Amjad Ahmedbhai Sheikh v. Asst. Commissioner Of Incometax Circle

ITL 51/18 IN THE HIGH COURT OF JUDICATURE AT BOMBAY,NAGPUR BENCH, NAGPUR. INCOME TAX APPEAL NO. 51/2018 Amjad Ahmedbhai Sheikh,aged about 38 years, residing at Ward No.8,Old Basti, Butibori, Nagpur-441108, Tah. &Dist.: Nagpur. State of Maharashtra. .....VERSUS..… APPELLANT Asst. Commissioner of Incometax Circle No.7,Room No.521, 5[th] Floor, MECL Building,Seminary Hills, Nagpur-440006, Tah. & Dist.:Nagpur. State of Maharashtra. RESPONDENT Shri S.N. Bhattad with S.C. Thakar, counsel for the appellant.Shri Anand Parchure, counsel for the respondent CORAM : A.S. CHANDURKARAND S.M. MODAK, JJ.DATE : 17THMARCH,2021 ORAL JUDGMENT(PER : A.S. CHANDURKAR, J.) Heard. ADMIT on the following substantial question of law: “The Revenue having accepted the sale transactionentered into by the appellant and Shri narendra Parikhjointly as capital gain in the case of the co-owner,whether the Tribunal was justified in treating the saidtransaction as business income insofar as the appellant isconcerned?” Learned counsel Shri Anand Parchure waives notice for the respondent. 2.In this appeal filed under Section 260A of the Income Tax,1961 (for short, ‘the said Act’), the order dated 23.11.2017 passed by theIncome Tax Appellate Tribunal is under challenge. The facts relevant foradjudication of the present appeal are that for the assessment year 2010- 11 the appellant-assessee filed his return and declared a total income ofRs.27,43,007/-. In the revised return of income, the assessee claimeddeduction of Rs.80,000/- under Section 54F of the said Act on long termcapital gain. The assessment was completed under Section 143(3) of thesaid Act on 28.03.2013. The Assessing Officer however disallowed theclaim for exemption under Section 54F and treated the entire saleconsideration of immovable property of Rs.1,01,74,000/- as businessincome. After deducting the cost price, the net profit was treated asincome from business. The assessee challenged the said order before theCommissioner of Income Tax (Appeals) but the treatment of capital gainsas business income was upheld. Further appeal was carried before theIncome Tax Appellate Tribunal which observed that the assessee had soldfour plots to different parties during the relevant period and thusconcluded that the intention of the assessee was to exploit thecommercial potential of the land. On that count the appeal came to bedismissed. This order is the subject matter of challenge in the presentappeal. 3.Shri S.N. Bhattad, learned counsel for the assessee sumittedthat by virtue of two sale-deeds dated 20.02.2004 and 13.04.2004 theassessee along with one Shri Narendra Kanhaiyalal Parikh had jointlypurchased agricultural lands. The said lands were then sought to be converted for non-agricultural use. The said lands were then convertedinto various plots and plot nos.1 and 2 were sold on 09.12.2009 for aconsideration of Rs.2,43,52,000/- in which the share of the assessee wasRs.91,01,000/-. Another plot was further sold on 01.02.2010. It was hiscontention that the co-owner while filing his income tax return hadsought benefit of capital gains on account of sale of the land. The DeputyCommissioner of Income Tax was pleased to grant such benefit underSection 50C of the said Act and capital gain was calculated accordingly.This order passed by the Deputy Commissioner of Income Tax wasaccepted by the Revenue and it is thus submitted that since in the case ofthe co-owner of the same land income from the same transaction thatwas jointly entered into was considered as capital gain, the Revenuewas not justified in treating the sale transaction in a different mannerinsofar as the assessee was concerned. The income of the assesseefrom the same transaction could not be treated as business incomeand the benefit of capital gains ought to have been granted to theassessee. C.A.T. No.9/2021 has been filed seeking to place on recordadditional evidence and the nature of the assessment order passed in thecase of Shri Narendra Kanhaiyalal Parikh. It is urged that this assessmentorder deserves to be taken into consideration while answering thesubstantial question of law as framed. 4.Shri Anand Parchure, learned counsel for the respondentopposed aforesaid submissions. According to him the assessee was rightlyheld not eligible for claiming the benefit of capital gains in view of thefact that he had engaged in various activities that had a character of anadventure in the nature of trade. The case of the co-owner wasdistinguishable as the said assessee was in the business of cement andretail lime powder. Hence, it was submitted that the additional evidencesought to be brought on record was not relevant and the Income TaxAppellate Tribunal having rightly adjudicated the appeal as preferred, nointerference with the impugned order was called for. 5.We have heard the learned counsel for the parties and wehave given due consideration to their respective submissions. Perusal ofthe impugned order indicates reference to the joint purchase by theassessee and Shri Narendra Kanhaiyalal Parikh of parcels of land fromKahsra No.70. The manner in which the lands were jointly purchased andwere thereafter converted for non-agricultural use and plots therein werefurther sold have been taken into consideration. Since the Tribunal foundthat the assessee had sold four plots to different parties in the saidassessment year, it concluded that in the light of the nature of business ofthe assessee and development activity carried on it was clear that theassessee intended to exploit the commercial potential of the land. It isundisputed that the assessment order dated 30.03.2013 in the case of Shri Narendra Kanhaiyalal Parikh, co-owner of the said lands along withthe assessee permitted the said co-owner to take into account full value ofthe sale consideration for the purposes of Section 50C of the said Act forcomputing capital gains. This assessment order however was not placedbefore the Income Tax Appellate Tribunal by the assessee. According tothe assessee, he was not aware of the passing of the said assessmentorder and it is for that purpose that the application to bring on recordadditional evidence has been filed in the present proceedings. 6.We find that the assessee and Shri Narendra KanhaiyalalParikh were joint purchasers of agricultural land by virtue of sale-deedsdated 23.03.2004 and 29.04.2004. After converting the same for non-agricultural use, various plots came to be sold. Prima-facie we find thatas the co-owner has been granted benefit of capital gains with regard tothe same transaction which assessment order has been accepted by theRevenue, said aspect deserves to be taken into consideration whileadjudicating the claim of the assessee for seeking benefit of capital gains.The said assessment order dated 30.03.2013 was in existence when theTribunal decided the appeal. The same was however not brought onrecord by the assessee. In the peculiar facts of the present case as it isfound that co-owner of the same land has been granted benefit of capitalgains we find that the effect of the assessment order passed in the case of the co-owner deserves to be considered by the Income Tax AppellateTribunal. For the said purpose, a re-consideration of the proceedings bythe Income Tax Appellate Tribunal would be necessitated. 7.Accordingly, the substantial question of law as framed isanswered by holding that the effect of the sale transaction of the co-owner being extended the benefit of capital gains deserves to beconsidered by the Income Tax Appellate Tribunal as income from thesame transaction has been treated as business income insofar as theassessee is concerned. In that view of the matter the following order ispassed: the co-owner deserves to be considered by the Income Tax AppellateTribunal. For the said purpose, a re-consideration of the proceedings bythe Income Tax Appellate Tribunal would be necessitated. 7.Accordingly, the substantial question of law as framed isanswered by holding that the effect of the sale transaction of the co-owner being extended the benefit of capital gains deserves to beconsidered by the Income Tax Appellate Tribunal as income from thesame transaction has been treated as business income insofar as theassessee is concerned. In that view of the matter the following order ispassed: The order passed by the Income Tax Appellate Tribunal,Nagpur Bench, Nagpur on 23.11.2017 is set aside. The proceedings areremanded to the Tribunal to re-consider the appeal with a liberty to theassessee to raise additional grounds in support thereof. The assessee is atliberty to place on record the assessment order dated 30.03.2013 passedby the Assessing Officer in the case of Shri Narendra Kanhaiyalal Parikhfor its due consideration by the Income Tax Appellate Tribunal withoutgoing into the question of limitation. The appeal shall be decided on itsown merits without being influenced by any observations made in thisjudgment. The appeal be preferably decided within a period of threemonths from the date of its first hearing. The appeal is allowed in aforesaid terms and disposed of. (S.M. MODAK, J.) (A.S. CHANDURKAR, J.) APTERohitApte Digitally signed byRohit ApteDate: 2021.03.1714:57:34 +0530