DEW DROP PROPERTIES,MUMBAI vs. JOINT COMMISSIONER OF INCOME TAX, GURUGRAM

Brief facts of the case are that assessee is a firm and it filed its return of income on 05.08.2013 reporting total income at Rs.4,43,15,390/-. Assessee is engaged in the business of buying, selling, leasing and development of properties. It is also running a resort. It derived income from house properties, business, capital gain and income from other sources. In the profit and loss account, assessee included profit on sale of shop at Rs.26,15,420/- and calculated net profit at Rs.4,34,525/-, after salary to partners for Rs.12,00,000/-. Ld. Assessing Officer treated the profit on sale of shop as short term capital gain instead of business profit reported by the assessee. He thus, recomputed the total income of the assessee whereby the net profit in the profit and loss account should be Rs.(-)21,80,895. He thus, disallowed the salary to partners of Rs.12 lakhs and completed the assessment at total assessed income of Rs.4,55,15,390/-.

1. In the first appellate proceedings, assessee made its submissions. According to the ld. CIT(A) he could not produce documentary evidence in support of the contention that the profits earned on sale of shop were the business profits and not short term capital gain as characterised by the ld. Assessing Officer. Thus, in absence of documentary evidences, ld. CIT(A) affirmed the stance taken by the ld. Assessing Officer and dismissed the appeal of the assessee.

Before us, ld. Counsel for the assessee reiterated the fact and submitted that two properties which were purchased and sold, profits therefrom were shown in the profit and loss account along with other business income. Assessee submitted a tabular detail to demonstrate

We have perused the records and the orders of the authorities below. The tabulated details furnished by the ld. Counsel is reproduced below:

1. Apart from the above tabulated detail, there is nothing on record to establish factually the contention made by the assessee that the profit earned by the assessee on sale of shop is a business profit. The 4 Dew Drop Properties AY 2013-14 financial statements, records of inventory, both opening and the closing balances as well as details of other business profits need to be verified from the corroborative documentary evidences before accepting the contentions made by the assessee. Accordingly, in the interest of justice and fair play, we find it appropriate to remit the matter back to the file of ld. Assessing Officer to ascertain the factual position as to the claim of assessee that the profit earned by it on sale of two shops represents business profits, so as to allow the claim of salary to partners which has been disallowed. Needless to say, assessee be given reasonable opportunity of being heard to substantiate the claim by furnishing relevant documentary evidences. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

In the result, appeal of the assessee is allowed for statistical purposes.