TaxTMI 
TaxTMI 
2025 (7) TMI 2002
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....treat the income from the sale of immovable properties as income from capital gains instead of business income by merely following the order of Hon'ble ITAT in the case of appellant for F.Y. 2015-16, without looking into the merits of the case. It is pertinent to mention here that the order of Hon'ble ITAT for A. Y. 2015-16 in ITA No. 158/JODH/2019 was not acceptable by the department but further appeal against the order was not recommended only due to law tax effect involved. 3. The Ld. CIT(A) has erred in fact & law in directing the AO to examine the eligibility of exemption u/s 54F/54EC before giving the order of give effect, which is akin to setting aside the matter/issue which is contrary to the provisions of section 250. 4. That the tax effect involved in this case is above the limit laid down in Circular No. 17/2019 dated 08.08.2019 issued by the CBDT, (Judicial Section) New Delhi." 2. The sole issue challenged by the revenue is that the CIT (A)/NFAC was not justified in treatment of the income from the sale of immovable properties as capital gains instead of business income and directing the AO to examine the eligibility of exemption u/s 54F/54E....
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....e was selected for scrutiny. During the course of assessment proceedings, it was found by the AO that the appellant had sold 10 immovable properties during the impugned AY for total consideration of Rs. 4,18,45,690/-. These properties sold were constructed over a period of 3 years by joining the land of 3 family members. The AO held that the activity of joining the lands and constructing houses thereon amounted to adventure in the nature of trade and accordingly, the AO brought to tax the profit on sale of properties as income from business and disallowed the deductions/exemptions claimed by the appellant u/s. 54F of the Act and 54EC of the Act. Aggrieved by the said additions/disallowances, the appellant is in appeal and has raised 07 grounds which are adjudicated as under :- 7. Ground no. 1, 6 & 7 are general in nature and hence, not adjudicated. 8. Ground no. 2 to 4 are relating to treating the income from capital gains offered as income from business and disallowing the deductions/exemptions claimed u/s. 54F/54EC of the Act. one of these grounds is also in respect of disallowance of part of the expenditure on construction for non production of details before t....
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....r verification and documents submitted during the course of assessment proceeding. The finding that "No bills supporting such expenditure were provided to this office despite being asked clearly." is totally incorrect as the documents relevant to construction cost has been produced during the course of hearing and same has been verified by the Ld. AO on test check basis. It was submitted that plot wise details has not been maintained and total construction cost incurred has been averaged and claimed accordingly against property sold. Submission made had been reduced Ld. AO in the assessment order (page 16 of assessment order). Therefore finding recorded with reference to nonproduction of documentary evidences is. grossly erroneous and contrary the material available on record. With reference to non reflecting of entries in bank statement on voucher to voucher and day to day basis was that for multiple invoices/expenditure payment was made through single cheque. A detailed submission showing each payment from bank account towards nature of expenditure and documents detail thereof [PB 33-46 (36-38), 56-66] were produced/submitted before Ld. AO. Going through such detail your good sel....
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.... after considering the relief granted to the appellant in deciding ground no. 2 to 4 above. 10. In the result, the appeal is treated as partly allowed for statistical purpose." 5. The Ld. CIT (DR) for the Revenue presented the appeal and contended that the Ld. NFAC/CIT(A) was not justified in facts and law in directing to treat the income from the sale of immovable properties as capital gains instead of business income, by ignoring the fact that assessee in his business concerns was engaged in the business of real estate development and huge expenses of Rs. 8.72 Cr. were incurred on development of projects to earn profit and that the Id. CIT(A) has erred in law & facts by directing the AO to treat the income from the sale of immovable properties as income from capital gains instead of business income by merely following the order of Hon'ble ITAT in the case of appellant for F.Y. 2015-16 which is distinguishable on facts, and the merits of the present case for the year under consideration. It is pertinent to mention here that the order of Hon'ble ITAT for A.Y. 2015-16 in ITA No. 158/JODH/2019 was not acceptable by the department but further appeal against the ord....
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.... numbers 1760, 1761, 1763 and 1764 on 13.07.2010 itself. This contiguous land was named as 'Fateh Hills Township'. The Fateh Hills Township has been planned on the Khasra No. 1760, 1761, 1763, 1765 &1765/6320 at Sire Mandir Road, Jalore. These properties jointly owned by Pushp Raj Bohra (Assessee), Ramesh Raj Bohra and Dinesh Raj Bohra. Again, the planned map has been submitted to Nagar Parishad for approval which was approved and the status of the property got changed to 'AT DISPOSAL on 06.03.2014. Thereafter, the contiguous land was given to Fateh Agro Builders Pvt. Ltd through a developer agreement on 23.04.2014. 8. The Ld. CIT (DR) emphasized that it is all the more pertinent to mention here that the assessee and his two brothers are directors in Fateh Agro Builders Pvt. Ltd. The case of Fateh Agro Builders Pvt Ltd was under scrutiny for A. Y. 2015-16 also. The company was engaged in business of Builders - Property Developers. And that the company has projected in Jalore namely Fateh Royal Residency and Fateh Hills and at Bangalore in the names of Perfect Charm, Perfect Charisma and Perfect Bansankari'. During the survey held at the premise of M/s Fateh Agro ....
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....essee toward construction Rs. 85,22,137/- allowed. 6. Assessment completed at total income amounting to Rs. 3,63,33,232/- as against returned income of Rs. 38,47,500/- and thereby making addition of Rs. 7. Against the assessment order framed appeal was preferred before the CIT(A) raising the following grounds for assessing the capital gain as business income and quantum of income: "2, That on the facts and in the circumstances of the case, Ld. AO erred in treating the capita/ gain earned on sale of different properties as income from business on the basis of hypothesis presumption. The transaction of sale of property may kindly be held sale of capita/ assets and not in the nature of business. 3. That without prejudice to other grounds and in alternative in case transaction of development of township plan treated as business transaction instead of efforts for realisation of proper consideration of capita/ asset, business income and capita/ gain be computed invoking provisions of section 45(2). 4. That on the facts and in the circumstances of the case, Ld. AO erred in restricting the claim of expenditure towards construction to Rs. 85,22,1....
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.... the issue before the assessing officer is not within the powers of the CIT(A). Section 251(1)(a) laid in very clear terms that in an appeal against an order of assessment, CIT(A) may confirm, reduce, enhance or annul the assessment. Power of restoration of case to the assessing officer is restricted in the case of assessment u/s 144. In the case under consideration assessment has been framed u/s 143(3) and not u/s 144. 12. Further, the direction to the assessing officer to examine the issue which is not part of the original assessment amount to enhancement of the of the assessment and as per section 251(2) same cannot be done without providing opportunity to the assessee. considering all above factors, it is requested to please issue the requisite order to delete the direction to the assessing officer for examination of exemption u/s 54F/54EC. 11. We have heard rival contentions, perused the material on record, impugned order, written submission, and citation including coordination Bench decision. Admittedly, during the survey conducted at the premise of M/s Fateh Agro Builders Pvt. Ltd., the assessee itself admitted that the aforesaid properties were jointly ....
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....uestion that the AO has decided the date of transfer conversion of the subject properties into stock in trade of business of the company which neither addressed by the CIT (A)/NFAC nor the Coordinate Bench in the assessee own case in ITA No. 158/JODH/2019 and in the case of assessee's brother Ram Raj Bohra in ITA No. 157/JODH/2019 (Supra) in respect of Assessment Year 2015-16 whose decision relied upon. Since, a planned map has been submitted to Nagar Parishad for approval of the properties which was duly approved and therefore the status of the said properties get stands changed to 'AT DISPOSAL on 06.03.2014 and thereafter, the contiguous land was given to Fateh Agro Builders Pvt. Ltd through a developer agreement on 23.04.2014. 15. Meaning thereby that the subject properties of the assessee stands converted into stock in trade as on 23.04.2014. It is settled law that any profit or income or gain on transfer of a capital assets up to the stage of conversion into stock in trade shall be charged to capital gains and thereafter as business income. In our view, on the date of approval of map of the property by the Nagar Parishad and its transfer to the Company dealing in Re....
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....te business. Thus the motive to acquire land was to earn profit through activity of development of the land through his own partnership firm as builder, contractors of the partnership firm also not paid taxes. Whereas the assessee herein claim the above transaction as capital gain and also claim exemption u/s. 54F of the Act. If the assessee would have done this construction project in his individual capacity, he should have been liable for higher tax and will not have been eligible for claiming exemption u/s. 54F of the Act. Thus the above transaction of the assessee is clearly to evade legitimate taxes due on the profit of the sale of the property. Further the moment when the assessee was entered into the development agreement on 30-11-2011, the value of the land belongs to the assessee became Rs. 1,65,87,450/- as per assessee's own submission. In that case, the assessee was liable to file Wealth Tax Return for the A.Ys. 2012-13 to 2015-16, but the assessee never filed Wealth Tax Return for these assessment years. Thus it can be clearly construed the above piece of land was treated by the assessee as stock-in-trade and no question of capital gain arise in the above set of fac....
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....e business reality and found that the two office premises by the Appellant-Assessee were acquired with an intention to resell and not for use. Having found no perversity in the approach of the Tribunal and its conclusion, the first question of law framed will have to be answered against the Appellant-Assessee and is accordingly answered. 19. The Hon'ble Apex Court in the case of Karanpura Development Co. Ltd. vs. Commissioner of Income-tax [1962] 44 ITR 362 (SC) has observed as under: Section 28(i) of the Income-tax Act, 1961 (Corresponding to section 10(1) of the Indian Income-tax Act, 1922) - Business income - Chargeable as - Assessment years 1949-50 and 1950-51 - Whether where a company acquires properties which it sells or leases out with view to acquiring other properties to be dealt with in same manner, company is not treating them as properties to be enjoyed in shape of rents which they yield but as a kind of circulating capital leading to profits of business, which profits may be either enjoyed or put back into business to acquire more properties for further profitable exploitation - Held, yes - Assessee-company was incorporated with objects of purchase and ....
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....d that the subject properties sold were constructed over a period of 3 years by joining the land of 3 family members. However, he has ignored the vital fact that the assessee has converted these properties with a map duly approved by Nagar Parishad and transferred to his business concern company in which he was one of the Director along with his other two brothers as above which were engaged in the business of real estate development where huge expenses of Rs. 8.72 Cr. were incurred by assessee on development of projects to earn profit. 22. Since the planned map has been submitted to Nagar Parishad for approval which was approved and the status of property got changed to 'AT DISPOSAL after approval of the Township plan identity of the land by Khasra Nos. have been lost. The approved plan of the Fateh Royal Residency Township was being enclosed with the assessment order as Annexure A. 23. From the planned map submitted to Nagar Parishad for approval it is evident that the properties were approved and the status of the property got changed to 'AT DISPOSAL on 06.03.2014. Thereafter, the contiguous land was given to Fateh Agro Builders Pvt. Ltd through a developer agreeme....