Shri Rajkumar Sudamrao Dhamdhere, Aurangabad V. CIT, Aurangabad

ITA 927/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2794 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Business income; Cost of acquisition; Difference of opinion; Change of opinion
• Section: 143(3); 263

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.927/PN/2013 ASSESSMENT YEAR : 2008-09 SHRI RAJKUMAR SUDAMRAO DHAMDHERE, SHRINATH, TIRUPATI PARK, N-4, CIDCO, AURANGABAD. PAN : AGBPD0854A . APPELLANT VS. THE COMMISSIONER OF INCOME TAX, AURANGABAD. . RESPONDENT / APPELLANT BY : SHRI SUNIL PATHAK / RESPONDENT BY : SHRI S. K. RASTOGI / DATE OF HEARING : 28.01.2016 / DATE OF PRONOUNCEMENT: 29.01.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX, AURANGABAD (IN SHORT T HE COMMISSIONER) DATED 26.03.2013 WHEREBY THE ASSESSMENT ORDER PASSE D BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 29.12.2010 HAS BEEN HELD TO BE ERRONEOUS IN S O FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 01. THE ASSESSMENT ORDER PASSED BY THE LEARNED ASS ESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 CANNOT BE SAID AS ERRONEOU S OR PREJUDICIAL TO THE INTEREST OF THE REVENUE ONLY DUE TO THE CHANGE IN OPINION RE GARDING HEAD OF INCOME ASSESSED. HENCE, NOTICE ISSUED U/S 263 AND ORDER PASSED BY TH E LEARNED COMMISSIONER OF INCOME TAX U/S 263 OF THE INCOME TAX ACT, 1961 IS I LLEGAL AND BAD IN LAW AND THEREFORE NEEDS TO BE CANCELLED. 2 ITA NO.927/PN/2013 02. THE LEARNED COMMISSIONER OF INCOME TAX, AURANGA BAD ERRED IN FACTS AND ON LAW IN CONSIDERING INCOME FROM LONG TERM CAPITAL GA INS AS INCOME FROM BUSINESS. 03. THE LEARNED COMMISSIONER OF INCOME TAX, AURANGA BAD ERRED IN FACTS AND ON LAW BY NOT CONSIDERING THAT THE APPELLANT HAS SHOWN THE SAID LAND IN QUESTION UNDER THE HEAD INVESTMENT AND NOT UNDER STOCK IN TRADE . ALSO, THAT THE INTENTION OF THE APPELLANT WAS NOT TO EARN BUSINESS PROFIT BUT T O GET BENEFIT FROM APPRECIATION OF PROPERTY. 04. SUCH ORDER/ORDERS BE PASSED AS MAY BE DEEMED FI T AND PROPER. 05. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER VARY AND/ OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 3. THE ONLY ISSUE IN THE PRESENT APPEAL IS CHALLENG ING THE APPLICATION OF SECTION 263 OF THE ACT INVOKED BY THE COMMISSIONER AND TREATING THE INCOME OFFERED FROM SALE OF DEVELOPED PROPERTY AS BUSINES S INCOME BY THE COMMISSIONER AS AGAINST LONG TERM CAPITAL GAINS C LAIMED BY THE ASSESSEE AND ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. 4. THE RELEVANT FACTS CONCERNING THE ISSUE ARE THAT THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT OF THE LAND SITUATED AT SHI KRAPUR, TQ. SHIRUR, DIST. PUNE WITH THE OWNERS SHRI BABAN SAHADU GILBILE AND OTHER FOUR PERSONS FOR AN AMOUNT OF RS.15,00,000/- ON 07.08.2001. THEREAFTER , THE SAID LAND WAS PURCHASED BY THE ASSESSEE FROM THESE PERSONS ON 30. 03.2003 FOR A CONSIDERATION OF RS.4,50,000/-. THE SAID LAND WAS DEVELOPED BY THE ASSESSEE UPTO FINANCIAL YEAR 2004-05 AND THEN ASSESSEE SOLD AREA OF 2924 SQ.FT., OUT OF TOTAL BUILD-UP AREA 10064 SQ.FT. IN THE FINANCIAL Y EARS 2004-05 & 2005-06. THE BALANCE CONSTRUED AREA ADMEASURING 7140 SQ.FT. WAS SOLD BY THE ASSESSEE FOR A TOTAL CONSIDERATION OF RS.1,00,00,000/- ON 29.06.20 07 AND OFFERED LONG TERM CAPITAL GAIN FOR TAXATION FOR ASSESSMENT YEAR 2008 -09. ON PERUSAL OF THE COMPUTATION OF INCOME, IT WAS OBSERVED BY THE COMMI SSIONER THAT THE ASSESSEE HAD CLAIMED INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT TO THE TUNE OF RS.93,23,842/- AGAINST THE SALE CONSIDE RATION OF RS.1,00,00,000/- AND OFFERED LONG TERM CAPITAL GAIN OF RS.6,76,158 /- FOR TAXATION. THE ASSESSING OFFICER WHILE FINALIZING THE ASSESSMENT U NDER SECTION 143(3), HAS ACCEPTED INDEXED COST OF ACQUISITION/ IMPROVEMENT C OST SHOWN BY THE ASSESSEE AND THE RESULTANT CAPITAL GAINS. FROM THE ABOVE FA CTS, THE COMMISSIONER WAS OF 3 ITA NO.927/PN/2013 THE VIEW THAT THE ASSESSEE HAD ENTERED INTO DEVELOP MENT AGREEMENT OF THE PROPERTY WITH A CLEAR INTENTION TO DO BUSINESS ACTI VITIES AND EARN PROFIT. THE COMMISSIONER FURTHER TOOK A VIEW THAT THE ASSESSEE PRIMARY INTENTION WAS TO EARN PROFIT FROM THE SAID LAND AND THUS THE ENTIRE TRANSACTIONS DESERVE TO BE TERMED AS ADVENTURE IN THE NATURE OF TRADE. THE COMMISSIONER ALSO FOUND OBSERVED THAT THE ASSESSEE IS IN CONSTRUCTION BUSIN ESS AND IS ALSO A PARTNER IN M/S TIRUPATI SUPREME ENCLAVE, A PARTNERSHIP FIRM DE ALING IN CONSTRUCTION AND DEVELOPMENT ACTIVITIES. THEREFORE, THE COMMISSIONE R FOLLOWING THE VARIOUS DECISIONS OF THE HIGH COURT, ESPECIALLY, THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF VENKATASWAMI NAIDU & CO. VS. C IT, (1959) 35 ITR 594 (SC) HELD THAT INCOME EARNED FROM THE ABOVE SALES T RANSACTION IS PRIMA-FACIE CHARGEABLE TO TAX AS INCOME FROM BUSINESS AND NOT FROM LONG TERM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, TH E COMMISSIONER DIRECTED THE ASSESSING OFFICER TO COMPUTE THE BUSINESS INCOME AS UNDER :- GROSS RECEIPT (SALE CONSIDERATION) - RS.1,00,00,0 00/- LESS: COST OF PROJECT AS ON THE DATE OF SALE - RS . 73,43,775/- NET PROFIT - RS. 21,56,225/- 5. AGGRIEVED BY THE IMPUGNED ORDER OF THE COMMISSIO NER, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE RELIED UPON THE SUBMISSIONS FILED BEFORE THE COMMISSIONER TO SUPPOR T HIS CASE. AS PER REPLY AS REPRODUCED IN PARA 2 OF THE ORDER OF THE COMMISS IONER FRAMED UNDER SECTION 263 OF THE ACT APPEALED AGAINST, IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD EXAMINED THE ISSUE WHILE PASSING THE AS SESSMENT ORDER DATED 03.10.2012. IN THE BALANCE SHEET, ASSESSEE HAS SHO WN A PROPERTY UNDER THE HEAD INVESTMENT AND NOT STOCK-IN-TRADE. INTENT ION OF THE ASSESSEE WAS NOT TO EARN BUSINESS PROFIT BUT TO GET BENEFIT FROM APP RECIATION OF PROPERTY. IT IS THE CASE OF THE ASSESSEE THAT HE HAS RIGHTFULLY TREATED INCOME FROM SALE OF PROPERTY AS LONG TERM CAPITAL GAINS AND THE ASSESSING OFFI CER HAS ACCEPTED RETURNED INCOME OF ASSESSEE AFTER OPTING COURSE PERMISSIBLE IN LAW. MERE CHANGE OF OPINION IS NOT SUFFICIENT TO TREAT ASSESSMENT ORDER AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4 ITA NO.927/PN/2013 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE COMMISSIONER AND SUBMITTED THAT DETAILED JUSTIFICATION HAS BEEN GIVEN BY THE COMMISSIONER TO COME TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ISSUE BEFORE US IS CORRECTNESS OF ACTION TAKEN UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER IN THE FACTS OF THE CASE. WE NOTICE F ROM THE ORDER OF THE COMMISSIONER THAT THE ASSESSEE IS A PARTNER IN THE FIRM OF M/S TIRUPATI SUPREME ENCLAVE. THE SAID FIRM IS A BUILDER AND DE VELOPER. THE ASSESSEE IN HIS COMPUTATION OF INCOME, IN ADDITION TO THE SHARE PROFIT FROM THE SAID FIRM, HAS SHOWN LONG TERM CAPITAL GAINS FROM THE SALE OF PROPERTY AT SHIKRAPUR, TQ. SHIRUR, DIST. PUNE AT RS.6,76,158/-. ON VERIFICATI ON OF THE CASE RECORDS AND DETAILS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE COMMISSIONER NOTICED THAT INITIALLY THE ASSESSE E HAD ENTERED INTO A DEVELOPMENT AGREEMENT ON 07.08.2001 WITH AN INTENTI ON TO DEVELOP THE LAND ADMEASURING 0.80R, GUT NO.1575B SITUATED AT SHIKRAP UR, WITH THE LAND OWNER SHRI BABAN SAHADU BJILBILE AND FOUR OTHER PERSONS F OR AN AMOUNT OF RS.15,00,000/-. THEREAFTER, THE ASSESSEE HAD EXECU TED PURCHASE DEED FOR THE AFORESAID LAND GUT NO.1575B ADMEASURING 0.80R SITUA TED AT SHIKRAPUR FOR A CONSIDERATION OF RS.4,50,000/- FROM THE AFORESAID O WNER VIDE PURCHASE DEED DATED 30.07.2003. AS PER THE DETAILS OF CONSTRUCTI ON EXPENSES FOR THE PERIOD 2001-02 TO 2004-05 SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS OBSERVED BY THE COMMISSIONER THA T IMMEDIATELY AFTER ENTERING INTO DEVELOPMENT AGREEMENT ON 07.08.2001 W ITH THE AFORESAID OWNERS, THE ASSESSEE HAS STARTED CONSTRUCTION ACTIVITY ON T HE SAID LAND FROM 29.11.2011 AND HAD INCURRED CONSTRUCTION EXPENSES TO THE EXTEN T OF RS.8,40,307/- (LAND LEVELING & EXCAVATION RS.1,35,800/-, COMPOUND WILL CONSTRUCTION RS.2,45,600/- AND RCC WORK RS.4,58,907/-). DURING THE FINANCIAL YEAR 2002- 03, THE TOTAL CONSTRUCTION EXPENSES WERE SHOWN AT R S.37,50,684/-. IN FINANCIAL YEAR 2003-04 I.E. FROM 05.04.2003 TO 30.07.2003, I. E. TILL THE DATE OF PURCHASE OF THE SAID LAND, ON WHICH CONSTRUCTION ACTIVITY WA S UNDERTAKEN BY THE ASSESSEE 5 ITA NO.927/PN/2013 IN ACCORDANCE WITH THE DEVELOPMENT AGREEMENT, THE A SSESSEE HAS SHOWN CONSTRUCTION EXPENSES AT RS.3,70,180/-. FROM 30.07 .2003 I.E. THE DATE AFTER WHICH THE ASSESSEE HAD EXECUTED PURCHASE DEED, THE TOTAL EXPENSES ON ACCOUNT OF CONSTRUCTION EXPENSES INCURRED IS AT RS.24,50,86 5/-. IN FINANCIAL YEAR 2004- 05 TOTAL CONSTRUCTION EXPENSES INCURRED ARE SHOWN A T RS.3,13,441/-. THE ASSESSEE HAS DEVELOPED AND CONSTRUCTED THE PROPERTY AND SOLD SHOPS/FLATS IN FINANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION TO THE TUNE OF RS.1,00,00,000/- AND HAS SHOWN THE INCOME A S LONG TERM CAPITAL GAINS AFTER TAKING BENEFIT OF COST INDEXATION AND COST OF IMPROVEMENT. WE FIND FROM THE ABOVE FACTS, IT IS CLEAR THAT THE INCOME OFFERE D FROM THE AFORESAID TRANSACTION UNDER THE HEAD CAPITAL GAINS ARE CLEARL Y OPPOSED TO THE FACTS ON RECORD AND THUS ERRONEOUS. THE INCOME SO OFFERED U NDER THE HEAD CAPITAL GAINS AS AGAINST THE CORRECT HEAD BUSINESS INCOME HAS RESULTED IN LOSS OF REVENUE AND IS THUS ALSO PREJUDICIAL TO THE INTERES TS OF THE REVENUE. FROM THE FACTS OF THE CASE, IT IS CLEAR THAT THE INTENTION O F THE ASSESSEE WAS TO EARN BUSINESS PROFIT AND NOT TO GAIN FROM MERE APPRECIAT ION OF PROPERTY. THIS VITAL ASPECT GOING TO THE ROOT HAS NOT BEEN EXAMINED BY T HE ASSESSING OFFICER AT ALL. THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE INCOM E OFFERED UNDER THE HEAD CAPITAL GAINS WITHOUT EXAMINING THE ISSUE. WE FI ND THAT COMMISSIONER HAS ARRIVED AT HIS FINDINGS ON OBJECTIVE CONSIDERATION OF FACTS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSI ONER PASSED UNDER SECTION 263 OF THE ACT AND DECLINE TO INTERFERE WITH THE SA ME. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON THIS 29 TH DAY OF JANUARY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 29 TH JANUARY, 2016. 6 ITA NO.927/PN/2013 % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT, AURANGABAD; 4) THE DR A BENCH, I.T.A.T., PUNE; 5) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE