The ACIT, Circle-9, Ahmedabad V. Shri Govindbhai C.Patel, Ahmedabad

ITA 1610/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0203 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SENIOR
• Keywords: Capital asset; Business income; Salary income; Cost of acquisition; Capital Gains

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO. 1610/AHD/2009 WITH C O NO. 121/AHD/2009 (ASSESSMENT YEAR: 2005-06) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-9, AHMEDABAD SHRI GOVINDBHAI C PATEL, 2 ND FLOOR, MUNICIPAL BUILDING, PATTHARKUVA, RELIEF ROAD, AHMEDABAD V/S V/S SHRI GOVINDBHAI C PATEL, 2 ND FLOOR, MUNICIPAL BUILDING, PATTHARKUVA, RELIEF ROAD, AHMEDABAD PAN: AEHPP 8754 K ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-9, AHMEDABAD (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SMT. NEETA SHAH, SENIOR DR ASSESSEE BY:- SHRI DHIREN SHAH, AR O R D E R PER MAHAVIR SINGH (JUDICIAL MEMBER) : THE APPEAL [ITA NO.1610/AHD/2009 FILED BY THE REVENUE] AND THE CROS S OBJECTION [C O NO.121/AHD/2009 FILED BY THE ASSESSEE] ARE ARISIN G OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APP EALS)-XV, AHMEDABAD, DATED 29-01-2008 FOR ASSESSMENT YEAR (AY ) 2005-06. THE ONLY GROUND RAISED BY THE REVENUE IN THEIR APPE AL READS AS UNDER:- THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN GIVING RELIEF OUT OF ADDITIO N OF RS.86,78,746/- MADE BY THE AO IN RESPECT OF INCOME ARISING OUT OF TRANS FER OF CAPITAL ASSETS IN TERMS OF SECTION 2(14)(III) OF THE I.T. ACT WHEN TH E LAND IN QUESTION WAS FOR INDUSTRIAL USE AND WAS NOT AGRICULTURAL LAND . 2 2 THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR THE ASSESSEE HAS SOLD AGRICULTURAL LAND FOR AN AMOUNT O F RS.93,90,500/- ON 14-02-2004. THE PURCHASE COST OF ACQUISITION AND THE DOCUMENT EXPENSES FOR PURCHASE OF THE SAID LAND WAS RS.7,11, 754/-. THE SURVEY-WISE DETAILS OF LAND ALONG WITH DETAILS OF P URCHASE COST AND DOCUMENT EXPENSES, DATE OF PURCHASES, SALES PRICE A ND SALES DATE ARE AS UNDER:- SR. NO. SUR. NO. AREA SQ. M PURCH PRICE PURCH DOC. EXP. PURCH TOTAL PURCH DATE SALES PRICE SALES DATE 1 237 5564 48000 10315 58315 23/4/04 836500 14/12/04 2 496/1/B 2023 17500 7925 25425 23/4/04 3 475/2 7689 115335 18925 134260 07/5/04 4 475/2 7689 66500 18457 84957 19/5/04 5 475/2 7588 65500 18242 83742 19/5/04 8554000 14/12/04 6 497/2 8701 75000 15090 90090 21/7/04 7 494.495/1 23163 ===== 200000 ====== 34965 ===== 234965 ====== 21/7/04 587835 ===== 123919 ===== 711754 ===== 9390500 ====== THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS REQUIRED THE ASSESSEE AS TO WHY THE SALE OF AGRICUL TURAL LAND SHOULD NOT BE TREATED AS SHORT-TERM CAPITAL GAINS. THE ASS ESSEE STATED THAT THE SAID AGRICULTURAL LAND IS SITUATED AT MOTODA, T ALUKA SANAND, DISTRICT AHMEDABAD, WHICH IS HAVING THE POPULATION OF LESS THAN 10,000 AS WELL AS IS MORE THAN 20 KM AWAY FROM THE LOCAL LIMITS OF AHMEDABAD MUNICIPAL CORPORATION. THE CERTIFICATE DA TED 20-03- 2005 REGARDING THE SAME ISSUED BY THE TALATI OF MAT ODA GRAM PANCHAYAT WAS PRODUCED BEFORE THE ASSESSING OFFICER . ACCORDING TO THE ASSESSEE, THE SAID AGRICULTURAL LAND IS SITUATE D IN AN AREA WHICH HAS POPULATION OF LESS THAN 10,000 AS WELL AS AT A DISTANCE OF MORE THAN 8 KM FROM THE LOCAL LIMITS OF MUNICIPALITY (AH MEDABAD MUNICIPAL CORPORATION), THE SAID AGRICULTURAL LAND DOES NOT FALL AS A CAPITAL ASSET IN VIEW OF THE PROVISIONS OF CLAUSE (III) TO SUB- SECTION 14 OF SECTION 2 OF THE ACT. ACCORDINGLY, SI NCE THE SAID AGRICULTURAL LAND IS NOT A CAPITAL ASSET, THERE IS NO CAPITAL GAIN ON THE SALE OF SAID AGRICULTURAL LAND. THE ASSESSEE IN SUPPORT OF THE 3 CONTENTION THAT VILLAGE MATODA, TALUKA SANAND IS HA VING A POPULATION OF LESS THAN 10,000 AND IT IS LOCATED MO RE THAN 20 KM FROM AWAY FROM AHMEDABAD MUNICIPAL CORPORATION, THE CERTIFICATE OF GRAM PANCHAYAT WAS ALSO FILED ALONG WITH THE RETURN OF INCOME. THE AO CONSIDERED THE CONTENTION OF THE ASSESSEE THAT H E PURCHASED THE AGRICULTURAL LAND AND SOLD THE SAME DURING THE SAME FINANCIAL YEAR I.E. 2004-05 DOES NOT APPEAR TO BE AN EVENT WHICH O CCURRED BY CHANCE AND THEREBY THE ASSESSEE EARNED STCG. BECAUS E THE ASSESSEE PURCHASED THE LAND WITH CONFIRMING PARTY A S GANESH INDUSTRIAL ESTATE DEVELOPMENT CORPORATION AND SOLD TO GANESH HOUSING CORPORATION LTD AND BOTH THESE PARTIES ARE THE SAME IN WHICH THE ASSESSEE HIMSELF IS MANAGING DIRECTOR. AF TER CONSIDERING ALL THE FACTS, IT IS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PURCHASED THE AGRICULTURAL LAND FOR RS.7,11,754 /- ON 21-07-2004 FROM SHRI KHUSHALBHAI AND THE TRANSACTION WAS CONFI RMED BY M/S GANESH INDUSTRIAL ESTATE DEVELOPMENT CORPORATION, R EGD. OFFICE, 2 ND FLOOR, PATTHARKUVA, RELIEF ROAD, AHMEDABAD. THE AS SESSEE HIMSELF IS MANAGING DIRECTOR OF M/S GANESH HOUSING CORPORATION AND SHOWING INCOME FROM SALARY. THIS COMPANY IS ALS O OWNED BY THE ASSESSEE HIMSELF AS ALSO THE M/S GANESH INDUSTRIAL ESTATE DEVELOPMENT CORPORATION. THIS LAND HAS BEEN SHOWN T O BE SOLD TO GANESH HOUSING CORPORATION LTD. BY THE ASSESSEE HIM SELF ON 14-12- 2004. CONSIDERING THE FACTS THAT THE ASSESSEE IS HI MSELF PURCHASING ON BEHALF OF GANESH CORPORATION AND SELLING THE SAM E TO THE GANESH CORPORATION SHOWS THAT THE TRANSACTION CAN N OT BE SAID TO BE CATEGORIZED AS SALE OF CAPITAL ASSETS BUT IT BEC OMES APPARENT THAT THE ASSESSEE HAS BEEN SYSTEMATICALLY PLANNING TO PURCHASE THE LAND AS AN ADVENTURE IN BUSINESS OF LAND AND THEREB Y A PART OF THE LAND TRANSACTION BUSINESS. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH THE F ULL AND COMPLETE DETAILS OF THE TRANSACTION ALONG WITH EVID ENCE FOR AGRICULTURAL LAND LIKE FORM NO.6-HAKK PATRAK, FORM NO.8A & 7/12 EXTRACTS. HOWEVER, THE ASSESSEE DID NOT FILE THE RE QUISITE DETAILS. AFTER CONSIDERING ALL THE FACTS, THE ASSESSEES CLA IM THAT THE SHORT TERM CAPITAL GAIN OF RS.86,78,746/- IS EXEMPT U/S 2 (14)(III) OF THE 4 ACT, IS NOT CORRECT AND THE INCOME FROM SALE OF LAN D IS TAXABLE AS BUSINESS INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). THE CIT(A) DELETED THE ADDITION BY OBSERVIN G AS UNDER:- 4 GROUND NO. I IS ADDITION ON ACCOUNT OF SHORT TER M CAPITAL GAIN OF RS.86,78,746/- THIS HAS BEEN DISCUSSED ON PAGE 13, 14 AND 15 OF TH E ASSESSMENT ORDER. THE AO ADDED SHORT TERM CAPITAL GAIN OF RS.86,78,74 6 CLAIMED EXEMPT BY THE APPELLANT U/S 2(14)(III) OF THE I.T. ACT WHICH EXEMPTS AGRICULTURAL LAND FROM THE CATEGORY OF CAPITAL ASSET, THUS MAKING GAI NS ON TRANSFER OF THE SAME EXEMPT FROM TAXATION. THE AO WHILE MAKING THE ADDITION STATED THAT THE APPELLANT DID NOT SUBMIT SUFFICIENT PROOFS IN T HE FORM OF 7/12 EXTRACTS WITH RESPECT TO THE AGRICULTURAL LAND AND THAT HE P URCHASED AND SOLD THE AGRICULTURAL LAND IN THE SAME FINANCIAL YEAR. DURING THE COURSE OF APPELLATE PROCEEDINGS THE SUBM ISSIONS OF THE APPELLANT ALONG WITH 7/12 EXTRACTS ETC. WERE SENT T O THE AO VIDE THIS OFFICE LETTER DATED 1-5-2008. IN RESPONSE THROUGH HIS LETT ER DATED 14-5-08 THE AO SIMPLY REITERATED WHAT HE HAD STATED IN THE ASSESSM ENT ORDER THAT THE REQUISITE DETAILS WERE NOT SUBMITTED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. AFTER GOING THROUGH SUBMISSIONS I FIND THAT 7/12 EX TRACTS SUBMITTED DO SHOW THE APPELLANT AS THE OWNER OF AGRICULTURAL LAN D. THIS LAND IS SITUATED IN A VILLAGE KNOWN AS MATODA, TALUKA SANANA WITH PO PULATION OF LESS THAN TEN THOUSAND WHICH ALSO PROVES THIS LAND TO BE AGRI CULTURAL. IT WAS ALSO EXPLAINED THAT THIS LAND WAS SOLD TO GANESH HOUSING CORPORATION FOR THE PURPOSE OF BONA FIDE INDUSTRIAL USE AND ON THIS LAN D AN INDUSTRIAL PARK IS COMING UP AS PER SANCTION LETTER DATED 5-11-2004 IS SUED BY MINISTRY OF COMMERCE AND INDUSTRY. AS THE LAND PURCHASED AND SO LD HAS BEEN PROVED TO BE AN AGRICULTURAL LAND, THE ADDITION MADE BY TH E AO OF RS.86,78,746 IS DIRECTED TO BE DELETED. 4. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE CASE RECORDS WE FIND THAT THE ASSESSEE HAS SUBMITTED THE DETAILS LIKE 7/12 EXTRACTS, WHICH SHOW THAT THE ASSESSEE IS THE OWNER OF THAT AGRICULTURAL LAND AND THE SAID LAND IS SITUATED IN VILLAGE KNOWN AS MATODA, TALUKA SANAND WITH POPULATION OF LESS THAN TEN THOUSAND WHICH ALSO PROVES THAT THIS LAND IS AGRICULTURAL LA ND AND NOT A CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT. THAT APART, THE LAND PURCHASED AND SOLD BY THE ASSESSEE HAS BEEN PROVED TO BE AN AGRICULTURAL LAND AND ACCORDINGLY, THE ADDITION HAS 5 RIGHTLY BEEN DELETED BY THE CIT(A) AND WE CONFIRM THE SAME. THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. NOW COMING TO CO OF THE ASSESSEE IN CO.121/AHD/2009 . 5. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THA T BOTH THE SIDES FAIRLY AGREED THAT THE CO OF THE ASSESSEE IS SUPPOR TIVE OF THE CIT(A)S ORDER AND WE HAVE ALREADY DISMISSED THE RE VENUES APPEAL, THIS CO OF THE ASSESSEE HAS BECOME INFRUCTU OUS. HENCE, THE CO OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 6. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CO OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-10-2009 SD/- SD/- (P K BANSAL) ACCOUNTANT MEMBER (MAHAVIR SINGH) JUDICIAL MEMBER DATE : 30-10-2009 DKP* COPY OF THE ORDER FORWARDED TO : 1. SHRI GOVINDBHAI C PATEL, 2 ND FLOOR, MUNICIPAL BUILDING, PATTHARKUVA, RELIEF ROAD, AHMEDABAD 2. THE ACIT, CIRCLE-9, AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XVI, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER /TRUE COPY/ DY.R/AR, ITAT, AHMEDABAD