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TMI Blog2019 (12) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... -10 -Do- -Do- -Do- 81/Ahd/15 -Do- 2010-11 -Do- -Do- -Do- 888/Ahd/15 -Do- 2011-12 -Do- -Do- 143(3) of the Act 76/Ahd/15 Smt. Kapilaben S. Savalia 2008-09 -Do- -Do- 153A r.w.s. 143(3) of the Act 77/Ahd/15 -Do- 2009-10 -Do- -Do- -Do- 78/Ahd/15 -Do- 2010-11 -Do- -Do- -Do- 887/Ahd/15 -Do- 2011-12 -Do- -Do- 143(3) of the Act 2. We first take up IT(SS)A No. 82/Ahd/2015 concerning AY 2008-09 for adjudication purposes. IT(SS)A No. 82/Ahd/2015-AY- 2008-09 (Bhanuben K. Savalia) 3. As per the grounds of appeal, the assessee has challenged the action of the Revenue in treating land at Thaltej, Ahmedabad as 'capital asset' instead of 'stock-in-trade' being considered by the assessee. 4. The relevant facts for determination of the issue raised by the assessee are noted as under: 4.1 The assessee filed return of income for AY 2008-09 on 05.12.2008 under section 139 of the Act declaring total income of Rs. 21,49,200/-. A search action under section 132 of the Act was carried out in the group cases of Savalia group. A search action was also carried out on 06.01.2011 in the residential premises of the assessee at Ahmedabad. In pursuance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illa plots as short term capital gains until a distinct proceeding started consequent to search action. It was noted that the original return for AY 2010-11 was also filed under section 139 of the Act prior to search on 05.01.2011 and till that date all the plots of Krish Villa were already sold. Despite this, the assessee has shown income from Krish Villa as short term capital gain and therefore it cannot be treated as genuine mistake of the assessee originally. No revised returns were filed for AYs. 2008-09 to 2010-11. Consequent upon the fresh proceedings under section 153A, the assessee has wrongly tried to take the benefit of Income Tax provisions by showing this income as business income. The AO further observed that the object of fresh filing of return of income under section 153A of the Act is to enable the assessee to disclose her correct income after taking into account material seized during the course of search. It was contended that the aforesaid Section 153A of the Act is not meant to provide fresh opportunity to the assessee to take any kind of benefit qua the original return. The AO further noted that all the return of income from AYs. 2008-09 to 2010-11 were filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order, submission of the appellant and material available on record. The appellant is an individual assessee who was searched u/s 132 of the Act on 06.01.2011 along with the Savalia group. The original returns of income u/s 139 for the AYs 2008-09 to 2010-11 were filed before the search showing receipt from sale of Krish Villa plots as capital gain. All plots of Krish Villa were sold before the date of search. 10.1 The appellant filed return of income u/s 153A for AYs. 2008-09, 2009-10, 2010-11 and 2011-12 in response to notice u/s 153A(1)(a) on 21.08.2012. In the return filed u/s 153A in these years, the appellant changed the head of income of receipt from sale of Krish Villa plot from capital gain to business income. However on or before the date of search carried out, appellant did not revise any of the returns of income filed u/s 139 of the Act for AY 2008-09 to AY 2010-11. Thus it is evident that the appellant knowingfully shown the receipt from sale of Krish Villa plots as capital gain in return filed u/s. 139 and no mistake was committed in showing the capital assets and capital gain as this is not an isolated incident. The appellant knowingfully shown the same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Revenue. The appellant filed her balance sheet first time during the assessment proceeding u/s 153A after the search only. It is seen that the appellant was also involved in the similar activities of buying and selling of plots in the earlier years also and income sale of plots and lands were shown as capital gain in those years. 10.5 It is seen that audit report in AYs. 2009-10 to 2010-11 were prepared on 18.06.2012 much after the search and the nature of income was changed in the return of income filed u/s 153A of the Act. The return of income u/s 139 for AY 2011-12 was filed after search in this also audit report was prepared on 21.08.2012 only. During pre-search period the appellant consciously acted as investor and continuously shown capital assets and capital gain in the return of income filed u/s 139 of the Act in all the years. 10.6 There are some basic prerequisite as per the law of land to run any business activity. It is necessary for any entrepreneur to have professional tax number, TAN and TDS on payment from the second year onward, Sales Tax registration, maintenance of accounts and books, statutory audit of accounts when turnover is above 40 lakhs, Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether any benefit can be given to the appellant in return filed u/s 153A of the Act. Therefore these decisions are not applicable in the appeal under consideration. 10.10 The assessment procedure, in the cases where search is conducted u/s 132 of the Act, has been amended w.e.f. 01.06.2003 and in such search cases assessment shall be completed as per the provision of section 153A of the Act. The section 153A reads as under : - [Assessment in case of search or requisition. "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 and 153A of the Act Section 147 of the Act empower the AO to assess undisclosed escaped income and section 153A also empower the AO to assess total income including escaped and undisclosed income. Thus it can be seen that the prime intention and purpose of assessment u/s 153A and assessment u/s 147 is same and both sections empower the revenue to assess or reassess the escaped and undisclosed income of the assesssee. 10.13 It is clear from the facts of the appeal under consideration that had the search has not been conducted in the case of the appellant she would not have been able to file the return u/s 153A and would not have been able to revise or rectify the so called bona fide mistakes committed in the original return of income filed u/s 139 of the Act. 10.14 The issue of revision of the original return filed u/s 139 of the Act during reassessment proceeding u/s 147 was raised before the Honble Supreme Court. The Hon'ble Apex court in the case of CIT v. Sun Engineering Works (P.) Ltd. [1992] 64 Taxman 442 (SC) has considered the following question of law - "Where an item unconnected with the escapement of income has been concluded finally against the assessee ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under-assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words 'such income' in section 147 clearly refer to the income which is chargeable to tax but has 'escaped assessment' and the ITO's jurisdiction under the section is confined only to such income which has escaped assessment. It does not extend to reconsidering generally the concluded earlier assessment. Claims which have been disallowed in the original assessment proceeding cannot be permitted to be re-agitated on the assessment being reopened for bringing to tax certain income which had escaped assessment because the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve in broad propositions laid in that regard in Indian Refrigeration Industries (P.) Ltd.'s case (supra), Ramsevak Paul's case (supra), Assam Oil Co. Ltd.'s case (supra). Standard Motor Products of India Ltd.'s case (supra), Rangnath Bangur's case (supra), State Bank of Hyderabad's case (supra) and Indian Rare Earth Ltd.'s case (supra). 41. Keeping in view the above principles, we may now turn our attention to the question formulated by the High Court as noticed in the earlier part of the judgment. 42. The Tribunal rightly found that the loss which the assessee wanted to be set off against the 'escaped income' could not be allowed to be so set off because in the original assessment proceedings, no 'set off was claimed or permitted and the original assessment had acquired finality when the appeal against the order of assessment failed before the AAC and the assessee took no further steps to agitate the issue. The Tribunal was also right in concluding that the items which the assessee wanted to be taken into account in the proceedings under section 147 were unconnected with the escapement of Income. The High Court clearly fell in error in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is "at cost". 8. The original returns of income for assessment years 2000-01 to 2005-06 were within the time allowed filed under section 139(1) of the Act. The search under section 132 of the Act in the case of the assessee was carried out on 9-12-2005 and assessee filed return of income in response to notice under section 153A on 2-11-2007 for assessment years 2000-01 to 2005-06. Further, the assessee could have revised returns within the period of one year from the end of relevant assessment year or before completion of assessment whichever was earlier. Admittedly the assessees did not revise any of the returns for assessment years under consideration prior to date of search carried out in the case of the assessee. Now question arises as to whether the assessee can revise the returns of income for all the six assessment years covered under the search period which incidentally includes the return of income for the very first year of business of the assessee on the ground that valuation of the closing stock was made on estimated basis. In the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year, " 9. Section 153A(1) contains non-obstante clause and hence provisions of this section will override the provisions of section 139, section 147, section 148, section 149, section 151 and section 153 of the Act. Under section 153A(1) the Assessing Officer is empowered to issue notices to the assessee searched for a period of six years in order to assess the income on the basis of material found during the course of search. The second proviso to section 153A(1) provides that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in section 153A(1) pending on the date of initiation of search under section 132 or making of requisition under section 132A as the case may be shall abate. Therefore, after initiation of search no assessment in respect of pending assessment sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on records to prove. The assessee had not filed any evidence to support its contention and hence deserves to be rejected. 11. The provisions of section 153A are directed to assess or reassess the income for six assessment years based on search proceedings and hence the assessment proceedings under section 153A are beneficial to the revenue. In other words the proceedings under section 153A are initiated to assess or reassess the undisclosed income. In the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 Hon'ble Supreme Court has held that section 147 being for the benefits of the revenue and not for the assessee, assessee cannot be permitted to convert the reassessment proceedings into an appeal or revision in disguise and seek relief in respect of items earlier rejected or claimed relief in respect of items not claimed in the original assessment proceedings unless refutable to escaped income even in cases where the claims of the assessee during the course of reassessment proceedings relating to the escaped income are accepted, still the allowance of such claim has to be limited to the extent to which they reduce the income to the level originally assessed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income filed u/s 139 of the Act for Ays. 2008-09, 2009-10 and 2010-11 . 10.18 Since the land at Thaltej-Krish Villa plots is a capital assets and taxable under the capital gain and the appellant had sold this land in less than the Jantri price, the provision in section 50C of the Act becomes applicable in the case of the appellant. The provisions in section 50C is a special provision inserted w.e.f. 1.4.2003 and is a deeming provision which allows the AO to take full value of consideration where the consideration received by the assessee is less than the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer arid treated the value adopted or assessed as full value of consideration received. 10.19 Therefore the action of the AO of adopting the deemed value of consideration of Thaltej-Krish Villa plots u/s 50C(1) of the Act in AY 2009-10 at Rs. 1,18,59,863/- is found justified. Thus the finding of the AO treating the profit of Rs. 51,54,873 (being 1/3 share) from sale of Thaltej Krish Villa plots as Short Term Capital Gain u/s 50C of the Act as against the business income shown by the appellant of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and FY 2008-09 between March 2008 to June 2008 immediately thereafter, the assessee and the co-owners got the said land converted into non-agricultural land in August 2008 i.e. barely few months later and put up the residential housing plot scheme known as 'Krish Villa' while providing for common infrastructure and internal roads. The learned AR referred to Collector's letter dated 18.08.2008 showing the requisite permission for using the land for non-agricultural use. It clearly reveals the idea and intention of commercial exploitation of the land notwithstanding erroneous entries in the books. It was further pointed out that the assessee and the co-owners also received commencement letter from Ahmedabad Municipal Corporation (AMC) dated 07.02.2009. The lay out plan of plotting done by the assessee alongwith other two co-owners in the aforesaid scheme 'Krish Villa' dated 07.02.2009 was also referred to and relied upon. A broacher of the residential housing scheme (Krish Villa) was also stated to be published for sale to public. It was pointed out that development was carried out on the said parcels of land and expenditure were incurred in the subsequent FY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AR referred to the account of business development expenses, correspondences with AMC, broachers published etc. The learned AR vehemently stressed that pattern and sequence of event would clearly show the assessee intended to exploit the land parcels (with an idea to maximize profits) so acquired as a business venture or something akin to it. The learned AR also referred to and relied upon the decision of the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao v. CIT [1961] 42 ITR 179 wherein it was held by the Hon'ble Supreme Court that where is land is purchased then developed and later sold in bits, it is a business venture. 8.3 The leaned AR thereafter referred to the provisions of Section 153A of the Act and submitted that in view of specific provisions of Section 153A of the Act, the return of income filed in response to notice under section 153A of the Act is to be considered as return filed under section 139 of the Act. The learned AR for the assessee relied upon the decision of the Hon'ble Gujarat High Court in the case of Kirit Dahyabhai Patel v. Asstt. CIT [2017] 80 taxmann.com 162 for the proposition that return filed under section 153A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous claim on figures or appropriate classification could be revised so long as the relevant facts are available on record. The learned AR submitted in elaboration that if an assessee under a mistake, mis-conception or not being properly instructed is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. To support such view, the leaned AR for the assessee referred to the decision of the Hon'ble Gujarat High Court in the case of S.R. Koshti v. CIT [2005] 146 Taxman 335/276 ITR 165, CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 23 taxmann.com 23/208 Taxman 498/349 ITR 336 (Bombay) etc. It was thus contended that the assessee was entitled and duty bound to report true income under proper head in the return filed under section 153A of the Act which assessee did. 9. The learned DR for the Revenue, on the other hand, relied upon the orders of the AO and CIT(A) and submitted that the in view of the reasoned order, no interference thereof is called for. The learned DR referred to the decision of the Hon'ble MP High Court in the case of CIT v. Suresh Chand Goyal [2007] 163 Taxman 54/[2008] 298 ITR 277 (MP) to submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee incurred various development expenses to put up the residential housing plot scheme known as 'Krish Villa' while providing for common infrastructure and internal roads. The assessee has also received commencement letter for such act from AMC in February 2009 i.e. in 8-9 months time. The layout plan of plotting done by the assessee alongwith co-owners, broachers of the residential housing scheme was referred and relied upon to support its revised position that the assessee acquired parcels of land with a sole intention to exploit the land portfolio with commercial motive and consequently the gains arising in the process gives rise to business income having regard to the inclusive definition of Section 2(13) of the Act r.w.s. 28 of the Act. On perusal of the sequence of event narrated on behalf of the assessee at length as noted in preceding paras, we observe that the assessee as acted in a synchronized manner with continuity. As noted, the land was converted into non-agricultural land to pave the way for its commercial utilization. The component authorities were approached immediately on purchase of land for conversion and demarcation of layout. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled that such intention has to be decided on the basis of surrounding circumstances, existence of commerciality in relationship of parties to the transaction, motives governing the action of the assessee in bringing about the transaction and subsequent conduct. Thus, the driving force for entering into a transaction would be determinative of the real nature and character of such transaction. The entire explanation for initial intention to acquire land with commercial objectives is thus specific and verifiable notwithstanding incorrect declaration in the return filed originally prior to search. The action of the assessee coincide with a normal behaviour of a person indulged in a commercial act. A person intending to hold a land of this value for its own exploitation and enjoyment would not ordinarily engage himself in a quite contradictory conduct and the governing features narrated above cannot be brushed aside and primacy cannot be accorded to the entries made to the books of account/return of income. The conduct of the assessee unequivocally shows the intention of the assessee and attendant facts clearly points out that the assessee was interested in exploiting commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof to various parcels involving scheming and organization on the part of the assessee was constituted to be an adventure in the nature of trade which is susceptible to chargeability under the head 'business income' as per Section 28 of the Act. The assessee has relied upon many other decisions expressing the similar view which we do not intend to deal with having regard to the express view available from the Hon'ble Supreme Court. 11. We shall now turn to the incidental point involving question of law arising in the subject matter of appeal i.e. whether the assessee is entitled to revise its position in departure with the original stand (taken in the return filed under section 139 of the Act prior to search) and claim the profits and gains arising from development and sale of land parcels as chargeable under section 28 of the Act under the head 'Profits & Gains' of business as against initial claim of its chargeability under section 45 of the Act under the head 'capital gains' or not. The question is no longer res integra. In so far as the taxability of an income under the appropriate head is concerned, the question is answered by the Hon'ble Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of claim of the assessee for taxability of profits arising on sale of plots under the head 'business income' as claimed in the return filed under section 153A of the Act. 14. We however now turn to the yet another related aspect in controversy. It is the case of the Revenue that the provisions of Section 153A of the Act are for the benefit of the Revenue in the light of the decision of the Hon'ble Supreme Court in case of Sun Engineering Works (supra). It is thus claimed on behalf of the Revenue that assessee is not permitted to make a fresh claim or alter its original stand to its advantage in the course of assessment proceedings pursuance to search. We do not see any force in such plea either. The decision of the Hon'ble Supreme Court in Sun Engineering (supra) was rendered in the context of Section 147 of the Act which seeks to assess the chargeable income escaped assessment. Keeping in view the object and purpose of the proceedings under section 147 of the Act, it was held by the Hon'ble Supreme Court that such provision is enacted for the benefit of Revenue and not the assessee. In total contrast to Section 147/148, a special procedure has been provided u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to search) under section 139 of the Act had declared the land at Thaltej (Krish Villa) as capital asset in FY 2007-08 relevant to AYs. 2008-09. The gains arising from sale of the land spanning over AYs. 2008-09, 2009-10 & 2010-11 was accordingly shown and declared as capital gains in its return of income filed prior to search. However, consequent upon search, the assessee altered its stand and declared the land to be held as stock-in-trade/current investment and the gains arising on sale thereof in subsequent years have declared it to be business income of the assessee. 17. In view of discussion in length on identical fact situation, the case of assessee merits acceptance for treating the profits on sale of land/plot to be 'business income' as per return filed under section 153A of the Act instead of 'capital gains' . 18. In the result, all the appeals of the assessee for AYs. 2009-10 to 2011-12 are allowed. I.T.(SS)A. Nos. 79, 80, 81 & 888/Ahd/2015 - AYs. 2008-09, 2009-10, 2010-11 & 2011-12) in case of Darshnaben Harshadbhai Savalia & I.T.(SS)A. Nos. 76, 77, 78 & 887/Ahd/2015 AYs. 2008-09, 2009-10, 2010-11 & 2011-12) in case of Smt. Kapilaben S. Savalia. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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