CIT (Central), Bangalore / The DCIT, Central Circle-1, Bangalore v. Kishan House
[Citation -2020-LL-0129-141]

Citation 2020-LL-0129-141
Appellant Name CIT (Central), Bangalore / The DCIT, Central Circle-1, Bangalore
Respondent Name Kishan House
Court HIGH COURT OF KARNATAKA
Relevant Act Income-tax
Date of Order 29/01/2020
Assessment Year 2003-04
Judgment View Judgment
Keyword Tags substantial question of law • documentary evidence • agreement for sale • sale consideration • business income • capital gain
Bot Summary: Whether the assessing officer was justified in treating the income as business income for the assessment year 2003-04 when the assessee offered it as capital gains for the assessment year 2005-06 2. The assessee filed his returns of income under Section 139 of the Act on 31.03.2006 for the 5 Assessment Year 2005-06 admitting the transactions over the income arising out of the aforesaid transactions as long term capital gains. Thereafter, assessee filed an appeal before the Income Tax Appellate Tribunal. In support of his submission learned Senior Counsel for the assessee has placed reliance on the decision of Division Bench of this Court in COMMISSIONER OF INCOME TAX AND ANOTHER VS. BAGMANE DEVELOPMENT PVT. LTD. 392 ITR 379. The Division Bench of this Court in the case of Commissioner of Income Tax and another supra has laid down criteria for determining whether or not an income from the property is a business income or is a long term capital gain, which is reproduced below for the facility of reference: 9 There was a large time-gap between the dates of acquisition of the shares and the sale thereof. Admittedly, the properties were acquired by the assessee in the year 1992 and assessee had entered into an agreement for sale on 13.05.2002. The Tribunal thereafter on the basis of meticulous appreciation of evidence on record has recorded a finding that assessee has rightly disclosed the income from the property as long term capital gains instead of business income.


1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 29TH DAY OF JANUARY 2020 PRESENT HONBLE MR. JUSTICE ALOK ARADHE AND HONBLE MR. JUSTICE RAVI V. HOSMANI ITA NO. 326 OF 2010 C/w ITA No. 327 OF 2010 IN ITA No.326 OF 2010 BETWEEN: 1. COMMISSIONER OF INCOME TAX (CENTRAL) CENTRAL REVENUE BUILDINGS QUEENS ROAD BANGALORE-560001 2. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE(1) BANGALORE APPELLANTS (BY SRI. E I SANMATHI, ADVOCATE) AND: M/S KISHAN HOUSE BUILDERS ASSOCIATION NO.221, NAGARATHPET BANGALORE-560052 RESPONDENT (BY SRI. A. SHANKAR, SR.COUNSEL FOR SRI. M LAVA, ADVOCATE) 2 THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961 PRAYING TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED HEREIN AND ALLOW APPEAL AND SET ASIDE COMMON ORDER PASSED BY ITAT, B BENCH, BANGALORE IN ITA NO.809/BANG/2009 DATED 31/03/2010, IN INTEREST OF JUSTICE. IN ITA NO. 327 OF 2010 BETWEEN: 1. COMMISSIONER OF INCOME TAX (CENTRAL) CENTRAL REVENUE BUILDINGS QUEENS ROAD BANGALORE-560 001 2. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE(1) BANGALORE APPELLANTS (BY SRI. E I SANMATHI, ADVOCATE) AND: M/S ASHA HOUSING ENTERPRISES NO.221, NAGARATHPET, BANGALORE - 560052 RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL FOR SRI. M LAVA, ADVOCATE) THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961 PRAYING TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED HEREIN AND ALLOW APPEAL AND SET ASIDE COMMON ORDER PASSED BY ITAT, B BENCH, 3 BANGALORE IN ITA NO.810/BANG/2009 DATED 31/03/2010, IN INTEREST OF JUSTICE. THESE APPEALS COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT These appeals under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) have been filed by Revenue which were admitted by Bench of this Court by order dated 18.01.2011 on following substantial questions of law. Whether assessing officer was justified in treating income as business income for assessment year 2003-04 when assessee offered it as capital gains for assessment year 2005-06? 2. Since, substantial questions of law in ITA No.326/2010 and in ITA No.327/2010 are same, these appeals were heard analogously and are being decided by this common judgment. 4 3. Facts giving rise to filing of these appeals briefly stated are that assessee in I.T.A.No.376/2010 purchased land situated at Kalenahalli Agrahara village, Begur Hobli, Bengaluru in 1992, whereas assessee in I.T.A. No.327/2010 purchased land situated at Shinivagilu in Bengaluru in year 1992 itself. assessee in I.T.A No. 326/2010 entered into agreement of lease on 13.05.2002 with M/s. Abhishek Developers for sale consideration of Rs.16.25 Crores and on date of agreement received sum of Rs.3.00 Crores as part of sale consideration. balance sum of Rs.3.25 crores was received in part in years FY 2002-03, 2003-04 and 2004-05. assessee in I.T.A. No.327/2010 entered into agreement for sale on 22.06.2002 for Rs.12.25 crores and received sum of Rs.5.52 crores as part of sale consideration and balance amount was received in instalment in subsequent assessment years. 4. assessee filed his returns of income under Section 139 of Act on 31.03.2006 for 5 Assessment Year 2005-06 admitting transactions over income arising out of aforesaid transactions as long term capital gains. Assessing Officer by order dated 30.06.2008, treated income as business income and not capital gain. Being aggrieved assessing authority filed appeal before Commissioner of Income Tax (Appeals). aforesaid appeals were dismissed by order dated 17.07.2009. 5. Thereafter, assessee filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal for short). Tribunal by its order dated 31.03.2000, inter-alia, held that properties in question were never transferred to M/s. Abhishek Developers during Financial Year 2002-03. It was further held that assessee had entered into agreement with M/s. Abhishek Developers for sale of lease and had retained physical possession of property in question. It was further held that Revenue did not come out with any documentary evidence to suggest that assessee has incurred 6 income from transactions of land during Assessment Year 2003-04. 6. Tribunal further held that in balance sheet assessee had disclosed land under head property as asset from year 1995 till 2005. Accordingly, Tribunal while placing reliance on decision of Rajasthan High Court in COMMISSIONER OF INCOME TAX VS. SOHAN KHAN , (2008) 304 ITR 194 held that transaction was capital transaction and has to be treated as long term capital gain and not as business income. Accordingly, appeals filed by assessee were allowed. Being aggrieved Revenue has filed these appeals. 7. Learned counsel for revenue submitted that Tribunal ought to have considered intention of assessee to do business with properties in question and to have appreciated that it was in nature of business. It is further submitted that one Susheel Mantri and Snehal Mantri are partners in M/s. Abhishek Developers and after search was 7 conducted in premises of assessee, only thereafter return of income was filed by showing income from properties in question as long term capital gain. It is further submitted that entire rights in properties were transferred on date of execution of agreement i.e., 13.05.2002. In support of aforesaid submissions learned counsel for Revenue has placed reliance on decisions in COMMISSIONER OF INCOME TAX VS. SHAMBU INVESTMENTS PVT. LTD. (2001) 249 ITR 47. It is further submitted that aforesaid decision has been upheld by Supreme Court in 203 ITR 143. 8. On other hand, learned Senior Counsel for assessee submitted that question, whether income from property is business income or long term capital gain is question of fact. ITAT on basis of meticulous appreciation of evidence on record has recorded findings in this regard. It is also pointed out that in Assessment Year 2005-06 revenue has accepted income from 8 aforesaid properties as long term capital gain. In support of his submission learned Senior Counsel for assessee has placed reliance on decision of Division Bench of this Court in COMMISSIONER OF INCOME TAX AND ANOTHER VS. BAGMANE DEVELOPMENT PVT. LTD. (2017) 392 ITR 379. 9. We have considered submissions made by learned counsel for parties and have perused records. It is trite law that scope of judicial scrutiny against order of Tribunal is limited to substantial question of law and this Court in exercise of powers under Section 260A of Act can neither appreciate evidence nor can oppose findings of fact. Division Bench of this Court in case of Commissioner of Income Tax and another supra has laid down criteria for determining whether or not income from property is business income or is long term capital gain, which is reproduced below for facility of reference: 9 (1) There was large time-gap between dates of acquisition of shares and sale thereof. (2) Thus, intention to sell cannot be inferred at point of time of purchase. (3) That merely because sale had resulted in profit did not mean that when assessee purchased shares, it was with intention to sell them at profit. (4) That investor may sell shares when he gets good price for shares. (5) That assessee had shares in 25 to 30 companies and value of total holding was between Rs.57,000 and Rs.63,000, which was very small amount considering number of companies in which shares were held, thus, denoting that assessee was small investor. (6) That number of transactions are not many every year and assessee could not be said to indulge in several transactions of purchase and sale every year. 10. It has further been held that total fact of relevant factors and circumstances determining character of transaction and volume, frequency continued and regularity of transactions of parties and 10 sale on goods has also be taken into account. It has been held that aforesaid question is question of fact it has to be determined in fact situation of case. 11. In light of aforesaid settled legal principles, facts of case may be examined. Admittedly, properties were acquired by assessee in year 1992 and assessee had entered into agreement for sale on 13.05.2002. Thereafter in accounts up to year 2004, property was mentioned as asset. details of which read as under: Year ended Amount 31.03.1993 9,85,621 31.03.1994 20,03,964 31.03.1995 20,03,978 31.03.1996 20,04,079 31.03.1997 20,04,129 31.03.1998 20,04,299 31.03.1999 20,04,339 31.03.2000 20,04,379 31.03.2001 20,04,379 31.03.2002 20,04,389 31.03.2003 22,11,578 31.03.2004 64,21,678 During period Property was 01.04.2004 to sold for 31.03.2005 Rs.16.65 crores. 11 12. Thus, from perusal of aforesaid entries it is evident that assessee has not conducted any other activity other than holding land as investment. It is also pertinent to mention here that revenue has not come up with any documentary evidence to suggest that assessee had earned income from transaction to land in question during year 2003-04. Tribunal thereafter on basis of meticulous appreciation of evidence on record has recorded finding that assessee has rightly disclosed income from property as long term capital gains instead of business income. aforesaid finding by no stretch of imagination can be believed to either perverse and arbitrary. 13. In view of preceding analysis, substantial question of law framed by this Court are answered against revenue and in favour of assessee. 12 14. In result, we do not find any merits in these appeals. same fail and are hereby dismissed. Sd/- JUDGE Sd/- JUDGE BVK CIT (Central), Bangalore / DCIT, Central Circle-1, Bangalore v. Kishan House
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