DCIT, CHENNAI V. B.Ananthakrishnan, CHENNAI

ITA 967/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7184 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M KARUNAKARAN
• Assessee Lawyers: C V PAVANA KUMAR
• Keywords: Capital asset; Business income; Rectification of order; Salary income; Revised return
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 967/MDS/2014 ( / ASSESSMENT YEAR: 2005-06) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-XIII, ROOM NO.608, 6 TH FLOOR, 121, N.H.ROAD, CHENNAI-600 034. VS SHRI B.ANANTHAKRISHNAN, 21, CHELLAMMAL STREET, SHENOY NAGAR, CHENNAI-600 030. PAN:AACPA9644C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. M.KARUNAKARAN, ADVOCATE /RESPONDENT BY : MR. C.V.PAVANA KUMAR, JCIT / DATE OF HEARING : 2 ND SEPTEMBER, 2014 /DATE OF PRONOUNCEMENT : 31 ST OCTOBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, CH ENNAI DATED 03.12.2013 FOR THE ASSESSMENT YEAR 2005-06. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIR ECTING THE ASSESSING OFFICER TO TAX THE TRANSACTIONS IN TH E LAND SITUATED AT RAJAKILPAKKAM AND CHITLAPAKKAM AS CAPI TAL GAINS ONLY AND NOT AS BUSINESS INCOME. 2 ITA NO.967/MDS/2014 2. BRIEF FACTS ARE THAT ASSESSEE FILED RETURN OF IN COME ON 26.10.2005 DECLARING TOTAL INCOME OF ` 1,87,51,199/- WHICH INCLUDES LONG TERM CAPITAL GAINS AT ` 1,59,98,819, SHORT TERM CAPITAL GAINS OF ` 27,18,024/- AND INCOME FROM OTHER SOURCES AT ` 34,356/-. LATER, REVISED RETURN WAS FILED ON 16.10 .2006 DECLARING INCOME FROM LONG TERM CAPITAL GAINS AT ` 1,01,38,659/- AND SHORT TERM CAPITAL GAINS AT ` 27,40,380/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDE R SECTION 143(2) WAS ISSUED CALLING FOR VARIOUS DETAILS. THOU GH SEVERAL OPPORTUNITIES WERE GIVEN BY THE ASSESSING OFFICER, THE ASSESSEE COULD NOT APPEAR AND FILE THE REQUIRED DET AILS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICE R MADE ENQUIRIES WITH THE SUB-REGISTRAR OFFICE IN RESPECT OF SALE OF PROPERTIES MENTIONED BY THE ASSESSEE. THE ASSESSING OFFICER SEEMS TO HAVE OBTAINED COPIES OF SALE DEEDS FROM TH E SUB- REGISTRAR OFFICE AND ON GOING THROUGH THE SALE DEE DS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS NOT THE OWNER OF LAND BUT HE IS ONLY A POWER OF ATTORNE Y HOLDER. WITH THE AVAILABLE INFORMATION GATHERED, THE ASSESS ING OFFICER FORMED OPINION THAT ASSESSEE IS INTO THE B USINESS AND 3 ITA NO.967/MDS/2014 THEREFORE HE TREATED THE ENTIRE INCOME FROM LONG TE RM AND SHORT TERM CAPITAL GAINS RETURNED BY THE ASSESSEE A S BUSINESS INCOME. THE ASSESSEE PREFERRED AN APPEAL B EFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMIT TED BEFORE HIM THAT ASSESSEES FATHER IS THE ORIGINAL G ENERAL POWER OF ATTORNEY HOLDER AND A SALE AGREEMENT WAS A LSO ENTERED INTO BY THE ASSESSEES FATHER FOR PURCHASE OF THE LAND AND BEFORE EXECUTION OF THE SALE DEED, ASSESSEES F ATHER DIED. ASSESSEE SUBMITTED THAT SINCE ASSESSEES FATH ER DIED THE ORIGINAL OWNER EXECUTED A FRESH GENERAL POWER OF ATTORNEY TO THE ASSESSEE. THEREFORE IT WAS THE SUBM ISSION OF THE ASSESSEE THAT THEY ARE THE OWNERS OF THE PROPER TY AS ENTIRE SALE CONSIDERATION WAS PAID BY HIS FATHER. I T WAS THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE IS NOT DOI NG ANY REAL ESTATE BUSINESS. CONSIDERING THESE SUBMISSIONS , COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT INCO ME FROM SALE OF LAND IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT AS BUSINESS INCOME OF THE ASSESSEE AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 4 ITA NO.967/MDS/2014 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN COMPUTING INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS AS AGAINST CAPIT AL GAINS. HE SUBMITS THAT ASSESSEE MADE PLOTS AND SOLD AND TH EREFORE, HE IS INTO THE BUSINESS. 4. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. IN THE COURSE OF PROCEEDINGS BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS), THE ASSESSEE SUBMITTED THAT O RIGINALLY LANDS WERE PURCHASED BY HIS FATHER BY ENTERING INTO GENERAL POWER OF ATTORNEY AND AGREEMENT OF SALE. THE ASSES SEE SUBMITTED THAT SALE DEED COULD NOT BE EXECUTED AS H IS FATHER DIED AND LATER THE LAND OWNERS EXECUTED A FRESH GEN ERAL POWER OF ATTORNEY TO THE ASSESSEE AND HIS BROTHER. COMMISSIONER OF INCOME TAX (APPEALS) CALLED FOR REM AND REPORT FROM THE ASSESSING OFFICER AND AFTER CONSIDE RING THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER, T HE 5 ITA NO.967/MDS/2014 COMMISSIONER OF INCOME TAX (APPEALS) GAVE A FINDING THAT ASSESSING OFFICER DID NOT GIVE ANY FINDING IN THE R EMAND REPORT AS TO HOW TRANSACTIONS ARE BUSINESS IN NATUR E INSTEAD OF CAPITAL GAINS. THUS, THE COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED THAT IN THE ABSENCE OF ANY FIND ING GIVEN BY THE ASSESSING OFFICER AS TO WHY SALE PROCEEDS OF THESE LANDS SHOULD BE TREATED AS INCOME FROM BUSINESS, TH E SAME HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS A ND NOT AS BUSINESS INCOME OBSERVING AS UNDER:- 6. THE AR IN HIS REPLY DATED 11 . 11 . 2013 STATED AS UNDER: ' PLEASE REFER TO THE LAST HEARING IN THE ABOVE APPEA L ON 06.11.2013 DURING WHICH YOUR HONOUR SUPPLIED ME A COPY OF THE REPORT OF THE ACIT , BUSINESS CIRCLE , CIRCLE-XIII , CHENNAI WITH DIRECTION TO OFFER APPELLANT ' S COMMENTS ON THAT IN RESPONSE THERETO, UNDER INSTRUCTIONS FROM THE APPELLANT , I SUBMIT RESPECTFULLY THE FOLLOWING. THE ADMITTED FACT BY THE ACIT IN HIS REPORT IS THAT APPELLANT HAS SUBMITTED TWO WRITTEN SUBMISSIONS ALONG WITH E VIDENCE IN SUPPORT OF THE CONTENTION THAT APPELLANT DID NOT C ARRY ON ANY REAL ESTATE BUSINESS. YOUR PREDECESSOR F AD FORWARDED ONE COPY, EACH, OF THE WRITTEN SUBMISSION ALONG WITH ENCLOSURES TO THE ACI T FOR HIS COMMENTS . BUT THE ACIT , INS . REPORT DATED 18 . 09.2013 , HAS STATED THAT GPA IN FAVOUR OF LATE BAKTHAVACHALU NAIDU , APPELLANT'S FATHER AND THE AGE OF SALE ENTERED INTO BY HIM WERE NOT PRODUCED . THIS IS NOT CORRECT . THE CA MR . RAMALINGAM DID APPEAR BEFORE THE THEN ACIT AND THE PRESENT ACIT AND EXPLAINED TH E FACTS. EVEN IF THE DOCUMENTS WERE NOT AVAILABLE IN THE IT RECORDS OF ACIT, IF THE CA WAS INFORMED HE WOULD HAVE DEFINITE LY PRODUCED ALL THE COPIES THAT WERE FILED BEFORE CIT(A) . SINCE APPELLANT HAD TO PRODUCE THE VERY SAME COPIES WHICH WERE FILED BEFOR E THE CIT(A) , THERE WOULD NOT HAVE BEEN DIFFICULTY TO FILE THESE DOCUMENTS . IN THE ABSENCE OF PROPER COMMUNICATIONS AND DIRECTION BY T HE PRESENT ACIT , THE PRESUMPTION SUCH DETAILS WERE NOT PRODUCED AND THEREFORE APPELLANT WAS DOING REAL ESTATE BUSINESS IS INCORRE CT. 6 ITA NO.967/MDS/2014 AS STATED IN PARA 2 ABOVE , THE PRESENT ACIT WAS AWARE OF THE 2 ND WRITTEN SUBMISSION WHEREIN ALSO THE ABOVE FACTS I . E . GPA , AGT . OF SALE, WILL OF LATE M . BAKTHAVACHALU WERE REFERRED TO . IN THE 2 ND PAGE OF THE W/S ULTIMATELY IT WAS POINTED OUT AND S UBMITTED BY APPELLANT THAT L TCG AS SUCH HAVING BEEN ASSESSED BOTH IN THE 144 AND 154 ORDERS (WHEREIN DEDUCTION U/S 54 WAS ALSO ALLOWED WHICH CAN BE DONE ONLY IN CASE WHERE L TCG WAS ASSESSED AND W HICH FACT WAS FULLY WITHIN THE KNOWLEDGE OF THE ACIT WHEN THE PA SSED THE ORDER U/S 154 AND AT THE TIME OF SUBMITTING HIS REPORT ON 18 . 09.2013) , THE ONLY DISPUTE IN THE APPEAL IS APPLYING THE TAX RATE OF 2 0% INSTEAD OF 30% ADOPTED IN THE ORDERS AND THEREFORE OTHER GROUNDS W ERE NOT PRESSED . DURING LAST HEARING THE CA DREW THE ATTENTION ACIT TO THE ABOVE FACT I . E . APPLICATION OF CORRECT OF INCOME-TAX , THE PRESENT ACIT AGREED WITH HIM THAT IF THIS IS THE ONLY ISSUE HE WILL SEND HIS REPORT COVERING THE TAX RATE ISSUE ONLY BUT THE RESULT TURNED OUT TO BE DIF FERENT . HIS REPORT DATED 18.09 . 2013 REVEALS THAT HE NOT AT ALL CONSIDERED THE W/S AND OFFER HIS COMMENT , INSPITE OF THE SPECIFIC DIRECTION OF THE CIT(A)-XI/ , CHENNAI ON 13 . 09.2010 VIDE PARA 3. THEREFORE IT IS INCORRECT TO SAY THAT THE DOCUMENTS WERE NOT PRODUCED WHEN THE VERY SAME DOCUMENTS WERE FILED BEFORE THE CIT(A) . THE APPELLANT DID NOT FEEL SHY TO PRODUCE THE SAME BEFORE ACIT . EVEN NOW IF IT IS DIRECTED THE APPELLANT IS WILLING TO PRODUCE BEFORE ACIT ALL TH E REQUIRED DOCUMENTS . AT THE SAME TIME THE FACT REMAINS THAT IT IS THE A PPELLANT'S FATHER, DURING HIS LIFE TIME PURCHASED THE LANDS , OBTAINED PERMISSION FOR LAYOUT , EXECUTED A WILL IN FAVOUR OF FAMILY MEMBERS , INCLUDING THE APPELLANT , BEQUEATHING , AMONG OTHERS , THIS PROPERTY ALSO AND HENCE THE LANDS SOLD WERE LONG TERM CAPITAL ASSET AND HE NCE GAIN ARISING THEREFROM ON SALE BY APPELLANT IS ONLY L TCG. IN F ACT ONE OF THE SELLERS OF THE LANDS TO LATE MR . BAKTHAVATCHALU , CONFIRMED VIZ . MR . R . VARUN CHOLA IN PAGE 3/6 OF THE GPA , AGAIN , EXECUTED BY HIM IN FAVOUR OF THE APPELLANT AND HIS BROTHER ON 12 . 03 . 2004 REG . AS DOC . NO . 289/2004 TO THE EFFECT THAT HE ALREADY RECEIVED TH E ENTIRE SALE CONSIDERATION FROM LATE BAKTHAVACHALU AND THAT HE HAD ENTERED I NTO A SALE AGREEMENT ON 13 . 07 . 1988 WITH THE LATTER FOR SALE OF THE IMPUGNED LANDS . THUS , SEC . 53A OF THE TRANSFE R OF PROPERTY WAS APPLIED IN 1988 ITSELF TO THIS TRANSACTION . AFTER THE DEATH OF MR. BAKTHAVACHALU APPELLANT HIS BROTHER BECAME OWNERS OF THE IMPUGNED PROPERTY THROUGH INHERITANCE AND HENCE THE ACIT ' S COMMENTS THAT THE ASSESSEE AND HIS BROTHER IS NOT THE REAL OWNER OF T HE IMMOVABLE PROPERTIES AND THAT THEY ARE ONLY PROMOTERS OF THE LANDS AS P . A . HOLDER IS NOT CORRECT. THE APPELLANT WAS FURTHER REQUESTED TO CLARIFY CERT AIN ISSUES AND THE AR REPLIED AS UNDER: 'PLEASE REFER TO COMMISSIONER OF INCOME-TAX(APPEALS)-VII , CHENNAI LETTER OF EVEN NUMBER DATED 11 . 11 . 2013 RAISING THE FOLLOWING QUERIES . IN RESPONSE THERETO AND UNDER INSTRUCTIONS FROM THE APPELLANT, I SUBMIT RESPECTFULLY THE FOLLOWING. 7 ITA NO.967/MDS/2014 QUERY RAISED BY CIT REPLY THERETO IN THE ORDER U/S 144 DATED 18 . 12.2007, LTCG WAS TREATED AS BUSINESS INCOME . HOW THE SALE PROCEEDS ARE CAPITAL GAIN INSTEAD OF BUSINESS INCOME. PLEASE SEE SUBMISSION UNDER ITEMS(L) TO (9) OF WRITTEN SUBMISSIONS II DATED 01 . 09.2010 S ALSO PARAS 1,2 & 3 OF WRITTEN SUBMISSION DATED 30 . 01 . 2009 WITH ITS ENCLOSURES. THE APPELLANT HAS DERIVED INCOME FROM SALARY IN EARLIER YEARS AND INCOME FROM OTHER SOURCES AND CAPITAL GAINS IN THIS YEAR . SINCE HE HAD INHERITED THE PROPERTY FROM HIS LATE FATHER, AND, IN THE ABSENCE OR MAINTENANCE OF BOOKS OF ACCOUNTS, THE SAME NOT BEING STOCK IN TRADE OF THE APPELLANT . THE IMPUGNED PROPERTY IS ONLY THE A LONG TERM CAPITAL ASSET IN THE HANDS OF THE APPELLANT. COPY OF ASSESSMENT ORDERS, FOR THE SAME AY VIZ. 2005-06 IN THE CASE OF SMT. B. RAJESWARI, APPELLANT'S MOTHER WAS ALSO FILED WHEREIN HER SHARE OF THE VERY SAME LANDS SOLD BY HER WERE NOT TREATED AS BUSINESS INCOME BUT ONLY AS CAPITAL ASSET AND LTCG WAS ASSESSED. 2) IF IT IS HELD AS BUSINESS INCOME PROVE THE EXPENSES CLAIMED FOR ALLOWING THE SAME PLEASE SEE BILLS SUBMITTED AND ENCLOSED TO THE ABOVE WRITTEN SUBMISSIONS 3) IF IT IS HELD AS CAPITAL GAIN, PRODUCE EVIDENCE FOR CLAIM U/S.54F OF THE ACT PLEASE SEE DCIT, CIRCLE-XIII, CHENNAI - 34 LETTER DATED 19.06.2007 IN WHICH (1 ST PAGE) HE REFERRED TO THE COPY OF THE PURCHASE DATED 30.01 . 2005 IN RESPECT OF PROPERTY AT N0 . 46, 8 T H CROSS STREET, WEST SHENOY NAGAR, CHENNAI IN THE JOINT NAMES OF APPELLANT AND HIS BROTHER B . MOHANAKRISHNAN (APPELLANT ' S SHARE BEING RS . 25,50,OOO) FLED BY APPELLANT. AFTER VERIFYING THE PROOF FILED AND AFTER SATISFACTION, THE ACIT ALLOWED EXEMPTION U / S 54F . COPY OF THE SAID LETTER IS ENCLOSED. IF STILL REQUIRED COPY OF THE DOCUMENT WILL BE FILED.' 7. THE PROPERTY IN QUESTION WAS SOLD BY THE APPELLA NT AS A GPA AS DETAILED BELOW: S . NO. DATE OF SALE BUYER CONS I DERATION EXTENT ( . CENTS ) (RS . ) 1 16.08.2004 EXCEL/O, A FI RM 38,08,164 47 REPRES ENTED BY MR. P. 2 16.08.2004 - - ~ --- - --- DO - - - - - -- - -- 3808 164 47 3 16.08.2004 ---------- DO - - -- - - 3808 164 47 4 16.08.2004 ------- - -- DO - ----- -- - - 3808 164 4 7 5 16 . 08 . 2004 ---------- DO ------ 3808 164 47 TOTAL 1,9040,820 235 8 ITA NO.967/MDS/2014 7.1 THE LAND WAS ACQUIRED DURING 1996, 1997 AND 199 9 FOR A C ONSIDERATION OF RS.25,20,000/- THE INDEXED COST WAS WORKED OUT AT RS.38,0L,101/-. THE LONG TERM CAPITAL GAIN ON THIS TRANSACTION WORKED TO RS.1,52,39,719/-. THE LAND AT CHITLAPAKKAM WAS SO L D AND THE APPELLANT'S SHARE WAS ARRIVED AT RS.25,52,100/-. THE INDEXED COST WAS WOR KED OUT AT RS . 8,64,000/- - . THE LTCG ON CHITLAPAKKAM LAND WAS WORKED OUT AT RS.16,88,100/-. THE TOTAL LTCG WA S THUS ARRIVED AT RS.1 , 59,98,819/ - (RS.1,52,39,719+RS . 16,88,100-RS.9,29,000) AFTER AL L OWING A DEDUCTION OF RS.9,29,000/- - ON ACCOUNT OF BROKER AGE, I MPROVEMENT AND LEGAL EXPENSES. THE APPELLANT ORIGIN ALLY CLAIMED RS . 58,60 , 160/- AS DEDUCTION U/S 54 OF THE ACT . LATER HE RESTRICTED HIS CLAIM TO RS.29,30,080J- WHI CH WAS ALLOWED BY THE AO IN THE RECTIFICATION ORDER DATED 21 . 09.2007. AGAINST THE ABOVE FACTUAL POSITION, THE AO DID NOT GIVE A FINDING IN THE REMAND REPORT AS TO HOW T HE ABOVE TRANSACTIONS ARE BUSINESS IN NATURE INSTEAD OF CAPI TAL GAIN . IF THE APPELLANT IS ONLY A GPA, THEN WHAT HAPPENED TO THE TAXATION OF SALE PROCEEDS IN THE HANDS OF ORIGINAL OWNERS OF THE LAND. NO FACT FINDING WAS G I VEN BY THE AO . THE PURPOSE OF CALL I NG FOR A REMAND REPORT IS TO F I ND OUT WHAT HAPPENED ACTUAL L Y AND WHAT I S THE OUTCOME OF LAND TRANSACTIONS DONE BY THE APPELLANTS. IF I T IS BUSINESS , HOW I T IS BUSINESS? IF I T IS CAPITA L GA I N HOW IT I S CAPITA L GAINS? NOTHING IS DECIPHERABLE FROM THE REPORT OF THE ASSESSING OFFICER. 7.2 I N THE ABSENCE O F PROPER FINDING, THE BENE F IT OF DOUBT GOES TO THE ASSESSEE AND T HE TRANSACTION IS TREATED AS CAP I TAL GAINS ONLY . IT IS A SETTLED L AW THAT WHERE TWO I NTERPRETATIONS ARE REASONABLY POSSIBLE, THE ONE WHI CH I S IN FAVOUR OF THE ASSESSEE SHOULD BE GIVEN EFFECT TO . ACCORDINGLY THE AO IS DIRECTED TO TAX THE TRANSACTI ONS IN THE LANDS SITUATED AT RAJAKILPAKKAM AND CHITLAPAKKAM AS CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME. 6. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) AND HIS FINDINGS, WE ARE OF TH E VIEW THAT SALE PROCEEDS OF THE LANDS HAVE TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT AS BUSINESS INCOME . THE REVENUE HAS NOT REBUTTED THE FINDINGS OF THE COMMI SSIONER 9 ITA NO.967/MDS/2014 OF INCOME TAX (APPEALS) AND THEREFORE WE UPHOLD THE IMPUGNED ORDER AND REJECT THE GROUNDS OF APPEAL RAI SED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 31 ST DAY OF OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 31 ST OCTOBER, 2014 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .