ACIT, Circle-1, Warangal V. Sri Venugopal Mundada, Warangal

ITA 1015/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7680 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Business income
• Section: 80IB; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1050/HYD/2013 ASSESSMENT YEAR 2007-2008 MR. VENUGOPAL MUNDADA WARANGAL. PAN ABZPM2970R VS. JCIT, WARANGAL (APPELLANT) (RESPONDENT) ITA.NO.1015/HYD/2013 ASSESSMENT YEAR 2007-08 ACIT, CIRCLE-1 HYDERABAD. VS. MR. VENUGOPAL MUNDADA WARANGAL PAN ABZPM2970R FOR ASSESSEE : MR. P. MURALIMOHAN RAO FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 13.10.2014 DATE OF PRONOUNCEMENT : 12.11.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS-APPEALS BY ASSESSEE AND REVENUE AGAINST THE ORDER OF LD. CIT(A)-XVIII, MUMBAI HAVIN G CONCURRENT JURISDICTION WITH CIT(A)-VI, HYDERABAD D ATED 06.03.2013. 2. WE HAVE HEARD LD. COUNSEL AND LD. D.R. 2 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL 3. BRIEFLY STATED, ASSESSEE DERIVES INCOME FROM INTEGRATED BUSINESS OF HANDLING STORAGE AND TRANSPO RT. ASSESSEE ALONG WITH 5 OTHER PERSONS HAVE FORMED AOP NAMED DURGA BHAVANI ENTERPRISES AND AOP HAS TAKEN CONTRAC T FOR THE WORK OF PRESERVATION, MAINTENANCE AND TRANSPORT AND HANDLING FROM A.P. STATE WAREHOUSING CORPORATION. MEMBERS OF THIS AOP HAS GIVEN THEIR GODOWNS ON RENT AND EACH MEMBER OF AOP HAS CLAIMED DEDUCTION UNDER SECTION 80IB (11A) OF T HE I.T. ACT WHICH WAS DISALLOWED BY A.O. BASED ON THE REASONS G IVEN IN EARLIER YEAR. APART FROM THAT, A.O. ALSO IN EXPARTE ORDER UNDER SECTION 144 MADE AN ADDITION OF RS. 4 LAKHS AS SHOR T TERM CAPITAL GAIN, RS.3,10,743 AS LONG TERM CAPITAL GAIN AND RS. 1 LAKH AS INCOME FROM OTHER SOURCES AND BROUGHT TO TA X CAPITAL GAINS DECLARED BY ASSESSEE AS BUSINESS INCOME AT RS.14,09,959. 4. ASSESSEE CONTESTED BEFORE THE LD. CIT(A) WHO ON THE BASIS OF THE EVIDENCE FILED BEFORE HIM CALLED F OR REMAND REPORT AND A.O. SUBMITTED REMAND REPORTS TO LD. CIT (A). BASED ON THE REMAND REPORTS GIVEN, RELIEF WAS GIVEN TO AS SESSEE IN ALMOST ALL THE ISSUES EXCEPT ON THE TREATMENT OF EX EMPT CAPITAL GAINS DECLARED AS BUSINESS INCOME. THEREFORE, ASSES SEE IS AGGRIEVED ON THE ADDITION CONFIRMED AT RS.14,09,959 WHEREAS, REVENUE IS AGGRIEVED ON THE DELETIONS MADE BY LD. C IT(A). 5. THE ISSUE RAISED BY ASSESSEE WAS THAT SALE PROCEEDS OF RS.14,09,959 FROM SALE OF AGRICULTURAL LAND IS EXEMPT UNDER SECTION 2(14)(III). THIS ISSUE IS COVE RED BY THE COORDINATE BENCH DECISION IN THE CASE OF ASSESSEE I N EARLIER YEAR. THE COORDINATE BENCH VIDE SUB-PARA 13.3 IN PA GE 55 OF THE ORDER HELD AS UNDER: 3 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL 13.3. WE HAVE CONSIDERED BOTH THE PARTIES AND PERU SED THE MATERIAL ON RECORD. THE ASSESSEE PURCHASED THE ABOVE LANDS, USED IT FOR AGRICULTURAL ACTIVITIES FOR ABOU T 2 YEARS AND THEREAFTER SOLD IT FOR PROFITS. THE AGRIC ULTURAL INCOME EARNED FROM THESE LANDS WERE SHOWN IN THE RETURNS OF INCOME FIELD, WHICH HAVE NOT BEEN DISPUT ED BY THE A.O. PURCHASE AND SALE PRICE OF THE ABOVE LANDS ALSO SHOWN THAT THE SAME WERE TRANSACTED AS AGRICULTURAL LANDS, ONLY OTHERWISE, THE PRICE WOULD HAVE BEEN ABNORMALLY HIGH. A.O. HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO PROVE THAT THE ABOVE LANDS WERE PURCHASED AND USED FOR ANY OTHER PURPOSE BY THE SUBSEQUENT BUYERS . THE PURCHASE AND SALE DEED OF THE SAID LANDS AS WEL L AS THE LAND REVENUE RECORDS REFERRED THE SAID LANDS AS AGRICULTURAL LANDS. CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER COULD NOT MAKE OUT ANY CASE TO TR EAT THE LANDS AS NON-AGRICULTURAL LANDS SO AS TO TAX THE PR OFITS ON THEIR SALE UNDER THE HEAD SHORT TERM CAPITAL GAINS. SINCE THE EVIDENCE PRODUCED BY THE ASSESSEE CLEARLY SHOWS THAT THE PROPERTY IN QUESTION IS AN AGRICULTURAL PROPERT Y AS SUCH THE RATIO LAID DOWN BY THE JUDGMENT RELIED BY THE DEPARTMENTAL REPRESENTATIVE IS NOT APPLICABLE TO TH E FACT OF THE CASE. IN THE CASE OF CIT VS. GEMINI PICTURE CIR CUIT (P) LTD., 220 ITR 43, LAND SITUATED WITHIN MUNICIPAL LI MITS REGISTERED AS URBAN LAND, BEARING MUNICIPAL DOOR NO . AND SUBJECT TO URBAN LAND TAX SOLD ON YARDAGE BASIS SURROUNDED ON ALL SIDES BY INDUSTRIAL AND COMMERCIA L BUILDINGS ON WHICH THE ASSESSEE ITSELF CONSTRUCTED TWO BUILDINGS AFTER ITS PURCHASE, PART OF SUCH LAND LYI NG VACANT CANNOT BE AGRICULTURAL LAND FOR THE MERE REA SON THAT IT WAS SUBJECT TO AGRICULTURAL OPERATION, AND HENCE ITS SALE GAVE RISE TO CAPITAL GAINS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SA ME IS CONFIRMED. 6. SINCE GAIN ON SALE OF AGRICULTURAL LANDS ARE EX EMPT FROM CAPITAL GAINS, THE FACTS BEING SIMILAR, WE ARE OF THE OPINION THAT A.O. AND LD. CIT(A) ARE NOT JUSTIFIED IN BRINGING INTO TAX GAIN ON SALE OF AGRICULTURAL LANDS AS BUSI NESS INCOME. THIS GROUND OF ASSESSEE IS ACCORDINGLY ALLOWED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 4 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL 8. AS FAR AS REVENUE APPEAL IS CONCERNED, REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE CIT(A)-VI IS ERRONEOUS IN BOTH FA CTS AND IN LAW IN DELETING THE ADDITION OF RS.1491812 TOWARDS I) THE INCOME FROM HOUSE PROPERTY. II) THE INCOME FROM SHORT TERM CAPITAL GAINS III) THE INCOM E FROM LONG TERM CAPITAL GAINS AND IV) THE INCOME FRO M OTHER SOURCES. 2. THE CIT(A) OUGHT TO HAVE CALLED FOR REMAND REPORT F ROM THE A.O. TO VERIFY THE ISSUES. 3. WHETHER THE CIT(A)-VI WAS CORRECT IN NOT CONSIDERIN G THE A.O.S ADDITION OF THE ASSESSEES CLAIM OF DEDU CTION U/S.80IB(11A) FOR AN AMOUNT OF RS.6,81,069 IN THE ABSENCE OF INFORMATION/EVIDENCE FURNISHED BY THE APPELLANT AT THE TIME OF FINALIZATION OF ASSESSMENT . 4. THE CIT(A)-VI IS ERRED IN NOT APPRECIATING THE DISALLOWANCE MADE BY THE A.O. IN THE ABSENCE OF INFORMATION/EVIDENCE TOWARDS THE HEAD SHORT TERM CAPITAL GAINS OF RS.4,00,000. 5. THE CIT(A)-VI IS ERRED IN NOT APPRECIATING THE DISALLOWANCE MADE BY THE A.O. IN THE ABSENCE OF INFORMATION/EVIDENCE TOWARDS THE HEAD LONG TERM CAPITAL GAINS OF RS.3,10.743. 6. THE CIT(A)-VI IS ERRED IN NOT APPRECIATING THE DISALLOWANCE MADE BY THE A.O. IN THE ABSENCE OF INFORMATION/EVIDENCE TOWARDS THE HEAD INCOME FROM OTHER SOURCES OF RS.1,00,000. 9. WE ARE UNABLE TO APPRECIATE THE GROUNDS RAISED BY REVENUE FOR THE SIMPLE REASON THAT MOST OF THE ISSU ES HAVE BEEN ACCEPTED BY A.O. IN THE REMAND REPORT. IN SPIT E OF GIVING A REMAND REPORT TO LD. CIT(A) A.O. HAS COME IN APPEAL CONTESTING THAT LD. CIT(A) OUGHT TO HAVE CALLED FOR REMAND REPORT FROM A.O. TO VERIFY THE ISSUES. AS PER THE E VIDENCE PLACED ON RECORD, THE LD. CIT(A) CALLED FOR REMAND REPORT VIDE 5 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL LETTER DATED 22.06.2011 AND A.O. GAVE REPORT ON 05. 09.2011. LD. CIT(A) ALSO GAVE AN OPPORTUNITY TO ASSESSEE VID E LETTER DATED 09.09.2011. IN VIEW OF THESE FACTS, GROUND NO .2 ITSELF IS PERVERSE AND THE SAME IS REJECTED. 10. AS FAR AS GROUND NO.3 IS CONCERNED, THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDERS OF ITAT WHICH THE LD. CIT(A) FOLLOWED. THE ORDER OF LD. CIT(A) IS AS UNDER : 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT, ORDER OF THE A.O. AND FACTS OF THE CASE CAREFULLY, IT IS NOTICED THAT THIS ISSUE WAS INVOLVED IN THE APPELLA NTS OWN CASE FROM THE A.Y. 2004-05 TO 2006-07 THE HONB LE TRIBUNAL HAS DECIDED THIS ISSUE BY HOLDING THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS, THEREFOR E, ENTITLED FOR DEDUCTION U/S.80IB(11A) OF THE I.T. ACT. SINCE THIS ISSUE HAS BEEN DECIDED BY THE HONBLE TRIBUNAL ON T HE ASSESSEES OWN CASE WHICH IS BINDING ON THE LOWER AUTHORITIES, THEREFORE, RESPECTFULLY FOLLOWING THIS DECISION, THE GROUND OF APPEAL IS ALLOWED. IN VIEW OF THIS, WE DO NOT SEE ANY MERIT IN REVENUE CONTENTION. 11. AS FAR AS GROUNDS NO. 4 AND 5 ARE CONCERNED, T HE ISSUE ARISES IN A PECULIAR MANNER. ASSESSEE HAS OFF ERED INCOME OF RS.83,721 AS INTEREST. A.O. IN THE EXPARTE ORD ER ESTIMATED THE SAME AT RS. 1 LAKH. ASSESSEE HAS SHOWN SHORT TE RM CAPITAL GAIN OF RS.2,06,826 ON SALE OF SHARES WHICH WAS AGA IN ESTIMATED AT RS.2,50,000. FURTHER, ASSESSEE HAS SHO WN CAPITAL GAIN ON SALE OF LAND AT RS.1,47,441 WHICH WAS ESTIM ATED BY A.O. AT RS.1,50,000. IN THE REMAND REPORT, WHEN THE SE WERE POINTED OUT BY ASSESSEE, A.O. HAS ACCEPTED AND ACCO RDINGLY, LD. CIT(A) DELETED THEM VIDE PARA 4.3 AS UNDER : 4.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT, ORDER OF THE A.O. AND FACTS OF THE CASE CAREFULLY, IT IS 6 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL NOTICED THAT IN THE REMAND REPORT, THE A.O. HAS ACC EPTED THE INTEREST INCOME AT RS.83,721/- AS SHOWN BY THE ASSESSEE. THUS, THE ADDITION MADE ON ESTIMATE BASIS OF AT RS.1,00,000/- IS DELETED. REGARDING THE SHORT TERM CAPITAL GAINS SHOWN AT RS.2,06,826/- WHICH WAS ESTIMATED BY THE A.O. AT RS.2,50,000/- IS AGAIN ACCEPTED BY THE A.O. IN THE REMAND REPORT AND THE SALE OF LAND AT RS.1,47,4 41/- WHICH WAS ESTIMATED AT RS.1,50,000/- THE A.O. HAS ACCEPTED THE FIGURE IN THE REMAND REPORT, THEREFORE , THE ADDITION MADE AT RS.4,00,000/- ON ACCOUNT OF SHORT TERM CAPITAL GAINS AND RS.1,00,000/- INCOME FROM OTHER SOURCES IS DELETED. HENCE, GROUND OF APPEAL IS ALLO WED. SINCE, THESE ARE DELETED ON THE BASIS OF A.OS REPO RT, WE ARE UNABLE TO APPRECIATE THE GROUNDS TAKEN BY REVENUE. THE SAME ARE REJECTED. 12. GROUND NO.5 PERTAINS TO ADDITION OF LONG TERM CAPITAL GAINS OF RS.3,10,743. THE REMAND REPORT OF A.O. ON THIS ISSUE IS EXTRACTED BY LD CIT(A) IN HIS ORDER. 13. LD. CIT(A) AFTER ANALYZING THE FACTS OF THE CA SE, DELETED BY STATING AS UNDER : 3.3. I HAVE CONSIDERED SUBMISSIONS OF THE APPELLA NT, ORDER OF THE A.O. AND FACTS OF THE CASE CAREFULLY, IT IS NOTICED THAT THIS ISSUE OF LONG TERM CAPITAL GAINS IS NOT DISCUSSED BY THE A.O. IN THE ASSESSMENT ORDER ANYWH ERE BUT MADE THE ADDITION IN THE COMPUTATION OF INCOME. HOWEVER, IN THE REMAND REPORT THE A.O. HAS SUBMITTE D AS UNDER :- AS REGARD INCOME FROM LONG TERM CAPITAL GAINS, IT I S SUBMITTED THAT IT IS TYPOGRAPHICAL ERROR. IN THIS REGARD; IT IS PERTINENT TO REFER TO THE QUESTIONNAI RE ISSUED BY THE A. O. VIDE DATED 05. 11.2009 WHICH IS AS UNDER :- QUESTION NO. 2(II): 'YOU HAVE SHOWN GROSS RECEIPTS OF BUSINESS AT RS.52,16,787/- AND HAVE CLAIMED EXPENSES UNDER VARIOUS HEADS. HOWEVER, AS NO VERIFICATION OF EXPENSES CLAIMED IS POSSIBLE, YOUR INCOME FROM BUSINESS IS PROPOSED TO BE TAKEN @ 8% 7 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL OF GROSS RECEIPTS SHOWN. THUS, YOUR INCOME FROM BUSINESS IS PROPOSED TO BE TAKEN AT RS. 41,17,343/- . HOWEVER, WHILE FINALIZING THE ASSESSMENT, THE A.O. INSTEAD OF TREATING THE SAME AS 'INCOME FROM BUSINESS' MENTIONED AS 'INCOME FROM LTCG'. IN THE REMAND REPORT THE A.O. HAS MENTIONED THAT WHILE TYPING INCOME FROM BUSINESS, IT WAS MENTIONED AS INCOME FROM LONG TERM CAPITAL GAINS. BUT EVEN THE BUSINESS INCOME OF RS. 3,10,743/- IS ALSO NOT DISCU SSED IN THE ASSESSMENT ORDER. ON THE OTHER HAND, THE AR HAS SUBMITTED THAT THE A. O. HAS ADDED THE AMOUNT OF RS. 3,10,743/- BY DISALLOWI NG THE CLAIM OF THE EXPENDITURE INCURRED BY THE ASSESS EE AND HAS CALCULATED THE INCOME BY TAKING 8% OF GROSS REC EIPTS WITHOUT CONSIDERING THE EXPENDITURE INCURRED. FROM THE PERUSAL OF THE SUBMISSIONS AND FACTS, IT I S OBSERVED THAT WHEN THE A.O. HAS COMPUTED THE BUSINE SS INCOME BY ADOPTING 10% OF THE GROSS RECEIPTS THEN T HE QUESTION OF ALLOWING OF EXPENDITURE DOES NOT ARISE. AS PER THE FIGURE GIVEN IN THE REMAND REPORT, THE GROSS RE CEIPT OF BUSINESS SHOWN IN THE REMAND REPORT IS RS. 52,16,78 7/- WHICH HAS BEEN COMPUTED BY THE AO. AT 8% IS MENTION ED AS RS. 41,17,343/- WHICH IS AGAIN WRONG CALCULATION WITHOUT APPLYING THE MIND. THE 8% OF RS. 52,16,787/ - COMES TO RS. 4,27,343/-, BUT THE AO. HAS MADE ADDIT ION OF RS. 3,10,743/-. SINCE THIS ADDITION IS MADE WITH OUT ANY DISCUSSION IN THE ASSESSMENT ORDER AND WITHOUT ANY BASIS, HENCE DELETED. GROUND OF APPEAL IS ALLOWED. 14. SINCE, THERE IS NO BASIS FOR ADDITION ITSELF, WE ARE UNABLE TO APPRECIATE REVENUE CONTENTION. LD. CIT(A) IS CORRECT IN DELETING THE AMOUNT. SINCE THE GROUNDS RAISED BY REVENUE ARE DEVOID OF ANY MERITS, WE LEVY COST OF RS.1000 O N ACIT-1, WARANGAL FOR COMING IN APPEAL ON ISSUES WHICH ARE A LREADY ACCEPTED BY HIM IN THE REMAND REPORT. THIS AMOUNT S HOULD BE RECOVERED FROM THE SALARY OF THE OFFICER CONCERNED. 8 ITA.NO.1050 & 1015/HYD/2013 MR. VENUGOPAL MUNDADA, WARANGAL 15. HOWEVER, AS SEEN FROM THE ORDERS OF ASSESSING OFFICER, HE HAS NOT CONSIDERED THE INCOME RETURNED WHILE COMPLETING THE ASSESSMENT, BUT COMPUTATION WAS MADE BY MAKING VARIOUS ADDITIONS ON HIS OWN. MOST OF THE AD DITIONS MADE BY A.O. WERE ACCEPTED TO BE WRONG AND LD. CIT( A) DELETED THE SAME. IN THE BARGAIN RETURNED INCOME BY ASSESSE E WAS NOT BROUGHT TO TAX. THEREFORE, WE DIRECT THE A.O. TO AC CEPT THE INCOME RETURNED. TO THAT EXTENT, REVENUE APPEAL IS PARTLY ALLOWED. HOWEVER, THE COST OF RS.1000 SHOULD BE REC OVERED FROM A.O. AND REMIT TO THE GOVERNMENT ACCOUNT, AS H E NOT ONLY IGNORED THE INCOME RETURNED BUT ALSO MADE ADDITIONS WHICH COULD NOT BE SUSTAINED. 16. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AN D REVENUE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.11.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH NOVEMBER, 2015. VBP/- COPY TO 1. MR. VENUGOPAL MUNDADA, H.NO.8-4-71, SRI KRISHNA COLONY, WARANGAL. 2. ACIT, CIRCLE-1, AAYAKAR BHAVAN, STATION ROAD, WA RANGAL. 3. COMMISSIONER OF INCOME TAX (APPEALS)-18, (HAVING CONCURRENT JURISDICTION OF CIT(A)-VI, HYDERABAD.) R OOM NO.20, 3 RD FLOOR, B-WING, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021. 4. CIT(A)-VI, HYDERABAD. 5. CIT-5/6, HYDERABAD 6. D.R. ITAT B BENCH, HYDERABAD