR TEST CHECK BEFORE THE AO. THE AO, THE REFORE, PRESUMED THAT THESE EXPENSES MADE HAVE BEEN INCURRE D PARTLY IN CASH AND DISALLOW 5% OF THE TOTAL EXPENSES CLAIMED UNDER THE HEAD MANUFACTURING OUT OF RS.4,32,985/- AND ADDED THE SA ME TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY, THE AO, ADDED A SUM OF RS.84,659/- BEING 5% OF THE TOTAL EXPANSE CLAIMED AT RS.16,93,1 89/- UNDER THE HEAD ADMINISTRATIVE EXPENSES. THE AO, FURTHER ADD ED A SUM OF RS.4,22,587/- BEING 5% OF THE TOTAL EXPENSES CLAIME D AT RS.84,51,747/- IN THE PROFIT AND LOSS ACCOUNT AGAIN ON THE GROUND THAT BILLS/VOUCHERS OF THESE EXPENSES WERE NOT PRODUCED BY THE ASSESSEE. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 11 OF 63 13. BEING AGGRIEVE, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A). DURING THE APPELLATE PROCEEDINGS THE APP ELLANTS COUNSEL IN HIS SUBMISSION HAS STATED THAT ALL THE EXPENSES CLAIMED AS ABOVE HAVE BEEN SPENT PURELY FOR BUSINESS PURPOSE AND ALL THE BILLS AND VOUCHERS DULY AUDITED WERE PRODUCED BEFORE THE AO A ND AGAIN SUBMITTED DURING THE APPELLATE PROCEEDINGS FOR VERI FICATION. THE APPELLANTS SUBMISSION DATED 22-03-2017 WAS SENT TO THE AO FOR HIS COMMENTS/OBJECTIONS. THE AO IN HIS REMAND REPORT HA S ADMITTED THAT NOW, THE ASSESSEE HAS PRODUCED COMPUTERIZED BOOKS OF ACCOUNTS IN THE SHAPE OF A PEN DRIVE AS WELL AS VOUCHERS FOR TH E EXPENDITURE CLAIMED WHICH WERE TEST CHECKED AND FOUND TO BE IN ORDER. SINCE, THE AO, HAS ALREADY MADE THE NECESSARY VERIFICATION OF THE GENUINENESS OF THE EXPENSES AND NOTHING ADVERSE WAS FOUND, THE ADDITIONS OF RS.4,32,985/-, RS.84,659/- AND RS.4,22,587/- MADE B Y THE AO WERE DELETED. 14. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. CIT(DR)RELYING ON THE ORDER OF TH E AO AND SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED TO DELETING THE ADDI TION. 15. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FIND ING OF THE LD.CIT(A) AND SUBMITTED THAT THE CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE AO. THE AO VIDE HIS REMAND REPORT H AS ADMITTED THAT ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 12 OF 63 THE ASSESSEE HAS PRODUCED THE COMPUTERIZED BOOKS OF ACCOUNTS AS WELL AS VOUCHERS FOR THE EXPENDITURE CLAIM WHICH WE RE TEST CHECKED AND FOUND TO BE IN ORDER. THEREFORE, CIT(A) HAS RIG HTLY DISALLOWANCE OF EXPENSES MADE BY THE AO. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO D URING THE COURSE OF REMAND PROCEEDINGS HAD VERIFIED THE EXPENSES AND TEST CHECK OF THE SAME AND FOUND THE SAME TO BE IN ORDER AS PER R EMAND REPORT. THEREFORE, CIT(A) HAS CORRECTLY DELETED THE ADDITIO NS OF DISALLOWANCE OUT OF EXPENSES MADE BY THE AO, HENCE, SAME IS UPHO LD THIS GROUND OF APPEAL THEREFORE DISMISSED. 17. GROUND NO. III: RELATES TO DELETION OF THE ADDITION OF RS.8,75,03,317/- ON ACCOUNT OF UNEXPLAINED INVESTME NT MADE BY THE ASSESSEE IN CONSTRUCTION OF COMMERCIAL COMPLEX AT GULAB SINGH MARG, JAMMU. 18. BRIEF FACTS OF APROPOS GROUND ARE THAT THE ADDITION OF RS.8,75,03,317/- WAS MADE ON THE GROUND THAT DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE HAS CONSTRUC TED A COMMERCIAL COMPLEX AT GULAB SINGH MARG AND IN WHICH HE HAS CLA IMED TO HAVE INVESTED A SUM OF RS.15,20,00,000/- IN THE BUILDING ACCOUNT UP TO DATE OF SURVEY UNDER SECTION 133A OF THE ACT, BUT H E DID NOT PRODUCE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 13 OF 63 DETAILS OF THE INVESTMENT MADE DURING COURSE OF SUR VEY INVESTIGATION. THE AO, THEREFORE, WORKED OUT THE ACTUAL COST OF CO NSTRUCTION, THE DETAILS OF WHICH WERE GIVEN IN PARA 7 OF THE ASSESS MENT ORDER WHICH IS AS UNDER:- VALUATION ASSESSMENT OF VALUE 1. TOTAL BUILT UP AREA AT BASEMENT - LEVEL - 1 27700 SQ FT @RS.1,500 SQ FT 4,15,50,000 2. TOTAL BUILT UP AREA AT BASEMENT - LEVEL - 2 27700 SQ FT @RS.1,500 SQ FT 4,15,50,000 3. TOTAL BUILT UP AREA AT GROUND FLOOR 18,178 SQ FT @RS.1,500 SQ FT 2,72,67,000 4. TOTAL BUILDING AREA AT FIRST FLOOR = 18000 SQ FT @RS.1,500 SQ FT 2,70,00,000 5. TOTAL 13, 73,67,000 SERVICES 1. ADD 10% FOR ELECTRIFICATION OF HOUSE AND CONNECTED SYSTEM RS.1,37,36,700 2. ADD 10% FOR SANITARY FITTINGS AND CONNECTED SYSTEM RS.1,37,36,700 MISCELLANEOUS 1. BOUNDARY WALL AND GATE RS.10,00,000 2. ADD VALUE OF LIFT RS.1,70,00,000 3. ADD VALUE OF SWIMMING POOL RS.50,00,000 4. ADD VALUE OF GLASS WORK RS.40,00,000 5. ADD VALUE OF VERIFIED TILES, RUBBER TILES AND WALL TILES AND HV AC RS.1,55,00,000 TOTAL A RS.20,73,40,400 19. THE AO HAS TAKEN THE COST OF CONSTRUCTION AT RS.1,5 00/- PER SQ. FT. ON THE BASIS OF VARIOUS MARKET ENQUIRIES AND CO NSULTATIONS WITH THE APPROVED DEPARTMENT VALUER AND ALSO ON THE BASI S OF VALUATION ADOPTED BY THE APPROVED VALUER SHRI NAVNEET GUPTA I N THE CASE OF ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 14 OF 63 M/S. K. C. SPORTS ASSESSEES OWN CASE. THE AO ALSO NOTICED THAT THE ASSESSEE HAS MADE A LEASE DEED DATED 30-10-2013 WIT H M/S. K. C. CITY CENTRE P LTD (A PRIVATE LIMITED COMPANY), ACCORDING TO WHICH M/S.K.C. CITY CENTRE PRIVATE LIMITED HAS ALLOWED TO MAKE CONSTRUCTION FROM THE ROOF OF FIRST FLOOR ONWARDS. THE AO FOUND THAT THE ESTIMATED COST OF CONSTRUCTION OF 2 ND FLOOR, SERVICE AREA, AND THIRD FLOOR, FOURTH AND FIFTH FLOOR AS PER THE DETAILS IN THE GIVEN PORTION OF ORDER AT PAGE NO.16. ACCORDINGLY, THE AO ESTIMATED THE ENTIRE COST OF CONSTRUCTION OF SAID BUILDING AT RS.35,45,96,400 /- TILL THE DATE OF SURVEY AND THEN THE AO HAS APPORTIONED 30% OF THAT CONSTRUCTION COST FOR THE FINANCIAL YEAR 2013-14, THE PREVIOUS YEAR U NDER CONSIDERATION AND WORKED OUT THE ESTIMATED INVESTMENT AT RS.10,63 ,78,920. SINCE, THE ASSESSEE HAS ALREADY DISCLOSE THE INVESTMENT DU RING THE FINANCIAL YEAR 2013-14 AT RS.1,88,75,603/-, THE DIFFERENCE OF THE AMOUNT OF RS.8,75,03,317/- I.E. [10,63,78,920 - 1,88,75,603 ] WAS PROPOSED TO BE ADDED BY THE AO HAS UNDISCLOSED INVESTMENT U/S.6 9A OF THE ACT BY WAY OF SHOW CAUSE NOTICE ISSUED BY THE ASSESSEE. TH E ASSESSEE VIDE REPLY DATED 26-09-2016 STATED THAT THOUGH THE CONST RUCTION WAS STARTED IN THE YEAR 2013, IT IS STILL UNDER CONSTRU CTION YEAR TO BE COMPLETED ALSO WAS SEEN AT THE TIME OF SURVEY OPERA TION CONDUCTED ON 27-07-2016. HOWEVER, THE AO WAS NOT CONVINCED WI TH THE REPLY OF ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 15 OF 63 THE ASSESSEE AND ADDED THE SUM OF RS.8,75,03,317/- AS UNEXPLAINED INVESTMENT IN THE SAID BUILDING ON THE GROUND THAT THE ASSESSEE PRODUCED ONLY UNAUDITED BALANCE SHEET. IT COULD NOT PRODUCE THE DETAILS OF THE ENTRIES LIKE (BUILDING WORK IN PROGR ESS), CAPITAL WORK & SUNDRY CREDITOR ETC. THE ASSESSEE ALSO DID NOT PROD UCE THE BOOKS OF ACCOUNTS BILLS AND VOUCHERS. THE ASSESSEE ALSO COUL D NOT FURNISH THE CASH FLOW STATEMENT AND RECONCILIATION OF ACCOUNTS FOR THE PERIOD UNDER CONSIDERATION. IN SUPPORT OF HIS CLAIM THAT T HE ASSESSEE HAS CLAIMED INVESTMENT OF RS.15.20 CRORE IN CONSTRUCTIO N OF COMMERCIAL COMPLEX AT GULAB SINGH MARG, JAMMU BUT COULD NOT FU RNISH THE DETAILS IN SUPPORT OF THE SAME. THEREFORE, IN ABSENCE OF PR OPER DETAILS/EVIDENCES AND BOOKS OF ACCOUNTS AND CASH FL OW STATEMENT AN AMOUNT OF RS.8,75,03,317/- WAS ADDED TO THE TOTAL I NCOME OF THE ASSESSEE AND TREATED AS UNEXPLAINED INVESTMENT U/S. 69A OF THE ACT. 20. BEING AGGRIEVED, THE ASSESSE CARRIED THE MATTER BEF ORE THE CIT(A), WHEREIN THE ASSESSEE GAVE A DETAIL SUBMISSI ON VIDE LETTER DATED 22-03-2017 ALONG WITH BOOKS OF ACCOUNTS AND O THER SUPPORTING DOCUMENTS AND RAISED SEVERAL OBJECTIONS AGAINST THE SAID ADDITION MADE IN THE SECTION 69A OF THE ACT. THE CIT(A) HAS SUMMARIZED THE OBJECTIONS OF THE ASSESSEE IS UNDER:- 1. THE FACT IS THAT THE CONSTRUCTION WORK COMMENCED DURING THE YEAR UNDER CONSIDERATION ON 04.12.2013 AND ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 16 OF 63 NO SUBSTANTIAL EXPENDITURE HAS BEEN INCURRED DURIN G THE YEAR EXCEPT THAT SHOWN IN BALANCE SHEET AS ON 31.03.2014 AND PRESENTED BEFORE THE AO ALONG WITH BILLS, VOUCHERS AND OTHER SUPPORTING EVIDENCES WHERE THE INVESTMENT OF RS.1,88,75,6037- STANDS RECORDED. THAT APPELLANT HAS DONE ONLY EXCAVATION AND RAFTING WORK DURING THE ASSESSMENT YEAR UNDER CONSTRUCTION. THE REST OF THE CONSTRUCTION WAS DONE IN SUBSEQUENT YEARS AN D THE CONSTRUCTION WORK IS STILL UNDER CONSTRUCTION. THIS HAS BEEN DULY CERTIFIED INDEPENDENT ARCHITECT REQUISITIONED BY THE SURVEY-PARTY. THE CERTIFICATE OF THE ARCHITECT CONTAINS SCHEDULE OF PAYMENTS AND CLEARLY DEPICTS T HE STATUS OF CONSTRUCTION VIS-A-VIS FEE PAID TO HIM TILL 31/03/2014. 2. THE COPY OF BALANCE SHEET AS ON 31/03/14, WHERE A SUM OF RS.L,88,75;603/-WAS INVESTED ON EXCA VATION AND RAFTING WORK WAS ALSO PRODUCED BEFORE THE AO AS AN EVIDENCE BUT THE A.O. REJECTED THIS BALANCE SHEE T ON THE GROUND THAT THE SAME WAS NOT AUDITED AND UNRELI ABLE BUT THE AO HIMSELF HAS ACCEPTED THE FIGURES AS GIVE N IN THAT BALANCE SHEET WHILE CALCULATING THE UNDISCLOSE D INVESTMENT. 3. THAT THE COST OF CONSTRUCTION ADOPTED BY THE AO AT RS.1500 PER SQ. FT ON THE BASIS OF VALUATION OF K. C. SPORTS CLUB IS MISLEADING AS ON PERUSAL OF THE SAID VALUATION REPORT IT WILL REVEAL THAT AVERA GE COST OF CONSTRUCTION IS ONLY RS.850/- PER SQ. FT. 4. THAT AO IS CONCERNED ONLY WITH A.Y.2014-15 YET HE HAS ESTIMATED THE COST OF CONSTRUCTION UPTO THE DAT E OF SURVEY AND PRESUMED THAT THAT 30% WORK WAS DONE UPT O 31.03.2014. 5. THAT IT MAY BE APPRECIATED THAT THE COST OF CONSTRUCTION OF THE ENTIRE COMMERCIAL COMPLEX CAN O NLY BE DETERMINED AFTER COMPLETION OF CONSTRUCTION AND, THEREFORE, THE APPELLANT CANNOT BE EXPECTED TO PROV IDE DETAILS OF COSTS WHICH ARE YET TO BE INCURRED. 6. THAT WITHOUT PREJUDICE TO WHAT HAS BEEN STATED ABOVE, IT IS FURTHER SUBMITTED THAT UNDER SECTION 6 9 OF THE ACT, NO ADDITION CAN BE MADE SIMPLY ON THE BASI S OF ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 17 OF 63 APROPOS ESTIMATION OF ALLEGED UNACCOUNTED INVESTMEN T, IN VIEW OF THE SETTLED LEGAL POSITION. 7. THAT SECTIONS 68, 69, 69A TO 69D OF THE ACT ARE DEEMING PROVISIONS AND AS SUCH THE CONDITIONS PRECEDENTS FOR INVOKING SUCH PROVISIONS ARE REQUIRE D TO BE STRICTLY CONSTRUED. THE FACTS AND CIRCUMSTANCES GIVING RISE TO THE PRESUMPTION HAVE TO BE ESTABLISHED WITH REASONABLE CERTAINTY. THE ASSESSING OFFICER CANNOT FIRST MAKE CERTAIN ASSUMPTION AND THEREAFTER APPLY THE DEEMING PROVISIONS BASED ON SUCH ASSUMPTION. 8. THAT DURING THE COURSE OF SURVEY CONDUCTED ON 27.07.2016 UNDER SECTION 133A OF THE ACT NO INCRIMINATING EVIDENCE WAS FOUND FROM THE PREMISES OF THE ASSESSEE, WHICH, IN ANYWAY, LEAD TO ANY INFEREN CE THAT THE ASSESSEE HAD MADE UNDISCLOSED INVESTMENT I N THE AFORESAID PROPERTY. 9. THAT EVEN IN THE SHOW-CAUSE NOTICE, THE ID. A.O. HA S NOT PIN-POINTED OUT ANY CORROBORATIVE EVIDENCE FOUN D DURING THE COURSE OF SURVEY, TO THE EFFECT THAT THE ASSESSEE HAD ACTUALLY MADE PAYMENTS OR INCURRED EXPENSES WHICH HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR. 10. THAT THE INSTANT SHOW-CAUSE NOTICE HAS BEEN ISSUED AS A CONSEQUENCE OF SURVEY OPERATIONS UNDERTAKEN UN DER SECTION! 3 3A OF THE ACT IN THE CASE OF THE ASSESSE E ON 27.07.2016, I.E. IN THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR 2017-18 AND THE INFORMATION/DETAILS AVAILABLE AS ON THE DATE OF SURVEY WAS USED FOR THE PURPOSE OF MAKING ASSESSMENT IN THE CASE OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2014-15 I.E., TH E YEAR UNDER CONSIDERATION, WHICH, IN OUR RESPECTFUL SUBMISSION, HAVE NO BEARING ON THE PROCEEDINGS FOR THE INSTANT ASSESSMENT YEAR. 11. IN THE AFORESAID CIRCUMSTANCES, THE QUESTION OF ANY ADDITION ON ACCOUNT OF THE VALUE OF INVESTMENT IN T HE COMMERCIAL PROPERTY IN THE HANDS OF THE ASSESSEE ON THE BASIS OF ASSUMPTIONS, WITHOUT ANY CORROBORATIVE EVIDENCE, DO NOT ARISE AT ALL. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 18 OF 63 21. THE ABOVE OBJECTIONS ALONG WITH ANNEXURE AND BOOKS OF ACCOUNTS PRODUCED IN THE PEN DRIVE WERE SENT TO THE AO FOR HIS COMMENTS IN HIS REMAND REPORT ON THE ISSUES RAISED BY THE APPELLANT. THE AO VIDE HIS REMAND REPORT DATED 13-06-2017 STAT ED THAT THE ADDITIONS WERE MADE ON ACCOUNT OF UNEXPLAINED INVES TMENT ON THE BASIS OF ESTIMATED AMOUNT INCURRED BY THE ASSESSEE TOWARDS CONSTRUCTION/INVESTMENT IN THE COMMERCIAL COMPLEX A T GULAB SINGH MARG AFTER ASSUMING THAT 30% OF THE BUILDING WAS CO MPLETED DURING THE YEAR UNDER CONSIDERATION. IN THE CASE OF CONSTR UCTION, THE AO HAS WORKED OUT EXPENSES FOR ALL THE FLOORS INCLUDING CO ST OF THOSE FLOORS WHICH ARE STATED TO BE CONSTRUCTED BY M/S.K.C.CITY CENTRE P LTD. IT IS A FACT THAT CONSTRUCTION OF THIS BUILDING STARTE D DURING THE YEAR UNDER CONSIDERATION AND THE CONSTRUCTION WORKED WAS GOING ON AT THE TIME OF SURVEY OF U/S.133A ON 27-07-2016. THE AO FU RTHER SUBMITTED THAT DURING THE REMAND PROCEEDINGS, THE ASSESSEE FU RNISHED A CERTIFICATE FROM THE ARCHITECT, WHEREIN IT HAS BEEN MENTIONED THAT ONLY EXCAVATION AND RAFT WORK WAS COMPLETED AS ON 3 1-03-2014. ANOTHER CERTIFICATE FROM THE APPROVED VALUER SHRI R .C. GUPTA HAS ALSO BEEN FURNISHED BY THE ASSESSEE VALUING THE COST OF BUILDING OF RS.180.43 LAKH AS ON 31-03-2014. DURING THE ASSESSM ENT PROCEEDING, THE ASSESSEE HAS NEITHER PRODUCED ANY DOCUMENT ABOU T THE APPROVAL ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 19 OF 63 OF SIDE PLAN BY THE MUNICIPALITY NOR THE EXPENDITUR E LEDGER TO SUBSTANTIATE TO WHEN THE FIRST EXPENDITURE WAS INCU RRED BY THE ASSESSEE OR TO FIND OUT THE START OF THE CONSTRUCTI ON. DURING THE REMAND PROCEEDINGS THE ASSESSEE ALSO FURNISHED THRO UGH OTHER DOCUMENTS IN SUPPORT OF HIS CLAIM, WORKING THE COST OF RS.850/- PER SQ. FT. INSTEAD OF RS.1,500/- PER SQ. FT. AS WORKED OUT BY THE AO AT THE TIME OF ASSESSMENT. THE AO, THEREFORE OBSERVED THAT IT ISSUES A MATTER OF FACT THAT THIS DOCUMENTS WERE NEVER PRODU CE BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHE R, THERE IS NO DOUBT THAT M/S. K.C. CITY CENTRE P LTD. IS A SEPARA TE ENTITY BUT AS NO DETAILS OF EXPENDITURE INCURRED BY IT WAS PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS GATHER THAT THE W HOLE OF THE EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE IN HI S INDIVIDUAL CAPACITY. CONSIDERING THIS FACTS, THE CIT(A) OBSERV ED THAT THE CONSTRUCTION WORK COMMENCED ON 04-12-2013 THAT IS D URING THE ASSESSMENT YEAR UNDER CONSIDERATION AND THUS THE AD DITION COULD BE MADE ONLY ON THE BASIS OF INVESTMENT MADE DURING TH IS PERIOD IN THE CONSTRUCTION OF SAID BUILDING. IT IS EVIDENT FROM T HE FACTS STATED IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT TH AT NO EVIDENCE WAS FOUND TO CONTROVERT ASSESSEES CLAIM THAT ONLY EXCAVATION AND RAFT WORK WAS DONE DURING THIS PERIOD. THIS FACT WA S DULY CERTIFIED BY ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 20 OF 63 AN INDEPENDENT ARCHITECT REQUISITION BY THE SURVEY PARTY I.E. THE APPELLANT HAS DONE ONLY EXCAVATION AND RAFT WORK DU RING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE REST OF TH E CONSTRUCTION WAS DONE IN THE SUBSEQUENT YEARS AND THE CONSTRUCTI ON WORK WAS STILL UNDER PROCESS AT THE TIME OF SURVEY. THIS CERTIFICA TE OF THE ARCHITECT HAS ALSO BEEN FILED BY THE APPELLANT. THE AO HAS AL SO ADMITTED IN HIS REMAND REPORT THAT THE ASSESSEE HAS FURNISHED A CER TIFICATE FROM THE ARCHITECT, WHEREIN IT HAS BEEN MENTIONED THAT ONLY EXCAVATION AND RAFT WORK WERE COMPLETED AS ON 31-03-2014 AND ANOTH ER CERTIFICATE FROM THE APPROVED VALUER SHRI R.C. GUPTA HAS ALSO B EEN FURNISHED BY THE ASSESSEE VALUING THE COST OF BUILDING AT RS.180 .43 LAKHS AS ON 31- 03-2014. THE CIT(A) FURTHER OBSERVED THAT THE AO DI D NOT FIND ANY COGENT EVIDENCE TO SUGGEST THAT THE ASSESSEE HAD AC TUALLY MADE AN INVESTMENT OF RS.10,63,78,920/- TILL THE DATE OF SU RVEY I.E., 27-07- 2016. THE SURVEY PARTY ALSO DID NOT FIND ANY INCRIM INATING DOCUMENT DURING THE COURSE OF SURVEY CONDUCTED U/S.133A OF T HE ACT WHICH COULD SUGGEST THAT THIS SUM HAS BEEN INVESTED IN TH E SAID BUILDING. THE ADDITION U/S.69 CANNOT BE MADE ON ESTIMATED BAS IS. THE AO HAS TO BROUGHT IT ON RECORD OF SOME MATERIAL EVIDENCE W HICH COULD SUBSTANTIATE THE ACTUAL INVESTMENT. THE AO HAS FAIL ED TO BRING OUT SUCH MATERIAL, THE AO HAS ALSO NOT POINTED OUT ANY CORROBORATIVE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 21 OF 63 EVIDENCE IN HIS SHOW CAUSE NOTICE AS FOUND DURING T HE COURSE OF SURVEY TO THE FACT THAT THE ASSESSEE HAS ACTUALLY MADE PAY MENTS OR INCURRED EXPENSES WHICH HAVE NOT BEEN INCURRED IN THE BANKS OF ACCOUNTS OF THE ASSESSEE IN THE RESPECTIVE ASSESSMENT YEAR. FUR THER, THE RATE OF RS.1,500/- PER SQ. FT. ADOPTED BY THE AO ALSO NOT O N BASIS AS SAME VALUER HAS TAKEN TO DIFFERENT RATES OF VARIED BETWE EN RS.850/- PER SQ. FT. TO RS.1,500/- PER SQ. FT. AND THAT IS TOO A N ESTIMATE AND NOT THE ACTUAL RATE APPLIED OF CONSTRUCTION OF THE SAID BUILDING. THE CIT(A) FURTHER OBSERVED THAT ON THE ONE HAND THE AO HAS RIGHTLY MADE BALANCE SHEET OF THE ASSESSEE BEING ENTITY, HOWEVER , ON THE OTHER HAND, IT HAS ACCEPTED THE FIGURE OF THE BALANCE SHE ET WHERE SUM OF RS.1,88,78,603/- WAS INVESTED ON EXCAVATION AND RAF TING WORK. THEREFORE, THE CIT(A) OBSERVED THAT THE CONTENTION OF THE APPELLANT WAS FOUND TO BE CORRECT THAT COST OF CONSTRUCTION O F THE ENTIRE COMPLEX CAN ONLY BE DETERMINED AFTER COMPLETION OF CONSTRUCTION AND THE APPELLANT CANNOT BE ACCEPTED TO PROVIDE DETAILS OF COST WHICH ARE YEAR TO BE INCURRED. IN VIEW OF THIS FACT, THE CIT( A) OBSERVED THAT NO ADDITION CAN BE MADE U/S.69 OF THE ACT SIMPLY ON TH E BASIS OF APPORTIONED ESTIMATION OF ALLEGED INVESTMENT IN VIE W OF THE SETTLED LEGAL POSITION. THE LD.CIT(A) FURTHER OBSERVED THAT SECTION 68, 69, 69A & 69D ARE DEEMING PROVISION AND AS SUCH AN ADDITION PRECEDENT FOR ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 22 OF 63 THE EXCAVATION SUCH PROVISION ARE REQUIRED TO BE ST RICTLY CONSTRUED. THE FACTS AND CIRCUMSTANCES GIVEN RISE TO THE PRESU MPTION HAVE TO BE ESTABLISHED WITH REASONABLE CERTAINTY. THE AO CANNO T FIRST MAKE CERTAIN ESTIMATION AND THEREFORE AFTER APPLY THE DE EMING PROVISION BASED ON SUCH ASSUMPTION. DURING THE REMAND PROCEED INGS, THE AO HAS NOT DENIED THAT THE APPELLANT HAD PRODUCED THE SITE PLAN APPROVED BY THE MUNICIPALITY IN JUNE, 2013. THE AO HAS ALSO ADMITTED THAT HOTEL IS A SEPARATE ENTITY AND WOULD NOT HAVE BEEN CLUBBED WITH THE ASSESSMENT OF APPELLANT. THUS, IF AT ALL THE UN DISCLOSED INVESTMENT HAD TO BE MADE; IT HAD TO BE MADE IN THE HANDS OF THE HOTEL AND NOT THE APPELLANT. THEREFORE, CIT(A) OBSE RVED THAT THE ADDITION U/S.69 CAN BE MADE ON THE BASIS OF CONCRET E OR MATERIAL FOUND AS A RESULT OF SURVEY OPERATION OR IN THE INV ESTMENT CONDUCTED DURING THE ASSESSMENT PROCEEDINGS. ACCORDINGLY, THE CIT(A) WAS OF THE VIEW, THERE WAS NO BASIS FOR THE ADDITION OF RS .8,75,03,317/- AS UNDISCLOSED INVESTMENT IN THE SAID PROPERTY, HENCE, THE ADDITION MADE BY THE AO WAS DELETED. 22. BEING AGGRIEVED, THE REVENUE FILED THIS APPEAL BEFO RE THIS TRIBUNAL. THE LD. CIT(DR) SUBMITTED THAT THE AO HAS ESTIMATED THE COST OF CONSTRUCTION OF THE ENTIRE BUILDING AT RS.3 4,45,96,400/- TILL THE DATE OF CERTIFICATE ON THE BASIS OF TAKING CONS TRUCTION RATE AT ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 23 OF 63 RS.1,500/- PER SQ. FT., AND APPORTIONED 30% OF THE TOTAL COST IN THE FINANCIAL YEAR 2013-14 AND WORKED OUT THE ESTIMATED INVESTMENT AT RS.10,63,78,920/- FOR THE ASSESSMENT YEAR UNDER CON SIDERATION AS AGAINST WHICH THE ASSESSEE HAS DISCLOSED THE INVEST MENT AT RS.1,88,75,603/-. ACCORDINGLY, THE DIFFERENT AMOUNT OF RS.8,75,03,317/- WAS ADDED BY THE AO AS UNDISCLOSED INVESTMENT. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE CONSTRUCT ION WORK WAS COMMENCED DURING THE YEAR UNDER CONSIDERATION FROM 04-12-2013 AND ONLY EXPENDITURE UP TO EXCAVATION AND RAFTING WAS I NCURRED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. SINCE, THE AO HAS MADE THE ESTIMATE OF CONSTRUCTION AND THE ASSESSEE HAS ALSO FILED ESTIMATED COST OF CONSTRUCTION BASED ON A CERTIFICATE FROM A RCHITECT. THEREFORE, IN ABSENCE OF THE PROPER EVIDENCES AND ACTUAL COST OF CONSTRUCTION DURING THE YEAR UNDER CONSIDERATION UP TO THE END O F THE FINANCIAL YEAR I.E. 2013-14, THE MATTER NEEDS TO GO BACK TO T HE AO/CIT(A) FOR ACTUAL INVESTMENT IN COST OF CONSTRUCTION. THEREFOR E, IT WAS REQUESTED THAT THE ISSUE MAY BE SET-ASIDE TO THE FI LE OF THE AO TO WORK OUT ACTUAL COST OF CONSTRUCTION FOR THE YEAR U NDER CONSIDERATION AFTER RECONSIDERATION OF THE FACTS AND DETAILS OF T HE INVESTMENT MADE IN CONSTRUCTION FOR THAT ASSESSMENT YEAR UNDER CONS IDERATION. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 24 OF 63 23. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SURVEY U/S.133A WAS CONDUCTED ON 27-07-201 6, AND THE ASSESSMENT WAS MADE FOR THE PERIOD ENDING ON 31-03- 2014. THE BUILDING WAS NOT CONSTRUCTED DURING THE YEAR UNDER CONSIDERATION AND ONLY PART OF EXCAVATION AND RAFTING WORK DONE DURIN G THE YEAR UNDER CONSIDERATION. THE REST OF CONSTRUCTION WORK DONE I N SUBSEQUENT YEAR UNDER, THE ASSESSEE HAS FILED BALANCE SHEET AS ON 3 1-03-2014 SHOWING THE TOTAL CONSTRUCTION IS APPEARING AT PAPER BOOK P AGE NO.26. THE CIT(A) HAS DISCUSSED THIS FACT AT PAGE NO. 112 TO 1 16 OF HIS ORDER AND RELYING THEREFORE THE CIT(A) WAS RELIED ON THE ORDE R OF THE CIT(A) AND SUBMITTED THAT THE CIT(A) HAS CORRECTLY DELETED THE ADDITION MADE BY THE AO WHICH WAS MADE ON THE ESTIMATED BASIS WITHOU T BRINGING OUT ANY EVIDENCE ON RECORD. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CONS TRUCTION WORK HAS BEEN CLAIMED TO HAVE COMMENCED WITH EFFECT FROM 04 -12-2013. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT NO SUBSTANTIA L EXPENSES WERE INCURRED DURING THE YEAR EXCEPT THAT SHOWN IN THE B ALANCE SHEET AS ON 31-03-2014 PRESENTED BEFORE THE AO WITH BILLS AN D VOUCHERS AND OTHER SUPPORTING EVIDENCES FOR INVESTMENT OF RS.1,8 8,75,603/-. THE ASSESSEE HAS ALSO FILED A CERTIFICATE FROM THE ARCH ITECT WHEREIN IT WAS ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 25 OF 63 MENTIONED THAT ONLY EXCAVATION AND RAFTING WORK WAS COMPLETED AS ON 31-03-2014. WE FIND THAT THE AO HAS ESTIMATED TH E TOTAL COST OF CONSTRUCTION AT RS.35,45,96,400/-IN CONSTRUCTION OF COMMERCIAL COMPLEX AND CONSIDERED 30% COST OF CONSTRUCTION F OR THE YEAR UNDER CONSIDERATION AT I.E. RS.10,63,78,920/-. THIS HAS B EEN DONE BY APPLYING THE RATE OF 1500/- PER SQ. FT. FOR CONSTRU CTION COST BASED ON BASED ON MATERIAL PROVIDED BY THE ASSESSEE. WE OBSE RVE THAT THE LD.CIT(A) HAS MENTIONED THAT COST IN CONSTRUCTION B USINESS HAS TO BE TO BE CONSIDERED AFTER TOTAL COST OF CONSTRUCTION D ETERMINED AFTER COMPLETION OF CONSTRUCTION. THEREFORE, THE COST OF WHOLE PROJECT IS TO BE WORKED OUT AND SAME NEEDS TO BE APPORTIONED F OR ASSESSMENT YEAR UNDER CONSIDERATION ON THE BASIS OF CONSTRUCTI ON HAS BEEN COMPLETED DURING ASSESSMENT YEAR UNDER CONSIDERATI ON. THEREFORE, THE AO WOULD REQUIRED TO ASCERTAINED ACTUAL COST OF CONSTRUCTION UP TO 31.03.2014 BY CONSIDERING THE RATE OF COST OF CO NSTRUCTION SHOWN IN BY THE ASSESSEE IN K.C. SPORTS CLUB AND OTHERS. IN VIEW OF THIS FACT, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE NEE DS TO BE RE- EXAMINED BY THE AO TO ASCERTAIN TOTAL COST OF CONS TRUCTION OF THE PROJECT AND COST OF CONSTRUCTION INCURRED FOR THE A SSESSMENT YEAR UNDER CONSIDERATION BY OBTAINING NECESSARY DETAILS FROM THE ASSESSEE. IN VIEW OF THIS FACT, THE ISSUE IS SET-ASIDE TO THE FILE OF THE AO FOR ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 26 OF 63 CALCULATION AND ESTIMATION OF ACTUAL COST OF CONSTR UCTION UP TO 31.03.2014 OUT OF TOTAL COST OF CONSTRUCTION INCURR ED FOR THE BUILDING, ON THE BASIS OF EVIDENCES AS MAY BE PRODUCED BY THE ASSESSEE. THE AO WILL ALLOW THE ASSESSEE NECESSARY OPPORTUNITY TO PLACE ALL EVIDENCES AS AVAILABLE WITH THE ASSESSEE TO JUSTIFY THAT THE COST OF CONSTRUCTION INCURRED WORK DURING ASSESSMENT YEAR U NDER CONSIDERATION WITH THE NECESSARY EVIDENCES. THEREFO RE, THIS GROUND OF APPEAL IS SET-ASIDE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION, AFTER TAKING INTO CONSIDERATION OF ACTUAL COST AND COST INCURRED UP TO FINANCIAL YEAR UNDER CONSIDERATION AFTER ALLOWING D UE OPPORTUNITY OF HEARING TO THE ASSESSEE AND TO ALLOWING TO ADMIT NE CESSARY EVIDENCE WHICH THE ASSESSEE WANTS TO RELY. 25. GROUND NO. IV: RELATES TO DELETION OF ADDITION OF RS.8,73,465/- ON ACCOUNT OF MUNICIPALITY FEES PAID OUT OF UNEXPLAINED SOURCES BY ADMITTING EVIDENTIAL SOURCES UNDER RULE 46AOF INCOME-TAX RULES, 1962. 26. SHORT FACTS OF THE CASES ARE THAT THE ASSESSEE HAS PAID VARIOUS FEES IN CASH INCLUDING FEES PAID TO JAMMU MUNICIPAL ITY ON VARIOUS DATES AMOUNTING TO RS.10,66,440/- PAID ON 02-01-201 3, RS.6,89,239/- PAID ON 01-05-2013 AND RS.1,84,216/- PAID ON 01-05- 2013 RESPECTIVELY. THE ASSESSEE WAS, THEREFORE, ASKED TO EXPLAIN THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 27 OF 63 SOURCE OF CASH DEPOSIT, ABOUT THE CASH FLOW STATEME NT IN RESPONSE TO WHICH IT WAS SUBMITTED THAT THE ASSESSEE HAD AMPLE CASH IN HAND TO INCUR THE SAID EXPENDITURE AND HAS WITHDRAWN RS.25, 00,000/- FROM M/S. K.S. PROFILES, BARI BRAHMANA, JAMMU IN WHICH A SSESSEE WAS A PARTNER, M/S. K.S. PROFILES HAD RECEIVED THAT AMOUN T IN CASH FROM ON MR. HAMID ALI AS ADVANCE FOR SALE OF MACHINERY. THE COPIES OF FEES PAID TO MUNICIPALITY AND AGREEMENT FOR SALE OF MACH INERY WERE SUBMITTED BEFORE THE AO. HOWEVER, THE AO FOUND THAT THERE WAS CONTRADICTIONS IN THE REPLIES FILED BY THE ASSESSEE , THEREFORE THE AO MADE THE ADDITION OF RS.8,73,465/-I.E.[RS.1,84,216- RS.6,89,249/-] ON THE GROUND THAT THE ASSESSEE HAS FAILED TO EXPLA IN SOURCES OF DEPOSITS OF MUNICIPAL FEES. 27. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BE FORE CIT(A), WHEREIN IT WAS SUBMITTED THAT MUNICIPAL FEES WAS PA ID OUT OF CASH AVAILABLE WITH THE ASSESSEE WHICH HE HAS RECEIVED F ROM MR. HAMID ALI AGAINST SALE OF MACHINERY BY THE FIRM M/S. K.S. PRO FILES IN WHICH THE ASSESSEE WAS ALSO A PARTNER. THE DOCUMENTARY EVIDEN CE IN THE SHAPE OF SALES OF MACHINERY WAS SUBMITTED BEFORE THE AO D URING THE ASSESSMENT PROCEEDINGS AND DURING THE APPELLATE PRO CEEDINGS ENCLOSED AS ANNEXURE-L. THE APPELLATE HAS ALSO FI LED A COPY OF COMPLAINT FILED AGAINST M/S. HAMID ALI IN THE COURT OF LAW U/S.138. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 28 OF 63 THE COPY OF WHICH HAS ALSO BEEN ENCLOSED AS ANNEXU RE-M. THIS ABOVE SUBMISSIONS OF THE APPELLANT STATED AS ABOVE WERE SENT TO THE AO FOR A REMAND REPORT. HOWEVER, THE AO HAS NOT MAD E ANY COMMENT ON THE VERACITY OF THE CLAIM OF THE APPELLANT. THE LD.CIT(A) HAS CONSIDERED THE DOCUMENT SUBMITTED BY THE ASSESSEE A ND ON VERIFICATION OF THESE DOCUMENTS, THE CONTENTION OF THE APPELLANT WAS FOUND TO BE CORRECT I.E. APPELLANT HAD SUFFICIENT F UNDS AVAILABLE WITH HIM TO DEPOSIT THE SAID FEES. THEREFORE, THE ADDITI ON AMOUNTING TO RS.8,76,465/- WAS DELETED. 28. BEING AGGRIEVED, THE REVENUE FILED THIS APPEAL BEFO RE THIS TRIBUNAL. THE LD. CIT(DR) RELYING ON THE ORDER OF A O SUBMITTED THAT THE ASSESSEE HAS MADE CONTRADICTORY SUBMISSIONS, TH EREFORE THE AO HAS DISALLOWED THE PAYMENT OF MUNICIPALITY FEES AS SOURCES OF THE SALE WAS NOT PROPERLY EXPLAINED. 29. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED NECESSARY DOCUMENTARY EVIDEN CES IN THE SHAPE OF SALE DEED OF THE MACHINERY BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS AND ALSO DURING THE APPELLATE PROCEEDIN GS AS PER ANNEXURE-L. THESE DOCUMENTS WERE FORWARDED TO THE AO FOR HIS COMMENTS IN THE REMAND PROCEEDINGS. HOWEVER, THE AO DID NOT MAKE ANY COMMENTS ON THE AFORESAID CLAIM OF THE PAYMENT, THEREFORE THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 29 OF 63 CIT(A) AFTER VERIFICATION OF THESE DOCUMENTS FOUND THE CONTENTION OF THE ASSESSEE AS CORRECT AS THE ASSESSEE HAD SUFFICI ENT FUNDS AVAILABLE WITH HIM TO DEPOSIT THE SAID FEES. THERE IS NO VIOL ATION OF RULE 46A OF THE I.T. RULES AS ALLEGED BY THE REVENUE, AS THE CI T(A) HAS DULY FORWARDED DOCUMENTARY EVIDENCES TO THE AO FOR HIS C OMMENTS. FURTHER, THESE DOCUMENTARY EVIDENCES WERE FILED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 30. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSE SSEE HAS WITHDRAWN A SUM OF RS.25,00,000/- FROM M/S. K.S. PR OFILES WHO HAD RECEIVED THE SAID THAT AMOUNT IN CASH FROM ONE MR. HAMID ALI, AS ADVANCE AGAINST SALE OF MACHINERY. THE ASSESSEE HA S ALSO FILED A COPY OF COMPLAINT FILED AGAINST SHRI HAMID ALI UNDER SEC TION 138 OF NEGOTIABLE ACT BY THE ASSESSEE TO PROVE THE GENUINE NESS OF TRANSACTION. THE ASSESSEE HAS ALSO FILED A COPY OF FEES PAID TO MUNICIPALITY AND AGREEMENT FOR SALE OF MACHINERY BE FORE THE AO AS WELL AS DURING THE APPELLATE PROCEEDINGS. THESE DOC UMENTS WERE FORWARDED TO THE AO FOR HIS COMMENTS; HOWEVER, THE AO HAS NOT MADE ANY COMMENTS. THEREAFTER, EXAMINING THE SAME, THE C IT(A) FOUND THAT THE ASSESSEE HAD SUFFICIENT FUNDS AVAILABLE WI TH HIM TO DEPOSIT THE MUNICIPALITY FEES. IN VIEW OF THESE FACTS, WE F IND THAT THERE IS NO ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 30 OF 63 VIOLATION OF RULE 46A OF I.T.RULES. THE AO WAS DUL Y GIVEN AN OPPORTUNITY TO REBUT THE EVIDENCES FILED BY THE ASS ESSEE IN HIS REMAND REPORT. THEREFORE, THE CIT(A) HAS FOLLOWED THE DUE PROCEDURE OF LAW AND ADMITTED EVIDENCES, WHICH WERE NECESSARY TO DEC IDE THE ISSUE UNDER CONSIDERATION. IN THE LIGHT OF THIS CIRCUMSTA NCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), ACCORDINGLY T HE SAME IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. 31. GROUND NO. V: RELATES TO DELETION OF ADDITION OF CA PITAL GAIN OF RS.2,21,49,975/- ACCRUING TO THE ASSESSEE ON THE LEASE OF LAND TO M/S. K.C. SPORTS CLUB AND CAPITAL GAIN OF RS.21, 73,33,252/- ON THE LEASE OF LAND OF M/S. K.C. CITY CENTRE PVT. LTD BY HOLDING THAT THIS IS NOT A TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AND HENCE THE QUESTION OF CHARGING CAPITAL GAIN WOULD NOT ARISE. 32. BRIEF FACTS OF THE CASES ARE THAT DURING THE COURSE SURVEY CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE U/S.133A ON 27- 07-2016, A REGISTERED LEASE DEED EXECUTED BETWEEN T HE ASSESSEE, MR. RAJU CHOWDHURY AND M/S. K.C. SPORTS CLUB, A REGISTE RED FIRM WAS FOUND AND IMPOUNDED. AS PER THE LEASE DEED THE FOLL OWING TERMS AND CONDITIONS WERE AGREED UPON BY THE LESSOR AND LESSE E:- 1. LAND MAJORING 10 KANAL AND 19 MARLA, A FREEHOLD LAN D, OWNED BY THE ASSESSEE AT PLOURA, JAMMU WAS LEASED I N ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 31 OF 63 FAVOUR OF M/S. K.C SPORTS CLUB, A PARTNERSHIP FIRM VIDE LEASE DEED DATED 5 TH JUNE, 2013 FOR 20 YEARS. 2. ACCORDING TO THE LEASE DEED THE K. C. SPORTS CLUB W ILL PAY YEARLY RENT OF RS.1,20,000/- AT THE FIRST INSTA NCE FOR 20 YEARS. 3. THAT THE LESSEE WILL NOT SUBLET HIS RIGHTS UNDER TH E LEASE WITHOUT THE CONSENT IN WRITING OF THE LESSOR. 4. THAT THE SAID PREMISES SHALL BE USED ONLY FOR THE PURPOSE OF CLUB AND FOR NO OTHER PURPOSE. 5. THAT THE LESSEE WILL PAY ALL RATES TAXES AND CHARGE S WHICH ARE NOW PAYABLE OR MAY HEREAFTER BE PAYABLE I N RESPECT OF THE SAID LAND. 6. THAT WHENEVER ANY PART OF THE RENT SHALL BE IN-ARRE ARS FOR A YEAR THE LESSOR MAY RE-ENTER ON THE SAID LAND AND TERMINATE THE LEASE. 7. THAT THERE SHALL BE NO ESCALATION OR SECURITY DEPOS ITS IN RESPECT OF WHICH THE PARTIES MAY ENTER TO A SUPPLEMENTARY DEED. 8. THAT THE RIGHTS AND OBLIGATION SHALL BE AS PER THE TRANSFER OF PROPERTY ACT AND WILL BE OBSERVED BY BO TH THE PARTIES IN TRUE SENSE. 33. FURTHER, ANOTHER SUPPLEMENTARY LEASE DEED WAS EXE CUTED ON 3 RD OF AUGUST, 2013 AGAIN BETWEEN THE ASSESSEE, SH. RA JU CHOWDHARY AND M/S. K.C. SPORTS CLUB, A PARTNERSHIP FIRM AND IT WAS AGR EED UPON THAT THE SECOND PARTY, THE LESSEE, WOULD BE AT LIBE RTY TO MORTGAGE THE (EASE HOLD RIGHTS TO ANY BANK OR FINANCIAL INST ITUTION FOR OBTAINING A LOAN ON THE SAME WITH AN UNDER TAKING TO LIQUIDAT E THE SAME DURING THE CURRENCY OF THE LEASE DEED ITSELF. THERE WAS AL SO A ANOTHER ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 32 OF 63 SUPPLEMENTARY LEASE DEED WAS EXECUTED ON 16 TH DEC.2016 BETWEEN THE ASSESSEE, SH. RAJU CHOWDHARY AND M/S. K.C. SPOR T CLUB, A PARTNERSHIP FIRM WITH FOLLOWING TERMS AND CONDITION S:- 1. THAT THE LESSEE HAS ONLY BEEN GRANTED LIMITED AN D RESTRICTED RIGHT TO OCCUPY AND USE THE SAID PREMISE S. 2. THAT ON THE EXPIRY OF THE STIPULATED PERIOD OF 2 0 YEARS, UNLESS THE SAME IS FURTHER EXTENDED BY MUTUAL CONSE NT, THE POSSESSION OF THE ENTIRE LAND AND BUILT UP PREM ISES WOULD REVERT BACK TO THE LESSOR. 3. THAT THE LESSEE HAS NOT ACQUIRED ANY RIGHT OR TI TLE' IN THE LEASE PROPERTY AND THE LESSOR CONTINUES TO REMA IN THE SOLE AND ABSOLUTE OWNER THEREOF. 4. THAT THE LESSOR RESERVES THE RIGHT TO CANCEL THE LEASE DEED IN CASE IT IS FOUND THAT THE LEASE PREMISES IS NOT BEING USED FOR THE INTENDED PURPOSE/OBJECTIVE AS SET OUT IN THE PRIMARY LEASE DEED. 5. THAT WITHOUT PREJUDICE TO CLAUSE 4 ABOVE, THE LE ASE CAN BE TERMINATED AT THE INSTANCE OF THE LESSOR PRIOR T O THE STIPULATED PERIOD OF 20 YEARS, SUBJECT TO THE PRIOR WRITTEN CONSENT OF THE LESSEE AND ALSO PAYMENT OF ADEQUATE FAIR COMPENSATION BY THE LESSOR TO THE LESSEE IN RESPECT OF THE VALUE OF THE CLUB CONSTRUCTED ON THE LEASED PREMISE S BY THE LESSEE, AS MAY BE MUTUALLY DECIDED BY BOTH THE PARTIES. 6. THAT WITHOUT PREJUDICE TO CLAUSES 4 AND 5 ABOVE, TH E LEASE CAN BE TERMINATED AT THE INSTANCE OF THE LESS EE PRIOR TO THE STIPULATED PERIOD OF 20 YEARS, SUBJECT TO TH E PRIOR WRITTEN CONSENT OF THE LESSEE WITHOUT ANY RIGHT TO CLAIM COMPENSATION IN RESPECT OF THE VALUE OF THE CLUB CONSTRUCTED ON THE LEASED PREMISES BY THE LESSEE, T HOUGH IT WOULD BE OPEN TO THE LESSOR AND THE LEASE TO MUT UALLY ARRIVE AT FAIR VALUE OF THE COMPENSATION. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 33 OF 63 34. THE AO OBSERVED THAT THERE IS ANOTHER LEASE DEED DA TED 30.10.2013, EXECUTED BETWEEN THE ASSESSES AND M/S. K.C. CITY CENTRE PVT. LTD. AT GULAB SINGH MARG, JAMMU, WAS FOUND DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. ACCORDING TO THIS LEASE DEED THE ASSESSEE HAS GIVEN, ON LEASE, THE ROOF OF FIRST FLOOR ALONG WITH DEMARCATED AREA IN THE FIRST FLOOR, GROUND FLOOR, BASEMENT LEVEL-I AND LEVEL-II FOR A PERIOD OF 25 YEARS AT THE FIRST INSTANCE OVER WHICH THE LESSEE WOULD BUILT UP HOTEL CONSISTING OF 2 ND FLOOR, A SERVICE FLOOR THEN 3 RD FLOOR, 4 TH FLOOR AND 5 TH FLOOR WITH TERRACE, THE DETAILS OF WHICH ARE MENTIONED IN SITE PLAN ANNEXED WITH THE LEASE DEED. FOLLOWING TERMS AND CONDITIONS WERE AGREED UPON BY THE LESSOR AND LESSE E:- 1. WHEREAS YEARLY RENT OF RS.3 LAKH IS FIXED WHICH THE PARTY OF THE 2 ND PART WOULD PAY TO THE PARTY OF THE 1 ST PART EVERY YEAR IN CASH OR THROUGH CHEQUE AGAINST PROPER RECEI PT. IT IS FURTHER AGREED THAT THE PAYMENT OF THE RENT WOUL D START AFTER DELIVERY OF POSSESSION BUT FROM THE DARE OF S TART OF COMMERCIAL ACTIVITIES BY THE PARTY OF 2 ND PART WITH THE FURTHER FOLLOWING RIGHTS AND LIABILITIES OF PARTIES . 2. THAT LESSEE WILL NOT TRANSFER OR SUBLET HIS RIGH TS UNDER THIS LEASE WITHOUT THE CONSENT IN WRITING OF THE LE SSOR. 3. THAT IT IS AGREED IN BETWEEN THE PARTIES THAT TH E PARTY OF THE 2 ND PART WOULD BE AT LIBERTY TO MORTGAGE THE LEASE HOLD RIGHTS VIZ-VIA PREMISES THE SUBJECT MATTER OF THE LEASE DEED WITH ANY BANK OF FINANCIAL INSTITUTION AND OBT AIN THE LOAN ON THE SAME WITH AN UNDERTAKING TO LIQUIDATE T HE SAME DURING THE CURRENCY OF THE LEASE DEED ITSELF. 4. THAT LESSEE WILL PAY ALL RATES, TAXES AND CHARGE S WHICH MAY HEREAFTER, ON START OF COMMERCIAL ACTIVITIES, B E ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 34 OF 63 PAYABLE IN RESPECT OF THE SAID, GROUND FLOOR, FIRST FLOOR BASEMENT LEVEL I AND LEVEL II AS DEMARCATED IN THE SITE PLAN. 5. THAT AS AGREED THERE SHALL BE NO ESCALATION OR S ECURITY DEPOSIT, IN RESPECT OF WHICH THE PARTIES MAY ENTER TO A SUPPLEMENTARY DEED. IT IS HOWEVER, AGREED THAT THE POSSESSION OF THE PREMISES WILL BE TAKEN OVER BY TH E LESSEE IMMEDIATELY AFTER THE BUILDING OF FIRST FLOOR. 6. THAT THE RIGHTS AND OBLIGATIONS SHALL BE AS PER THE TRANSFER OF PROPERTY ACT AND WILL BE OBSERVED BY BO TH THE PARTIES IN TRUE SENSE. 7. THAT THE PARTIES HAVE FURTHER AGREED THAT THEY C AN EXTEND THE LEASE BY THEIR MUTUAL CONSENT FOR A TERM WHICH THEY MAY DESIRE. 8. THAT THE PARTIES TO THE DEED ARE STATE SUBJECT. 9. THAT THE STAMP DUTY-OF RS.1,05,7507/- WAS PAID A ND ATTACHED HEREWITH. 35. A SUPPLEMENTARY LEASE DEED WAS MADE ON 16 TH DAY OF DECEMBER, 2016 BETWEEN THE ASSESSES SH. RAJU CHOWDHARY AND M/ S. K.C. CITY CENTRE PVT. LTD WHEREBY FOLLOWING TERMS AND CONDITI ONS WERE AGREED UPON: 1. THAT THE LESSEE HAS ONLY BEEN GRANTED LIMITED AND RESTRICTED RIGHTS TO OCCUPY AND USE THE ABOVE REFER RED PREMISES IN THE 2. THAT ON THE EXPIRY OF THE STIPULATED PERIOD OF 25 Y EARS, UNLESS THE SAME IS FURTHER EXTENDED BY MUTUAL CONSE NT, THE POSSESSION OF ENTIRE BUILT UP PREMISES WOULD REVERT BACK TO THE LESSOR. ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 35 OF 63 3. THAT BY VIRTUE OF THE AFORESAID LEASE DEED THE LES SEE HAS NOT ACQUIRED ANY RIGHT OR TITLE IN THE LEASED PROPE RTY AND THE LESSOR CONTINUES TO BE SOLE AND ABSOLUTE OWNER THEREOF. 4. THAT THE LESSOR RESERVES THE RIGHT TO CANCEL THE LE SSEE DEED IN CASE IT IS FOUND THAT THE LEASED PREMISE IS NOT BEING USED FOR THE INTENDED PURPOSE/OBJECTIVES AS SET OUT IN THE PRIMARY LEASE DEED. 5. THAT WITHOUT PREJUDICE TO CLAUSE 4 ABOVE, THE LE ASE CAN BE TERMINATED AT THE INSTANCE OF THE LESSOR PRIOR T O THE STIPULATED PERIOD OF 25 YEARS, SUBJECT TO THE PRIOR WRITTEN CONSENT OF THE LESSEE AND ALSO PAYMENT OF ADEQUATE FAIR COMPENSATION BY THE LESSOR TO THE LESSEE IN RESPECT OF THE VALUE OF BUILDING CONSTRUCTED ON THE LEASED PREMISE S BY THE LESSEE, AS MAY BE MUTUALLY DECIDED BY BOTH THE PART IES. 6. THAT WITHOUT PREJUDICE TO CLAUSES 4 AND 5 ABOVE, THE LEASE CAN BE TERMINATED AT THE INSTANCE OF THE LESS EE PRIOR TO THE STIPULATED PERIOD OF 25 YEARS, SUBJECT TO TH E ' PRIOR WRITTEN CONSENT OF THE LESSOR, WITHOUT ANY RIGHT TO CLAIM ON THE LEASED PREMISES BY THE LESSEE, THOUGH IT WOULD BE OPEN TO THE LESSOR AND THE LESSEE TO MUTUALLY ARRIVE AT FAIR VALUE OF THE COMPENSATION. 36. IN VIEW OF ABOVE, THE AO CONSIDERED THE ABOVE, LEA SE DEEDS AND TREATED THESE LEASE AS TRANSFER U/S 2(47) OF THE INCOME TAX ACT ON THE GROUND THAT THE LANDS WERE LEASED OU T OF M/S K. C. SPORTS AND M/S K. C. CITY CENTRE FOR MORE THAN 12 Y EARS, THE TRANSFEREE WOULD BE ENJOYING THE SAID PROPERTY RECE IVED BY WAY OF LEASE DEED AND THE LEASE OF PROPERTY IS BASICALLY A RIGHT TO USE AN ASSET. A LEASE IS A CONTRACT BY WHICH ONE PARTY (LE SSOR) GIVES THE USE AND POSSESSION OF LAND AND BUILDING TO ANOTHER PART Y (LESSEE) FOR A SPECIFIC PERIOD OF TIME, USUALLY IN RETURN FOR A SP ECIFIC RENT. HENCE, ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 36 OF 63 AN ASSIGNMENT 'OF A LEASE IS THE 'LEGAL TERM USED F OR THE SALE OF A LEASE. A GRANT OF A LEASE IS THE CREATION OF A NEW ASSET. THE PERSON WHO OWNS THE PROPERTY GRANTS A LEASE TO A TENANT FOR A SPECI FIC PERIOD OF TIME, HOWEVER, THE RIGHTS IN THE PROPERTY WILL EVENTUALLY REVERT BACK TO THE FREEHOLD LANDLORD. THE AO THEN PLACED RELIANCE ON D ECISION OF MUMBAI BENCH OF INCOME TAX APPELLATE TRIBUNAL (THE TRIBUNA L) IN THE CASE OF ACIT V. UNITED MOTORS P. LTD. (2009-TIOL-693-ITAT-M UM.), WHEREIN IT HAS BEEN HELD THAT INCOME FROM TRANSFER OF A LEASED PREMISES WITHOUT TRANSFERRING ITS OWN BUSINESS AMOUNTS TO E XTINGUISHMENT OF THE TAXPAYER'S RIGHT IN THE CAPITAL ASSET AS PER SE CTION 2 (47) OF THE INCOME TAX ACT, 1961. THE AO OBSERVED THAT AS PER SECTION 2(14) OF THE ACT ANY KIND OF PROPERTY OF THE ASSESSEE WITH T HE CAPITAL ASSET AND AS PER SECTION 2(47) THE EXTINGUISHMENT OF ANY RIGHT IN A CAPITAL ASSET WILL ATTRACT ON THE CAPITAL ASSET OF CAPITAL GAIN. THE AO THEREFORE ON THE BASIS OF MARKET ENQUIRIES ADOPTED THE VALUE OF LAND AT RS.3,50,000/- PER MARIA AND WORKED OUT THE VALUE OF THE SAID LAND AT RS.7,66,50,000/- ON THE VALUE OF DETERMINED AT R S.7,66,50,000/-. THE AO COMPUTED THE CAPITAL GAIN OF RS.7,38,33,250/ - BY REDUCING THE COST OF ACQUISITION AT RS.28,16,750/-. FURTHER, IN THE CASE OF LEASE PROPERTY AT GULAB SINGH MARG, JAMMU THE CAPITAL GAI N WAS COMPUTED AT RS.21,73,33,252/- BY TAKING VALUE OF LAND AT RS. 31,11,00,000/- ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 37 OF 63 37. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE LD.CIT(A), WHEREIN IT WAS CONTENDED THAT THE ADDITI ON OF RS.2,21,49,975/- ON ACCOUNT OF NOTIONAL CAPITAL GAI N IN RESPECT OF LAND LEASE TO K.C. SPORTS CLUB AT RS.21,73,33,252/- IN LEASE TO ROOF PORTION TO K.C. CITY CENTRE (HOTEL) P LTD. IS ILLEG AL BASED UPON INCORRECT APPLICATION/INTERPRETATION OF THE LAW. WH EN NO PROFITS OR GAINS IN THE FORM OF CAPITAL GAIN EITHER AROSE OR A CCRUED FACTUALLY AND NO CONSIDERATIONS WERE BASED ON AND EVEN THE PROPER TY LEASE TO HOTEL WAS NOT IN EXISTENCE ON AND THE AGREEMENT WAS NOT I N OPERATION DURING THE YEAR UNDER CONSIDERATION. THE LD. AO HAS COMPUTED AN ALLEGED CAPITAL GAIN OF RS.7,38,33,250/- ON THE LAN D MEASURING10 KANALS 19 MARIAS FALLING UNDER KHASRA NO.1331 KHATA NO.807 KEWAT NO.89 SITUATED AT PALOURA LEASED OUT TO M/S. K.C. S PORTS CLUB, A PARTNERSHIP FIRM OF APPELLANT AND HIS SON ARJUN CHO WDHARY. THEREFORE, HAVING WORKED OUT THIS GAIN, THE LD. AO RESTRICTED THE ADDITION OF EXTENT TO 30% AMOUNTING TO RS.2,21,49,9 75/- WHICH WAS THE SHARE OF ARJUN CHOWDHARY. THE AR OF THE APPELLA NT SUBMITTED THAT WHEN THE LANDLORD GRANTS A LEASE, HE IS TREATE D AS MAKING A PART DISPOSAL OF HIS INTEREST IN THE PROPERTY. BUT THIS FACT CANNOT BE APPRECIATED ALWAYS. IN A NORMAL BUY TO LET BUSINESS , WHERE TENANT JUST PAYS THE RENT, NO CAPITAL GAIN TAX IS CHARGED. THE RESULT OF IS ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 38 OF 63 SIMPLE, NO CAPITAL SUM HAS BEEN PAID, BUT IF A PREM IUM WAS TO BE PAID THIS SUM WOULD BE IN ADDITION TO THE RENTAL PA YMENT. THE AR OF THE APPELLANT HAS INVITED THE ATTENTION OF THE LD.C IT(A) TO LEASE DEED AGREEMENT ENCLOSED AS ANNEXURE-N ALONG WITH COPY OF SUPPLEMENTARY LEASE DEED DATED 30-08-2013 AND 16-12 -2013 ENCLOSED AS AN ANNEXURE-O AND ANNEXURE-P RESPECTIVELY AB OUT LEASING THE CAPTIONED LAND BY THE APPELLANT TO K.C. SPORTS CLUB . THIS FORM PART OF THE ASSESSMENT RECORDS. IT WAS SUBMITTED THAT M/ S. K.C. SPORTS CLUB, A PARTNERSHIP FIRM, AS PARTNER FROM A SAME FA MILY HAVING 70% SHARES OF SHRI RAJU CHOWDHARY AND PLOT OF HIS SON A RJUN CHOWDHARY. THE FAMILY WAS ESTABLISHED TO CONTRACT AND RENT THE SPORTS CLUB. NO OUTSIDE PARTY WAS INVOLVED IN THIS LEASE DEED, THE LESSEE ENVISAGE THE YEARLY RENT OF RS.1,20,000/- SHALL BE PAID TO THE A SSESSES. THE SUB- LEASE HAS NOT RIGHT TO TRANSFER OR SUBJECT ITS TO RIGHT UNDER THE LEASE AND THE PREMISES SHALL BE A USE ONLY FOR CLUB, AND IN CASE OF DEFAULT, THE ASSESSEE SHALL HAVE RIGHT TO RE-ENTERED ON DEMI SE LAND AND DETERMINE THE LEASE. IT WAS AGREED THAT RIGHT AND O BLIGATION OF THE PARTIES SHALL BE AS PER TRANSFER OF PROPERTY ACT AT J&K, NO SECURITY DEPOSIT OR LUMP SUM PREMIUM IS RECEIVED BY ASSESSEE FROM LESSEE. IT WAS SUBMITTED THAT AS PER PROVISION SECTION 45(3) O F THE ACT, THE PROFIT OF TRANSFER OF CAPITAL ASSET BY A PARTNER TO A PARTNERSHIP FIRM ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 39 OF 63 WOULD BE ASSESSABLE IN THE HAND OF THE PARTNER AT T HE VALUE AT WHICH SUCH ASSET THE RECORD WITH THE BOOKS OF THE PARTNER SHIP FIRM. IN THE INSTANCE CASE, SINCE M/S. K.C. SPORTS CLUB, THE PAR TNERSHIP FIRM, HAS NOT RECORDED AMOUNTS IN THE BOOKS OF ACCOUNTS ARISI NG OUT OF ON ACCOUNT OF LEASE DEED, THE FULL VALUE CONSIDERATION RECEIVED BY THE ASSESSEE, M/S. RAJU CHOWDHARY WOULD BE CONSIDERED A S NIL. ACCORDINGLY, NO CAPITAL GAINS ARISE. HOWEVER, THE L D. AO PATENTLY FAILED TO APPRECIATE THE LEGAL POSITION AND HAS APP LIED A CASE ON ALTOGETHER DIFFERENT FACTS BY PLACING RELIANCE ON T HE DECISION OF ACIT V. UNITED MOTORS PVT. LTD (SUPRA). THE SAID CASE IS DISTINGUISHABLE AS THE PREMIUM HAS BEEN PAID TO ACQUIRE THE LEASE HOLD RIGHTS WHICH ARE NOT THE FACTS OF THE CASE WHICH IS UNDER APPEAL BEF ORE THE CIT(A). SINCE, THERE IS NO DISPUTE THAT NO PREMIUM OR SECUR ITY FOR USE OF LANDS HAVE BEEN DETERMINED OR PAID. ONLY RENT IS TO BE PA ID. RENT AS DEFINED IN SECTION 194-I OF THE IT ACT ENVISAGES SU CH PAYMENTS MADE UNDER A LEASE ONLY FOR USE OF LAND, WITHOUT THERE B EING ANY CORRESPONDING ACQUISITION OF LARGER RIGHTS IN THE S AID LEASEHOLD PLOTS. FURTHER, THE EXPLANATION OF SECTION 105 OF THE TRAN SFER OF PROPERTY ACT, 1882 DEFINES A LEASE OF AN IMMOVABLE PROPERTY AS TRANSFER OF RIGHT TO ENJOY THE PROPERTY, MADE A CERTAIN TIME IN CONSIDERATION OF A PRICE. THE SECTION FURTHER DISTINGUISHES BETWEEN LEASE PREMIUM AND ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 40 OF 63 RENT. RENT IS DEFINED U/S.105 OF THE TRANSFER OF PR OPERTY ACT, 1882 TO MEAN MONEY PAID PERIODICALLY OR ON SPECIFIED OCCASI ON TO THE TRANSFER OF LAND. PREMIUM IS NOT PAID FOR THE USE OF LAND. P REMIUM ON THE OTHER HAND MEANS A CONSIDERATION OF A PRICE PAID FO R TRANSFER OF RIGHT TO ENJOY THE PROPERTY. THUS, THERE IS A DIFFERENCE BETWEEN RENT AND PREMIUM. PREMIUM IS NOT PAID FOR THE USE OF LAND. T HIS USE WERE SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT AND THE DECISION IN THE CASE OF A.R. KRISHNAMURTHY V. CIT (1989) 176 ITR 417 (SC), WHEREIN THE ASSESSMENT IN FAVOUR OF THE REVENUE AS IN THIS CASE PREMIUM HAVE BEEN PAID FOR ACQUIRING LEASE HOLD RIG HTS, WHEREIN THE SUPREME COURT HAS HELD THAT WHAT IS PAID FOR THE CO ST OF ACQUISITION OF RIGHT IN A PROPERTY KNOWN AS LEASE ON RIGHT DOES NOT RENT BUT A PREMIUM WHICH IS A CAPITAL RECEIPT FOR THE RECIPIEN T. CONSEQUENTLY, SECTION 2(14) OF THE ACT RECOGNIZE LEASE HOLD INTER EST AS A SEPARATE, DISTINCT AND INDEPENDENT RIGHT IN AN IMMOVABLE PROP ERTY CAPABLE OF BEING TRANSFERRED FOR A CONSIDERATION. THUS, IN THE CASE OF ASSESSEE, THE RENT TO BE RECEIVED BY THE LESSER AND ACCORDING LY, IT WILL NOT BE CONSTRUED AS A CAPITAL RECEIPT FOR LEASE HOLD RIGHT S IN AN IMMOVABLE PROPERTY AND AS NO PREMIUM FOR TRANSFER OF LAND HAS BEEN PAID AND THE LESSOR WILL NOT BE TAXABLE IN THE FORM OF CAPIT AL GAINS U/S.45 OF THE ACT. THE RELIANCE WAS ALSO PLACED ON THE DECISI ON OF HONBLE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 41 OF 63 SUPREME COURT IN THE CASE OF CIT V. PANBARI TEA CO. LTD (1965) 57 ITR 422 (SC) , WHEREIN IT WAS HELD THAT WHEN THE INTERE ST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE PAID IN PREMIUM OR SALAMI. BUT THE PERIODICALLY PAYMENTS MADE FOR THE CONTINUOUS ENJOY MENT OF THE BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THEREFORE, IT WAS CONTENDED THAT THE ACTION OF AO IN MAKING ADDITION OF RS.2,21,49,975/- AND RS.2,17,33,252/- FOR LETTING O UT THE RIGHTS TO USE THE RIGHTS OF LANDS FOR HOTEL TO K.C. CITY CENT RE P LTD. ARE UNJUSTIFIED, UNLAWFUL AND TOTALLY AGAINST THE FACTS OF THE CASE AND MAY PLEASE BE DELETED. THE CIT(A) FORWARDED THE ABO VE SUBMISSIONS OF THE ASSESSEE TO THE AO FOR A REMAND REPORT. THE AO IN HIS REMAND REPORT HAS SIMPLY STATED THAT THE DECISION OF HONB LE SUPREME COURT WERE NOT BROUGHT TO HIS KNOWLEDGE DURING THE ASSESS MENT PROCEEDINGS AND THEREFORE THE AO RELIED UPON THE DECISION OF HO NBLE ITAT, MUMBAI. CONSIDERING THE ABOVE FACTS, THE CIT(A) OBS ERVED THAT THE ASSESSMENT INVOLVED IN BOTH THE LEASE DEEDS ARE IDE NTICAL, THESE ARE BEING ADJUDICATED TOGETHER. THE CIT(A) OBSERVED THA T IT EMERGES FROM THE ISSUE IN QUESTION WHETHER THE LEASE TWO PA RTIES AT PLOURA, JAMMU & GULAB SINGH MARG, JAMMU CONSTITUTE TO TRAN SFER WITHIN THE MEANING OF TRANSFER AS PROVIDED U/S.2(47) OF THE IT ACT ? IF YES, THEN OF COURSE, THE ASSESSEE WOULD BE LIABLE TO PAY CAPITAL GAINS. THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 42 OF 63 CIT(A) FURTHER OBSERVED THAT HE HAS CONSIDERED THE TERMS AND CONDITIONS OF THE LEASE DEEDS EXECUTED ON VARIOUS D ATES BETWEEN THE ASSESSEE AND M/S. K.C. SPORTS CLUB AND BETWEEN THE ASSESSEE AND K.C. CITY CENTRE PVT. LTD. AS PER THE TERMS AND CON DITIONS AGREED UPON BY THE LESSOR AND LESSEE, IN THE SAID LEASE DE EDS, IT IS FOUND THAT THE AGREEMENT IS REVOCABLE. THE PROPERTY GO BACK TO THE OWNER AFTER TERMINATION OF THE LEASE PROPERTY AND IN BETWEEN AL SO IF ANY OF THE TERMS AND CONDITIONS ARE NOT ADHERED TO, THE ASSESS EE IS AND WILL REMAIN THE ABSOLUTELY OWNER OF THE PROPERTY, THE PR EMISES CANNOT BE USED FOR ANY OTHER PURPOSE OTHER THAN WHAT IS STATE D IN THE LEASE DEED, THE PROPERTY CANNOT BE SUB-LETED AND THE RIGH TS AND OBLIGATION SHALL BE AS PER THE TRANSFER OF PROPERTY ACT AND WI LL BE OBSERVED BY BOTH THE PARTIES IN TRUE SENSE. THEREFORE, THE CIT( A) OBSERVED THAT IT IS NOT CORRECT ON THE PART OF THE AO TO HOLD THAT T HROUGH THIS LEASE DEEDS, THE RIGHTS OF THE ASSESSEE ARE EXTINGUISHED. IN ALL KIND OF LEASE, THE PROPERTY IS TRANSFERRED TO THE LESSEE FOR THE E NJOYMENT OF PROPERTY FOR A CERTAIN PERIOD BUT ALL SUCH LEASE CA NNOT BE TERMED AS TRANSFER COMES WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. SINCE, THERE IS NO TRANSFER OF POSSESSION OF THE PROPERTY, IT IS NOT CORRECT ON THE PART OF THE AO TO HOLD THAT THIS A TRANSFER, WI THIN THE MEANING OF CLAUSE (V) AND (VI) OF SECTION 2(47) OF THE INCOME TAX ACT READ WITH ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 43 OF 63 CLAUSE (D) OF SECTION 269UA ON THE GROUND THAT PROP ERTY HAS BEEN TRANSFERRED ON LONG TERM LEASE FOR MORE THAN 12 YEA RS AS A PART PERFORMANCE U/S.53A OF THE TRANSFER OF PROPERTY ACT . OTHERWISE, ALSO THESE PROPERTIES CANNOT BE TRANSFERRED TO A FIRM OR A COMPANY BECAUSE OF SPECIAL STATUS OF J&K WHERE TRANSFER OF PROPERTY ACT OF STATE OF J & K IS APPLICABLE. THIS IS THE REASON WH Y SECTION 269S OF THE IT ACT HAS BEEN PROVIDED IN THE STATUTE. SINCE, THERE IS NO TRANSFER THE APPLICABILITY OF SECTION 2(47) OF THE ACT DOES NOT ARISE. THE CIT(A) FURTHER OBSERVED THAT THE AO HAS HELD IT AS A TRANS FER BY DRIVING STRENGTH FROM THE ITAT, MUMBAI DECISION IN THE CASE OF ACIT V. UNITED MOTORS P LTD., WHEREIN THE HONBLE ITAT HAS HELD TH AT INCOME FROM TRANSFER OF A LEASE PREMISES WITHOUT TRANSFERRING I TS OWN BUSINESS AMOUNTS TO EXTINGUISHMENT OF THE TAX PAY RIGHT IN T HE CAPITAL ASSET AS PER SECTION 2(47) OF THE IT ACT. WHEREAS THE APPELL ANT ON THE OTHER HAND HAS PLACED RELIANCE ON THE TWO DECISION OF HON BLE SUPREME COURT IN THE CASE OF AR KRISHAN MURTI V. CIT (1989) 176 ITR 417 (SC) AND CIT V. PANBARI TEA COMPANY LTD. (1965) 57 ITR 4 22 (SC). THE CIT(A) OBSERVED THAT IN THE CASE OF CIT V. PANBARI TEA CO. LTD. (SUPRA). IT HAS BEEN CLEARLY HELD THAT WHEN THE INT EREST OF THE LESSOR IS PARTED WITH FOR A PRICE, THE PRICE IS PREMIUM OR SALAMI. BUT THE PERIODICAL PAYMENTS MADE FOR THE CONTINUOUS ENJOYME NT OF THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 44 OF 63 BENEFITS UNDER THE LEASE ARE IN THE NATURE OF RENT. THE FORMER IS A CAPITAL INCOME AND LETTER IS A REVENUE RECEIPT. SIN CE, NO PREMIUM WAS PAID BY THE LESSEE, IT IS CLEARLY IN THE NATURE OF RENT AND IS A REVENUE RECEIPT AS HELD BY THE HONBLE SUPREME COUR T (SUPRA). IN VIEW OF THESE FACTS AND CONSIDERING THE FACTS AND C IRCUMSTANCES AND PREVAILING LEGAL POSITION, THE LD.CIT(A) HELD THAT THIS IS NOT A TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(47 ) OF THE IT ACT AND HENCE, THE QUESTION OF CHARGING CAPITAL GAINS WOULD NOT ARISE. THEREFORE, THE ADDITION OF RS.2,21,49,975/- AND RS. 21,73,33,252/- MADE BY THE AO WERE THEREFORE DELETED. 38. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. CIT (DR) SUBMITTED THAT THE PROPE RTY UNDER CONSIDERATION IS CAPITAL ASSET, WHICH IS NOT IN DIS PUTE, HENCE, IT IS CAPITAL ASSET UNDER SECTION 2(14) OF THE ACT. THE L ESSEE HAS GIVEN THE PROPERTY ON LEASE, WHICH IS MORE THAN 15 YEARS. THE REFORE, TRANSFER OF PROPERTY BY WAY OF LEASE BY THE ASSESSEE WOULD P ARTAKE THE CHARACTER OF TRANSFER AND HENCE, LIABLE TO BE TO CA PITAL GAINS. THE LD. CIT (DR) HAD PLACED RELIANCE ON THE DECISION OF HON `BLE MADRAS HIGH COURT IN THE CASE OF CIT V. SUJATHA JEWELLERS [2007 ] 290 ITR 631 (MAD) / 160 TAXMAN 183 (MAD) IN WHICH IT WAS HELD THAT WH EN THE ASSESSEE TRANSFERS HIS LEASEHOLD RIGHTS IN THE LAND IN HIS O CCUPATION BY WAY OF ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 45 OF 63 A SUB-LEASE TO ANOTHER PERSON, IT AMOUNTS TO EXTING UISHING HIS RIGHTS IN THE PROPERTY AND SINCE HIS LEASEHOLD RIGHTS HAD CREATED AN INTEREST IN THE LAND, I.E. ENJOYMENT AND POSSESSION THEREOF , IT WOULD DEFINITELY COME WITHIN THE DEFINITION OF CAPITAL AS SET UNDER SECTION 2(14) OF I.T. ACT. THE LEARNED COUNSEL FOR THE ASSE SSEE THEREFORE, SUBMITTED THAT SUBLEASE IS COVERED BY THE DEFINITIO N CLAUSE OF SECTION 2(47) OF THE ACT. IT WAS SUBMITTED THAT WHERE THE T RANSFER IS FOR MORE THAN 20 YEARS BY WAY OF SUBLEASE, THE PERPETUAL RIG HT IS EXTINGUISHED. THE LD. CIT (DR) SUBMITTED THAT TRANSFER OF PROPERT Y ACT, 1882 DOES NOT APPLY TO J & K, STATE; HENCE, LEASE IS NOT REGI STERED. THE ASSESSEE HAS MADE PART PERFORMANCE OF UNDER SECTION 153A OF TRANSFER OF PROPERTY ACT. HENCE, THE AO HAS RIGHTLY BROUGHT TO TAX IT AS CAPITAL GAINS. THE LD. CIT (DR) FURTHER SUPPORTED HIS VIEW BY PLACING RELIANCE IN THE CASE OF CIT V. C. F. THOMAS [2006] 284 ITR 5 57 (KERALA) /158 TAXMAN 310 (KERALA) WHERE TRANSACTION BY WAY OF ANY AGREEMENT OR ARRANGEMENT, WHERE THE ASSESSEE HAS RECEIVED A SUM OF RS. 10 LAKHS AS PAKIDI, WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF AN IMMOVABLE PROPERTY IS WITHIN THE ME ANING OF SECTION 53A OF TRANSFER OF PROPERTY ACT,1882. THEREFORE, LE ARNED CIT(D.R.) CONTENDED THAT IN THE INSTANT CASE THE ASSESSEE HAS RECEIVED A RENT AS PER AGREEMENT OF SUBLEASE HENCE, IT AMOUNTS TO EXTINGUISHMENT ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 46 OF 63 OF RIGHT HENCE, IT AMOUNTS TO TRANSFER OF IMMOVABL E PROPERTY ON WHICH CAPITAL GAINS HAS BEEN RIGHTLY TAXED BY THE A O. THEREFORE, LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION M ADE BY THE AO. 39. AU CONTRAIRE , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO MADE AN ADDITION OF RS. 2,21,49,975 TO THE RETURNED INCOME ON ACCOUNT OF THE LEASE TRANSACTION AS NOTIO NAL CAPITAL GAINS ACCRUING TO THE ASSESSEE ON THE LEASE OF LAND TO M/ S. K.C. SPORTS CLUB. SIMILARLY THE AO MADE ADDITION OF RS. 21,73,33,252 ON ACCOUNT OF TREATING THE LEASE TRANSACTION AS NOTIONAL CAPITAL GAINS IN RESPECT OF ROOF PORTION LEASE TO K.C. CITY CENTRE (HOTEL) (P) LTD. THE LD. CIT(A) HAS DELETED BOTH THE ADDITION BY MAKING HIS OBSERVA TION AS PAGE NO. 117 TO 139 OF THE APPEAL ORDER BY PASSING A WELL-RE ASONED ORDER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, WHICH ARE PLACED AT PAPER BOOK PAGE NO. 1 TO 24. THE LD. CIT(A) HAS CA TEGORICALLY OBSERVED THAT IT IS A CLEAR CASE OF LEASE OF PROPER TY WHEREAS THE AO HAS TRIED TO BRING OUT A NEW CASE BY TREATING THE W HOLE TRANSACTION AS CAPITAL GAINS. THE LEARNED COUNSEL FOR THE ASSES SEE REFERRING TO THE `COPY OF LEASE DEED DATED 05.06.2003 WITH M/S. K. C . SPORTS CLUB PLACED AT PAPER BOOK PAGE NO. 57 TO 62 AND SUPPLEME NTARY LEASE DEED DATED 03.08.2008 AND 16.12.2016 PLACED AT PAPER BOO K PAGE NO. 63 TO 70 SUBMITTED THAT THE PROPERTY WAS LEASED OUT TO K. C. SPORTS CLUB, ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 47 OF 63 A PARTNERSHIP FIRM AT RS.1,20,000 PER ANNUM AND SHR I RAJU CHOUDHARY ENJOYS 70% SHARE IN THE FIRM K. C. SPORTS CLUB AND THE FIRM WAS ESTABLISHED TO RUN SPORTS CLUB. NO OUTSIDE PARTY W AS INVOLVED IN THE DEED OF LEASE AND THE WHOLE TRANSACTION WAS ROUTED THROUGH AGREEMENTS. SIMILARLY, THE PROPERTY WAS LEASED TO K . C. CITY CENTRE (P) LTD. AT RS.3,00,000 PER ANNUM OF WHICH LEASE DE ED IS PLACED AT PAPER BOOK PAGE NO. 31 TO 42 OF PAPER BOOK, FOLLOWE D BY COPY OF SUPPLEMENTARY LEASE DEED PLACED AT PAPER BOOK PAGE NO. 43 TO 46. LEARNED COUNSEL STATED THAT WHEN LANDLORD GRANTS A LEASE HE IS TREATED AS MAKING A PART DISPOSAL OF HIS INTEREST I N THE PROPERTY. IT IS JUST LIKE A RENT. IF THE PROPERTY IS RENTED OUT ON LEASED OUT. IT DOES NOT TANTAMOUNT TO SALE. FROM THE LEASE DEEDS AND SU PPLEMENTARY LEASE DEEDS, IT WOULD BE APPRECIATED THAT IT IS ONL Y A CASE OF RENTING OUT OF THE PROPERTY. THE OWNERSHIP OF THE SAID PROP ERTY ALWAYS VEST WITH THE ASSESSEE AND NOT WITH THE PERSON TO WHOM T HE PROPERTY IS RENTED OUT. NEITHER THE LESSEE CAN SELL THE PROPERT Y, NOR CAN LESSOR CAN SELL THE SAME. HAD IT BEEN THE INTENTION OF THE LEGISLATURE TO TREAT THE PROPERTY, WHICH IS LET OUT AS A SALE THEN IT WO ULD HAVE BEEN COVERED BY THE PROVISIONS OF SECTION 50C ALSO. BY L EASING OUT THE PROPERTY, NO PREMIUM WAS RECEIVED, AS IT WAS NOT LE ASED TO ANY OTHER OUTSIDER. IT IS NO BODY`S CASE THAT THE PROPERTY WA S NOT LEASED OUT AT ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 48 OF 63 THE PREVAILING MARKET RATE. AS SUCH, THIS CASE DOES NOT FALL WITHIN THE MISCHIEF OF SECTION 45 (3) OF THE ACT AS SECTION 45 (3) OF THE ACT DEALS WITH THE TRANSFER OF CAPITAL ASSET BY PARTNER TO TH E PARTNERSHIP FIRM. THE LEARNED COUNSEL REFERRED THE PROVISIONS OF SECT ION 45(3) WHICH SAYS THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY A PERSON TO A FIRM OR OTHER ASSOCIATION OF PERS ONS OR BODY OF INDIVIDUALS (NOT BEING A COMPANY OR A CO-OPERATIVE SOCIETY) IN WHICH HE IS OR BECOMES A PARTNER OR A MEMBER, BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE, SHALL BE CHARGEABLE TO T AX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TAKES P LACE AND, FOR THE PURPOSE OF SECTION 48, THE AMOUNT RECORDED IN THE B OOKS OF ACCOUNTS OF THE FIRM, ASSOCIATION OR BODY AS THE VALUE OF TH E CAPITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATIO N RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. IT WAS FURTHER SUBMITTED THAT THE AO DID NOT APPRECIATE TH AT JAMMU AND KASHMIR ENJOYS A SPECIAL STATUS UNDER THE TRANSFER OF PROPERTY ACT. UNDER THE SAID LAW, THE PROPERTIES CANNOT BE TRANSF ERRED BY AN INDIVIDUAL TO FIRM OR A COMPANY BECAUSE OF ITS SPEC IAL STATUS OF THE J&K, WHERE TRANSFER OF PROPERTY ACT OF STATE OF JAM MU AND KASHMIR IS APPLICABLE. THUS, IT IS CLEAR THAT AN INDIVIDUAL CANNOT SELL ANY PROPERTY TO A PARTNERSHIP FIRM, TO A COMPANY, OR TO ANY OUTSIDER FROM ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 49 OF 63 JAMMU AND KASHMIR RESIDENT. THUS, IN VIEW OF THESE CIRCUMSTANCES, THIS FACT HAS NOT BEEN APPRECIATED BY THE AO. AS SU CH, THERE WAS NO QUESTION OF INVOKING THE PROVISIONS OF CAPITAL GAIN S. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAD FIL ED WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A), WHO HAS FORWARDE D THE SAME TO THE AO ASKING TO FURNISH THE REMAND REPORT. A REMAN D REPORT WAS DULY FURNISHED BY THE AO TO THE LD. CIT(A), WHICH IS PLA CED AT PAPER BOOK PAGE NO. 71 TO 75. THE LEARNED COUNSEL REFERRED THE RELEVANT PORTION OF THE REMAND REPORT IN WHICH IT IS STATED BY THE A O THAT THE A.R. OF THE ASSESSEE HAS NOW SUBMITTED THAT SINCE NO PREMIUM OR SECURITY FOR USE OF LAND HAVE BEEN DETERMINED OR PAID IN CAS E OF LEASE DEEDS ENTERED BETWEEN THE ASSESSEE AND M/S. K.C. SPORTS C LUB AND M/S. K.C. CITY CENTRE PVT. LTD. AS SUCH, THERE CANNOT BE ANY CAPITAL GAINS. FOR JUSTIFYING THIS, RELIANCE HAS BEEN PLACED ON TW O JUDGEMENTS ADJUDICATED BY THE HONOURABLE APEX COURT, WHEREIN I T HAS BEEN HELD THAT WHEN INTEREST OF LESSOR IS PARTED WITH FOR A P RICE, THE PRICE PAID IS PREMIUM. THESE CASE LAWS WERE NOT BROUGHT TO TH E KNOWLEDGE OF THE UNDERSIGNED DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. ON THE BASIS OF THE FACTS AVAILABLE ON RECORD, THE CASE LA W OF HON`BLE ITAT, MUMBAI BENCH WAS APPLIED WHILE FRAMING THE ASSESSME NT. THIS REPORT IS BEING SUBMITTED UNDER RULE 46A OF THE AT RULES 1 962 ON THE BASIS ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 50 OF 63 OF FRESH FACTS & CIRCUMSTANCES BROUGHT ON RECORD, D URING THE REMAND PROCEEDINGS AND YOUR GOOD SELF IS REQUESTED TO KIND LY DECIDE THE GROUNDS OF APPEAL ON MERITS OF THE CASE, CONSIDERIN G FACTUAL POSITION AT THE TIME OF ASSESSMENT . THE LEARNED COUNSEL, FURTHER THE SUBMITTED THAT FROM THE PLAIN READING OF THE REMAND REPORT OF THE AO, IT IS CONCLUSIVELY PROVED THAT THE DEPARTMENT H AD DULY ACCEPTED THE FACTS GIVEN IN WRITING BEFORE THE LD. CIT(A) AN D THE DEPARTMENT HAS NOWHERE MADE ANY ADVERSE COMMENT ON THE SAME. T HUS, IMPLIEDLY IT IS CLEAR THAT THE DEPARTMENT HAS ACCEP TED OUR SUBMISSIONS IN TOTO. THE ONLY POINT WHICH HAS BEEN RAISED AND REQUESTED TO THE CIT(A) BY THE AO THAT THE CASE MAY BE DECIDED ON MERITS. IN VIEW OF THESE CIRCUMSTANCES, THE DEPARTM ENT HAS NO REASON AND OCCASION FOR COMING IN APPEAL BEFORE THE TRIBUN AL AND THE APPEAL OF THE DEPARTMENT MAY BE DISMISSED. THE LEARNED COU NSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE INSTANT CASE , THE PARTNERSHIP FIRM M/S. K.C. SPORTS CLUB HAS NOT RECORDED ANY AMO UNT IN THE BOOKS OF ACCOUNTS ARISING ON ACCOUNT OF LEASE DEED. AS SU CH, THERE IS NO QUESTION OF ANY CAPITAL GAIN. THE AO HAS RELIED AND APPLIED CERTAIN CASE LAWS, OF WHICH FACTS ARE ALTOGETHER DIFFERENT AND ARE NOT APPLICABLE TO THE PRESENT FACTS AND CIRCUMSTANCES O F THE CASE. IT WAS FURTHER SUBMITTED THAT UNDER THE PROVISIONS OF INCO ME TAX ACT, 1961, ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 51 OF 63 DIFFERENT TREATMENT CANNOT BE GIVEN TO SAME PAYMENT UNDER DIFFERENT SECTIONS I.E. IN THE HANDS OF THE LESSOR AS CONSIDE RATION TAXABLE UNDER THE HEAD CAPITAL GAINS UNDER SECTION 45 AND IN THE HANDS OF THE LESSEE AS RENT FOR THE PURPOSE OF DEDUCTION OF TAX UNDER S ECTION 194I OF THE ACT. THUS, THE AUTHORITY CANNOT TAKE A SEPARATE STA ND. THUS, NO CAPITAL GAIN ARISES AS NO PAYMENT HAS BEEN MADE TOW ARDS LEASE PREMIUM FOR ACQUISITION OF LAND AND ONLY RENT IS PA ID. FURTHER, THIS CASE IS COVERED WITHIN THE MEANING OF SECTION 105 O F THE TRANSFER OF PROPERTY ACT, 1882, WHICH DEFINES A LEASE OF AN IMM OVABLE PROPERTY AS A TRANSFER OF RIGHT TO ENJOY THE PROPERTY, MADE IN CONSIDERATION OF A PRICE. THIS SECTION FURTHER DISTINGUISHES BETWEEN LEASE PREMIUM AND RENT. RENT IS DEFINED UNDER SECTION 105 OF THE TRANSFER OF PROPERTY ACT 1882 TO MEAN MONEY PAID PERIODICALLY O R ON THE SPECIFIED OCCASION TO THE TRANSFER OF LAND. PREMIUM ON THE OTHER HAND MEANS A CONSIDERATION OF THE PRICE PAID FOR TRANSFE R OF A RIGHT TO ENJOY THE PROPERTY. THUS, THERE IS A DIFFERENCE BETWEEN R ENT AND PREMIUM. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE AO IN HIS REMAND REPORT HAS SIMPLY STATED THAT THE DECISION OF SUPRE ME COURT OF INDIA WAS NOT BROUGHT TO HIS NOTICE DURING ASSESSMENT PR OCEEDINGS, THEREFORE, THE AO RELIED UPON THE DECISION OF ITAT BOMBAY BENCH. IT IS IMPLIEDLY A CASE WHERE THE AO HAS ADMITTED THE F ACTS WHICH PROVED ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 52 OF 63 THAT THERE WAS NO JUSTIFICATION IN CHARGING CAPITAL GAIN. AS SUCH, THE DEPARTMENT HAS CASE OR REASON AND BASIS FOR COMING IN APPEAL BEFORE THE TRIBUNAL, HENCE, THE APPEAL OF THE REVENUE MAY BE DISMISSED. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE CASE LAWS RELIED BY THE LEARNED CIT (D.R.) ARE DISTINGUISHABLE ON FACTS AND HENCE, NOT APPLICABLE. IN THE CASE OF CIT V. SUJATHA JEWELLERS (SUPRA), THE PROPERTY WAS TRANSFERRED FOR LEASE OF 22 YEARS ON W HICH THE ASSESSEE HAD RECEIVED A SUM OF RS.10 LAKH, AS INTEREST FREE ADVANCES, WHEREAS IN THE CASE OF NO SUCH ADVANCE HAS BEEN RECEIVED. F URTHER, IN SAID CASE THE PROPERTY WAS TRANSFERRED TO THIRD PARTY, W HEREAS IN THE CASE OF ASSESSEE, THE PROPERTY WAS LEASED OUT TO THE FIR M IN WHICH THE ASSESSEE HAD ENJOYED 70% HIS SHARES. THEREFORE, THE RE IS NO EXTINGUISHMENT OF RIGHTS OF THE ASSESSEE. FURTHER, IN THE CASE OF CIT V. C.F. THOMAS [2006] 284 ITR 557 (KER)/ 158 TAXMAN 310 (KER) (SUPRA) THE ASSESSEE HAD RECEIVED A SUM OF RS.10 LA KHS BY WAY OF PAKADI, WHEREAS NO SUCH FACTS EXIST IN THE CASE OF THE ASSESSEE AS NO PREMIUM HAS BEEN RECEIVED BY THE ASSESSEE. THEREFOR E, THE ABOVE TWO CASE LAWS RELIED BY THE LEARNED CIT (D.R.) ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THESE FACTS AND C IRCUMSTANCES, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE CIT(A) HAS RIGHTLY ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 53 OF 63 DELETED THE ADDITION MADE ON ACCOUNT OF CAPITAL GAI NS ON LEASE DEED BASIS. 40. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF THE COPY OF LEAS E DEED DATED 05.06.2003 WITH M/S. K. C. SPORTS CLUB PLACED AT PA PER BOOK PAGE NO. 57 TO 62 AND SUPPLEMENTARY LEASE DEED DATED 03.08.2 008 AND 16.12.2016 PLACED AT PAPER BOOK PAGE NO. 63 TO 70 R EVEALS THAT THE PROPERTY WAS LEASED OUT TO M/S. K. C. SPORTS CLUB, A PARTNERSHIP FIRM, AT A RENT OF RS.1,20,000 PER ANNUM IN WHICH THE ASS ESSEE ENJOYS 70% OF SHARE AS PARTNER IN THE FIRM K. C. SPORTS CLUB. THE SAID FIRM WAS ESTABLISHED TO RUN SPORTS CLUB. THE PERUSAL OF CLAU SE 3 OF SUPPLEMENTARY LEASE DEED DATED 16.12.2016, (PB-69) WITH M/S. K.C. SPORTS CLUB, SHOWS THAT LESSEE HAS NOT ACQUIRED ANY RIGHT, TITLE IN THE LEASED PROPERTY AND THE LESSOR CONTINUES TO REMAIN THE SOLE AND ABSOLUTE OWNER THEREOF. SIMILAR PROVISIONS WERE ALS O MADE IN CLAUSE 4 OF ORIGINAL LEASE DEED DATED 05.06.2013 (PB-57 TO 62). UNDER CLAUSE 4 OF SUPPLEMENTARY LEASE DEED, THE LESSOR HAS THE O PTION TO TERMINATE/ CANCEL THE LEASE DEED, PRIOR TO STIPULAT ED PERIOD, IF NOT FOUND USED AS PER TERMS OF AGREEMENT THUS, THE A SSESSEE HAS NOT TRANSFERRED HIS RIGHT NOR THERE IS EXTINGUISHMENT O F ANY RIGHTS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANC E ON THE DECISION ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 54 OF 63 OF HON`BLE SUPREME COURT IN THE CASE OF CIT V. PANB ARI TEA CO. LTD. [1965] 57 ITR 422 (SC) IN WHICH THE HON`BLE SUPREME COURT HELD OF WHICH CATCH NOTE READ A:- THAT CONSIDERATION RECEIV ED BY WAY OF PREMIUM AND ANNUAL RENT OF THE PREMIUM CERTAIN AM OUNT WAS PAYABLE AT THE TIME OF EXECUTION AND BALANCE IN INS TALMENTS- PREMIUM RECEIVED IN ADDITION TO RENT IN INSTALMENTS IS CAPITAL RECEIPT NOT LIABLE TO TAX. THUS, THE HONBLE SUPREME COURT HELD THAT PREMIUM IS CAPITAL RECEIPT AND RENT IS REVENUE RECEIPT. IN THE INSTANT CASE, THE ASSESSEE HAS NOT RECEIVED ANY PREMIUM, HENCE, RENT RECEIVED IS CHARGEABLE AS REVENUE RECEIPT, AND THERE BEING NO P REMIUM HENCE, NO CAPITAL GAINS IS CHARGEABLE TO CAPITAL GAINS. WE FURTHER FIND THAT THERE IS NO OUTSIDER WAS INVOLVED IN THE LEASE DEED AND THE WHOLE TRANSACTION HAS BEEN ROUTED THROUGH AGREEMENTS. SIM ILARLY, THE PROPERTY WAS LEASED TO M/S. K. C. CITY CENTRE (P) L TD. FOR A RENT OF RS.3,00,000/- PER ANNUM AS DISCERNIBLE FROM COPY OF LEASE DEED PLACED AT PAPER BOOK PAGE NO. 31 TO 42, AND COPY O F SUPPLEMENTARY LEASE DEED PLACED AT PAPER BOOK PAGE NO. 43 TO 46. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT WHEN LA NDLORD GRANTS A LEASE BY MAKING A PART OF DISPOSAL OF HIS INTEREST IN THE PROPERTY IT IS A AKIN TO RENT ONLY. IF THE PROPERTY IS RENTED OUT BY WAY OF LEASE DEED, IT CANNOT BE SAID TO BE SALE OF PROPERTY. ONGOING T HROUGH THE COPY OF ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 55 OF 63 LEASE DEEDS UNDER CONSIDERATION, IT IS NOTICED THAT THE OWNERSHIP OF THE SAID PROPERTY WAS ALWAYS VESTED WITH THE ASSESS EE AND NOT WITH THE PERSON TO WHOM THE PROPERTY IS RENTED OUT. NEIT HER THE LESSEE CAN SELL THE PROPERTY, NOR CAN LESSOR CAN SELL THE SAME. HAD IT BEEN THE INTENTION OF THE LEGISLATURE TO TREAT THE PROPE RTY AS SALE ON LEASE, THEN THE PROVISIONS OF SECTION 50C WOULD HAVE COVER ED IT ALSO, BUT IT IS NOT COVERED BY THAT SECTION. WE ALSO NOTE THAT T HE ASSESSEE THROUGH LEASE DEED RECEIVED NO PREMIUM AND IT WAS NOT GIVEN TO ANY OTHER OUTSIDER. FURTHER, IT IS NOT THE CASE OF THE AO THA T THE PROPERTY WAS NOT LEASED OUT AT THE PREVAILING MARKET RATE. IN VI EW OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THIS CASE DOES NOT FALL WITHIN THE MISCHIEF OF SECTION 45 (3) OF THE ACT AS SECTION 45 (3) OF THE ACT DEALS WITH THE TRANSFER OF CAPITA L ASSET BY PARTNER TO THE PARTNERSHIP FIRM. THE PROVISION OF SECTION 4 5(3) SAYS THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAP ITAL ASSET BY A PERSON TO A FIRM OR OTHER ASSOCIATION OF PERSONS O R BODY OF INDIVIDUALS (NOT BEING A COMPANY OR A CO-OPERATIVE SOCIETY) IN WHICH HE IS OR BECOMES A PARTNER OR A MEMBER, BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE, SHALL BE CHARGEABLE TO T AX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TAKES P LACE AND, FOR THE PURPOSE OF SECTION 48, THE AMOUNT RECORDED IN THE B OOKS OF ACCOUNTS ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 56 OF 63 OF THE FIRM, ASSOCIATION OR BODY AS THE VALUE OF TH E CAPITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATIO N RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. THUS, THIS SECTION APPLIES WHERE THE PARTNER HAS TRANSFERED TH E PROPERTY BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE TO PARTNERSHIP FIRM AND THE FIRM HAS RECORDED THE SAID AMOUNT OF CONTRIBUTION IN ITS BOOKS OF ACCOUNTS, THE SAME MAY BE TREATED AS TRANSFER AND CHARGEABLE TO TAX. HOWEVER, IN THE CASE OF THE ASSESSEE, THE FIRM HAS NOT RECOR DED ANY CONTRIBUTION FROM PARTNERS IN HIS BOOKS OF ACCOUNTS AND THE FIRM IS PAYING ONLY RENT TO THE ASSESSEE. THEREFORE, THIS D OES NOT AMOUNTS TO TRANSFER OR PROPERTY, HENCE, NOT EXIGIBLE TO CAPITA L GAINS. THE LD.CIT(A) FURTHER OBSERVED THAT HE HAS CONSIDERED T HE TERMS AND CONDITIONS OF THE LEASE DEEDS EXECUTED ON VARIOUS D ATES BETWEEN THE ASSESSEE AND M/S. K.C. SPORTS CLUB AND BETWEEN THE ASSESSEE AND K.C. CITY CENTRE PVT. LTD. AS PER THE TERMS AND CON DITIONS AGREED UPON BY THE LESSOR AND LESSEE IN THE SAID LEASE DEE DS, IT WAS FOUND THAT THE AGREEMENT IS REVOCABLE. THE PROPERTY GO BA CK TO THE OWNER AFTER TERMINATION OF THE LEASE PROPERTY AND IN BETW EEN ALSO IF ANY OF THE TERMS AND CONDITIONS ARE NOT ADHERED TO , THE A SSESSEE IS A WILL REMAIN THE ABSOLUTELY OWNER OF THE PROPERTY, THE PR EMISES CANNOT BE USED FOR ANY OTHER PURPOSE OTHER THAN WHAT IS STATE D IN THE LEASE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 57 OF 63 DEED, THE PROPERTY CANNOT BE SUB-LETED AND THE RIG HTS AND OBLIGATION SHALL BE AS PER THE TRANSFER OF PROPERTY ACT AND WI LL BE OBSERVED BY BOTH THE PARTIES IN TRUE SENSE. WE OBSERVED THAT TH E AO HAS HELD THAT THROUGH LEASE DEEDS, THE RIGHTS OF THE ASSESSEE ARE EXTINGUISHED. IN ALL KIND OF LEASE, THE PROPERTY IS TRANSFERRED TO T HE LESSEE FOR THE ENJOYMENT OF PROPERTY FOR A CERTAIN PERIOD BUT ALL SUCH LEASE CANNOT BE TERMED AS TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. SINCE, THERE IS NO TRANSFER OF POSSESSION OF THE PR OPERTY, IT IS NOT CORRECT ON THE PART OF THE AO TO HOLD THAT THIS A T RANSFER WITHIN THE MEANING OF CLAUSE (V) AND (VI) OF SECTION 2(47) OF THE INCOME TAX ACT READ WITH CLAUSE (D) OF SECTION 269UA ON THE GROUND THAT PROPERTY HAS BEEN TRANSFERRED ON LONG TERM LEASE FOR MORE TH AN 12 YEARS AS A PART PERFORMANCE U/S.53A OF THE TRANSFER OF PROPERT Y ACT. OTHERWISE, ALSO THESE PROPERTIES CANNOT BE TRANSFERRED TO A FI RM OR A COMPANY BECAUSE OF SPECIAL STATUS OF J&K WHERE TRANSFER OF PROPERTY ACT OF STATE OF J & K IS APPLICABLE. THIS IS THE REASON WH Y SECTION 269S OF THE IT ACT HAS BEEN PROVIDED IN THE STATUTE. SINCE, THERE IS NO TRANSFER, THE APPLICABILITY OF SECTION 2(47) OF THE ACT DOES NOT ARISE. LEARNED COUNSEL HAS ALSO SUBMITTED THAT THE AO DID NOT APPRECIATE THAT JAMMU AND KASHMIR ENJOYS A SPECIAL STATUS UNDE R THE TRANSFER OF PROPERTY ACT. UNDER THE SAID LAW, AN INDIVIDUAL CANNOT TRANSFER THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 58 OF 63 PROPERTIES TO FIRM OR A COMPANY BECAUSE OF ITS SPEC IAL STATUS OF THE J&K, WHERE TRANSFER OF PROPERTY ACT OF STATE OF JAM MU AND KASHMIR IS APPLICABLE. THUS, IT IS CLEAR THAT AN INDIVIDUAL CANNOT SELL ANY PROPERTY TO A PARTNERSHIP FIRM, TO A COMPANY, OR TO ANY OUTSIDER FROM JAMMU AND KASHMIR RESIDENT. THUS, IN VIEW OF THESE CIRCUMSTANCES, THE AO HAS NOT APPRECIATED THESE FACTS CLEARLY; HEN CE, THERE WAS NO OCCASION TO INVOKE THE PROVISIONS OF CAPITAL GAINS. THE LEARNED COUNSEL HAS SUBMITTED THAT THE ASSESSEE HAD FILED W RITTEN SUBMISSIONS BEFORE THE LD. CIT(A), WHO HAS FORWARDED THE SAME T O THE AO ASKING TO FURNISH THE REMAND REPORT. A REMAND REPORT WAS D ULY FURNISHED BY THE AO TO THE LD. CIT(A), WHICH IS PLACED AT PAPER BOOK PAGE NO. 71 TO 75. THE AO IS HIS REMAND REPORT SINCE NO PREMIUM OR SECURITY FOR USE OF LAND HAVE BEEN DETERMINED OR PAID IN CASE OF LEASE DEEDS ENTERED BETWEEN THE ASSESSEE AND M/S. K.C. SPORTS C LUB AND M/S. K.C. CITY CENTRE PVT. LTD. AS SUCH, THERE CANNOT BE ANY CAPITAL GAINS. FOR JUSTIFYING THIS, RELIANCE HAS BEEN PLACED ON TW O JUDGEMENTS ADJUDICATED BY THE HONOURABLE APEX COURT, WHEREIN I T HAS BEEN HELD THAT WHEN INTEREST OF LESSOR IS PARTED WITH FOR A P RICE, THE PRICE PAID IS PREMIUM. THESE CASE LAWS WERE NOT BROUGHT TO TH E KNOWLEDGE OF THE UNDERSIGNED DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. ON THE BASIS OF THE FACTS AVAILABLE ON RECORD THE CASE LAW OF HON`BLE ITAT, ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 59 OF 63 MUMBAI BENCH WAS APPLIED WHILE FRAMING THE ASSESSME NT. THIS REPORT IS BEING SUBMITTED UNDER RULE 46A OF THE AT RULES 1 962 ON THE BASIS OF FRESH FACTS & CIRCUMSTANCES BROUGHT ON RECORD, D URING THE REMAND PROCEEDINGS AND YOUR GOOD SELF IS REQUESTED TO KIND LY DECIDE THE GROUNDS OF APPEAL ON MERITS OF THE CASE, CONSIDERIN G FACTUAL POSITION AT THE TIME OF ASSESSMENT. THUS, IN REMAND REPORT THE AO HAS CLEARLY ADMITTED AND ACCEPTED THAT IT IS NOT THE CA SE OF CAPITAL GAINS HENCE, HE HAS NOT MADE ANY ADVERSE COMMENT ON THE S AME AND IMPLIEDLY ACCEPTED THAT THERE IS NO CASE OF CAPITAL GAINS TO BE CHARGED IN THIS CASE. WE FIND THAT THAT IN THE INSTANT CASE , THE PARTNERSHIP FIRM M/S. K.C. SPORTS CLUB HAS NOT RECORDED ANY AMO UNT IN THE BOOKS OF ACCOUNTS ARISING ON ACCOUNT OF LEASE DEED. AS SU CH, THERE IS NO QUESTION OF ANY CAPITAL GAIN. THE AO HAS RELIED IN THE CASE OF ACIT V. UNITED MOTORS (I) LTD. [2009] 32 SOT 399 (MUMBAI- T RIB) IN WHICH THE ASSESSEE HAD RECEIVED NON-REFUNDABLE SIGNING AMOUNT AS PREMIUM FOR A FAIRLY A LONG PERIOD, WAS TREATED AS CAPITAL RECE IPT CHARGEABLE TO CAPITAL GAINS. FURTHER, IN SAID CASE THE ASSESSEE H AD TRANSFERRED AND SHIFTED HIS OWN BUSINESS FROM THAT PREMISES, WHEREA S, IN THE CASE IN HANDS, THERE IS NO SUCH PREMIUM RECEIPTS OF NON-REF UNDABLE NATURE, NOR THE ASSESSEE HAS SHIFTED HIS BUSINESS PREMISES RATHER THE ASSESSEE HAS HIS 70% INTEREST IN THE SAID LESSEE FIRM, HENCE , THE FACTS OF SAID ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 60 OF 63 CASE ARE ALTOGETHER DIFFERENT AND ARE NOT APPLICABL E TO THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. WE ARE ALSO AG REE WITH SUBMISSIONS OF THE LEARNED COUNSEL THAT UNDER THE P ROVISIONS OF INCOME TAX ACT, 1961, DIFFERENT TREATMENT CANNOT BE GIVEN TO SAME PAYMENT UNDER DIFFERENT SECTIONS I.E. IN THE HANDS OF THE LESSOR AS CONSIDERATION TAXABLE UNDER THE HEAD CAPITAL GAINS UNDER SECTION 45 AND IN THE HANDS OF THE LESSEE AS RENT FOR THE PURP OSE OF DEDUCTION OF TAX UNDER SECTION 194I OF THE ACT. THUS, THE AUTHOR ITY CANNOT TAKE A SEPARATE STAND. THUS, NO CAPITAL GAIN ARISES AS NO PAYMENT HAS BEEN MADE TOWARDS LEASE PREMIUM FOR ACQUISITION OF LAND AND ONLY RENT IS PAID. FURTHER, THIS CASE AND DOES NOT COVER WITHIN THE MEANING OF SECTION 105 OF THE TRANSFER OF PROPERTY ACT, 1882, WHICH DEFINES A LEASE OF AN IMMOVABLE PROPERTY AS A TRANSFER OF RIG HT TO ENJOY THE PROPERTY, MADE A CERTAIN TIME IN CONSIDERATION OF A PRICE. THIS SECTION FURTHER DISTINGUISHES BETWEEN LEASE PREMIUM AND RENT. RENT IS DEFINED UNDER SECTION 105 OF THE TRANSFER OF PRO PERTY ACT 1882 TO MEAN MONEY PAID PERIODICALLY OR ON THE SPECIFIED OC CASION TO THE TRANSFER OF LAND. PREMIUM ON THE OTHER HAND MEANS A CONSIDERATION OF THE PRICE PAID FOR TRANSFER OF A RIGHT TO ENJOY THE PROPERTY. THUS, THERE IS A DIFFERENCE BETWEEN RENT AND PREMIUM. THE AO IN HIS REMAND REPORT HAS SIMPLY STATED THAT THE DECISIONS OF SUPREME COURT ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 61 OF 63 OF INDIA WERE NOT BROUGHT TO THE NOTICE OF HIM DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, HENCE, HE RELIED UPON THE DECISION OF ITAT BOMBAY BENCH. THUS, IT IS IMPLIEDLY CASE WHERE THE AO HAS ADMITTED THE FACTS WHICH PROVED THAT THERE WAS NO JUSTIFICAT ION IN CHARGING CAPITAL GAIN. WE ALSO OBSERVED THAT THE CASE LAWS R ELIED BY THE LEARNED CIT (D.R.) ARE DISTINGUISHABLE ON FACTS AND HENCE, NOT APPLICABLE. IN THE CASE OF CIT V. SUJATHA JEWELLERS (SUPRA), THE PROPERTY WAS TRANSFERRED FOR LEASE OF 22 YEARS ON W HICH THE ASSESSEE HAD RECEIVED PREMIUM A SUM OF RS.10 LAKH, AS INTERE ST FREE ADVANCES AND THERE THE ASSESSEE HAS TRANSFERRED HIS LEASEHOL D RIGHTS IN LAND IN HIS OCCUPATION BY WAY OF SUB-LEASE TO ANOTHER PERSO N, WHICH AMOUNTED TO EXTINGUISHMENT OF HIS RIGHTS IN THE PRO PERTY, WHEREAS IN THE INSTANT CASE, THIS IS NOT A CASE OF SUB-LEAS E, THERE IS NO SUCH ADVANCE RECEIPTS AND CLAUSE 4 OF SUPPLEMENTARY LEAS E DEED CONTAINED RIGHT TO CANCEL OR TERMINATE THE LEASE DEED BEFORE STIPULATED PRESS ALSO AND THERE IS NO THIRD PARTY LEASE DEED ENTERED BETWEEN THE PARTIES. FURTHER, IN SAID CASE THE PROPERTY WAS TRA NSFERRED TO THIRD PARTY, WHEREAS IN THE CASE OF ASSESSEE, THE PROPERT Y WAS LEASED OUT TO THE FIRM IN WHICH THE ASSESSEE HAD ENJOYED 70% A S HIS SHARE IN THE PROPERTY. IN VIEW OF THIS MATTER, THE SAID DECISION IS DISTINGUISHABLE ON FACTS HENCE, NOT APPLICABLE TO PRESENT FACTS AND THERE BEING NO ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 62 OF 63 EXTINGUISHMENT OF RIGHTS OF THE ASSESSEE. FURTHER, THE LD.CIT(DR) RELIED IN THE CASE OF CIT V. C.F. THOMAS [2006] 284 ITR 557 (KER)/ 158 TAXMAN 310 (KER) (SUPRA), IN WHICH THE ASSESSEE HAD RECEIVED A SUM OF RS.10 LAKHS BY WAY OF PAKADI, WHEREAS NO SUCH FA CTS EXIST IN THE CASE OF THE ASSESSEE AS NO PREMIUM HAS BEEN RECEIVE D BY THE ASSESSEE. THEREFORE, THE ABOVE TWO CASE LAWS RELIED BY THE LEARNED CIT (D.R.) ARE NOT APPLICABLE TO THE FACTS OF THE C ASE. IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT AS PER THE TERMS AND CONDITIONS OF THE LEASE DEEDS EXECUTED ON VARIOUS DATES BETWEEN THE A SSESSEE AND M/S. K.C. SPORTS CLUB AND M/S. K.C. CITY CENTRE PVT. LTD . THE LEASE DEED ARE REVOCABLE, THE PROPERTY CAN GO BACK TO THE OWNE R AFTER TERMINATION OF THE LEASE PROPERTY AND IN BETWEEN AL SO IF ANY OF THE TERMS AND CONDITIONS ARE NOT ADHERED TO , THE ASSES SEE IS A WILL REMAIN THE ABSOLUTELY OWNER OF THE PROPERTY, THE PREMISES CANNOT BE USED FOR ANY OTHER PURPOSE OTHER THAN WHAT IS STATED IN THE LEASE DEED, THE PROPERTY CANNOT BE SUB-LETED AND THE RIGHTS AN D OBLIGATION SHALL BE AS PER THE TRANSFER OF PROPERTY ACT AND WILL BE OBSERVED BY BOTH THE PARTIES IN TRUE SENSE. THOUGH, THE PROPERTY IS TRANSFERRED TO THE LESSEE FOR THE ENJOYMENT OF PROPERTY FOR A CERTAIN PERIOD BUT ALL SUCH LEASE CANNOT BE TERMED AS TRANSFER WITHIN THE MEANI NG OF SECTION 2(47) OF THE ACT. SINCE, THERE IS NO TRANSFER OF PO SSESSION OF THE ACIT-CIRCLE-2-JAMMU V. RAJU CHOUDHARY/I.T.A. NO. 64 8/ASR/2017/A.Y.:2014-15 PAGE 63 OF 63 PROPERTY, IT IS NOT CORRECT ON THE PART OF THE AO T O HOLD THAT THIS A TRANSFER WITHIN THE MEANING OF CLAUSE (V) AND (VI) OF SECTION 2(47) OF THE INCOME TAX ACT READ WITH CLAUSE (D) OF SECTION 269UA ON THE GROUND THAT PROPERTY HAS BEEN TRANSFERRED ON LONG T ERM LEASE FOR MORE THAN 12 YEARS AS A PART PERFORMANCE U/S.53A OF THE TRANSFER OF PROPERTY ACT. THERE CANNOT BE TRANSFER OF PROPERTY DUE SPECIAL STATUS OF J&K, WHERE TRANSFER OF PROPERTY ACT OF STATE OF J & K IS APPLICABLE. THIS IS THE REASON WHY SECTION 269S OF THE ACT HAS BEEN PROVIDED IN THE STATUTE. SINCE, THERE IS NO TRANSFER THE APPLIC ABILITY OF SECTION 2(47) OF THE ACT DOES NOT ARISE. IN VIEW OF THESE F ACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT T HE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE ON ACCOUNT OF CAP ITAL GAINS ON LEASE DEED BASIS. IN THE LIGHT OF ABOVE FACTS AND CIRCUMS TANCES, THE APPEAL OF REVENUE ON THIS GROUND IS THEREFORE, DISMISSED. 41. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. 42. THIS ORDER IS PRONOUNCED ON 16.03.2020 SD/- SD/- (N.K.CHOUDHRY) (O.P.MEENA) JUDICIAL MEMBER ACCOUN TANT MEMBER AMRITSAR: DATED: 16 TH MARCH, 2020/OPM COPY OF ORDER SENT TO - ASSESSEE/AO/PR. CIT/ CIT (A )/ ITAT (DR)/ GUARD FILE OF ITAT. BY ORDER // TRUE COPY // ASST. REGISTRAR, ITAT, AMRITSAR BENCH