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Income Tax Appellate Tribunal, “SMC - C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV
These appeals are preferred by the assesses against the respective order of CIT(Appeals) on common grounds and for the sake of reference, I extract the grounds of hereunder:-
“1. On the facts and in the circumstances of the case, the reopening of the assessment U/s. 147 of the Act by issuing the notice U/s.148 was opposed to law and accordingly the assessment as made is liable to be cancelled.
The conditions precedent being absent, the reopening of the assessment U/s.147 is bad in law.
3. There being no omission much less an omission of declaration of income in the relevant assessment year in the return of income filed by the appellant, the reopening of the assessment U/s. 147 was without jurisdiction and consequently the reassessment is liable to be annulled.
4. The learned CIT(A) erred confirming the addition made under the head short term capital gains and making addition of Rs.22,75,757/- in the hands of the appellant.
5. The learned CIT(A) ought to have appreciated that the transaction did not belong to the appellant individually and the transactions were required to be considered in the hands of AOP in which the appellant was a member with 1/7th share.
6. The learned CIT(A) having perused the agreement of AOP ought to have appreciated that there was a valid AOP in existence which carried on the transaction as business transaction/ adventure in the nature of trade and accordingly the AOP alone was liable to tax and no part of the income if any of the AOP was liable to be confirmed in the hands of the appellant.
7. On the facts the learned CIT(A) ought to have appreciated that the transaction did not yield income which had ended up in loss and even if the appellant was liable to be assessed on his share it was loss, which was required to be considered for set off against his other income.
8. The learned CIT(A) ought to have given adequate opportunity to the appellant for providing the details with regard to various income incurred in connection with the same purchase which had direct bearing and was liable to be deducted for computing the profit/ loss of the transaction.
The Id CIT(A) ought to have considered the documentary evidences filed with regard to the expenditure incurred for development of land, or given an one more opportunity before the AO for explanation. Thus, the Id CIT(A) ought to have allowed the expenditure incurred in full 10. Without prejudice, the impugned additions confirmed are opposed to law in that no adequate opportunity was given to the appellant to prove the genuineness of the transaction and the financial results there from besides the source of investment.
Without prejudice, the additions/disallowances were excessive, arbitrary and unreasonable and ought to be reduced substantially.
The learned CIT(A) erred in confirming the interest u/s. 234A, 234B and 234C of the Act.
For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
2. Through the first 3 grounds in these appeals, reopening of assessment is challenged by the assesses on the ground that there was no material information before the AO to reopen the assessment in the hands of assessee; whereas the activities of sale/purchase of land was undertaken by the AOP of which the assesses are members. It was further contended that assessment ought to have been framed in the hands of AOP and not the individuals. Therefore, reopening of the assessment framed in the hands of assesses is not proper and deserves to be quashed.
The ld. DR, on the other hand, has submitted that as per information gathered it was found that assessees along with 6 other persons have purchased two plots of converted land measuring 1 acre 9.5 guntas and 2 acres 35 guntas in See. No.8, Vaddarapalya Village, Uttarahalli Hobli, Bangalore South. These plots were purchased on 01.07.2004 and 30.10.2004 respectively with a total investment of Rs.30,50,610. The land was divided into smaller plots which were sold over a period of time during the FY 2004-05 to 2012-13. In this regard, it was found that during the year under consideration some plots were sold to different persons and on verification of return of income, it was ascertained by the AO that no income arising from land transaction has been offered to tax by the assessee. The AO was of the view that income arising from sale of plots had escaped assessment and that is why he has reopened the assessment u/s. 147 of the Act by issuing a notice u/s. 148 of the Act. Therefore, there is no illegality in reopening the assessment. With regard to assessment in the hands of AOP, the ld. DR has submitted that no return of income was filed in the name of AOP, therefore there was no question of reopening the assessment in the hands of AOP.
Having carefully examined the orders of lower authorities in the light of rival submissions, I find that undisputedly the returns were regularly filed by the individuals and nothing has been placed on record with regard to filing of returns by the AOP. During the course of hearing, the ld. counsel for the assessee has invited my attention to one return of AOP i.e., Griha Developers, appearing at page 6 of the compilation of assessee, but no evidence is filed with regard to date of filing of this return. It was stated that return was sent through registered A.D., but no evidence is placed on record. In the absence of material evidence, it is very difficult to accept the contention of assessee that return was filed by the AOP declaring short term capital gain accrued on sale of plots. Moreover, the AO has got the information with regard to sale of plots by the assesses and on the basis of that information, assessment was reopened. Therefore, I do not find any irregularity in reopening of assessment. Moreover, I have also carefully examined the order of CIT(Appeals) in this regard and I find myself in agreement with it. Accordingly, I confirm his order in this regard.
On merits, the ld. counsel for the assessee has submitted that while computing the short term capital gain in the hands of assessee, the CIT(Appeals) has not allowed the cost of improvement incurred on leveling of plots for its carving out. Assessee has claimed the cost of improvement in the form of expenditure incurred in levelling and marketing, but the same was not allowed by the CIT(Appeals) on the ground that this expenditure can only be incurred in the first year when the 42 plots were sold. The ld. counsel further contended that it is not the aggregate of the expenditure incurred in levelling the plots etc. Therefore, the claim raised by the assessee should be allowed while computing the short term capital gain.
The ld. DR, on the other hand, placed reliance on the order of CIT(Appeals).
Having carefully examined the orders of lower authorities, I find that the AO has computed the short term capital gain, but while doing so, he has not taken into account the expenditure incurred in levelling the plot.
Undisputedly the assessee has carved out 90 plots out of the total lands purchased and for its carving out, some expenditure is bound to be incurred. But the AO did not taken into account the expenditure incurred in this regard and he has computed the short term capital gain without taking into account the expenditure incurred after the purchase of plot. This approach of AO is incorrect as for developing a plot, some expenditure is bound to be incurred. Therefore, I am of the view that this issue requires readjudication by the AO and I accordingly set aside the order of CIT(Appeals) and restore the matter to the file of AO with a direction to re- examine the claim of expenditure incurred in levelling of the plot or otherwise relevant for the purpose of computation of short term capital gain.
In the result, the appeals of the assesses are allowed for statistical purposes.
Pronounced in the open court on this 26th day of May, 2017.