Income Tax Appellate Tribunal - Chennai
Aashish Gupta, Chennai vs Department Of Income Tax on 31 July, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
CHENNAI BENCH 'C' : CHENNAI
[BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND
SHRI HARI OM MARATHA, JUDICIAL MEMBER]
I.T.A Nos. 1897 and 1898/Mds/2010
Assessment years : 2005-06 & 2006-07
The ACIT vs Shri Aashish Gupta
Circle XIII No.6-B, Calve Chateau
Chennai No.808, Poonamallee High Road
Kilpauk
Chennai 600 010
[PAN - AAGPG9637F ]
(Appellant) (Respondent)
I.T.A No. 1899/Mds/2010
Assessment years : 2005-06
The ACIT vs Shri Anuj Gupta
Circle XIII No.6-B, Calve Chateau
Chennai No.808, Poonamallee High Road
Kilpauk
Chennai 600 010
[PAN - AAEPA3948H]
(Appellant) (Respondent)
Appellant by : Shri K.P.Gopakumar, Jt. CIT
Respondents by : Shri J.C.Prakash, FCA
ORDER
PER HARI OM MARATHA, JUDICIAL MEMBER:
The above captioned appeals, filed by the Revenue, are being disposed of by a common order for the sake of convenience and brevity.
:- 2 -: ITA 1897,1898 & 1899/10 I.T.A.Nos.1897 & 1898/Mds/2010
2. These are two appeals, for assessment years 2005-06 and 2006-07, filed by the Revenue. For the sake of convenience, we narrate the facts of assessment year 2005-06.
3. The assessee, namely, Shri Aashish Gupta, filed his return of income for assessment year 2005-06, admitting total income of ` 2,47,361/- on 5.9.2005. The assessee was doing commission business. A survey u/s 133A was conducted in the case of one Dr.G.Loganathan by ITO, Ward I(4), Salem, in which it was found that two properties were purchased by him. The details of the two purchases are as under:
Sl. Document Date of Seller Name Property Purchase Guideline No. No. Purchase details Price value
1. 52/05 19.1.05 Anuj Gupta 24397 sq ` 18.5 8347000 B/o assessee ft lakhs
2. 785/05 11.5.05 Ashish Gupta 24400 sq ` 18.5 8344800 ft lakhs
4. It was also found that Dr.G.Loganathan had paid additional stamp duty on the market value of the above properties fixed at ` 83,47,000/- and ` 83,44,800/- respectively. As a sequel to this information, an enquiry was conducted and it was found that the assessee had not admitted any capital gains during the year. Shri Anuj Gupta, brother of this assessee, appeared in response to summons :- 3 -: ITA 1897,1898 & 1899/10 send by the ITO. His statement was recorded in which he admitted that he was into real business alongwith his brother(this assessee) and the property sold in Salem was their first venture and the profits therefrom were admitted as business income in assessment year 2005-
06. It was stated that the property was purchased in the month of November 2004 and sold immediately thereafter to Dr.G.Loganathan of Salem. Out of the sale proceeds, the assessee purchased another property at Hosur and started construction of a shopping complex. Consequently, a notice u/s 148 dated 31.7.2007 was issued and served on the assessee. The Assessing Officer invoked the provisions of section 50C of the Act. The assessee complied with the notice through letter dated 13.8.2007 requesting that the return filed on 5.9.2005 may be treated as the return filed in response to notice u/s 148 and also requested for the supply of reasons for reopening of the assessment. As requested, copy of reasons was sent to the assessee on 4.2.2008. The assessee had objected to the re-assessment proceedings by making following submission:
- That the assessee is carrying on the business of real estate. The land was held as stock in trade and not as an investment.
- The impugned land is not a capital asset as defined u/s 2(14).
- Provisions of section 50C are applicable upon the transfer of capital asset.
:- 4 -: ITA 1897,1898 & 1899/10
- Subsequent to purchase and sale of property, the assessee is involved in the real estate business.
- That the property was purchased on 29.11.2004 and sold on 1.12.2004 tat is within two days the property was disposed.
- Even earlier to this transaction the assessee paid advance on 11.6.2004 for a purchase of property in Bangalore, which is presently under litigation.
- That this is not the sole and lonely transaction.
- That the intention of the assessee is not to invest in the land as investment.
- That it is prerogative of the assessee to carry on a transaction as business transaction or an investment.
5. The Assessing Officer, after considering the objections and other contentions of the assessee, observed that the property was purchased by the assessee on 29.11.2004 and sold on 1.12.2004 for ` 18.5 lakhs, but the buyer, Dr.G.Loganathan sold the property on 1.12.2006 for ` 82.94 lakhs. According to the Assessing Officer, the huge difference in value within a short span of time and consequent sale proceeds being treated as business receipt shows that the assessee has tried to avoid payment of capital gains. Thus, he treated this as a colourable device. He, therefore, computed the short term capital gains and taxed the same. On the contrary, the ld. CIT(A) has allowed the appeal of the assessee on merits by treating this :- 5 -: ITA 1897,1898 & 1899/10 transaction as a business transaction not attracting the provisions of section 50C of the Act. Now, the Revenue is aggrieved.
6. The case of the Revenue is that there is no material on record to support the contention of the assessee that the asset in question is not a capital asset and is a business asset. On the contrary, the ld.AR has relied on the order of the ld. CIT(A).
7. After hearing both sides, we are of the considered opinion that the intention of the assessee has to be given due weightage to arrive at the exact character of the transaction. In this case, when the entire facts are visualized and captured in one go, the only conclusion can be drawn is that this is a simple transaction of purchase and sale of land in the normal course of business activity. It is true that this was the first transaction of purchase and sale by the assessee. Any way, whenever the assessee starts his business he has to undertake first transaction and by treating it as the first instance, the nature of asset cannot change. The mere fact that the assessee had purchased land today and sold it tomorrow rather speaks volumes in favour of the character of assessee's transaction which can be treated as a business transaction only. The decision of Hon'ble Madras High Court rendered in the case of CIT vs Thiruvengadam Investments P. Ltd, 320 ITR 345, :- 6 -: ITA 1897,1898 & 1899/10 is directly applicable to the facts of this case. In this case, it has been held as under:
"The Tribunal held that the invocation of the provisions of section 50C was not warranted as the property was never held by the assessee as capital asset and as per the accounts also, the amount given to the owner of the property had been shown as loans and advances thereby the property had been treated as business asset and not as a capital asset."
8. Therefore, by following the above decision, we decide this appeal in favour of the assessee and cannot allow the appeal of the Revenue for assessment year 2005-06.
9. In assessment year 2006-07, the assessee filed his return admitting total taxable income of ` 4,16,408/-. Assessment was completed u/s 143(3) on 31.12.2008 at a total income of ` 70,16,270/-. On similar facts, to be doubly sure, that this transaction, has taken place and also assessed in assessment year 2005-06, may be required to be assessed in assessment year 2006-07 treating the transaction to be relevant to the assessment year 2006-07, so to say on protective basis. As we have taken a view in assessment year 2005-06 that this transaction is a business transaction and cannot be treated as a transfer of property attracting the provisions of section 50C of the Act. Therefore, this appeal also stands dismissed.
10. In the result, both the appeals of the Revenue stand dismissed.
:- 7 -: ITA 1897,1898 & 1899/10 I.T.A.No. 1899/Mds/2010
11. This appeal of the Revenue, for assessment year 2005-06, in the case of Shri Anuj Gupta, brother of above assessee, Shri Aashish Gupta, is directed against the order of the ld. CIT(A), Chennai, dated 30.8.2010.
12. For assessment year 2005-06, the assessee filed his return of income admitting taxable income of ` 2,00,490/- and assessment was completed u/s 143(3) r.w.s 147 at a total income of ` 67,28,213/- on 31.12.2008. The facts of this case are common as discussed above in the case of Shri Aashish Gupta. With similar reasoning, we dismiss this appeal of the Revenue also, the facts and issues being mutatis mutandis identical.
13. To summarize the result, all the three appeals of the Revenue stand dismissed.
Order pronounced in the open court on 02.08.11.
Sd/- Sd/-
(DR. O.K. NARAYANAN) (HARI OM MARATHA)
VICE-PRESIDENT JUDICIAL MEMBER
Dated: 2nd August, 2011
RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR