M/S. ABHIJIT AMAR AGRO PVT. LTD. V. THE PRINCIPAL COMMI.OF INCOME TAX and ANR.

CW/15463/2017

AI Insights

The case involves multiple writ petitions filed by various companies, all directed by similar directors and located at the same address, challenging notices issued by the Income Tax Department for the assessment year 2015-16. The petitions were consolidated due to the identical nature of the issues involved. The primary contention was the lack of recorded reasons for the issuance of the notices and the classification of income from land sales. The Income Tax Department, based on a survey and subsequent investigations, alleged that the companies were involved in the business of buying and selling land, which constituted a business activity, thus making the income from such transactions taxable as business income rather than capital gains. The petitioners argued that their main activities were agricultural and not business-related, and that the land was used for agricultural purposes, not as stock in trade.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 685326 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 28-11-2017
• Assessment Year: misc
• Other Referred Cases: ITO Vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC), Gangasharan & Sons Pvt. Ltd. 130 ITR 1 (SC), Sheo Nath Singh Vs. AAC (1971) 82 ITR 147 (SC), CIT Vs. Hindustan Zinc. Ltd. (2017) 393 ITR 264 (Raj HC), Smt. Kiran Kanwar Vs. UOI (2016) 290 CTR 403, PCIT Vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 677 (Delhi), Chhugamal Rajpal Vs. S.P. Chaliha (1971) 79 ITR 603 (SC), Bakulbhai Ramanlal Patel Vs. ITO (2011) 56 DTR 212 (Guj.), Raymond Woollen Mills Ltd. Vs. Income Tax Officer :: 236 ITR 34
• Laws Referred To: Income Tax Act, 1961, Prohibition of Benami Property Transactions Act, 1988, Rajasthan Tenancy Act, 1955, Indian Stamp Act, 1899
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K K BISSA
• Assessee Lawyers: MAHENDRA GARGIYA; NEERAJ JAIN
• Keywords: Agricultural income; Benami property; Business income; Capital Gain; Escaped assessment; Income Tax; Land Grabbing; Tax Evasion
• Section: 147; 148

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR S.B. Civil Writ Petition No. 13414 / 2017 M/s Ayush Agrotech Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged 59 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents Connected With S.B. Civil Writ Petition No. 13412 / 2017 M/s Akhilesh Agrotech Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged 59 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 13469 / 2017 M/s Ankit Agrochem Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Avinash Modi S/o Shri Arun Kumar Modi, Aged About 37 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. (2 of 11) [CW-13414/2017] ----Respondents S.B. Civil Writ Petition No. 13474 / 2017 M/s Akalvya Agrotech Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Avinash Modi S/o Shri Arun Kumar Modi, Aged About 37 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 13475 / 2017 M/s Amar Pratap Agro Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikarner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged About 59 Years, Resident A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle -1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 13495 / 2017 M/s Abhijit Amar Agro Private Limited, A-21, IIIRd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Avinash Modi S/o Shri Arun Kumar Modi, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. (3 of 11) [CW-13414/2017] 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 13499 / 2017 M/s Avijit Agro Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged 59 Years, Resident of Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 13514 / 2017 M/s Anshu Biotech Private Limited, A-21, IIIrd Floor, Room No.5, Sadulganj, Bikaner Through Its Director Shri Avinash Modi S/o Shri Arun Kumar Modi, Aged About 37 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Range-1, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 13503 / 2017 M/s Amar Pratap Agro Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged About 59 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. (4 of 11) [CW-13414/2017] 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 15452 / 2017 M/s Ayush Agrotech Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged About 59 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 15455 / 2017 M/s Abhijit Amar Agro Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Avinash Modi S/o Shri Arum Kumar Modi, Aged About 37 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 15463 / 2017 M/s Abhijit Amar Agro Private Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Avinash Modi S/o Shri Arun Kumar Modi, Aged 37 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. (5 of 11) [CW-13414/2017] 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents S.B. Civil Writ Petition No. 15464 / 2017 M/s. Ayush Agrotech Pvt. Limited, A-21, IIIrd Floor, Room No. 5, Sadulganj, Bikaner Through Its Director Shri Ashok Kumar Modi S/o Late Shri Hanuman Prasad Modi, Aged About 59 Years, Resident of A-21, Sadulganj, Bikaner. ----Petitioner Versus 1. The Principal Commissioner of Income Tax, Income Tax Department, Bikaner. 2. The Assistant Commissioner of Income Tax, Circle-1, Room No. 52, Income Tax Office, Rani Bazar, Bikaner. ----Respondents _____________________________________________________ For Petitioner(s) : Mr. Mahendra Gargiya, Mr. Neeraj Kumar Jain For Respondent(s) : Mr. K.K. Bissa _____________________________________________________ HON'BLE MS. JUSTICE NIRMALJIT KAUR Judgment / Order 28/11/2017 All the above-mentioned writ petitions shall stand decided by this common order as the issue involved is identical. The writ petitions have been filed seeking quashing of the impugned notice dated 24.03.2017 as also the order rejecting the objections dated 7.7.2017. The petitioner assessee filed its return of income for the assessment year 2015-16 on 27.09.2015 which consisted of business income, short term capital gain and long term capital gain. The respondent No.2 issued notice dated 24.03.2017 stating (6 of 11) [CW-13414/2017] therein that they had reasons to believe that the petitioner’s income chargeable to tax for Assessment Year 2015-16 has escaped assessment and asked them to deliver a return in the prescribed form before the expiry of 30 days from the service. The petitioner submitted their objections to the notice. However, the objections submitted by the petitioner were rejected vide order dated 7.7.2017. While praying for setting aside the impugned notice and objections, learned counsel for the petitioners submitted that no reasons were recorded for issuing the notice. Further, their main object was to carry on agricultural, horticultural etc. and other objects of the Memorandum of Association were secondary in nature. The main object of the petitioner assessee as per MOA was to set up and operate biopark, research and development and training activities, undertake demonstrate activities related to farming practices, to carry on business of farming, horticultural, floriculture, tissue-culture, green houses, red-houses, red-houses, drip irrigation, dairies, sericulture, cultivation of all kinds of food- grains, seeds, oil-seeds, fruits, flowers, Zozoba, proprietors of orchards. The agricultural land purchases by the petitioner- assessee cannot be said to be its stock in trade. The land in question was classified as agriculture land in revenue record and after its purchase, actual cultivation has been carried out by the petitioner-assessee for raising grass for grazing cattles free of cost and there was no intention on the part of the petitioner-assessee to put the land for non-agricultural purpose. Merely because the (7 of 11) [CW-13414/2017] land in question was sold for profit, it cannot be held that the income arising from its sale was taxable as business income and not capital gain. It was further alleged that the respondent No.2 had rejected the objections in a mechanical manner by holding that the intention of the petitioner-assessee to sell the land would be considered at the time of assessment proceedings by taking into account the history of transaction, other business activities, mode of finance and other circumstantial evidence. The said notice could not have been sent on mere suspicion. There is no material to proceed against the petitioner – assessee. Reply has been filed. As per the reply, a notice dated 10.08.2017 was issued to the petitioners requiring them to submit their reply by 16.08.2017 which they failed to do. Yet another notice was issued on 20.09.2017 as per which, the reply was to be filed by 25.09.2017 but no compliance was made. Another order dated 30.10.2017 was issued and penalty too had to be imposed on the petitioner. Also, in case of any future grievance, the petitioner is free to approach the appellate forum. Thus, by filing this writ petition, the petitioners have by-passed all other efficacious and statutory remedies. Further, the evidence in possession of the Income Tax Department indicates that the petitioner and/or its sister concerns seems to be habitual defaulters of multiple laws, including blatant violations of the provisions of not only Income Tax Act, 1961 but also Prohibition of Benami Transaction Property (Transactions) Act, 1988, Rajasthan Tenancy Act, 1955, Indian Stamp Act, 1899 and that the (8 of 11) [CW-13414/2017] petitioner’s sister concerns seems to be involved in the activities of money laundering and tax evasion. The petitioner’s sister concerns appear to be also engaged in activities of illegal land grabbing of illiterate and poor agricultural families on a large scale. Heard. Learned counsel for the petitioner referred to the judgments rendered in the cases of ITO Vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC), Gangasharan & Sons Pvt. Ltd. 130 ITR 1 (SC), Sheo Nath Singh Vs. AAC (1971) 82 ITR 147 (SC), CIT Vs. Hindustan Zinc. Ltd. (2017) 393 ITR 264 (Raj HC), Smt. Kiran Kanwar Vs. UOI (2016) 290 CTR 403, PCIT Vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 677 (Delhi) to contend that the powers of the ITO to reopen assessment though wide, cannot be done on mere suspicion as the reopening after a lapse of many years is a serious matter. Further, while relying on the judgments rendered in the case of Chhugamal Rajpal Vs. S.P. Chaliha (1971) 79 ITR 603 (SC) and Bakulbhai Ramanlal Patel Vs. ITO (2011) 56 DTR 212 (Guj.), it was submitted that action under Section 147 is not permissible merely to make rowing investigation, exploring possibilities of non-existent income. Applying the test as laid down in the judgments referred above, the question herein is as to whether the Assessing Authority has proceeded on mere suspicion or there is sufficient material for reopening the assessment. (9 of 11) [CW-13414/2017] Vide its letter dated 27.3.2017, the petitioners had requested the respondent No.2 to provide reasons for issuing the notice. The respondent No.2 immediately vide letter dated 10.04.2017 gave the reasons for issuing the notice under Section 148. The petitioners were informed that, “during the survey of M/s. Akash Amar Agrotech Pvt. Ltd. conducted on 5.12.2013 certain documents were impounded for further investigation. From the perusal of the said documents & post survey investigations, it is noticed that the assessee company has sold land in the financial year 2009-10 to various entities. The assessee company’s Return of Income for the relevant year has shown Agricultural Income of Rs.3,38,250/- in lieu of sale of the agricultural land which has been claimed as exempt income by it. It is noted from the available records, and material impounded during the survey, that the assessee company is involved in the business of sale and purchase of land. The investment, sale & purchase of the entity is also of land including agricultural land.” Moreover, it is not disputed that as per the memorandum of Association, one of the objects to be pursued by the Company on its Incorporation is also purchase, sell, acquire, get convert, develop, improve, hold with absolute or limited rights or on lease, sub lease or otherwise and to erect, construct, build, demolish, re- erect, alter, repair, furnish, maintain land, including agricultural land, building, farm houses, residential flats, commercial complexes...” The Assessing Authority observed that the entity sells and purchases land, including agricultural land, as one of the (10 of 11) [CW-13414/2017] main objects of the assessee company for which it was formed which is a business activity of the assessee company. The Apex Court in the case of Raymond Woollen Mills Ltd. Vs. Income Tax Officer :: 236 ITR 34 has held as under:- “We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case.” Likewise, in the case of ITO Vs. Lakhmani Mewal Das (1976) 3 SCC 757, the Apex Court ruled as under:- “The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income tax Officer to form the above belief that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate.” Even in the reply filed in SBCWP No.13503/2017, the averment with regard to whether any incriminating material was found during the course of surveys or not, it was submitted that evidence related to huge amount of tax evasion, stamp duty evasion, violation of Land Ceiling Acts and other laws, falsification of facts in registered sale deeds, and evidences related to vast quantum of benami properties was found during the course of surveys. With a further information that Income Tax Department, (11 of 11) [CW-13414/2017] Jaipur, Rajasthan issued show cause notices to as many as 31 apparent benamidaars and their associated beneficial owners who are the sister concerns of the petitioner under the provisions of the Prohibition of Benami Property Transactions Act, and has provisionally attached 17 such properties on 12.11.2017 and 14 more properties on 24.11.2017 leading to a total of 31 such properties which prima – facie are benami properties. Thus, in the opinion of this Court, there was sufficient reason for the respondent authorities to believe that there may be escapement of income. In view of the above, no ground for interference is made out. The writ petitions are accordingly dismissed. (NIRMALJIT KAUR), J. Pdaiya/1-8, 51,68-71 Powered by TCPDF (www.tcpdf.org) "