ITO, COIMBATORE vs. K.SHAMEENA, COIMBATORE

आदेश /O R D E R

This appeal by the Revenue is directed against the order of the Commissioner of Income-tax(Appeals)-2, Coimbatore dated 30.01.2017 for assessment year 2009-10.

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under :

appeal with delay of 04 days. The learned AO has submitted a

Petition dated 12.05.2017 seeking condonation of delay and the

AO stated in this petition that the delay of 04 days in filing the

appeal before this Tribunal is on account of ascertaining the

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correct facts, evidences, law of the issue and it took time to locate the same and as soon as he traced the records, he filed the appeal on 15.05.2017. In our opinion, the reasons explained by the AO for filing the appeal belatedly is bonafide. Accordingly, the delay is condoned and the appeal is admitted.

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original return filed on 21.1.2010 may be treated as return in

response to notice u/s.148 of the Act.

4.1 During the reassessment proceedings, the assessee’s

representative explained that the properties sold were held as

this year’s opening stock of the partnership firm called M/s. Baba

& Company, wherein the assessee and her husband were

partners. The properties in question were originally purchased

by the partners i.e. the assessee and her husband and had been

introduced into the firm as capital after the constitution of the firm

on 1.4.2006. Those properties were sold by the partnership firm

and relevant transactions were reflected in the return filed by the

firm. The assessee along with her husband were only

Authorized Signatories for the documents executed on behalf of

the firm. So, the sale of properties cannot be held as sales

made by them in their individual capacities and there was no

question of computing the capital gains in their individual hands.

The AO was however not convinced with the submissions of the

assessee. According to the AO, the properties were purchased

by the assessee and her husband in their individual capacities

and they could not have become the properties of the

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partnership firm without any deed conveying the properties to the firm. Further, the name of the partnership did not appear in the

sale deeds. On that reasoning, the AO did not accept the assessee’s claim that the said properties have been introduced into the firm. According to the AO, the assessee converted the

lands as stock in trade in her business and therefore the gains on sale should have been offered as short term capital gains in her hands. Hence, the AO proceeded to compute the capital gains in her hands by applying the provisions of sec.50C and

made the addition of short term capital gains amounting to ₹31,52,250/-. Aggrieved, the assessee went in appeal before the CIT(Appeals).

4.2 Before the CIT(Appeals), the ld. AR of the assessee explained the facts of the case and filed written submissions

along with the documents evidencing the sale of lands, the income-expenditure and balance sheet statements of the assessee and her husband for A.Ys 2007-08 to 2009-10, profit and loss account and balance sheet of M/s. Baba & Company for

the years relevant to the A.Ys 2007-08 to 2010-11, copies of returns filed by the assessee, her husband and the partnership

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firm for the above years in a paper book form. The ld. AR

explained before the CIT(Appeals) that the said lands were

purchased by the assessee and her husband through Power of

Attorneys executed in their favour. Thereafter, the lands were

brought into books of accounts of the partnership firm M/s. Baba

& Co. In the accounts filed by the partnership form along with

the return for A.Y 2007-08 itself, the purchase amount paid was

reflected as an asset side in the balance sheet of the firm upon

introduction of the same by the partners into the firm and

crediting the partner’s current capital account. The said

properties continued to be shown in AY 2008-09 also by

transferring them to the purchases and when the properties have

been actually sold in the FY 2008-09 i.e. in the assessment year

in question, the sales were shown in the profit and loss account

of the partnership firm and the profits from the sale of these

properties has been offered to tax by the firm. Copies of relevant

accounts and a reconciliation of purchases and sales reflected in

the books of the firm have been filed in the paper book. So, the

AR argued that the AO was not correct in holding that the

assessee sold the properties in her individual capacity. Since

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the purchases of the impugned properties were made by the

assessee and her husband through Power of Attorney but not

through a conveyance deed, the same were introduced in the

firm as such without executing any conveyance deed in favour of

the partnership firm. The ld. AR further argued that the

partnership firm is not a distinct legal entity different from the

partners constituting the partnership and therefore no separate

conveyance is required when those lands were contributed as

capital in the firm, more so, when the purchases were through

Power of Attorney. He submitted that the return for the firm for

all the above years i.e. from the A.Ys 2006-07 to 2009-10 were

filed within stipulated time reflecting the above transactions.

Therefore, there is no question of an afterthought in showing the

sales in the hands of the firm. In fact, the firm was genuinely

constituted for carrying on business of real estate and the

assessments in the case of the firm have been separately

completed without disputing the sales shown in the accounts of

the firm. The AR also brought to the notice of the CIT(Appeals)

that similar addition made by the AO in the case of assessee’s

husband, Shri Anwar Basha has been deleted by the CIT(A). In

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his case also, the assessment was completed by assessing his

share of capital gains on the sale of the very same properties

along with his wife i.e. the assessee, ignoring the fact that the

sale of those lands was reflected in the account of the

partnership firm, M/s./ Baba & Co. and profit offered to tax.

Against that assessment, the CIT(A)-I, Coimbatore vide order in

Appeal No.237/11-12 dated 28.10.2013 deleted the addition of

short term capital gains by holding that profits offered in the

hands of the firm should not have been reassessed as income in

the hands of Shri Anwar Basha as short term capital gains.

order, the AO came to a view that gains on sale of the said

properties should be assessed in the hands of the assessee,

since she was a signatory for the sale deed executed in favour of

the buyers on sale of those properties. Further, the CIT(Appeals)

observed that the AO was of the opinion that the properties

should have been conveyed to the firm through separate deeds,

when they had been introduced in the books of the firm and the

assessee’s version that the properties were introduced in the

firm and profits on sales were offered to tax by the firm was an

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afterthought. The CIT(Appeals) did not agree with the AO

because the fact that the properties were introduced into the

firm, M/s. Baba & Co. is evident from the returns filed by the firm

even before this assessment. According to the CIT(Appeals),

there is no requirement of transferring the properties to the firm

through a separate conveyance deed, whey they were

introduced as capital in the firm. The properties of the firm are

usually held in the name of the partners even when funds of the

firm are used for purchase, since the partnership firm is not a

legal person capable of holding the properties. The

CIT(Appeals) observed that the partnership firm is only a

compendium of individuals, who unite for a common business

purpose and secondly, the sale of the impugned properties in the

assessment year in question has been reflected in the books of

accounts of the firm and net profit has been arrived at in its profit

and loss account submitted along with the return for this

assessment year. The CIT(Appeals) further observed that

scrutiny assessment of the firm has also been completed

accepting the sale of these properties shown under sales and

the profits so worked out. Without disputing that, according to

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the CIT(Appeals), the AO once again intends to tax the profit on

the sale of the very same properties in the hands of the

assessee, which amounts to double taxation of the same profits,

which is not permissible in law. Therefore, the CIT(Appeals)

observed that the AO is not justified in assessing the short term

capital gains on sale of the impugned properties in the hands of

the assessee and deleted the addition. Against this, the

Revenue is in appeal before us.

record, I am of the opinion that the Ld.CIT(A) decided the issue

in favour of assessee on the reason that the impugned property

was introduced into the firm, namely, M/s.Baba & Company

According to him, it was disclosed to the Department in the

return of income filed by the firm, viz. M/s.Baba & Company. It is

also noted by the Ld.CIT(A) that funds of the firm was used for

purchase of property. Furhter, all the impugned property was

reflected in the books of account of the firm and net profit shown

in the P&L A/c disclosed in the return of income filed by the firm.

In the assessment of the firm, the ld. Assessing Officer accepted

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the same and completed the assessment. The AO without disputing these facts, the sale of impugned property was brought into tax in the hands of assessee, which was not correct and it amounts to double taxation. Being so, in my opinion, I do not find any infirmity in the order of Ld.CIT(A) and the same is to be confirmed. Hence, this ground of appeal raised by the Department stands rejected. 7. In the result the appeal of Revenue is dismissed. Order pronounced on 21st August, 2017 at Chennai.

Sd/- (चं� पूजार�) (Chandra Poojari) लेखा सद�य/Accountant Member

चे�नई/Chennai, �दनांक/Dated, the 21st August, 2017 K S Sundaram आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF