Appeal Details
Counselvise Citation
[2011] 140 COUNSELVISE.COM (IT) 51787 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-08-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2007-2008
Appeal Filed On
27-07-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B ' BENCH, CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER] S.P.NO.55/MDS/2011 & I.T.A.NO.1371/MDS/2011 ASSESSMENT YEAR : 2007-08 SHRI MAINRAJ 60, RAGHAVAN COLONY VADAPALANI, CHENNAI 26 VS THE ACIT CENTRAL CIRCLE III(2) CHENNAI [PAN AGPPM1877J] (PETITIONER/APPELLANT) (RESPONDENT) S.P.NO.56/MDS/2011 & I.T.A.NO.1372/MDS/2011 ASSESSMENT YEAR : 2007-08 SMT. USHARANI 60, RAGHAVAN COLONY VADAPALANI, CHENNAI 26 VS THE ACIT CENTRAL CIRCLE III(2) CHENNAI [PAN AAKPU1483F] (PETITIONER/APPELLANT) (RESPONDENT) S.P.NO.57/MDS/2011 & I.T.A.NO.1373/MDS/2011 ASSESSMENT YEAR : 2007-08 SHRI SUGANDARARAJ 60, RAGHAVAN COLONY VADAPALANI, CHENNAI 26 VS THE ACIT CENTRAL CIRCLE III(2) CHENNAI [PAN ALZPS9760M] (PETITIONER/APPELLANT) (RESPONDENT) SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 2 -: PETITIONER/APPELLANT BY : SHRI N.DEVANATHAN RESPONDENT BY : SHRI K.MEGHANATH CHOWHAN, JCIT/DR DATE OF HEARING : 12-08-2011 DATE OF PRONOUNCEMENT : 18-08-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE ABOVE CAPTIONED MATTERS WHICH INCL UDE THREE STAY PETITIONS AND THREE APPEALS, EACH PERTAINING TO ASS ESSMENT YEAR 2007- 08 AND FILED BY THE ASSESSEES, ARE BEING DISPOSED O F BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. S.P.NO.55/MDS/2011 & I.T.A.NO. 1371/MDS/2011 IN T HE CASE OF SHRI MAINRAJ 2. THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGA INST THE ORDER OF THE LD. CIT(A), CHENNAI, DATED 24.6.2011, FOR A SSESSMENT YEAR 2007-08. THE FACTS LEADING TO THE APPEAL FROM WHIC H STAY PETITION ALSO EMANATES, ARE THAT THE ASSESSEE, A TRADER IN E DIBLE OIL, HAD FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 21.2.2008 ADMITTING A TOTAL INCOME OF ` 8,08,861/-. THE ASSESSING OFFICER ISSUED NOTICE U/S 143(2) ON 17.8.2008 AND NOTICE U/S 142(1 ) ON 20.3.2009. AFTER THE DATE OF FILING OF THE RETURN AND BEFORE THE DATE OF ISSUANCE OF NOTICE U/S 143(2), A SURVEY U/S 133A OF THE ACT WAS CONDUCTED (ON SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 3 -: 27.2.2008) IN THE BUSINESS PREMISES OF A THIRD PAR TY NAMELY, M/S RAJARATHINAM CONSTRUCTIONS PVT. LTD AT NO.20, ANDER SON STREET, AYANAVARAM, CHENNAI, INCLUDING ITS BRANCH OFFICE SI TUATED AT SIRUVALLUR ROAD, PERAMBUR, AND ITS GODOWN AT MADHAVARAM. A SIM ULTANEOUS SEARCH WAS ALSO CONDUCTED U/S 132 OF THE ACT AT THE RESIDENCE OF COMPANYS MANAGING DIRECTOR, SHRI A. ANTHONY RAJARA THINAM ON THE SAME DAY. DURING THESE SEARCH/SURVEY OPERATIONS AN INCRIMINATING DOCUMENT IN THE FORM OF A SALE DEED EVINCING SALE O F A PIECE OF LAND SITUATED IN THE REVENUE ESTATE OF VILLAGE, PERUMBA KKAM, FOR A SALE CONSIDERATION OF ` 1.79 CRORES BY SHRI MAINRAJ, THE PRESENT ASSESSEE. THE RELEVANT DETAILS OF THIS SALE TRANSACTION ARE G IVEN IN A TABULAR FORM AS UNDER: SL. NO. NAME OF SELLER EXTENT OF LAND CONSIDERATION ` NATURE OF DOCUMENT DATE 1. SHRI S.MAINRAJ 1.23 ACRES 1,79,25,000 SALE RECEI PT CUM DECLARATION 01.03.2007 3. IN THIS BACKGROUND, THE ASSESSMENT OF THIS CASE WA S NOTIFIED TO CENTRAL CIRCLE III(2) VIDE NOTIFICATION NO.13/2008- 09 DATED 23.12.2008 IN C.NO.6121/CENTRN/2008-09/VI. THE ASSESSMENT PRO CEEDINGS INITIATED AS STATED ABOVE WERE CONTINUED BY THIS CH ANGED OFFICE OF ASSESSING OFFICER BY ISSUANCE OF NOTICE U/S 142(1) ON 23.12.2009. IN SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 4 -: RESPONSE TO THIS NOTICE, ASSESSEES LD.AR APPEARED AND FILED THE REQUISITE DETAILS. 4. THE MAIN ISSUE IN THIS CASE IS THE SALE OF LAND ME ASURING 1.23 ACRES OF LAND FOR A CONSIDERATION OF ` 1,79,25,000/-, WHICH WAS, EARLIER, PURCHASED BY SHRI MAINRAJ, THE PRESENT ASSESSEE, ON 12.10.1998 FOR A CONSIDERATION OF ` 11,19,480/-. THE ASSESSING OFFICER NOTICED THAT T HE ASSESSEE HAD NOT DECLARED LONG TERM CAPITAL GAINS(L TCG) ON ACCOUNT OF THE SALE OF THE ABOVE PROPERTY. THE ASSESSING OFFICER SOUGHT EXPLANATION IN THIS REGARD AND THE ASSESSEE FILED A DETAILED WRITTEN SUBMISSION, DURING THE COURSE OF ASSESSMENT, EXPLA INING HIS STAND ON THIS ISSUE. THE LETTER GIVING THE DETAILS IS AS UN DER: 'I HAVE FILED THE RETURN OF INCOME FOR THE ABOVE A SSESSMENT YEAR 2007-08 BEFORE THE JURISDICTIONAL ASSESSING OF FICER, VIZ: ASSISTANT COMMISSIONER OF INCOME TAX CLAIMING EXEMP TION IN RESPECT OF CAPITAL GAINS ON SALE OF AGRICULTURAL LA NDS. THE LEARNED ASSESSING OFFICER INITIATED PROCEEDINGS U/S 143(3) SCRUTINY PROCEEDINGS AND IN RESPONSE TO NOTICE U/S 143(2) I HAVE FILED COMPLETE PARTICULARS IN RESPECT OF MY CL AIM REGARDING NON TAXABILITY OF CAPITAL GAINS, THE FOLLOWING ARE THE PARTICULARS FILED NAMELY: A) VILLAGE CULTIVATION RECORD SHOWING THE AGRICULTU RAL OPERATIONS CARRIED ON THE LAND; B) POPULATION CENSUS OF THE VILLAGE. C) DISTANCE FROM THE LOCAL LIMITS OF MUNICIPALITY. D) PHOTOGRAPHS OF CULTIVATION. E) OPINION FROM THE COUNSEL . F) CERTIFICATE FROM THE VILLAGE OFFICER SHOWING THE NATURE OF LAND . SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 5 -: G) SALE PROCEEDS TAKEN BY THE AXIS BANK TOWARDS DISCHARGE OF LIABILITY DIRECTLY TAKE FROM THE BUYER . H) THE FACT THE BUYER HAS USED THE LAND FOR OTHER PURPOSE IS NOT RELEVANT IN THE LIGHT OF BINDING DECISION OF MADRAS HIGH COURT DECISION REPORTED IN 292 ITR 481 (MAD) RELIED ON. I) FREE ELECTRICITY GIVEN BY THE GOVT PAID AND REFUNDED BY EB . IT IS SUBMITTED THAT IN THE LIGHT OF PUCCA EVIDENCE FURNISHED BY US THERE IS NO SCOPE FOR MAKING ANY ASSESSMENT ON THE BASIS OF MERE SUSPICION, SURMISES AND CONJECTURES WHICH IS N OT VALID IN LAW. 292 ITR 0481 (MAD) STILL THE LAND HAS GOT MANG O TREES, PUMP SETS, COCONUT TREES ETC., WITH ABUNDANT WATER FACIL ITY AVAILABLE FROM BIG WELL WHICH COULD BE INSPECTED EVEN ON TODA Y. AN ASSESSMENT BASED ON MERE SUSPICION, SURMISES AND CONJECTURE IS BAD IS BAD IN LAW: A) CIT VS KAMWESHWAR SINGH 1 ITR 94 AT106{PRIV Y COUNCIL). B) CIT VS GOKULDAS HUKUMCHAND 15 ITR 61. C) BANSHIDAR ONKARMALL VS CIT 23 ITR 353. D) CIT VS NARAIN CHAND BAIDYA 20 ITR 287. E) DHAKESHWARI COTTON MILLS 26 ITR 775 F) LALCHAND BHAGAT AMBICA 37 ITR 288 S.C G) GOPAL NATH AGARWAL 28 ITR 753 H) SETH NATHURMAL 25 ITR 216 I) RAJMOHAN SAHA 52 ITR 231 J) BHAGAT AMBICA RAM 37 ITR 288 SC K) UMACHARAN SHAH 37 ITR 271 SC L) OMAR SALAY MOHAMED SAIT 37ITR 151 SC LAW IS ALSO WELL SETTLED THAT THERE IS NO PRESUMPTI ON OF BAD FAITH AGAINST AN ASSESSEE SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 6 -: HEERABHAI DESAI 4 ITR 95 SIVAN PILLAI 34 ITR 328 LALCHAND BHAGAT AMBICA RAM 37 ITR 288 S.C CIT V MAHAJAN OVERSEAS 191 ITR ST.4 M.J CHERIAN 117 ITR 371 IT IS HUMBLY PRAYED THAT IN THE LIGHT OF GOVERNMENT RECORDS AND EVIDENCE FURNISHED BY US, IT IS HUMBLY PRAYED THAT THE ASSESSMENT BE BASED ON VERIFICATION OF EVIDENCE FILED BY US AN D NOT TO PROCEED ON THE BASIS OF SURMISES AND CONJECTURES. LAST BUT NOT THE LEAST, I WOULD REQUEST YOU TO CONS IDER THE PLIGHT THAT ALL THE SALE CONSIDERATION HAD BEEN ABSORBED BY THE BANK TO LIQUIDATE THE LIABILITY AND THERE EXISTS NO REAL CAPITAL GAIN S ACCRUED TO ME. STILL THERE EXIST BANK LIABILITIES. 5. THE ASSESSEES REPLY, WHICH MAINLY CONVEYED THAT TH E LAND IN QUESTION WAS AGRICULTURAL LAND AND THEREFORE, NO CAPITAL GAINS WOULD ARISE ON THE SALE THEREOF, WAS NOT ACCEPTED BY THE ASSESSING OFFICER ON THE REASONINGS THAT THIS PIECE OF LAND IS SITUATED WITHIN 8 KMS I.E AT A DISTANCE OF 7.8 KMS FROM THE LIMITS OF THE NEARBY MUNICIPAL CORPORATION; THAT NO AGRICULTURAL ACTIVITY WAS BE ING CARRIED OUT ON THIS PIECE OF LAND; AND ALSO THAT THE PURCHASERS INTENT ION WAS NOT TO CARRY ON AGRICULTURAL ACTIVITIES BUT TO CARRY ON COMMERCI AL ACTIVITIES THEREON. INFERENCES DRAWN BY THE ASSESSING OFFICER TO ESTABL ISH THAT THE LAND SOLD WAS NOT AGRICULTURAL BUT A CAPITAL ASSET, C AN BE SUMMARIZED AS UNDER: 1. THE LANDS WERE SITUATED IN NOTIFIED AREA AS PER SEC.2(14). SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 7 -: 2. THE ASSESSES HAS NOT PERFORMED ANY AGRICULTURA L OPERATIONS ON THE SAID LANDS FROM THE DATE OF ACQUI SITION OF LANDS IN 1998. INSTEAD, THEY APPOINTED ONE MR. P. N ATARAJAN, AS CARE TAKER WHO IN TURN CARRIED OUT A LITTLE AGRICUL TURAL OPERATIONS NOW AND THEN. 3. NEITHER THE ASSESSEES NOR THE CARE TAKER HAS MAINTAINED ANY ACCOUNT IN RESPECT OF PRIMARY AND SECONDARY AGR ICULTURAL OPERATION~ LIKE PLOUGHING, TILLING, SOWING , LABOUR , MANURE AND FERTILIZERS, HARVESTING, GROSS YIELD, NET AGRL. INC OME DERIVED ETC. 4. THE LAND IS SITUATED IN CHENNAI METROPOLITA N AREA VIDE SL.NO. 295 AT LOCAL BODY /VILLAGE NO. 187. 5. THE SELLERS OF THE LAND HAVE BEEN IN BUSINE SS OF EDIBLE OIL TRADE FOR THE LAST 15 YEARS. 6. MOST OF THE LANDS ADJOINING THE LANDS IN QU ESTION ARE NON- AGRICULTURAL IN NATURE. 7. THE LANDS WERE SOLD TO A COMPANY WHOSE ACTIVI TY IS DEVELOPMENT AND CONSTRUCTION RESIDENTIAL HOUSES. 8. THE AGRICULTURAL LANDS NEAR BY FETCHES ABOUT ` 15 LAKHS PER ACRE. 9. APPARENTLY THE SELLERS INTENTION OF PURCHAS ING THE LAND IN 1998 IS NOT FOR AGRICULTURAL PURPOSE. IN VIEW OF THE FORGOING POINTS IT IS CLEAR THAT THE LAND IN QUESTION IS NOT AGRICULTURAL LAND AND IS SITUATED WITHIN 8 K ILOMETERS FROM THE LOCAL LIMITS OF TAMBARAM MUNICIPALITY. 6. THEREFORE, THE ASSESSING OFFICER TREATED THIS PIEC E OF LAND, IN QUESTION AT THE TIME OF SALE AS A CAPITAL ASSET A ND NOT AS AGRICULTURAL LAND AND THUS HAS COMPUTED LTCG AS UNDER: SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 8 -: SALE CONSIDERATION OF THE LAND ` 1,79,25,000 LESS: INDEXED COST OF ACQUISITION ` 16,55,300/- LONG TERM CAPITAL GAIN ` 1,62,69,700/- 7. CONSEQUENT UPON ABOVE FINDING, HE HAS ALSO DISALLOW ED THE AGRICULTURAL INCOME CLAIMED AT ` 3 LAKHS BY TREATING IT AS INCOME FROM OTHER SOURCES. 8. FURTHER, THE ASSESSEE HAS ALSO CLAIMED A SUM OF ` 13,60,085/- TOWARDS MARKETING EXPENSES WHILE COMPUTING BUSINESS LOSS. THE ASSESSING OFFICER HAS DISALLOWED EXPENSES OF ` 13,60,085/- FOR WANT OF DETAILS. HE, THEREFORE, HAS ADDED THIS AMOUNT AL SO TO THE TOTAL INCOME OF THE ASSESSEE. HE HAS ALSO CHARGED INTERE ST U/S 234A AND 234B. AGGRIEVED, THE ASSESSEE HAS ASSAILED ALL THE SE ADDITIONS AND LD. CIT(A) HAS ALLOWED A PART RELIEF TO THE ASSESSEE, B Y ALLOWING ` 10 LAKHS AS MARKETING EXPENSES OUT OF THE TOTAL ADDITION OF ` 13,60,085/- ,BUT HE HAS CONFIRMED THE OTHER ADDITIONS. THE ASSESSEE HAS FILED SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT (A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND OPPOSED TO PRINCI PLES OF LEGITIMATE EXPECTATION AND AGAINST EVIDENCE ON RECO RD AND ASST ORDER IS BARRED BY LIMITATION. JURISDICTION 2. THE LEARNED CIT(A) FUNDAMENTALLY OUGHT TO HAVE APPRECIATED THAT THE TRANSFER OF ASSESSMENT FILE FR OM JURISDICTIONAL CIRCLE TO THE CENTRAL CIRCLE IS PER SE VOID AND NON EST IN LAW SINCE THERE EXIST NO INCRIMINATING M ATERIALS TO SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 9 -: JUSTIFY CENTRALIZATION AND THE POWERS CANNOT BE EXE RCISE IN MECHANICAL MANNER WITHOUT APPLICATION OF MIND, PART ICULARLY WHEN THE SCRUTINY PROCEEDINGS ARE ON THE WAY IN REG ULAR CIRCLE. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS GOT VESTED RIGHT TO BE ASSESSED IN TH E JURISDICTIONAL CIRCLE AS PER THE BINDING DECISION O F THE SUPREME COURT IN THE CASE OF BIDI SUPPLY CO VS UNIO N OF INDIA 29 ITR &1& SC AND THE REVENUE IN ANY EVENT AND WITHOUT PREJUDICE ERRED IN ISSUING NOTIFICATION AT THE FAG END OF THE LIMITATION OF COMPLETION OF ASSESSMENT MUCH TO THE DETRIMENT OF THE APPELLANT/DEPARTMENT . 4. THE LEARNED CIT (A) ERRED IN CONFIRMING ASSUMIN G JURISDICTION U/S 147 OF THE INCOME TAX ACT WHERE TH ERE EXISTS LIVE 143 (2) PROCEEDINGS PENDING ON THE DATE OF ISS UANCE OF NOTICE AND HENCE THERE IS NO ESCAPEMENT OF INCOME WARRANTING INITIATION OF PROCEEDINGS U/S 147 OF THE ACT. 5. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE INGREDIENT TO REOPEN THE ASSESSMENT ARE SINGULARLY ABSENT IN THE CASE OF THE APPELLANT, NAMELY PROPER RECORDI NG OF REASONS, EXISTENCE OF REASON TO BELIEVE, ABSENCE OF TANGIBLE MATERIALS AND SATISFACTION. 6. THE LEARNED CIT(A) FUNDAMENTALLY FAILED TO APPRE CIATE EVEN ASSUMING WITHOUT ADMITTING FOR THE SAKE IF ARG UMENT THAT THE CENTRALIZATION WAS FOR COORDINATED INVESTI GATION STILL THE ASSESSMENT CANNOT BE COMPLETED UNDER SEC TION14 7 R.W SECTION 143 (3) OF THEN ACT A CATCH 22 SITUATION FO R THE REVENUE IN THE ABSENCE IF INCRIMINATING MATERIALS L EADING TO FORMATION OF REASONS TO BELIEVE THAT INCOME HAD ESC APED ASST. LONG TERM CAPITAL GAINS 7. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT ONLY REASON OF THE ASSESSING OFFICE NOT DENY THE CLAIM O F THE APPELLANTS IN REGARD TO EXEMPTION OF CAPITAL GAINS IN RESPECT OF SALE OF AGRICULTURAL LANDS IS THAT THE LAND IS S ITUATE WITHIN 8 KMS OF THE MUNICIPAL LIMITS IS FACTUALLY IN CORRE CT IN THE LIGHT OF EVIDENCE FILED BY THE APPELLANT IN THE SHA PE OF CERTIFICATE ISSUED BY THE REVENUE DEPARTMENT OF THE STATE GOVERNMENT OF TAMI NADU. 8. THE CIT (A) FUNDAMENTALLY FAILED TO APPRECIATE THAT THE LAND IS SITUATED AND COMPRISED WITHIN THE JURISDICT ION OF SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 10 - : PERUMBAKKAM VILLAGE PANCHAYAT AND HENCE AGRICULTURA L LAND SITUATED WITHIN THE JURISDICTION OF PANCHAYAT IS NOT AMENABLE FOR CAPITAL GAINS WHICH HAS A POPULATION O F LESS THAN TEN THOUSAND AS PER LAST CENSUS IN TERM SO SEC 2 (14) OF THE INCOME TAX ACT . 9. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT THE LAND IS SITUATED AS PER REVENUE RECORDS DULY CERTIF IED MORE THAN 8 KMS FROM THE LOCAL LIMITS OF TAMABARM MUNICI PALITY AND HENCE THE PROVISION OF CLAUSE (B) OF SECTION 2 (14) OF THE ACT DOES NO APPLY AND HENCE THE IMPUGNED LAND I S NOT A CAPITAL ASSET WITHOUT PREJUDICE THE CENTRAL GOVER NMENT HAS NO POWER TO LEVY TAX ON SALE OF AGRICULTURAL LA NDS WHICH IS A STATE SUBJECT UNLESS PROCEDURE ENVISAGE UNDER ARTICLE 274 HAS BEEN FOLLOWED. 10. THE LEARNED CIT (A) GROSSLY ERRED IN HOLDING THAT THERE WAS NO CULTIVATION IN THE LAND IS CONTRARY TO EVIDENCE ON RECORD AND THE APPELLANT PROVED THE CULTIVATION TO THE HILT BY PRODUCING CULTIVATION RECORDS MAINTAINED BY THE GOVERNMENT, ASSESSED TO TAX ON THE BASIS OF CULTIVA TION, STATEMENT OF CARETAKER NATARAJAN SUPPORTING CULTIVA TION, AND EXPENSES INCURRED ON THE LAND, ENQUIRY MADE BY THE INTELLIGENCE WING, BESIDES AGRL LAND IS EQUIPPED WI TH DEEP WELL INCLUDING BORE WELL INSIDE THE WELL AND HIGH HORSEPOWER PUMP SET AND HENCE NO USEFUL PURPOSE WIL L BE SERVED ON CASE LAW WHICH TURN ON PARTICULAR FACTS O F THE CASE. 10. THE LEARNED CIT (A) ERRED IN MECHANICALLY CON FIRMING ADDITION IN RESPECT OF INCOME DERIVED FROM AGRICULT URAL OPERATION UNDER THE HEAD OTHER SOURCES WITHOUT NOTI CING THE FACT THAT THE APPELLANT HAD SUPPLIED VEGETABLES DAILY TO THE MARKET, BESIDES PADDY CULTIVATION WHICH WAS DUL Y RECORDED IN THE STATEMENT GIVEN BY MR. NATARAJAN, T HE CARETAKER OF THE LAND. TRAVELLING AND MARKETING EXPENSES 12. THE LEARNED CIT(A) ERRED IN ALLOWING PARTLY S UMS IN RESPECT OF TRAVELLING AND CONVEYANCE AND MARKETING EXPENSES WITHOUT CONSIDERING THE EVIDENCE AND EXPLANATION OFFERED BY THE APPELLANT 13. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT MUCH DAMAGE COULD HAVE BEEN AVOIDED ON ACCOUNT OF F AG END OF CENTRALIZATION OF THE CASE AT THE CLOSE OF T HE LIMITATION PERIOD AND THE ADDITION WAS MADE WITHOUT CAUSING ANY ENQUIRY SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 11 - : 14. THE LEARNED CIT (A) ERRED IN CONFIRMING CHARGIN G INTEREST U/S 234A AND 234B OF THE ACT. 15. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS. 9. IN THE MEANTIME, WHEN THERE WAS PRESSURE OF THE DEP ARTMENT ON THE ASSESSEE TO DEPOSIT THE OUTSTANDING TAX, A S TAY PETITION HAS BEEN FILED FOR THE STAYAL OF THE ENTIRE AMOUNT, AS PER LAW. WHEN WE WERE HEARING THE STAY PETITION, IT WAS THOUGHT THAT INSTEAD THE APPEAL CAN BE DISPOSED OF AS VERY SIMPLE ISSUE IS INVOLVED AND ALL RELEVANT DOCUMENTS ARE AVAILABLE IN THE PAPER BOOKS, ETC. I T WAS CONCURRED BY BOTH PARTIES AND WE ALSO THOUGHT IT FIT TO DECIDE T HE APPEAL INSTEAD OF PASSING ANY ORDER ON STAY PETITION BECAUSE WHATEVER VIEW, PRIMA-FACIE, WE ARE GOING TO TAKE IN THE STAY PETITION IT WOULD VIRTUALLY DECIDE THE APPEAL, SO WITH A VIEW TO SAVE TIME, THE APPEAL WA S ALSO HEARD. BOTH LD. REPRESENTATIVES OF THE PARTIES WERE READY TO A RGUE ON THE GROUNDS OF APPEAL AS WELL. CONSEQUENTLY, WE HEARD THE APPE AL. 10. THE MAIN ISSUE, AS IS EVIDENT FROM THE FACTS, IS RE GARDING THE NATURE OF THE LAND SOLD. ACCORDING TO THE ASSESSEE THIS IS AGRICULTURAL LAND AND ACCORDING TO REVENUE THIS IS A CAPITAL A SSET. THE QUESTION BEFORE US IS AS TO WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION IN RESPECT OF CAPITAL GAINS ON THE SALE OF THIS PIECE OF LAND WHICH IS SITUATED AT PERUMBAKKAM VILLAGE OR IN OTHER WORDS, WAS IT A CAPITAL SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 12 - : ASSET OR AN AGRICULTURAL LAND WHEN IT WAS SOLD. WE HAVE TREADED THROUGH THE ORDERS AND THE EVIDENCE AVAILABLE IN TH E PAPER BOOK AND HAVE FOUND THAT THE LAND IN QUESTION IS SITUATED 8 KMS AWAY FROM THE TAMBARAM MUNICIPALITY. THIS FACT IS SUPPORTED BY T HE FOLLOWING PIECES OF EVIDENCE ON RECORD: (I) A LETTER FROM VILLAGE ADMINISTRATIVE OFFICER, PERUMBAKKAM VILLAGE. (II) A COPY OF A MAP SHOWING ENTIRE AREA OF 831 ACRES FROM THE TAMILNADU GOVERNMENT REVENUE RECORDS, WHICH REPRESENTS FIELD AREA AND CLASSIFIED AS VILLAGE, ISSUED BY DEPUTY DIRECTOR, SURVEY AND LAND RECORDS. (III) A COPY OF THE SURVEY MAP CERTIFIED BY THE JOINT DIRECTOR, SURVEY AND LAND RECORDS, PUBLISHED BY K.MATHEW, IAS, SPECIAL COMMISSIONER & DIRECTOR, SURVEY AND SETTLEMENT SHOWING THE DISTANCE OF THIS LAND AT 8.5 KMS BETWEEN THE TWO BOUNDARIES TAMBARAM MUNICIPAL AND PERUMBAKKAM MUNICIPAL LIMITS. (IV) A COPY OF THE MAP OF CHENNAI METROPOLITAN DEVELOPMENT AUTHORITY, SHOWING DISTANCE BETWEEN PERUMBAKKAM SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 13 - : AND TAMBARAM AT 9.205 KMS. = 5.72 MILES. (V) EVIDENCE SHOWING SHORTEST DISTANCE BY ROAD MEASURED BY INSTRUMENT BY LICENSED SURVEYOR OF CORPORATION OF CHENNAI BY ROAD AT 8.22 KMS AND ARIEL ROUTE MEASURED BY SCALE WHICH GIVES A DISTANCE OF 8.01 KMS. (VI) A CERTIFICATE ISSUED BY TAHASILDAR CERTIFYING THE DISTANCE BETWEEN TAMBARAM AND PERUMBAKKAM AT 8.5 KMS AS PER REVENUE RECORDS. (VII) A CERTIFICATE ISSUED BY THE VILLAGE OFFICER CERTIFYING THE DISTANCE BETWEEN THE MUNICIPAL LIMITS OF TAMBARAM AND PERUMBAKKAM AT 9 KMS. 11. IN OUR CONSIDERED OPINION, THESE ARE THE BEST AVAI LABLE EVIDENCE TO DECIDE WHETHER THE DISTANCE BETWEEN THE LAND AND THE NEARBY MUNICIPALITY WHICH IS TAMBARAM MUNICIPALITY IS MORE THAN 8 KMS. THE CONTENTION OF THE LD.DR THAT THE ASSESSING OFF ICER HAS MADE SPOT INSPECTION AND HAS FOUND THAT THE LAND IS SITUATED EXACTLY AT A DISTANCE OF 7.8 KMS FROM THE MUNICIPAL LIMITS OF TAMBARAM, B Y MAIN ROAD THROUGH SALAIYUR IS NOT FOUND TO BE CORRECT. HE HA S REFERRED TO ARIEL DISTANCE WHICH ACCORDING TO HIM, WILL SHOW THAT THE LAND IS WITHIN 8 SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 14 - : KMS FROM TAMBARAM. IN OUR OPINION, THESE ARE VERY WEAK FORM OF EVIDENCE WHICH ARE IN THE HANDS OF THE REVENUE IN VIEW OF THE FACT THAT ARIEL DISTANCE CANNOT BE TAKEN IN SUCH CASES A ND ONLY DISTANCE MEASURED IN TERMS OF APPROACH BY ROAD AND NOT BY A STRAIGHT LINE DISTANCE ON HORIZONTAL PLANE OR CROWS FLIGHT TO RECKON THE DISTANCE BETWEEN A MUNICIPAL CORPORATION AND A VILLAGE. IN THIS REGARD, DECISION OF HON'BLE P&H HIGH COURT RENDERED IN THE CASE OF C IT VS SATINDER PAL SINGH, (2010) 229 CTR (P&H) 82, A COPY OF WHICH IS PLACED ON RECORD, CAN BE RELIED UPON. IN THIS CASE, IT HAS BEEN HELD THUS: THE MAXIMUM DISTANCE PRESCRIBED BY S. 2(14)(III)(B ) WHICH MAY BE INCORPORATED IN THE NOTIFICATION COULD NOT B E MORE THAN 8 KMS. FROM THE LOCAL LIMITS OF MUNICIPAL COMM ITTEE OR CANTONMENT BOARD ETC. THE NOTIFICATION HAS TO TAKE INTO ACCOUNT THE EXTENT OF, AND SCOPE FOR URBANIZATION O F THAT AREA AND OTHER RELEVANT CONSIDERATIONS. THE RECKONI NG OF URBANIZATION AS A FACTOR FOR PRESCRIBING THE DISTAN CE IS OF SIGNIFICANCE WHICH WOULD YIELD TO THE PRINCIPLE OF MEASURING DISTANCE IN TERMS OF APPROACH ROAD RATHER THAN BY S TRAIGHT LINE ON HORIZONTAL PLANE. IF PRINCIPLE OF MEASUREME NT OF DISTANCE IS CONSIDERED STRAIGHT LINE DISTANCE ON HO RIZONTAL PLANE OR AS PER CROW'S FLIGHT THEN IT WOULD HAVE NO RELATIONSHIP WITH THE STATUTORY REQUIREMENT OF KEEP ING IN VIEW THE EXTENT OF URBANIZATION. SUCH A COURSE WOUL D BE ILLUSORY. IT IS IN PURSUANCE OF THE AFORESAID PROVI SION THAT NOTIFICATION NO. 9447 DT. 6TH JAN., 1994 HAS BEEN I SSUED BY THE CENTRAL GOVERNMENT. IN RESPECT OF THE STATE OF PUNJAB, AT ITEM NO. 18 THE SUBDIVISION KHANNA HAS BEEN LIST ED AT SERIAL NO. 19. IT HAS INTER ALIA BEEN SPECIFIED THA T AREA UPTO SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 15 - : 2 KMS. FROM THE MUNICIPAL LIMITS IN ALL DIRECTIONS HAS TO BE REGARDED OTHER THAN AGRICULTURAL LAND. ONCE THE STA TUTORY GUIDANCE OF TAKING INTO ACCOUNT THE EXTENT AND SCOP E OF URBANIZATION OF THE AREA HAS TO BE RECKONED WHILE I SSUING ANY SUCH NOTIFICATION THEN IT WOULD BE INCONGRUOUS TO THE ARGUMENT OF THE REVENUE THAT THE DISTANCE OF LAND S HOULD BE MEASURED BY THE METHOD OF STRAIGHT LINE ON HORIZ ONTAL PLANE OR AS PER CROW'S FLIGHT BECAUSE ANY MEASUREME NT BY CROW'S FLIGHT IS BOUND TO IGNORE THE URBANIZATION W HICH HAS TAKEN PLACE. TRIBUNAL WAS THEREFORE JUSTIFIED IN HO LDING THAT DISTANCE OF 2 KMS. FROM THE MUNICIPAL LIMITS OF CIT Y OF KHANNA HAS TO BE RECKONED FOR THE PURPOSES OF S. 2( 14)(III) BY MEASURING THE SAME AS PER THE ROAD DISTANCE AND NOT AS PER STRAIGHT LINE DISTANCE ON A HORIZONTAL PLANE OR AS PER CROW'S FLIGHT.-LAUKIK DEVELOPERS VS. DY. CIT (2007) 108 ITJ (MUMBAI) 364 : (2007) 105 ITD 657 (MUMBAI) APPROVED. 12. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT IN VIEW OF THE OVERWHELMING EVIDENCE PRODUCED BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER ARE ENOUGH TO COME TO A DEFINITE CONCLUSIO N THAT THIS LAND WAS BEYOND 8 KMS. FROM THE TAMBARAM MUNICIPAL LIMITS. THE DEFINITION OF A CAPITAL ASSET GIVEN IN SECTION 2(14) OF THE AC T EXCLUDES AN AGRICULTURAL LAND FROM ITS AMBIT IF IT IS SITUATED BEYOND 8 KMS. FROM THE MUNICIPAL LIMITS. 13. THE OTHER OBJECTION OF THE ASSESSING OFFICER FOR NO T TREATING THIS LAND AS AGRICULTURAL LAND IS THAT NO AGRICULTURAL ACTIVITIES WERE BEING CARRIED ON IN THIS LAND. FROM POINT NO.2 WHICH IS GIVEN IN THE LIST OF SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 16 - : INFERENCES DRAWN BY THE ASSESSING OFFICER IN OUR EA RLIER PORTION OF THIS ORDER, ITSELF SHOWS THAT HE HAS ACCEPTED IN PRINCIP LE THAT AGRICULTURAL ACTIVITIES WERE CARRIED ON THIS LAND BEFORE SALE BE CAUSE HE HAS MENTIONED THAT SHRI P. NATARAJAN WAS APPOINTED AS CARETAKER WHO CARRIED OUT AGRICULTURAL OPERATIONS BUT NOW AND THE N. THE OTHER EVIDENCE IN THIS REGARD PRODUCED BY THE ASSESSEE A RE AS UNDER: (I) VILLAGE CULTIVATION RECORDS, NAMELY, CHITTA AND ADANGAL MAINTAINED BY THE GOVERNMENT FOR THE PURPOSE OF LEVY OF TAX CALLED KIST SHOWS THE LAND IS AGRICULTURAL LAND AND ALSO GIVEN A FINDING THAT THE ASSESSEE HAD CULTIVATED PADDY AND THE HAD PAID KIST IN THE NATURE OF LEVY FOR HOLDING AGRICULTURAL LAND AND YIELD OF AGRICULTURAL INCOME. (II) EXISTENCE OF ELECTRICITY PUMP SET HAVING 3 HORSE POWER AND ELECTRICITY SUPPLY GIVEN BY GOVERNMENT FREE OF COST TO GENUINE AGRICULTURISTS CONNECTED TO THE BIG WELL OWNED BY THE ASSESSEE. (III) ELECTRICITY CHARGES INCURRED BUT NOT TAKEN BY ELECTRICITY BOARD FOR CONSUMPTION OF ELECTRICITY TO SHOW THAT THE PUMP SET WAS USED FOR AGRICULTURAL OPERATIONS (A CONCESSION GIVEN BY THE GOVERNMENT). THIS ALSO SHOWS THAT THE CROPS WERE CULTIVATED THROUGH SUPPLY OF WATER. (IV) VILLAGE OFFICERS CERTIFICATE CERTIFYING THE POPULATION OF THE VILLAGE CONSISTING 9000 PEOPLE. SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 17 - : (V) VILLAGE OFFICERS CERTIFICATE CERTIFYING THE DISTANCE BETWEEN MUNICIPAL LIMITS OF TAMBARAM TO PERUMBAKKAM AT 9 KMS. (VI) STATEMENT RECORDED U/S 131 BY THE ADI(INTELLIGENCE WING). (VII) CONFIRMATION LETTER GIVEN BY SHRI P.NATARAJAN, THE CARETAKER OF AGRICULTURAL LAND. (VIII) TAHSILDARS CERTIFICATE SHOWING THAT THE LAND IS AGRICULTURAL LAND. 14. IN VIEW OF THE ABOVE OVERWHELMING EVIDENCE, IT CANN OT BE SAID THAT NO AGRICULTURAL ACTIVITIES WERE BEING CARRIED OUT ON THIS LAND BEFORE SALE. MOREOVER, AS STATED ABOVE, THE ASSESSING OFF ICER HAS HIMSELF ACCEPTED IN SUBSTANCE, THAT AGRICULTURAL ACTIVITIES WERE BEING CARRIED ON NOW AND THEN. THE FACT THAT THE ASSESSEE WAS SHOWI NG AGRICULTURAL INCOME FROM THIS LAND FURTHER FORTIFIES THIS CONTEN TION AND GOES TO PROVE THE CLAIM OF THE ASSESSEE. IN VIEW OF THE AB OVE FACTS, WE HOLD THAT AGRICULTURAL ACTIVITIES WERE CARRIED ON THIS LAND PRIOR TO SALE AND THE INCOME SHOWN AT ` 3 LAKHS HAS TO BE ACCEPTED AS AGRICULTURAL INCOME, AS APART FROM THAT NO FINDING HAS BEEN GIVE N BY THE ASSESSING OFFICER IN THIS REGARD. 15. THE ISSUE OF REGARDING JURISDICTION WAS NOT SERIOU SLY CONTESTED BEFORE US, HENCE, THE SAME STANDS DISMISSED. SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 18 - : 16. IN SO FAR AS THE ISSUE REGARDING VALIDITY OF NOTIC E U/S 148 IS CONCERNED, WE UPHOLD THE SAME BECAUSE AS A RESULT O F THIRD PARTYS CASE, CERTAIN INCRIMINATING EVIDENCE WAS FOUND WHIC H LEAD A VALID BASIS FOR FORMING AN OPINION OF ESCAPEMENT OF INCOME BY T HE ASSESSING OFFICER AND TO TAKE A RECOURSE TO SECTIONS 147 AND 148 OF THE ACT. SO, THIS LEGAL ISSUE CANNOT BE ALLOWED. 17. THE LAST ISSUE REGARDING CHARGING OF INTEREST U/S 2 34A AND 234B IS CONCERNED, IT WILL HAVE CONSEQUENTIAL EFFECT, AS THE CHARGING OF INTEREST IS MANDATORY. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED. 19. IN VIEW OF OUR ABOVE FINDING, THE STAY PETITION BEC OMES INFRUCTUOUS AND HENCE, DISMISSED. S.P.NO.56/MDS/2011 & I.T.A.NO. 1372/MDS/2011- IN TH E CASE OF SMT.USHA RANI 20. THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A) DATED 24.6.2011, PERTAINING TO ASSESSMEN T YEAR 2007-08. STAY PETITION HAS BEEN FILED FOR THE STAYAL OF THE OUTSTANDING AMOUNT. IN THIS CASE ALSO APPEAL WAS HEARD FOR SIMILAR REAS ONS AS WAS HEARD IN SHRI MAINRAJS CASE. SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 19 - : 21. BRIEFLY STATED, THE FACTS LEADING TO THE APPEAL AND STAY PETITION ARE THAT THE ASSESSEE FILED HER RETURN OF INCOME FO R ASSESSMENT YEAR 2007-08 ON 20.2.2008 ADMITTING A TOTAL INCOME OF ` 3,72,393/-. THE SOURCE OF INCOME HAS BEEN SHOWN AS INCOME FROM OTH ER SOURCES. AS DISCUSSED IN THE CASE OF SHRI MAINRAJ, AS A SEQUEL TO THE SURVEY/SEARCH CONDUCTED IN THE CASE OF M/S RAJARATHINAM CONSTRUCT IONS PVT. LTD ON 27.2.2008, IT WAS NOTICED THAT THE ASSESSEE HAD SOL D A PIECE OF LAND MEASURING 3.5 CENTS SITUATED AT PERUMBAKKAM VILLAGE FOR A CONSIDERATION OF ` 6,75,000/-. THE RELEVANT DETAILS OF THIS TRANSACT ION ARE AS UNDER: SL. NO. NAME OF SELLER EXTENT OF LAND CONSIDERATION ` NATURE OF DOCUMENT DATE 1. SMT. USHARANI 3.5 CENTS 6,75,000 SALE DEED 01.03 .2007 22. IN THIS BACKGROUND, THIS CASE WAS NOTIFIED TO CENTR AL CIRCLE III(2) VIDE NOTIFICATION NO.13/2008-09 DATED 23.12.2008 IN C.NO.6121/CENTRN/2008-9/VI, AS A RESULT OF WHICH A NOTICE U/S 148 WAS ISSUED ON 14.12.2009. SUBSEQUENTLY, NOTICES U/S 14 3(2) AND 142(1) WERE ISSUED ON 23.12.2009. THESE NOTICES WERE COMP LIED WITH AS THE ASSESSEES LD.AR APPEARED AND FILED THE REQUISITE D ETAILS. THE MAIN ISSUE IN THIS CASE IS WITH REGARD TO CAPITAL GAINS ON THE SALE OF PIECE OF LAND AS DISCUSSED ABOVE. THE EXPLANATION OF THE AS SESSEE AS WELL AS SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 20 - : THE OBSERVATION OF THE ASSESSING OFFICER ARE EXACT LY IDENTICAL AS THEY WERE IN THE CASE OF SHRI MAINRAJ. THEREFORE, WITH SIMILAR REASONING, WE HOLD THAT THE LAND SOLD IS AGRICULTURAL LAND AND THEREFORE, NO ADDITION ON ACCOUNT OF CAPITAL GAINS CAN BE MADE IN ASSESSEE S HANDS. CONSEQUENTLY, AGRICULTURAL INCOME OF ` 50,000/- DISCLOSED BY THE ASSESSEE HAS TO BE ALLOWED. 23. OUT OF TOTAL EXPENSES OF ` 8,15,100/- CLAIMED ON ACCOUNT OF DEALERS COMMISSION [OF ` 5,16,650/-], MARKETING EXPENSES [OF ` 2,98,450/-], THE LD. CIT(A) HAS ALLOWED ` 7 LAKHS BECAUSE THE ENTIRE EXPENSES ARE NOT PROPERLY EXPLAINED. THE DISALLOWA NCE WHICH IS ON LOWER SIDE WOULD NOT ENTAIL US TO INTERFERE IN THE LD. CIT(A)S ORDER, HENCE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 24. CHARGING OF INTEREST WILL TAKE CONSEQUENTIAL EFFECT . IN SO FAR AS VALIDITY OF NOTICE U/S 148 IS CONCERNED, WE UPHOLD THE SAME BECAUSE AS A RESULT OF SEARCH OF THIRD PARTYS CASE, CERTAIN I NCRIMINATING EVIDENCE WAS FOUND WHICH IS A VALID BASIS FOR RE-ASSESSMENT U/S 147 R.W.S 148. SO, THIS LEGAL ISSUE CANNOT BE ALLOWED. 25. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 21 - : 26. IN VIEW OF OUR ABOVE ORDER IN ASSESSEES APPEAL, TH E STAY PETITION HAS BECOME INFRUCTUOUS AND THE SAME IS DIS POSED OF ACCORDINGLY. S.P.NO.57/MDS/2011 & I.T.A.NO. 1373/MDS/2011 IN T HE CASE OF SHRI SUGANDARARAJ 27. THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2 007-08 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DATED 24.6.2011. STAY PETITION HAS ALSO BEEN FILED BY THE ASSESSEE FOR TH E STAYAL OF OUTSTANDING DEMAND. 28. BRIEFLY STATED, THE FACTS OF THE CASE LEADING TO T HIS APPEAL AND THE STAY PETITION ARE THAT THE ASSESSEE IS AN INDIV IDUAL AND DERIVES INCOME FROM SHARE IN NEW RAJA AND CO., A FIRM CARRY ING ON BUSINESS IN RETAIL TRADE OF BRANDED EDIBLE OIL AND REMUNERATION AS PARTNER IN THE FIRM AND INTEREST ON CAPITAL AND COMMISSION ON TURN OVER. THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08, ADMITTING TOTAL INCOME OF ` 4,14,745/- BEFORE THE JURISDICTIONAL ASSESSING OFFICER I.E BUSINESS CIRCLE V (3) ON 21.2 .2008. AS A RESULT OF SEARCH U/S 132 AND SIMULTANEOUS SURVEY U/S 133A IN THE BUSINESS PREMISES OF M/S RAJARATHINAM COSNTRUCTIONS PVT. LTD ON 27.2.2008 IT WAS FOUND THAT THIS ASSESSEE HAD SOLD A PIECE OF LA ND SITUATED IN SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 22 - : PERUMBAKKAM VILLAGE FOR A CONSIDERATION OF ` 1,60,00,000/-. THE RELEVANT DETAILS OF SALE TRANSACTION ARE AS UNDER: SL. NO. NAME OF SELLER EXTENT OF LAND CONSIDERATION ` NATURE OF DOCUMENT DATE 1. MR.SUGANDARARAJ 1.19 ACRES 1,60,00,000 SALE RECEIPT CUM DECLARATION 01.03.2007 29. THE JURISDICTION OF THIS CASE WAS TRANSFERRED TO CE NTRAL CIRCLE III(2) VIDE SAME NOTIFICATION AS WERE IN EARLIER CA SES. CONSEQUENTLY, NOTICE U/S 148 WAS ISSUED ON 14.12.2009. SUBSEQUEN TLY, NOTICES U/S 143(2) AND 142(1) WERE ALSO ISSUED ON 23.12.2009. THESE NOTICES WERE COMPLIED WITH AND THE ASSESSEES LD.AR FILED T HE REQUISITE DETAILS. AGAIN, THE MAIN ISSUE IN THIS CASE IS REGARDING THE NATURE OF THE LAND SOLD. THE LAND IN QUESTION IS SITUATED IN THE SAME VILLAGE AND IN THE SAME AREA WHERE THE LANDS IN THE ABOVE CASES ARE SI TUATED. THE ASSESSEE FILED DETAILED EVIDENCES WHICH ARE SIMILAR TO THE EVIDENCES IN ABOVE CASES AND THE ASSESSING OFFICER HAS GIVEN SIM ILAR REASONING TO HOLD THAT THE LAND IS A CAPITAL ASSET AS WAS GIVE N IN THE ABOVE CASES. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE ASSE SSING OFFICER IN THIS REGARD. THE AGRICULTURAL INCOME DISCLOSED WAS ALSO DISALLOWED AS A CONSEQUENCE THEREOF. SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 23 - : 30. BEFORE US SIMILAR ARGUMENTS WERE MADE BY BOTH THE P ARTIES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WITH THE SIMILAR LOGIC WHICH WE HAVE GIVEN IN THE CASE OF SHRI MAINRAJ, WE HOLD THAT THE LAND SOLD IS AGRICULTURAL LAND AND IT DOES NOT FALL UNDER THE DEFINITION OF CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT. THEREFORE, NO CAPITAL GAINS ARISE ON THE SALE OF THIS PIECE OF LAND. CONSEQUENTLY, W E DELETE THIS ADDITION. 31. THE DISALLOWANCE OF AGRICULTURAL INCOME BY TREATING IT AS INCOME FROM OTHER SOURCES TO THE TUNE OF ` 3 LAKHS IS ALSO ALLOWED AS AGRICULTURAL INCOME IN VIEW OF THE SAME REASONING A S GIVEN IN THE CASE OF SHRI.MAINRAJ . HENCE, THIS ADDITION IS ALSO DEL ETED. 32. THE LAST ISSUE OF THIS APPEAL IS REGARDING DISALLOW ANCE OF THE EXPENSES. THE ASSESSING OFFICER HAS DISALLOWED ` 4,79,275/- CLAIMED IN THE COMPUTATION OF BUSINESS LOSS. DURING THE APP ELLATE PROCEEDINGS IT WAS ARGUED THAT ` 4,79,275/- WAS SUB-DEALERS INCENTIVE AND TRAVELLING EXPENSES FOR WHICH THE ASSESSEE HAD ALRE ADY FILED DETAILS BEFORE THE PREDECESSOR OFFICER OF THE ASSESSING OFF ICER. IT WAS FURTHER ARGUED THAT THE ASSESSEE HAD TAKEN OLD, DAMAGED AND NOT SALEABLE OIL PACKETS FROM M/S NEW RAJA AGENCY, IN WHICH THE ASSE SSEE IS A PARTNER, AND MARKETED THEM. TO SELL THESE ITEMS, THE ASSESS EE HAD TO INCUR SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 24 - : CONSIDERABLE EXPENSES. AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS GIVEN THE FOLLOWING FI NDING: 13. THE BURDEN OF ESTABLISHING THE EXPENSES AND T HEIR ALLOWABILITY IS ON THE APPELLANT. THOUGH IT IS SUB MITTED THAT THE PARTICULARS WERE FURNISHED TO THE PREDECESSOR ASSESSING OFFICER, NO PARTICULARS WERE FURNISHED DU RING THE APPELLATE PROCEEDINGS. THE APPELLANT HAS NOT EXPLA INED THE REASONS WHY THE APPELLANT TOOK THE OLD, DAMAGED , ETC. OIL PACKETS FROM THE PARTNERSHIP FIRM (IN WHICH HE IS A PARTNER) WHICH IS BASICALLY DEALING IN OIL AND MADE A LOSS BY INCURRING EXPENSES. I, THEREFORE, HOLD THAT THE AP PELLANT HAS FAILED TO DISCHARGE HIS BURDEN IN ESTABLISHING AND IN EXPLAINING THE RATIONALE OF THE EXPENDITURE. HOWEV ER, CONSIDERING THAT THE APPELLANT HAS RETURNED RECEIPT OF ` 4,31,100/- FROM SALE OF OIL, I HOLD THAT THE DISALL OWANCE OF EXPENSES OF ` 3,00,000/- WOULD BE FAIR AND REASONABLE. ACCORDINGLY, THE DISALLOWANCE OF EXPENSES MADE IN T HE ASSESSMENT ORDER IS SUSTAINED AT ` 3,00,000/-. 33. BEFORE US, SIMILAR ARGUMENTS FROM BOTH SIDES WERE A DVANCED. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND TH AT THAT THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS ON A HI GHER SIDE. IN OUR CONSIDERED OPINION, THE DISALLOWANCE TO THE TUNE OF ` 1 LAKH OUT OF THE TOTAL EXPENSES CLAIMED OF ` 4,79,275/- WOULD BE JUSTIFIED IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, WE PARTLY ALLOW THIS ISSUE. 34. IN SO FAR AS THE CHARGING OF INTEREST U/S 234A AND 234B IS CONCERNED, THAT WILL TAKE A CONSEQUENTIAL EFFECT. SP 55 TO 57/11 ITA 1171 TO 1173/11 :- 25 - : 35. AS REGARDS REOPENING OF ASSESSMENT U/S 147 R.W.S 1 48 IS CONCERNED, IT IS HELD TO BE VALID BECAUSE CERTAIN I NCRIMINATING EVIDENCE WAS FOUND DURING SEARCH/SURVEY OPERATION WHICH IS S UFFICIENT TO FORM AN OPINION BY THE ASSESSING OFFICER THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED. 36. IN SO FAR AS THE ISSUE OF JURISDICTION IS CONCERNED , THE SAME WAS NOT SERIOUSLY PRESSED BEFORE US. HENCE, THE SAME ST ANDS DISMISSED. 37. IN VIEW OF OUR ORDER IN ASSESSEES APPEAL, THE STAY PETITION HAS BECOME INFRUCTUOUS AND HENCE, DISMISSED. 38. TO SUMMARIZE THE RESULT, ALL THE APPEALS OF THE ASS ESSEES ARE ALLOWED WHEREAS THE STAY PETITIONS ARE DISMISSED BE ING INFRUCTUOUS. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.08.2011. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 18 TH AUGUST, 2011 RD COPY TO: PETITIONER/APPELLANT /RESPONDENT/CIT(A)/ CITDR
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