TMI Blog2019 (9) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... business income, in our view, is unsustainable. As a natural corollary such income has to be treated as capital receipt. Having held so, now it is necessary to deal with assessee s contention that in assessment year 2007 08, such income is not taxable as it will come within the purview of personal effect as defined under section 2(14) In view of the aforesaid, we hold that the gain derived from sale of painting in the assessment year 2007 08 is not taxable as it is personal effect as defined under section 2(14) of the Act. However, insofar as assessment year 2008 09 is concerned, paintings have been specifically excluded from being treated as personal effect, therefore, the gain derived from sale of painting has to be assessed as long term capital gain. Undisclosed income on account of sale of shares of Matrix India Entertainment Consultant Pvt. Ltd. (MIECPL) - whether Commissioner (Appeals) had not given any opportunity of being heard to the assessee in complete violation of section 251(2) ? - HELD THAT:- We are of the view that learned Commissioner (Appeals) while enhancing the income of the assessee for the assessment year 2007 08 has not complied with the mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. During the assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee purchased and sold many paintings and derived profit of ₹ 20,14,335. However, the assessee had not offered it as income. Similarly, in the assessment year 2008 09 also, the assessee had not offered receipts from sale of paintings as income by treating the same as capital receipt from sale of personal effect. Similarly, in the assessment year 2008 09 the assessee has offered the income from sale of painting under the head capital gain. Being of the view that the profit derived from sale of painting is in the nature of business income, the Assessing Officer called for an explanation from the assessee and after rejecting the explanation furnished by the assessee, he proceeded to treat the profit derived from the sale of painting as income from business and profession. While deciding assessee s appeal on the issue, learned Commissioner (Appeals) also rejected assessee s claim of capital receipt and held that the profit from sale of painting has to be treated as business income. However, he granted partial relief to the assessee in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had it been a case of constraint of space, the assessee would not have purchased the paintings. He submitted, factual analysis made by the Assessing Officer and learned Commissioner (Appeals) also reveal that the assessee has undertaken frequent purchase and sale of paintings. Therefore, activity of the assessee is akin to adventure in the nature of trade. The learned Departmental Representative submitted, for these reasons also, the assessee has himself shown part of profit derived from sale of painting as business income in the assessment year 2008 09. Thus, he submitted, there is no reason to interfere with the decision of learned Commissioner (Appeals). In support of his contention, the learned Departmental Representative relied upon the following decisions: i) Sumati Dayal v/s CIT, [1995] 214 ITR 801 (SC); ii) ACIT v/s Faiz Murtaza Ali, [2012] 52 SOT 358 (Del.); iii) P.M. Mohammad Meerakhan v/s CIT, [1969] 73 ITR 735 (SC); iv) Mazagaon dock Ltd. v/s CIT, [1958] 34 ITR 368 (SC); v) H.H. Maharaja Rana Hemant Singhji v/s CIT, [1976] 103 ITR 61 (SC). 6. We have consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Suresh Seth (supra), the Co ordinate Bench has held that painting is to be treated as personal effect as per section 2(14) of the Act. No contrary decision in this regard has been brought to our notice by the learned Departmental Representative. In view of the aforesaid, we hold that the gain derived from sale of painting in the assessment year 2007 08 is not taxable as it is personal effect as defined under section 2(14) of the Act. However, insofar as assessment year 2008 09 is concerned, paintings have been specifically excluded from being treated as personal effect, therefore, the gain derived from sale of painting amounting to ₹ 3.50 lakh has to be assessed as long term capital gain. Accordingly, grounds no.1 and 2 of ITA no.784/Mum./2017 and ground no.2 of ITA no.785/Mum./2017, is allowed. 8. The only other surviving issue for our adjudication is ground no.1 and 1.1 of ITA no.785/Mum./2017. 9. These grounds relate to the addition of an amount of ₹ 51,20,600, as undisclosed income on account of sale of shares of Matrix India Entertainment Consultant Pvt. Ltd. (MIECPL). 10. Brief facts are, during the search and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be added to the income of the assessee in the assessment year 2007 08. Learned Authorised Representative submitted, while enhancing the income of the assessee for the assessment year 2007 08, that too, in the appeal proceeding for the assessment year 2008 09, learned Commissioner (Appeals) had not given any opportunity of being heard to the assessee in complete violation of section 251(2) of the Act. Thus, he submitted, enhancement of income by learned Commissioner (Appeals) cannot be sustained. 12. The learned Departmental Representative submitted, the issue may be restored back to learned Commissioner (Appeals) for deciding afresh after due opportunity of being heard to the assessee. 13. Having considered rival submissions and perused material on record, we are of the view that learned Commissioner (Appeals) while enhancing the income of the assessee for the assessment year 2007 08 has not complied with the mandatory provision of section 251(2) of the Act. The aforesaid factual position has not been disputed by the learned Departmental Representative. In view of the aforesaid, we restore the issue to learned Commissioner (Appeals) for fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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