2018 (9) TMI 1546 - AT - Income Tax

Sale of shares - LTCG OR STCG - Period of holding - Disallowance u/s 10(38) - Held that - The dates of purchase and sale of shares are not in dispute. In fact, the assessee purchased 750 shares of M/s Ganesar Ginning Mills Ltd. on 23.09.2005 which falls in the financial year 2005-06 and the same were sold by the assessee on 29.11.2006 which falls in financial year 2006-07. Therefore, it is clear that the assessee was holding the shares for more than 12 months. Hence, it has to be treated only as long term capital gains. Validity of reopening of assessment - Non-service of notice under Section 143(2)- Held that - Even though the case was reopened and reason for reopening was supplied, the Assessing Officer was expected to serve the notice under Section 143(2) of the Act within a period of six months. As held by the Apex Court, if the notice under Section 143(2) was not issued within the prescribed time, then there will be presumption that the Assessing Officer accepted the return filed by the assessee. In this case, the assessee requested the Assessing Officer to treat the return already filed as one filed in response to the notice under Section 148 of the Act. Therefore, there is a presumption that the Assessing Officer accepted the return already filed since the notice under Section 143(2) of the Act was not served within a period of six months. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Exemption claimed in respect of sale of agricultural land - Held that - As decided in assessee s own case 2016 (10) TMI 1231 - ITAT CHENNAI found that the assessee is not in the business of real estate. Accordingly, orders of both the authorities below are set aside by holding that the land in question is agricultural land and the profit on such sale of land is not liable for taxation by virtue of Section 2(14)(iii) of the Act. Therefore, the addition made by the Assessing Officer is deleted. - Decided in favour of assessee

Summary

Issues Involved:

1. Disallowance claimed by the assessee under Section 10(38) of the Income-tax Act, 1961.
2. Non-service of notice under Section 143(2) of the Income-tax Act, 1961.
3. Exemption claimed by the assessee in respect of the sale of agricultural land.

Detailed Analysis:

1. Disallowance claimed by the assessee under Section 10(38) of the Income-tax Act, 1961:

The Revenue's appeal for the assessment year 2007-08 revolved around the disallowance claimed by the assessee under Section 10(38) of the Income-tax Act, 1961. The Departmental Representative argued that the gain disclosed by the assessee as long-term capital gain should be treated as short-term capital gain. The CIT(Appeals) had relied on the Tribunal's previous orders in the case of the assessee’s wife and daughter, where the gain was treated as long-term capital gain. The Tribunal confirmed that since the shares were held for more than 12 months, it should be treated as long-term capital gains, aligning with Section 2(29A) of the Act and previous judicial precedents. Consequently, the Tribunal upheld the CIT(Appeals)' decision.

2. Non-service of notice under Section 143(2) of the Income-tax Act, 1961:

In the assessee's appeal for the assessment year 2007-08, the primary issue was the non-service of notice under Section 143(2) of the Act. The assessee argued that the notice was received beyond the prescribed period, leading to a presumption that the Assessing Officer accepted the return filed by the assessee. The Departmental Representative contended that the reopening of the assessment and the reasons for it were communicated to the assessee. However, the Tribunal, relying on the Supreme Court's judgment in ACIT v. Hotel Blue Moon, held that the issuance of notice under Section 143(2) within the prescribed period is mandatory. Since the notice was not served within six months, the Tribunal presumed that the Assessing Officer accepted the return filed by the assessee and set aside the orders of the lower authorities.

3. Exemption claimed by the assessee in respect of the sale of agricultural land:

For the assessment year 2009-10, the issue was the exemption claimed by the assessee for the sale of agricultural land. The assessee argued that the land was agricultural, situated beyond 8 KMs of the municipality, and used for agricultural purposes, thus qualifying for exemption under Section 2(14)(iii) of the Act. The Assessing Officer disallowed the claim, treating the land as industrial and the transaction as an adventure in the nature of trade. The Tribunal, referring to the classification of the land as "Punja land" by the State Revenue Department and previous Tribunal orders, concluded that the land retained its agricultural character despite the surrounding industrial development. The Tribunal also noted that the assessee was not in the business of real estate, as established in previous assessments. Therefore, the Tribunal set aside the orders of the lower authorities and deleted the addition made by the Assessing Officer.

Conclusion:

In summary, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeals for both assessment years. The Tribunal upheld the classification of the gains as long-term capital gains, acknowledged the procedural lapse in the issuance of notice under Section 143(2), and recognized the agricultural nature of the land sold by the assessee, thereby granting the claimed exemptions.