SHREE LAND CORPORATION. V. THE INCOME TAX OFFICER

TAXAP/221/2003

AI Insights

The case involves Shree Land Corporation, the appellant, who was engaged in the business of purchasing and selling land for constructing housing societies and letting them out. The Income Tax Officer assessed the income from these activities, which was contested by the appellant through various appeals. The core issue was whether the Tribunal was correct in treating the assessee as a registered firm despite no actual business activities being conducted, and whether the income from house property should be assessed in the hands of co-owners as individuals rather than as a firm. The High Court found that the assessee had not carried out any business activities since inception, leading to the conclusion that the firm was not registered for tax purposes.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 753722 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 22-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S UDHIR M EHTA
• Assessee Lawyers: R K PATEL
• Keywords: Assessment Year; Business activity; Income from house property; Income Tax; Registered firm
• Section: 143(3); 260A; 185(1)

Judgement Text

"O/TAXAP/221/2003 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 221 of 2003 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ SHREE LAND CORPORATION.....Appellant(s) Versus THE INCOME TAX OFFICER....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 5 O/TAXAP/221/2003 JUDGMENT Date : 22/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This appeal u/s.260A of the Income Tax Act, 1961 is filed against the judgment and order dated 13.02.2003 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘B’ in ITA No.506/AHD/1997 for the A.Y. 1983-84 whereby, the appeal filed by the assessee was dismissed. 2. Briefly stated, the facts are that the assessee herein is engaged in the business of purchase and sale of land for constructing housing societies and thereafter, letting it out on hire. The assessee firm had disclosed the income only from rent for the houses constructed in the past. The assessee filed the Return of Income on 17.09.1983 for the A.Y. 1983-84 declaring total income at Rs.78,887/-. Assessment scrutiny was undertaken and ultimately, the Assessing Officer passed the order u/s.143(3) on 21.08.1985. Aggrieved by the order of Assessing Officer, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee vide order dated 28.11.1996. Against the order of CIT(A), the assessee filed appeal before the Tribunal. After hearing both the sides, the Tribunal dismissed the appeal of the assessee, Page 2 of 5 O/TAXAP/221/2003 JUDGMENT vide impugned judgment and order dated 13.02.2003. Hence, this appeal at the instance of the assessee. 3. The appeal was admitted on 28.07.2003 in respect of the following substantial question of law; “Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in treating the assessee as a registered firm though, in fact, no business was carried on by the assessee and for the earlier years the Commissioner of Income-tax had come to a specific conclusion that the assessee was not a registered firm but the income from the house property was being assessed in hands of all co-owners as individuals? 4. We have heard learned counsel for both the sides and perused the material on record. While entertaining the application u/s.264 of the Act filed by the assessee against the order passed by the Assessing Officer us.185(1), the CIT(Appeals) observed in Para-4 of its order as under; “I have given a careful consideration to the facts and the circumstances of the case. Though in the partnership deed, it was mentioned that the firm came into existence with the object to do business and earn income from organizing of society, purchase Page 3 of 5 O/TAXAP/221/2003 JUDGMENT and sale of land and construction of building yet in fact no such activity has been carried out. As no business activity was carried out during the year and no income was earned or returned, I am of the opinion that order u/s.185(1) passed by the Income-tax Officer granting registration to the assessee is not in accordance with law. The order passed by the Income-tax Officer u/s.185(1) on 19.03.1983 for the A.Y. 1979-80 is, therefore, annulled.” 5. From the aforesaid findings, it is clear that the assessee had not carried out any business activity since its inception and therefore, had not entered into any business transaction. Under such circumstance, the CIT was justified in annulling the order u/s.185(1) of the Act for the Assessment Year in question. We are in complete agreement with the reasonings given by the CIT in its order and hence, find no reasons to disturb the same. 6. Accordingly, the question of law as to whether the Tribunal is right in law in treating the assessee as a registered firm though, in fact, no business was carried on by the assessee and for the earlier years the Commissioner of Income-tax had come to a specific conclusion that Page 4 of 5 O/TAXAP/221/2003 JUDGMENT the assessee was not a registered firm but the income from the house property was being assessed in hands of all co-owners as individuals is answered in the negative in favour of the assessee and against the Revenue. Consequently, the impugned judgment and order dated 13.02.2003 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘B’ in ITA No.506/AHD/1997 is quashed and set aside and the order of CIT, Surat dated 19.03.1990 is restored. The appeal is, accordingly, allowed. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 5 of 5 "