9911796707
TMI Blog2019 (11) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... h and seizure operation was initiated against the assessee u/s 132 of IT Act on 19.01.2017. as per second proviso to section 153 A(l) of income tax act. The assessment order passed by Assessing Officer for A/Y 2013-14 and for which appeal was pending has abated on the date search is initiated i.e 19.01.2017. Order passed by Honourable CIT (appeal) dated 16.10.2017 is a void order. The order is passed on assessment which has abated. Assessee brought this fact in the notice of learned CIT (appeal).Assessee request Honourable ITAT to treat the order of CIT (appeal) as well as assessment order as cancelled since, Assessee's income for A/Y- 2013-14 is being reassessed u/s 153A of income tax act. (ii) For that the Ld. CIT (A), Ranchi erred in treating the activity of self construction of building on owned land and selling subsequently as adventure in the nature of trade and ignored our ground of appeal. The Ld. CIT (A) erred in treating income as business income instead of long term capital gain. It is the capital assets of the assessee and should be treated as capital gain. (iii) For that the Ld. CIT (A), Ranchi erred in calculating profit earned from sale of flats by arbitrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38 of 2010. (xi) For that the appellant craves for leave to add, delete, amend or modify any ground before or at the time of appellate proceedings." 4. Facts in brief are that the assessee is an individual filed his return of income on 31.3.2014 declaring total income of Rs. 17,12,450/-. The income of the assessee includes income from partnership firm, house property and other sources and long term capital gain from sale of flats. The assessee alongwith Smt Asha Devi Adukia purchased a land with building on 10.11.1981. Smt. Asha Devi Adukia gifted her part of the land with building to Prakash Kumar Adukia on 20.11.2006. Thereafter, the assessee alongwith Prakash Kumar Adukia decided to develop and construct flat after demolishing the old structure on the land and constructed 12 flats. For constructing the flat on total area of 44,298 sq. ft from the financial year 2009-2010 to 2013-14, an amount of Rs. 5,92,54,714/- was incurred. Out of 12 flats, four flats were sold in the assessment year 2013-14 at the rate of Rs. 66,00,000/- per flat and 2 flats were sold in assessment year 2014-15 at the rate of Rs. 78,00,000/- per flat. The Assessing Officer calculated the long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d further selling part of the same as adventure in nature of trade. 7. Replying to above, ld D,.R. strongly supporting the order of the CIT(A) submitted that in the case of ITO v.s vs. Ch. Atchaiah (1966) 218 ITR 239 (SC), the Hon'ble apex Court held that the AO must tax the right person and the right person alone and 'right person' means the person who is liable to be taxed, according to law, with respect to a particular income. Ld D.R. submitted that the CIT(A) was right in taxing the income of the assessee from sale of flats as business income treating the activities of construction and selling the flat as adventure in nature of trade. Therefore, ld DR submitted that the CIT(A) was right in treating the sale as adventure in the nature of trade and taxing the income as business income of the assessee. 8. On careful consideration of the rival submissions, first of all, I respectfully observe that in the case of vs. Ch. Atchaiah (supra) in the relevant para as reproduced by the CIT(A) in para 5.22, Their Lordships speaking for the apex court held that the Assessing Officer can and he must tax the right person and the right person alone. Bu 'right person' is meant the person w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not constitute an adventure in the nature of trade, especially when the land is not ordinarily a commercial commodity. 1o At thus juncture, I also find it necessary to take cognizance of the decision of Hon'ble Supreme Court in the case of Saroj Kumar Mazumdar (supra), wherein, it was held that in a case where a transaction under examination is not in the line of the business of the assessee and is an isolated or a single instance of a transaction, the burden lies on the revenue to bring the case within the words of the statute, namely, that it was an adventure in the nature of trade. Similar view has been expressed by Hon'ble Supreme Court in another decision in the case of Janaki Ram Bahadur Ram (supra), wherein, Their Lordships observed that a transaction of purchase of land cannot be assumed without more to be venture in the nature of trade. The mere fact that the owner of an immovable property takes steps to enhance its value before selling, it does not amount to an adventure in the nature of trade. 11. In the present case, undisputedly, the land was purchased on 10.11.1981 and after passage of 26 years, the owners of land applied for permission/sanction of constructing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the expenses on improvement and construction of the land and building has been started during financial year 2009-2010 and completed in 2013-14. Ld A.R. also contended that the land and building was capital assets and the entire amount of receipts should be treated as long term capital gain. 13. Replying to above, ld DR drew my attention towards written synopsis filed by the assessee and submitted that the assessee sold four flats during financial year 2012-13 relevant to assessment year 2013-14 and construction was started from financial year 2009-2010 but the substantial amount of construction has been invested during financial years 2010-2011, 2011-12, 2012-13 and 2013-14 and out of total cost of construction shown by the assessee of Rs. 5,92,54,714/-, only a meagre amount of Rs. 51,98,963/- have been expensed during financial year 2009-2010. Therefore, the entire income accrued to the assessee from the sale of flats cannot be treated as long term capital gain. Ld D.R. submitted that the AO was right in bifurcating the income in two parts i.e. income from sale of land and income from sale of flats as long term capital gain and short term capital gain, respectively. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 54F of the Act on the ground that residential flat was not constructed after the date of transfer and they were constructed alongwith saleable flats. 17. Ld A.R. submitted that the assessee is entitled for claim of exemption u/s.54F of the Act as the income earned or accrued to the assessee from sale of flats has been utilised for the purpose of construction of flats kept by the assessee for his residential purpose. Ld A.R. further drawn my attention towards judgment of Special Bench of ITAT Kolkata in the case of Octavius Steel & Co. ltd vs ACIT, 83 ITD 087 (Kol) (SB) and CBDT circular No.791 dated 2.6.2000 and submitted that for the purpose of claiming deduction u/s. 54EA/54EB/54EC, the date of transfer shall be the date on which the stock-in-trade is sold or otherwise transferred by the assessee and not on the date of conversion of the capital asset into stockin- trade. Ld A.R. submitted that on conversion of capital asset into stock-intrade, there is no profit as no can make profit out of himself and this situation is now clarified by the legislature by introducing provisions of section 45(2) of the Act, which provides that for taxation where the converted stock-in-trade is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income tax as his income of the previous year in which such stock in trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. Therefore, in view of above CBDT circular and order of Special Bench of Kolkata Bench of the Tribunal in the case of Octavius Steel & Co. Ltd (supra), I have no hesitation to hold that the Assessing Officer was also not correct in denying benefit of section 54F of the Act to the assessee on the ground that residential flat was not constructed after the date of transfer but alongwith saleable flats. 21. In the present case, the assessee has constructed 12 flats out of which 4 flats were sold in the assessment year 2013-14 and partial capital gain was accrued to the assessee during this period. From the table submitted by the assessee and not disputed by the department, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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