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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by Revenue is against order of CIT(A)-1, Nashik, dated 15.12.2015 relating to assessment year 2011-12 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The Revenue has raised the following grounds of appeal:-
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1) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-1, Nashik is justified in deleting the addition of Rs.98,96,077/- on account of section 50C. 2) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-1, Nashik was correct in holding the transactions of the assessee as business transactions when the assessee himself had offered the same as Capital Gain in the returned of income. 3) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-1, Nashik is justified in deleting the addition of Rs.46,38,879/- on account of section 68 of the Act being peak cash balance. 4) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-1, Nashik is justified in deleting the addition of Rs.5,59,875/- on account of section 68 of the Act being loan taken from wife. 5) The appellant prays the order of the Assessing Officer may be restored. 6) The appellant prays to adduce such further evidence to substantiate his case.
The issue raised in the present appeal vide ground of appeal No.1 is against deletion of addition of ₹ 98,96,077/- by invoking the provisions of section 50C of the Act. The linked issue is vide ground of appeal No.2, wherein the CIT(A) has accepted the transaction of assessee to be business transaction and the Revenue is aggrieved since the assessee himself had offered the same as capital gains in the return of income.
Briefly, in the facts of the case, the assessee had furnished the return of income declaring total income of ₹ 34,67,526/-. The assessee was an individual and had declared income from short term capital gains, long term capital gains and income from other sources in the return of income. The Assessing Officer noted that the assessee had furnished the return of income in ITR-2, which was for individual and HUF having no income from business and profession. The Assessing Officer had information that the assessee had sold Basement of Gurudev Towers, Canada Corner, Nashik, admeasuring 2711.98 sq.ft. to Shirpur Co-op. Bank, Shirpur on 24.04.2010 for ₹ 66,51,000/-. Stamp
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duty valuation of said Basement was ₹ 1,44,53,000/-. The assessee had declared the said income as short term capital gains. However, during the course of assessment proceedings, the assessee pointed out that due to oversight the return was filed in Form No.ITR-2 declaring short term capital gains as against correct income from business. The assessee had also sold land at Kopergaon, against which it had declared capital gains at ₹ 1,67,946/-; vis-à-vis Basement in Gurudev Towers, the assessee had declared the short term capital gains at ₹ 6,68,958/-. The Assessing Officer noted that the stamp duty valuation of Basement sold was ₹ 1.44 crores as against the sale value declared by assessee at ₹ 66,51,000/- and observed that the difference of ₹ 78,02,000/- was taxable under section 50C of the Act. The assessee in support of its claim that it was business income, filed audit report which was signed on 05.01.2014 i.e. more than two and half years belated than required. The Assessing Officer noted that the same was prepared after notices were issued under section 143(2) and 142(1) of the Act. The Assessing Officer was of the view that no business activity was carried out during the year by assessee as even in Profit and Loss Account only sale value of Basement was shown and no other business receipts were shown. He also noted that books of account were not properly maintained and maximum payments were in cash.
Another point noted was that the said plot was not treated as stock-in- trade in the previous year and no Balance Sheet was prepared and even no return of income was filed by assessee. Considering all these, the Assessing Officer computed short term capital gains in the hands of assessee by adopting stamp duty valuation at ₹ 1.44 crores. The cost of acquisition was taken at ₹ 38,87,965/- and short term capital gains were computed at ₹ 1,05,65,035/-. The assessee had already offered sum of ₹ 6,68,958/- as short term capital
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gains and the balance sum of ₹ 98,96,077/- was added in the hands of assessee.
Another addition which was made in the hands of assessee was on account of unexplained cash credit under section 68 of the Act. The Assessing Officer noted that there were cash deposits in the saving bank account and sought certain information. The assessee during the course of assessment proceedings worked out peak cash balance as per Cash Book at ₹ 61,69,170/- as on 06.12.2010. The Assessing Officer was of the view that an individual without any source of cash and without any destination of cash would not kept cash at home and he did not accept the theory of cash withdrawal which was re-deposits in the bank account. Hence, he made an addition of ₹ 61,69,170/-.
Another addition which was made in the hands of assessee was on account of loan taken from wife, where it was observed that wife was not filing any return of income. Hence, the creditworthiness of wife does not stand proved. The assessee was held to have not satisfied the genuineness of transaction and sum of ₹ 5,59,875/- was added in the hands of assessee.
The CIT(A) noted that the issue in dispute was whether the sale of property was capital gains or business income, wherein the Assessing Officer had considered the same as capital gains and applied the provisions of section 50C of the Act. However, the assessee claimed it to be business income. The CIT(A) observed that on perusal of assessment order in column 5 the Assessing Officer has noted the source of income to be construction and sale of immovable property, which she noted that the assessee was engaged in business of construction. She also referred to order of Assessing Officer
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passed under section 143(3) r.w.s. 147 in this regard. Reference was made to the assessment order for assessment years 2008-09, 2009-10 and 2010-11 and the asset in all the years was treated as stock-in-trade. She thus, observed that there was no reason to treat the sale of property as capital gains in the current assessment year. Merely because the assessee had filed return of income in ITR-2 could not be sole deciding factor, since it was case of inadvertent error. She further held that principles of consistency has to be followed and where the assessee was engaged in construction and sale of immovable property and where plot in question was shown as stock-in-trade in earlier years and accepted by the Revenue vide orders passed under section 143(3) of the Act, then the profits arising on its sale could be assessed as business income and not as capital gains. Consequently, provisions of section 50C of the Act would become in-applicable and the Assessing Officer was directed to delete the addition in this regard. Further, the CIT(A) relied on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Pruthvi Brokers and Shareholders reported in 349 ITR 336 (Bom) to propose that if the assessee makes mistake it was the duty of Revenue to rectify the same. In this regard, she referred to CBDT Circular No.14(XL-35) of 1955, dated 11.04.1955 that the Income-tax Department could not take advantage of assessee’s ignorance and should have examined the facts in proper perspective.
Coming to the next addition made under section 68 of the Act by assessing peak cash balance in assessee’s bank account. The CIT(A) observed that closing cash balance of ₹ 46,38,879/- was accepted by the Assessing Officer in assessment year 2009-10. Further, cash balance of assessee had also been accepted in assessment years 2008-09 and 2010-11. Therefore, she held that no addition could be made on account of opening
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balance. She thus, directed the Assessing Officer to delete addition relating to opening cash balance of ₹ 46,38,879/- but since the assessee could not establish nexus between withdrawals and deposits, addition of ₹ 15,40,191/- was upheld in the hands of assessee.
In respect of loan received from the wife of assessee of ₹ 5,59,879/-, the CIT(A) noted that the assessee had taken loan in earlier years also from his wife, which was accepted by the Revenue authorities in scrutiny assessments. Further, she was assessed to tax in her individual capacity and even her return of income was filed on record. Considering the same, the CIT(A) held that loan from Smt. Priya Jagtiani stood explained and addition in this regard was deleted.
The Revenue is in appeal against the order of CIT(A).
The first two grounds of appeal raised by Revenue are against assessability of capital gains in the hands of assessee.
On perusal of record and the order passed by CIT(A) and various evidences filed by the assessee, which have also been taken into consideration by the CIT(A), it is an admitted fact that the assessee was carrying the business of construction. The plot which has been sold during the year was part of stock-in-trade in earlier years. The assessee for assessment years 2008-09 to 2010-11 had filed the returns of income in response to notices issued under section 148 of the Act and even the tax audit report, wherever applicable, were filed for all these years and the sale of unit in Gurudev Towers was accepted as business income of assessee. In such scenario, there is no
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reason to treat the said income differently in the year under consideration. The assessee had sold one of the units of Gurudev Towers in the year and just because the assessee declared the same as short term capital gains but later pointed out that the same was by way of an inadvertent mistake, then such declaration made by assessee cannot be held against the assessee. It is the duty of Assessing Officer to examine the facts in proper perspective and assess the income in the hands of assessee as per law. CBDT vide Circular No.14(XL-35) of 1955, dated 11.04.1955 had laid down the said directions for Assessing Officer and the same merits to be applied in assessing the income in the hands of assessee. The CIT(A) has elaborately considered the issue vide paras 4.3 to 4.5 in appellate order and we are placing reliance on the said observations of CIT(A) but the same are not being reproduced for the sake of brevity. Accordingly, we find no merit in the grounds of appeal raised by Revenue and we hold that income arising on sale of unit in Gurudev Towers is to be assessed as ‘Income from business’ and the provisions of section 50C of the Act are thus, not applicable.
Now, coming to the next ground of appeal No.3 raised by Revenue which is against deletion of addition of ₹ 46,38,879/- made under section 68 of the Act. The Assessing Officer had made the addition of ₹ 61,69,170/- which was the peak of cash balance as per Cash Book, but which also included opening cash of ₹ 46,38,879/. The said opening cash balance has been accepted in the hands of assessee and once the same has been accepted in earlier years, there is no merit in including the same as addition under section 68 of the Act. So, upholding the order of CIT(A) in this regard, we dismiss the ground of appeal No.3 raised by Revenue.
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Now, coming to last issue raised vide ground of appeal No.4 i.e. in respect of addition made on account of loan received from wife of assessee. The said addition was made in the hands of assessee on the ground that wife of assessee was not assessable to tax. However, the assessee has filed complete evidence in this regard before the CIT(A) and even before us that wife of assessee has been taxed to all years and had sufficient funds to make the aforesaid advances. Accordingly, we find no merit in the ground of appeal No.4 raised by Revenue and the same is dismissed.
In the result, the appeal of Revenue is dismissed.
Order pronounced on this 18th day of December, 2018.
Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 18th December, 2018. GCVSR
आदेश की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to : 1. अऩीऱाथी / The Appellant; प्रत्यथी / The Respondent; 2. 3. आयकर आयुक्त(अऩीऱ) / The CIT(A)-1, Nashik; 4. The Pr.CIT-1, Nashik; ववबागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “फी” / DR 5. ‘B’, ITAT, Pune; 6. गार्ड पाईऱ / Guard file. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune