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Before: Shri Inturi Rama Rao & Shri Duvvuru R.L. Reddy
आयकर अपीलीय अिधकरण, ‘‘सी’’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी इंटूरी रामा राव, लेखा सद� एवं �ी धु�ु� आर.एल रे�ी, �ाियक सद� के सम� Before Shri Inturi Rama Rao, Accountant Member & Shri Duvvuru R.L. Reddy, Judicial Member आयकर अपील सं./I.T.A. No. 2263/Chny/2019 िनधा�रण वष�/Assessment Year: 2012-13 & C.O. No. 104/Chny/2019 [In I.T.A. No. 2263/Chny/2019] The Deputy Commissioner of Shri Sailendra Kumar Kethineni, Income Tax Vs. No. 61, Greenways Road, R.A. Puram, Non Corporate Circle 2(1), Chennai 600 028. Chennai 600 034. [PAN:AAFPK8983P] (अपीलाथ� /Appellant) (Respondent/Cross Objector) अपीलाथ� की ओर से / Appellant by : Shri Abani Kanta Nayak, CIT ��थ� की ओर से/Respondent by : Shri M. Karunakaran, Advocate सुनवाई की तारीख/ Date of hearing : 18.02.2020 घोषणा की तारीख /Date of Pronouncement : 24.02.2020 आदेश /O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: The appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 2, Chennai dated 10.04.2019 relevant to the assessment year 2012-13. The effective grounds raised by the Revenue are that the ld. CIT(A) has erred in deleting the addition made in respect of employees contribution towards PF/ESI and treating the sale of land in Sholinganallur as capital asset on the basis of book entry without appreciating that book entries are not determinative of income of assessee.
2 I.T.A. No. 2263/Chny/19 & C.O. No. 104/Chny/19
Brief facts of the case are that the assessee is an individual and admitted income from house property, business income besides capital gains and income from other sources. The assessee filed the return of income for the assessment year 2012-13 on 30.09.2012 admitting an income of ₹.12,85,67,130/-. The assessment under section 143(3) of the Income Tax Act, 1961 [“Act” in short] was completed by determining the total income at ₹.12,97,34,004/- after making various additions to the income returned. Thereafter, the assessment was reopened by issue of notice under section 148 of the Act. The reasons for reopening of the assessment were communicated to the assessee for filing his objection. After considering the submissions and facts of the case, the assessment was completed under section 143(3) r.w.s. 147 of the Act by determining the total income at ₹.14,80,55,891/- after making various additions. On appeal against various additions, the ld. CIT(A) partly allowed the appeal of the assessee.
Aggrieved, the Revenue is in appeal before the Tribunal against deletion of addition made in respect of employees contribution towards PF/ESI and treating the sale of land in Sholinganallur as capital asset on the basis of book entry without appreciating that book entries are not determinative of income of assessee and the ld. DR dutifully supported the order passed by the Assessing Officer. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).
3 I.T.A. No. 2263/Chny/19 & C.O. No. 104/Chny/19
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Against the disallowance of ₹.1,04,787/- under section 43B of the Act towards delayed remittance of ESI & PF, the Assessing Officer found that the assessee had remitted belatedly the ESI payment of ₹.31,744/- and EPF payments of ₹.73,043/- totalling to ₹.1,04,787/- beyond the due dates under the relevant statutes and therefore, the same was disallowed and brought to tax. Before the ld. CIT(A), the assessee has submitted that since the entire amount has been remitted before the due date for filing of return of income under section 139(1) of the Act, the same should be allowed as deduction under section 43B of the Act. By following and reproducing the relevant portion of the decision in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. in TCA Nos. 585 and 586 of 2015 vide order dated 24.07.2015, the ld. CIT(A) rightly allowed the ground raised by the assessee. We find no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the Revenue stands dismissed.
The next ground relates to treatment of long term capital gains claimed at ₹.13,45,46,777/- as business income by the Assessing Officer. The assessee sold an extent of 2.80 acres of land at Sholinganallur village for a total consideration of ₹.14,42,00,000/- and after deducting the indexed cost of acquisition of the property of ₹.1,52,47,042/-, admitted capital gains
4 I.T.A. No. 2263/Chny/19 & C.O. No. 104/Chny/19
of ₹.12,89,52,958/- in the return of income. In the course of assessment proceedings, the Assessing Officer found that the profit on sale of another property viz., Anandavalli Nagar property, was admitted as business income, whereas, the profit on sale of land at Sholinganallur was shown under Capital Gains. When the assessee was asked to explain the same, the assessee has submitted before the Assessing Officer that the properties were located at different places and that the land at Sholinganallur was always held as investment and therefore, the profit on sale of land at Sholinganallur was offered to tax under the head Capital Gains. As per the assessee, the other land at Anandavalli Nagar (near Sriperumbudur) of 2 grounds was treated as stock-in-trade and the profit was shown as business income. Referring to the Wealth tax returns, the Assessing Officer concluded that the assessee cannot claim one property in the same locality as capital asset and another one as stock-in-trade. The Assessing Officer further observes that one more piece of land at Sholinganallur was claimed as exempt in wealth tax return on the ground that the land was held as stock-in- trade. Therefore, the Assessing Officer determined that the assessee’s aggregation of land at Sholinganallur was only for the purpose of business activity and taxed the same as business income. The Assessing Officer computed the business profit at ₹.13,45,46,777/- after deducting the cost of
5 I.T.A. No. 2263/Chny/19 & C.O. No. 104/Chny/19
the land of ₹.96,53,223/- as per books from the sale consideration of ₹.14,42,00,000/-.
5.1 Before the ld. CIT(A), it was the submission of the assessee that the capital work-in-progress of ₹.13,03,63,953/-, being the closing stock value of the properties, where development work was in progress, was shown under the head of business income, and that, these properties were situated at Srivari Gardens, Anandavalli Nagar, etc. It was further submission of the assessee that all the other properties are capital assets, that they were not held as stock-in-trade, and that, the properties sold were different and distinct. The assessee also contended that the Assessing Officer was not justified in treating the profit on sale of the said land as business income and prayed for deleting the addition of ₹.13,45,46,777/ - under the head business income and the long term capital gains of ₹.12,89,52,958/ - admitted on sale of the said property may be accepted. Further, the assessee fixed assets details from the Balance Sheet as on 31.03.2009, 31.03.2010 and 31.03.2011 in support of his argument that the Sholinganallur properties were disclosed as Fixed Assets in the Balance Sheet for the preceding three Financial Years. After considering the submissions of the assessee, the ld. CIT(A) has observed that the conclusion arrived by the Assessing Officer that the Sholinganallur property needs to be treated as stock-in-trade has no basis since the Assessing Officer failed to gather any evidence to support
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his view. In the absence of evidence to the contrary, the ld. CIT(A) directed the Assessing Officer to treat the Sholinganallur property as stock-in-trade and also to treat the income from the sale of property at Sholinganallur under the head Long Term Capital Gains.
5.2 Before us, the ld. DR has submitted that the assessee has applied two different yardsticks in respect of sale of two lands appearing in the balance sheet under fixed assets by treating one sale as a capital gain and another as business income. It was further submission that mere entries in the books are not determinative of income of the assessee in view of the decisions in the case of Sutlej Cotton Mills Ltd. v. CIT (1979) 116 ITR 1(SC) & Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT 227 ITR 172 (SC). We find force in the arguments of the ld. DR. When the assessee as admitted another property at Sholinganallur, which was included in the wealth tax return for the assessment year 2012-13 as stock-in-trade, the ld. CIT(A) has not given any justification to treat one property as stock-in-trade and another as fixed asset of same locality. Accordingly, we direct the ld. CIT(A) to decide the issue afresh by passing speaking order with proper justification in accordance with law after affording an opportunity of being heard to the assessee. Thus, the ground raised by the Revenue is allowed for statistical purposes.
7 I.T.A. No. 2263/Chny/19 & C.O. No. 104/Chny/19
The Cross Objection filed by the assessee is delayed by 27 days in filing before the Tribunal, for which, the assessee has filed a petition for condonation of the delay in the form of an affidavit, to which; the ld. DR has not raised any serious objection. Consequently, the delay of 27 days in filing of the CO stands condoned.
6.1 The only objection of the assessee in the CO is with regard to reopening of assessment under section 147 of the Act. While dismissing the issue, the ld. CIT(A) has passed well-reasoned detailed order with regard to reopening of assessment. We find no infirmity in the order passed by the ld. CIT(A) on this issue and thus, the objection of the assessee stands dismissed.
In the result, the appeal filed by the Revenue is partly allowed for statistical purposes and the CO filed by the assessee is dismissed. Order pronounced on the 24th February, 2020 at Chennai.
Sd/- Sd/- (INTURI RAMA RAO) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 24.02.2020 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.