S.K. RAVIKUMAR Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The assessee is a partnership firm in the name and style of "M/S.Srinivasa Enterprises". Sri.N.A.Venugopal and N.A.Ravigopal were the owners of immovable properties situated at Doddaballapur. They had purchased the same under a separate Sale Deed in the year 1973. They constituted a partnership in the name of M/S.Srinivasa Enterprises along with 12 others in terms of the Partnership Deed dated 26.11.1976. A Theatre by name "Gopal Theatre" was constructed in the premises in question. Sri.N.A.Venugopal and N.A.Ravigopal retired from the partnership with effect from 6.6.1978. The partnership firm continued. It was reconstituted on several occasions. In the year 2001, four partners remained. The Theatre and the land were sold to one Sri T.Prasanna Kumar by virtue of two separate registered sale deeds on 14.2.2001 by the partners as well as the erstwhile partners of the firm. The firm was also dissolved on the same day in terms of the Deed of Dissolution dated 14.2.2001. Certain amounts were paid to the four former partners including Venugopal and Ravigopal.

(2.) A notice under Section 148 of the Income Tax Act was issued to the assessee-firm, which was served on the Managing Partner. In response to the notice, the assessee filed the return of income declaring a loss of Rs.1,40,068/-. The assessee was asked to produce the details in support of the return filed and also a copy of the partnership deed at the time of constitution of the firm. Thereafter, books of account were produced. The assessee was asked to furnish the break- up of the value of the land, building etc., in respect of the Theatre sold and also evidences in support of the additions to the movable assets. The assessee did not furnish the details as sought for. Thereafter, the Sub-Registrar, Doddaballapura was requested to furnish the market value adopted, in respect of the theatre sold and the Sub-Registrar has given the valuation of the land at Rs.33 lakhs and building at Rs.11.70 lakhs. The assessee was intimated about the valuation and proposed to compute long term capital gains in respect of the land and short term capital gains in respect of the building including fixtures and furniture. Thereafter, the long term capital gains at Rs.23,25,600/- and short term capital gains at Rs.10,10,537/- were computed. Aggrieved by the same, the partners filed an appeal before the Commissioner of Income Tax (Appeals), which was dismissed. The appeal filed by the partners before the Income Tax Appellate Tribunal was also rejected. Hence, this appeal.

(3.) By the order dated 17.3.2010, the appeal was admitted to consider the following substantial questions of law: