Patidar Builders Private Limited, Bhopal V. The ACIT, 2(1), Bhopal

ITA 107/IND/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7850 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: P K JAIN
• Keywords: Capital asset; Business income; Additional evidence; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAACP8931A I.T.A.NO. 107 /IND/201 2 . A.Y. : 2007 - 08 PATIDAR BUILDERS, ACIT, E - 4/382, ARERA COLONY, BHOPAL VS 2(1), BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI P.K.JAIN, C. A. RESPONDENT BY : SHRI R. A. VERMA, SR. DR DATE OF HEARING : 1 2 .0 7 .2012 DATE OF PRONOUNCEMENT : 16 . 0 7 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 11.01.2012 FOR THE ASSE SSMENT YEAR 2007-08. 2. FOLLOWING TWO GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE :- -: 2: - 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND NOT JUSTIFIED IN NOT ADMITTING COPY OF ANUBANDH PATRA (AGREEMENT TO SALE) DATED 10.05.1998 AS ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULES, 1962 READ WITH SECTION 250(4)(5) OF THE INCOME-TAX ACT, 1961, , WHICH GOES TO THE VERY ROOT OF THE MATTER AND INVOLVES A SUBSTANTIAL CAUSE IN DETERMINING CORRECT INCOME AND THE CORRECT TAX LIABILITY FOR THE YEAR UNDER APPEAL OF THE APPELLANT COMPANY, PRODUCTION WHEREOF BEFORE THE LD. CIT(A) IS FULLY COVERED BY T HE EXCEPTION IN CLAUSE (D) OF SUB-RULE(1) OF RULE 46A WHICH READS AS WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. THE SAI D ADDITIONAL EVIDENCE THEREFORE, BE ORDERED TO BE ADMITTED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND NOT JUSTIFIED IN -: 3: - 3 SUSTAINING THE UNLAWFUL ADDITION OF RS. 24,20,000/- AS MADE BY THE LD. ASSESSING OFFICER TO THE APPELLA NT COMPANYS TOTAL INCOME ALLEGING IT TO BE ITS BUSINE SS INCOME AS AGAINST THE SAME BEING CAPITAL RECEIPT NOT LIABLE TO CAPITAL GAINS TAX UNDER THE PROVISION S OF INCOME-TAX ACT, 1961,. THE SAID ADDITION IS UNJUSTIFIED AND UNLAWFUL, THEREFORE, BE DELETED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEVELOPING REAL ESTATE AND SALE OF RAW HOUSES. THE ASSESSING OFFICER OBSERVED IN THE ASSESSMENT ORDER THAT THE A SSESSEE HAS SHOWN SUM OF RS. 24,20,000/- ON TRANSACTIONS OF SAL E OF TWO LANDS SITUATED AT GRAM RATANPUR SADAK PATWARI HALKA NO. 44, TAHSIL HUZUR, BHOPAL, WHICH WERE HELD IN THE NAME O F KANHA GRAIH NIRMAN SAHAKARI SAMITI. ON PERUSAL OF THE REG ISTERED SALE DEEDS DATED 26.09.2006 AND 16.10.2006 OF THE A BOVE LANDS FILED BY THE ASSESSEE, IT IS SEEN THAT KANHA GRAIH NIRMAN SAHAKARI SAMITI EFFECTED THE SALE TRANSACTIONS OF T HE ABOVE LAND AND THE ASSESSEE COMPANY WAS MERELY A CONSEN TER TO -: 4: - 4 THE ABOVE TRANSACTIONS. THE ASSESSEE COMPANY NEVER ACQUIRED SUCH LANDS IN TERMS OF PROVISONS OF TRANSFER OF PRO PERTY ACT, 1982. AS PER REVENUE RECORDS ALSO, THE OWNER WAS KA NHA GRAIH NIRMAN SAHAKARI SAMITI WHO SOLD THE ABOVE LAN DS. THUS, THE ASSESSING OFFICER TREATED THE SURPLUS ARI SING TO THE ASSESSEE COMPANY ON THE ABOVE SALE TRANSACTION AS B USINESS PROFIT ARISING OUT OF ADVENTURE IN THE NATURE OF TR ADE AND ADDED TO THE INCOME OF THE ASSESSEE. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- 7.4 I HAVE CAREFULLY CONSIDERED THE WRITTEN! ORAL SUBMISSION OF THE LD. AR AS ALSO THE FINDINGS OF TH E ASSESSING OFFICER INCLUDING THEIR CASE RECORDS. THI S IS A CASE WHERE THE ASSESSEE HAS STATED TO HAVE PURCHASE D EIGHT ACRES OF RURAL AGRICULTURAL LAND SITUATED AT KHASRA NO. 230, GRAM RATANPUR SADAK, P.H.NO.44 TAH. HUZUR, BHOPAL VIDE AGREEMENT TO SALE DATED 10.05.19 98 FOR RS 18,40,000/-. THE SELLER AS PER THIS AGREEMEN T IS M/S. KANHA GRAB NIRMAN SAHAKARI SAMITI, BHOPAL. ADMITTEDLY, NO SALE DEED WAS EXECUTED FOR SUCH -: 5: - 5 PURCHASE. THE AGREEMENT TO SALE DATED 10.05.1998 WA S ALSO ADMITTEDLY NOT PRODUCED BEFORE THE ASSESSING OFFICER AND FOR WHICH AN APPLICATION FOR ACCEPTANCE OF ADDITIONAL EVIDENCE WAS FILED U/R 46A DURING THE APPELLATE PROCEEDING. THE APPLICATION FOR ADDITIONA L EVIDENCE STANDS REJECTED. THE LAND WHICH WAS STATED TO BE PURCHASED THROUGH AGREEMENT TO SALE DATED 10.05.1998 FOR RS. 18,40,OOO/- WAS SOLD BY EXECUTING TWO SALE DEEDS DATED 26.09.2006 AND 16.10.2006 FOR RS. 25,00,000/- EACH AND FOR TOTAL CONSIDERATION OF RS. 50,00,000/- . AS PER THE TWO REGISTERED SALE DEEDS, THE SELLER IS M/S. KANHA GRAH NIRMAN SAHAKARI SAMITI, BHOPAL LAND THE BUYER PARTY IS M/S. ARCHANA CONSTRUCTION, A .PARTNERSHIP FIRM. IN BOTH THE REGISTERED DEEDS, TH E STATUS OF APPELLANT IS SHOWN ONLY TO BE A CONSENTER OF SUCH SALE TRANSACTIONS. THE APPELLANT HAS SHOWN SURPLUS OF RS. 24,20,000/- -: 6: - 6 AND CLAIMED THE SAME AS CAPITAL GAIN ON SALE OF AGRICULTURAL LAND, BEING EXEMPTED INCOME. THE CASE OF THE APPELLANT IS THAT EVEN THOUGH NO REGISTERED DEE D WERE EXECUTED FOR PURCHASE OF SUCH LAND BUT HE BECA ME THE OWNER OF SUCH LAND ON THE BASIS OF AGREEMENT TO SALE DATED 10.05.1998. THE APPELLANT HAS ALSO CLAIM ED THAT VIDE THIS AGREEMENT TO SALE DATED 10.05.1998, ALL PAYMENT WERE MADE TO THE SELLER PARTY AND POSSESSIO N OF THE LAND WAS ALSO TAKEN. THE ASSESSING OFFICER'S CASE IS THAT SUCH SALE OF L AND BY THE APPELLANT AS PER THE TWO REGISTERED ,DEEDS W AS NOT EVIDENCED AS IN THE REGISTERED DEEDS, THE SELLE R IS M/S KANHA GRAH NIRMAN SAHAKARI SAMITI, BHOPAL AND NOT THE APPELLANT. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT AS PER THE REVENUE RECORDS THE APPELL ANT WAS NEVER THE OWNER OF SUCH AGRICULTURAL LAND. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT THE APPELL ANT NEVER ACQUIRED SUCH AGRICULTURAL LAND AS PER THE TRANSFER OF PROPERTY ACT. EVEN THE AGREEMENT TO SAL E -: 7: - 7 DATED 10.05.1998 WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS AND THE SAME HAS NOT BEEN ACCEPTED AS AN ADDITIONAL EVIDENCE. IN THESE CIRCUMSTANCES WHEN THE APPELLANT WAS NEITHER THE OWNER OF SUCH AGRICULTURAL LAND NOR THE SELLER OF S UCH AGRICULTURAL LAND, THEREFORE, NO SUCH CLAIM FOR EXE MPTED CAPITAL GAIN CAN BE ALLOWED TO THE ASSESSEE. THE ASSESSING OFFICER ACCORDINGLY TAXED SUCH SURPLUS AMOUNTING TO RS. 24,20,000/- BEING BUSINESS IN THE NATURE OF TRADE. HAVING GONE THROUGH THE DETAILED SUBMISSION OF THE LD. AR AS ALSO THE FACTS NARRATED BY THE ASSESSING OFFI CER IT IS EMERGED THAT THE WHOLE CLAIM OF THE APPELLANT BEING CAPITAL GAIN SALE OF AGRICULTURAL LAND AS EXE MPTED INCOME IS BASED ON THE DOCUMENT WHICH IS DATED 10.05.1998 WHICH IS AGREEMENT TO SALE VIDE WHICH TH E APPELLANT STATED TO HAVE PURCHASE SUCH AGRICULTURAL LAND. HOWEVER, THIS ADDITIONAL EVIDENCE HAS NOT BEE N ACCEPTED AND, THEREFORE, NO COGNIZANCE IS GIVEN TO SUCH -: 8: - 8 DOCUMENT. IN THIS BACKGROUND THE OWNERSHIP OF THE AGRICULTURAL LAND IN THE HANDS OF APPELLANT IS NOT PROVED. IN THE SUBSEQUENT SALE DEEDS WHEN THE AGRICULTURAL LAND WAS STATED TO BE SOLD, THE APPELL ANT IS NOT THE SELLER BUT THE CONSENTER. IN THESE CIRCUMST ANCES, THE TWO BASIC INGREDIENTS FOR CLAIM OF EXEMPTED INC OME ON ACCOUNT OF SALE OF AGRICULTURAL LAND I.E. OWNERS HIP OF AGRICULTURAL LAND AND THE GENUINE SELLER OF THE AGRICULTURAL LAND ARE NOT PROVED. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE CLAIM OF THE APPELLANT TO BE AS EXEMPTED CAPITAL GAIN. IT IS SEEN THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE. THE APPELLANT COMPANY BY S UCH LAND TRANSACTION AND AS CONSENTER WITH M/S KANHA GRAH NIRMAN SAHAKARI SAMITI, BHOPAL AND THE BUYER PARTY M/S. ARCHANA CONSTRUCTIONS HAS EARNED/RECEIVE D INCOME TO THE EXTENT OF RS. 24,20,000/-. SUCH INCOM E IS EVIDENCED FROM THE BOOKS OF ACCOUNT OF THE APPELLAN T. THIS INCOME IS PRIMA FACIE IN THE NATURE OF ADVENTU RE IN -: 9: - 9 NATURE OF TRADE AND, THEREFORE, THE ACTION OF THE ASSESSING OFFICER ASSESSING THE TOTAL INCOME OF RS. 24,20,000/- AS BUSINESS INCOME AS AGAINST THE CLAIM OF THE APPELLANT AS EXEMPTED CAPITAL GAIN IS CONFIRMED . 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. SHRI P.K. JAIN, C. A., APPEARED ON BEHALF OF ASSESS EE AND CONTENDED THAT AGRICULTURAL LAND WAS TRANSFERRE D IN FAVOUR OF THE ASSESSEE IN VIEW OF THE EXTENDED PROV ISIONS OF SECTION 2(24) ACCORDING TO WHICH EVEN TAKING THE PO SSESSION OF LAND AMOUNTS TO TRANSFER. HE FURTHER CONTENDED T HAT THE AGRICULTURAL LAND WAS EXCLUDED FROM THE PURVIEW OF CAPITAL ASSETS AS PER SECTION 2(14)(III) OF INCOME-TAX ACT, 1961. AS PER LD. AUTHORIZED REPRESENTATIVE, THE ASSESSEE COMPANY DURING THE PREVIOUS YEAR UNDER CONSIDERATION DID EFFECT TR ANSFER OF A CAPITAL ASSET I.E. RURAL AGRICULTURE LAND WHICH RES ULTED INTO A PROFIT OF RS. 24,20,000 AND AS SUCH, THIS PROFIT WO ULD CONSTITUTE INCOME OF THE ASSESSEE COMPANY FOR THE P REVIOUS YEAR UNDER CONSIDERATION UNDER THE HEAD CAPITAL GAI NS -: 10: - 10 BECAUSE, IN THIS VERY YEAR THE TRANSFER HAD TAKEN P LACE BY EXECUTING TWO SALE DEEDS DATED 26.9.2006 AND 16.10. 2006 RESPECTIVELY. OUR ATTENTION WAS ALSO INVITED BY LD . AUTHORIZED REPRESENTATIVE TO PARA 2.11 TO 2.2 OF THE WRITTEN SUBMISSION PLACED BEFORE US. 7. IN VIEW OF THE ABOVE SUBMISSIONS, THE LD. AUTHORIZE D REPRESENTATIVE CONTENDED THAT THE LOWER AUTHORITIE S WERE NOT JUSTIFIED IN TREATING THE EXEMPTED GAIN OF TRANSFER OF AGRICULTURAL LAND AS BUSINESS INCOME OF THE ASSESSE E COMPANY. 8. ON THE OTHER HAND, THE LD. SENIOR DR REITERATED THE FINDINGS RECORDED BY THE LOWER AUTHORITIES WITH RES PECT TO NATURE OF ASSESSEES BUSINESS AND THE TRANSACTION O F SALE OF LAND ALLEGED TO BE EFFECTED BY THE ASSESSEE, WHEREI N ASSESSEE WAS NOT THE SELLER OF LAND BUT MERELY ACTED AS CONS ENTER. THE LD. SENIOR DR FURTHER CONTENDED THAT VARIOUS OPPORT UNITIES WERE GIVEN BY THE ASSESSEE BUT THE ASSESSEE DID NO T FURNISH THE AGREEMENT TO SALE DATED 10.5.1998, THEREFORE, T HE CIT(A) WAS JUSTIFIED IN NOT ACCEPTING THE SALE AGREEMENT A S ADDITIONAL EVIDENCE. -: 11: - 11 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES AND AL SO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED BY THE LD. AUTHORIZED REPRESENTATIVE DURING THE COURSE OF HEA RING BEFORE US. FROM THE RECORD, WE FOUND THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF DEVELOPING REAL ESTATE A ND SALE OF ROW HOUSES. IN THE RETURN OF INCOME, THE ASSESSEE H AD SHOWN EXEMPTED CAPITAL GAINS ON SALE OF LAND. AS PER THE FINDINGS GIVEN BY THE LOWER AUTHORITIES AND WHICH ARE ALSO A S PER MATERIAL ON RECORD, CLEARLY INDICATE THAT THE ASSES SEE IS NOT THE SELLER OF LAND BUT WAS MERELY CONSENTER TO THE TRANSACTIONS OF SALE. WE ALSO FOUND THAT THE ASSESS EE HAS NOT SHOWN THE AGRICULTURAL LAND ALLEGED TO BE ACQUIRED IN THE YEAR 1998, AS INVESTMENT IN ITS BOOKS OF ACCOUNTS, THER EFORE, THERE IS NO REASON TO TREAT THE LAND AS CAPITAL ASSETS FO R THE PURPOSE OF COMPUTING CAPITAL GAINS. NO WHERE BEFORE THE LOWER AUTHORITIES NOR BEFORE THE TRIBUNAL, THE ASSE SSEE HAS SHOWN THAT AGRICULTURAL LAND SO ACQUIRED WAS SITUAT ED OUTSIDE THE MUNICIPAL LIMIT SO AS TO CLASSIFY THE S AME UNDER SECTION 2(14)(III) OF THE INCOME-TAX ACT, 1961. NO SUPPORTING -: 12: - 12 MATERIAL WAS PLACED BEFORE ANY OF THE AUTHORITIES T O SUBSTANTIATE THE CLAIM THAT THE SAID AGRICULTURAL L AND WAS OUTSIDE THE PURVIEW CAPITAL ASSETS. SINCE THE ASSES SEE WAS ENGAGED IN THE BUSINESS OF DEVELOPING REAL ESTATE A ND SALE OF ROW HOUSES, EVEN IF IT IS TAKEN THAT THE ASSESSEE H AS ENTERED INTO AGREEMENT FOR PURCHASE OF THE LAND, THE SAME W AS MEANT FOR ITS BUSINESS PURPOSE. THE AGREEMENT TO SALE DAT ED 10.05.1998, WAS NOT PRODUCED BEFORE THE ASSESSING O FFICER. THE AGREEMENT TO SALE WAS PRODUCED BEFORE THE CIT(A ) FOR THE FIRST TIME, WHO DID NOT ACCEPT THE SAME AS ADDITION AL EVIDENCE AND DECLINE ASSESSEES PLEA BY OBSERVING THAT THE A SSESSEE DID NOT FURNISH THE SAID SALE DEED DATED 10.5.1998 TO SUBSTANTIATE ITS CLAIM THAT AGRICULTURAL LAND WAS A CTUALLY PURCHASED WAY BACK IN THE YEAR 1998. THE AGREEMENT TO SALE DATED 10.5.1998 GOES TO THE ROOT OF THE ISSUE AND F OR THE SUBSTANTIAL INTEREST OF JUSTICE, THE CIT(A) SHOULD HAVE ACCEPTED THE SAME. AS PR OUR CONSIDERED VIEW, FOR S UBSTANTIAL JUSTICE, ADDITIONAL EVIDENCE SHOULD NOT BE REFUSED TO BE ADMITTED ON TECHNICALITIES. HOWEVER, WE ACCEPT THE ADDITIONAL EVIDENCE AND AFTER GOING THROUGH THE AGREEMENT TO S ALE DATED -: 13: - 13 10.5.1998, WE FOUND THAT THE ASSESSEE HAS NOT SHOWN THE PURCHASE OF AGRICULTURAL LAND IN ITS BOOKS OF ACCOU NT AS AN INVESTMENT. THEREFORE, THERE IS NO REASON TO ACCEPT THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE THAT A SSESSEE HAS ACQUIRED AGRICULTURAL LAND AS AN INVESTMENT, PR OFIT ARISING OUT OF WHICH SHOULD NOT BE LIABLE TO BE TAX ED AS BUSINESS PROFIT OR CAPITAL GAIN, WHEN THE ASSESSEE HAS GROSSLY FAILED TO SHOW THAT THIS AGRICULTURE LAND WAS SITUA TED OUTSIDE THE MUNICIPAL LIMIT SO AS TO COME UNDER THE PURVIEW OF SECTION 2(14)(III) OF THE INCOME-TAX ACT, 1961. THU S, EVEN AFTER ACCEPTING THE AGREEMENT TO SALE DEED DATED 10.5.199 8, THE CONCLUSION DRAWN BY LOWER AUTHORITIES WILL NOT BE C HANGED AND PROFIT ARISING IN FAVOUR OF THE ASSESSEE AS A C ONSENTER TO THE DEED OF SALE WAS CORRECTLY TAXED AS BUSINESS IN COME. EVEN IN THE REVENUE RECORDS, THIS LAND NEVER TRANSF ERRED IN FAVOUR OF ASSESSEE AND IT WAS STANDING ONLY IN THE NAME OF KANHA GRIH NIRMAN SAHKARI SAMITI, WHO WAS ACTUALLY SELLER OF LAND DURING THE YEAR UNDER CONSIDERATION. EVEN I N THE SALE DEED ALLEGED TO BE EXECUTED DURING THE YEAR, THE AS SESSEE WAS NOT SHOWN AS A SELLER OF THE PROPERTY BUT MERELY AS CONSENTER -: 14: - 14 TO THE TRANSACTION OF SALE. WE HAVE DELIBERATED ON THE VARIOUS CASE LAWS RELIED ON BY THE LD. AUTHORIZED REPRESENT ATIVE BEFORE US AND FOUND RATIOS ARE QUITE DISTINGUISHABL E, WHEREAS FACTS OF THE INSTANT CASE CLEARLY SUGGEST THAT WHAT EVER PROFIT THE ASSESSEE HAS EARNED AS A CONSENTER OF LAND WAS MERELY IN THE NATURE OF BUSINESS INCOME EARNED DURING THE COU RSE OF ITS BUSINESS OF DEVELOPING REAL ESTATE AND SALE OF HOUS ES. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY THE LOWER AUTHORITIES RESULTIN G INTO TREATING THE GAIN ARISING OUT OF SALE TRANSACTION A S BUSINESS INCOME. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH JULY, 2012. CPU* 12167