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Smt. Saira Banu Versus The Assistant Commissioner of Income Tax, Circle-7 (1) , Kendriya Sadan

2015 (7) TMI 692 - KARNATAKA HIGH COURT

Applicability of section 40A(3) - amount paid in cash by the appellant for purchase of property - Whether the Tribunal justified in holding that the amounts paid towards the acquisition of capital asset and later converted into stock-in-trade would attract the provisions of Section 40A(3)? - Held that:- If the authorities below were to treat the transaction of purchase of land as a stock-in-trade (business purpose) and not as a capital asset, then they ought to have given sufficient opportunity .....

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issued a show cause notice to her to explain the same.

Thus on account of petitioner not having been afforded adequate opportunity to show cause before a final decision was taken, the matter requires to be remanded back to the assessing officer for deciding the case afresh in accordance with law and after giving an opportunity to the appellant-assessee. Since we are remanding the matter back to the assessing officer, we are not answering the questions which have been framed in this ap .....

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ons of Section 40A(3) of the Income Tax Act, 1961 (for short 'the Act') or not? 2. For the Assessment Year 2004-05 the appellant had filed return of income declaring a total income of ₹ 31,65,530/-. The same was accepted after being processed under Section 143(1) of the Act and refund of ₹ 6,693/-was ordered. The case was subsequently selected for scrutiny and by an order passed under Section 143(3) of the Act, the income of the appellant was determined at ₹ 59,75,530/- .....

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MITTED on the following questions of law: "i. Whether on the facts and in the circumstances of the case is the Tribunal justified in holding that the amounts paid towards the acquisition of capital asset and later converted into stock-in-trade would attract the provisions of Section 40A(3) of the Income-tax Act, 1961? ii. Whether on the facts and in the circumstances of the case is the Tribunal justified in law in holding that despite the payments having been made for the purchase of the ca .....

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t at length and have perused the records. 3. The question is of applicability of Section 40A(3) of the Act with regard to three transactions relating to purchase of three different properties from different persons. In the financial year in question, the appellant had purchased 12 properties, out of which payment for nine was made by cheques/bank drafts. Hence, there is no dispute regarding the same. For the remaining three properties, major portion of the payment was made by cash. Since in the .....

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which was also affirmed by both the appellate authorities. The submission of Sri A.Shankar, learned counsel appearing of the appellant is of two fold. Firstly, it is contended that the land was purchased as capital asset and hence the provisions of Section 40A(3) of the Act would not be attracted even though during the year in question itself the land so purchased had been converted from capital asset to stock-in-trade. It was next submitted that even if the purchase of land was treated as busi .....

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, learned counsel for the appellant has relied on the following decisions: i. Tolaram Daga -vs- Commissioner of Income Tax, Assam ([1965 ] 57 ITR (Sh.N.) 9) / [1966] Vol.LIX ITR 632 ii. Attar Singh Gurmukh Singh -vs- Income Tax Officer, Ludhiana [1991] 191 ITR 667 iii. Sri Laxmi Satyanarayana Oil Mill -vs- Commissioner of Income Tax [2014] 367 ITR 200 (T & AP) iv. Smt. Harshila Chordia -vs- Income-Tax Officer [2008] 298 ITR 349 (Raj) v. Shri Shankar S. Koliwad -vs - The Income Tax Officer IT .....

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entive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and since, in the facts of the present case, the genuineness of the transaction is not disputed and the sellers are identified and have acknowledged having received the payments in cash, the provisions of Section 40A(3) of the Act would not be attracted. Learned counsel for the appellant has further contended that though appellant had disclosed the fact that the purchase of plots in qu .....

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usiness purpose, the property was being purchased and once the assessee establishes that at the time of purchase it was a capital asset, merely because subsequently it was converted as stock-in-trade the same would not mean that it was a business transaction and the provisions of Section 40A(3) of the Act would not be attracted. It has been contended by learned counsel for the appellant that in case the assessing officer was not to accept the contention of the appellant, then opportunity ought t .....

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to produce further evidence in support of her case, which was not done. It has been submitted that even before the Tribunal no opportunity was given and the finding recorded by the authorities below are against the record as the books of accounts clearly reflect the purchase of property as capital asset and at no stage opportunity was given to the appellant to produce any evidence as no notice was given prior to rejecting the contention of the appellant. 3. On the other hand, Sri K.V.Aravind, l .....

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