DCIT Vs Chandrakant L. Patel (ITAT Ahmedabad)
Conclusion: Since there was no valid transfer of land in question by assessee to the partnership firm of M/s. V Developers in the year under consideration giving rise to any capital gain and the transfer of the said land having validly taken place only in the previous year relevant to AY 2012-13 by assessee to M/s. V Developers, the capital gain arising from the said transfer was not chargeable to tax in the hands of the assessee for AY 2012-13 as duly declared by assessee in his return of income for AY 2012-13.
Held: Assessee had entered into a partnership firm in the name and style of M/s. V Developers with M/s B Odhavji Industrial Enterprises Pvt. Ltd. and the land was introduced by the assessee in the partnership firm as stock-in-trade for a value of Rs.22,41,00,000/-. Assessee accordingly agreed to offer the capital gain arising from the said transaction in his return of income for the AY 2012-13. Assessee submitted that the land in question was never converted as stock-in-trade and introduced as capital contribution in the firm of M/s. V Developers, also pointed out that the land in question was agricultural as of 18.03.2010, and no transfer of property or the land in question within the meaning of Section 2(47) in the previous year relevant to AY 2010-11 and there was no question of taxability of any capital gain. Assessee treated the value as the sale consideration and after deducting the cost of acquisition to the assessee amounting to Rs.17,76,06,000/- and stamp duty paid at the time of transfer of land in the name of the assessee amounting to Rs.1,04,78,760/-, made out a short term capital gain chargeable to tax in the hands of the assessee for the year under consideration at Rs.3,60,15,240/-. Addition to that extent on account of short-term capital gain was made by AO to the total income of the assessee in the assessment completed under Section 143(3). Assessee submitted that the said transfer was held to be null and void ab initio by the CIT(A) vide his impugned order on the ground that both the partners of the partnership firm were not agriculturists. It was held that there was no valid transfer of land in question by assessee to the partnership firm of M/s. V Developers in the year under consideration giving rise to any capital gain and the transfer of the said land having validly taken place only in the previous year relevant to AY 2012-13 by the assessee to M/s. Vallabh Developers, the capital gain arising from the said transfer was chargeable to tax in the hands of the assessee for AY 2012-13 as duly declared by the assessee in his return of income for AY 2012-13. Therefore, the impugned order of CIT(A) was justified fordeleting the addition of Rs.3,60,15,240/- made by AO on account of short term capital gain and dismissed the appeal of the Revenue.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is preferred by the Revenue against the order of learned Commissioner of Income-Tax (Appeals)-I, Ahmedabad (“CIT(A)” in short) dated 28.04.2014 and the solitary issue involved therein relates to the deletion by the learned CIT(A) of the addition of Rs. 3,60,15,240/- made by the Assessing Officer on account of Short Term Capital Gain.
2. The assessee, in the present case, is an individual who filed his return of income for the year under consideration on 06.08.2010 declaring a total income of Rs.71,690/-. A search action under Section 132 of the Income-tax Act, 1961 (“the Act” in short) and survey under Section 133A of the Act were carried out in the cases of Bhogilal Group. During the course of said action, various documents were found and seized which revealed that the assessee had purchased agricultural land at Survey No.86 from one Princes Gaekwad vide conveyance deed executed on 18.03.2010 for a consideration of Rs.17,76,06,000/-. It was also revealed that the assessee on 18.03.2010 itself had entered into a partnership firm in the name and style of M/s. Vallabh Developers with M/s Bhogilal Odhavji Industrial Enterprises Pvt. Ltd. and the land at Survey No. 86 was introduced by the assessee in the partnership firm as stock-in-trade for a value of Rs.22,41,00,000/-. The return of income filed by the assessee for the year under consideration was selected under compulsory scrutiny and when the assessee was called upon by the Assessing Officer to offer his explanation as regards the chargeability of capital gains in relation to land at Survey No. 86, he explained that the land in question was sold to Bhogilal Odhavji Industrial Enterprises Pvt. Ltd. on 13.05.2011 for a total consideration of Rs.21,11,00,000/- and his share in the said land was only 30%. The assessee accordingly agreed to offer the capital gain arising from the said transaction in his return of income for the AY 2012-13. It was also submitted by the assessee that the remaining 70% of the share in the said land was belonging to one Shri Mukesh Gupta as clearly reflected in banakhat executed on 17.10.2007. It was further submitted by the assessee that the land in question was never converted as stock-in-trade and introduced as capital contribution in the firm of M/s. Vallabh Developers. It was contended that M/s. Vallabh Developers had only nominal existence and term of the partnership deed dated 18.03.2010 was never given any effect. It was submitted that the transfer of immovable property exceeding the value of Rs.2000/- could be made only by a registered conveyance deed as per the Transfer of Property Act. It was also pointed out that the land in question was an agricultural land as on 18.03.2010 and it was converted into non-agricultural land only on 11.01.2011. It was submitted that the partnership firm could not be owner of agricultural land unless all the partners are agriculturists. It was contended that after purchase of land by the assessee jointly with Shri Mukesh Gupta from Princess Ujwala Raje, the land in question continued to be owned by them jointly till it was finally sold to M/s. Bhogilal Odhavji Industrial Enterprise Pvt. Ltd. It was contended that there was thus no transfer of property or the land in question within the meaning of Section 2(47) of the Act in the previous year relevant to AY 2010-11 and there was no question of taxability of any capital gain. It was pointed out the land was actually transferred on 12.05.2011 and the name of Shri Mukesh B. Gupta did appear in the sale deed as a confirming party.
3. The explanation/submission made by the assessee was not found acceptable by the Assessing Officer. According to him, there were certain facts emerging from the material available on record and the same being relevant to decide the issue, he summarized the same in his order as under:-
“In the year 2007 an agreement for sale of land at Survey No.86 between the seller Princess Gaekwad and the assessee as well as Shri Mukesh Gupta was executed wherein Shri Mukesh Gupta has also declared himself as an Agriculturist.
