ACIT, CHENNAI V. Varghese Eapen, CHENNAI

ITA 1753/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4775 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-06-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: DR ANITHA SUMANTH
• Keywords: Unexplained cash credit; Capital asset; Additional evidence; Capital Gains
• Section: 143(3); 153A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. ITA NOS.1752 &1753(MDS)/2010 ASSESSMENT YEARS: 2007-08 & 2008-09 THE ASSISTANT COMMISSIONER SHRI VARGHESE EAPEN, OF INCOME-TAX, VS. 8(NEW NO.13), 15 TH AVENUE, CENTRAL CIRCLE III(4), HARRINGTON ROAD, CHENNAI. CHETPET, CHENNAI-31. PAN AAAPE0490J (APPELLANT) (RESPONDENT) APPELLANT BY : DR. I.VIJAYAKUMAR , CIT, DR. RESPONDENT BY: DR. ANITHA SUMANTH, ADVOCATE. O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THESE TWO APPEALS ARE FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEARS ARE 2007-08 AND 2008-09. THE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER OF THE COMMIS SIONER OF ITA 1752 & 1753(MDS)/2010 2 INCOME-TAX(APPEALS)-II AT CHENNAI DATED 11-6-2010 A ND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 153A READ WI TH SECTION 143(3) OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSME NT YEAR 2007-08 AND THE ASSESSMENT COMPLETED UNDER SECTION 143(3) F OR THE ASSESSMENT YEAR 2008-09. 2. THE ONLY GROUND RAISED BY THE REVENUE IN ITS AP PEAL FOR THE ASSESSMENT YEAR 2007-08 IS THAT THE COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITIONS M ADE BY THE ASSESSING AUTHORITY TOWARDS UNEXPLAINED CREDIT S AMOUNTING TO ` 4,08,000/- AND ADDITION TOWARDS CAPITAL GAINS AMOUN TING TO ` 125 LAKHS. IT IS THE CASE OF THE REVENUE THAT THE COMM ISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN VIOLATING THE PROVISIONS OF RULE 46A(2) OF THE INCOME-TAX RULES, 1962, AS HE HAS NOT RECORDED IN WRITING THE REASONS FOR THE ADMISSION OF ADDITIONAL EVIDENCES, INSPITE OF SPECIFIC OBJECTIONS FILED BY THE ASSESSING AUTHORITY. 3. THE ONLY GROUND RAISED FOR THE ASSESSMENT YEAR 2008-09 IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING AUTHOR ITY TOWARDS ITA 1752 & 1753(MDS)/2010 3 UNEXPLAINED CREDITS AMOUNTING TO ` 6,10,000/-. IT IS AGAIN THE CASE OF THE REVENUE THAT THE COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN VIOLATING THE PROVISIONS OF RULE 64A(2) OF THE INCOME-TAX RULES, 1962, AS HE HAS NOT RECORDED IN WRITING THE REASONS FOR THE ADMISSION OF ADDITIONAL EVIDENCES AGAINST OBJECTION S PLACED BY THE ASSESSING AUTHORITY. 4. WE HEARD BOTH SIDES IN DETAIL. 5. THE ASSESSEE WAS HAVING ANCESTRAL LAND PROPERTI ES AT VALLANKARA, VENNIKULAM IN THE STATE OF KERALA. HE WAS CO-OWNER OF THE PROPERTY ALONG-WITH HIS SISTER AND TWO BROTHERS . THE SAID PROPERTY WAS SOLD AND THE ASSESSEE RECEIVED HIS SHARE IN THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS 2006-07, 2007-08 A ND 2008-09. THE AMOUNTS RECEIVED BY THE ASSESSEE WERE ` 4,47,300/-, ` 4,08,000/- AND ` 6,10,000/- RESPECTIVELY. THE ASSESSING AUTHORITY HAS TREATED THE ABOVE AMOUNTS AS UNEXPLAINED AND MA DE ADDITIONS UNDER SECTION 68 OF THE ACT. THE TWO AMOUNTS INVOL VED FOR THESE TWO ASSESSMENT YEARS ARE ` 4,08,000/- AND ` 6,10,000/-. ITA 1752 & 1753(MDS)/2010 4 6. ACCORDING TO THE EXPLANATION OFFERED BY THE ASS ESSEE THE PROPERTY WAS AGRICULTURAL IN NATURE AND CONSEQUENTL Y THE SALE PROCEEDS ALSO WAS OUTSIDE THE PURVIEW OF NORMAL INC OME OR CAPITAL GAINS INCOME. BUT THE ASSESSING OFFICER TREATED TH E INCOME AS TAXABLE ON THE GROUND THAT THE ASSESSEE HAS NOT PRO DUCED ANY EVIDENCES IN SUPPORT OF THE SALE OF LAND IN KERALA. 7. IN FACT THE ASSESSEE HAS PRODUCED THE DEED OF F AMILY SETTLEMENT DATED 26-2-2004, SALE AGREEMENT OF THE S AID PROPERTY, CERTIFICATE ISSUED BY THE VILLAGE OFFICER, COPY OF THE SALE DEED, CERTIFICATE ISSUED BY THE AGRICULTURAL OFFICER, CER TIFICATE ISSUED BY THE ASSISTANT ENGINEER WITH OTHER DETAILS TO ESTABLISH THE HOLDING OF LAND AS WELL AS THE SALE OF THE SAID LAND. THESE EVIDEN CES HAVE BEEN PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX (APP EALS) IN THE FORM OF ADDITIONAL EVIDENCES. THE COMMISSIONER OF INCOME TAX (APPEALS) HAVE ACCEPTED THOSE EVIDENCES AND BROUGHT THEM ON RECORD AND ADJUDICATED THE MATTER IN THE LIGHT OF T HOSE EVIDENCES. THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSION ER OF INCOME TAX (APPEALS) HAS NOT RECORDED ANY REASON IN WRITIN G TO ADMIT THOSE EVIDENCES BEFORE HIM. IT IS ON THIS TECHNICAL GROU ND THAT THE REVENUE ITA 1752 & 1753(MDS)/2010 5 IS MAINLY AGITATING AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) IN DELETING THOSE ADDITIONS MADE UNDE R SECTION 68. 8. EVEN THOUGH THE COMMISSIONER OF INCOME TAX (APP EALS) HAS NOT PASSED A FORMAL DECLARATION OF ACCEPTING TH E ADDITIONAL EVIDENCES, THE DISCUSSION MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS CLEARLY BROUGHT OUT THE REASONING AND JUSTIFICATION IN ACCEPTING THOSE ADDITIONAL EVIDENC ES. ONLY FOR THE REASON THAT THE EVIDENCES ARE PLACED BEFORE THE FIR ST APPELLATE AUTHORITY AS ADDITIONAL EVIDENCES, THE PROBATIVE VALUE OF EVIDENCES DOES NOT GET DILUTED. AN EVIDENCE BECOMES ADDITION AL EVIDENCE DEPENDING UPON THE STAGE WHEN THE EVIDENCE WAS PROD UCED BEFORE THE APPROPRIATE AUTHORITY. IN THE PRESENT CASE THE REVENUE HAS NO SERIOUS CASE AGAINST THE MERITS OF THE EVIDENCES PR ODUCED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APP EALS). IT IS TO BE SEEN THAT THE AUTHORITY OF THE COMMISSIONER OF I NCOME TAX (APPEALS) IS CO-TERMINUS WITH THE AUTHORITY OF THE ASSESSING AUTHORITY AND THEREFORE HE IS EMPOWERED TO ADMIT THE EVIDENCE ON RECORD AND ADJUDICATE THE MATTER. THE REVENUE HAS NO CASE THA T THE EVIDENCES WERE ADMITTED ON THE BACK OF THE REVENUE. IT IS TH E CASE OF THE ITA 1752 & 1753(MDS)/2010 6 REVENUE THAT THE EVIDENCES WERE ACCEPTED AGAINST TH E OBJECTION OF THE ASSESSING AUTHORITY. ON THE STRENGTH OF THE FA CTS OF THE CASE IT IS PERMISSIBLE FOR THE COMMISSIONER OF INCOME TAX (APP EALS) TO OVERRULE THE OBJECTIONS PLACED BY THE ASSESSING AUT HORITY. 9. ON GOING THROUGH THE ORDERS PASSED BY THE COMMI SSIONER OF INCOME TAX (APPEALS) AND THE NATURE AND CONTENTS OF THE EVIDENCES PRODUCED BY THE ASSESSEE WE FIND THAT THE ASSESSEE HAS PROVED BEYOND ANY DOUBT THAT HE HAD RECEIVED SALE P ROCEEDS OF THE ANCESTRAL AGRICULTURAL PROPERTY SITUATED IN KERALA. THEREFORE, THERE IS NO REASON TO HOLD THAT THOSE RECEIPTS ARE UNEXPLAIN ED CASH CREDITS IN THE HANDS OF THE ASSESSEE. THE COMMISSIONER OF INC OME TAX (APPEALS) HAS RIGHTLY DELETED THOSE ADDITIONS. THE WHOLE ARGUMENT OF THE REVENUE IS MADE ON THE BASIS OF TECHNICALITIES. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS POINT IS THEREFORE UPHELD. 10. THE NEXT QUESTION IS THAT OF LONG TERM CAPITAL GAINS AMOUNTING TO ` 125 LAKHS, PERTAINING TO THE ASSESSMENT YEAR 2007- 08. ITA 1752 & 1753(MDS)/2010 7 11. THE ASSESSEE HAD 50% SHARE IN 7.96 ACRES OF LA ND SITUATED AT KATTRAMBAKKAM, SRIPERUMBADUR. THE ASSE SSEE SOLD HIS SHARE IN THE PROPERTY IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE ASSESSING AUTHORITY HELD THAT TH E ASSESSEE HAD UNDERSTATED THE SALE CONSIDERATION AS EVIDENT FROM THE DOCUMENT FOUND IN THE COURSE OF SURVEY OPERATIONS CARRIED OU T IN THE PREMISES OF M/S.JOY FOAM PVT. LTD. IN THE COURSE OF SURVEY AN AGREEMENT TO SELL THE PROPERTY OF ASSESSEES SHARE WAS SEIZED WH EREIN THE CONSIDERATION WAS STATED AT ` 2.5 CRORES. THE ASSESSING AUTHORITY TREATED THE SALE CONSIDERATION OF ` 2.5 CRORES, AS REFLECTED IN THE SEIZED AGREEMENT AND ACCORDINGLY MADE AN ADDITION O F ` 125 LAKHS. 12. THE COMMISSIONER OF INCOME TAX (APPEALS) HAD I N FACT CONSIDERED TWO ISSUES. THE FIRST ISSUE WAS WHETHER THE AGREEMENT SEIZED BY THE DEPARTMENT COULD BE ACTED UPON OR NOT . ON THAT ISSUE THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE AGREEMENT WAS UNSIGNED AND IT CANNOT BE USED AGAINST THE ASSE SSEE AS AN ACCEPTABLE EVIDENCE. THE SECOND ISSUE CONSIDERED B Y THE COMMISSIONER OF INCOME TAX (APPEALS) WAS THE NATURE OF THE LAND ITA 1752 & 1753(MDS)/2010 8 SOLD. HE FOUND THAT THE LAND WAS AGRICULTURAL IN N ATURE. THEREFORE, ON BOTH COUNTS HE FOUND THAT THERE IS NO TAXABLE SURPL US IN THE SALE OF LAND AND ACCORDINGLY DELETED THE ADDITION OF ` 125 LAKHS. 13. ON GOING THROUGH THE DETAILED ORDER OF THE COM MISSIONER OF INCOME TAX (APPEALS), WE FIND THAT THE ASSESSEE HAS PRODUCED SUFFICIENT MATERIALS BEFORE THE COMMISSIONER OF INC OME TAX (APPEALS) TO ESTABLISH THAT THE LAND SOLD BY THE AS SESSEE WAS AGRICULTURAL IN NATURE. EVEN THOUGH DOCUMENTARY EV IDENCES WERE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX (APP EALS), THE COMMISSIONER OF INCOME TAX (APPEALS) FORWARDED ALL THOSE EVIDENCES TO THE ASSESSING AUTHORITY AND CALLED FOR A REMAND REPORT. IT IS AFTER CONSIDERING THOSE EVIDENCES AND THE REM AND REPORT OF THE ASSESSING AUTHORITY THAT THE COMMISSIONER OF INCOME TAX (APPEALS) CAME TO THE CONCLUSION THAT THE LAND SOLD BY THE AS SESSEE WAS AGRICULTURAL LAND. 14. THE SALE DEED OF THE PROPERTY WAS PRODUCED BEF ORE THE COMMISSIONER OF INCOME TAX (APPEALS). AS PER THE S ALE DEED, THE PROPERTY IS SITUATED IN KATTRAMBAKKAM, SRIPERUMBADU R IN KANCHEEPURAM DISTRICT, ABOUT 41 KMS. AWAY FROM THE KANCHEEPURAM ITA 1752 & 1753(MDS)/2010 9 MUNICIPAL LIMITS. THEREFORE THERE IS NO QUESTION O F THE LAND BECOMING A CAPITAL ASSET BY VIRTUE OF THE LOCATION OF THE PR OPERTY. THE PROPERTY IS SITUATED IN A VILLAGE NOT SO FAR NOTIFIED FOR TH E PURPOSE OF TREATING THE LAND AS A CAPITAL ASSET. NOW THE QUESTION IS WHETH ER IT IS AGRICULTURAL IN NATURE. THE VILLAGE ADMINISTRATIVE OFFICER HAS CERTIFIED THAT AGRICULTURAL ACTIVITIES WERE CARRIED ON IN THE SAID PROPERTY. IT IS ALSO TO BE SEEN THAT THE REVENUE HAS NO CASE THAT ANY OTHER ACTIVITY WAS CARRIED ON IN THAT PROPERTY. AS A MATTER OF FACT, THE ASSESSING AUTHORITY HAS NOT QUESTIONED ANYWHERE THE GENUINENE SS OF THE AGRICULTURAL NATURE OF THE LAND. THEREFORE ON GOIN G THROUGH THE DETAILS AVAILABLE IN THE RECORDS, WE FIND THAT THE LAND SOL D BY THE ASSESSEE AT SRIPERUMBUDUR WAS AGRICULTURAL IN NATURE. AS THE P ROPERTY SOLD WAS AGRICULTURAL IN NATURE, THE ASSET WAS NOT IN THE NA TURE OF CAPITAL ASSET AND THE SURPLUS ON SALE OF SUCH ASSET DOES NOT PART AKE THE CHARACTER OF CAPITAL GAINS. ONCE THE CONSIDERATION ON THE SA LE OF THE PROPERTY DOES NOT PARTAKE THE CHARACTER OF CAPITAL GAINS, TH E QUESTION REGARDING THE ACTUAL AMOUNT OF CONSIDERATION BECOME S JUST ACADEMIC. EVEN IF THE ASSESSEE HAD, FOR THE SAKE ARGUMENT SAY , HAD RECEIVED SOMETHING MORE THAN WHAT HAS BEEN STATED IN THE SAL E DEED, THE SURPLUS WOULD AGAIN BE CONSIDERATION FOR AGRICULTUR AL LAND AND ITA 1752 & 1753(MDS)/2010 10 OUTSIDE THE PURVIEW OF CAPITAL GAINS. THEREFORE WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED I N DELETING THE SAID ADDITION OF ` 125 LAKHS. 15. IN RESULT THESE TWO APPEALS FILED BY THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 27 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 27 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.