1212 Taxpundit 0027

www.taxpundit.org Anil Amrutlal Relia vs. Income Tax Officer ITAT Ahmedabad Bench "B" A.K Garodia Kul Bharat, AM & Kul Bharat, JM ITA NO. 1323/AHD/2010 & 2911/AHD/2011 & 1516/AHD/2012, 3249 & 3250/AHD/2011 Decision on: 16th November, 2012 1212 Taxpundit 27 (2012) 34 CCH 058 AhdTrib section 68/69, Section 2(14) Assessment Year: 2006-07, 2007-08 & 2008-09 Favour : Revenue Counsel appeared: S N Divotia, AR for the Petitioner.: BKS Pandya, CIT DR for the Respondent A. K. GARODIA, AM. 1. Out of this bunch of five appeals, there are four cross appeals of the assessee and the revenue for the assessment years 2006-07 & 2007-08 and the remaining one appeal is of the revenue for the assessment year 2008-09. All these appeals are filed against separate orders of Ld. CIT (A) XI, Ahmedabad of various dates. All these appeals were heard together and are being disposed off by way of this common order for the sake of convenience because the issue involved is interconnected. 2. First, we take up the cross appeals for the assessment year 2006-07 in I.T.A.No. 1323/Ahd/2010 and 1516/Ahd/2012. The grounds raised by the assessee in I.T.A.No. 1323/Ahd/2010 are as under: "The order passed u/s 250 on 26.03.2010 for A.Y.2006-07 by CIT(A)-XI, A'bad, partly allowing the appeal against order u/s.-143(3) dated 30.12.2008 passed by the A.O. is wholly illegal, unlawful and against the principles of natural justice. The Ld. CIT (A) has grievously erred in law and on facts in not admitting the ground relating to claim of the appellant regarding exemp ion of profit from sale of paintings in view of personal effect u/s.2 (14) of the Act. www.taxpundit.org That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought to have admitted and disposed off the ground relating to non-chargeability of profit from sale of paintings in view of personal effect u/s.2(l 4) of the Act. 2.3 The Ld. CIT (A) has failed to appreciate that the powers of the appellate authority include the power to admit the ground relating to claim of exemption or deduction which was not made be A.O. by filing a revised return of income. 3.1 The Ld. CIT (A) ought to have held that the paintings held by the appellant were ' "personal Page 1 of 14 www.taxpundit.org effect" u/s.2 (14) of the Act so that the profit from the sale thereof was not chargeable to tax u/s.45. 4.1 The Ld.CIT (A) ought to have considered and disposed off the consequential grounds to the main ground of non-chargeability of profit from sale of paintings u/s.2 (14) of the Act. 5.1 The Ld.CIT (A) has grievously erred in holding that the ground relating to exemption u/s.54B/54D/54G was academic and did not call for adjudication. 5.2 That in the facts and circumstances of the case, the Ld. CIT(A) ought to have appreciated that when the levy of capital gains tax on the profit from sale of paintings was upheld, the ground relating to exemption was not academic and the same ought to have been adjudicated. The above grounds of appeal are in the alternative and without prejudice to each other." 2.1 The Grounds raised by the revenue in I.T.A.No. 1516/Ahd/2012 are as under: "1) The Ld. CIT(A) XI, Ahmedabad has erred in law and on facts in holding that paintings sold were not stock in trade and sale of original painting w not part of assessee's business. 2) The Ld. CIT (A) has erred in law and on facts in holding that the painting in question were received by way of gift even when no gift deed was produced either before the A.O. or the CIT (A). 3) On the facts and in the circumstance s of the case, the Ld CIT (A) ought to have upheld the order of the A.O. 4) It is, therefore, prayed that the order of Ld. CIT (A) may be set aside and that of the A.O. be restored." 2.2 The appeal of the revenue was filed late by 721 days. In the condonation application submitted by the revenue, it was submitted that Ld. CIT(A) has decided the present case by the impugned order that the income form sale of paintings has to be onsidered as income from capital gain and on this very issue, the department has filed appeal before the tribunal for the assessment year 2007-08 and 2008-09 but for the assessment year 2006-07, although, CIT-III, Ahmedabad has already authorized and directed the A.O. to file appeal before the tribunal against the impugned order of Ld. CIT(A) dated 17.05.2010 but due to inadvertence, such appeal remained to be filed. It is also submitted in the nd condonation application that such failure to file the 2 appeal was caused because the then incumbent st have been deputed to attend seminar of IRS Officers of 61 batch held at National Academy of Direct Taxes (NADT), Nagpur form 24-26 May 2010 and after the seminar, the then incumbent joined the office on 27.05.2010 but the then incumbent and officers who had charge in the management have failed to give attentionwww.taxpundit.org to the deadline and therefore, failed to file the appeal in time. 2.3 In the course of hearing before us, Ld. D.R. furnished an affidavit of Shri Puneet Gulati being the ACIT-VI in support of the contentions raised in the condonation application. He also submitted that the delay in filing the appeal should be condoned. The Ld. A.R. objected to condonation of delay but considering the explanation of the revenue in the condonation application, we feel it fit and proper to condone the delay in the interest of justice and in the facts of the present case and hence, the delay in filing the appeal is condoned. 2.4 Brief facts of the present case till the assessment stage are noted by Ld. CIT (A) in para 4 & 4.1 of his order which are reproduced below: Page 2 of 14 www.taxpundit.org "4. The first effective ground of appeal is regarding the A.O's action of treating the proceeds from sale of paintings as business income of the appellant. As stated earlier the sale proceeds of Rs. 1,75,54,800/-were offered by the appellant as long term capital gains [claiming deduction of commission paid of Rs.15,12,000/-and deduction of Rs.72,00,000/-being investment in capital gain bonds]. Thus the appellant offered net amount of Rs.88,42,800/-[ Rs. 1,75,54,800/-minus Rs. 87,12,000/-] as long term capital gains. In the statement filed in October 2008, he excluded the said capital gains from computation income. As seen from the assessment order the A.O held that the appellant is in the business of trading in paintings and therefore the entire sale proceeds of paintings were to be assessed as business income. 4.1 While assessing the sale proceeds as business income the observations made by the A.O in brief are as follow. Survey u/s. 133-A was conducted on 23/12/2005. Appellant was found running an art gallery. The appellant failed to establish that the impugned paintings were received by way of gift as claimed by the appellant. As the gifts are not established the paintings are taken to have been purchased during the year. On the date of survey substantial stock of paintings was found. He is having employees and workers at his shop/art gallery and he organizes art exhibitions indicating that the appellant is a trader in paintings. The purchase price is being taken as Nil as the appellant claimed not to have spent anything on the acquisition of the impugned paintings." 2.5 Being aggrieved, the assessee carried the matter in appeal before Ld CIT(A) against the A.O.'s action of treating the proceeds from sale of paintings as business income of the assessee. Ld. CIT(A) held that the sale proceeds of paintings cannot be treated as business income and the same has to be assessed as capital gain. Now, the revenue is in appeal against the direction of Ld. CIT(A) that the sale proceeds of the paintings is taxable as capital gain and not as business income. The assessee is in appeal before us against this direction of Ld. CIT(A) that paintings were not personal effect u/s 2(14) of the Income tax Act, 1961 and hence, is taxable as capital gain u/s 45. 2.6 The second grievance of the assessee is that Ld CIT(A) has erred in holding that the claim for deduction u/s 54B, 54D and 54G was academic and did not call for any adjudication. 2.7 Ld. A.R. submitted that on page 81 of the paper book is the confirmation of sale form Shri Amit Ambalal and this confirmation of sale has been verified by the A.O. in the course of remand proceedings and in the remand repot available on page 85-86 of the paper book, he also reported that it was stated by Shri Amit Ambalal before him that he has given some paintings in gift such as family portrait etc.

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