TaxTMI 
TaxTMI 
2019 (12) TMI 250
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....rshnaben Harshadbhai Savalia 2008-09 -Do- -Do- 153A r.w.s. 143(3) of the Act 80/Ahd/15 -Do- 2009-10 -Do- -Do- -Do- 81/Ahd/15 -Do- 2010-11 -Do- -Do- -Do- 888/Ahd/15 -Do- 2011-12 -Do- -Do- 143(3) of the Act 76/Ahd/15 Smt. Kapilaben S. Savalia 2008-09 -Do- -Do- 153A r.w.s. 143(3) of the Act 77/Ahd/15 -Do- 2009-10 -Do- -Do- -Do- 78/Ahd/15 -Do- 2010-11 -Do- -Do- -Do- 887/Ahd/15 -Do- 2011-12 -Do- -Do- 143(3) of the Act 2. We first take up IT(SS)A No. 82/Ahd/2015 concerning AY 2008-09 for adjudication purposes. IT(SS)A No. 82/Ahd/2015-AY- 2008-09 (Bhanuben K. Savalia) 3. As per the grounds of appeal, the assessee has challenged the action of the Revenue in treating land at Thaltej, Ahmedabad as 'capital asset' instead of 'stock-in-trade' being considered by the assessee. 4. The relevant facts for determination of the issue raised by the assessee are noted as under: 4.1 The assessee filed return of income for AY 2008-09 on 05.12.2008 under section 139 of the Act declaring total income of Rs. 21,49,200/-. A search action und....
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....e AO however disputed the assessee's claim that income from sale of plot/part of land is akin to adventure in the nature of trade. The AO contended that the assessee kept on showing income from Krish Villa plots as short term capital gains until a distinct proceeding started consequent to search action. It was noted that the original return for AY 2010-11 was also filed under section 139 of the Act prior to search on 05.01.2011 and till that date all the plots of Krish Villa were already sold. Despite this, the assessee has shown income from Krish Villa as short term capital gain and therefore it cannot be treated as genuine mistake of the assessee originally. No revised returns were filed for AYs. 2008-09 to 2010-11. Consequent upon the fresh proceedings under section 153A, the assessee has wrongly tried to take the benefit of Income Tax provisions by showing this income as business income. The AO further observed that the object of fresh filing of return of income under section 153A of the Act is to enable the assessee to disclose her correct income after taking into account material seized during the course of search. It was contended that the aforesaid Section 153A of the A....
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....e defense offered by the assessee. The relevant paras dealing with the issue by the CIT(A) in its common order for AYs. 2008-09 to 2011-12 is reproduced hereunder: '10. I have carefully considered the assessment order, submission of the appellant and material available on record. The appellant is an individual assessee who was searched u/s 132 of the Act on 06.01.2011 along with the Savalia group. The original returns of income u/s 139 for the AYs 2008-09 to 2010-11 were filed before the search showing receipt from sale of Krish Villa plots as capital gain. All plots of Krish Villa were sold before the date of search. 10.1 The appellant filed return of income u/s 153A for AYs. 2008-09, 2009-10, 2010-11 and 2011-12 in response to notice u/s 153A(1)(a) on 21.08.2012. In the return filed u/s 153A in these years, the appellant changed the head of income of receipt from sale of Krish Villa plot from capital gain to business income. However on or before the date of search carried out, appellant did not revise any of the returns of income filed u/s 139 of the Act for AY 2008-09 to AY 2010-11. Thus it is evident that the appellant knowingfully shown the receipt from s....
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....Rs. 1,00,28,418/- but no separate bifurcations of fixed assets and WIP/stock-in-trade was given. It is also important to note that no balance sheet or statement of affairs showing the nature of assets was filed before search in any proceeding before the Revenue. The appellant filed her balance sheet first time during the assessment proceeding u/s 153A after the search only. It is seen that the appellant was also involved in the similar activities of buying and selling of plots in the earlier years also and income sale of plots and lands were shown as capital gain in those years. 10.5 It is seen that audit report in AYs. 2009-10 to 2010-11 were prepared on 18.06.2012 much after the search and the nature of income was changed in the return of income filed u/s 153A of the Act. The return of income u/s 139 for AY 2011-12 was filed after search in this also audit report was prepared on 21.08.2012 only. During pre-search period the appellant consciously acted as investor and continuously shown capital assets and capital gain in the return of income filed u/s 139 of the Act in all the years. 10.6 There are some basic prerequisite as per the law of land to run any busines....
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.... deal with the nature of transaction whether its nature of trade or capital gain however the issue involve in the appeals under consideration is whether the appellant can change head of income in the return filed u/s 153A though in the original return shown in different head and whether any benefit can be given to the appellant in return filed u/s 153A of the Act. Therefore these decisions are not applicable in the appeal under consideration. 10.10 The assessment procedure, in the cases where search is conducted u/s 132 of the Act, has been amended w.e.f. 01.06.2003 and in such search cases assessment shall be completed as per the provision of section 153A of the Act. The section 153A reads as under : - [Assessment in case of search or requisition. "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnis....
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....sued u/s 153A(1)(a) by the AO only. Thereafter the AO shall assess or reassess the return of income filed u/s 153A of the Act. Thus the provision of this section is not for the benefit of the assessee and assessee cannot be allowed to revise/rectify the mistake committed in the original return of income. 10.12 There is perfect similarity in the assessment made u/ss. 147 and 153A of the Act Section 147 of the Act empower the AO to assess undisclosed escaped income and section 153A also empower the AO to assess total income including escaped and undisclosed income. Thus it can be seen that the prime intention and purpose of assessment u/s 153A and assessment u/s 147 is same and both sections empower the revenue to assess or reassess the escaped and undisclosed income of the assesssee. 10.13 It is clear from the facts of the appeal under consideration that had the search has not been conducted in the case of the appellant she would not have been able to file the return u/s 153A and would not have been able to revise or rectify the so called bona fide mistakes committed in the original return of income filed u/s 139 of the Act. 10.14 The issue of revision of ....
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.... income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the ITO's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under-assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words 'such income' in section 147 clearly refer to the income which is chargeable to tax but has 'escaped asses....
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.... therefore, fell in error in reading those judgments, divorced from the context in which the precise questions came up for consideration in those cases, and to hold that the assessee could 'reagitate' the concluded issues and claim relief in respect of items, finally concluded in the original assessment proceedings, during the reassessment proceedings, unconnected with the escapement of income. We cannot, therefore, approve in broad propositions laid in that regard in Indian Refrigeration Industries (P.) Ltd.'s case (supra), Ramsevak Paul's case (supra), Assam Oil Co. Ltd.'s case (supra). Standard Motor Products of India Ltd.'s case (supra), Rangnath Bangur's case (supra), State Bank of Hyderabad's case (supra) and Indian Rare Earth Ltd.'s case (supra). 41. Keeping in view the above principles, we may now turn our attention to the question formulated by the High Court as noticed in the earlier part of the judgment. 42. The Tribunal rightly found that the loss which the assessee wanted to be set off against the 'escaped income' could not be allowed to be so set off because in the original assessment proceedings, no 's....
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....auditors. The tax audit report in Form No. BCD has been placed on record. It was also submitted that for assessment year 2000-01, no tax audit was carried out by the auditors. The assessee himself had valued the closing stock for assessment year 2000-01 at cost. We have gone through the tax audit report for assessment year 2001-02. As per the tax audit in Form No. 3CD, the method of valuation of closing stock employed in the assessment years 2001-02 to 2005-06 was is "at cost". 8. The original returns of income for assessment years 2000-01 to 2005-06 were within the time allowed filed under section 139(1) of the Act. The search under section 132 of the Act in the case of the assessee was carried out on 9-12-2005 and assessee filed return of income in response to notice under section 153A on 2-11-2007 for assessment years 2000-01 to 2005-06. Further, the assessee could have revised returns within the period of one year from the end of relevant assessment year or before completion of assessment whichever was earlier. Admittedly the assessees did not revise any of the returns for assessment years under consideration prior to date of search carried out in the case of the asses....
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....y other legal proceeding, then, notwithstanding anything contained in sub-section (1) section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation. -For the removal of doubts, it is hereby declared that, - (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year, " 9. Section 153A(1) contains non-obstante clause and hence provisions of this section will override the provisions of section 139, section 147, section 148, section 149, section 151 and section 153 of the Act. Under section 153A(1) the Assessing Officer is empowered to issue notices to the assessee sea....
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.... years by invoking the provisions of section 147 after initiation of search proceedings in view of second proviso to section 153A(1) of the Act. From the facts given above it is clear that the assessee had changed the method of valuation of the closing stocks for all assessment years to reduce the profits and hence the change in the method of valuation is not bona fide. As regards the contention of the assessee that it is impossible to value the closing stock at cost price in the case of jewellers, this is a sweeping generalization without having any material on records to prove. The assessee had not filed any evidence to support its contention and hence deserves to be rejected. 11. The provisions of section 153A are directed to assess or reassess the income for six assessment years based on search proceedings and hence the assessment proceedings under section 153A are beneficial to the revenue. In other words the proceedings under section 153A are initiated to assess or reassess the undisclosed income. In the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 Hon'ble Supreme Court has held that section 147 being for the benefits of the revenue and not for the....
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....a fide to the assessee in return filed u/s 153A of the Act. The contention of the appellant that it was a bonafide mistake is devoid of merit as the issue of capital gain came to the notice to the department due to search therefore the nature of receipt and head of income was changed after search only in the return filed u/s 153A of the Act. Thus the AO is justified in not allowing the change of head of income from capital gain to business income in return filed u/s 153A and has rightly treated the land at Thaltej -Krish Villa plot as capital asset as shown in the return of income filed u/s 139 of the Act for Ays. 2008-09, 2009-10 and 2010-11 . 10.18 Since the land at Thaltej-Krish Villa plots is a capital assets and taxable under the capital gain and the appellant had sold this land in less than the Jantri price, the provision in section 50C of the Act becomes applicable in the case of the appellant. The provisions in section 50C is a special provision inserted w.e.f. 1.4.2003 and is a deeming provision which allows the AO to take full value of consideration where the consideration received by the assessee is less than the value adopted or assessed by any authority of Sta....
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....d as trading asset and consequently declined to agree with the plea of the assessee that profits arising from sale of land at Thaltej as business income of the assessee. 7. Further aggrieved, the assessee preferred appeal before the Tribunal. 8. The learned AR for the assessee submitted at the outset that both the authorities below have mis-directed themselves in appreciation of facts and wrongly applied the law. The learned AR pointed out that the assessee alongwith two other co-owners namely Smt. Darshanaben Savalia & Smt. Kapilaben S. Savalia purchased certain parcels of agricultural land at Thaltej admeasuring about 15902 sq.mtrs. as co-owners in FY 2007-08 and FY 2008-09 between March 2008 to June 2008 immediately thereafter, the assessee and the co-owners got the said land converted into non-agricultural land in August 2008 i.e. barely few months later and put up the residential housing plot scheme known as 'Krish Villa' while providing for common infrastructure and internal roads. The learned AR referred to Collector's letter dated 18.08.2008 showing the requisite permission for using the land for non-agricultural use. It clearly reveals the idea and intent....
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....nd treated at par with the systematic commercial exploitation of plots of Krish Villa scheme by the assessee. It was submitted that a bona fide and inadvertent mistake of showing the profits on sale of plots of land of Krish Villa scheme came to the notice of the assessee after search and consequently, the return filed under section 153A of the Act was carried declaration of income under appropriate head. 8.2 To buttress the activity of the assessee to be a business venture (by way of conversion of agricultural land, providing the internal roads and common infrastructure, obtaining the necessary permission from the AMC and obtaining the approved plan etc.), the learned AR referred to the account of business development expenses, correspondences with AMC, broachers published etc. The learned AR vehemently stressed that pattern and sequence of event would clearly show the assessee intended to exploit the land parcels (with an idea to maximize profits) so acquired as a business venture or something akin to it. The learned AR also referred to and relied upon the decision of the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao v. CIT [1961] 42 ITR 179 wherein it was hel....
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....nsequent upon search. The learned AR thus submitted that the action of the assessee requires to be upheld and the order of the AO/CIT(A) requires to be modified. 8.4 The learned AR thereafter reiterated once again that there is no under reporting of income in the return filed under section 153A of the Act which stood substituted to the return originally filed under section 139 of the Act. The assessee has merely re-aligned the income under the appropriate head having regard to the ground realities and conduct of the assessee as venture in the nature of trade. 8.5 The learned AR next submitted that it is well established that there is no estoppel against law and an erroneous claim on figures or appropriate classification could be revised so long as the relevant facts are available on record. The learned AR submitted in elaboration that if an assessee under a mistake, mis-conception or not being properly instructed is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. To support such view, the leaned AR for the assessee referred to the decision of the Hon'ble Gujarat High Court in the case of S.R. Koshti v. CIT [....
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....umstances prevalent in a given case, the incidental issue noted above is abstract in nature and involves a question of law. 10.1 It is the case of the assessee that certain parcels of agricultural land admeasuring 15902 sq.mtrs. were acquired/purchased at Thaltej, Ahmedabad between March 2008 to June 2008 jointly alongwith two co-owners namely Smt. Darshnaben H. Savalia and Smt. Kapilaben S. Savalia who are also appellants in this group of appeals. The purchases have taken place in FY 2007-08 & FY 2008-09 as noted above. It is the case of the assessee that aforesaid parcels of land were immediately converted into non-agricultural land within two months from the last purchase and the assessee incurred various development expenses to put up the residential housing plot scheme known as 'Krish Villa' while providing for common infrastructure and internal roads. The assessee has also received commencement letter for such act from AMC in February 2009 i.e. in 8-9 months time. The layout plan of plotting done by the assessee alongwith co-owners, broachers of the residential housing scheme was referred and relied upon to support its revised position that the assessee acquired pa....
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....not be, in our considered opinion, regarded as capital acquisition taxable under the head 'capital gains'. Such organized course of commercial exploitation of land portfolio carries all trappings of adventure in the nature of trade, commerce etc. and thus falls within the ambit of expression 'business' as defined under section 2(13) of the Act. As a sequel thereto, the profits arising from such adventure can be taxed as 'business income' under section 28 of the Act as rightly claimed on behalf of the assessee. While considering, whether a particular transaction was entered for commercial gains or not, the salutary intention of the person is determinative. It is well settled that such intention has to be decided on the basis of surrounding circumstances, existence of commerciality in relationship of parties to the transaction, motives governing the action of the assessee in bringing about the transaction and subsequent conduct. Thus, the driving force for entering into a transaction would be determinative of the real nature and character of such transaction. The entire explanation for initial intention to acquire land with commercial objectives is thus specif....
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.... the activity can only be described as business adventure. Where a person goes further and divides the land in the plots develops the area to make it more attractive and sales the land not as a single unit as he bought it but in parcels, he is dealing with land as his stock-in-trade. He is carrying on business and making a profit. This is exactly what had happened in the instant case. Here also, the assessee soon after purchasing land developed it and started selling sub-divided plots within two years of purchase. Similar view has been expressed by the Hon'ble Supreme Court in P.M. Mohammed Meerakhan v. CIT [1969] 73 ITR 735 (SC) wherein division of the land into plots and sale thereof to various parcels involving scheming and organization on the part of the assessee was constituted to be an adventure in the nature of trade which is susceptible to chargeability under the head 'business income' as per Section 28 of the Act. The assessee has relied upon many other decisions expressing the similar view which we do not intend to deal with having regard to the express view available from the Hon'ble Supreme Court. 11. We shall now turn to the incidental point involvin....
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....kers & Shareholders (P.) Ltd. (supra), B. G. Shirke Construction Technology (P) Ltd. (supra) and so on. Therefore, the assessee is within its legitimate right to alter a wrong position taken earlier in the course of proceedings. In the instant case, the assessee has altered its position in the return filed under section 153A of the Act filed in pursuance of search proceedings wherein the assessee has sought taxability of income generated from sale of land parcels under the head 'business income' which action is permissible provided such claims is justified when tested under the provisions of Act. 13. We thus find considerable merit in the plea of the assessee herein for eligibility of claim of the assessee for taxability of profits arising on sale of plots under the head 'business income' as claimed in the return filed under section 153A of the Act. 14. We however now turn to the yet another related aspect in controversy. It is the case of the Revenue that the provisions of Section 153A of the Act are for the benefit of the Revenue in the light of the decision of the Hon'ble Supreme Court in case of Sun Engineering Works (supra). It is thus claimed on beha....
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....on that assessee is not prevented from making a claim to its advantage in the proceedings under section 153A of the Act unlike Section 147 of the Act. 15. In the result, appeal of the assessee for AY 2008-09 is allowed. IT(SS)A Nos. 83, 84 & 889/Ahd/2015 - AYs. 2009-10 to 2011-12 (Bhanuben K. Savalia) 16. As per the grounds of appeal, the assessee has challenged the action of the Revenue in treating profits arising from sale of a part of land at Thaltej, Ahmedabad (Krish Villa) as short term capital gains as against the business income shown by the assessee and consequently applying the provisions of Section 50C of the Act. As noted earlier, the assessee while filing the original return (prior to search) under section 139 of the Act had declared the land at Thaltej (Krish Villa) as capital asset in FY 2007-08 relevant to AYs. 2008-09. The gains arising from sale of the land spanning over AYs. 2008-09, 2009-10 & 2010-11 was accordingly shown and declared as capital gains in its return of income filed prior to search. However, consequent upon search, the assessee altered its stand and declared the land to be held as stock-in-trade/current investment and the gains arising on ....