Shri Sharad Mansukhlal Mutha, Ahmednagar V. ITO,Wd.-1, Ahmednagar

ITA 972/PUN/2011

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7677 (ITAT-PUNE)
• Duration Of Justice: 6 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-04-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 25-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARI KRISHAN
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.972/PUN/2011 / ASSESSMENT YEAR : 2005-06 SHRI SHARAD MANSUKHLAL MUTHA, 83, MANIKNAGAR, NAGAR PUNE ROAD, AHMEDNAGAR PAN : AFVPM3565Q . /APPELLANT VS. INCOME TAX OFFICER, WARD-1, AHMEDNAGAR . / RESPONDENT ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI AJAY MODI, JCIT / DATE OF HEARING : 17.04.2018 / DATE OF PRONOUNCEMENT: 18.04.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-1, PUNE, DATED 20-01-2011 FOR THE ASSESSMENT YEAR 2005 -06. 2. BRINGING OUR ATTENTION TO THE GROUNDS RAISED BY THE ASSESSEE, LD. COUNSEL SUBMITTED THAT GROUND NOS. 1 AND 2 SUPPORTS TH E GROUND NO.3 RELATING TO PROPER HEAD OF INCOME FOR TAXING THE GAINS EAR NED ON SALE OF THE LANDS. THEREFORE, GROUND NO. 3 REQUIRES ADJUDICATION C ONSIDERING THE ARGUMENTATIVE GROUND NO.1 AND 2. REFERRING TO GROUN D NO.4 RELATING TO CLAIM OF DEDUCTION U/S.54B OF THE ACT, LD. COUNS EL SUBMITTED THAT THE SAME IS NOT PRESSED. ACCORDINGLY, GR OUND NOS. 1, 2 ARE DISMISSED AS ARGUMENTATIVE AND GROUND NO.4 IS DISMISSE D AS NOT PRESSED. 2 3. THAT LEAVES GROUND NO.3 FOR ADJUDICATION AND THE SAID GROUND READS AS UNDER : 3. THAT ON FACTS AND IN LAW THE LD.CIT(A)-I, PUNE OUGHT TO HAVE HELD THAT THE AMOUNT RECEIVED ON SALE OF AGRICULTURAL LA NDS OUGHT TO HAVE BEEN TAXED UNDER THE HEAD CAPITAL GAINS INSTEAD OF TREAT ING THE SAME AS BUSINESS INCOME. 4. NARRATING THE FACTS, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN CONSTRUCT ION ACTIVITY. ASSESSEE FILED RETURN OF INCOME ON 31-10-2005 DECLARING TO TAL INCOME OF NIL. ASSESSEE CLAIMED AGRICULTURAL INCOME OF RS.15,000/- FOR THIS YEAR. FURTHER, ASSESSEE SOLD 3 PIECES OF LAND FOR A SUM OF RS.26 ,65,000/- AND EARNED LONG TERM CAPITAL GAINS. FURTHER, ASSESSEE RE-INVE STED THE CAPITAL GAINS ON A NEW PROPERTY ON 25-09-2005 LOCATED A T GAT NO.66/2B, BOLHEGAON, TAL. NAGAR, AHMEDNAGAR AND CLAIMED EXEM PTION U/S.54B OF THE ACT . HOWEVER, IN THE ASSESSMENT, THE AO REJECTED THE CLAIM OF THE ASSESSEE AS CAPITAL GAINS AS WELL AS THE CLAIM O F DEDUCTION U/S.54B OF THE ACT AND TREATED THE SAME AS BUSINESS IN COME. THE DISCUSSION GIVEN IN PARA 7.9 OF THE ASSESSMENT ORDER ARE RELEVANT. RELEVANT LINES FROM THE SAID PARA ARE EXTRACTED HERE AS UNDER : 7.9 IN VIEW OF THE ABOVE, THE ENTIRE SALE CONSIDER ATION RECEIVED BY ASSESSEE ON SALE OF LAND WITHIN THE MUNICIPAL LIMITS OF AHMEDNAGAR ARE CHARGEABLE TO TAX AS BUSINESS PROFITS AND NOT AS CA PITAL GAINS AND THE ASSESSEES CLAIM IN THIS REGARD ARE DISALLOWED.. 5. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE COULD NOT IMPROVE HIS CASE SO FAR AS THE RELEVANT HEAD OF INCOME IS CONCERNED. EVENTUALLY, THE CIT(A) CONFIRMED THE CONCLUSIONS OF THE AO AND TREATED THE SAID CAPITAL GAINS AS BUSINESS PROFITS. 6. AGGRIEVED WITH THE SAME, ASSESSEE FILED THE PRESENT AP PEAL RAISING GROUND NO.3 MENTIONED ABOVE. 7. BRINGING OUR ATTENTION TO THE BALANCE SHEET MAINTAINED BY THE ASSESSEE FOR THE EARLIER A.Y. 2000-01 AND ALSO TO THE LIST OF AGRICULTURAL 3 LANDS AS ON 31-03-2000 (PAGE 29 OF THE PAPER BOOK) AND SUBMITTED THAT THE SAID AGRICULTURAL LANDS WITH AGGREGATE VALUE OF RS.14,65,7 89/- ARE SHOWN UNDER THE FIXED ASSETS COLUMN UNDER THE HEAD ASSETS OF THE BALANCE SHEET. FURTHER, BRINGING OUR ATTENTION TO THE CLO SING STOCK OF LAND AMOUNTING TO RS.77,82,200/- LD. COUNSEL DEMONSTRATED THAT THE ASSESSEE MAINTAINED TWO PORTFOLIOS OF LAND (1) FOR THE INVEST MENT IN FIXED ASSETS AND (2) FOR THE CLOSING STOCK, I.E. BUSINESS ASSETS. FURTHER, BRINGING OUR ATTENTION TO PAGE 30 OF THE PAPER BOOK W HICH CONTAINS THE LIST OF INVESTMENTS, LD. COUNSEL SUBMITTED THAT THE LANDS SH OWN AT (1) GAT NO.172, SITUATED AT NIMBALAK, TAL; NAGAR, DIST. AHMEDABAD , (2) S.NO.62/2A, BOLHEGAON, TAL. NAGAR, DIST. AHMEDNAGAR AND (3) S.NO.63/1, SITUATED AT BOLHEGAON, TAL. NAGAR, DIST. AHMEDNAGAR WERE SOLD IN THE YEAR UNDER CONSIDERATION FOR A SUM OF RS.26,65,0 00/-. THEREFORE, THE GAINS EARNED BY THE ASSESSEE ON SALE OF THE LANDS HELD AS INVESTMENT CONSTITUTE CAPITAL GAINS. LD. COUNSEL ALSO SUB MITTED THAT THESE FACTS WERE NOT PROPERLY MADE OUT BEFORE THE AO AND CIT(A). THEREFORE, LD. COUNSEL FOR THE ASSESSEE PRAYED FOR REMA NDING GROUND NO.3 TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER CONSIDERIN G THE FACTS OF THE CASE. HE ALSO SUBMITTED THAT PAGE 29 OF THE PAPER BOOK CONTAINS THE BALANCE SHEET FOR THE MARCH 2000 AND THAT IS AVAILA BLE IN THE RECORDS OF THE AO FOR THE RELEVANT ASSESSMENT YEAR. IN RESPONSE TO THE ABOVE, LD. DR FOR THE REVENUE SUBM ITTED THAT THIS PART OF ARGUMENTS/EXPLANATIONS WERE NOT PROVIDED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. HOWEVER, LD. DR RELIED ON THE FINDING OF THE AO/CIT(A) DUTIFULLY. 8. LD. DR FOR THE REVENUE SUBMITTED THAT THE ASSESSEE DID NOT RAISE THIS ISSUE OR ARGUMENTS BEFORE THE AO OR THE CIT(A). IN THAT CASE, OFFICERS CANNOT BE HELD RESPONSIBLE FOR NOT TAKING THE FACTS INTO 4 CONSIDERATION. IT IS THE ASSESSEES MISTAKE THAT THIS AS PECT WAS NOT RAISED OR ADJUDICATED BY THE LOWER AUTHORITIES. 9. WE HEARD BOTH THE PARTIES ON THIS ISSUE OF REMANDING GROUND NO.3 TO THE FILE OF AO. ON PERUSAL OF THE ORDERS OF TH E AO AND THE CIT(A), IT IS UNSUSTAINABLE FINDING THAT THE HEAD OF INCOME FO R TAXING THE GAINS EARNED BY THE ASSESSEE ON SALE OF LANDS HELD AS IN VESTMENTS WAS NOT THE SUBJECT MATTER OF ADJUDICATION IN THE ASSESSMEN T/APPELLATE PROCEEDINGS. THE FACTS RELATING TO MAINTENANCE OF TWO POR TFOLIOS (1) FOR INVESTMENT IN FIXED ASSETS AND (2) STOCK IN TRADE WERE NE VER RAISED BEFORE THE LOWER AUTHORITIES. REASONS FOR NOT FILING THE BALA NCE SHEET FOR THE YEAR UNDER CONSIDERATION NEEDS TO BE EXAMINED BY T HE AO IN THE REMAND PROCEEDINGS. THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE SHOULD BE REMANDED TO THE FILE OF AO FOR FRESH ADJUDICATION. ASSESSEE IS DIRECTED TO FILE THE BALANCE SHEET FOR THE A.Y. 2000-01 AND OTHER EVIDENCES TO DEMONSTRATE THAT THE GAINS EARNED ON SALE OF PROPERTIES ARE UTILIZED FOR RE-INVESTMENT AND NOT FOR THE BUSINESS ASSET S HELD AS STOCK IN TRADE. AO SHALL GRANT REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESS EE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF APRIL, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 18 TH APRIL, 2018 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-1, PUNE 4. CIT-1, PUNE 5. , , A BENCH PUNE; 6. / GUARD FILE.