Smt. Parul Gupta, Uttar Pradesh V. CIT, Meerut

ITA 1393/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81563 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 10-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL BAJPAI
• Assessee Lawyers: H G MALIK
• Keywords: Gift; Business income; Depreciation
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F, NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1393 /DEL/2012 ASSESSMENT YEAR : 2008-09 SMT. PARUL GUPTA, VS. CIT, MEERUT W/O SH. AJAY GUPTA, A-2, SHASTRI NAGAR, GARH ROAD, MEERUT. GIR / PAN:ACCPG9307N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H. G. MALIK, ADV. RESPONDENT BY : SHRI SUNIL BAJPAI, CIT DR ORDER PER T.S. KAPOOR, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT DATED 03.02.2012 PASSED U/S 263 OF INCOME-TAX ACT, 1961. THE ASSESSEE HAS TAKEN FIVE GROUNDS OF APPEAL. HOWEVER, THE CRUX OF GRIEV ANCE OF THE ASSESSEE IS PASSING OF ORDER U/S 263 WHEREBY THE COMMISSIONER H AS SET ASIDE THE ASSESSMENT ORDER WITH THE OBSERVATION THAT THE ASSE SSING OFFICER HAD WRONGLY CONSIDERED A PART OF INCOME AS AGRICULTURAL INCOME WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSM ENT IN THIS CASE WAS COMPLETED VIDE ASSESSMENT ORDER DATED 25.01.2010 U/ S 143(3) OF THE ACT. LD. CIT ON THE BASIS OF EXAMINATION OF RECORDS, OBS ERVED AS UNDER: THE ASSESSEE HAS RECEIVED THE AGRICULTURAL LAND WI TH EUCALYPTUS TREES ON THE LAND IN GIFT. THE ASSESSEE SOLD THE TREES IN THE SAME YEAR AND ITA NO.1393/DEL/2012 2 SHOWED RS. 9,11,800/- AS AGRICULTURAL INCOME. IN TH E CASE OF CIT VS. RAJA BENAY KUMAR SAHAI RAI, THE HON'BLE SUPREME COU RT DECIDED THAT THE PRIMARY SENSE IN WHICH THE TERM 'AGRICULTU RE' SHOULD BE UNDERSTOOD, IS ITS ROOT MEANING 'AGER' = FIELD + 'C ULTURA' =CULTIVATION; THAT IS TO SAY, FIELD CULTIVATION OR CULTIVATION OF THE GROUND, IN THE SENSE OF TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR OPERATIONS ON THE LAND. THESE ARE BASIC OPERATIONS AND DEMAND THE EXPENDITURE OF HUMAN LABOUR AND SKILL UPON THE LAND ITSELF AND FURTHER THEY ARE ALL DIRECTED TO MAKE THE CROP SPROUT OUT O F THE LAND. THE TAX PAYER HAS FAILED TO PROVE THAT ANY AGRICULTURE OPER ATION WAS DONE BY HIM. IT IS APPARENT THAT THE ASSESSEE DOES NOT FULF ILL THE PRIMARY SENSE OF AGRICULTURE, THEREFORE, THE SALE OF TREES SHOULD BE TREATED AS ADVENTURE IN TRADE.' 3. THE ASSESSEE WAS SHOW CAUSED VIDE NOTICE DATED 2 7.10.2010 IN RESPONSE TO WHICH, THE ASSESSEE FILED DETAILED REPL Y WHICH IS PLACED AT PAPER BOOK PAGE 29-40. HOWEVER, LD. CIT DID NOT ACCEPT T HE CONTENTION OF THE ASSESSEE AND PASSED ORDER U/S 263 OF THE ACT. 4. AT THE OUTSET, LD. A.R. INVITED OUR ATTENTION TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS PLACED AT PAPER BOOK PAGE 7. HE FURTHER TOOK US TO PAGES 8-10 WHERE DETAILED REPLY TO THE SAID NOTICE U/S 142(1) WAS PL ACED. LD. A.R. SPECIFICALLY INVITED OUR ATTENTION TO PARA 3 OF PAPER BOOK PAGE 9 WHERE THE SPECIFIC REPLY TO THE QUERY OF THE ASSESSING OFFICER WAS PLACED. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE ASSESSING OFFICER AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE, HAD TREATED THE INCOME AS AGRICULT URAL INCOME AND, THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER WAS NEITH ER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. IT WAS SUB MITTED THAT THE ASSESSING OFFICER HAD TAKEN THE CORRECT VIEW AS SALE OF TREES WAS NECESSARILY AN AGRICULTURAL INCOME AND IN THIS RESPECT OUR ATTENTI ON WAS INVITED TO PAPER BOOK PAGES 30-35 WHEREIN COPY OF SUBMISSIONS MADE T O LD. CIT WERE ITA NO.1393/DEL/2012 3 PLACED AND WHEREIN ASSESSEE HAD RELIED UPON VARIOUS JUDGEMENTS WITH THE PROPOSITION THAT INCOME OF THE ASSESSEE WAS AGRICUL TURAL INCOME AND, THEREFORE, IT CANNOT BE SAID THAT THE ORDER IS ERRO NEOUS. LD. A.R. FURTHER ARGUED THAT LD. CITS OBSERVATION REGARDING TREATME NT OF SALE OF TREES AS BUSINESS INCOME COULD BE ONE OF THE POSSIBLE VIEWS BUT THAT WOULD NOT MAKE THE VIEW OF ASSESSING OFFICER ERRONEOUS. RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: I) SPECTRA SHARES & SCRIPTS (P) LTD. VS CIT 261 CTR 499 (AP) II) CIT VS NEW DELHI TELEVISION LTD. 262 CTR 604 (D EL.) III) BIKAR SINGH VS CIT 156 TTJ 13 (JD) (UO) IV) CIT VS DEVELOPMENT CREDIT BANK LTD. 323 ITR 206 (BOM.) 5. LD. D.R. ON THE OTHER HAND SUBMITTED THAT THE AS SESSEE RECEIVED A PIECE OF LAND AS GIFT WITH TREES GROWN ON IT AND NO AGRICULTURAL OPERATIONS WERE DONE BY THE ASSESSEE. THEREFORE, SALE OF TREE S FROM THE ABOVE LAND CANNOT BE SAID TO BE AN AGRICULTURAL INCOME AND HEN CE, CIT HAS RIGHTLY TAKEN ACTION U/S 263 OF THE ACT. 6. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE HAD RECEIVED CERTAIN AGRICULTURAL LAND AS GIFT WHEREIN SOME 275 EUCALYPTUS TREES WERE STANDIN G AT THE TIME OF GIFT. THIS FACT IS COMING OUT FORM THE COPY OF THE GIFT D EED DATED 05.05.2004 PLACED AT PAPER BOOK PAGES 12 TO20. IN THE GIFT DE ED, IT IS CLEARLY MENTIONED THAT THE ASSESSEE WILL BE ENTITLED TO THE VALUE OF TREES STANDING ON THE AGRICULTURAL LAND WHICH WERE PLANTED BY DONORS OF T HE LAND. THESE DOCUMENTS WERE AVAILABLE BEFORE THE ASSESSING OFFIC ER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AS PER THE CERTIFICATE ANNEX ED BY THE COUNSEL OF THE ASSESSEE ON THE PAPER BOOK. THOUGH THE ASSESSING O FFICER HAS NOT ITA NO.1393/DEL/2012 4 ELABORATELY DEALT WITH THE ISSUE BUT AFTER RAISING QUERY AND AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, HE ACCEPTE D THE SUBMISSIONS OF ASSESSEE AND DID NOT DISALLOW THE CLAIM OF AGRICULT URAL INCOME. THEREFORE, IT IS NOT A CASE OF NO INQUIRY NEITHER IT IS A CASE OF INADEQUATE INQUIRY. LD. CIT IN THE NOTICE ISSUED U/S 263 WAS OF THE OPINION THA T THE SAID INCOME COULD NOT HAVE BEEN TREATED AS AGRICULTURAL INCOME AND, THERE FORE, HE INITIATED PROCEEDINGS U/S 263. IN RESPONSE TO THE NOTICE U/S 263, THE ASSESSEE FILED ELABORATE REPLY WHICH IS PLACED AT PAPER BOOK PAGES 29-40 WHEREIN THE ASSESSEE RELIED UPON A NUMBER OF CASE LAWS TO JUSTI FY THAT INCOME RECEIVED BY HER WAS NECESSARILY AN AGRICULTURAL INCOME. THE REFORE, AT THE MAXIMUM, IT CAN BE SAID THAT THIS IS A CASE WHERE TWO OPINIO NS WERE POSSIBLE AND IN VARIOUS JUDICIAL PRONOUNCEMENTS, IT HAS BEEN HELD T HAT AN ORDER CANNOT BE SAID TO BE ERRONEOUS SIMPLY ON THE BASIS THAT ASSES SING OFFICER HAD TAKEN ONE OF THE POSSIBLE VIEWS WHICH IS AGAINST REVENUE. THE FACTS AND CIRCUMSTANCES OF CASE LAW OF SPECTRA SHARES & SCRIP TS (P) LTD. (SUPRA), AS RELIED UPON BY LD. A.R. ARE AS UNDER: THE AO HAD PASSED THE ASSESSMENT ORDER ACCEPTING T HE CASE OF THE ASSESSEE THAT ITS INCOME HAS TO BE TAXED UNDER THE HEAD 'CAPITAL GAIN' AS HE WAS SATISFIED WITH THE EXPLANATION AND DATA S UBMITTED BY THE ASSESSEE VIDE ITS LETTERS (TO HIS QUERIES MADE VIDE HIS LETTERS DT.22 ND JAN., 2008, 17 TH APRIL, 2008 AND 4 TH AUG., 2008) THAT IT IS AN INVESTMENT COMPANY CARRYING ON BUSINESS IN SHARES AND SUCH INV ESTMENT IS MADE FOR THE SOLE PURPOSE OF DERIVING DIVIDEND INCOME. T HE CORRESPONDENCE EXCHANGED BETWEEN THE PARTIES SHOWS THAT THE AO RAI SED SPECIFIC QUERIES ABOUT THE BUSINESS ACTIVITY OF THE ASSESSEE AND ALSO ITS CLAIM OF L TCG INCOME FROM QUOTED SHARES, UNQUOTED SHARES AN D MUTUAL FUND UNITS APART FROM STCG FROM THE SALE OF SHARES AND M UTUAL FUND UNITS. THE ASSESSEE HAD ALSO GIVEN DETAILS OF COMPUTATION OF CAPITAL GAINS UNDER VARIOUS CATEGORIES. IT IS SETTLED LAW THAT TH E AO IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS. IN PARAS 5 AND 5.2 OF HIS ORDER UNDER S. 263, THE CIT ALSO H ELD THAT SUBSTANTIAL ITA NO.1393/DEL/2012 5 INFORMATION HAD BEEN FURNISHED BY THE ASSESSEE, AND AT PARA 5.1 HE HELD THAT THERE WAS APPLICATION OF MIND BY THE AO B UT THE CONCLUSION OF THE AO IS WRONG. IT MAY BE THAT IN THE ASSESSMEN T ORDER, THE AO HAS NOT MADE AN ELABORATE DISCUSSION ON THE ISSUE AS TO THE NATURE OF ACTIVITY OF THE ASSESSEE I.E., WHETHER IT IS AN INV ESTMENT OR WHETHER IT IS BUSINESS INCOME AND DID NOT REFER TO HIS QUERY ON T HE ISSUE TO THE ASSESSEE BEFORE PASSING THE ORDER OR THE REPLY GIVE N BY THE ASSESSEE TO HIS QUERY (VIDE IT'S LETTER DT. 29 TH AUG., 2008). WHEN IT IS NOT INCUMBENT ON THE AO TO PASS A DETAILED ORDER, MERELY BECAUSE THE ORDER DOES NOT CONTAIN REASONS AS TO WHY HE ACCEPTED THAT THE ASSE SSEE IS AN INVESTMENT COMPANY, HIS ORDER DOES NOT BECOME SUSCE PTIBLE FOR REVISION; THE AO WHILE MAKING AN ASSESSMENT HAD EXA MINED THE ACCOUNTS, MADE INQUIRIES, APPLIED HIS MIND TO THE F ACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINED THE INCOME OF THE ASSESSEE. THEREFORE, IT IS NOT OPEN TO THE CIT, ON THE GROUND THAT A DIFFERENT VIEW IS POSSIBLE, TO REOPEN THE ASSESSMENT ON THE G ROUND THAT THE AO DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD - CIT VS. SUNBEAM AUTO LTD. (2009) 227 CTR (DEL) 476; (2010) 47 DTR (DEL) 348, CIT VS. SUNBEAM AUTO LTD. (2009) 227 CTR (DEL) 133; (2009) 31 DTR (DEL) 1 ; (2011) 3321TR 167 (DEL) AND CIT VS. G ABRIALLNDIA LTD. (1993) 114 CTR (BOM) 81 ; (1993) 2031TR 108 (BOM) R ELIED ON. 6.1 FROM THE ABOVE FINDINGS, IT COMES OUT THAT IT I S NOT OPEN TO CIT TO REOPEN AN ASSESSMENT ON THE GROUND THAT THE ASSESSI NG OFFICER DID NOT MAKE ELABORATE DISCUSSION. 6.2 SIMILARLY, HON'BLE MUMBAI HIGH COURT IN THE CAS E OF CIT(A) VS DEVELOPMENT CREDIT BANK LTD. (SUPRA) HAS HELD AS UN DER: HELD, DISMISSING THE APPEAL, THAT THERE WAS NO BAS IS OR JUSTIFICATION FOR THE COMMISSIONER TO INVOKE THE PROVISIONS OF SE CTION 263. THE ASSESSING OFFICER AFTER MAKING AN ENQUIRY AND ELICI TING A RESPONSE FROM THE ASSESSEE CAME TO THE CONCLUSION THAT THE A SSESSEE WAS ENTITLED TO DEPRECIATION ON THE VALUE OF SECURITIES HELD ON THE TRADING ACCOUNT. THE COMMISSIONER COULD NOT HAVE TREATED TH IS FINDING TO BE ERRONEOUS OR TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE OBSERVATION OF THE COMMISSIONER THAT THE ASSESSING OFFICER HAD ARRIVED AT A FINDING WITHOUT CONDUCTING AN ENQUIRY WAS ERRONEOUS, ITA NO.1393/DEL/2012 6 SINCE AN ENQUIRY WAS SPECIFICALLY HELD WITH REFEREN CE TO WHICH A DISCLOSURE OF DETAILS WAS CALLED FOR BY THE ASSESSI NG OFFICER AND FURNISHED BY THE ASSESSEE. THE TRIBUNAL WAS JUSTIFI ED IN HOLDING THAT RECOURSE TO THE POWERS UNDER SECTION 263 WAS NOT WA RRANTED IN THE FACTS AND CIRCUMSTANCE OF THE CASE. 6.3 IN THE PRESENT CASE, WE FIND THAT SPECIFIC QUER Y WAS RAISED BY THE ASSESSING OFFICER REGARDING AGRICULTURAL INCOME AND THE ASSESSEE HAD FILED COMPLETE REPLY TO THIS QUERY AND THE ASSESSING OFFI CER HAD NOT MADE ANY ADDITION ON THIS EFFECT. THE VIEW TAKEN BY THE ASS ESSING OFFICER IS A POSSIBLE VIEW AS IN THE CASE OF K SIMRATHMULL VS CI T (1967) 64 ITR 166 THE HON'BLE MADRAS HIGH COURT HAD HELD AS UNDER: NEITHER THE CHARACTER OF THE RECIPIENT, NOR THE FA CT THAT IT IS RECEIVED IN THE COURSE OF ANY BUSINESS CAN ALTER THE CHARACT ER OF THE RECEIPT AS AGRICULTURAL INCOME. A PERSON MAY CAME BY POSSESSI ON OF AGRICULTURAL LAND FROM WHICH HE DERIVES INCOME ON A CCOUNT OF DIFFERENT SITUATIONS AS FOR INSTANCE AS AN OWNER, O R SECURITY FOR REPAYMENT OF LOANS ADVANCED BY HIM, OR AS A LESSEE, OR BY A CONVEYANCE WITH AN AGREEMENT TO RESALE, OR EVEN AS A TRESPASSER. ALL THESE DO NOT AFFECT THE CHARACTER OR RECEIPT AS AGR ICULTURAL INCOME. 6.4 SIMILARLY, IT WAS HELD IN THE CASE OF PREMIER C ONSTRUCTION CO. LTD. VS CIT (1948) 16 ITR 380 THAT IF AN INCOME FALLS WITH IN THE DEFINITION OF AGRICULTURAL INCOME, IT EARNS EXEMPTION WHICH IS NO T AFFECTED BY THE CHARACTER OF THE ASSESSEE WHO RECEIVES IT. THESE CASE LAWS WERE RELIED UPON BY THE ASSESSEE IN RESPONSE TO NOTICE U/S 263 AND W HICH ARE ALSO DISTINGUISHABLE WITH CASE LAW OF CIT VS RAJA BENAY KUMAR SAHAS ROY (1957) 32 ITR 466 AS RELIED UPON BY LD. CIT IN HIS NOTICE U/S 263 AS IN THAT CASE THE ISSUE FOR CONSIDERATION WAS FOR AGRICULTUR AL INCOME FROM TREES OF SPONTANEOUS GROWTH WHEREAS THE PRESENT CASE INVOLVE S THE QUESTION OF AGRICULTURAL INCOME FROM TREES PLANTED BY DONORS OF THE LAND. ITA NO.1393/DEL/2012 7 7. IN VIEW OF ABOVE, WE FIND THAT THE ASSESSING OFF ICER HAD TAKEN THE VIEW, WHICH IS A PLAUSIBLE VIEW AND THE JURISDICTIO N ASSUMED BY LD. CIT BY HOLDING A DIFFERENT VIEW IS NOT AS PER LAW. 8. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH AUG., 2014. SD./- SD./- (I. C. SUDHIR ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 08 TH AUG., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).