Principal Commissioner Of Income Tax, Jaipur-Ii, Jaipur Raj v. By Way Of This Appeal, The Appellant Has Challenged Thejudgment And Order Of The Tribunal Whereby The Tribunal Haspartly Allowed The Appeal Of The Assessee Reve

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 83/2018 Principal Commissioner Of Income Tax, Jaipur-Ii, Jaipur Raj ----Appellant Versus Smt. Manju Bansal, Plot No.5 Mangal Vihar Gopalpura Byepass,Jaipur Raj ----Respondent For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. MathurFor Respondent(s): HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS 13/03/2018 Judgment By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal of the assessee reversing the view takenby the AO as well as CIT(A). Counsel for the appellant has framed following questions of law:- “i) Whether in the facts and circumstances of the casethe ITAT was justified in deleting the addition of Rs.7834422/- made by the Assessing Officer on accountof short term capital gain, by treating the transactionas business transaction. ii) Whether in the facts and circumstances of the casethe ITAT was justified in treating the short term capitaltransaction as business receipt without appreciatingthe fact that assessee has claimed it u/s 44AD asbusiness receipt is belated return and only afterinitiation of enquiries by the department. Further, theassessee has not filed earlier year returns and wasunable to explain the said asset as stock in trade,specially when several other properties are shown ascapital assets.” Counsel for the appellant has contended in view of thestatement which has been recorded by the department whichreads as under:- “iz’u 4% vki viuk O;olk; fdl uke ls djrh gS ,oa O;olk; esa D;k D;kys[k iqLrdsa j[krh gSAmRrj4% eSa [kqn ds uke ls gh O;olk; djrh gw¡ ,oa dsoy cSd [kkrs ds fglkcls ys[kk iqLrdsa cukbZ tkrh gSaAiz’u5% o"kZ 2009 esa tc vkius viuk O;olk; 'kq: fd;k Fkk ml o"kZ esa vkidsikl D;k D;k lEifr Fkh ftlds vk/kkj ij vkius O;olk; 'kq: fd;kAmRrj5% eq>s bl ckjs esa ;kn ugh gSA o"kZ 2009 esa O;olk; 'kq: djrs le;dkSulh lEifr ls O;olk; 'kq: fd;k Fkk ,oa ml o"kZ esa D;k cspk Fkk ;gHkh /;ku ugha gSAiz’u6% blds ckn ds o"kZ 2010&11 vFkkZr fu0o"kZ 2011&12 esa vkius D;k D;k[kjhn cspku fd;k FkkAmRrj% o"kZ 2010&11 esa eSu ,l0,e0,l dkWyksuh okyk IykV [kjhnk Fkk ,oacspk Fkk ,oa ,d IykV vkj ds iqje dkyksuh esa [kjhnk Fkk ,oa mls cukdj dccspk Fkk bldk eq>s /;ku ugha gSA ,l0,e0,l dkWyksuh okyk tSlk Fkk oSlh ghfLFkfr esa cspk FkkA He contended that the AO while considering the matter has observed as under:- “For the sake of arguments, the assessee had showncertain assets purchased as Fixed Assets or takinginto consideration as Investment in a particular yearand later-on in the subsequent year(s) wants to startthe activity of Sale and purchase of theLand/Properties then it has to convert the Fixed assetsinto Stock in trade. IN that case as per provisions ofSection 45(2) of the Income Tax Act, 1961 till thedate of such conversion the Income can be treated asCAPITAL GAIN and not as Business Income. After thedate of conversion the income will be treated asBusiness Income. This Section under the Income Tax Act provides anexception for the purpose of capital gains. When aperson converts any capital asset owned by him intostock in trade of a business carried on by him, it isregarded as a transfer. The Fair Market Value of theasset on the date of such conversion shall be the fullvalue of consideration for the transfer. The Capitalgain will be calculated on this amount. It means evenfixed assets is treated as Stock in trade on later stageincome will be capital gain till the date of conversion.” It is further contended that the CIT(A) while considering theappeal has considered the submissions made by both the sidesand after taking into consideration has observed as under:- This Section under the Income Tax Act provides anexception for the purpose of capital gains. When aperson converts any capital asset owned by him intostock in trade of a business carried on by him, it isregarded as a transfer. The Fair Market Value of theasset on the date of such conversion shall be the fullvalue of consideration for the transfer. The Capitalgain will be calculated on this amount. It means evenfixed assets is treated as Stock in trade on later stageincome will be capital gain till the date of conversion.” It is further contended that the CIT(A) while considering theappeal has considered the submissions made by both the sidesand after taking into consideration has observed as under:- “The above clearly shows that the assessee has soldthe plots and not filed the return of income,information for which was received by thedepartment. On being questioned for the same, theassessee has come up with the plea of having soldthe same as stock in trade. No evidence of the factthat the assessee was in the business of sale andpurchase of land and the plots were held as stock intrade could be produced by the assessee. All booksof accounts, balance sheet, profit and loss accountare prepared subsequently, no returns of income hadbeen filed prior to the year or for the year inquestion. Four other plots are appearing as capitalassets in the balance sheet and the two plots soldare being claimed to be stock in trade based on thebalance sheet of previous year which is again arrivedat and submitted subsequent to the enquiry by thedepartment. The returns for subsequent years arefiled under Section 44AD. The assessee is claimingthat construction had been carried out on the plotbefore its sale to supplement its stand that it wasthe part of business, whereas the registered saledeed records only a 100 sq. ft. tin shade room onthe plot at the time of sale. The onus for provingtreating a particular asset as stock in trade or assetrests with the assessee especially in a case where noreturns were filed and the return is filed afterdetection of the transaction by the department andnotice thereon based on information received.Reliance is placed on the case of V.S. ChandraShekhar vs. ACIT, Bangalore wherein it has beenheld that since the assessee failed to bring anyevidence on record to show that the amount waspaid to the vendor for acquiring land as stock intrade for the purpose of business, addition madethereon by the authorities below was to beconfirmed. (54 Taxmann.com 185, BangaloreTribunal). In view of the discussion and facts of thecase, the addition made by the Assessing Officerunder the head capital gain is confirmed. The groundof appeal is dismissed.” In that view of the matter, he contended that the view taken by the Tribunal is contrary to law. In our considered opinion, the Tribunal while considering thematter has rightly observed as under:- In that view of the matter, he contended that the view taken by the Tribunal is contrary to law. In our considered opinion, the Tribunal while considering thematter has rightly observed as under:- “3.4. We have heard the rival contentions andperused the materials available on record. Theassessee during the relevant previous has sold twoproperties 74, SMS Colony, Durga Jaipur and 91, R.K.Puram, Sanganer, Jaipur. The first property 74, SMSColony, has been sold vide Regd. Sale deed dated21.07.2010 for sale consideration of Rs.10,00,000/-,the stamp valuation authority for the purpose ofRegistration adopted DLC Value of Rs.20,44,872/-which was later on enhanced to Rs. 76,21,852/-bythe DIG stamps. The second property 91, R.K.Puram, Sanganer, Jaipur has been sold vide Regd.Sale deed dated 31.01.2011 for sale consideration ofRs.10,21,000/-which was more than the DLC Value ofRs.9,86,873/- adopted by the stamp valuationauthority(PBP-71 backside). The registered saledeeds of both the properties are placed at PageNo.60 and 71 of the Paper Book. The first property74, SMS Colony, was purchased by the assessee videRegd. Purchase deed dated 26.03.2010 forRs.400000/- (PBP-52-59) and second property 91,R.K. Puram was purchased vide Regd. Purchase deeddated 24.06.2010 for Rs.3,00,000/-(PBP 66-70),which after certain construction thereon have beensold during the relevant previous year. The registeredpurchase deeds of both the properties are placed atPage No.52 and 66 of the Paper Book. The assesseealso vide Regd. Deed dated 25.11.2010 purchasedanother land B-6, Devi Chiranjeevi Colony, Jaipur forRs.4,96,000/- (PBP 81-88) which is lying in hand atthe end of relevant previous year. The assessee inresponse to certain inquiries conducted by therevenue, filed belated return u/s 139(4) of the IT Act1961, declaring net profit of Rs.1,75,491/- from theabove said transactions of purchase, construction andsale of properties. The relevant return of income andTrading and Profit & Loss Account and Balance Sheetare placed at Page No.28-31 of Paper Book. There isno dispute on these facts of the case, the onlydispute involved in the case is that whether therelevant transactions of purchase, construction andsale of properties falls within the nature of carryingon business assessable under the heading “profit andgains of business or Profession” u/s 28 of IT Act orfalls within the nature of transfer of capital assetsassessable as Capital gain u/s 45 of IT Act. Theassessee has claimed the relevant transactions asbusiness transactions assessable under the heading“profit and gains of business or Profession” u/s 28 ofIT Act, and thus without taking into account the DLCValue adopted by stamp valuation authority, declarednet profit on the basis of face value of saleconsideration, whereas the AO has held the same astransfer of capital assets assessable as Capital gainu/s 45 of IT Act, and thus applying the enhanced DLCValue of Rs.76,21,852/-as provided u/s 50C of IT Actdetermined Short Term Capital Gain ofRs.71,28,702/-in respect of First Property 74, SMSColony and of Rs.705720/- in respect of second property 91, R.K. Puram, Jaipur. The ld. A.R. drewour attention to the Balance Sheet for the precedingA.Y.2010-11, placed at page No.27 of the paper bookwhere in the closing stock of Rs.4,93,150/- has beenshown. The ld. A.R. explained the same pertaining tothe property 74, SMS colony, Jaipur purchased on26.03.2010, comprising face value of Rs.4,00,000/-and registry exp. of Rs.93,150/-.The ld. A.R. furtherin support of his contention submitted that theassessee is regularly engaged in the business ofpurchase, construction and sale of flats /houses andrelied on return of income, Trading and Profit & LossAccount and Balance Sheet of the succeeding yearsplaced at Page No.32-42 of paper Book, whereinsimilar activities have been shown to be regularlycarried on and claimed as business activities. Theld.A/R also referred to statements of the assesseeand her husband recorded by the AO placed at pageNo.43-51 of paper book , where in both the assesseeand her husband affirmed the carrying of business ofpurchase, construction and sale of properties. The ldA.R. submitted that in case of business transactionsprovisions of section 50C are not applicable. It isevident that the property 74, SMS colony waspurchased on 26.03.2010 in the form of land and thesame was sold on 21.07.2010 after construction ofboundary wall etc. as mentioned in regd. Saledeed .The second property 91, R.K.Puram waspurchased on 24.06.2010 which after construction ofcomplete residential house has been sold on31.01.2011. Both the properties have been soldwithin short time interval of 4-7 months from thedate of purchase. The similar purchase, constructionand sale activities of flats/house are evident insucceeding years also. The assessee in herstatements in response to Q. No.10 (PB No.45), hascategorically stated that both the properties soldduring the relevant previous year are included in herbusiness activities. The husband of the assessee inresponse to Q.No.3 (PB No.48) has also confirmedsuch business activities carried on by the assessee.Thus cyclical, regular, and frequent activities ofpurchase, construction and sales having short timeinterval of few months between sale and purchaseare evident from the documents available on recordwhich constitute business activities. Therefore wehold that the relevant transactions of purchase,construction and sale of properties carried on duringthe relevant previous year are falling within thenature of carrying on business assessable under theheading “profit and gains of business or Profession”u/s 28 of IT Act 1961.The assessee has alreadydeclared the net profit of Rs.1,75,491/-u/s 44AD ofthe Act, and filed relevant details before the AOwhich have been not doubted by the AO, thereforethe additions of Rs.71,28,702/- and 7,05,720/- madeby the AO towards Short term Capital Gain aredeleted. Thus Ground No. 3 of the assessee isallowed. It is also pertinent to mention that we have deleted the additions, on the basis of evidences andmaterial available on the record, therefore GroundNo.2 relating to admission of additional evidencesand alternative plea of the assessee do not requireadjudication.” In our opinion, the same amount was shown as business assets and it was never shown in the capital account merelybecause belated return was filed, it is not a ground to convert thebusiness assets into capital account. It is for assessee to decidewhere to show his income unless he has been shown to havesome ulterior motive, in that case, it will be open for thedepartment to stick to one view as earlier the assessee has notchanged her position. In that view of the matter, it will not beavailable for her to change the position and she has done thetransaction in accordance with law. Therefore, the Tribunal has notcommitted any error. Hence, no substantial question of law arises. The appealdeserves to be dismissed. The same is dismissed. In our opinion, the same amount was shown as business assets and it was never shown in the capital account merelybecause belated return was filed, it is not a ground to convert thebusiness assets into capital account. It is for assessee to decidewhere to show his income unless he has been shown to havesome ulterior motive, in that case, it will be open for thedepartment to stick to one view as earlier the assessee has notchanged her position. In that view of the matter, it will not beavailable for her to change the position and she has done thetransaction in accordance with law. Therefore, the Tribunal has notcommitted any error. Hence, no substantial question of law arises. The appealdeserves to be dismissed. The same is dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/82