A.R.Real Estate Developers P Ltd., CHENNAI V. DCIT Corporate Circle 1(1), CHENNAI

ITA 804/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9545 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 26-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDIP
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Business income; Difference of opinion; Change of opinion; Capital Gains
• Section: 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.804/CHNY/2019 / ASSESSMENT YEAR : 2014-15 M/S.A.R.REAL ESTATE DEVELOPERS P LTD ., 148,ACROPOLIS GROUND FLOOR, DR.RADHAKRISHNAN SALAI, MYLAPORE,CHENNAI 600 004. VS. THE INCOME TAX OFFICER, CORPORATE WARD -1(1), CHENNAI. [PAN AAGCA 4778 E ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.A.S.SRIRAMAN,ADVOCATE !' /RESPONDENT BY : MR.SAILENDRA MAMIDI,PCIT,DR & / DATE OF HEARING : 18 - 09 - 201 9 & / DATE OF PRONOUNCEMENT : 18 - 09 - 201 9 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME-TAX-1, CHENNAI , PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) I N ITA NO.804/CHNY/19 :- 2 -: C. NO.218/263/PCIT-1/2018-19 DATED 07/03/2019 FO R THE ASSESSMENT YEAR 2014-15. 2. MR.A.S.SRIRAMAN REPRESENTED ON BEHALF OF THE ASSESSEE AND MR.SAILENDRA MAMIDI REPRESENTED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY LD.AR THAT THE ASSESSEE HAD DURING THE RELEVANT ASSESSMENT YEAR SOLD UNDIVIDED INTEREST IN LAND, HELD BY THE ASSESSEE COMPANY AS AN INVESTMENT IN OLD MAHABALIPU RAM ROAD (OMR). IT WAS SUBMITTED THAT WHILE FILING THE RETU RN OF INCOME, THE ASSESSEE DISCLOSED THE SAME AS GIVING RISE TO LONG TERM CAPITAL GAINS. IT WAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED TH E SAID LAND ON 02.08.2007. THE ASSESSEE HAD PROPOSED TO PUT A SOFT WARE TECHNOLOGY PARK ON THE SAID LAND. HOWEVER, AS THE ASSESSEE WAS UNABLE TO SOURCE THE FUNDS FOR THE SAME, ASSESSEE HAD SOLD THE UNDI VIDED INTEREST IN THE LAND TO VARIOUS PROSPECTIVE BUYERS, WHO HAD ENT ERED INTO CONSTRUCTION AGREEMENT WITH THE BUILDER. IT WAS SUB MITTED THAT THE ASSESSEE HAD NOT DONE ANY CONSTRUCTION ON THE SAID PROPERTY AS HAS BEEN MENTIONED IN PARA 2.1 OF ORDER OF THE PCIT. I T WAS SUBMITTED THAT THE RETURN FILED BY THE ASSESSEE ORIGINALLY ON 22.11.2014 CAME TO BE PROCESSED U/S.143(3) OF THE ACT AND DETAILS HAD BEEN CALLED FOR IN RESPECT OF CERTAIN TRANSACTIONS VIDE NOTICE ISSUED U/S.142(1) OF THE ACT ITA NO.804/CHNY/19 :- 3 -: DATED 12.04.2016 AND FURTHER CLARIFICATIONS SOUGHT VIDE LETTER DATED 08.07.2016. IT WAS SUBMITTED THAT THE TRANSACTION OF THE SALE OF UNDIVIDED INTEREST OF LAND HAS BEEN SPECIFICALLY EX AMINED BY THE ASSESSING OFFICER. THE ASSESSEE HAD ALSO FILED A R EPLY IN THE ORIGINAL ASSESSMENT DATED.15.06.2018. IT WAS SPECIFICALLY BR OUGHT TO OUR ATTENTION THAT SINCE THE ASSESSEE IS NOT HAVING ANY BUSINESS ACTIVITY, TRANSACTION OF SALE OF UNDIVIDED SHARE (UDS) OF LAN D WAS TREATED AS INCOME UNDER THE HEAD CAPITAL GAINS. IT IS SPECIFIC ALLY MENTIONED THAT WEALTH TAX U/S.2(EA) UNDER WEALTH TAX ACT HAD BEEN INITIATED AGAINST THE ASSESSEE, AND THE ASSESSEE CATEGORICALLY MENTIO NED THAT THE ASSESSEE HAD NOT CARRIED OUT ANY ACTIVITY TO TERM T HE BUSINESS OF THE ASSESSEE AS A BUILDER. LD.AR DREW OUR ATTENTION TO THE PAGE-7 OF THE PAPER BOOK, BEING THE COPY OF BALANCE SHEET OF THE ASSESSEE, WHICH SHOWED THE SAID LAND AS AN INVESTMENT IN FIXED ASSE TS UNDER THE HEAD TANGIBLE ASSETS. IT WAS SUBMITTED THAT THE ASSES SEE HAVING NOT DONE ANY ACTIVITY OF THE CONSTRUCTION, THE INCOME OF ASS ESSEE FROM THE SALE OF UNDIVIDED INTEREST IN LAND WAS LIABLE TO BE ASSE SSED ONLY UNDER THE HEAD INCOME FROM CAPITAL GAINS. IT WAS SUBMITTED THAT LD. PCIT DID NOT ACCEPT THE REPLIES FILED BY THE ASSESSEE TO SHO W CAUSE NOTICE U/S.263 OF THE ACT, WHILE PASSING IMPUGNED ORDER DA TED 07.03.2019, LD.PCIT HELD THAT THE ASSESSING OFFICER HAD ACCEPTE D THE ASSESSEES CLAIM WITHOUT MAKING DUE VERIFICATION AND WITHOUT M AKING NECESSARY ITA NO.804/CHNY/19 :- 4 -: ENQUIRIES AND THAT THERE WAS NO APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER AND CONSEQUENTLY DIRECTED THE ASS ESSING OFFICER TO PASS FRESH ORDER AFTER EXAMINING THE ASPECTS AGAIN. IT WAS SUBMITTED THAT THE ORDER PASSED U/S.263 OF THE ACT IS UNSUSTA INABLE IN SO FAR AS THE ASSESSEE HAS NOT DONE ANY BUSINESS ACTIVITY. IT WAS ALSO A SUBMISSION THAT THE SALE OF THE LAND HELD AS INVEST MENT BY THE ASSESSEE WAS NOT LIABLE TO BE TREATED AS GIVING RIS E TO INCOME UNDER THE HEAD BUSINESS INCOME. IT WAS SUBMITTED THAT THIS IS ONLY AN ASSET HELD BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD ALSO EXAMINED THE ISSUE IN DEPTH WHEN C OMPLETING THE ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT, AND THE DIRECTION OF THE LD.PCIT TO RE-DO THE ASSESSMENT IS ONLY ON A CHANGE OF OPINION. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD CONSIDERED THE DETAILS FILED BY THE ASSESSEE AND HAVING REACHED A FINDING, THE SAME CANNOT BE DISTURBED, JUST BECAUSE THE LD.PCIT IS OF THE OPINI ON THAT THE INCOME OF ASSESSEE IS LIABLE TO BE ASSESSED UNDER ANOTHER HE AD. 4. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF LD.PCIT PASSED U/S.263 OF THE ACT. IT WAS A SUBMIS SION THAT THERE WAS A TOTAL NON APPLICATION OF THE MIND BY THE ASSESSIN G OFFICER IN SO FAR AS ITA NO.804/CHNY/19 :- 5 -: THE INCOME FROM SALE OF THE UNDIVIDED INTEREST IN T HE LAND TO THE VARIOUS FLAT OWNERS IS TO BE ASSESSED AS INCOME FRO M BUSINESS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, IT IS NOTICED THAT IN PARA-2.1 OF THE ORDER OF PCIT PASSED U/S.263 OF THE ACT, THE LD.PCIT HAS DRAWN A PRESUMPTION THAT THE ASSESSEE IS THE BU ILDER OF THE RESIDENTIAL FLATS. THIS IS NOT A CORRECT. THE ASSE SSEE HAS ONLY SOLD UNDIVIDED INTEREST IN THE LAND OWNED BY IT TO THE V ARIOUS PURCHASERS OF RESIDENTIAL FLATS, BEING CONSTRUCTED BY A THIRD PAR TY ON THE SAID LAND. THE SAID LAND HAS BEEN ACQUIRED BY THE ASSESSEE AS EARLY AS 2007 AND THE SALE OF UNDIVIDED INTEREST IN THE LAND HAS TAKE N PLACE IN 2014 ONWARDS. THUS, IT IS VERY CLEAR THAT THIS PROPERTY IS HELD BY THE ASSESSEE FOR MORE THAN SEVEN YEARS. IT IS AN ADMITT ED FACT THAT THE ASSESSEE HAD PROPOSED TO START A SOFTWARE TECHNOLOG Y PARK, AND ON IT IS FAILURE TO DO SO, THE ASSESSEE HAD SOLD THE SAID UNDIVIDED INTEREST IN ITS LAND TO VARIOUS FLAT OWNERS. THE BUSINESS OF TH E ASSESSEE IS NOT OF PURCHASE AND SALE OF THE LAND. THE ASSESSEE HAS IN ITS RETURN CLAIMED THE SAME AS GIVING RISE TO LONG TERM CAPITAL GAINS, WHICH HAS ALSO BEEN EXAMINED BY THE ASSESSING OFFICER IN THE COURSE OF ORIGINAL ASSESSMENT. THE SAME HAS ALSO BEEN EXAMINED BY THE ASSESSING OFFICER IN THE COURSE OF WEALTH TAX ASSESSMENT. WHA T IS THE ERROR IN THE FINDING OF THE ASSESSING OFFICER HAS NOT BEEN P OINTED OUT BY THE LD. ITA NO.804/CHNY/19 :- 6 -: PCIT IN HIS IMPUGNED ORDER PASSED U/S.263 OF THE AC T. JUST BECAUSE, THE ASSESSING OFFICER HAS NOT ASSESSED THE SAID INC OME FROM SALE CONSIDERATION OF UNDIVIDED INTEREST IN THE LAND UND ER THE HEAD BUSINESS AS IS OF THE VIEW OF THE LD.PCIT, CANNOT TERM THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER TO BE ONE DONE BY NON-APPLICATION OF MIND, OR ONE DONE WITHOUT MAKING DUE VERIFICATION, OR ONE DONE WITHOUT MAKING NECESSARY ENQUIRIES. A P ERUSAL OF THE ORDER OF LD.PCIT ALSO SHOWS THAT IN PARA-2, LD.PCIT RECORDS THAT THE ASSESSEE HAS SHOWN THE LAND OF RS.74.58 LAKHS AS TA XABLE INCOME BY TREATING THE TRANSACTION OF THE SALE OF UNDIVIDED I NTEREST IN THE LAND AS LIABLE FOR CAPITAL GAINS. AS AGAINST THIS, LD.PCIT AT PARA 2.2 HAS COME TO THE CONCLUSION THAT IF IT IS TREATED AS INCOME FROM BUSINESS, THE TRANSACTION WOULD SHOW BUSINESS INCOME OF RS.5,45,3 9,727/-. JUST BECAUSE BY SHIFTING THE HEAD OF INCOME, THE ASSESSE E WOULD BE HIT BY TAX LIABILITY CANNOT BE GROUND ENOUGH FOR SHIFTING THE CAPITAL GAINS DISCLOSED BY THE ASSESSEE TO THE BUSINESS HEAD, ESP ECIALLY WHEN THE PROPERTY HAS BEEN SHOWN AS AN INVESTMENT BY THE ASS ESSEE AND THE SAME HAS ALSO BEEN CLEARLY DEMARCATED AND THE ASSES SEE HAS ALSO NOT DONE ANY BUSINESS ACTIVITY OF CONSTRUCTION IN RESPE CT OF THE SAID PROPERTY. IN THIS CIRCUMSTANCE, WE ARE OF THE VIEW THAT THE ORDER OF ITA NO.804/CHNY/19 :- 7 -: PCIT PASSED U/S.263 OF THE ACT IS UNSUSTAINABLE AND CONSEQUENTLY, QUASHED THE SAME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 18 TH SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) % # / JUDICIAL MEMBER / CHENNAI * / DATED: 18 TH SEPTEMBER, 2019. K S SUNDARAM !,- .- / COPY TO: 1 . / APPELLANT 4. / / CIT 2. !' / RESPONDENT 5. - !2 / DR 3. / () / CIT(A) 6. / GF