Income Tax Appellate Tribunal - Ahmedabad
Smt. Bhanuben Kantibhai Savalia,, ... vs The Dy.Cit, Central Circle-2(1),, ... on 17 September, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'B' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER आयकर अपील (एसएस) सं. / I.T.(SS)A. Nos. 82, 83, 84 & 889/Ahd/2015 ( नधा रण वष / Assessment Year : 2008-09, 2009-10, 2010-11 & 2011-12) Bhanuben Kantibhai बनाम/ The DCIT Savalia Vs. Central Circle 2(1), 10/203, Satyagrah Ahmedabad Chhavani, Opp: Rangoli Restaurant, Satellite, Ahmedabad थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : ACWPS4723 L (अपीलाथ /Appellant) .. ( यथ / Respondent) & आयकर अपील (एसएस) सं. / I.T.(SS)A. Nos. 79, 80, 81 & 888/Ahd/2015 ( नधा रण वष / Assessment Year : 2008-09, 2009-10, 2010-11 & 2011-12) Darshnaben Harshadbhai बनाम/ The DCIT Savalia Vs. Central Circle 2(1), 702, Surmount Complex, Ahmedabad Iscon Temple, S. G. Highway, Ahmedabad थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AFQPS4024R (अपीलाथ /Appellant) .. ( यथ / Respondent) & I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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आयकर अपील (एसएस) सं. / I.T.(SS)A. Nos. 76, 77, 78 & 887/Ahd/2015 ( नधा रण वष / Assessment Year : 2008-09, 2009-10, 2010-11 & 2011-12) Smt. Kapilaben S. बनाम/ The DCIT Savalia Vs. Central Circle 2(1), 10/203, Satyagrah Ahmedabad Chhavani, Opp: Rangoli Restaurant, Satellite, Ahmedabad थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : ABBPV5065E (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Nupur Shah, A.R. यथ क ओर से / Shri Alok Singh, CIT.D.R. Respondent by :
सन ु वाई क तार"ख / Date of 25/07/2019 Hearing घोषणा क तार"ख /Date of 17/09/2019 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeals at the instance of assessee arise from the respective orders of the Commissioner of Income Tax (Appeals) ('C IT(A)') against respective assessment orders for different assessment years as tabulated below:
I T ( ss) A Na me o f AY CI T ( A) ' s AO ' s AO ' s o r d e r u nd er
No s. as se s see o r d er o r d er Sec tio n
d ated d ated
8 2 / Ahd /1 5 B ha n ub e n 2 0 0 8 -0 9 2 7 .0 1 .2 0 1 5 2 1 .0 3 .2 0 1 3 153A r . w. s.
Ka nt ib ha i 143(3) of the
Sa va li a I nco me T ax Ac t,
1961
8 3 / Ahd /1 5 - Do - 2 0 0 9 -1 0 - Do - - Do - - Do -
8 4 / Ahd /1 5 - Do - 2 0 1 0 -1 1 - Do - - Do - - Do -
8 8 9 / Ahd /1 5 - Do - 2 0 1 1 -1 2 - Do - - Do - 1 4 3 ( 3 ) o f t he Ac t
7 9 / Ahd /1 5 Dar s h nab e n 2 0 0 8 -0 9 - Do - - Do - 1 5 3 A r . w. s .
I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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Har s had b ha i 1 4 3 ( 3 ) o f t he Ac t
Sa va li a
8 0 / Ahd /1 5 - Do - 2 0 0 9 -1 0 - Do - - Do - - Do -
8 1 / Ahd /1 5 - Do - 2 0 1 0 -1 1 - Do - - Do - - Do -
8 8 8 / Ahd /1 5 - Do - 2 0 1 1 -1 2 - Do - - Do - 1 4 3 ( 3 ) o f t he Ac t
7 6 / Ahd /1 5 S mt. 2 0 0 8 -0 9 - Do - - Do - 1 5 3 A r . w. s .
Kap i lab e n 1 4 3 ( 3 ) o f t he Ac t
S. Sa va li a
7 7 / Ahd /1 5 - Do - 2 0 0 9 -1 0 - Do - - Do - - Do -
7 8 / Ahd /1 5 - Do - 2 0 1 0 -1 1 - Do - - Do - - Do -
8 8 7 / Ahd /1 5 - Do - 2 0 1 1 -1 2 - Do - - Do - 1 4 3 ( 3 ) o f t he Ac t
2. We first take up IT(SS)A No. 82/Ahd/2015 concerning AY 2008-09 for adjudication purposes.
IT(SS)A No. 82/Ahd/2015-AY- 2008-09 (Bhanuben K. Savalia)
3. As per the grounds of appeal, the assessee has challenged the action of the Revenue in treating land at Thaltej, Ahmedabad as 'capital asset' instead of 'stock-in-trade' being considered b y the assessee.
4. The relevant facts for determination of the issue raised b y the assessee are noted as under:
4.1 The assessee filed return of income for AY 2008-09 on 05.12.2008 under s.139 of the Act declaring total income of Rs.21,49,200/-. A search action under s.132 of the Act was carried out in the group cases of Savalia group. A search action was also carried out on 06.01.2011 in the residential premises of the assessee at Ahmedabad. In pursuance of the search, a notice under s.153A(1) of the Act was issued on 27.07.2012. In response thereof, the assessee filed return of income under s.153A of the Act declaring total income of Rs.21,48,450/-. In the course of the assessment proceedings under s.153A of the Act, it was observed b y the AO that the assessee had initiall y declared income from sale of land/plot named 'Krish Villa' as 'short term capital gain' in the AY 2009-10 and other years when the plots were sold. The investment in Thaltej land (Krish Villa) was shown in the accounts as 'plot at Thaltej' of Rs.1,00,28,418/- (1/3 r d share) as 'Investment/Capital' asset at the time of filing of return prior to search under s.139 of the Act. However, the I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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position was altered in the return of income filed subsequent to search and the aforesaid co-ownership land (other co-owners namel y Smt. Darshnaben H. Savalia and Smt. Kapilaben S. Savalia) was shown as 'stock-in-
trade/current asset' (instead of capital asset) in the return filed pursuant to notice under s.153A of the Act. As a consequence of such change in the classification and characterization of land held b y the assessee at the end of the FY 2007-08 concerning AY 2008-09, the resultant gains arising on sale of plot/land were also declared as 'business income' (as against the capital gains in the return filed prior to search) in the respective returns filed pursuant to search action. The AO observed that the assessee has sold the land or a part thereof in AYs. 2009-10, 2010-11 and 2011-12 and the gains thereon have been declared under the head 'business income' in respective assessment years whereas the gains from such sale was earlier shown to be capital gains in the original return. The AO observed that the assessee has failed to substantiate her claim that Krish Villa is in the nature of adventure in the nature of trade and consequently, the profit arising on sale of land is required to be taxed as 'business income' and it was a bonafide mistake at the time of original return to show the sale consideration from the land parcels as short term capital gain. The AO however disputed the assessee's claim that income from sale of plot/ part of land is akin to adventure in the nature of trade. The AO contended that the assessee kept on showing income from Krish Villa plots as short term capital gains until a distinct proceeding started consequent to search action. It was noted that the original return for AY 2010-11 was also filed under s.139 of the Act prior to search on 05.01.2011 and till that date all the plots of Krish Villa were alread y sold. Despite this, the assessee has shown income from Krish Villa as short term capital gain and therefore it cannot be treated as genuine mistake of the assessee originally. No revised returns were filed for AYs. 2008-09 to 2010-11. Consequent upon the fresh proceedings under s. 153A, the assessee has wrongl y tried to take the benefit of Income Tax provisions b y showing this income as business income. The AO further observed that the object of fresh filing of return of income under s.153A of the Act is to enable the assessee to disclose her correct income after taking into account material seized during the course I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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of search. It was contended that the aforesaid Section 153A of the Act is not meant to provide fresh opportunit y to the assessee to take an y kind of benefit qua the original return. The AO further noted that all the return of income from AYs. 2008-09 to 2010-11 were filed under s.153A of the Act on 21.08.2012. The AO also noted that the assessee after changing the nature and character of income arising from sale of plots (Krish Villa) from 'capital gains' (declared originall y prior to search) to 'business income' in the return of filed after search, got her accounts audited and submitted the audit report alongwith return filed under s.153A of the Act. It was thus noted that the entire action of the assessee was an afterthought of the search action with an intention to take benefit of the tax provisions which is contrary to the mandate of law. The plots/land shown to be held as 'trading asset' in the revised return under s.153A of the Act were sold in the later year at a price below the stamp dut y rate. The assessee has simpl y indulged in mis-representation of facts with a view to label the transactions to be of business nature to escape the application of Section 50C of the Act. It was further noted that the assessee was engaged in the similar kind of activit y in the previous years and also in the subsequent years (Shilaj land) where the assessee has declared income b y way of capital gains on sale of plot. The AO thus observed that the activit y of sale of plots in Krish Villa cannot be treated differentl y. The AO accordingly declined to accept the change in the nature and character of investment in Krish Villa plot and income arising therefrom. The AO accordingl y treated Krish Villa, Thaltej land as capital asset in tune with original return and declined the revised claim of assessee to treat the same as stock-in-trade for AY 2008- 09 and consequent profit arising from sale of plot as business income of the assessee. In essence, the AO thus treated the land at Thaltej as capital asset for AY 2008-09 in question and applied the provisions relating to capital gains for the purposes of the abilit y of gains in the subsequent assessment years in appeal.
5. Aggrieved b y the re-characterization of investment in land (AY 2008-09) and subsequent income of sale (AYs. 2009-10, 2010-11 & 2011-
12), the assessee preferred appeal before the CIT(A). I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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6. The CIT(A) however was not impressed by the defense offered b y the assessee. The relevant paras dealing with the issue b y the CIT(A) in its common order for AY 2008-09 to 2011-12 is reproduced hereunder:
"10. I have carefully consi dered the assessment order, submission of t he appellant and material available on record. The appellant is an individual assessee who was searched u/s 132 of the Act on 06.01.2011 along with the Savalia group. The original returns of income u/s 139 for the AYs 2008-09 to 2010-11 were filed before the search showing receipt from sale of Krish Villa plots as capital gain. All plots of Krish Villa were sold before the date of search.
10.1 The appellant filed return of income u/ s 153A for AY 2008- 09, 2009-10, 2010- 11 and 2011-12 in r esponse to notice u/s 153A(1)(a) on 21.08.2012. In the return filed u/s 153A in these years, the appellant changed the head of income of receipt from sale of Krish Villa plot from capital gain to business income. However on or before the date of search carried out, appellant did not revise any of the returns of income filed u/s 139 of the Act for AY 2008-09 to AY 2010-11. Thus it is evident that the appellant knowingfully shown the receipt from sale of Krish Villa plots as capital gain in return filed u/s. 139 and no mistake was committed in showing the capital assets and capital gain as this is not an isolated incident. The appellant knowingfully shown the same as capital assets and capital gain in three years i.e. A.Y. 20.08-09 to A.Y. 2010-11. I 10.2 The appellant has ar gued that the AO has placed reliance on the assessment or der u/s 143(3) of the Act dated 3.11.2011 as the sai d order is without jurisdiction as per the proviso to Sec. 153A(1) of the Act and thus null and void ab initio. It is seen that the AO has merely referred the assess ment order u/s 143(3) of the Act dated 3.11.2011 and mentioned that even during the assessment proceeding u/s 143(3) in AY 2010-11, the ass essee was showing the assets as capital as sets and receipt from the sale of plot as capital gain only. It is clear that the AO discussed and referred the assess ment order just to .show the intention of the assessee and prove that she intentionally and deliberately shown the same as capital asset s and capital gain and did not commit a bonafied mistake. Thus the argument of the appellant hold no merit.
10.3 Now the question arises as to whether the appellant can revise the head of income declar ed in the original returns of income filed u/s 139 of the Act for AY 2008-09 to AY 2010-11 aft er the search in the return of income filed u/s 153A of the Act where the period of filing of revised return has already been over, on the ground that due to bonafied mistake, receipt from sale of Krish Villa plots was shown as capital gai n though the true nature of the activities are adventur e in nature.
10.4 It is seen that the original return u/s 139 of the Act for AY 2008- 09, A.Y.2009-10 and A.Y 2010-11 were filed on 05.12.2008, 30.10.2009 and 12.10.2010 and the capital assets and the profit from sale of 13 plots of Krish Villa was shown as short term capital gain in both years and the computation of capital gain shows cost of land inclusive of development expenses. However while filing the return of income I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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after search u/s 153A of the IT Act for AY 2008-09 to 2010-11 the appellant changed the nature of assets and income from capital as sets and capital gain to business assets and business income. In return filed u/s 153A of the Act ass ets in the balance sheet was shown as 1/3rd share in the plot at Thaltej of Rs.1,00,28,418/- but no separate bifurcat ions of fixed assets and WIP/ stock-in-trade was given. It is also important to note that no balance sheet or statement of affairs showing the nature of assets was filed befor e search in any proceeding before the Revenue. The appellant filed her balance sheet firs t time during the ass essment proceeding u/s 153A after the search only. It is seen that the appellant was also involved in the similar activities of buying and selling of plots in the earlier years also and income sale of plots and lands were s hown as capital gain in those years.
10.5 It is seen that audit report in AY 2009-10 to 2010-11 were prepared on 18,06.2012 much after the sear ch and the nature of income was changed in the return of income filed u/s 153A of the Act. The r eturn of income u/s 139 for AY 2011-12 was filed after search in this also audit report was prepared on- 21.08.2012 only. During pre-search period the appellant consciously acted as investor and continuously shown capital assets and capital gai n in the return of income filed u/s 139 of the Act in all the years.
10.6 There are some basic prerequisite as per the law of land to run any business activity. It is necessary for any entrepreneur t o have professional tax number, TAN and TDS on payment from the second year onward , Sales Tax r egistration , maintenance of accounts and books, statutory audit of accounts when turnover is above 40 lakhs , Office licence etc. However the appellant did not complete any of t he above formalities. It is also seen that the appellant has not employed and not incurred any expenditure for office st aff/ personnel who looks after the business , office and accounts etc which indicates that appellant was not doing any business and her activities were not at all adventure in nature. Thus the true nature of activities as per the documents and records is investment only. Therefore it is clear that the appellant knowing fully well about her activities, shown/declared income from sale of Krish Villa plot as capital gain in the ret urn of income filed u/ s 139 of the Act.
;
10.7 The facts and records shows that it was a conscious decision on part of the appellant to show development charge as cost of land and income from sale of Krish Villa plot as capital gain. It can be seen that this is not an isolated incidence as the same treatment was given in AY 2008-09 to 2010-11 before the search and nature of assets was changed after the search therefore cannot be accepted as bonafied mistake committed. Had it been a bonafied mistake appellant would have revised the original return filed u/s 139 of the Act by way of filing a revised return but the fact is that the appellant did not revise any of the return of income within the prescribed time prior to date of search carried out on 06.01.2011.
10.8 Therefore the basic contention of the appellant that the actual nature of transaction is adventure in the nature of trade and due to the bonafides mistake same was wrongly shown as capital gain in the original I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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return of income filed under section 139 of the IT act in AY 2008-09, 2009-10, 2010-11, do not hold any merit and the return filed u/s 153A of the Act and the change of head of income can not be treated bonafied. However it reflects the malafied intention of the appellant that to avoid provision of section 50C of the I T Act the head of income was changed.
10.9 The appellant has relied on various case laws however facts ar e different and distinguishable from the appeals under considerati on. The cases relied upon deal with the nature of transaction whether its nature of trade or capital gain however the issue i nvolve in the appeal s under consideration is whether the appellant can change head of income in the return filed u/s 153A t hough in the original return shown in differ ent head and whether any benefit can be given to the appellant in return filed u/s 153A of the Act . Therefore these decisions are not applicable in the appeal under consider ation.
10.10 The assessment procedure, in the cases where search is conducted u/s 132 of the Act, has been amended w.e.f. 01.06.2003 and in such search cases assessment shall be completed as per the provision of secti on 153A of the Act. The section 153A reads as under : --
[Assessm ent in case of search or requisition.
"153A. (1) Notwithst anding anything cont ained in section 139, section 147, section 148, section 149, secti on 151 and section 153, in the case of a pers on where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall--
(a)issue notice to s uch person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clouse (b), in the prescribed f orm and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b)assess or reassess the total income of six assessment years immediately preceding the assessment year r elevant to the previous year in which such search Is conducted or requisition is made:
Provided that the As sessing Officer shall assess or reassess t he total income in respect of each assessment year falling within such six assessment years :
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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appeal or any other legal proceeding, then, notwithstandi ng anything contained in sub-section (1) or section 153, the assessment or reasses sment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner :
Provided that such revival shall cease to have effect, if such order of annulment is set asi de.
Explanation.--For the removal of doubts, it is hereby declared that,--
(i )save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii)in an assess ment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such asses sment year."
10.11 It is clear from bare reading of the section itself that assesses i s not free to file return of income u/s 153A of the Act own her own and can file return of income u/s 153A of the Act in response to notice issued u/s 153A (1)(a) by the AO only. Thereafter the AO shall assess or reas sess the return of income filed u/s 153A of the Act. Thus the provision of this section is not for the benefit of the assessee and assessee cannot be allowed to revise / rectify the mistake committed in the original return of income.
10.12 There is perfect similarity in the assessment made u/s 147 and 153A of the Act Section 147 of the Act empower the AO to assess undisclosed escaped income and section 153A also empower the AO to ass ess total income including escaped and undisclosed income. Thus it can be seen that the prime intention and purpose of assessment u/s 153A and assessment u/s 147 i s same and both sections empower the revenue to assess or reassess the escaped and undisclos ed income of the asses ssee.
10.13 It is clear from the facts of the appeal under consideration that had the search has not been conducted in the case of the appellant s he would not have been able to file the return u/s 153A and would not have been able to revise or rectify the so called bonafide mistakes committed in the original return of income filed u/s 139 of the Act.
10.14 The issue of revision of the original retur n filed u/s 139 of the Act during reassessment proceeding u/s 147 was raised before the Honble Supreme Court. The Hon'ble Apex court in the case of CIT v. Sun Engineering Works (P.) Ltd. [ 1992] 64 TAXMANN 442 (SC) has considered the followi ng question of law -
" Where an item unconnected with the escapement of income has been concluded finally against the assessee how far in reassessment on an escaped item of income it is open to the assessee to seek a review of the concluded item for the purpose of computation of the escaped income?"
I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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The Hon'ble SC has analyzed the legal posi tion of section 147 and income escaped assess ment i n detail and laid down some principle which are equally applicable in the search assess ment u/s 153 A of the I T Act as both sections fundamentally deal with the escaped and undisclosed income. The Hon'ble Supreme Court hel d that held that Since the proceedings under section 147 are for the benefit of the revenue and not an assessee and are aimed at gathering the 'escaped income' of an assessee, the same cannot be allowed to be converted as 'revisional' or 'review' proceedings at the instance of the assessee, thereby making the machinery unworkable. It was specifically mentioned in para 39 that the AO is not empower to entertain such claim and held that "The I TO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147"
10.15 The principle laid down by the Hon'bfe Supreme Court are as under-
"38. Although, section 147 is part of a taxing statute, it impos es no charge on the subject but deals merely with the machinery of assessment and in interpreting a provision of that kind, the rule is that construction should be preferred which makes the machiner y workable. Since the proceedings under section 147 are for the benefit of the revenue and not for on assessee and are aimed at garnering the 'escaped income' of an asses see, the same cannot be allowed to be convert ed as 'revisional' or ' review' proceedings at the instance of the assessee, thereby making the machinery unworkable.
39. As a result of the aforesaid discussion we find that in proceedings under section 147 the ITO may bring to charge items of income which had escaped assess ment ot her than or in addition to that item or items which have led to the issuance of notice under section 148 and where reassessment is made under section 147 in respect of income whi ch has escaped tax, t he ITQ's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or per mitting the assessee to reagitate questions which had been decided in the original assessment pr oceedings. It is only the under assessment which is s et aside and not the enti re assessment when reassessment proceedings are initiated. The ITO cannot m ake an order of reassessment inconsistent with the original or der of as sessm ent in respect of m atters which are not the subject m atter of proceedings under section 147. An assessee cannot resist validly initiated reassessment proceedi ngs under this section merely by showing that other income which had been assessed originally was at too high a figure except in cas es under section 152(2). The words 'such income' in section 147 clearly refer to the income which is chargeable to tax but has 'escaped assessment' and the ITO's jurisdiction under the section is confined onl y to such income which has escaped assessment. It does not extend to reconsidering generally the concluded earlier assessment. Claims which have been disallowed in the original assessment proceeding cannot be I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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permitted to be reagi tated on the assessment being reopened f or bringing to tax cert ain income which had escaped assessment because the controversy on reassess ment is confined to matter s which are relevant only in respect of the income which had not been brought to tax during the course of the original assess ment. A m atter not agitated in the concl uded original assessm ent proceedings also cannot be perm itted to be agitated in the reassessm ent proceedings unless relatable to the item sought to be taxed as 'escaped incom e'. Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, It would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under section 147 which are for the benefit of the revenue and not an assessee, an assessee cannot be perm itted to convert the reassessm ent proceedings as his appeal or revision, i n disguise and seek relief in respect of item s earlier rejected or claim relief in respect of item s not claim ed in the original assessm ent proceedings, unless relatable to 'escaped incom e', and reagitate the concluded m atters. Even in cases where the claims of the ossessee during the course of reassessment proceedings related to the escaped assess ment are accepted, still the allowance of such claims has to be limited to the extent to which they r educe t he income to that originally assessed. The i ncome for purposes of 'reassessment' cannot be reduced beyond the income original ly assessed.
40. It would be seen that whereas in the case of Anglo French Textile Co. Ltd. (s upr a) the question as to the rights of an assessee to claim 'redoing', 'revising' or 'recomputing' entire income during the reassessment proceedings was left open, that question did not come up for consideration in the case of H.R. Shri Ramulu (supra) or H.M. Esufali H.M. Abdulahi (supra) or even in V. Jaganmohan Rao's case (supra). Som e of the High Courts, therefore, fell in error in reading those judgm ents, divorced from the context in which the precise questions cam e up for consideration in those cases, and to hold that the assessee could 'reagitate' the concluded issues and claim relief in respect of item s, finally concluded in the original assessm ent proceedings, during the reassessm ent proceedings, unconnected with the escapem ent of incom e. We cannot, therefore, approve in broad propositions laid in that regard in Indian Refrigeration Industries (P.) Ltd.'s cas e (supra), Ramsevak Paul's case (supra ), Ass am Oil Co. Ltd. 's cas e (supra). Standard Motor Products of India Ltd. 's case (supra), Rangnath Bangur's case (s upra), State Bonk of Hyderabad's cas e (supra) and Indian Rare Earth Ltd. 's case (supra).
41. Keeping in view the above principles, we may now turn our attention to the quest/on formulated by the High Court as noticed in the earlier part of the judgment
42. The Tribunal rightly found that the loss which the asssss ee wanted to be set off against the 'escaped incom e' could not be allowed to be so set off because in the original assessm ent I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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proceedings, no 'set off was claim ed or permitted and the original assessm ent had acquired finality when t he appeal against the order of assessm ent failed before the AAC and the assessee took no further steps to agitate the issue. The Tribunal was also right in concluding that the item s which the assessee wanted to be taken into account in the proceedings under section 147 wer e unconnected with the escapem ent of Incom e. The High Court clearly fell in error in holding otherwi se. Since the original assessm ent had been concluded finally against the assessee, it was not perm issible for the assessee in the reassessm ent proceedings to seek a review/revision of the concl uded assessm ent for the purpose of com putation of the escaped incom e. The High Court clearly fell in error by permitting the asses see to reagitate, in the reassessment proceedings under section 147(a), the finally concluded assess ment proceedings and to grant to him relief in respect of items not only earlier rejected, but also unconnected with the escapement of income by assuming as if the original assessment had not been concluded or was 's till open'.
43. Therefore, our ans wer to the question formul ated by the High Court and noticed in the earlier part of this judgment is that in the reassessment proceedi ngs it is not open to an assesses to seek a review of the concluded item, unconnected with the escapement of income, for the of computation of the escaped income."
10.16 The exact issue as agi tated by the appellant i.e. revision of mistake committed in the ori ginal return u/s 139 and thereafter rectifying in return filed u/s 153A of the IT Act, has been decided by the Hon' ble ITAT B Bench Delhi in the case of Charchit Agar wal v. ACIT*, Central Circle 12, New Delhi [ 2009] 34 SOT 348 (DELHI). The honble ITAT B Bench Delhi has considered and decided the issue of mistake committed in the original return and thereafter rectifying in return filed u/s 153A of the IT Act and followed the principle laid down by the Apex Court in the case of Sun Engineering Wor ks (P.) Ltd. [ 1992] 64 TAXMAN 442 (SC), The Hon'ble ITAT has held that-
"7, We have heard both the parties and gone through the materi al available on record. During the course of hearing, it was clarified by the ld. AR of the assessee that for assessment years 2001-02 t o 2005-06, the books of account were audited by the auditors. The tax audit report in Form No. BCD has been pl aced on record. It was also submitted that for assessment year 2000-01, no tax audit was carried out by the auditors. The assessee him self had valued the closing stock for assessm ent year 2000-01 at cost. We have gone through the tax audit report for assessm ent year 2001-02. As per the tax audit in Form No. 3CD, the m ethod of valuation of dosing stock em ployed in the assessm ent years 2001-02 to 2005-06 was is "at cost".
8. The original retur ns of income for assess ment years 2000-01 t o 2005-06 were within t he time allowed filed under section 139(1} of the Act. The search under section 132 of the Act in the case of the assessee was carried out on 9-12-2005 and assessee filed return of income in response to notice under section 153A on 2-11-2007 for assessment years 2000-01 to 2005-06- Furt her, the assessee could I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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have revised retur ns within the period of one year from the end of relevant assessment year or before completion of assess ment whichever was earlier. Admittedly the assesses did not revise any of the returns for assess ment years under consideration prior to date of search carried out in the case of the assessee. Now question arises as to whether the assessee can revise the returns of incom e for all the six assess m ent years covered under the search period which incidentally includes the return of i ncom e for the very first year of business of the assessee on the gr ound that valuation of the closing stock was m ade on estim ated basis. In the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 assessment has to be made under section 153A of the Act. Section 153A was inserted in the statute by the Finance Act, 2003 with effect from 1-6-2003 reads as under :--
"153A. (1) Notwithst anding anything cont ained in section 139, section 147, section 148, section 149, secti on 151 and section 153, in the case of a pers on where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall--
(a) issue notice to such person requiring him t o furnish within such period, as may be specified in the noti ce, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accor dingly as if s uch return were a return required to be furnished under section 139;
(b) assess or reassess the 'total income of six assessment years immediately preceding the assessment year r elevant to the previous year in which such search is conducted or requisition is made:
Provided that the As sessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.
(2) If any proceeding ini tiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstandi ng anything contained in sub-section (1) or section 153, the assessment or reasses sment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:
I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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Provided that such revival shall cease to have effect, if such order of annulment is set asi de.
Explanation. --For the removal of doubts, it is hereby declared that, --
(i )save as other wise provided in this section, section 1538 and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii)in an assess ment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such asses sment year, "
9. Section 153A(1) cont ains non obstante cl ause and hence provisions of this section will override the provisions of section 139, section 147, sect ion 148, section 149, section 151 and section 153 of the Act. Under section 153A(1) the Assessing Officer is empowered to issue notices to the assessee searched for a period of six years in order to assess the income on the basis of material found during the course of search. The second proviso to section 153A(1) pr ovides that the assessment or reassessment , if any, relating to any asses sment year falling wi thin the period of si x assessment years refer red to in section 153A(1) pending on the date of initiation of search under section 132 or making of requisition under section 132A as the case may be shall abate. Therefore, after initiation of search no assessment in respect of pending assessment shall be made and As sessing Officer is empowered to issue noti ce under section 153A t o assess or re-assess the total income of six assessment years immediately preceding as sessment year relevant to the previous year in which such search was conducted or requisition was made. The assessee had val ued the dosing stock for assessment years 2000-01 to 2005-06 on average cost method which has resulted In reduction of taxable income in all the years ranging from Rs. 8,975 in assessment year 2001- 02 to Rs. 9,00,797 i n assessment year 2005- 06. The contention of the assessee that in the case of jewellers, it is impossible to value the closing stock on the basis of market cost as the items of closing stock cannot be identified with reference to various purchases made during the year. However, the fact remains that the as sessee had been valui ng the closing stock at " cost" as certified by t ax auditors. It is a fact that all the assessee are required to maintain the stock registers during the course of normal business activities. It is not difficult to identify the items purchased, the date of purchase and their costs. Hence we do not find any substance in the argument of the assessee that it is impossible to value the closing stock at "actual cost"
particularly in view of the fact that the assessee had been valuing the closing stock at cost price from very begi nning of the business.
10. Moreover, the change of method of valuation of the closing stock is allowed if such change is bona fide and the assessee has proper reasons for such change. The concluded proceedings cannot be reopened on the gr ound that the assessee had incorrectly valued the closing stock in those years. The assess ee had filed returns of I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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incom e for all the six assessm ent years under section 139(1). The assessm ents or reassessm ents cannot be m ade in these years by invoking the provisions of section 147 after initiation of search proceedings in view of second proviso to section 153A(1) of the Act. Fr om the facts given above it is clear that the assessee had changed the method of valuation of the closing stocks for all assessment years to reduce the profits and hence the change in the method of valuation is not bona fide. As regards the contention of the assessee that it is impossible to value the closing stock at cost price in the case of jewellers, this is a s weeping generalization without having any material on records to prove. The assessee had not filed any evidence to support its content ion and hence deserves to be rejected.
11. The provisions of section 153A are directed to assess or reassess the incom e for six assessm ent years based on search proceedings and hence the assessm ent proceedings under section 1S3A are beneficial to the revenue. In other words the proceedings under section 153A are initiated to assess or reassess the undisclosed incom e. In the case of CIT v. Sun Engg. Wor ks (P.) Ltd. [1992] 198 I TR 297 Hon'ble Suprem e Court has held that section 147 being for the benefits of the r evenue and not for t he assessee, assessee cannot be permitted to convert the reassessm ent proceedings into an appeal or revision In disguise and seek relief in respect of item s earlier rejected or clai m ed relief in respect of item s not claim ed in the original assessment proceedings unless refutable to escaped i ncom e even in cases where the claim s of the assessee during the course of reassessm ent proceedings relating t o the escaped incom e are accepted, still the allowance of such claim has to be lim ited to the extent to which they reduce the incom e to the level originally assessed. The income, for the purpose of reassessm ent cannot be reduced beyond the incom e originally assessed. In the asses sm ent years before us, returns of incom e for assessm ent years 2000-01 to 2005-06 have been accepted under section 143(1) and, t herefore, in view of t he decision of Hon'ble Suprem e Court in the case of Sun Engg. W orks (P.) Ltd. (supra) , the assessee cannot be perm itted to claim the benefit of closing stock by changing the m ethod of valuation as it becom es favourable to the assessee.
13. We have also gone through the other decisions relied upon by the Id. AR of the assessee but da not find any decision which is direct on the issue before us. During the course of hearing, ld. AR of the assesses could not cite a single case law accordingly t o which assessee could have filed returns for earlier years revising the valuation of closi ng stock for which as sessments had already been finalized. Theref ore, in view of above discussions in search proceedings under section 153A, which ar e for the benefit of t he revenue, assessee is not perm itted to value the closing stock f or concluded years at average cost price. Accordingly, the Assessing Officer as well as Commissioner of Income-tax (Appeals ) was justified in rejecting the change in method of valuation adopted by the assessee for all these years. Hence, we do not find any infirmity in the order passed by the Commissioner of Income-tax (Appeals ), I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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confirming the additions made by the As sessing Officer due to change of method of valuation."
10.17 In view of the above mentioned facts and principle laid down by the Hon'ble Apex Court and the decision of Hon'ble Delhi ITAT, it is established that the search proceedings under section 153A is for the benefit of the revenue. As per the provision the AO is not empower to give any benefit to the assessee in return fil ed u/s 153A of the Act. The contention of the appellant that it was a bonafide mistake is devoid of merit as the issue of capital gain came to the notice to the department due to search therefore the nature of receipt and head of income was changed after search only in the return filed u/s 153A of the Act. Thus the AO is justified in not allowing the change of head of income from capital gain to business income in return filed u/s 153A and has rightly treated the land at Thaltej -Krish Villa plot as capital asset as shown in the return of income f iled u/s 139 of the Act for AY 2008-09, 2009-10 and 2010-11 .
10.18 Since the land at Thaltej-Krish Villa plots is a capital assets and taxable under the capi tal gain and the appel lant had sold this land in less than the Jantri price, the provision in section 50C of the Act becomes applicable in the case of the appellant. The provisions in section 50C is a special provision inserted w.e.f 1.4.2003 and is a deeming pr ovision which allows the AO to take full value of consider ation where the consi deration received by the assessee is less than the value adopted or assessed by any authority of state government for the purpose of payment of stamp duty in respect of such transf er arid treated the val ue adopted or assessed as full value of consideration received.
10.19 Therefore the action of the AO of adopting the deemed value of consideration of Thal tej-Krish Villa plots u/s 50C(1) of the Act in AY 2009-10 at Rs.1,18,59,863/- is found justified. Thus the finding of the AO treating the profit of Rs, 51,54,873 (being 1/3 share) from sale of Thlatej Krish Villa plots as Short Term Capital Gain u/s 50C of the Act as against the business income shown by the appellant of Rs.29,43,804/- is confirmed.
10.20 Since the same issue was involved in AY 2010-11 and 2011-12 in the appeal filed by the appellant therefore as per the finding given in A.Y. 2008-09 and 2009-10, the claim of the appellant in A.Ys. 2010-11 and 2011-12 of changing the nature of income from capital gain to business income is not allowed and action of the AO of treating the 1/3rd profit from sale of plots as Short Term Capital Gain u/s 50C of the Act against the business income shown by the appellant i s confirmed.
10.21 Based on the decision given in the case of Darshanaben Savalia for A.Y. 2008-09 to AY 2011-12 being facts and circumstances and submissions are identical, the findings of t he AO treating the as sets and income as capital assets and capital gains in A.Y. 2008-09 to A.Y. 2011-12 and treating the profit (being 1/3 share) from sale of plots as Short Term Capital Gain u/s 50C of the Act against the business income shown by the appellant are confirmed. In nutshell, the Findings of capital ass ets and amount of short ter m capital gain u/s 50C of the Act confirmed in each case are as follows:
I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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Sr. No. Name of Findings 1/3rd share of Short term capital gain u/s 50C
the appellant confirmed confirmed in the hand of each appellant
AY 2008-09 AY2009-10 AY2010-11 AY2011-12
1. Darshanaben Treatment of Rs.51, 54,873/- Rs.23,23,938/- Rs.62,96,637/-
Savalia Capital
asset
2. Kapilaben Treatment of Rs.51,b4,873/- Rs.23,23,938/- Rs.62,96,637/-
S Savalia Capital
asset
3. Bhanuben Treatment of Rs.51,54,873/- Rs.23,23,938/- Rs.62,96,637/-
K. Savalia Capital
asset
In short, the CIT(A) declined to entertain claim of the assessee that land at Thaltej was held as trading asset and consequentl y declined to agree with the plea of the assessee that profits arising from sale of land at Thaltej as business income of the assessee.
7. Further aggrieved, the assessee preferred appeal before the Tribunal.
8. The learned AR for the assessee submitted at the outset that both the authorities below have mis-directed themselves in appreciation of facts and wrongl y applied the law. The learned AR pointed out that the assessee alongwith two other co-owners namel y Smt. Darshanaben Savalia & Smt. Kapilaben S. Savalia purchased certain parcels of agricultural land at Thaltej admeasuring about 15902 sq.mtrs. as co-owners in FY 2007-08 and FY 2008-09 between March 2008 to June 2008 immediatel y thereafter, the assessee and the co-owners got the said land converted into non-
agricultural land in August 2008 i.e. barel y few months later and put up th e residential housing plot scheme known as 'Krish Villa' while providing for common infrastructure and internal roads. The learned AR referred to Collector's letter dated 18.08.2008 showing the requisite permission for using the land for non-agricultural use. It clearl y reveals the idea and intention of commercial exploitation of the land notwithstanding erroneous entries in the books. It was further pointed out that the assessee and th e co-owners also received commencement letter from Ahmedabad Municipal Corporation (AMC) dated 07.02.2009. The lay out plan of plotting done b y the assessee alongwith other two co-owners in the aforesaid scheme 'Krish I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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Villa' dated 07.02.2009 was also referred to and relied upon. A broacher of the residential housing scheme (Krish Villa) was also stated to be published for sale to public. It was pointed out that development was carried out on the said parcels of land and expenditure were incurred in the subsequent FY 2008-09 onwards and the residential housing plot schem e was completed in March 2011 or thereabout. The sub-divided plots in the said scheme were sold to respective members b y executing the conveyance deed from FY 2008-09 till FY 2010-11. It was pointed out that the above sequence of event and continuit y in action and scale of activit y would clearl y show the eminent intent of the assessee and co-owners to reap business profits b y exploration with commercial motive. Consequentl y, the mistake committed in the return filed earlier was corrected and the income was realigned from the head 'capital gains' to 'business income' having regard to the true nature of activit y. It was next pointed out that the income was offered as short term capital gains earlier the tax rate of which is at par with the business income.
8.1 The learned AR reiterated that it is not a case where the land was held in the custod y of the assessee for a long time without any action. The conduct of the assessee as pointed out above would clearl y show that the parcels of land in question were acquired with commercial motives attached. It was next submitted that it was incorrect for the lower authorities to compare the transaction at Thaltej land (Krish Villa) with Chandkheda land or Shilaj land. It was pointed out that in case o f Chandkheda land, the assessee has not carried out an y development work. The assessee was simplicitor sold of the land to be prospective bu yers and she received the consideration for sale of land alone. Same is true for Shilaj land. Thus, the nature of income Chandkheda land and Shilaj land was rightl y offered as capital gain and the aforesaid transaction of sale of land cannot be co-related and treated at par with the s ystematic commercial exploitation of plots of Krish Villa scheme b y the assessee. It was submitted that a bonafide and inadvertent mistake of showing the profits on sale of plots of land of Krish Villa scheme came to the notice of the I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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assessee after search and consequentl y, the return filed under s.153A of the Act was carried declaration of income under appropriate head.
8.2 To buttress the activit y of the assessee to be a business venture (b y way of conversion of agricultural land, providing the internal roads and common infrastructure, obtaining the necessary permission from the AMC and obtaining the approved plan etc.), the learned AR referred to the account of business development expenses, correspondences with AMC, broachers published etc. The learned AR vehementl y stressed that pattern and sequence of event would clearl y show the assessee intended to exploit the land parcels (with an idea to maximize profits) so acquired as a business venture or something akin to it. The learned AR also referred to and relied upon the decision of the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao vs. CIT (1961) 42 ITR 179 (SC) wherein it was held b y the Hon'ble Supreme Court that where is land is purchased then developed and later sold in bits, it is a business venture.
8.3 The leaned AR thereafter referred to the provisions of Section 153A of the Act and submitted that in view of specific provisions of Section 153A of the Act, the return of income filed in response to notice under s.153A of the Act is to be considered as return filed under s.139 of the Act. The learned AR for the assessee relied upon the decision of the Hon'ble Gujarat High Court in the case of Kirit Dahyabhai Patel vs. ACIT 280 ITR 216 (Guj) for the proposition that return filed under s.153A of the Act acquires the colour and tenor of return filed under s.139 of the Act. The learned AR also referred to the decision of the Hon'ble Bombay High Court rendered in the case of CIT vs. B. G. Shirke Construction Technology (P) Ltd. (2017) 79 taxmann.com 306 (Bombay) where Hon'ble High Court echoed the similar view and held that return filed under s.153A(1) of the Act is akin to a return furnished under s.139 of the Act and therefore provisions of Act as applicable in the case of return filed in regular course under s.139(1) of the Act would also continue to appl y in case of return filed under s.153A of the Act in similar manner. The learned AR referred to the decision of the Co-ordinate bench in ACIT vs. V. N. Devadoss (2013) I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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32 taxmann.com 133 (Chennai) wherein the assessee made a fresh claim of deduction under s.80IB(10) of the Act in a return filed under s.153A of the Act. The co-ordinate bench held that such deduction cannot be denied on the ground that claim was not made earlier in a return filed under s.139(1) of the Act and a return filed in pursuance of a notice issued under s.153A of the Act is as good as a return filed under s.139 of the Act and more particularl y under s.139(1) of the Act. The learned AR thus submitted that where the demonstrable factors exist indicating venture in the nature of trade, a mere fact that the transactions were wrongl y reflected in the earlier return would not take away the legal rights of the assessee to correct the error and reflect true state of affairs in the return filed in pursuance of notice issued under s.153A of the Act consequent upon search. The learned AR thus submitted that the action of the assessee requires to be upheld and the order of the AO/CIT(A) requires to be modified.
8.4 The learned AR thereafter reiterated once again that there is no under reporting of income in the return filed under s.153A of the Act which stood substituted to the return originall y filed under s.139 of the Act. The assessee has merel y re-aligned the income under the appropriate head having regard to the ground realities and conduct of the assessee as venture in the nature of trade.
8.5 The learned AR next submitted that it is well established that there is no estoppel against law and an erroneous claim on figures or appropriate classification could be revised so long as the relevant facts are available on record. The learned AR submitted in elaboration that if an assessee under a mistake, mis-conception or not being properl y instructed is over assessed, the authorities under the Act are required to ensure that onl y legitimate tax dues are collected. To support such view, the leaned AR for the assessee referred to the decision of the Hon'ble Gujarat High Court in the case of S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj), CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bombay) etc. It was thus contended that the assessee was entitled and dut y bound to report true I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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income under proper head in the return filed under s.153A of the Act which assessee did.
9. The learned DR for the Revenue, on the other hand, relied upon th e orders of the AO and CIT(A) and submitted that the in view of the reasoned order, no interference thereof is called for. The learned DR referred to the decision of the Hon'ble MP High Court in the case of CIT vs. Suresh Chand Goyal (2008) 298 ITR 277 (MP) to submit that selling of own land after plotting it out in order to secure proper price is not an adventure in nature of trading or business. It was further pointed out that the assessee is not entitled to take advantage of its own wrong, if an y, in the return filed in pursuance of search proceedings. It was submitted that such returns are intended for the benefit of the Revenue and not for the benefit of the assessee. For this proposition, the learned DR for the Revenue relied upon the decision of Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC).
10. We have carefull y considered the rival submissions and the assessment orders as well as the order of the C IT(A) appealed against. The material referred to and relied upon as well as case laws cited have also been looked into. The substantive issue in the present case is whether the assessee held the land parcels at Thaltej as capital asset prior to its sale and whether gains arising on sale of plot/land to various customers after carrying out various amends in the nature of land and other incurring some development expenses b y the assessee in the relevant assessment orders is required to be taxed under the head 'business income' as offered b y the assessee in the return filed under s.153A of the Act or is to be treated as 'capital gains' of the assessee as originall y declared in the return filed prior to search. The incidental issue also arises as to whether the assessee is entitled in law to take a different position about the character of income in the return filed under s.153A of the Act or not. While substantive issu e is essentiall y factual in nature and depends on the facts and circumstances prevalent in a given case, the incidental issue noted above is abstract in nature and involves a question of law.
I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
[ B h a n u b e n K. S a v a l i a & 2 O r s . ] - 22 - 10.1 It is the case of the assessee that certain parcels of agricultural land admeasuring 15902 sq.mtrs. were acquired/purchased at Thaltej,
Ahmedabad between March 2008 to June 2008 jointl y alongwith two co- owners namel y Smt. Darshnaben H. Savalia and Smt. Kapilaben S. Savalia who are also appellants in this group of appeals. The purchases have taken place in FY 2007-08 & FY 2008-09 as noted above. It is the case of the assessee that aforesaid parcels of land were immediatel y converted into non-agricultural land within two months from the last purchase and the assessee incurred various development expenses to put up the residential housing plot scheme known as 'Krish Villa' while providing for common infrastructure and internal roads. The assessee has also received commencement letter for such act from AMC in February 2009 i.e. in 8-9 months time. The lay out plan of plotting done b y the assessee alongwith co-owners, broachers of the residential housing scheme was referred and relied upon to support its revised position that the assessee acquired parcels of land with a sole intention to exploit the land portfolio with commercial motive and consequentl y the gains arising in the process gives rise to business income having regard to the inclusive definition of Section 2(13) of the Act r.w.s. 28 of the Act. On perusal of the sequence of event narrated on behalf of the assessee at length as noted in preceding paras, we observe that the assessee as acted in a s ynchronized manner with continuit y. As noted, the land was converted into nonagricultural land to pave the way for its commercial utilization. The component authorities were approached immediatel y on purchase of land for conversion and demarcation of lay out. The assessee has demonstrated carrying out development of the land parcels and incurring of expenditure thereon. The Collector's letter granting permission for conversion and commencement letter from AMC proves the case in point towards commercial motive. The lay out plan suggests the demarcation of common infrastructure and internal roads in the housing plot scheme named 'Krish Villa'. It is also observed that the appellants herein have sold the plot in the said scheme to different members spanning over FY 2008-09 to FY 2010-11 after putting up the residential housing plot scheme as approved. The appellants have issued broachers for sale of plot to potential bu yers. In the AY 2011-12, I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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the assessee has also declared the profit of sale on plots under the head 'business income' as per her proportionate share.
10.2 The above narrated sequential action clearl y seeks to pronounce the indomitable intention of the appellants to acquire/approach land parcels with commercial motives. From the real, substantive and s ystematic course of activit y or conduct with a set purpose clearl y underscores the real intent of the assessee. The concrete material on record leaves no manner of doubt that the acquisition of land under sale was induced b y commercial spirit. At this juncture, it will be pertinent to observe that the intention of the assessee is to be judged not with reference to the income declared under a particular head of income as prescribed in the statute, but is required to be decided on the basis of commercial principles. The assessee has moved swiftl y and did everything possible to exploit the divided land commerciall y at the first available opportunit y. This t ype of activit y cannot be, in our considered opinion, regarded as capital acquisition taxable under the head 'capital gains'. Such organized course of commercial exploitation of land portfolio carries all trappings of adventure in the nature of trade, commerce etc. and thus falls within the ambit of expression 'business' as defined under s.2(13) of the Act. As a sequel thereto, the profits arising from such adventure can be taxed as 'business income' under s.28 of the Act as rightl y claimed on behalf of the assessee. While considering, whether a particular transaction was entered for commercial gains or not, the salutary intention of the person is determinative. It is well settled that such intention has to be decided on the basis of surrounding circumstances, existence of commercialit y in relationship of parties to the transaction, motives governing the action of the assessee in bringing about the transaction and subsequent conduct. Thus, the driving force for entering into a transaction would be determinative of the real nature and character of such transaction. The entire explanation for initial intention to acquire land with commercial objectives is thus specific and verifiable notwithstanding incorrect declaration in the return filed originall y prior to search. The action of the assessee coincide with a normal behavior of a person indulged in a I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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commercial act. A person intending to hold a land of this value for its own exploitation and enjo yment would not ordinaril y engage himself in a quite contradictory conduct and the governing features narrated above cannot be brushed aside and primacy cannot be accorded to the entries made to the books of accounts/return of income. The conduct of the assessee unequivocall y shows the intention of the assessee and attendant facts clearl y points out that the assessee was interested in exploiting commercial opportunit y for quick gains in a very short time horizon. In the light of the sequential events noted above, the claim of the Revenue that land was intended for investment as personal use and for appreciation with efflux of time as capital asset is utterl y improbable. It is apparent that the action of the Revenue was simpl y guided b y considerations of the revenue alone to collect more taxes b y holding the income to be taxable under the head 'capital gains' and consequentl y, bringing the transactions under th e umbrella of Section 50C of the Act. At this stage, we also note the assertions made on behalf of the assessee in affirmative and that transactions of acquisition and exploitation land at Chandkheda & Shilaj is not comparable with the transactions of land at Thaltej in question having regard to the immediate post acquisition conduct. A combined reading of all the connected facts warrant for an inescapable conclusion that motive for purchase of land parcels at Thaltej was for embarking an adventure in the nature of trade, commerce etc. 10.3 While coming to such conclusion, it will be relevant to note that Hon'ble Supreme Court in somewhat identical fact situation decided the issue in favour of the assessee. The Hon'ble Supreme Court in Raja J. Rameshwar Rao vs. CIT (1961) 42 ITR 179 (SC) held that where land was acquired for construction of a market thereon and surplus land was divided in plots and sold, transaction of sale of land was adventure in the nature o f trade. It was inter alia observed b y Hon'ble Supreme Court that when a person acquires a land with a view to sell it later after developing it, he is carrying on an activit y resulting in profit and the activity can onl y be described as business adventure. Where a person goes further and divides the land in the plots develops the area to make it more attractive and sales I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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the land not as a single unit as he bought it but in parcels, he is dealing with land as his stock-in-trade. He is carrying on business and making a profit. This is exactl y what had happened in the instant case. Here also, the assessee soon after purchasing land developed it and started selling sub-divided plots within two years of purchase. Similar view has been expressed b y the Hon'ble Supreme Court in P. M. Mohammed Meerakhan vs CIT [1969] 73 ITR 735 (SC) wherein division of the land into plots and sale thereof to various parcels involving scheming and organization on the part of the assessee was constituted to be an adventure in the nature of trade which is susceptible to chargeabilit y under the head 'business income' as per Section 28 of the Act. The assessee has relied upon man y other decisions expressing the similar view which we do not intend to deal with having regard to the express view available from the Hon'ble Supreme Court.
11. We shall now turn to the incidental point involving question of law arising in the subject matter of appeal i.e. whether the assessee is entitled to revise its position in departure with the original stand (taken in the return filed under s.139 of the Act prior to search) and claim the profits and gains arising from development and sale of land parcels as chargeable under s.28 of the Act under the head 'Profits & Gains' of business as against initial claim of its chargeabilit y under s.45 of the Act under the head 'capital gains' or not. The question is no longer res integra. In so far as the taxabilit y of an income under the appropriate head is concerned, the question is answered b y the Hon'ble Gujarat High Court in the case CIT vs. Pranjay Mercantile Ltd. 361 ITR 462 (Guj). In the light of the decision of the Hon'ble Gujarat High Court, it is trite that the income of the assessee is to be assessed under different heads enumerated in Section as per the true nature and character of income and not merel y on the basis of classification given b y the assessee.
12. We now turn to another aspect as to whether the assessee is entitled to revise its claim and alter its original position in accordance with law or not. The Hon'ble Gujarat High Court in CIT vs. Mitesh Impex 270 CTR 66 I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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has inter alia observed that the income tax proceedings are not adversarial in nature and the object of the Revenue would be to tax real income. The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC) noted that there is no reason wh y assessee should be prevented from raising a question of law before the Tribunal for the first time so long as relevant facts are on record in respect of the item concerned. From a reading of long line of judicial precedents, it is apparent that the authorities under the Act are under sacrosanct obligation to act in accordance with law. Tax could be collected as provided under the Act. If an assessee, under a mistake, misconception or not being properl y instructed, is over assessed, the authorities under the Act are required to ensure that onl y legitimate tax dues are collected. This is the view which flows from enumerable judgments including CIT vs. Shelly Products (2003) 262 ITR 367 (SC), S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj), CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bombay), CIT vs. B. G. Shirke Construction Technology (P) Ltd. (2017) 395 ITR 371 (Bombay) and so on. Therefore, the assessee is within its legitimate right to alter a wrong position taken earlier in the course of proceedings. In the instant case, the assessee has altered its position in the return filed under s.153A of the Act filed in pursuance of search proceedings wherein the assessee has sought taxabilit y of income generated from sale of land parcels under the head 'business income' which action is permissible provided such claims is justified when tested under the provisions of Act.
13. We thus find considerable merit in the plea of the assessee herein for eligibilit y of claim of the assessee for taxabilit y of profits arising on sale of plots under the head 'business income' as claimed in the return filed under s.153A of the Act.
14. We however now turn to the yet another related aspect in controvers y. It is the case of the Revenue that the provisions of Section 153A of the Act are for the benefit of the Revenue in the light of the decision of the Hon'ble Supreme Court in case of Sun Engineering Works I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
[ B h a n u b e n K. S a v a l i a & 2 O r s . ] - 27 - Pvt. Ltd. (1992) 198 ITR 297 (SC). It is thus claimed on behalf of the
Revenue that assessee is not permitted to make a fresh claim or alter its original stand to its advantage in the course of assessment proceedings pursuance to search. We do not see any force in such plea either. The decision of the Hon'ble Supreme Court in Sun Engineering (supra) was rendered in the context of Section 147 of the Act which seeks to assess the chargeable income escaped assessment. Keeping in view the object an d purpose of the proceedings under s.147 of the Act, it was held b y the Hon'ble Supreme Court that such provision is enacted for the benefit of Revenue and not the assessee. In total contrast to Section 147/148, a special procedure has been provided under chapter XIV for assessment in search cases. The assessments of search cases are required to be made as per Section 153A of the Act. Unlike Section 147, the scope of Section 153A of the Act is not necessaril y relatable to onl y undisclosed income. The scheme of assessment under s.153A of the Act appears to be quite different qua Section 147 of the Act on the face of it. Section 153A of the Act begins with non obstante clause which has an override effect over Section 147 of the Act among others. At this point, it will relevant to take note of the decision rendered b y the Hon'ble Gujarat High Court in case of Kirit Dahyabhai Patel vs. ACIT (2017) 80 taxmann.com 162 (Guj) wherein the Hon'ble Gujarat High Court has inter alia observed that return of income filed in response to notice under s.153A of the Act is to be considered as return filed under s.139 of the Act. Similarl y, the Hon'ble Calcutta High Court in the case of Shrikant Mohta vs. CIT ITAT No. 19 of 2015 judgment dated 25 t h June, 2018 has answered the question posed before it in affirmative that where a return was filed in response to notice under s.153A(1)(a) of the Act is required to be treated as a return under s.139 of the Act and that an y other return is of no consequence and non est. The co-ordinate bench in ACIT vs. V. N. Devadoss (2013) 32 taxmann.com 133 (Chennai) has also expressed a similar view and held that the assessee was entitled to avail the benefit of deduction under s.80IB(10) of the Act in return filed under s.153A of the Act, despite the fact that claim was not made earlier in a return filed under s.139(1) of the Act. A conspectus of the aforesaid decision cited would thus give a rise to a compelling I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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impression that assessee is not prevented from making a claim to its advantage in the proceedings under s.153A of the Act unlike Section 147 of the Act.
15. In the result, appeal of the assessee for AY 2008-09 is allowed.
IT(SS)A Nos. 83, 84 & 889/Ahd/2015 - AYs. 2009-10 to 2011-12 (Bhanuben K. Savalia)
16. As per the grounds of appeal, the assessee has challenged the action of the Revenue in treating profits arising from sale of a part of land at Thaltej, Ahmedabad (Krish Villa) as short term capital gains as against the business income shown b y the assessee and consequentl y appl ying the provisions of Section 50C of the Act. As noted earlier, the assessee while filing the original return (prior to search) under s.139 of the Act had declared the land at Thaltej (Krish Villa) as capital asset in FY 2007-08 relevant to AY 2008-09. The gains arising from sale of the land spannin g over AY 2008-09, 2009-10 & 2010-11 was accordingl y shown and declared as capital gains in its return of income filed prior to search. However, consequent upon search, the assessee altered its stand and declared the land to be held as stock-in-trade/current investment and the gains arising on sale thereof in subsequent years have declared it to be business income of the assessee.
17. In view of discussion in length on identical fact situation, the case of assessee merits acceptance for treating the profits on sale of land/plot to b e 'business income' as per return filed under s.153A of the Act instead of 'capital gains' .
18. In the result, all the appeals of the assessee for AY 2009-10 to 2011- 12 are allowed.
I.T.(SS)A. Nos. 79, 80, 81 & 888/Ahd/2015 - A Ys. 2008-09, 2009-10, 2010-11 & 2011-12) in case of Darshnaben Harshadbhai Savalia & I T ( S S ) A N o . 8 2 / Ah d / 1 5 & 1 1 a p p e a l s .
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I.T.(SS)A. Nos. 76, 77, 78 & 887/Ahd/2015 AYs. 2008-09, 2009-10, 2010- 11 & 2011-12) in case of Smt. Kapilaben S. Savalia
19. The other assessee, namel y, Smt. Darshnaben Harshadbhai Savalia and Smt. Kapilaben S. Savalia are also the co-owners of the same land parcels as discussed in the case of Smt. Bhanuben Kantiben Savalia (supra). Therefore, observations made in Smt. Bhanuben Kantiben Savalia shall appl y mutatis mutandis in other appeals relating to other assessees as noted above.
20. In view of discussion in length on identical fact situation, the case of assessee merits acceptance for treating the profits on sale of land/plot to b e 'business income' as per return filed under s.153A of the Act instead of 'capital gains' .
21. In the combined result, all the appeals of respective assessees are allowed.
This Order pronounced in Open Court on 17/09/2019 Sd/- Sd/-
(MAHAVIR PRASAD) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 17/09/2019
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं-धत आयकर आयु/त / Concerned CIT
4. आयकर आयु/त- अपील / CIT (A)
5. 3वभागीय 6त6न-ध, आयकर अपील"य अ-धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड< फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील"य अ-धकरण, अहमदाबाद ।