×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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Captioned appeals by the assessee are against two separate orders, both dated 31st October 2016, passed by the learned Commissioner of Income Tax (Appeals)–47, Mumbai, pertaining to the assessment years 2007–08 and 2008–09.
2. The only issue arising in the appeal for the assessment year 2007–08 and the issue raised in ground no.2 of appeal relating to the assessment year 2008–09 are on the common point, whether the receipt from the sale of paintings is to be assessed as income from business and profession or capital gain.
3. Brief facts are, the assessee, an individual, is engaged in profession of a professional photographer. For the assessment year 2007–08, the assessee filed his return of income on 29th October 2007, declaring total income of ` 97,56,138. Similarly, for the assessment year 2008–09, the assessee had filed his return of income on 26th September 2008, declaring total income of ` 3,02,06,403. It is relevant to observe, assessment in both these assessment years were originally completed under section 143(3) of the Income-tax Act, 1961 (for short "the Act") Subsequently, in pursuance to a search and seizure operation conducted under section 132 of the Act in case of the assessee on 24th January 2011, proceedings under section 153A of the Act was initiated for both the assessment years. In response to the notice issued under section 153A of the Act, the assessee filed a revised return of income for the assessment year 2007–08, declaring total income of ` 1,66,00,130. Whereas, in respect of assessment year 2008–09, the assessee again declared the same income as was declared in the original return of 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 assessment year 2008– 09 by reducing the total addition made by the Assessing Officer in this regard.
4. Reiterating the stand taken before the Departmental Authorities, the learned Authorised Representative submitted, the assessee is a professional photographer and is not in the business of trading in painting. He submitted, the assessee is an art lover and collector, hence, he regularly purchases paintings of reputed artists. He submitted, knowing assessee’s love towards paintings, even his friends also on some occasions gift him paintings. He submitted, due to constraint of space in his residential house, he was forced to sell some of the paintings in these assessment years which also included paintings received as gift. The learned Authorised Representative submitted, till assessment year 2007–08, the paintings were in the nature of personal effect which is evident from the fact that by virtue of an amendment to section 2(14) of the Act by Finance Act, 2007, w.e.f. 1st April 2008, the definition of personal effect was amended by excluding painting and art work from the definition of personal effect. Thus, he submitted, till the assessment year 2007–08, paintings are to be treated as personal effect, hence, not taxable even as capital gain. He submitted, the income derived from sale of painting cannot be treated as business ncome also as the assessee is not carrying on any business in sale and purchase of painting. He submitted, merely because the assessee had purchased and sold some paintings in these two assessment years, it cannot be treated as business income. In support of such contention, the learned Authorised Representative relied upon a decision of the Tribunal, Kolkata Bench, in ACIT v/s Suresh Sethi, ITA no.763/Kol./2012, dated 15th March 2013.
5. The learned Departmental Representative strongly relying upon the observations of the Assessing Officer and learned Commissioner