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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS.SUCHITRA KAMBLE & SHRIB.M. BIYANI
Per B.M. Biyani, A.M.:
The captioned Appeal by revenue and Cross-objection by assessee are directed against the order dated 13.10.2017 of learned Commissioner of Income-Tax (Appeals)-I, Indore[“Ld. CIT(A)”], which in turn arises out of the order of assessment dated 28.03.2013 passed by the learned JCIT, Range-4,
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 Indore[“Ld. AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for Assessment-Year 2010-11.
At the time of hearing, the Ld. AR requested that the assessee is not going to press the Cross-Objection. In view of this, the Cross-objection is dismissed, being not pressed. We proceed with the appeal of Revenue.
The assessee-individual filed its return of income on 14.10.2020 declaring a total income of Rs. 2,47,43,190/- from business, capital gain and other sources. The case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) were issued from time to time which were duly complied with. Finally, the Ld. AO completed assessment vide order dated 28.03.2013 u/s 143(3) of the act after making certain additions and subtractions. Against the order of Ld. AO, the assessee filed appeal to Ld. CIT(A) on certain issues wherein the Ld. CIT(A) allowed relief. Now, against the order of Ld. CIT(A), the revenue has filed this appeal before us.
The Revenue has raised following substantial Grounds:
“1. Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition made by the A.O. on account of commission expenses of Rs. 1,74,50,000/- without appreciating the findings of the A.O. 2. Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing the AO to give relief to the appellant addition made by the AO in respect of short term capital gain against the sale of flat of Rs. 68,79,170/- by stating that the appeal is allowed for statistical purpose merely on affidavit filed by the assessee and ignoring the fact that the residential flat was held by the assessee as capital asset as per purchase deed & assessee is in real estate consultancy business. 3. Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition made by the AO u/s 14A of the LT. Act of Rs. 4,63,431/- when the provision of section 14A was clearly applicable on assessee's investment in shares and mutual fund wherefrom income was exempt.”
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 Ground No. 1:
In this Ground, the issue involved is the deduction of commission- expenditure of Rs. 1,74,50,000/- claimed by the assessee.
Facts qua this issue are such that the assessee is an individual. Copy of Form 3CD, being audit-report u/s 44AB, is placed in the Paper-Book according to which the assessee is engaged in the business of (i) Trading of Shares, and (ii) Property-brokership. The assessee has paid a total commission of Rs. 1,74,50,000/- to four parties i.e. (i) Rs. 1,20,00,000/- to M/s Jhavar & Associates, (ii) Rs. 48,50,000/- to M/s Violet Commercial Pvt. Ltd., (iii) Rs. 3,00,000/- to Vijay Bakliwal, and (iv) Rs. 3,00,000/- to Pratibha Bakliwal and claimed deduction as business expenditure.
During assessment-proceeding, when the Ld. AO confronted the assessee with respect to commission-payment, the assessee made necessary submissions. The Ld. AO has noted following observations in this regard:
(a) Regarding payment of Rs. 1,20,00,000/- to M/s Jhavar & Associates, the assessee submitted that he completed a purchase-deal of two lands located at a very prime location in Powai, Mumbai for L&T Ltd. The deal was of a high value amounting to Rs. 120 Crore and the assessee received commission @2% amounting to Rs. 2.40 Crore. In order to materialize this deal from very beginning till completion, the assessee engaged M/s Jhavar & Associates, another broker as associate, for which the assessee passed 1% brokerage amounting to Rs. 1.20 Crore. Similarly, the assessee completed a deal of land for Mr. Prashant Sharma for Rs. 48.50 Crores, for which the assessee received a commission @2% amounting to Rs. 97,04,000/-. The assessee engaged M/s Violet Commercial Pvt. Ltd., another broker as associate in materializing this deal, for which half of the commission amounting to Rs. 48,50,000/- was paid. Ld. AO observed that the assessee has filed letter dated 13.03.2013 written by M/s Jhavar & Associates and M/s Violet Commercial Pvt. Ltd. in support of
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 deduction. No other evidences, except this letter, was filed to support the services of the payees. The Ld. AO also observed that the assessee did not produce the payees in person for verification of service.
(b) Regarding payment of commission of Rs. 3,00,000/- to Vijay Bakliwal, and Rs. 3,00,000/- to Pratibha Bakliwal, the Ld. AO has not mentioned anything in the assessment-order although these payments are also included in the disallowance of Rs. 1,74,50,000/-. As a matter of fact, the commission of Rs. 3,00,000/- to Vijay Bakliwal and Rs. 3,00,000/- to Pratibha Bakliwal, have been paid for research and advising into the business transactions.
The Ld. AO was not satisfied with the genuineness of services rendered by payees and applying the decision of Hon’ble Supreme Court in Lachminarayan Madan Lal Vs. CIT (1972) 86 ITR 439, McDowell and Co. Ltd. Vs. CTO 154 ITR 148 and Sumati Dayal Vs. CIT 214 ITR 801, disallowed the deduction.
During first-appellate proceeding, the assessee made a detailed submission to Ld. CIT(A). The assessee also invoked Rule 46A and submitted several additional-evidences, the details of which are mentioned by Ld. CIT(A) in the form of a long-list on Page No. 32 to 34 of his order. Although we do not repeat the complete details of these evidences for the sake of brevity, briefly these documents are in the nature of Bills raised by payees, MOU between assessee and payees, A/c confirmations of payees, Bank statement of payees, Income-tax returns of payees, evidences of TDS out of payments, etc. The Ld. CIT(A) sought remand-report from Ld. AO, which the Ld. AO submitted. In remand-report, although the Ld. AO did not raise any objection against invocation of Rule 46A or admissibility of additional-evidences, but however made certain comments over the merit of documents. The assessee also submitted his re-joinder on the remand- report. Ld. CIT(A) has noted the contents of remand-report submitted by Ld. AO and of the re-joinder filed by assessee in his order.
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 9. Ld. CIT(A) considered the submission of assessee as well as Ld. AO. Finally, the Ld. CIT(A) deleted the entire addition by observing and holding as under:
“7.3 After gone through the appellant’s submission, it is clear that the appellant has submitted proof of payment of commission to the different parties. The appellant had also relied on the following decisions: (1) CIT vs. Medical Technologies Ltd-(2013) 215 Taxman 10(Guj) Commission paid to M for procuring order of equipments. Commission received by M had been shown as income in return filed by M. Hence there remained no doubt as to genuineness of payments, has to be allowed. (2) Mali Florex Ltd. vs. DCIT (2013) 57 SOT 37 Hyd Assessee had incurred expenditure wholly or exclusively for purpose of business must be allowed. Payments made was subjected to TDS and subsequent has filed their return of income. Amounts could not be disallowed. (3) ITO vs. Nam Estates (P) Ltd. (2013) 141 ITD 659 Bang, 21 ITR (Trib) 109 Bang Expenses on commission and brokerage charges on which tax deducted at source and remitted to the treasury were genuine and allowed the same. (4) CIT vs. Gopaldas Estate Housing (P) Ltd-267 ITR 149 Delhi Brokerage paid to brokers were not related to the assessee and expenditure is neither of personal nor capital. Disallowance not justified. (5) ACIT vs. Uday S. Kotak (2007) 13 SOT 548 Mum In this context it is to be seen that how much brokerage income has been earned by the assessee, whether his claim for payment of sub-brokerage is disproportionate to the earning of the gross brokerage, whether by incurring such expenses assessee is able to achieve increased business. The fact is that he has given the confirmation money was transferred to his account through normal banking channel. Thus the view taken by the CIT(A) on appreciation of the facts is a possible view.” 7.4 The appellant had received commission / brokerage from three parties and also submitted the copy of the said Page 5 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 transaction during the course of appellate proceedings. Further, the persons to whom the payments of commission had been made had further confirmed the said transaction under the proceeding of section 133(6) of the IT Act, to the ADIT(Investigation).Therefore, in the light of the confirmations and subsequent verification done along with the above judicial decisions and taking into account the totality of the facts and circumstances of the case, there is found to be no basis to doubt the genuineness of payments of commission / brokerage by the appellant. Thus, the addition so made is deleted and this ground of appeal is allowed.” 10. During hearing before this Bench on 21.01.2020, the Bench took note of the above-cited Para No. 7.4 of the order of Ld. CIT(A) and made following order:
“It is noticed that Ld. CIT(A) has mentioned report of ADIT in the impugned order. This report is required for adjudication of the dispute, therefore, the Revenue is directed to file this report as mentioned at Para 7.4 of the order of Ld. CIT(A), within two weeks. Adj. to 5.3.20.” Thereafter, several adjournments were granted to revenue for production of impugned report but the report was not produced. Finally on 15.12.2020, last opportunity was given by passing following order:
“Ld. Sr. DR seeks further time to file the requisite report. Last opportunity is granted to Revenue. Adj. to 25.1.21” But the impugned report was not produced. However, taking a justice- oriented approach, some more opportunities were still granted and the case was adjourned from time to time. But the revenue is not able to produce the impugned report of ADIT. Lastly, we thought it fit to decide the issue without waiting further.
Ld. DR relied upon the order of Ld. AO and argued to uphold the addition.
Per contra, Ld. AR made a detailed submission on the issue and carried us through the findings made by lower authorities as also the copies of documents filed in the Paper-Book running through 171 pages in all and a compilation of case-laws also filed by him. Ld. AR reiterated the same Page 6 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 submissions as made before lower authorities. Ld. AR also relied strongly on the order of Ld. CIT(A) in toto and Para No. 4.7 in particular. With an extensive submission, Ld. AR argued that the Ld. CIT(A) has rightly deleted the addition and his action must be upheld.
We have considered the submissions of both sides and perused the material held on record. On a careful consideration of assessment-order, we observe that the Ld. AO made disallowance for two reasons, viz. (i) the assessee could not furnish full evidences in support of the commission- payment, and (ii) the assessee could not produce the payees in person for verification. But we observe that during the course of appeal-proceeding before Ld. CIT(A), the assessee has produced voluminous evidences, as narrated earlier, by means of Rule 46A and the Ld. CIT(A) has not only admitted the evidences but also accepted the same vide Para No. 7.3 of his order. Going further, we observe that Ld. CIT(A) has given a very bold and categorical finding in Para No. 7.4 of his order, reproduced earlier, where he has observed “Further, the persons to whom the payments of commission had been made had further confirmed the said transaction under the proceeding of section 133(6) of the IT Act, to the ADIT(Investigation). Therefore, in the light of the confirmations and subsequent verification done along with the above judicial decisions and taking into account the totality of the facts and circumstances of the case, there is found to be no basis to doubt the genuineness of payments of commission / brokerage by the appellant.”As noted earlier we have given several opportunities to revenue to produce the impugned report of ADIT, but the revenue has miserably failed to produce the same. It clearly shows that the revenue is not able to controvert this finding of Ld. CIT(A) which has been worded in a very bold and transparent manner. In this backdrop, we are fully satisfied that the assessee has submitted enough documentary evidences in support of his claim of deduction and nothing more should be expected by revenue. Being so, we do not find any infirmity in the action of Ld. CIT(A). We, therefore, hold that the assessee has rightly
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 claimed the deduction as allowable. Thus, we dismiss the Ground No. 1 of Revenue.
Ground No. 2:
In this Ground, the issue involved is the addition of Rs. 68,79,170/- made by Ld. AO by way of short-term capital gain by invoking section 50C of the act.
Facts qua this issue are such that the assessee has sold a flat for a consideration of Rs. 1,11,00,000/- which was purchased in the year 2008- 09 for Rs. 98,50,900/-. The assessee deducted cost of Rs. 98,50,900/- from the consideration of Rs. 1,11,00,000/- and declared resultant profit of Rs. 12,49,100/-under the head “Income from Business”.
During assessment-proceeding, Ld. AO observed that the impugned flat was a part of “Fixed Assets” in Schedule-C of the accounts and the assessee is also not engaged in the business of real-estate. Ld. AO also observed that the sale-transaction would attract section 50C and in that process, Ld. AO also observed that the stamps authority had made valuation of transaction at Rs. 1,67,30,070/-. Accordingly, the Ld.AO proposed to tax the transaction as short-term capital gain and computed taxable income on the basis of section 50C. When the Ld. AO confronted the assessee in this regard, the assessee made following submission:
“The assessee is in property broker ship business since long and he also doing purchase/sale of immovable properties. The assessee has done similar type of transaction during the assessment year 2008-09. He booked a flat for Rs.23,00,000/- in the assessment year 2007-08 and sold it in the assessment year 2008-09 by Rs.32,00,000/-. He earned a profit of Rs.9,00,000/- on it and this income was declared by us in business income. This case was also decided by the Hon'ble Addl. Commissioner of Income Tax, Range-3, Indore and copy of his order was already submitted by us previously. We enclose herewith copy of ledger account and income and expenditure account of the above said period for your reference. The property referred under this point is his business assets but due to clerical mistake of the assessee’s accountant it was shown in fixed assets schedule instant of current assets. An affidavit regarding this point is Page 8 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 attached herewith. The assessee has not claimed any depreciation on it. We would like that inform your that there is no change in the guideline price decided by Maharashtra State Govt. At the time of purchase and sale of the flat. At the time of purchase the assessee has paid stamp duty on Rs.1,67,30,070/- and at the time of sale the stamp value was Rs.1,67,00,070/-. We also want to inform your that the at the time of purchase of flat the building was tinder construction and the assessee has paid only Rs.65,50,900/- to the seller against total purchase amount of Rs.90,00,000/-The remaining amount was paid by the assessee on 27.04.2009 and the flat was sold on 29.04.2009. From the above it is clear that this flat was purchased only for business purpose. The flat sold in the year under assessment and at that time also the flat was not completed.” 17. However, the Ld. AO was not satisfied with the submissions of assessee. Therefore, the Ld. AO shifted business-income to “Income from capital gain” head and also invoked section 50C. The Ld. AO, thus, assessed short-term capital gain of Rs. 68,79,170/- by holding as under:
“Assessee has stated that it was a business deal and therefore the provision of Sec 50C are not applicable. Assessee has stated that due to clerical mistake, Flat was shown in fixed asset. It is not acceptable because the investment in Flat was shown in fixed asset in Balance sheet in A.Yr.2009- 10 and also in A.Yr. 2010- 11 and the same have been certified by the assessee and Auditor. Thus the reply of the assessee is not acceptable. In fact, the assessee has sold flat which was purchased in A.Yr.09-10 for a sum of Rs. 98,50,900/-and it was declared in Schedule C under the head Fixed Assets to the Balance sheet. If it was stock in trade, it should be declared in Stock and not under the head Fixed Assets to the Balance sheet. Here, the assessee has narrated the story of business to avoid provision u/s 50C. Hence the reply of the assessee is rejected and Short term Capital Gain is worked out as under: Cost of acquisition as per Balance sheet under Fixed asset Rs.98,50,900 Less: Sale proceeds u/s 50C Rs.1,67,30,070/- Short Term Capital Gain Rs.68,79,170/- Page 9 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 18. During appellate proceeding, the Ld. CIT(A), however, deleted the addition by observing as under:
“11.1 After carefully gone through the appellant's submission and the order of AO, the gist of the case is that the appellant was involved in selling purchasing of real estate selling purchasing and earning brokerage/commission etc on sale/purchase of immovable properties. The appellant had sold a flat of Rs. 1,10,00,000/ - and earned the profit of Rs. 12,49,100/ - on it and declared the same under the head of Income from business . The appellant has further submitted that the appellant's accountant had wrongly shown the said flat in column of fixed assets in schedule of balance sheet for the year ended on 31.03.2009 and therefore, the AO had applied provisions of section 50C and made the addition under the head of short term capital gain for Rs. 68,79,170/ -. Further, the appellant had submitted its affidavit for the said mistake from the accountant. 11.2 The appellant has also relied on the following decisions:- (1) CIT vs. Mukesh Kishore Barot Coowner-(2013) 215 Taxmann 151 Gujarat Assessee sold a plot of land which was held by him as stock in trade which give rise to business income and not the capital gain and therefore 50C would have no application. (2) CIT vs. Indralok Infra-Agro (P) Ltd.-(2013) 59 SOT 10MUM Provisions of 50C were not applicable to cases where income from sale was computed under the heads Income from Profit & Gains from Business & Profession.” 11.3 In view of the aforesaid discussion and the above judicial decisions and circumstance of the case, I don’t find any deliberate intention on the part of appellant. Therefore, the section 50C of the IT Act is also not applicable in this ground. Hence, this ground of appeal is allowed for statistical purpose and accordingly the AO is directed to give relief to the appellant.” 19. During hearing before us, Ld. DR forcefully argued the issue. Ld. DR submitted that the assessee is engaged in the business of property-
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 brokership and not real estate. Ld. DR argued that in any case, the accounts of assessee are duly audited year-after-year and it is the assessee who has declared the impugned flat in the list of “Fixed Assets” and not stock-in- trade and the auditors have also certified so. Ld. DR argued that the story of mistake by accountant, as rightly observed by Ld. AO, is an after-thought to avoid section 50C. Ld. DR submitted that the affidavit filed by assessee in this regard is a self-serving document and should not be given any credence. With these submissions, Ld. DR argued that the Ld. AO has rightly taxed the impugned transaction and the action of Ld. AO must be upheld.
Per contra, Ld. AR emphasized the submission made by assessee to Ld. AO. The Ld. AR submitted that the flat was mistakenly shown as fixed- asset and therefore to clarify that mistake, an affidavit was submitted to Ld. AO. Ld. AR submitted that the assessee has also filed a certificate of auditors in this regard, a copy of which is placed at Page No. 170 of the Paper-Book. Ld. AR submitted that the assessee is engaged in the business of brokership as well as regularly dealing in property and this is not the only transaction done by assessee. Ld. AR submitted that the assessee has sold flats and shown as business income in preceding years as well as subsequent year and the same was also accepted in scrutiny assessments done by department. In support of this, Ld. AR has placed the copies of assessment-orders of AY 2008-09, 2009-10 (preceeding-years) and AY 2011- 12 (subsequent-year) in Paper-Book. With these submissions, Ld. AR argued that the impugned flat sold by the assessee was in fact business-stock and the assessee had rightly declared profit as business-income.
We have considered rival submissions and perused the material held on record. The first aspect is how the assessee has himself shown the impugned flat in books of account? In this regard, we observe that the Ld. AO has rightly found that the assessee has shown the impugned flat in the list of Fixed-Assets in its annual account year-after-year from the first day of purchase of flat. Ld. AO has also noted that the accounts of assessee are duly audited and the auditors have also certified the accounts as true and correct, in which the flat was declared as fixed asset. We observe that the Page 11 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 assessee also accepts these findings of Ld. AO and there is no dispute about these. But the next-aspect is the assessee’s claim that the declaration of flat in the list of “Fixed-Assets” was by mistake of accountant and in this regard an affidavit was also filed to lower authorities and a copy of the same is placed at Page No. 167 of the Paper-Book. We have perused the affidavit and observe that the affidavit has been given by Rajeev Ajmera i.e. assessee himself and not by any accountant. Further, the affidavit nowhere states that the mistake occurred by accountant. We also observe that the Ld. CIT(A) has mentioned in his order “Further, the Appellant had submitted its affidavit for the said mistake from the accountant”. But this finding of Ld. CIT(A) does not seem to be correct because there is no affidavit from accountant, it is from assessee. Be that as it may be, we are concerned to ascertain whether the assessee was really engaged in the business of real estate? We observe from assessment-order that the assessee has made a specific claim before the Ld. AO by stating “The assessee has done similar type of transaction during the assessment-year 2008-09. He booked a flat for Rs. 23,00,000/- in the assessment-year 2007-08 and sold it in the assessment-year 2008-09 by Rs. 32,00,000/-. He earned a profit of Rs. 9,00,000/- on it and this income by declared by us in Business Income….”. But the Ld. AO has not given any finding on this submission of assessee. Therefore, this point is lacking any conclusion at the stage of AO. Before us, Ld. AR has also pleaded that the assessee has done transactions of real estate in preceding years and subsequent years. Ld. AR has also placed assessment-orders of AY 2008-09, 2009-10 and 2011-12 in the Paper-Book. On perusal of the same, we are able to extract following mentions in these orders:
AY 2008-09 – Page No. 1: “Nature of business – Income from property dealing & share profit.” “Return declaring an income of Rs. 1,72,97,710/- was filed on 29.09.2008. Assessee has shown income from property dealing & share trading” AY 2008-09 – Page No. 2:
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 “Assessee vide his written submission dated 30.11.2010 submitted as under: “The assessee has engaged in the business of shares, mutual funds and property brokership. These all business required huge funds for trading/investment.” AY 2008-09 - Page No. 3: “The assessee has shown business income from commission earned property dealing and share trading.” AY 2009-10 – Page No. 1: “Nature of business - Trading of shares and commission income AY 2011-12 – Page No. 1: “Nature of business - Trading of shares and earning commission income The assessee is engaged in trading of shares and earning commission income.” Thus, from these assessment-orders, it is clearly borne out that the assessee is engaged in property-brokership / commission income and trading of shares. However, somewhere “property dealing” has also been mentioned which means only “property brokership” or “purchase / sale of property”, is not clearly borne out. On further scrutiny of these assessment-orders, we are unable to find any discussion of real-estate transaction having been made by assessee in those years.
At this stage, we also take note of the Form No. 3CD of the AY 2010-11 under consideration, placed in the Paper-Book at Page No. 7, where the auditors have clearly mentioned “Trading of Shares and Property Brokership” against Clause No. 8(a) Nature of Business or Profession.
We would also like to refer the certificate of auditors, placed by Ld. ARat Page No. 170 of the Paper-Book. On perusal, we observe that the certificate says “The assessee is in the business of real estate brokerage and trading”. This certificate is also having a loose-end in as much the assessee is also engaged in “trading of shares” and the certificate does not clearly specify what is meant by “trading” i.e. it means “trading of shares” or “real estate trading”?
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Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 We also observe that the Ld. CIT(A) has also not given a clear finding, except recording what has been stated by the assessee, on this point. Ld. CIT(A) has not sufficiently discussed the core controversy involved. Needless to mention that the Ld. CIT(A) quoted judicial rulings where it has been held that section 50C is not applicable if the property is held as stock-in-trade. These rulings are not relevant to core controversy of assessee, which is whether the assessee was engaged in real-estate business or not.
Now its time to conclude the discussion. We firstly observe that the Ld. AO has not given any finding on the claim of assessee about real-estate business having been accepted by Revenue in scrutiny-assessment of AY 2008-09. Thereafter, we observe that the various evidences placed before us, as discussed above, do not lead us to hold conclusively that the assessee is in fact engaged in purchase and sale of property. In absence of concrete basis before us, we are not unable to make any conclusive finding on this aspect. Therefore, in all fairness, we feel it appropriate to refer this issue back to the Ld. AO. The Ld. AO shall refer the case record of assessee available with him and make a conclusive finding as to whether the assessee had in fact done any dealing of purchase and sale of property in other assessment-years as claimed. Thereafter, based on outcome of such finding, the Ld. AO would decide the present issue more appropriately. In the result, we remand this issue back to Ld. AO for a fresh examination. With this, Ground No. 2 is statistically allowed.
Before taking up next ground, we would also like to make a mention that Ld. AR has made an additional pleading that even if the impugned flat is treated as fixed asset and not stock-in-trade, section 50C would not have any application. Since we are remanding the core issue back to Ld. AO, we are not adjudicating this additional plea at this stage. However, the assessee shall be free to make any such submission before Ld. AO, if required, and the Ld. AO would take a call in the matter in accordance with the provision of law and decided cases.
Ground No. 3: Page 14 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 24. In this Ground, the issue involved is the disallowance of Rs. 4,63,431/- made by Ld. AO u/s 14A of the act.
During assessment-proceeding, Ld. AO observed that the assessee has made investment in mutual funds and shares, which generates exempted income. Therefore, the Ld. AO confronted the assessee for disallowance u/s 14A read with Rule 8D. In response, the assessee submitted that during the year, there was no transaction of purchase / sale of mutual fund and even otherwise the assessee is holding mutual funds as business-stock, therefore section 14A is not applicable. Regarding investment in shares, the assessee submitted that he has made investment out of surplus funds. The assessee also submitted that he has not incurred any expenditure for earning exempt-income and therefore also disallowance is not attracted.
Ld. AO, however, observed that section 14A applies irrespective of whether holding is by way of investment or stock-in-trade. Ld. AR further observed that the dividend income is exempted u/s 10(34) and long-term capital gain is exempted u/s 10(38). Therefore, the Ld. AO held that disallowance u/s 14A is attracted. Based on these observations, Ld. AO invoked section 14A and made disallowance of Rs. 4,63,431/- in terms of working as per Rule 8D.
During appeal, the assessee reiterated the same submissions. Additionally, the assessee submitted that the Ld. AO has not brought on record any evidence to show that the assessee has incurred any expenditure in relation to exempt-income. The assessee submitted that the section 14A has the implicit notion of apportionment in cases where expenditure is incurred for earning composite or indivisible income and hence the Ld. AO has applied section 14A but when there is no expenditure incurred by assessee for earning exempt-income at all, how can AO invoke section 14A and make disallowance? The assessee also submitted certain judicial rulings in his support. Ld. CIT(A) considered the findings of Ld. AO, submissions of assessee, provision of section 14A and the judicial rulings cited before him and thereafter deleted the disallowance by holding as under: Page 15 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11 “9.3 In view of above judicial decisions and facts of the case, it is clear that the AO had not brought on record, any fact or material to show for applicability of the said section. Therefore, the addition so made by the AO is hereby deleted and accordingly this ground of appeal is allowed.”
Before us, the Ld. DR relied upon the order of Ld. AO. Per contra, the Ld. AR placed heaving reliance upon the submissions made by assessee to lower authorities and the decision taken by Ld. CIT(A).
We have considered submissions of both sides and perused the material held on record. We observe that the Ld. AO has not given any finding to demonstrate that the assessee has actually incurred any expenditure for earning exempted income. We further observe that the Ld. CIT(A) has considered the applicability aspect of section 14A and held that section 14A was not applicable in this case. This finding of Ld. CIT(A) has not been controverted by Ld. DR. Therefore, we are inclined to uphold the decision taken by Ld. CIT(A). We, therefore, dismiss Ground No. 3 of Revenue.
In the result, the appeal of Revenue is partly allowed for statistical purposes. The assessee’s cross-objection is dismissed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 31/08/2022.
Sd/- Sd/-
(SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore �दनांक /Dated : .2022 Patel/Sr. PS
Copies to: (1) The appellant Page 16 of 17
Shri Rajeev Ajmera ITA No.51/Ind/2018& CO.No.23/Ind/2018 Assessment year 2010-11
(2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY
Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation
Date of typing & draft order placed before the Dictating Member
Date on which the approved draft comes to the Sr. P.S./P.S.
Date on which the fair order is placed before the Dictating Member for pronouncement
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
Date on which the file goes to the Assistant Registrar for signature on the order
Date of dispatch of the Order
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