SHRI PAWAN NAGPAL, Bhopal V. THE ACIT 3(1), Bhopal

ITA 801/IND/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1246 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Assessee Lawyers: C P RAWKA
• Keywords: Depreciation; Rectification of order; Cost of acquisition; Set aside
• Section: 143(3)

Judgement Text

PAWAN NAGPAL & SEEMA NAGPAL 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.801/IND/2014 ASSESSMENT YEAR 2009-10 ITA NO.794/IND/2014 ASSESSMENT YEAR 2009-10 FOR ASSESSEES SHRI C.P. RAWKA, CA FOR DEPARTMENT SHRI RAJEEB JAIN, SR. DR DATE OF HEARING 14. 0 2.2019 DATE OF PRONOUNCEMENT 15 . 0 3.2019 SHRI PAWA N NAGPAL A-4, HOUSING BOARD COLONY KOHEFIZA, BHOPAL VS. ACIT - 3(1) BHOPAL (APPELLANT) (RESPONDENT ) PAN NO. AAWPN3120A ACIT - 3(1) BHOPAL VS. SMT. SEEMA NAGPAL P/O M/S. ACTIVE MOTORS A-4, HOUSING BOARD COLONY KOHEFIZA, BHOPAL (APPELLANT) (RESPONDENT ) PAN NO. AAWPN31 19R PAWAN NAGPAL & SEEMA NAGPAL 2 O R D E R PER KUL BHARAT, J.M. APPEAL BY THE ASSESSEE AND THE REVENUE ARE DIRECT ED AGAINST ORDER OF THE CIT(A), BHOPAL DATED 3.9.2014 PERTAINING TO THE ASSESSMENT YEAR 2009-10. BOTH THE APPEALS ARE TAKEN UP FOR HEARING TOGETHER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP ASSESSEES APPEAL. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LEARNED CIT(A) BE HELD TO HAVE ERRED IN SU STAINING THE ADDITION FOR LONG TERM CAPITAL GAIN MADE SUBSTANTIV ELY IN THE CASE OF THE APPELLANT. THE ADDITION MADE MAY THEREFORE BE DELETED. 2. THAT THE LEARNED ACIT AND ALSO THE LEARNED CIT (A) BE HELD TO HAVE ERRED IN NOT CONSIDERING FULL FACTS REGARDING THE S ALE OF WORKSHOP AND TREATING THE TRANSACTION TO BE MADE BY THE APPE LLANT INDIVIDUALLY. THE ADDITION MADE AND SUSTAINED WITH OUT CONSIDERING FULL FACTS MAY THEREFORE BE DELETED. 3. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE GRO UNDS STATED ABOVE, THE ADDITION OF RS.97,91,550/- MADE FOR LONG TERM C APITAL GAIN IN THE ASSESSMENT ORDER U/S 143(3) AND FURTHER INCREASED T O RS.1,38,49,155/- IN ORDER U/S 154 BE HELD TO BE HIG H AND UNREASONABLE AND BE SUITABLY REDUCED. 4. THE APPELLANT CRAVE LEAVE TO ADD, AMEND OR ALTER AN Y GROUND OF APPEAL BEFORE OR DURING THE COURSE OF APPELLATE PRO CEEDINGS. 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSM ENT AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WAS FRAMED VIDE O RDER PAWAN NAGPAL & SEEMA NAGPAL 3 DATED 9.12.2011. THE ASSESSING OFFICER WHILE FRAMING T HE ASSESSMENT, MADE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN OF RS.97,91,550/-. AGAINST THIS THE ASSESSEE PRE FERRED AN APPEAL BEFORE LD. CIT(A) WHO DELETED THE ADDITION IN THE HANDS OF WIFE OF ASSESSEE NAMELY SMT. SEEMA NAGPAL HOWEVER CONFIRMED ADDITION IN THE HANDS OF THE ASSESSE E. THEREFORE, ADDITION IN THE HANDS OF SMT. SEEMA NAGPAL WAS DELETED. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL AND AGAINST SUSTAINING ADDITION IN THE HAND S OF THE ASSESSEE. THE ASSESSEE IS IN APPEAL. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH T HE AUTHORITIES BELOW FAIL TO APPRECIATE THE FACT IN RIGHT PERSPECTIVE. HE SUBMITTED THAT NO CAPITAL GAIN TAX IS LEVIABLE IN THE HANDS OF THE ASSESSEE AND HIS WIFE. LD. COUNSEL REITERATED THE WRITTEN SUBMISSIONS. FOR THE SAKE OF CLARITY THE WRITTEN SUBMISSIONS ARE REPRODUCED AS UNDE R: THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY, COMMISSION FROM INSURANCE COMPANIES AND S HARE OF PROFIT AND INTEREST FROM THE FIRM M/S ACTIVE MOTORS DE ALER OF HERO HONDA MOTOR CYCLE. THE RETURN OF INCOME FOR A. Y. UNDER APPEAL WAS FILE D ON 31.03 .2010 DECLARING , INCOME AT RS.3,83,103/-. THE ASSESSMENT IN THIS CASE WAS COMPLETED ON A TOTAL INCOME OF RS. 1,05,33,116/- RESULTANTLY ASSESSING OFFICER MADE THE ADDITION OF CAPITAL GAIN AT RS. 97,91,550 AND INTEREST FROM FIR M AT RS. 3,58,463 WHICH WAS REMAINED TO OFFER AT THE TIME OF ORIGINAL RETURN. THE ASSESSEE WAS IN APPEAL BEFORE CIT(A) BHOPAL ON THE FOLLOWING PAWAN NAGPAL & SEEMA NAGPAL 4 GROUNDS- 1. THAT THE ADDITION OF RS. 97,91,550/- FOR LONG-TERM CAPITAL GAIN MADE SUBSTANTIVELY IN THE CASE OF THE ASSESSEE BE H ELD TO BE UNJUSTIFIED AND BAD. THE ADDITION MADE WITHOUT CONSIDE RING FULL FACTS MAY THEREFORE BE DELETED. 2. THAT THE LEARNED ACIT BE HELD TO HAVE ERRED IN NOT CON SIDERING FULL FACTS REGARDING THE SALE OF WORKSHOP AND TREAT ING THE TRANSACTION TO BE MADE BY THE APPELLANT. THE ADDITI ON MADE WITHOUT CONSIDERING FULL FACTS MAY THEREFORE BE DELET ED. 3. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE GRO UNDS STATED ABOVE, THE ADDITION OF RS. 97,91,550/- MADE BE HELD TO BE HIGH AND UNREASONABLE AND BE SUITABLY REDUCED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER AN Y GROUND OF APPEAL BEFORE OR DURING THE COURSE OF APPELLATE PROC EEDINGS. THE LEARNED ASSESSING OFFICER DISCUSSED THE ADDITION OF CAPITAL GAIN AT PAGE 2 AND 3 OF THE ASSESSMENT ORDER. THE RE LEVANT DISCUSSIONS ARE REPRODUCED HERE UNDER- ASSESSEE WIDE SUBMISSION DATED 09.11.2011 FURNISHED D ETAILS AS WAS ASKED ABOVE. FROM THE PURCHASE DEED OF PLOT IT IS OBSERVED THAT THE ASSESSEE AND HIS WIFE SMT. SEEM A NAGPAL WER E PURCHASED PLOT JOINTLY FROM SHIKHAR GRAH NIRMAN SAHKA RI SANSTHAN MYDT., BHOPAL HAVING KHASRA NO. 36,37,4211,4212,43,40,38 & 41 MEASURING 6000 SQ. FT. (557.62 SQ. MT.) ON 28.03.2002 FOR CONSIDERATION OF RS. 3,30 ,0001-. FURTHER THE ASSESSEE CONSTRUCTED DOUBLE STORIED BUILD ING ON THE SAID PLOT AND SOLD THE SAME ON 0910412008 FOR SALE CONSIDERATION OF RS. 1,10,00,000/- TO MY BIKE THROUG H PARTNER SHRI SAURABH GARG, BHOPAL. HOWEVER, THE MARKET PRICE OF THE ABOVE PROPERTY MENTIONED WAS RS. 1,43,00,000/-. ASSE SSEE VIDE REPLY DATED 21.11.2011 REGARDING LONG TERM CAPITAL G AIN OF SALE OF PROPERTY IS AS UNDER:- 'MIS ACTIVE MOTORS WAS A PARTNERSHIP FIRM OF SHRI PA WAN NAGPAL AND SMT. SEEMA NAGPAL. IT WAS WORKING SINCE 1999. IN THE F. Y. 2001-02 PLOT OF LAND WAS PURCHASED. THE PAYMENT WAS M ADE FROM THE FUNDS OF THE FIRM, THE PAYMENT HAD BEEN MAD E VIDE CHEQUE NO. 797626 DATED 27.02.2002 OF STATE BANK OF I NDIA CC ALE, SULTANIA ROAD, BHOPAL (THE FIRM PAN IS AAEFA8145J. I T WAS REGULARLY BEING ASSESSED UNDER THE INCOME TAX ACT). A WORKSHOP BUILDING WAS CONSTRUCTED ON THAT PLOT IN THE YEAR 2 002-2003 AND ONWARDS. THE ABOVE BUILDING WAS SOLD BY PARTNERSHIP F IRM MIS ACTIVE MOTORS ALONG WITH THE OTHER ASSETS OF THE BU SINESS IN THE F. Y. 2008-09. THE PROFIT EARNED IN THE TRANSACTION WAS OFFERED TO PAWAN NAGPAL & SEEMA NAGPAL 5 INCOME TAX IN THE RETURN OF THE RELEVANT FINANCIAL YEAR (A. Y. 2009- 10). ' THE CONTENTION OF THE ASSESSEE CANNOT CONSIDERED TO B E TRUE AND SEEMS TO BE MISLEADING. THE ASSESSEE NEVER TRANSFER RED SUCH PROPERTY IN THE NAME OF FIRM MIS ACTIVE MOTORS AND N OT SHOWN ANY CAPITAL GAIN IF THEY TRANSFER THE ABOVE PROPERTY IN THE SAID FIRM. FROM THE PURCHASE DEED AND SALES DEED OF THE PROPERTY IT IS CLEARLY MENTIONED THAT THE PROPERTY IS PURCHASED BY M R. PAWAN NAGPAL AND SMT. SEEMA NAGPAL AND ALSO SALE BY THEM ON LY. ALSO THE PROPERTY WAS NEVER BEEN TRANSFERRED TO THE FIRM MIS ACTIVE MOTORS IS EVIDENT FROM SALE DEED ITSELF. FURTHER NO SU CH CAPITAL GAIN HAS BEEN SHOWN BY THEM ON SUCH TRANSFER TO THE SAID FIRM. ON THE BASIS OF ABOVE FACTS, IT IS VERY CLEAR THAT THE SAID PROPERTY WAS PURCHASED BY ASSESSEE AND HIS WIFE AND SALE BY TH EM ONLY. THAT ON PERUSAL OF THE ABOVE IT WILL BE SEEN THAT A SSESSEE ALONG WITH HIS WIFE SMT. SEEMA NAGPAL WAS CARRYING ON BUSI NESS UNDER THE NAME AND STYLE M/S ACTIVE MOTORS BHOPAL UNDER DEALERSHIP OF HERO HONDA MOTOR CYCLE.THAT IT WAS EXPLAINED BEFORE AO THAT SAID FIRM PURCHASED A PLOT SHIKHAR GRAH NIRMAN SAHKARI SANSTHAN MYDT., BHOPAL HAVING KHASRA NO. 36,37,4211,42/2,43,40,38 & 41 MEASURING 6000 SQ. FT. (557.62 SQ. MT.) ON 28.03.2002 FOR CONSIDERATION OF RS. 3,30,000/-. THE PAYMENT OF RS. 3,30,000/- WAS MADE BY FIRM M/S ACTIVE MOTORS BHOPAL TO THE SELLER OF THE LAND BY CHEQUE N O. 797626 DATED 27.02.2002 OF STATE BANK OF INDIA CC ALC., SULT ANIA ROAD, BHOPAL AND ACCORDINGLY THE SAID LAND AS SHOWN AS ADDIT ION TO FIXED ASSETS FOR F.Y. 2001-02 TOTAL COST RS. 4,25,3301-,BREAKUP OF THE SAME ARE:- PARTICULARS AMOUNT COST OF LAND 3,30,000/- REGISTRATION EXPENSES 78,310/- OTHER EXPENSES 17,020/- TOTAL RS.4,25,330/- PLEASE REFER PAGE 7 OF PAPER BOOK. THIS FACT WAS DUL Y EXPLAINED TO THE AO VIDE LETTER DATED 21.11.2011. THE ONLY OBJECTION OF AO THAT IN CASE OF TRANSFER O F PROPERTY TO THE FIRM ATTRACTS CAPITAL GAIN WHICH HAS NOT BEEN SHOWN BY THE ASSESSEE. THE FINDING AS RECORDED BY THE AO IS CONTRA RY TO THE FACTS STATED AT PARA 3 ABOVE. THE ANOTHER OBJECTION OF AO WAS THAT SALE DEED WAS EX ECUTED IN THE NAME OF PARTNERS OF LAND PURCHASED. THE LEARNED AO ALSO DID PAWAN NAGPAL & SEEMA NAGPAL 6 NOT APPRECIATED THAT ASSESSEE FIRM CONSTRUCTED THE BU ILDING IN THE F.Y.2003-04 TO 2005-06 AND DEPRECIATION WAS CLAIMED ON SAID BUILDING FOR F.Y. 2006-07 AND 2007-08. PLEASE REFER SCHEDULE OF FIXED ASSETS PAGE 9-13 OF THE PAPER BOOK. DURING THE COURSE OF APPEAL PROCEEDINGS, SAME FACTS WERE POINTED OUT BEFO RE CIT(A). THE LEARNED CIT(A) DISCUSSED THE FACTS ON PAGE 3 OF THE APPELLATE ORDER. THE LEARNED CIT(A) WAS OF THE VIEW THAT ASSESSEE COU LD NOT EXPLAIN WHAT IS THE NEW PROJECT. HE WAS ALSO NOT CO NVINCED TO THE INVESTMENTS IN THE NEW PROJECT. IN FACT THE NEW PRO JECT WAS NOTHING BUT A CONSTRUCTION OF BUILDING ON THE LAND PURCHASED IN THE NAME OF PARTNERS AND DEBITED TO THE BOOKS OF THE FIRM. THE KIND ATTENTION IS INVITED TO THE SCHEDULE OF FIXE D ASSETS REFERRED ABOVE. THE FIRM CLAIMED THE DEPRECIATION ON BUILDING UNDER THE HEAD NEW PROJECT WHICH WAS DULY ALLOWED IN E ARLIER YEARS. FURTHER THE FIRM IN WHICH ASSESSEE IS A PART NER HAS NOT CLAIMED DEPRECIATION ON THE BLOCK OF ASSETS OF LAND ( PLEASE REFER PAGE 5 OF APPELLATE ORDER) AS NO DEPRECIATION IS ALLO WABLE ON LAND UNDER THE INCOME TAX ACT. THE FINAL FINDINGS OF THE CIT(A) ARE:- FROM THE FACTS OF THE CASE DISCUSSED ABOVE, IT IS HE LD THAT THE LAND PURCHASED IN THE F Y. WAS HELD BY THE APPELLANT AS CA PITAL ASSET AND THERE WAS NO CONSTRUCTION OF ANY WORKSHOP OVER THE ALLEGED PLOT OF LAND BY THE PARTNERSHIP FIRM. IN ABSENCE OF ANY MATERIAL EVIDENCES REGARDING THE NEW PROJECT AND ITS USE FOR B USINESS PURPOSE OF THE FIRM, IT IS DIFFICULT TO ACCEPT THAT THE NEW PROJECT WAS CONSTRUCTED WITHIN THE PLOT OF LAND PURCHASED I N F Y. 2001-02 AND IT WAS USED FOR BUSINESS PURPOSE OF THE FIRM. IN VIEW OF THE ABOVE OBSERVATION, THE, SUBMISSION OF THE LEARNED AR IS NOT ACCEPTABLE AS FACTUALLY CORRECT. THE APPLICANT HAS DISCLOSED HOUSE RENT OF RS. 5,02,2131- IN THE YEAR UNDER REFERENCE. AS PER THE SCHEDULE-D, ANOTHER BLOCK OF ASSET UNDER THE TITLE 'B UILDING RESIDENCE' WAS FOUND APPEARING THROUGHOUT THE YEARS AND UPTO THE END OF THE YEAR UNDER REFERENCE. THE BLOCK 'BUILD ING' WAS THE ASSET USED FOR THE PURPOSE OF THE BUSINESS OVER WHIC H THE APPELLANT CLAIMED DEPRECIATION REGULARLY. THERE WAS N O ADDITION TO THIS BLOCK OF ASSET FROM F Y. 2001-02 TO F Y. 2008-09. THE BLOCK 'NEW PROJECT', BUILDING AND FURNITURES WERE SHOWN T O HAVE BEEN WRITE OFF BY THE END OF THE YEAR UNDER REFERENCE ON A CCOUNT OF CLOSURE OF THE FIRM AND TRANSFER OF ASSETS AND LIABI LITIES TO M/S MY BIKE. THE SALE DEED SPEAKS ABOUT SALE OF THE PLOT AND HOUSE BUILDING LOCATED IN MARKET AREA AND AFTER CONSIDERAT ION OF OVERALL PAWAN NAGPAL & SEEMA NAGPAL 7 FACTS AND CIRCUMSTANCES OF THE CASE, IT IS INFERRED THAT THE ALLEGED NEW PROJECT IS NOTHING BUT THE HOUSING BUILDING CON STRUCTED ON THE PLOT OF LAND OVER WHICH INCOME FROM HOUSE PROPERTY H AVE BEEN SHOWN IN THE RETURN. IN THE GIVEN FACTS AND CIRCUMST ANCES OF THE CASE AND RELYING ON DECISION OF CIT VS KUMBHAZHA TO URIST HOME(KER) 328ITR 600, I FIND THAT THERE IS NO INFIRM ITY IN THE ORDER OF AD IN ASSESSING LONG TERM CAPITAL GAIN ON TRANSF ER OF THE ALLEGED LAND SUBSTANTIVELY IN THE HANDS OF THE APPELL ANT AND, HENCE, ADDITION MADE ON THIS ACCOUNT IS CONFIRMED. THAT ON PERUSAL OF THE ABOVE IT WILL BE SEEN THAT T HERE WAS NO CONSTRUCTION OF ANY _ WORKSHOP OVER THE ALLEGED PLOT OF LAND BY THE PARTNERSHIP FIRM. IN THIS REGARD.IT IS SUBMITTED THAT LEARNED CIT(A) TOTALLY FAILED TO GO THROUGH THE COPY OF THE SALE DEE D EXECUTED IN FAVOR OF MIS MY BIKE. PLEASE REFER PAGE 16 OF PAPER BOOK WHERE IT HAS CLEARLY MENTIONED THAT PROPERTY IS HAVING TWO FL OORS AS SUCH THE FINDINGS RECORDED BY THE CIT(A) IS NOT IN APPRECI ATION TO THE FACTS AND EVIDENCES AVAILABLE ON RECORD OF AO AND CIT (A). HOWEVER LEARNED CIT(A) REFERRED TO SALE DEED AND ACCEPT ED THE FACT THAT THERE WAS A CONSTRUCTION OF BUILDING ON T HE PLOT. AT THE FINAL, THE LEARNED CIT(A) RELIED TO THE DECISION OF K UMBAZHA TOURIST HOME(KER)328 ITR 600. THE SAID CASE IS IN FAVOR OF THE ASSESSEE WHEREIN I T HAS BEEN HELD BY THE HONORABLE KERALA HIGH COURT THAT ONCE THE PR OPERTY IS APPEARING IN THE BOOKS OF THE FIRM AND IN CASE OF DIS SOLUTION OF FIRM SEC 45(4) IS APPLICABLE AND CAPITAL GAIN ARISES ON SUCH TRANSFER IS TO BE TAXED IN THE HANDS OF THE FIRM IN V IEW OF THE PROVISIONS OF THE SEC 45(4) OF THE ACT. THE ASSESSEE IS A PARTNER IN A FIRM NAMED AND CITED AS ACTIVE MOTORS. THE MAIN BUSINESS OF THE FIRM WAS RUNNING A GENCY OF HERO HONDA MOTOR CYCLES AT BHOPAL. F OR THIS PURPOS E, THE FIRM REQUIRED A SHOWROOM AND WORKSHOP. ACCORDINGLY IT PURC HASED A PLOT IN HALALPUR, LALGHATI, BHOPAL WHICH WAS REGIST ERED IN THE NAME OF PARTNERS INCLUDING THE PRESENT ASSESSEE. TH E PURCHASE CONSIDERATION WAS PAID FROM OUT OF FUNDS OF THE PARTNE RSHIP FIRM INCLUDING THE REGISTRATION EXPENSES. AS SUCH THE OW NERSHIP IN REAL TERMS BELONGED TO THE FIRM WITH THE INSIGNIFICANT DI FFERENCE THAT THE SAME WAS REGISTERED IN THE NAME OF PARTNERS. THE FIRM PUT UP THE CONSTRUCTION ON THE ABOVE PLOT BY CREATING INFR ASTRUCTURE FOR SHOWROOM. ENTIRE EXPENDITURE WAS MET FROM THE COFFE RS OF THE FIRM ONLY. IN SUPPORT OF THIS SUBMISSION COPIES OF DETAIL S OF ASSETS AS ALONG WITH BALANCE SHEETS ARE ANNEXED HEREWITH. YOUR HONOR MAY APPRECIATE THAT ABOVE FACTS CLEARLY SHOW THAT THE P LOT AND THE PAWAN NAGPAL & SEEMA NAGPAL 8 SUPERSTRUCTURE BELONGED TO THE FIRM IN ALL RESPECT I N THE CAPACITY OF REAL AND BENEFICIAL OWNER OF THE PROPERTY. THE FIRM CONTINUED TO ENJOY THE BENEFITS OF OWNERSHIP ALL ALONG TILL IT DE CIDED TO GIVE UP THE AGENCY OF HERO HONDA. AT THIS JUNCTURE, NEW BUS INESS CONCERN MY BIKE CAME INTO PICTURE, WHO WAS ALLOTTED THE AGEN CY. THIS NEW CONCERN PROPOSED TO PURCHASE THE ABOVE PROPERTY I.E. THE PLOT WITH SUPERSTRUCTURE AS BEING SUITABLE TO THEM. THEREFORE , THE PROPERTY IN QUESTION WAS SOLD TO THIS CONCERN ON 09/04/2008 FOR A CONSIDERATION OF RS. 1,10,00,0001-. THE PARTNERSHIP FIRM VERY HONESTLY WORKED OUT THE CAPITAL GAIN CHARGEABLE ON T HE SAID TRANSACTION AND PAID THE CAPITAL GAIN TAX ACCORDINGLY . THE INCOME WHICH AROSE TO THE FIRM WAS DULY DISCLOSED BY THE FIR M IN ITS RETURN OF INCOME FOR THE A Y 2009- 10. PLEASE REFER ACKNOWLEDGEMENT OF ITR ALONG WITH COMPUTATION OF IN COME OF M/S ACTIVE MOTORS (THE PARTNERSHIP FIRM) ON PAGE NO . 27-29 OF THE PAPER BOOK (PART-II). THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT ULS 143(3) IN THE ASSESSEE'S CASE DID NOT APPRECIATE THE ABOVE FACTS IN THE RIGHT PERSPECTIVE. HE OPINED THAT SINCE THE PLOT WAS IN THE NAME OF PARTNERS, THE CAPITAL GAIN TAX WAS CHARGEABLE IN TH E HANDS OF PARTNERS ONLY. AT THE FIRST APPEAL STAGE, THE LEARN ED CIT APPEAL DID NOT APPRECIATE THE FACTS OF THE CASE. HE HELD TH AT NO CONSTRUCTION WAS CARRIED OUT ON THE PLOT, WHICH IS F AR FROM TRUTH. THE FACT RELATING TO THE CONSTRUCTION ON THE PLOT U NDER REFERENCE IS WELL EVIDENT FROM THE BALANCE SHEET. ACCORDINGLY, T HE FINDINGS OF THE LEARNED CIT (APPEAL) ARE CONTRARY TO THE FACTUAL MATRIX OF THE CASE. REFERENCE IS INVITED TO HONORABLE DELHI HIGH COURT I N THE CASE OF CIT VIS A.R. CHADDHA & CO. (247 ITR 782,784) IN WHICH IT HAS BEEN HELD THAT 'WHERE THE INTENTION OF THE ASSESSEE WAS TO DIVEST BOTH THE PROPERTY AND THE INCOME THERE FROM THE RENT AL INCOME OF THE PROPERTY WAS NOT TO BE INCLUDED IN THE TOTAL INC OME OF THE ASSESSEE'. IT IS REITERATED THAT INCOME FROM CAPITAL GAIN HAS A LREADY BEEN INCLUDED IN THE FIRMS CASE FOR THE A Y 2009-10. THER EFORE LEARNED ASSESSING OFFICER ERRED IN TAXING THE SAME AGAIN IN THE HANDS OF ASSESSEE AND LEARNED CIT (APPEAL) ALSO DID NOT APPRECI ATE THE FACTS IN THE RIGHT PERSPECTIVE. IN THIS REGARD REFERENCE IS INVITED TO HONORABLE KOLK ATA HIGH COURT DECISION IN THE CASE OF CIT VIS BADULIPUR TEA COMPANY (249 ITR 483,485), CATCH NOTE OF WHICH IS BEING REPRODUCED HERE - INCOME-ACCRUAL-SALE OF BUSINESS-ASSETS AND LIABILIT IES OF PAWAN NAGPAL & SEEMA NAGPAL 9 ASSESSEE-COMPANY TAKEN OVER BY ANOTHER COMPANY AS P ER AGREEMENT WHICH WAS APPROVED BY THE RBI RETROSPECTI VELY FROM THE DATE OF AGREEMENT-INCOME OF THE YEAR UNDER CONS IDERATION FROM THE TEA ESTATE ALREADY ASSESSED IN THE HANDS O F TRANSFEREE COMPANY-SAME COULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE KERALA HIGH COURT HAD AN OCCASION TO DECIDE A SIMILAR ISSUE IN THE CASE OF D.K.B. & CO. VIS CIT (233 ITR 344,348) IN WHICH IT HAS BEEN HELD THAT INCOME FROM DEPOSITS IN THE NAME OF HUSBAND OF ONE OF THE PARTNER OF THE FIRM HAS BEEN HELD TO BELONG TO THE ASSESSEE FIRM BECAUSE SUCH DEPOSITS REALLY BELONGED TO THE FIRM. REFERENCE IS FURTHER INVITED TO HONORABLE ANDHRA HIGH COURT DECISION IN THE CASE OF ABDUL KAREEMIA & BROTHERS VIS CIT 144 ITR 442 IN WHICH THE HONORABLE HIGH COURT HELD THAT - IT IS EQUALLY WELL SETTLED BY THE DECISION OF THE SU PREME COURT IN NARAYANAPPA'S CASE, THAT A PARTNER CANNOT AT ANY GI VEN POINT OF TIME CLAIM ANY OF THE FIRM'S PROPERTIES TO BE HIS N OTWITHSTANDING THE FACT THAT AT ONE TIME THEY BELONGED TO HIM AND T HAT HE HAD PUT THE PROPERTIES INTO THE ASSETS OF THE FIRM. IT HAS BEEN FOUND BY THE TRIBUNAL AND ALSO THE LOWER AUTHORITIES AS A FACT TH AT RIGHT FROM THE DEPRECIATION ON THESE PROPERTIES ALSO AND THAT T HE INCOME FROM THESE PROPERTIES WAS TREATED AS THE FIRM'S INCOME A ND ACCORDINGLY DIVIDED BETWEEN THE PARTNERS. ANOTHER SIGNIFICANT FIN DING IS THAT THE PROPERTIES WERE ALSO ACQUIRED WITH THE FUNDS OF T HE FIRM AND THE COST OF THESE PROPERTIES WAS DEBITED IN THE BOOKS OF THE FIRM. FROM ALL THESE CIRCUMSTANCES, THE DEPARTMENTAL AUTH ORITIES AND THE TRIBUNAL CONCLUDED AND, IN OUR OPINION, RIGHTLY, THAT THESE PROPERTIES BECAME AND WERE TREATED AS THE PROPERTIES OF THE FIRM. ONCE THAT IS SO, IT IS NOT DISPUTED THAT BY MERELY M AKING ENTRIES IN THE ACCOUNT BOOKS OF THE FIRM, THE FIRM'S PROPERTIE S CANNOT BECOME AND CANNOT BE TREATED TO HAVE BECOME THE SEPARATE PR OPERTIES OF THE PARTNERS. COPY OF ABOVE CASE LAWS ENCLOSED HEREWITH. IT IS THEREFORE REQUESTED TO DELETE THE ABOVE ADDITI ON FROM THE HANDS OF ASSESSEE SINCE THE AMOUNT OF LONG TERM CAPI TAL GAIN IS ALREADY BEEN TAXED IN THE HANDS OF FIRM MIS ACTIVE M OTORS AND ASSESSING THE SAME AGAIN IN ASSESSEE'S HANDS WILL A MOUNT TO DOUBLE TAXATION. THEREFORE THE SAME MAY KINDLY BE DELE TED. 4. PER CONTRA LD. DR OPPOSED THE SUBMISSIONS OF THE PAWAN NAGPAL & SEEMA NAGPAL 10 ASSESSEE. LD. DR VEHEMENTLY ARGUED THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO DELETE THE ADDITIONS FROM WIFE O F THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAD PURCHASED THE PROPERTY IN THE JOINT NAME OF HIS WIFE SMT. SEEM A NAGPAL. HE SUBMITTED THAT PLOT WAS JOINTLY OWNED WHICH WAS PURCHASED FROM SHIKHAR GRIH NIRMAN SAHKARI SANSTHAN FOR A SALE CONSIDERATION OF RS.3,30,000/- AND FURTHER CONSTRUCTED DOUBLE STORIED BUILDING ON THE SAID PLOT AND SOLD THE SAME ON 9.4.2008 AT A SALE CONSIDERATION OF RS.1.10 CRORES. THE A.O. ADOPTED THE MARKET RATE OF S ALE CONSIDERATION AT RS.1.43 CRORES AND COMPUTED THE LONG TERM CAPITAL GAIN AT RS.97,91,550/- AND ADDED THE SAME IN THE ASSESSEES HAND ON THE PROTECTIVE BASIS AND IN THE HANDS OF SHRI PAVAN NAGPAL, HUSBAND OF THE ASSESSEE ON SUBSTANTIVE BASIS. HE SUBMITTED THAT THE LD. CIT(A) HAS DELETED THE ADDITION PURELY ON THE BASIS THAT SAME HAS BEEN SUBSTANTIVELY ADDED IN THE HANDS OF SHRI PAVAN NAGPAL. HE SUBMITTED THAT BOTH THE AUTHORITIES HAVE FAIL ED TO APPRECIATE THE FACT THAT PROPERTY IN QUESTION WAS PURCHASED OUT OF FUNDS OF THE FIRM HOWEVER SALE DEED WAS EXECUTED IN THE NAME OF PARTNERS. IT IS ALSO SUBMITTED THAT THE BUILDING WAS CONSTRUCTED OUT OF FUNDS BELONGING TO FIRM. THE REVENUE HAS BEEN ALLOWING DEPRECIATION THER EON. PAWAN NAGPAL & SEEMA NAGPAL 11 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORDS AND GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. THE LD. CIT(A) HAS SUSTAINED THE ADDITION IN THE HANDS OF THE ASSESSEE BY GIVING THE FI NDING ON FACT AS UNDER: PAWAN NAGPAL & SEEMA NAGPAL 12 PAWAN NAGPAL & SEEMA NAGPAL 13 PAWAN NAGPAL & SEEMA NAGPAL 14 PAWAN NAGPAL & SEEMA NAGPAL 15 PAWAN NAGPAL & SEEMA NAGPAL 16 6. THE CONTENTION OF THE ASSESSEE IS THAT THE LAND IN QUESTION WAS TRANSFERRED TO THE FIRM AND A BUILDING WAS CONSTRUCTED THEREON. IT IS ALSO POINTED OUT THAT CLAIM OF DEPRECIATION WAS BEING ALLOWED TO THE FIRM. ANOTHER ARGUMENT OF ASSESSEE IS THAT THE FIRM IS THE REAL OWNER OF THE PROPERTY AS THE COST OF ACQUISITION OF THIS PROPE RTY WAS MADE BY THE FIRM BUT NOT THE ASSESSEE. THERE IS NO D ISPUTE WITH REGARD TO THE PROPERTY IN QUESTION IS AN IMMOVABL E PROPERTY, THE ASSESSEE IS REQUIRED TO PROVE THE TRANS FER OF SUCH PROPERTY TO THE FIRM. IN OUR VIEW MERELY ALLOWAN CE OF PAWAN NAGPAL & SEEMA NAGPAL 17 DEPRECIATION TO THE FIRM WAS NOT SUFFICIENT TO HOLD T HAT PROPERTY WAS TRANSFERRED TO THE FIRM. IT IS SETTLED P OSITION OF LAW THAT THE TRANSFER OF ANY IMMOVABLE PROPERTY IS REQUI RED TO BE EFFECTED THROUGH A REGISTERED DOCUMENT. HOWEVE R, THE QUESTION THAT THE FIRM IS THE REAL OWNER OF THE PROPER TY IS NOT ADJUDICATED BY THE AUTHORITY BELOW. LD. COUNSEL FO R THE ASSESSEE POINTED OUT THAT IN ACQUISITION OF LAND AND CONSTRUCTION OF PROPERTY THEREON FUNDS BELONGING TO FIRM WAS UTILIZED AND THE ASSESSEE AND HIS WIFE ARE MERELY NAM E LENDERS. MOREOVER, IT IS A SETTLED POSITION OF LAW T HAT A PARTNERSHIP FIRM CAN ACQUIRE PROPERTY IN THE NAME OF IT S PARTNERS. WE FIND MERIT INTO THE CONTENTION OF THE AS SESSEE THAT A PARTNERSHIP FIRM HOWEVER MAY BE A SEPARATE ENTITY BUT IT ACTS THROUGH ITS PARTNERS. AFTER CONSIDERING THE TOTALITY OF FACT AND PARTICULARLY IN VIEW OF FACT THAT THE LD. CIT(A) HAS NOT ADJUDICATED THIS ASPECT. WE HEREBY SET AS IDE THE ORDER OF LD. CIT(A) AND RESTORE THE GROUNDS OF A PPEAL TAKEN BEFORE HIM FOR DECISION AFRESH. LD. CIT(A) IS H EREBY DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE LAND IN QUESTION WAS ACQUIRED AND BUILDING THEREON WAS CONSTRUCTED OUT OF FUNDS OF FIRM AND DECIDE THE ISSU E AFRESH IN ACCORDANCE WITH LAW. THE GROUNDS RAISED IN TH E APPEAL ARE ALLOWED FOR STATISTICAL PURPOSE. APPEAL OF THE PAWAN NAGPAL & SEEMA NAGPAL 18 ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. NOW COMING TO THE REVENUES APPEAL IN ITANO.794/IND/2014 THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEAL)-I HAS ERRED IN: - 1. DELETING THE ADDITION OF RS.1,38,49,155/- ON ACCOUN T OF LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE (AS PER THE RECTIFICATION ORDER DATED 19.09.2013). 7. THE REVENUE IN THE PRESENT APPEAL HAS RAISED A SOLITAR Y GROUND AGAINST DELETION OF LONG TERM CAPITAL GAIN WHICH WAS MADE BY THE ASSESSING OFFICER ON THE PROTECTIVE BASIS. THE REPRESENTATIVE OF THE RESPECTIVE PARTIES HAVE ADOP TED IN THE SAME ARGUMENT AS WERE IN ITANO.801/IND/2014 WHEREIN WE HAVE DECIDED THE APPEAL OBSERVING AS UNDER: 6. THE CONTENTION OF THE ASSESSEE IS THAT THE LAND IN QUESTION WAS TRANSFERRED TO THE FIRM AND A BUILDING WAS CONSTRUCTED THEREON. IT IS ALSO POINTED OUT THA T CLAIM OF DEPRECIATION WAS BEING ALLOWED TO THE FIRM . ANOTHER ARGUMENT OF ASSESSEE IS THAT THE FIRM IS TH E REAL OWNER OF THE PROPERTY AS THE COST OF ACQUISITI ON OF THIS PROPERTY WAS MADE BY THE FIRM BUT NOT THE ASSESSEE. THERE IS NO DISPUTE WITH REGARD TO THE PAWAN NAGPAL & SEEMA NAGPAL 19 PROPERTY IN QUESTION IS AN IMMOVABLE PROPERTY, THE ASSESSEE IS REQUIRED TO PROVE THE TRANSFER OF SUCH PROPERTY TO THE FIRM. IN OUR VIEW MERELY ALLOWANCE OF DEPRECIATION TO THE FIRM WAS NOT SUFFICIENT TO HOLD THAT PROPERTY WAS TRANSFERRED TO THE FIRM. IT IS SE TTLED POSITION OF LAW THAT THE TRANSFER OF ANY IMMOVABLE PROPERTY IS REQUIRED TO BE EFFECTED THROUGH A REGISTERED DOCUMENT. HOWEVER, THE QUESTION THAT THE FIRM IS THE REAL OWNER OF THE PROPERTY IS NOT ADJUDICATED BY THE AUTHORITY BELOW. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN ACQUISITION OF LAN D AND CONSTRUCTION OF PROPERTY THEREON FUNDS BELONGIN G TO FIRM WAS UTILIZED AND THE ASSESSEE AND HIS WIFE ARE MERELY NAME LENDERS. MOREOVER, IT IS A SETTLED POSITION OF LAW THAT A PARTNERSHIP FIRM CAN ACQUIRE PROPERTY IN THE NAME OF ITS PARTNERS. WE FIND MERIT INTO THE CONTENTION OF THE ASSESSEE THAT A PARTNERS HIP FIRM HOWEVER MAY BE A SEPARATE ENTITY BUT IT ACTS THROUGH ITS PARTNERS. AFTER CONSIDERING THE TOTALIT Y OF FACT AND PARTICULARLY IN VIEW OF FACT THAT THE LD. CIT(A) HAS NOT ADJUDICATED THIS ASPECT. WE HEREBY SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE GROUNDS OF APPEAL TAKEN BEFORE HIM FOR DECISION AFRESH. LD. CIT(A) IS HEREBY DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE LAND IN QUESTION WAS ACQUIRED AND BUILDING THEREON WAS CONSTRUCTED OUT OF FUNDS OF FIRM AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE GROUNDS RAISED IN THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSE. APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE GROUNDS RAISED IN REVENUES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSE. PAWAN NAGPAL & SEEMA NAGPAL 20 8. IN THE RESULT, BOTH APPEAL OF THE ASSESSEE IN ITANO.801/IND/2014 AND REVENUE IN ITANO.794/IND/2014 ARE ALLOWED FOR STATISTICAL PURPOSE. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.201 9. SD/- SD/- (MANISH BORAD) (KULBHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER / DATED : 15 TH MARCH, 2019 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE