Ita/37/2011 Of The Commissioner Of Income Tax,Kozhikode v. Sri.m.n.saidalavi, Malappuram

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN MONDAY, THE 9TH DAY OF JANUARY 2012/19TH POUSHA 1933 ITA.No. 37 of 2011 ----------------- ITSSA.77/2004 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT(S)/APPELLANT/RESPONDENT: --------------------------------- THE COMMISSIONER OF INCOME TAX, KOZHIKODE. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: ------------------------ 1 SRI.M.N.SAIDALAVI,MEDUVIL NALAKATH HOUSE,TIRURANGADI.P.O,CHEMMAD MALAPPURAM DISTRICT, PIN-676306. R, BY SRI.S.ARUN RAJ THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 09-01-2012,THE COURT ON 17.1.2012 DELIVERED THE FOLLOWING: ITA.No. 37 of 2011 APPENDIX APPELLANT'S ANNEXURES: ANNEXURE A: COPY OF ORDER UNDER SECTION 158 BC READ WITH SECTION263 DATED 31.12.2003 ANNEXURE B : COPY OF THE CIT'S ORDER DATED 29.6.2004 ANNEXURE C : CERTIFIED COPY OF THE ITAT'S ORDER DATED 17.9.2010 RESPONDENTS' ANNEXURES: NIL //TRUE COPY// P.A. TO JUDGE C.N. RAMACHANDRAN NAIR, &K. VINOD CHANDRAN, JJ ---------------------------------------------------- ITA No. 37 of 2011----------------------------------------------------Dated this the 17[th] day of January, 2012 J U D G M E N T K. Vinod Chandran, J The order of the Tribunal in the assessee's appeal ischallenged by the Revenue in the above appeal. The brieffacts necessary for consideration of the appeal is statedhereunder. 2. The block assessment for assessment years 1989-90 to1999-2000 was completed against the assessee consequent toa search under Section 132 of the Income Tax Act. Theassessment was completed determining undisclosed income ofRs.1,07,96,410/-. In the cash flow statement for the yearended 31.3.1997 a receipt of Rs.5 lakhs was shown as profiton sale of debris to explain the source for investment. Thesame was brought to tax for the assessment year 1997-98 asshort term capital gain. The explanation of the assessee wasthat the assessee, along with two others purchased a propertywith building thereon but, however, without any value attributed to the building, which was in a dilapidatedcondition. Subsequent to the acquisition of the property thedilapidated building was demolished and the materials soldout. Amounts were received on sale of such debris whichalong with rent received for letting out a portion of the plot foradvertisement purposes came to Rs. 15 lakhs. The amountsassessed as short term capital gains is 1/3[rd] of the saidamount since the purchase of property and sale of the buildingmaterials were jointly done by these persons. One otheraddition was with respect to the investment in purchase ofproperty in Pollachi which according to the assessee waspurchased in the financial year 1997-98 for an amount ofRs.19,84,650/-. However, the Assessing Officer relying on thesubmission made by the assessee's brother in another searchoperation as also the documents recovered therefrom broughtto tax further amount of Rs.15,15,350/- for the assessmentyear 1998-99. This was on the premise that the statement ofthe brother of the assessee was that he has received Rs.35lakhs from the assessee for the said property against whichthe assessee had disclosed only Rs19,84,650/- in the cash flow statement. The last issue challenged herein, and raised beforethe Tribunal was with respect to the adoption of CPWD ratesfor estimating cost of construction as against the State PWDrates adopted by the approved valuer of the assessee. Theabove issues were found against the assessee in the firstappellate order which was challenged before the Tribunal. statement. The last issue challenged herein, and raised beforethe Tribunal was with respect to the adoption of CPWD ratesfor estimating cost of construction as against the State PWDrates adopted by the approved valuer of the assessee. Theabove issues were found against the assessee in the firstappellate order which was challenged before the Tribunal. 3. The Tribunal found that Rs.5lakhs disclosed by theassessee as the amount received on sale of debris cannot becharged as capital gains since the acquisition of the buildingwas on NIL cost and the computation of capital gains cannotbe done. It is an admitted fact that the land on which thebuilding was situated was purchased and it is not seenwhether the Tribunal has examined the title deeds to come toa conclusion that there was no cost attributable to thebuilding. Admittedly there was consideration passed on theacquisition of the property and since the Tribunal has notgone into the facts, we should have remanded the issue forfresh consideration. However, we desist from doing so, sincein any event the acquisition of the property and the sale ofbuilding, though a solitary incident would come within the term of business and would be assessable as business income.The short term capital gains assessed to tax without anydeduction would be as good as an assessment of businessincome especially so, since the rates are the same. In suchcircumstances, we are constrained to set aside the order ofthe Tribunal with respect to the deletion of tax assessed onRs.5lakhs being sale of debris. 4. The other deletion which is the subject matter ofchallenge here made by the Tribunal was with respect to theamount of Rs.15,15,350/- being alleged undisclosedinvestment in a property at Pollachi. The addition was madeby the Assessing Officer as noticed earlier, on the premisethat the assessee had shown a lesser amount in the cash flowstatement, while, the assessee's own brother had disclosed inhis accounts Rs.45 lakhs as the value of the property againstwhich Rs 35 lakhs was shown as cash received from theassessee. The property was jointly purchased by the assesseeand his brother on behalf of their children and subsequentlythe right of the assessee's children was purchased by theassessee on behalf of his children. The assessee, on being confronted with the statement of his brother denied the sameand contended that the entire sale proceeds as disclosed in hiscash flow statement was adjusted against the prior purchaseprice paid when the property was originally purchased jointlywith his brother. The documents, as noticed by the Tribunalcontain the amount disclosed by the assessee in the cash flowstatement. Therefore, there was absolutely no materialavailable with the Assessing Officer to simply adopt the detailsof a search conducted in the assessee's brother's premises.The Tribunal having found the above issue on facts, we areinclined to sustain the same as the issue does not raise anyquestion of law. The remaining issue is regarding theadoption of CPWD rates by the departmental valuer and StatePWD rates by the approved valuer of the assessee. TheTribunal found that the difference is only nominal andconsistently State PWD rates are adopted for the purpose ofestimation; which according to us cannot be faulted. In thecircumstances, we partly allow the appeal filed by thedepartment answering the first question in favour of theRevenue, sustaining the assessment of Rs.5 lakhs received on sale of debris as business income and not capital gains. Theissue projected in question No.2 and 3, we refuse to answersince the said issues, as noticed earlier, does not give raise toany question of law and the order of the Tribunal is sustainedto that extent. Sd/- C.N. RAMACHANDRAN NAIR(Judge) jma//true copy// Sd/- K. VINOD CHANDRAN (Judge) P.A to Judge