The ACIT, Central Circle-2, Surat V. Chittusing M.Chauhan, SILVASSA

ITSSA 145/AHD/2009

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8739 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-01-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 10-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C PATWARI
• Keywords: Capital asset; Business income; Search and seizure; Additional evidence
• Section: 143(3); 153A; 132

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ %& %& %& %& , , , , &' ( & &' ( & &' ( & &' ( & ' ' ' ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND TEJ RAM MEENA, ACCOUNTANT MEMBER) IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 [ASSTT.YEARS : 2002-2003, 2004-2005, 2005-2006 AND 2006-2007] ACIT, CENT.CIR.2 SURAT. /VS. SHRI CHITTUSINGH M. CHAUHAN AVDESH MANSION PLOT NO.262/4/26-A PWD ROAD SILVASSA 396 230 U.T. OF DADRA & NAGAR HAVELI PAN : ABNPC 6044 J ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / &/ REVENUE BY : SHRI D.C.PATWARI 1% . / &/ ASSESSEE BY : SHRI HARDIK VORA 2 . %3'/ DATE OF HEARING : 29 TH JANUARY, 2013. 456 . %3'/ DATE OF PRONOUNCEMENT : 15-2-2013 &7 / O R D E R PER T.R. MEENA, ACCOUNTANT MEMBER: THESE FOUR APPEALS BY THE REVENUE ARE AGAINST THE COMMON ORDER OF THE LEARNED CIT(A)-II DATED 7.8.2009 FOR THE ASSESSMENT YEARS 2 002-2003, 2004- IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 -2 2005 AND 2006-2007. SINCE COMMON ISSUES ARE INVOLV ED IN ALL THESE FOUR APPEALS, WE DISPOSE OF THE SAME BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. AS AFORESAID, SINCE GROUNDS ARE SIMILAR IN ALL THESE APPEALS, WE REPRODUCE BELOW THE GROUNDS RAISED IN ITA NO.145/AH D/2009: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE INCOME AS CAPITAL GAINS AS AGAINST BUSINESS INC OME ASSESSED BY THE AO. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN N OT APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSE E IS ENGAGED IN THE ACTIVITY OF TRADING OF LAND. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN N OT APPRECIATING THE FINDINGS OF THE AO THAT THE INCOME EARNED ON SALE OF LAND NEEDS TO BE TAXED AS BUSINESS INCOME. 3. THE BRIEF FACTS, AS CAN BE SEEN FROM THE ORDER O F THE AUTHORITIES BELOW THAT SEARCH AND SEIZURE OPERATION UNDER SECTI ON 132 OF THE IT ACT WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 27.12.2006. THE RETURN OF INCOME IN RESPONSE TO TH E NOTICE UNDER SECTION 153A(A) WAS FILED BY THE ASSESSEE ON 28.3.2 008, AND THEREAFTER, THE CASE OF THE ASSESSEE WAS FOR SCRUTI NY ASSESSMENT. THE ASSESSEE DERIVED INCOME FROM LAND SALE-PURCHASE BUS INESS, SHARE IN PARTNERSHIP FIRM AND MEDICAL PRACTICE. ON PERUSAL OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, IT HAS BEEN OBSERVED BY T HE AO THAT THE ASSESSEE HAS BEEN ENGAGED IN PURCHASE AND SALE OF L AND IN A REGULAR AND FREQUENT MANNER, BUT HAS SHOWN THE INCOME FROM SUCH BUSINESS AS EMANATING FROM THE HEADS OF CAPITAL GAINS. THE A O, KEEPING IN MIND THE FREQUENCIES OF THE SALE AND PURCHASE OF TH E LAND, ISSUED IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 -3 NOTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WHY INCO ME SHOULD NOT BE TREATED AS BUSINESS INCOME AS AGAINST THE CLAIM OF CAPITAL GAINS. THE ASSESSEE REPLIED THAT THE TRANSACTIONS PERTAINING T O SALE-PURCHASE OF THE LAND IN QUESTIONS ARE NOT REGULAR IN ASSESSMENT YEA R AND PERIOD OF HOLDING SHOWS FROM MINIMUM ONE YEAR TO MAXIMUM 10 Y EARS, AND THEREFORE THE IMPUGNED TRANSACTION OF SALE-PURCHASE ARE FOR THE PURPOSE OF INVESTMENT AND NOT FOR BUSINESS, AND THE REFORE THE INCOME SHOULD BE TREATED AS CAPITAL GAINS AS CLAIMED IN TH E RETURN OF INCOME. HOWEVER, THE AO, HAVING NOT SATISFIED WITH THE EXPL ANATIONS OF THE ASSESSEE, HELD THAT THE IMPUGNED TRANSACTIONS IN SA LE AND PURCHASE OF THE LAND ARE PLANNED, RECURRENT AND FREQUENT TRADES , AND THAT MOTIVE OF THE TRACTIONS HAVE BEEN TO EARN PROFIT THROUGH SALE UPON APPRECIATION OF THE LAND VALUE, AND ACCORDINGLY, THE AO TREATED THE INCOME FROM SALE OF LAND AS BUSINESS INCOME AND NOT CAPITAL GA INS AS CLAIMED BY THE ASSESSEE. 4. THE AGGRIEVED ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) AFTER CONSIDERING ALL THE ASPECTS HELD THAT THE ASSESSEE HAS HELD THE LAND GENERALLY FOR M ORE THAN THREE YEARS AND NOT FREQUENTED TRANSACTIONS, ACCORDINGLY, THE L EARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE TO TREAT THE INCO ME FROM SALE AND PURCHASE OF THE LAND AS CAPITAL GAIN. THE AGGRIEV ED REVENUE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE AO. HE SUBMITTED THAT THE DETAILS OF THE TRANSACTIONS FURN ISHED BY THE ASSESSEE SHOWED THAT THE IMPUGNED TRANSACTIONS IN LAND WERE NOT ISOLATED, BUT PLANNED, RECURRENT AND FREQUENT TRADES AS HELD BY T HE AO. HE FURTHER IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 -4 SUBMITTED THAT THE MOTIVE OF THE ASSESSEE WAS TO EA RN PROFIT RATHER THAN TO INVEST IN THE LAND, AND THAT THE TRANSACTIONS WE RE IN THE NAME OF THE PARTNERSHIP FIRM, WHICH INDICATE THAT THE SALE AND PURCHASE OF THE LAND WERE FOR THE BUSINESS PURPOSE AND NOT FOR CREATION OF INVESTMENT. THE LEARNED DR SUBMITTED THAT CONSIDERING ALL THE ASPEC TS BOTH IN FACTS AND THE LAW SUPPORTED BY THE LEGAL DECISIONS AND CBDT C IRCULAR, THE AO IS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE TO TREAT THE INCOME FROM THE SALE OF LAND AS CAPITAL GAIN, AND THEREF ORE, IT IS SUBMITTED THAT THE ORDER OF THE AO SHOULD BE CONFIRMED. THE LEARNED DR ALSO RELIED ON THE JUDGMENT OF DEHI HIGH COURT IN THE CA SE OF CIT VS. ANIL KUMAR BHATIA, ITA NOS.1626, 1632, 1998, 2006, 2019 & 2010/2010 DATED 7-8-2012 REGARDING THE POWER OF THE AO TO MAK E REOPENING AND REASSESSMENT NOTWITHSTANDING THAT THE ASSESSEE FILE D RETURNS BEFORE THE DATE OF SEARCH WHICH STOOD PROCESSED UNDER SECTION 143(1)(A) OF THE ACT. HE ALSO RELIED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF HEMACHAND HIRACHAND SHAH VS. C IT, 83 TAXMAN 626 (GUJ) TO THE PROPOSITION THAT WHEN THE A SSESSEE WAS CARRYING LARGE NUMBER OF TRANSACTIONS IN LANDS, WIT HIN A REASONABLY SHORT PERIOD OF TIME, SHOWED THE ORGANIZED BUSINESS ACTIVITY OF THE ASSESSEE, AND THEREFORE PROFIT WHICH ACCRUED FROM S UCH TRANSACTIONS WOULD BE TAXABLE AS BUSINESS INCOME. THIRD DECISIO N RELIED ON BY THE LEARNED DR IS THAT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF A.N.SETH VS. CIT, 74 ITR 852 TO THE PROPOSITION THA T CONDUCT OF THE ASSESSEE SHOWED THAT ASSESSEE WAS TAKING STEPS TO S ELL THE LAND FOR MAKING HUGE PROFITS, WHICH INDICATED THAT THE ASSES SEE WAS DEALING IN LAND AS A DEALER OR A TRADE, AND THAT IT WAS AN ADV ENTURE IN THE NATURE OF TRADE. IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 -5 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE IMPUGNED TRANSACTIONS IN THE SALE-PURCHASE OF THE LAND WERE ON TWO COUNTS; ONE FOR INVESTMENT AND OTHER FOR BUSINESS INCOME. THE ASSESSEE HAS ALREADY DECLARED INCOME FROM TRADING OF THE LAND IN THE PROPRIETARY CONCERN KNOWN AS RAM ENTERPRISES. THE INVESTMENT M ADE IN THE LAND HAS ALREADY REFLECTED IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS RIGH T IN TRADING CAPITAL ASSETS AND BUSINESS ASSETS, AND THE ASSESSEE HAS SI NCE BEEN MAINTAINING TWO SEPARATE ACCOUNTS FOR THIS PURPOSE. IT IS SUBMITTED THAT THE AO, WHILE REJECTING THE CLAIM OF THE ASSES SEE, WAS SIMPLY CARRIED BY THE ASSUMPTION THAT THE MOTIVE BEHIND TR ANSACTION IN LAND WAS FOR THE PURPOSE OF EARNING INCOME AND NOT INVES TMENT, WITHOUT SUPPORT OF ANY EVIDENCE. THE LEARNED AR SUBMITTED THAT THE FACTUM OF THE TRANSACTION IN LAND DEALING HAS BEEN ACCEPTED B Y THE AO IN THE ASSESSMENT UNDER SECTION 143(3) FOR A.Y.2004-2005, AND NO ADDITIONAL EVIDENCE HAS BEEN FOUND BY THE AO DURING THE SEARCH AND SEIZURE OPERATION, TO SUPPORT THE CASE OF THE REVEN UE THAT MOTIVE OF THE ASSESSEE DEALING IN SALE-PURCHASE OF THE LAND I N QUESTION WAS FOR EARNING OF THE PROFIT RATHER THAN MAKING CAPITAL AS SETS FOR THE INVESTMENT. THE LEARNED CIT(A) HAS RIGHTLY HELD TH AT LOOKING TO THE FACTS OF THE CASE, THE AO WAS NOT JUSTIFIED IN TREA TING THE SAME AS BUSINESS INCOME. WITH REGARD TO THE VARIOUS JUDGME NT CITED BY THE LEARNED DR, THE LEARNED AR OF THE ASSESSEE SUBMITTE D THAT ALL THE JUDGMENTS CITED BY THE LEARNED AR ARE DISTINGUISHAB LE ON FACTS, INASMUCH AS, SOME ARE BASED EVIDENCES COLLECTED DUR ING THE SEARCH ACTION AND OTHERS ARE DURING THE REGULAR ASSESSMENT . IN THE CASE OF THE ASSESSEE, THE ASSESSMENTS WERE MADE UNDER SECTION 1 43(3) R.W.S. IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 -6 153A, AND THAT NO CLINCHING EVIDENCES WERE BROUGHT ON BY THE REVENUE DURING THE SEARCH ACTION. TO SUPPORT THE CA SE OF THE ASSESSEE, THE LEARNED AR RELIED ON CERTAIN DECISIONS VIZ. DEC ISION OF THE TRIBUNAL IN THE CASE OF LMJ INTERNATIONAL LTD. VS. DCIT, 119 TTJ (KOL) 214 TO THE PROPOSITION THAT WHEN NO INCRIMINA TING MATERIAL FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSES SMENT YEARS, AND SUCH ASSESSMENT HAS BEEN CONCLUDED UNDER SECTION 14 3(3), THE ASSESSMENT FOR SUCH YEARS CANNOT BE DISTURBED. REL IANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. NAISHADH V. VACHHARAJANI, IT APPEAL (L) NO.1042 OF 2001 DATED 22-9-2011. RELIANCE WAS ALSO PLACED ON H ONBLE DELHI HIGH COURT IN THE CSE OF CIT VS. AVINASH JAIN, ITA NO.703/2012 DTD. 9.01.2013. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW, AND ALSO VARIOUS JUDGMENTS C ITED BY BOTH THE PARTIES. FIRSTLY, WE FIND THAT THE AO HAD NOT SCR UTINIZED THE CASE UNDER SECTION 143(3) IN RESPECT OF THE ASSESSMENT Y EARS 2002-2003, 2005-2006 AND 2006-2007. THE PURCHASE AND SALE TRA NSACTIONS OF THE LAND WERE MADE WITHIN THREE YEARS OR MORE THAN THRE E YEARS. IN THE PAST ALSO NUMBER OF TRANSACTION IN LAND HAD BEEN MA DE BY THE ASSESSEE, THEREFORE, THE PURCHASE AND SALE TRANSACT IONS OF LAND MADE WITHIN THREE YEARS ARE HELD AS BUSINESS TRANSACTION AND THOSE TRANSACTIONS MADE, HAVING PERIOD HOLDING FOR MORE T HAN THREE YEARS AS INVESTMENT. ACCORDINGLY, WE HOLD THAT ONE SALE TR ANSACTION IN A.Y.2002-2003 ENTERED INTO WITH SHRI RAGHUBHAI CHAN DRA, TRANSACTION WITH BADRUDDIN N. SHKIKH & OTHERS FOR A .Y.2005-2006 AND ANOTHER TRANSACTION WITH ASPI DORABSA & OTHERS FOR A.Y.2006- IT(SS)A NOS.145, 146, 147 AND 148/AHD/2009 -7 2007 ARE HELD AS INVESTMENT AND THE REMAINING TRANS ACTIONS IN THESE TWO YEARS, I.E. A.Y.2002-2003 AND 2005-2006 ARE TO BE TREATED AS BUSINESS TRANSACTIONS. IN A.Y.2004-2005, THE AO HA D MADE SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT, AND NO ADDITION WAS MADE BY HIM, AS THE CLAIM OF THE ASSESSEE WAS ACCEP TED. DURING THE COURSE OF SEARCH OPERATION, NO EVIDENCE WAS FOUND B Y THE REVENUE TO ESTABLISH THAT THE IMPUGNED TRANSACTIONS IN THIS AS SESSMENT YEAR ARE BUSINESS TRANSACTIONS AND MOTIVE FOR SUCH TRANSACTI ONS IS FOR EARNING THE PROFIT. AS HELD IN VARIOUS CASE LAWS DISCUSSED ABOVE, WHEN NO INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARC H RELATING TO ANY ASSESSMENT YEARS, AND SUCH ASSESSMENT HAS BEEN CONC LUDED UNDER SECTION 143(3), THE ASSESSMENT FOR SUCH YEARS CANNO T BE DISTURBED. THEREFORE, WE HOLD THAT NO ADDITION FOR ASSESSMENT YEAR 2004-2005 UNDER SECTION 153A CAN BE MADE BY THE REVENUE. THE AO IS DIRECTED TO RE-CALCULATE THE BUSINESS INCOME AS WELL AS INVE STMENT AS PER OUR ABOVE OBSERVATIONS. THUS, WE PARTLY ALLOW THIS GRO UND OF THE REVENUE. 8. SINCE GROUNDS RAISED IN ALL THE REVENUES APPEAL S ARE SIMILAR, THE GROUNDS RAISED IN ALL REMAINING APPEALS ARE DIS POSED OF, AS PARTLY ALLOWED, AS PER OUR ABOVE OBSERVATIONS. 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( %& %& %& %& / TEJ RAM MEENA) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER