Shri Kanmal Kishanlal HUF, Indore V. The Income Tax Officer, 2(2), Indore

MA 63/IND/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8079 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Keywords: Capital asset; Business income; Date of conversion; Fair market value

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA , AM M.A. NO. 63/IND/2012 ARISING OUT OF ITA NO.436/IND/2010 A.Y. 2006-07 KANMAL KISHANLAL HUF INDORE :: APPELLANT VS INCOME TAX OFFICER 2(2), INDORE :: RESPONDENT APPELLANT BY SHRI MANJEET SACHDEVA RESPONDENT BY SHRI ARUN DEWAN DATE OF HEARING 11 .05.2012 DATE OF PRONOUNCEMENT 2 1 .05.2012 O R D E R PER R.C. SHARMA, AM THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASSESSEE TO RECTIFY A MISTAKE ALLEGED TO BE APPAREN T IN THE ORDER OF THE TRIBUNAL DATED 7.2.2012. 2 2. THROUGH THIS PETITION, THE LD.COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO PART OF THE ORD ER WHEREIN COMPUTATION OF BUSINESS PROFITS BY THE ASSE SSING OFFICER AT RS. 10,43,719/- WAS CONFIRMED BY THE TRIBUNAL. THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE WAS AS UNDER :- THAT THE ASSESSEE OWNED A RESIDENTIAL HOUSE PROPERTY ADMEASURING 3280 SQ.FT. AT 66, BADA SARAFA, INDORE. IT WAS PURCHASED BY SHRI KANMAL VIDE REGISTRY DEED NO. 1A/589 DATED 31.05.1933. AFTER DEATH OFSHRI KANMAL THE SAID PROPERTY DEVOLVED TO SHRI KANMAL KISHANLAL (HUF) SINCE MORE THAN 30 YEARS. THE HUF IS AT PRESENT HEADED BY KARTA SHRI SATYANARAYAN LADHA. THAT THE ASSESSEE DECIDED TO CONSTRUCT A RESIDENTIA L CUM COMMERCIAL COMPLEX AT THIS PLACE. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S KRISHNA BUILDERS TO CONSTRUCT THE BUILDING. AS PER THE MEMORANDUM OF UNDERSTANDING THE BUILDER SHALL CONSTRUCT THE BUILDING AND IN LIEU OF COST OF CONSTRUCTION BORNE BY THEM, THE BUILDER WILL GET 35 % OUT OF SALE PRICE OF SHOPS/FLATS AND THE ASSESSEE W IL GET 65% TOWARDS CONSIDERATION OF SALE VALUE OF PROPORTIONATE LAND SOLD ALONG WITH THE CONSTRUCTED AREA. THAT THE TOTAL AREA OF THE LAND IS 3280 SQ.FT. AND TOTAL CONSTRUCTED AREA IS 11718 SQ.FT. TOTAL 51 SHO PS WERE CONSTRUCTED AND OUT OF THESE 16 SHOPS WERE SOLD DURING THE YEAR. THE ASSESSEE CONVERTED THE PROPERTY INTO STOCK IN TRADE AS ON 01.04.2005 AND FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF CONVERSION INTO STOCK IN 3 TRADE WAS TAKEN AS RS. 12136000/- AS PER THE GUIDELINE AND THE SAME WAS ACCEPTED BY THE DEPARTMENT THAT AFTER CONVERSION OF THE SAID PROPERTY INTO STO CK IN TRADE, THE INCOME FROM THE SAID PROPERTY IS TAXABLE AS CAPITAL GAIN UPTO THE DATE IT WAS HELD A S CAPITAL ASSETS AND BUSINESS INCOME AFTER THE DATE O F CONVERSION. THE BUSINESS INCOME IS CALCULATED AS UNDER :- AS PER ASSESSEE :- FMV OF LAND 1,21,36,000 SALES 30,65,595 AS ON DATE OF CONVERSION INTO STOCK IN TRADE CLOSING STOCK 90,25,421 NET LOSS 44,984 ------------------ ------------------- TOTAL 1,21,36,000 1,21,36,000 ------------------ ------------------- AS PER ASSESSING OFFICER :- FMV OF LAND(65%) 1,21,36,000 SALES 30,65,595 AS ON DATE OF CONVERSION INTO STOCK IN TRADE CLOSING BALANCE 58,66,524 (65%) PROFIT 10,43,719 ------------------ ----------------- TOTAL 89,32,119 89,32,119 ------------------ ----------------- THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THE BUSINESS LOSS OF RS. 44984/- AS CALCULATED ABOVE BY THE ASSESSEE AND ERRED IN CALCULATING THE BUSINESS PROF IT OF RS. 1043719/-. THE LEARNED ASSESSING OFFICER AFTER ACCEPTING THE S ALES PROCEED OF RS.30,65,595/- AND FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.2005 THE DATE OF CONVERSION OF RS. 1,21,36,000/- ERRED IN CALCULATING THE BUSINESS INC OME AT RS. 10,43,719/-. THE LEARNED ASSESSING OFFICER WHILE CA LCULATING THE BUSINESS INCOME ERRED IN TAKING 65% OF THE FAIR MARKET 4 VALUE OF THE PROPERTY AS ON 01.04.2005 WHICH COMES TO RS. 78,88,400/- (65% OF RS.1,21,36,000/-0 AND ALSO ERRE D IN TAKING CLOSING STOCK AT 65% WHICH COMES TO RS. 58,6 6,524/- (65% OF RS. 90,25,421/-) WITHOUT CONSIDERING THAT T HE SHARE OF BUILDER OF 35% AS PER CLAUSE NO. 2 & 3 OF THE AG REEMENT BETWEEN THE ASSESSEE AND THE BUILDER WAS IN THE SAL E PROCEEDS AND NOT IN THE VALUE OF THE LAND. THE 35% SHARE OF THE BUILDER IN SALE PROCEED WAS BECAUSE OF THE FACT THAT ALL THE COST OF CONSTRUCTION WAS TO BE BORNE BY THE BUI LDER. COPY OF THE AGREEMENT IS ENCLOSED HEREWITH. THAT THE LEARNED ASSESSING OFFICER ERRED IN TAKING THE 65% OF THE FAIR MARKET VALUE AND CLOSING STOCK ON THE PARF T OF THE ASSESSEE AND CALCULATED THE BUSINESS INCOME WHICH I S NOT BASED ON THE FACTS OF THE CASE. 3. ON THE OTHER HAND, THE LEARNED SENIOR DR CONTEND ED THAT THERE IS NO MISTAKE APPARENT IN THE ORDER OF T HE TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FIND FROM RECORD THAT WHILE CALCULATING BUSINES S INCOME THE ASSESSING OFFICER HAS WRONGLY TAKEN THE ASSESSEES SHARE IN FAIR MARKET VALUE OF LAND AT 65 % WHICH IS IN CONTRADICTION TO CLAUSES 2 AND 3 OF THE AGREEMENT EXECUTED BETWEEN THE ASSESSEE AND THE BUILDER. ACCORDINGLY, THERE APPEARS SOME MISTAKE IN THE ASSESSING OFFICERS ACTION IN TAKING 65% OF THE FAI R 5 MARKET VALUE AND ALSO 65% IN THE CLOSING STOCK WHIL E CALCULATING THE BUSINESS INCOME OF THE ASSESSEE. A S THE MISTAKE IN THE ORDER OF THE ASSESSING OFFICER HAS A LSO RESULTED IN MISTAKE IN THE ORDER OF THE TRIBUNAL WH ICH IS APPARENT FROM RECORD, IN THE INTEREST OF JUSTICE, W E RESTORE THIS GROUND TO THE FILE OF THE ASSESSING OF FICER FOR DECIDING IT AFRESH KEEPING IN VIEW CLAUSES 2 AND 3 OF THE AGREEMENT ACCORDING TO WHICH THE ASSESSEE HAS 65% SHARE IN THE SALE PROCEEDS WHEREAS 100% OWNERSHIP O F THE LAND WAS RETAINED BY THE ASSESSEE. WE DIRECT ACCORDINGLY. 5. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSE S. ORDER PRONOUNCED IN OPEN COURT ON 21 ST MAY, 2012 SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER 21 ST MAY, 2012 DN/- 6