PRADEEP BRAHMWAR, Ajmer V. ITO, Ajmer

MA 20/JPR/2017

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5707 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 08-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JHA J CIT DHK
• Assessee Lawyers: SAURABH PORWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Principle of natural justice; Cost of acquisition; Fair market value
• Section: 45(2); 50C; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM M.A. NO. 20/JP/2017 (ARISING OUT OF ITA NO. 858/JP/2014) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR: 2010-11 PRADEEP BRAHMWAR, 204, HARIBHAU UPADHYAY NAGAR, EXTENSION, AJMER- 305001. CUKE VS. INCOME TAX OFFICER, WARD 1(3), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ALFPB 6046 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SAURABH PORWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJENDRA JHA (JCIT) LQUOKBZ DH RKJH[K @ DATE OF HEARING: 19/05/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 08/06/2017 VKNS'K@ ORDER PER: KUL BHARAT, J.M. THE ASSESSEE HAS FILED THIS MISC. APPLICATION ON 13 /01/2017 SEEKING RECALLING OF THE ORDER OF THE ITAT, JAIPUR BENCH, JA IPUR DATED 16/12/2016 PASSED IN ITA NO. 858/JP/2014 FOR A.Y. 2010-11. 2. IN THIS CASE, THE ASSESSEE FILED APPEAL VIDE ITA NO. 858/JP/2014 FOR A.Y. 2010-11 AGAINST THE ORDER OF LEARNED CIT(A), AJ MER DATED 30/09/2014. THIS BENCH OF THE ITAT, JAIPUR HAS DECIDED APPEAL IN ABSENCE OF THE ASSESSEE AND DISMISSED THE APPEAL BY CONFIRMING THE ORDER OF THE LD. CIT(A). MA 20/JP/2017_ PRADEEP BRAHMWAR VS ITO 2 3. THE ASSESSEE FILED THIS MISC. APPLICATION AND EXP LAINED THE REASONS AS TO WHY THE HEARING OF APPEAL ON 05/12/2016 COULD NOT BE ATTENDED. HE SUBMITTED THAT DUE TO FAMILY FUNCTION THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO ATTEND THE HEARING. FOR TAKING ADJOURNMENT ON TH E DATE FIXED HE HAD SENT AN ADJOURNMENT APPLICATION THROUGH SPEED POST. WITH REGARD TO THE MERIT OF THE CASE IS CONCERNED, HE HAS SUBMITTED AS UNDER:- 1. THAT THE ASSESSEE SHRI PRADEEP BRAHMWAR HAD REC EIVED HALF SHARE IN THE ANCESTRAL PROPERTY SITUATED AT THOK MALIYAN - III, AJMER SARHAD, NARELI, AJMER ON DEATH OF HIS FATHER LATE SHRI MADAN SINGH IN APRIL1973. FURTHER HIS MOTHER, SMT. PREM KUMARI HAD RELINQUISHED HER R IGHT IN THE SAID PROPERTY (1/2 SHARE) AS PER NOMINATION NO. 255 ON 2 1.01.2003 IN FAVOR OF HIS SON SHRI PRADEEP BRAHMAWAR SMT. PREM ALSO BECAM E OWNER OF 14 SHARE IN APRIL1973 ON DEATH OF HUSBAND. THUS THE A SSESSEE RECEIVED IN TOTAL LAND MEASURING 36 BIGHA AND 5 BISWA AT KHATA NO. 1707 THOK MALIYAN, NEAR NARELI VILLAGE, AJMER. 2. THE FAIR MARKET OF THE LAND AS ON 01.04.1981 WAS ESTIMATED AT RS. 3,50,000.00 AS COST TO THE PREVIOUS OWNERS SINCE AS SET IS ANCESTRAL AND WAS ACQUIRED BY PREVIOUS OWNERS PRIOR TO 01.04.1981 IN TERMS OF SECTION 149. 3. THE PREVIOUS OWNER (SMT. PREM KUMARI) ALSO SPENT RS. 3,50,000.00 FOR MAKING FENCING AND OTHER DEVELOPMENT EXPENDITURE RE LATED TO SAID LAND IN THE FINANCIAL YEAR 2002-03. 4. THE SAID LAND WAS CONVERTED INTO STOCK IN TRADE BY ASSESSEE ON 31.03.2003 FOR RS. 7,50,000.00 AND TAKEN INTO BOOKS BY CONVERTING IN STOCK IN TERMS OF PROVISIONS OF SECTION 45(2) OF IN COME TAX ACT, 1961. 5. NOW THE SAID STOCK OF LAND IS SOLD ON 07.10.2009 FOR RS. 10,00,000.00. THUS IN THE FINANCIAL YEAR 2009-10 THE GAIN ON SALE OF LAND AS PER THE MA 20/JP/2017_ PRADEEP BRAHMWAR VS ITO 3 PROVISIONS OF SECTION 45(2) I.E. (AFTER CONVERSION) OF CAPITAL ASSET INTO STOCK IN TRADE SHALL BE AS UNDER:- (A) BUSINESS PROFIT FROM TRADING OF LAND (AS PER SECTION 44AD) SALE PRICE (BEING PRICE OF REGISTRY) 1000000.0 0 LESS: COST OF LAND TAKEN AS STOCK IN TRADE ON 31. 03.03 -750000.00 ----------------- BUSINESS PROFIT FROM SALE OF LAND 250000.00 (B) CAPITAL GAIN SALE PRICE BEING PRICE OF CONVERSION 750000.00 OF CAPITAL ASSETS INTO STOCK IN TRADE LESS: COST OF ACQUISITION BEING FAIR -350000.0 0 MARKET VALUE AS ON 01.04.1981 LESS: COST OF IMPROVEMENT BEING COST OF -350000 .00 FANCING AND OTHER EXPENDITURE INCURRED BY PREVIOUS OWNER SMT. PREM KUMARI (IN TERMS OF SECTION 49) ---------------- CAPITAL GAIN ON SALE OF LAND 50000.00 MOREOVER THE PROVISIONS OF SECTION 50C WERE APPLIC ABLE ONLY ON CAPITAL ASSET AND ONLY W.E.F. 01.04.2003.THUS THE PROVISION S OF SECTION 50C ARE NOT APPLICABLE TO THE SAID TRANSACTION SINCE CAPITA L ASSETS CONVERTED IN STOCK IN TRADE ONLY ON 31.03.2003 WHILE THE PROVISI ONS OF SECTION 50C ARE APPLICABLE W.E.F. 01.04.2003. THUS NO QUESTION OF A PPLICABILITY OF PROVISIONS OF SECTION 50C ARE THERE ON CONVERSION O F CAPITAL ASSET INTO STOCK AS ON 31.03.2003. FURTHER ONCE CAPITAL ASSET CONVERTED INTO STOCK E.G. BUSINESS ASSET THE PROVISION OF SECTION 50C ON SUCH BUSINESS ASSET ARE NOT APPLICABLE. REFER IT HAS BEEN RECENTLY HELD BY ITAT MUMBAI IN CASE OF NEELKAMAL REALTORS & ERECTORS INDIA PRIVATE LIMITED V/S DCIT (ITA NO. 11 43/MUM/2013) THAT PROVISIONS SECTION 50C ARE APPLICABLE ON CAPITAL A SSETS AND NOT MA 20/JP/2017_ PRADEEP BRAHMWAR VS ITO 4 APPLICABLE ON ASSETS HELD AS STOCK IN TRADE AND T HAT TOO PROSPECTIVELY. FURTHER ONCE CAPITAL ASSET CONVERTED INTO STOCK E.G. BUSINESS ASSET THE PROVISIONS OF SECTION 50C ON SUCH BUSINE SS ASSET ARE NOT APPLICABLE. AS HELD IN CASE OF ITAT MUMBAI IN CASE OF NEELKAMAL REALTORS & ERECTORS INDIA (P) LTD V/S DCIT (ITA NO. 1143)MUM /2013) THAT PROVISIONS OF SECTION 50C ARE APPLICABLE ON CAPITA L ASSETS AND NOT APPLICABLE ON ASSETS HELD AS STOCK IN TRADE AND T HAT TOO PROSPECTIVELY. THE DECISION AS CITED BY A.O. OF HONBLE GUJRAT HI GH COURT - CIT V/S PREMJI GOPALBHAI 113 ITR 785 (GUJ.) IS ALSO IN FAVOR OF AS SESSEE & GROSSLY LIES ONUS ON DEPARTMENT TO PROVE OTHERWISE. THUS MERELY SUSPICIOUS, SINGLE TRANSACTION, CANNOT MAKE LIABLE THE CHANGE IN ASSESSEES CLAIM UNTIL NOT PROVED BY ACT. A SING LE TRANSACTION CANNOT BE CONSIDERED AS BUSINESS ACTIVITY IS AGAIN A WRONG MISCONCEPTION SINCE SECTION 28 HAS DEFINED THE BUSINESS CONCEP T:- ACTIVITY MUST BE REAL, SUBSTANTIAL AND ORGANIZED C OURSE OF ACTIVITY SYSTEMATIC AND ORGANIZED OR CONDUCT WITH A SET PURP OSE. THE EXPRESSION BUSINESS IS A WELL KNOWN EXPRESSION IN INCOME TAX LAW. CIT V/S DISTRIBUTORS (BARODA) (P) LTD. (1972) 83 I TR 377 (SC) NARAIN SWADESHI WVG. MILLS V/S CEPT (1954) 26 ITR 765 (SC) CIT V/S ADMIRALTY FLATS MOTEL (1982) 133 ITR 895 ( MAD.) BUSINESS ACTIVITY CAN SOMETIMES BE QUIESCENT; NOT NECESSARILY BE CONTINUOUS. CIT V/S CALCUTTA NATIONAL BANK LTD. (1959) 37 ITR 171 (SC.) ALTERNATIVELY; EVEN IF AOS VIEW FOR LONG TERM CAP ITAL GAIN IS SUSTAINED; THAN THE COST OF ACQUISITION OF SAID LAN D SHOULD BE TAKEN IN TERMS OF SECTION 49(1) E.G. THE COST TO THE PREVIOU S OWNERS IS DEEMED TO BE THE COST OF ACQUISITION TO THE ASSESSEE. (FROM T HE PREVIOUS OWNER FATHER LATE MADAN SINGH RECEIVED RIGHTS ON 08.03.19 85 (REFER RELEASE DEED). HOWEVER LATE MADAN SINGH ACQUIRED THIS LAND PRIOR TO 01.04.1981 MA 20/JP/2017_ PRADEEP BRAHMWAR VS ITO 5 (SINCE EXPIRED IN APRIL 1973). THUS IN TERMS OF SE CTION 49(L)(C)(I) BY SUCCESSION, IN HERITANCE OR DEMOLITION & THUS THE C OST OF ACQUISITION OF SAID CAPITAL ASSET WOULD BE TAKEN AT FAIR MARKET VA LUE AS ON 01.04.1981 / SECTION 55(2) OR DATE OF ACQUISITION BY PREVIOUS OW NER BEING OR ON BEFORE 01.04.1981 SO FMV AS ON 01.04.1981. SINCE THE LAND WAS ACQUIRED BY LATE MADAN SINGH BE FORE 01.04.1981 HENCE THE INDEXATION COST SHOULD ALSO HAVE BEEN GRA NTED FROM THAT DATE IN VIEW OF PROVISIONS IN ACT BELOW:- WHEN THE ASSET WAS ACQUIRED UNDER THE CIRCUMSTANCE S GIVEN BY SECTION 49(1) IF AN ASSET WAS ACQUIRED BY GIFT OR WILL (O R UNDER ANY CIRCUMSTANCES GIVEN BY SECTION 49(1), INDEXED COST OF ACQUISITION AT THE TIME OF ITS TRANSFER SHALL BE CALCULATED AS FOLLOWS COST OF ACQUISITION * COST INFLATION INDEX (CII) F OR THE YEAR IN WHICH THE ASSET IS TRANSFERRED / CII FOR THE YEAR IN WHICH AS SET WAS FIRST HELD BY THE PREVIOUS OWNER OR (1981-82), WHICHEVER IS LATER. THE BOMBAY HIGH COURT IN THE CASE OF CIT V/S MANJU LA J. SNAH (2012) 204 TAXMAN 691 HAS HELD THAT INDEXED COST OF ACQUISITIO N HAS TO BE COMPUTED WITH REFERENCE TO YEAR IN WHICH PREVIOUS OWNER FIRS T HELD ASSET (AND NOT YEAR IN WHICH THE ASSESSEE BECAME OWNER OF ASSET). A SIMILAR RULING IS GIVEN BY THE DELHI HIGH COURT IN CASE OF ARUN SHUNG LO TRUST V. CIT (2012) 2065 TAXMAN 456. PRACTICAL PROBLEMS ARE SOLVED IN T HE RECKONER ON THE BASIS OF THESE HIGH COURT RULINGS. THUS ON ACCOUNT OF DISMISSAL OF ASSESSEES APPEAL THE ASSESSEE HAS BEEN DEPRIVED FROM NATURAL JUSTICE AS SIMILAR ISSUES BY HONBLE BENCHS HAVE BEEN DECIDED IN FAVOUR OF ASSESSEE AND REQUEST TO A MEND THE ORDER AS PASSED AND ALSO REQUEST TO RECALL SUCH ORDER AND PR OVIDE FRESH OPPORTUNITY OF HEARING. 4. THE D.R. HAS OPPOSED THE PRAYER OF RECALLING OF O RDER DATED 16/12/2016. MA 20/JP/2017_ PRADEEP BRAHMWAR VS ITO 6 5. IN VIEW OF THE SUBMISSION OF THE ASSESSEE THAT DU E TO FAMILY FUNCTION, HE COULD NOT APPEAR ON THE DATE OF HEARING. HE HAS PLAUSIBLE REASON TO NOT TO APPEAR BEFORE THE BENCH, THEREFORE CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE, WE REC ALL ORDER DATED 16/12/2016 PASSED BY THIS BENCH IN ITA NO. 858/JP/2014 FOR THE A.Y. 2010-11. ACCORDINGLY THE PRESENT M.A. FILED BY THE ASSESSEE IS ALLOWED. THE REGISTRY IS DIRECTED TO FIX THE CASE AS PER REGULAR COURSE OF H EARING. 6. IN THE RESULT, THE MISC. APPLICATION IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/06/2017. SD/- SD/- FOE FLAG ;KNO DQY HKKJR (VIKRAM SINGH YADAV) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08 TH JUNE, 2017 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRADEEP BRAHMWAR, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD 1(3), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (MA NO. 20/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR