Munish Singla, Sushma Singla & Priyanka Singla (Legal Heir of Sewak Ram), Chandigarh V. Addl. CIT, R-III, Chandigarh

ITA 917/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4152 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-02-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K MITTAL
• Keywords: Business income; Set aside
• Section: 54F

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA, ACCOUNTA NT MEMBER ITA NO.917/CHD/2017 ASSESSMENT YEAR: 2009-10 ADDL. CIT, RANGE-III, CHANDIGARH VS MUNISH SINGLA, SUSHMA SINGLA & PRIYANKA SINGLA (LEGAL HEIRS OF SEWAK RAM), SCO 834, 1 ST FLOOR, NAC MANI MAJRA, CHANDIGARH. PAN ABGPR4704H (RESPONDENT) (APPELLANT) APPELLANT BY : SH. T.N. SINGLA, CA RESPONDENT BY : SH. K.K. MITTAL, CIT DR DATE OF HEARING : 12/02/2019 DATE OF PRONOUNCEMENT : 09/05/2019 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 1, [HEREINAFTER REFERRED TO AS CIT(A)] DATED 17.0 4.2017 . SINCE THE ORIGINAL ASSESSEE, NAMELY, SHRI SEWAK RAM HAS DIED, HENCE, THE PRESENT APPEAL HAS BEEN PREFERRED BY THE LEGAL HEIRS OF THE DECEASED ASSESSEE. 2. THE ASSESSEE IN THIS APPEAL HAS RAISED THE FOLLOWIN G GROUNDS: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOM E TAX (A) IS BAD, AGAINST THE FACTS & LAW 2 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS WRONGLY UPHELD THE INVESTMENT MADE IN PROPERTY DURING THE YEAR AS BUSINESS OF THE APPELLANT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS WRONGLY UPHELD THE ADDITION OF RS. 11,13,37,414/- B Y TREATING THE LONG TERM CAPITAL GAIN ON SALE OF LAND AS BUSINESS INCOME. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS WRONGLY UPHELD THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE APPELLANT AMOUNTING TO RS. 3,21,07,480/- U/S54F. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE FINAL HEARING. 3. GROUND NO.1 IS GENERAL IN NATURE. 4. THE GROUNDS NO.2 AND 3 RELATE TO THE ISSUE, WHET HER THE INCOME EARNED BY THE ASSESSEE FROM THE SALE OF THE PROPERTY IS TO BE COMPUTED UNDER THE HEAD CAPITAL GAINS OR AS BU SINESS INCOME OF THE ASSESSEE. 5. THE BRIEF FACTS RELEVANT TO THE ASSESSEE ARE THA T THE ASSESSEE/APPELLANT HAD DECLARED LONG TERM CAPITAL G AINS OF RS.11,13,37,414/- AND SHORT TERM CAPITAL GAINS OF R S. 11,55,058/- DURING THE YEAR. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE MADE HUGE INVESTMENTS IN 28 PROPERTIES TO THE TUNE OF RS.1,97,05,815/- AS ON 31.3.2008. THE NATURE OF PRO PERTIES INCLUDED BOOTHS, PLOTS, SCOS, HOUSES, LANDS AND SHOPS. OUT O F THESE, 16 PROPERTIES WERE PURCHASED DURING THE YEAR AND 7 OTH ER PROPERTIES SOLD IN THE SAME YEAR. THE ASSESSING OFFICER ALSO O BSERVED THAT OUT OF THE 28 INVESTMENTS, 15 WERE SHOPS AND BOOTHS. IN VIEW OF THE 3 NUMBER OF TRANSACTIONS OF SALE AND PURCHASE OF THE PROPERTY CARRIED OUT BY THE ASSESSEE, THE ASSESSING OFFICER TREATED THE INCOME OF THE ASSESSEE FROM THE SALE PURCHASE OF PR OPERTY AS BUSINESS INCOME AGAINST THE CLAIM OF THE ASSESSEE OF CAPITAL GAINS INCOME. 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT(A) , HOWEVER, THE SAME WAS DISMISSED BY THE THEN LD. CIT(A) VIDE AN E X PARTE ORDER DATED 06.12.2012. THE ASSESSEE PREFERRED FURTHER AP PEAL BEFORE THE TRIBUNAL, WHEREUPON, THIS TRIBUNAL SET ASIDE THE OR DER OF THE CIT(A) AND REMANDED THE MATTER BACK TO THE FILE OF THE LD. CIT(A) WITH THE DIRECTION TO GIVE ADEQUATE OPPORTUNITY OF HEARING T O THE ASSESSEE AND DECIDE THE MATTER AFRESH. PURSUANT TO THE ABOVE DIRECTION OF THE TRIBUNAL, THE LD. CIT(A) HAS DECIDED THE MATTER AFRESH BY WAY OF IMPUGNED ORDER AND HAS DISMISSED THE APPEAL OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE HAS COME IN APPEAL BE FORE US. 7. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE ALSO GO NE THROUGH THE MATERIAL ON RECORD. 9. THE MOOT QUESTION BEFORE US IS AS TO WHETHER THE INCOME EARNED BY THE ASSESSEE FROM THE SALE OF PROPERTY IS BUSINESS INCOME OR THE SAME FALLS IN THE HEAD CAPITAL GAIN S. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE CIT(A) WHICH HAVE B EEN RECORDED 4 IN PARA 4.4 OF THE IMPUGNED ORDER AND HAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED/ACQUIRED CERTAIN PROPERTY IN THE YEAR UNDER 1991. HOWEVER, THE SAID PROPERTY/LAND WAS EXC HANGED WITH THE CO-OWNERS OF THE SAID PROPERTY IN LIEU OF 3 BIG HA OF LAND VIDE EXCHANGE DEED DATED 14.02.2003. THE ASSESSEE ALSO P URCHASED OTHER ADJOINING LAND OF 4 BISWA ON 16.02.2004. THIS TOTAL LAND OF 3 BIGHA AND 4 BISWA WAS SOLD DURING THE YEAR, WHICH W AS AFTER A LAPSE OF MORE THAN FIVE YEARS FROM THE DATE OF EXCH ANGE OF LAND. IT HAS BEEN FURTHER SUBMITTED THAT THE EARLIER PROPERT Y, WHICH WAS EXCHANGED WITH THE PROPERTY IN QUESTION WAS IN FACT PURCHASED IN THE YEAR 1991. HENCE, THE PROPERTY IN QUESTION WAS SOLD AFTER 17 YEARS OF THE PURCHASE OF THE ORIGINAL LAND. THE ASS ESSEE SOLD THE AFORESAID PROPERTY AS A SINGLE UNIT AND FROM THE AM OUNT RECEIVED AS EARNEST MONEY/SALE CONSIDERATION, ASSESSEE PURCHASE D A NUMBER OF PROPERTIES, WHICH WERE SHOWN AS INVESTMENT IN THE B ALANCE SHEET. THE ASSESSEE SOLD 7 PROPERTIES DURING THE YEAR INCL UDING THIS LAND OF 3 BIGHA 4 BISWA AS PER DETAILS GIVEN AT PAGE 3 OF T HE ASSESSMENT ORDER. THAT THERE WERE CERTAIN REASONS FOR THE SEL LING THE 6 PROPERTIES WHICH WERE PURCHASED DURING THE YEAR ITS ELF. IN FACT, OUT OF THESE SIX PROPERTIES SOLD DURING THE YEAR, PART OF THE LAND WAS SOLD AT (A) SHANT NAGAR, (B) 100 FEET ROAD BTI AND (C) BHUCHOKALAN DUE TO THE DISPUTE AND UNCLEAR TITLE OF THE PROPERT Y. OTHER 2 BOOTHS NUMBER 39 & 40 WERE SOLD DUE TO THEIR BAD LOCATION AND TO FURTHER 5 INVEST THE FUNDS IN PRIME PROPERTIES. THE AFORESAID REASONS FORCED THE ASSESSEE TO SELL THESE PROPERTIES ALMOST AT THE COST PRICE WITH VERY LESS GAIN, WHICH WAS OTHERWISE NOT REGULAR BUS INESS OF THE ASSESSEE. IT HAS BEEN FURTHER SUBMITTED THAT THE AS SESSEE HAD SURPLUS FUNDS FROM SALE OF OLD ASSET DURING THE YEA R AND WANTED TO INVEST THE FUNDS IN REAL ESTATE, WHICH PROMPTED HIM TO PURCHASE VARIOUS PROPERTIES WITH THESE FUNDS. THE ASSESSEE H AD PURCHASED ALL THE PROPERTIES BY PAYING FULL CONSIDERATION AND ALS O PAID FULL STAMP DUTY BY GETTING THESE PROPERTIES REGISTERED IN HIS OWN NAME, WHICH CLEARLY SHOWS THE INTENT AND PURPOSE OF THE INVESTM ENT BY THE ASSESSEE. THE ASSESSEE HAD ALSO SHOWN ALL THESE ASS ETS AS INVESTMENT AND NOT AS STOCK IN TRADE IN HIS BOOKS O F ACCOUNTS. THE MAJORITY OF THESE ASSETS ARE STILL HELD BY THE ASSE SSEE AS OWNER AND NOT PUT TO SALE DURING THE LAST 6-7 YEARS WHICH ALS O SHOWS THE INTENT AND PURPOSE OF THE INVESTMENT BY THE ASSESSEE. THE LD. COUNSEL, THEREFORE, HAS SUBMITTED THAT IMMOVABLE PROPERTY PU RCHASED BY THE ASSESSEE WERE SHOWN AS INVESTMENT IN THE BOOKS OF A CCOUNT RIGHT FROM THE YEAR 1991 TILL DATE AND EVEN MOST OF THE P ROPERTIES WERE STILL HELD BY THE ASSESSEE AS INVESTMENT. ONLY SOME PROP ERTIES WERE SOLD DUE TO THE CIRCUMSTANCES NARRATED ABOVE AND TH IS FACT ALONE IS NOT SUFFICIENT TO HOLD THAT THE ASSESSEE WAS DOING BUSINESS TRANSACTION IN IMMOVABLE PROPERTY NOT INVESTMENT. 6 10. THE LD. DR, ON THE OTHER HAND, HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES AND HAS SUBMITTED THAT THE AS SESSEE HAD BEEN CONSISTENTLY DOING SALE AND PURCHASE OF THE PROPERT Y YEAR AFTER YEAR AND THAT THE PROPERTIES PURCHASED BY THE ASSES SEE NOT ONLY INCLUDED RESIDENTIAL PROPERTIES BUT ALSO COMMERCIAL PROPERTIES AND THAT THE NUMBER OF PROPERTIES PURCHASED AND SOLD IS VERY LARGE AND THAT ITSELF SHOWS THAT THE INTENTION OF THE ASSESSE E IS TO DO BUSINESS TRANSACTION AND NOT TO HOLD THE PROPERTIES AS INVES TMENT. HE, THEREFORE, HAS SUBMITTED THAT LOWER AUTHORITIES HAV E RIGHTLY TREATED THE INCOME FROM SALE OF IMMOVABLE PROPERTIES BY THE ASSESSEE AS BUSINESS INCOME OF THE ASSESSEE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN O UR VIEW, MERELY BECAUSE ASSESSEE AFTER SALE OF LARGE CHUNK OF LAND/ PROPERTY, PURCHASED MANY SMALL PROPERTIES INCLUDING SOME COMM ERCIAL PROPERTIES THAT ITSELF, IS NOT SUFFICIENT TO HOLD T HAT THE ASSESSEE WAS DOING REGULAR BUSINESS IN SALE AND PURCHASE OF THE IMMOVABLE PROPERTY. EVEN THE PURPOSE OF INVESTMENT IS TO HOLD THE PROPERTIES FOR BETTER/MAXIMUM APPRECIATION WITH THE PASSAGE OF TIME. IT IS IMMATERIAL WHETHER THE ASSESSEE, FOR THE PURPOSE OF INVESTMENT, PURCHASES COMMERCIAL PROPERTY OR RESIDENTIAL PROPE RTY OR ANY AGRICULTURAL LAND OR OTHERWISE. THE MOTIVE OF THE ASSESSEE IS TO BE SEEN WHETHER THE ASSESSEES INTENTION IS TO EARN Q UICK PROFIT BY 7 WAY OF REPETITIVE TRANSACTIONS OF SALE AND PURCHASE OF THE PROPERTIES OR TO HOLD THE PROPERTIES FOR THE PURPOS E OF INVESTMENT. IN THE CASE IN HAND, THE ASSESSEE AFTER SALE OF THE LA ND DURING THE YEAR UNDER CONSIDERATION HAD SURPLUS MONEY IN HIS HAND, WHICH HE INVESTED IN MANY SMALL PROPERTIES, OUT OF WHICH HE HAD TO RESALE SIX PROPERTIES FOR THE REASON THAT THE ASSESSEE WAS NO T EXPECTING MUCH GAIN FROM THE SAID PROPERTIES DUE TO CERTAIN DISPUTES / NON PREFERRED LOCATION ETC. OF THESE PROPERTIES. HOWEVE R, REST OF THE PROPERTIES HAVE BEEN RETAINED BY THE ASSESSEE FOR L ONG TERM. MERELY BECAUSE, THE ASSESSEE HAD PURCHASED MANY SMALL PROP ERTIES THAT ALSO ITSELF IS NOT GOOD ENOUGH REASON TO HOLD THAT IT WAS A BUSINESS TRANSACTION. THE QUANTUM OR NUMBER OR NUMBER OF INV ESTMENTS I.E. WHETHER THE ASSESSEE INVESTED IN A SINGLE PROPERTY OR IN MANY SMALL PROPERTIES TO GET BETTER APPRECIATION, DOES NOT CHA NGE THE NATURE OF THE INVESTMENT TO CATEGORIZE IT AS BUSINESS TRAN SACTION. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION ON THE PAR T OF THE LOWER AUTHORITIES IN TREATING THE INCOME OF THE ASSESSEE FROM SALE OF PROPERTY DURING THE YEAR AS BUSINESS INCOME. THE OR DER OF THE LOWER AUTHORITIES ON THIS ISSUE IS SET ASIDE AND THE ASSE SSING OFFICER IS DIRECTED TO TREAT THE INCOME FROM THE SALE OF PROPE RTY AS UNDER THE HEAD CAPITAL GAIN. THIS ISSUE IS ACCORDINGLY ALLO WED IN FAVOUR OF THE ASSESSEE. 8 12. IN GROUND NO.4, THE ASSESSEE HAS AGITATED THE A CTION OF THE LOWER AUTHORITIES IN REJECTING THE DEDUCTION CLAIME D BY THE ASSESSEE UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED AS THE ACT)ON THE AMOUNT SPENT FOR CONSTRUCTION O F RESIDENTIAL HOUSE. THE AFORESAID CLAIM OF THE ASSESSEE WAS REJE CTED BY THE ASSESSING OFFICER ON TWO GROUNDS. FIRSTLY, THAT THE ASSESSEE WAS OWNER OF MORE THAN ONE RESIDENTIAL PROPERTY AND SEC ONDLY, THAT THE HOUSE WAS NOT CONSTRUCTED WITHIN THREE YEARS FROM T HE DATE OF SALE OF PROPERTY. 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS ON THI S ISSUE. SO FAR AS THE ISSUE THAT THE ASSESSEE WAS HAVING MORE THAN ONE RESIDENTIAL HOUSE, THE ASSESSING OFFICER OBSERVED THAT THE ASS ESSEE WAS OWNER OF THE FOLLOWING RESIDENTIAL PROPERTIES: (1) HOUSE AT MALL GODOWN REGD. (2) HOUSE NO.17147 AT AGARWAL COLONY, BTI. (3) SHARE IN HOUSE IN KANHYA CHOWK, BTI. (4) SCO-834, FIRST FLOOR, NAC, MANIMAJRA.- THEREFORE, HE DENIED DEDUCTION UNDER SECTION 54/54F OF THE ACT. 14. THE LD. CIT(A) ALSO CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 15. WE HAVE HEARD THE RIVAL CONTENTIONS. SO FAR AS THE PROPERTY MENTIONED AT S.NO.1 IS CONCERNED, THE ASSESSEE HAD FURNISHED THE CERTIFICATE OF SUB REGISTRAR BEFORE THE LOWER AUTHO RITIES, WHEREIN IT 9 HAS BEEN STATED THAT THE PLAN FOR THE PROPERTY HAS BEEN APPROVED FOR COMMERCIAL PURPOSES AND FURTHER IT HAS BEEN CER TIFIED THAT IN THE SAID PROPERTY, GROUND FLOOR IS A SHOP AND ON THE FI RST FLOOR A HOTEL IS CONSTRUCTED. IN VIEW OF ABOVE, IT CANNOT BE SAID TO BE A RESIDENTIAL HOUSE OF THE ASSESSEE. SO FAR AS THE PROPERTY AT S.NO.2 IS CONCERNED, IT H AS BEEN SUBMITTED THAT THE SAID PROPERTY WAS ANCESTRAL PROP ERTY OF THE JOINT FAMILY OF THE ASSESSEE ALONG WITH HIS FATHER AND HI S UNCLE. THIS PROPERTY WAS TRANSFERRED IN THE NAME OF SHRI SEWAK RAM, HUF ON 18.01.2010 VIDE REGISTERED PARTITION DEED DATED 18 .01.2010. THAT THIS PROPERTY WAS NOT OWNED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY ON THE DATE OF SALE OF THE IMMOVABLE PROPE RTY DURING THE YEAR. SO FAR AS THE PROPERTY AT S.NO.3 IS CONCERNED, THE ASSESSEE HAS PRODUCED ON THE FILE, THE COPY OF THE REGISTERED SA LE DEED OF THE AFORESAID PROPERTY, WHEREIN THE NATURE OF THE PROPE RTY HAS BEEN MENTIONED AS COMMERCIAL PROPERTY. SO FAR AS THE PROPERTY AT LEVEL NO.4 ABOVE IS CONC ERNED, THE SAME IS A SHOP CUM OFFICE WHICH, ON THE FACE OF IT, APPEARS TO BE A COMMERCIAL PROPERTY. IN VIEW OF THIS, EXCEPT A SHARE IN THE ANCESTRAL HO USE IN THE PROPERTY MENTIONED AT S.NO.4, THE ASSESSEE DID NOT POSSESS ANY OTHER RESIDENTIAL PROPERTY ON THE DATE OF SALE OF T HE PROPERTY AND IN 10 VIEW OF ABOVE, THE ASSESSEE HAS RIGHTLY CLAIMED THE DEDUCTION UNDER SECTION 54/54F OF THE ACT ON CONSTRUCTION OF A RESIDENTIAL HOUSE. 16. SO FAR AS THE REJECTION OF THE CLAIM ON THE GRO UND THAT THE CONSTRUCTION WAS NOT COMPLETED WITHIN THREE YEARS F ROM THE DATE OF SALE OF PROPERTY IS CONCERNED, CONSIDERING THE BENE FICIAL PROVISIONS OF THIS CHAPTER INTENDED TO PROMOTE THE CONSTRUCTIO N OF RESIDENTIAL HOUSES, AND ALSO CONSIDERING THE EVIDENCE FURNISHED BY THE ASSESSEE OF APPROVED PLAN OF MUNICIPAL CORPORATION REGARDING ONE SINGLE HOUSE CONSTRUCTED BY THE ASSESSEE, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN REJECTING THE CLAIM OF DEDUCTION ON THIS GROUND. IN VIEW OF THIS ORDER OF THE LOWER AUTHORITIES ON THIS ISSUE IS SET ASIDE AND THE ASSE SSING OFFICER IS DIRECTED TO GRANT THE DEDUCTION ON ACCOUNT OF CONS TRUCTION OF RESIDENTIAL HOUSE UNDER THE RELEVANT PROVISIONS OF SECTION 54/54F OF THE ACT. 17. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 09 /05/2019) SD/- SD/- (SMT. ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 09/05/2019 AKS- TOUR 11 COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE C IT(A), THE DR