2019 (12) TMI 1239

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....s of appeal filed by the assessee read as under: 1. The Ld. CIT erred in confirming the order of ACIT in treating the sale of investments in immovable properties as a business activity and adding the gains/loss on the same to the business income of the appellant, in spite of the appellant holding the flats for more than 36 months. 2. The ACIT erred in initiating penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and for concealing the income. 3. Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2013-14 on 25.09.2013 declaring total income of Rs. 28,20,630/-. He revised his computation of total income and such revi....

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....years." However, the AO was not convinced with the above explanation for the reason that the assessee had not purchased fully constructed flats but had booked flats in FY 2007-08, which were proposed to be constructed later on; that only agreement to purchase/sale was entered on 27.03.2008 and property was fully constructed much later ; promoter had incorporated Kalpataru Estate Building 1B & 1C Co-operative Housing Society Ltd. on 15.04.2010 of which the assessee got shares on 14.03.2011 in relation to above said flats. It is further found by the AO that when the construction of flats was fully completed during FY 2010-11, the assessee transferred or sold those assets within a short span of approximately two years from getting its ready....

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..... CIT(A) held that in the instant case the transaction is one where income is to be assessed as profits and gains of business and profession and not capital gains. Accordingly, he confirmed the order of the AO making an addition of Rs. 41,64,507/-. 5. Before us, the Ld. counsel for the assessee submits that the assessee had sold three flats during the year and also a parking lot and all these properties were acquired on 27.03.2008; the assessee had offered the income from the above sale under the head "capital gains", as the business of the assessee is dealing in shares and securities and jewellery ; further, the gains offered were long term in nature because the assessee held those flats for more than 36 months and accordingly the index....

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....o the order of the Ld. CIT(A) argues that the flats are sold stage by stage, there is organized thought and decision making in the whole exercise and the transaction is one where income is to be assessed as profits and gains of business and profession and not capital gains. Regarding the claim of the assessee that consistency should be followed taking into account the treatment given in the past to the transaction, the Ld. DR submits that in income tax proceedings, each year is a separate unit and as a general rule the principle of res-judicata is not applicable to decisions of income tax authorities, an assessment for a particular year is final and conclusive between the parties only in relation to that year. Thus the Ld. DR submits that t....

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....were to deal on a systematic and repetitive manner, then no businessmen will lock its funds for three years for his trading activities. We further find that the assessee, after selling these flats has not acquired any additional flats by re-investing the sale proceeds of these sold flats. Also the fact remains that the above assets are appearing under 'investments' in the balance sheet of the assessee. The principle underlying the distinction between a capital sale and an adventure in the nature of trade were examined by the Hon'ble Supreme Court in Venkataswami Naidu & Co (G) v. CIT (1959) 35 ITR 594(SC), where it was held that the character of a transaction cannot be determined solely on the application of any abstract rule, prin....