Income Tax Appellate Tribunal - Pune
Naresh Sunderlal Chug,, Pune vs Income-Tax Officer,, on 12 April, 2018
आयकर अपील य अ
धकरण "ए"
यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
सु ी सुषमा चावला,
चावला याियक सद य,
सद य एवं ी अिनल चतुवद
ी,
ी लेखा सद य,
सद य के सम
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM
आयकर अपील सं. / ITA No. 765/PUN/2014
नधा रण वष / Assessment Year : 2009-10
Naresh Sunderlal Chug
Shop No.440, Shastri Park,
Pimpri, Pune-411 017
PAN : AAKPC1810G
.......अपीलाथ / Appellant
बनाम / V/s.
The Income Tax Officer,
Ward 8(1),
Pune
...... यथ / Respondent
Appellant by : Smt. Deepa Khare
Respondent by : Shri Achal Sharma, Addl. CIT
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 06.03.2018 Date of Pronouncement : 12.04.2018
आदे श / ORDER
PER SUSHMA CHOWLA, JM
The appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-V, Pune dated 24.01.2014 relating to assessment year 2009-10 against order passed under section 143(3) of the Income Tax Act, 1961 ( in short 'the Act').
2ITA No.765/PUN/2014
A.Y.2009-10
2. The assessee has raised following grounds of appeal:
"1. The learned CIT(A) erred in law and on facts in treating the sale of development rights as adventure in the nature of trade as against capital gains as claimed by the Appellant as also assessed by the Ld. AO as capital gains.
2. The learned CIT(A) erred in law and on facts in not giving an opportunity or any show cause notice while taking such view particularly when the same results into enhancement by the learned CIT(A).
3. The learned CIT(A) erred in law and on facts in not appreciating that in order to treat the income as adventure in the nature of trade, it is the burden of the Department to prove that the same was in the nature adventure and the learned AO has nowhere taken the view.
4. It is prayed that the view taken by learned CIT(A) as to adventure in the nature of trade may kindly be cancelled and the appellant may be granted exemption u/s. 54F as claimed in the return of income.
5. The appellant craves to add, alter, modify or substitute any ground of appeal at the time of hearing."
3. The issue raised in the present appeal is against the power of Commissioner of Income Tax (Appeals) vis-a-vis enhancement of income. The assessee is aggrieved by the order of Commissioner of Income Tax (Appeals) in treating the sale of development rights as adventure in the nature of trade as against capital gains as declared by the assessee and also assessed by the Assessing Officer.
4. Briefly stated in the facts of the case, the assessee during the year under consideration had furnished return of income declaring total income of Rs.1,15,380/-. The case of the assessee was picked up for scrutiny. During the assessment year under consideration, the assessee sold plot at S. No. 165, H No.512 at Pimpri on 20.08.2008 along with two other owners for Rs.2,10,00,000/-. The assessee got share in the said property at Rs.52,50,000/-. The assessee claimed deduction under section 54 of the Act at Rs.48,29,176/-. The assessee was asked to furnish purchase/sale deed of the new property. The assessee furnished agreement of purchase. The Assessing Officer noted that as per the agreement, assessee purported to have purchased Flat No. 601 and Flat No. 603, Building B-Wing in the project Parvasaakshi. On perusal of the purchase deed, the Assessing Officer noted that the sale deed was not registered with the Sub-Registrar 3 ITA No.765/PUN/2014 A.Y.2009-10 and the balance amount was also due to be paid. Even till the date of assessment, the assessee did not furnish registered document in respect of the said property. The Assessing Officer, thus, denied the deduction claimed under section 54 of the Act.
5. The assessee, in appeal, before the Commissioner of Income Tax (Appeals) raised the issue of denial of deduction claimed under section 54 of the Act with regard to investment in residential property at Rs.48,29,176/-. In this regard, assessee raised ground No. 2 and 3 before the Commissioner of Income Tax (Appeals). Before Commissioner of Income Tax (Appeals), the assessee filed explanation which is reproduced in Para-9 and furnished the following documents listed in Para-10 of the appellate order.
i. Copy of agreement for sale dated 05.01.2010 ii. Possession letter dated 10.03.2012 iii. Copy of ledger A/c of the appellant in the books of M/s. Sakshi Constructions. iv. Copy of Registered Sale Deed dated 28.02.2013.
v. Copy of Index-II.
6. The Commissioner of Income Tax (Appeals) forwarded the said documents to the Assessing Officer to submit his remand report. The remand report is reproduced in Para- 11 at page 6 & 7 of the appellate order. Vide Para-3, facts are narrated and vide Para-4 of the remand report, the Assessing Officer observed that the land claimed to be sold by assessee, was sold by the land owner to M/s.Synergy properties vide the sale deed executed on 14.08.2008. In the said sale deed, the assessee and others two persons were consenting parties. The assessee along with others received Rs.2.10 Crores as consenting parties and being the power of attorney holders on rights of the land. The Assessing Officer vide Para-5 observed that in view of the facts, the assessee was not the owner of the Asset and only had development rights. Therefore, the question of capital gains in the case of assessee does not arise at all. He was of the view that the 4 ITA No.765/PUN/2014 A.Y.2009-10 said income had to be brought to tax under the head 'income from other sources' and not under the head 'long term capital gains'. The Assessing Officer further observed that without prejudice, the claim of the assessee regarding 54F could not be accepted in the light of the new evidence produced by the assessee. Since the agreement for sale of flat was entered into on 28.02.2013 which was later than the period of two years as envisaged in the provisions of the Act and even where the possession of the said flat was given to the assessee on 10.03.2012 which was also later than the period of two years from the date of sale of original asset on 20.08.2008. The assessee filed his comments vide letter dated 04.01.2014 regarding investment in the new flat and vide para 4 stated that other points of the remand report were not relevant to the assessment order since all the documents were provided at the time of original assessment.
7. The CIT(A) vide Paras 13 and 14 came to the conclusion that the transaction entered into by the assessee was in the line of business firm where the assessee was partner. The CIT(A) also noted that the agreement dated 22.09.2004 was entered into by the assessee with the intention to develop the plot and not to hold the same as capital asset and later development rights were resold on 14.08.2008 where the assessee along with other two persons were the consenting parties. The CIT(A) thus held that income on sale of development rights was to be treated as 'business income' and the Assessing Officer was directed to adopt the same after allowing cost of acquisition without benefit of indexation which worked out to Rs.49,41,225/-. Since, the income was held to be 'business income', the CIT(A) held the question of deduction under section 54F becomes academic. It was further held on merit that the assessee was entitled to claim deduction under section 54F of the Act in case profit on sale of development rights in the land was held to be taxable under the head Long Term Capital Gain. The CIT(A) noted that the claim of assessee under section 54F of the Act could not be rejected on the ground of registration of document being effected after two years and possession being received later was, held to be non requirement of the section.
5ITA No.765/PUN/2014
A.Y.2009-10
8. The assessee is in appeal against the order of CIT(A) in holding that transaction of sale of development rights was adventure in the nature of trade, as against the claim of assessee that the same was income from capital gain, which fact is accepted by the Assessing Officer. The assessee is aggrieved by the order of enhancement of CIT(A) without giving any show cause notice in this regard.
9. The Ld. AR of the assessee pointed out that the income was assessed as 'Long Term Capital Gain but deduction under section 54F of the Act was denied to the assessee. Before CIT(A), additional evidence was filed for claiming aforesaid deduction under section 54F of the Act. Remand report was called from the Assessing Officer, who in the remand report stated that the income is not to be assessed as Long Term Capital Gain but as income from other sources. The CIT(A) vide Para 12 of the appellate order considered the reply of assessee wherein as per point No. 4, it was mentioned that other points of the remand report do not arise. However, without giving any notice to the assessee, the CIT(A) vide Para 13 and 14 held the income to be adventure in the nature of trade. Vide Para 15 and 16, the CIT(A) further decided that in case income is being assessed as Long Term Capital Gain, the assessee is entitled to claim deduction under section 54F of the Act. The Ld. AR pointed that the Revenue was not in appeal against the same and hence, the claim of the assessee is to be allowed under section 54F of the Act.
10. Referring to the provisions of 251(2) of the Act, the Ld. AR for the assessee pointed out that reasonable show cause had to be issued. But there was no show cause notice by CIT(A). The Ld. AR for the assessee placed reliance on the following decisions:
i) CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria [66 ITR 443 (SC)]
ii) CIT Vs. Sardari Lal & Co. [ 251 ITR 864.(Del.)] 6 ITA No.765/PUN/2014 A.Y.2009-10
11. The Ld. AR for the assessee pointed out CIT(A) had no power of enhancement of income by discovering new source of income. Further, reliance was placed on the decision of Delhi High Court in the case of Gedore Tools Pvt. Limited vs. Commissioner of Income-Tax [ 238 ITR 268 (Del.)]
12. The Ld. DR for the Revenue stressed that notice in this regard was given to the assessee. Referring to the section, the Ld. DR pointed out that it talks of reasonable opportunity and Assessing Officer in the remand report clearly stated it was not to be assessed as income from Long Term Capital Gain but as 'income from other sources'. The CIT(A) thus held it to be adventure in the nature of trade. He stresses in the facts of the present appeal that there was only change in the head of income where additional amount was also assessable and accordingly, the ratio on which the Ld.A.R. for the assessee placed his reliance is not applicable to the facts of the case.
13. We have heard the rival contentions and perused the record. In the facts of the present case, the assessee had declared income under the head Long Term Capital Gain and claimed deduction under section 54F of the Act. The assessee had purchased development rights of plot of land. Since the same could not be developed by the assessee, the said rights were transferred by way of deed which was executed by land owner in the name of buyer, with the assessee as consenting party. The assessee had declared gain arising on the said transfer as Long Term Capital Gain. Further, the assessee had made investment in new asset and had claimed deduction under section 54F of the Act. The Assessing Officer accepted the computation of Long Term Capital Gain in the hands of assessee; however, denied the deduction claimed under section 54F of the Act on the ground that the new asset was not purchased through registered documents and even till date of assessment order, the sale deed was not executed and balance consideration was still payable. The assessee filed appeal against the said order of Assessing Officer and made claim for allowing deduction under section 54F of the Act. 7 ITA No.765/PUN/2014
A.Y.2009-10 In this regard, additional evidences of payment of balance consideration and sale deed being registered in the year 2013 was filed. The aforesaid additional evidence was confronted to Assessing Officer and he was asked to submit remand report. In the said report, the Assessing Officer was of the view that the development rights which have been sold by assessee does not imply that the assessee was the owner of the said land. The Assessing Officer was of the opinion/ view that gain arising from transaction had to be assessed as income from other sources and such proposition was made in the remand report. The Assessing Officer also held that the assessee, in such circumstances, was not entitled to claim deduction under section 54F of the Act. The CIT(A) gave a copy of remand report to the assessee and asked for his comments. The assessee commented on non-allowance of claim of deduction under section 54F of the Act and in respect of other points raised by Assessing Officer, the assessee stated that "other point of the remand report were not relevant to the assessment order since all the documents were provided at the time of original assessment."
14. The CIT(A) after receiving the submission of assessee, remand report of Assessing Officer and comment of assessee, went on to decide the issue as to assessibility of gain arising on transfer of development rights. It may be pointed out herein itself, the said issue of assessibility of capital gain was completed before the Assessing Officer who accepted the stand of assessee that the said gain was to be assessed as income from capital gains. There was no dispute about the assessibility of gains as income from Long Term Capital Gain. The only dispute was that whether against such gains, the assessee could claim deduction under section 54F of the Act on account of investment in new asset. In this regard, action of the CIT(A) in holding that the said income on sale of development rights was to be treated as adventure in the nature of trade/ business income, was not correct as per provisions of the Act. The powers of CIT(A) are coterminous with the power of Assessing Officer. In other words, the CIT(A) has wide power while deciding the appeal. However, as per Clause (2) of Section 251 of 8 ITA No.765/PUN/2014 A.Y.2009-10 the Act, it is provided that the CIT(A) shall not enhance an assessment or a penalty or reduce the amount of refund, unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. The Explanation talks about the power of CIT(A) in deciding the appeal and stresses that he may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the CIT(A) by the appellant. In view of the said provisions, the CIT(A) has power to decide any matter arising out of the proceedings but the said power has to be exercised after giving reasonable opportunity to the assessee to show cause against such enhancement or reduction. The CIT(A) was not only changing the head of income but was also enhancing the assessment, since income which is assessed in the hands of assessee as per direction of CIT(A) had worked out at Rs.49,41,225/- as against income assessed by the Assessing Officer under the head Long Term Capital Gain at Rs.48,75,610/-. The second aspect is rate of tax. In case income is assessed under the head Long Term Capital Gain, the rate of tax is lower than the rate applied when the income is being assessed as business income. In view thereof in not giving an opportunity or any show cause notice of enhancement as required under section 251(2) of the Act, the order of CIT(A) suffers from infirmity and the same cannot be sustained.
15. Another point to be noted here is that when income was assessed under the head Long Term Capital Gain, then rate of tax was lower than the rate applied when the income was being assessed as business income. Regarding second aspect, the Ld. DR for the Revenue submitted that where issue of different head of income had arisen, assessibility was done by the Assessing Officer, then notice had to be issued by Assessing Officer, when remand report was called for his comments. It may be pointed out herein in itself that after assessing income as Long Term Capital Gain, Assessing Officer proposed to assess income as income from other sources, as per his comment in the remand report, which was confronted to the assessee; but when the income was 9 ITA No.765/PUN/2014 A.Y.2009-10 assessed as business income, no notice whatsoever, was given by CIT(A). Accordingly, we hold that the enhancement made by CIT(A) does not survive. Thus, we reverse the order of CIT(A). The income was assessed in the hands of assessee as income from Long Term Capital Gain. The CIT(A) vide Para15 and 16 has decided the issue of entitlement of claim under section 54F of the Act and held the assessee to be eligible for said claim. The Revenue is not in appeal against the order of CIT(A). Accordingly, we direct the Assessing Officer to allow claim of assessee under section 54F of the Act. The grounds of appeal raised by assessee are thus, allowed.
16. In the result, appeal of the assessee is allowed.
Order pronounced on this 12th day of April, 2018.
Sd/- Sd/-
( ANIL CHATURVEDI) (SUSHMA CHOWLA)
लेखा सद य/ACCOUNTANT MEMBER या यक सद य/JUDICIAL MEMBER
पुणे / Pune; दनांक / Dated : 12th April, 2018
SB
आदे श क त"ल#प अ$े#षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT(Appeals)-V, Pune.
4. The CIT-V, Pune.
5. "वभागीय त न%ध, आयकर अपील य अ%धकरण, "ए" ब)च,
पण
ु े / DR, ITAT, "A" Bench, Pune.
6. गाड, फ़ाइल / Guard File.
// True Copy //
आदे शानुसार / BY ORDER,
नजी स%चव /Private Secretary
आयकर अपील य अ%धकरण, पण
ु े / ITAT, Pune.