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United Builders Versus ACIT 25 (2) , Mumbai

2016 (9) TMI 292 - ITAT MUMBAI

Treatment of profit earned on sale of land - business income OR capital gain - Held that:- Merely because no return was filed by the assessee in earlier years in absence of any taxable income, the character of land would not automatically get changed from ‘investment’ to ‘stock-in-trade’. The other allegation of the AO is also without any basis and legal substance wherein it was stated that the assessee firm was constituted for the main object of development and trading in immovable properties, .....

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tions made by the assessee. The assessee has consistently kept these amounts as part of ‘investments’ since last so many years. No business at all has been done by the assessee firm. Its income has never been assessed under the head income from business. Nothing has been shown to indicate if the assessee ever treated the impugned land as part of the ‘stock-in-trade’ at any point of time in the past decade, and the assessment order has been passed merely on the basis of surmises and conjecture wh .....

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tral Board of Direct Taxes vide its notification dated 24th July 2006, but the AO omitted to grant the benefit of set off of brought forward long term capital loss under some erroneous assumption of facts with regard to time limit of filing of return and actual date of file of return.We find that it is a matter of proper verification of facts and therefore, this issue is sent back to the file of the AO to verify the requisite facts with regard to actual date of filing of return and extended due .....

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-35, Mumbai, {(in short CIT(A) }, dated 24.05.2013 passed against assessment order u/s 143(3) r.w.s. 263 of the Act, dated 31.12.12 for the A.Y.2007-08 on the following grounds: 1.THE LD CIT (A) ERRED IN HOLDING THAT THE INCOME EARNED ON SALE OF LAND BY THE APPELLANT IS A BUSINESS INCOME. 2. THE LD CIT(A) ERRED IN NOT ALLOWING THE CLAIM OF THE APPELLANT THAT THE INCOME EARNED BY THE APPELLANT ON SALE OF LAND WAS CAPITAL GAIN. 3. THE LD CIT(A) ERRED IN NOT ALLOWING SET OFF OF LONG TERM CAPITAL LO .....

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ve (AR) on behalf of the Assessee and by Shri E. Shreedhar, Departmental Representative (DR) on behalf of the Revenue. 3. Ground Nos. 1 & 2 address the common issue of treatment of profit earned by the assessee on sale of land as business income by the AO as against capital gain as was claimed by the assessee in the return of income. We have heard the arguments made by both sides and also gone through the orders passed by lower authorities as well as documentary evidences shown to us. The br .....

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passed the order u/s 143(3) read with section 263 dated 31.12.2012, wherein he treated the impugned income as income from business , mainly on the ground that the firm was incorporated with the intention of dealing in the business of sale and purchase of immovable properties and/or to develop the immovable properties etc. The relevant portion of the assessment order is reproduced below: 5. During the course of proceedings, the assessee was asked to submit partnership deed and the copies of retur .....

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intention to deal in properties. Therefore, it is clear that the investment shown by the assessee is nothing but its stock in trade. 6. This fact is further strengthened by the fact that the assessee firm had not filed the returns of income for A.Y.1996-97 to A.Y.2005-06. The assessee firm had submitted only balance sheets for these AYs. From which it is clear that the assessee has not done any activity in the firm for these years and the stock in trade was shown as an investment to get the bene .....

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rutiny and accepted u/s 143(1) of the Act only. 7. It is pertinent to mention here that the assessee f irm has claimed several expenses such as staf f salary, watchman salary, bank charges, accounting charges, level ing expenses, conveyance expenses and included such expenses in the cost of the properties which clearly indicates that the assessee f irm had purchased these properties as an stock in trade and not investment. 8. Considering these facts, the capi tal gains shown by the assessee f ir .....

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endorsed the observations of the AO and dismissed the appeal of the assessee. 3.2. Being aggrieved, the assessee filed an appeal before the Tribunal. The Ld. Counsel of the assessee made exhaustive submission to demonstrate that impugned land was investment. 3.3. Per contra, Ld. DR was not able to bring any contrary material on record. But, he strongly relied upon the orders of the lower authorities. 3.4. We have gone through the orders of the lower authorities as well as entire material brought .....

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d disclose resultant income under the head income from capital gains . It was accepted as such by the AO in the original assessment order passed u/s 143(3), but in view of the order passed in pursuance to direction of the CIT u/s 263, the AO changed its stand and treated the impugned income as income from business. 3.6. In our considered view, action of the lower authorities is factually incorrect and contrary to law. The assessee had disclosed both the pieces of land (located at two different p .....

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irm was not having any taxable income, and therefore no returns were filed for any year prior to A.Y. 2006- 07. In these circumstances, we find that merely because no return was filed by the assessee in earlier years in absence of any taxable income, the character of land would not automatically get changed from investment to stock-in-trade . The other allegation of the AO is also without any basis and legal substance wherein it was stated that the assessee firm was constituted for the main obje .....

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d by the lower authorities to counter the factual assertions made by the assessee. The assessee has consistently kept these amounts as part of investments since last so many years. No business at all has been done by the assessee firm. Its income has never been assessed under the head income from business. Nothing has been shown to indicate if the assessee ever treated the impugned land as part of the stock-in-trade at any point of time in the past decade, and the assessment order has been passe .....

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