SMT. HANSABEN NATVARSINH THAKOR,,VALSAD vs. THE INCOME TAX OFFICER, WARD-2,, VALSAD

Smt. Hansaben Natvarsinh Thakor Vs. ITO, Ward-2, Valsad/ITA No.1508/AHD/2016 for A.Y. 2012-13 Page 1 of 6

आयकर अपील�य अ�धकरण,सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A.No.1508/AHD/2016 �नधा�रण वष�/Assessment Year : 2012-13 Smt. Hansaben Natvarsinh Thakor, Vs. The Income Tax Officer, At/Post-Dumlav, Ward-2, Valsad. Tal./Dist.-Valsad – 396 055. [PAN: AEMPD 2671 N] अपीलाथ� Appellant ��यथ�/Respondent �नधा�रती क� ओर से /Assessee by Shri Rajesh Upadhyay – Advocate. राज�व क� ओर से /Revenue by Shri P.S.Chowdhary –Sr.DR

19.06.2019 सुनवाई की तारीख/ Date of hearing: उ�घोषणा क� तार�ख/Pronouncement on: 15.07.2019 आदेश /O R D E R PER O.P.MEENA, AM: This appeal filed by the Assessee is directed against the order of 1. Learned Commissioner of Income Tax (Appeals), Valsad dated 12.05.2016 for assessment year 2012-13.

The grounds raised by the assessee read as under : 2. “[1]. Lr.CIT[A], Valsad has erred in law and on facts to direct the A.O. to tax STCG on sale of the property of M/s New Hotel Samrat without appreciating the fact that such profit is already taxed in the hands of the firm as such, Lr. CIT(A)\s direction amounts to double taxation. [2] Lr. CIT(A), Valsad has erred in law and on facts to upheld A.O.’s decision to tax STCG on sale of M/s New Hotel Samrat property of Village- Chikhi, Tal./Distt.- Valsad in the hands of the appellant

Smt. Hansaben Natvarsinh Thakor Vs. ITO, Ward-2, Valsad/ITA No.1508/AHD/2016 for A.Y. 2012-13 Page 2 of 6

ignoring the fact that the said property is recorded in the books of the partnership firm, M/s New Hotel Samrat and the firm has already shown profit on sale of the sale property in its P & L A/c for F.Y. 2011-12. [3] Lr. CIT(A), Valsad has erred in law and on facts to upheld the decision of the A.O.that the A.O. is correct in law for not following procedure laid down u/s 50C(2) of the I.T.Act. The A.O. is under obligation to refer the matter pertains to value of the property to DVO when the documentary value is lesser than the value of SVO, in the interest of equity and justice. [4] Lr. CIT(A), Valsad has erred in law and on facts in not directing the A.O. to tax 50% STCG in the hands of the appellant.” Brief facts of the case are that the ld.Counsel for the assessee 3. submitted that the case was selected under CASS to enquire into large investment made by the assessee in immovable property as compared to total income. The assessee has filed details of investment made in the property on which no addition has been made. However, the Assessing Officer has made addition in respect of the property sold out to Shri Dilip Maganbhai Kaneriya by Register Deed No.460 dated 31.01.2012 at Rs.30,00,000/- by Smt.Hansaben N.Thakor and Divya N.Thakore. The value of the said property as per stamp duty was at Rs.55,35,335/-, accordingly, the Assessing Officer has worked out short term capital gain at Rs.45,35,335/- as per the provisions of section 50C of the Act and made addition accordingly. The ld.Counsel contended that the case was reopened on the basis of information received by the Assessing Officer under CASS for investment in property and not for sale of property, hence the addition made is against the provisions of Law. As no addition can be made in the case of limited scrutiny, on the reason which were not

Smt. Hansaben Natvarsinh Thakor Vs. ITO, Ward-2, Valsad/ITA No.1508/AHD/2016 for A.Y. 2012-13 Page 3 of 6

given in selection of case. The ld.Counsel further contended that the assessee is having 40% share in New Hotel Samrat (PAN: AAIFN 4152 G) wherein she has offered interest income of Rs.87,695/- from the said firm. The said partnership firm has sold immovable property of Hotel Samrat for a consideration of Rs.30,00,000/- in the year under assessment. The property on which the Assessing Officer has made addition as per provisions of section 50C belongs to the partnership firm and not to the assessee. It was further submitted that the firm has shown this property in its balance sheet from the beginning and the said firm has disclosed profit on sale of this property in its case. The ld.Counsel further submitted a copy of appellate order passed in respect of penalty levied u/s.271(1)(c) in the case of assessee for the assessment year under consideration by the ld.CIT(A)-Valsad vide his order in appeal no.CIT(A)/VLS/17/18-19/286 dated 30.05.2019 wherein the ld.CIT(A) in para 3.3 observed as under : “ After considering the findings of the assessing officer and submissions of the appellant, I find that the appellant has challenged the levy of penalty of Rs.6,78,821/- u/s.271(1)(c) of the Act. In the penalty order, the AO noted that the short term capital gain on sale of property was not shown in the return of income and the addition of Rs.55,35,335/- was made as per sec. 50C as well as the full sale consideration of Rs.30 lacs. However, in the first appeal against the quantum addition the CIT(A) directed the AO to take only 50% of sale proceeds as appellant was only half shareholder in the said property. After recalculating the total addition on the basis of appeal effect to the CIT(A)’s order, the AO concluded that Rs.22,67,668/- was finally concealed income on which penalty u/s.271(1)(c) of the Act was leviable. In the appellate proceedings, the AR of the appellant contended that the property of Hotel Samrat sold during the current

Smt. Hansaben Natvarsinh Thakor Vs. ITO, Ward-2, Valsad/ITA No.1508/AHD/2016 for A.Y. 2012-13 Page 4 of 6

year was duly reflected in the case of the firm M/s.New Hotel Samrat in which the appellant as well as another co-owner Divya Natvarsinh Thakor were partners. The AR also shown from the copy of P&L account of the firm M/s.New Samrat Hotel that Profit on sale of the hotel property was duly reflected in the case of the firm. Further, the AR has also shown from the copy of P&L account and balance sheet of A.Y. 2010-11 for the firm M/s.New Hotel Samrat that the said property was introduced as capital in the firm and even depreciations on the said property was allowed in the said case for A.Y. 2010-11. The AR also indicated that against the property value of Rs.10,00,000/- partners were shown as capital contribution of Rs.5 lacs each and even interest was paid by the firm. Thus, it was contended that there was no case for any addition of short term capital gain in the case of the appellant as the said property belonged to the firm. The AR has further stated that the appellant is in appeal before the ITAT for the remaining quantum addition sustained by the CIT(A). Based on these submissions, the AR contended that there was no case for levy of penalty u/s.271(1)(c) of the Act. After considering the fact that the hotel property sold during the year was very much part of the assets of the firm M/s.New Hotel Samrat and even the depreciations was allowed on the said property in A.Y. 2010-11. The profit on sale of property was shown in the case of firm for A.Y. 2012-13. Thus, even though the AO made addition on account of short term capital gain, the decisions about taxability of the income in the case of appellant or in the case of firm is not settled yet. Thus, in such a situation, no case is made out for concealment of income in the case of appellant. The AR has also referred to several court decisions including the decision of Apex court in the case of Reliance Petro products (supra) which is found to be applicable to the facts of current case. Hence, the penalty of Rs.6,78,821/- u/s.271(1)(c) of the Act is hereby deleted.” In view of above, it was contended that the property sold during 4. the year pertaining to M/s.New Samrat Hotel and profit on sale of the hotel property were duly reflected in the case of the firm, therefore the addition made in the case of the partner of the assessee firm is not sustainable in law. Per contra, the ld.Departmental Representative has supported the 5. order of the Lower Authorities.

Smt. Hansaben Natvarsinh Thakor Vs. ITO, Ward-2, Valsad/ITA No.1508/AHD/2016 for A.Y. 2012-13 Page 5 of 6

We have heard the rival submissions and perused the material 6. available on record. We find that the ld.CIT(A)-Valsad in his appellate order dated 30.05.2019 has clearly held that the property sold by the assessee was very much part of the asset of the firm M/s.New Hotel Samrat and even the depreciation was allowed on the said property in A.Y. 2010-11. The profit on sale of property was also shown in the case of firm for A.Y.2012-13 and on this basis the ld.CIT(A) has deleted the penalty imposed in respect of this very addition made in the case of assessee by invoking the provisions of section 50C of the Act. In view of these facts, we are of the considered opinion that since the property does not belong to the assessee as it pertains to the firm in which she is partner and introduced as a capital contribution thereon, therefore, the addition made in the case of assessee by invoking the provisions of section 50C amounting to Rs.55,35,335/- is accordingly deleted. Consequently all the above grounds of appeal are allowed. Additional Ground:- During the course of appellate 7. proceedings before us, the assessee has also raised an additional ground on the ground that the Assessing Officer has exceeded his jurisdiction in finalizing the assessment u/s.143(3) of the Act as the case was selected and CASS on the ground for verification of investment made in immovable property whereas the Assessing Office has made addition on sale of immovable property which is beyond his jurisdiction.

Smt. Hansaben Natvarsinh Thakor Vs. ITO, Ward-2, Valsad/ITA No.1508/AHD/2016 for A.Y. 2012-13 Page 6 of 6

We have heard the rival submissions. Since we have allowed the 8. appeal on merit in the case of assessee in the above para of this order, therefore the additional ground raised before us becomes academic in nature, hence we are not adjudicating on the same ground. Accordingly, same is dismissed. In the result, appeal of the assessee is partly allowed. 9. The order is pronounced by listing the case on the Notice Board 10. under Rule 34(4) of Income Tax Appellate Tribunal Rules, 1963.

Sd/- Sd/- (MAHAVIR PRASAD) (O.P.MEENA) (�याियकसद�यतथा/JUDICIAL MEMBER) (लेखासद�यकेसम� /ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 15th July, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat