M.Hari Prakash, Coimbatore V. ITO, Coimbatore

ITA 1863/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1177 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEEYA
• Assessee Lawyers: G BASKAR
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE , ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. APPELLANT RESPONDENT ASST. YEAR 1860/MDS/2012 MR. M.VIJAY PRAKASH, 137/136, SAMY IYER PUTHU THERU, COIMBATORE-641 001. PAN:AGJPV1115A INCOME TAX OFFICER, WARD-III(4), COIMBATORE 2008-09 1861/MDS/2012 M.BALAPAVITHRA PAN:AOGPB4343H INCOME TAX OFFICER, WARD-III(4), COIMBATORE 2008-09 1862/MDS/2012 H.KRITHIKA PAN:AXSPK4248B INCOME TAX OFFICER, WARD-III(4), COIMBATORE 2008-09 1863/MDS/2012 MR. M.HARI PRAKASH PAN:ACSPH6878D INCOME TAX OFFICER, WARD-III(4), COIMBATORE 2008-09 APPELLANT BY : MR.G.BASKAR, ADVOCATE RESPONDENT BY : MR . PATHLAVATH PEEYA, CIT DR DATE OF HEARING : 25 TH FEBRUARY, 2013 DATE OF PRONOUNCEMENT : 14 TH MARCH, 2013 O R D E R PER BENCH: THE PRESENT SET OF FOUR APPEALS HAVE BEEN FIELD BY THE ASSESSEES IMPUGNING THE ORDER OF THE CIT(A)-I, COI MBATORE DATED 3.9.2012 IN THE CASE OF RESPECTIVE ASSESSEES. SINCE THE ISSUE INVOLVED IN THESE APPEALS ARISES OUT OF S AME SALE TRANSACTION, THEY ARE TAKEN UP TOGETHER FOR ADJUDIC ATION. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE ES JOINTLY PURCHASED TWO PARCELS OF AGRICULTURAL LAND MEASURI NG 129 ITA NO.1860 TO 1863/MDS/2012 2 CENTS AND 490 CENTS ON 17.9.2007 IN VILLAGE ELATHUR , OMALUR TALUK, SALEM DISTRICT. WITHIN A PERIOD OF FOUR MONT HS, THE ASSESSEES SOLD THE AFOREMENTIONED ENTIRE AGRICULTUR AL LAND TO M/S. HIMADRI ENTERPRISES PVT.LTD. ON 2.1.2008. THE ASSESSEES TREATED THE INCOME ARISING FROM SALE OF L AND AS AGRICULTURAL INCOME AS DEFINED UNDER SECTION 2(1A ) OF THE ACT. THE ASSESSING OFFICER HELD THAT THE INCOME FR OM SALE OF LAND IS BUSINESS INCOME. ACCORDINGLY, THE ASSESSI NG OFFICER MADE ADDITION IN THE INCOME RETURNED BY THE RESPECT IVE ASSESSEES FROM SALE OF LAND AS INCOME FROM BUSINES S OR PROFESSION. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 30.12.2011 PASSED UNDER SECTION 143(3) READ WITH SE CTION 147, THE ASSESSEES PREFERRED SEPARATE APPEALS BEFO RE THE CIT(A) . THE CIT(A) VIDE ORDER DATED 3.9.2012 UPHEL D THE FINDINGS OF THE ASSESSING OFFICER AND CONFIRMED THE ADDITIONS MADE IN THE RESPECTIVE ASSESSMENT ORDERS. NOW, ALL THE FOUR ASSESSEES HAVE FILED SECOND APPEAL BEFORE THE TRIBU NAL ASSAILING THE ORDER OF THE CIT(A). ITA NO.1860 TO 1863/MDS/2012 3 3. SHRI G.BASKAR APPEARING ON BEHALF OF THE ASSESSE ES SUBMITTED THAT IT IS AN UNDISPUTED FACT THAT THE LA ND IN QUESTION IS AN AGRICULTURAL LAND. THE COUNSEL FURT HER CONTENDED THAT INCOME FROM SALE OF AGRICULTURAL LAN D IS EXEMPT FROM TAX UNDER THE PROVISIONS OF SECTION 2( 1A) OF THE ACT. ONLY FOR THE REASON THAT THE LAND HAS BEEN SO LD WITHIN A SHORT SPAN OF FOUR MONTHS, IT DOES NOT CHANGE THE N ATURE OF THE LAND. THE LAND IN QUESTION IS AN AGRICULTURAL L AND AND THE INCOME ARISING THEREFROM WILL REMAIN AGRICULTURAL I NCOME IRRESPECTIVE OF THE INTERVAL OF THE TRANSACTION. THE COUNSEL STATED THAT AT PAGE 44 & 46 OF THE PAPER BOOK CERTI FICATE FROM THE VILLAGE ADMINISTRATIVE OFFICER HAS BEEN PLACED ON RECORD AND THE TRANSLATED COPIES THEREOF ARE AT PAGE 45 AN D 47 OF THE PAPER BOOK. THE VAO IN THE CERTIFICATE HAS CATE GORICALLY STATED THAT THE LAND IN QUESTION FALLS WITHIN THE E LATHUR VILLAGE, OMALUR TALUK, SALEM DISTRICT AND THE LAND IS AN AGR ICULTURAL LAND. THE COUNSEL CONTENDED THAT THE AUTHORITIES BE LOW HAS REJECTED THE CERTIFICATES ISSUED BY THE VAO. A PER USAL OF THE SALE DEEDS AND THE REVENUE RECORDS WHICH IS PART OF THE PAPER BOOKS CLEARLY SHOW THAT THE LAND PURCHASED BY THE ITA NO.1860 TO 1863/MDS/2012 4 ASSESSEE IS AGRICULTURAL LAND AND EVEN AT THE TIME OF SALE THE NATURE OF LAND MENTIONED IN THE SALE DEED IS AGRICU LTURAL LAND. THE SALE PROCEEDS FROM THE SALE OF AGRICULTURAL LAN D ARE DEEMED TO BE AGRICULTURAL INCOME UNDER THE PROVISIO NS OF SECTION 2(1A) OF THE ACT. THE COUNSEL FURTHER SUBMI TTED THAT THE LAND IN QUESTION IS NOT PART OF ANY MUNICIPAL C ORPORATION OR NOTIFIED AREA AND IS FAR AWAY FROM THE LIMITS OF SA LEM CORPORATION. SINCE THE INCOME ARISING FROM SALE O F AGRICULTURAL LAND IS EXEMPT FROM TAX IRRESPECTIVE O F THE HOLDING PERIOD OF LAND, THE INCOME FROM SALE OF LAND IN TH E PRESENT CASE IS NOT TAXABLE BEING AGRICULTURAL INCOME. IN ORDER TO SUPPORT HIS CONTENTIONS, THE COUNSEL RELIED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAN UBHAI A. SHETH AND OTHERS VS. N.D. NIRGUDKAR, 2 ND ITO REPORTED AS 128 ITR 87(BOM). THE COUNSEL FURTHER CONTENDED THA T SHRI M.VIJAYPRAKASH AND MR. M. HARIPRAKASH ARE IN THE J EWELLERY BUSINESS AND ARE PARTNERS IN PARTNERSHIP FIRM AND T HE OTHER TWO ASSESSEES M.BALAPAVITRA AND H.KRITHIKA ARE HOUS EWIVES. THEY ARE NOT IN THE REGULAR BUSINESS OF SALE AND PU RCHASE OF LAND. ITA NO.1860 TO 1863/MDS/2012 5 4. ON THE OTHER HAND, THE DR SUBMITTED THAT IT IS N OT THE NATURE OF LAND WHICH IS TO BE SEEN BUT THE INTENTI ON WITH WHICH THE TRANSACTION IS BEING ENTERED INTO IS OF P RIME IMPORTANCE. THE SALE TRANSACTION OF THE LAND IN TH E PRESENT CASE HAS TAKEN PLACE WITHIN FOUR MONTHS OF ITS ACQU ISITION, THIS CLEARLY SHOWS THAT THE ASSESSEES HAD PURCHASED THE LAND WITH AN INTENTION TO SELL THE SAME AND EARN HUGE PR OFITS OUT OF THE SAME. THE DR POINTED OUT THAT ALTHOUGH AS CLAIM ED BY ASSESSEES THE LAND MAY BE AGRICULTURAL LAND BUT THE ASSESSEES HAD NEVER UNDERTAKEN ANY AGRICULTURAL ACT IVITY ON THE LAND IN QUESTION. THE DR POINTED OUT THAT ASSE SSING OFFICER IN PARA 4.2 AT PAGE 3 OF THE ASSESSMENT ORD ER HAS RECORDED FINDING OF FACT THAT THE ASSESSEES HAD ADM ITTED THAT NO IMPROVEMENT WAS MADE TO THE LANDS IN QUESTION AF TER THEY HAD PURCHASED THE SAME ON 17.9.2007. THE ASSESSEES HAVE STATED THAT THEY HAVE CULTIVATED CHRYSANTHEMUM AND MARIGOLD FLOWERS IN THEIR RESPECTIVE SHARE OF LANDS BUT THE ASSESSEES FAILED TO PRODUCE ANY DOCUMENT TO SHOW THAT THEY HA D PURCHASED SEEDS OR PLANTS ETC. FOR CULTIVATION AND/ OR FOR ANY DOCUMENT TO SHOW THAT THEY HAVE SOLD FLOWERS TO ANY OF THE ITA NO.1860 TO 1863/MDS/2012 6 WHOLESALERS/RETAILERS. ON THE CONTRARY, THE BLOCK DEVELOPMENT OFFICER, KADAYAMPATTY, NADUPATTI VILLAG E, OMALUR VATTAM, SALEM DISTRICT HAS STATED THAT NO AG RICULTURAL OPERATION WAS CARRIED OUT IN THE LANDS IN QUESTION. THE BDO ALSO STATED THAT NO IRRIGATION FACILITY IS AVAILABL E IN THE LAND. IN VIEW OF THE CATEGORIC FINDINGS OF THE ASSESSING OFF ICER WHICH HAS BEEN CONFIRMED BY THE CIT(A), THE APPEALS OF TH E ASSESSEES SHOULD BE DISMISSED. THE DR STRONGLY SUPP ORTED THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE DOCUMENTS ON RECORD. I T IS AN ADMITTED FACT THAT LAND WAS SOLD BY THE ASSESSEES W ITHIN A SHORT SPAN OF FOUR MONTHS FROM THE DATE OF PURCHASE . THE COUNSEL HAS REFERRED TO TRANSLATED COPY OF ONE CERT IFICATE ISSUED BY VILLAGE ADMINISTRATIVE OFFICER AT PAGE 45 AND 47 OF THE PAPER BOOK. THE COUNSEL FOR THE ASSESSEE ALSO REFERRED TO SOME REVENUE RECORD WHICH ARE IN VERNACULAR. FRO M THE VERNACULAR REVENUE RECORDS, IT CANNOT BE CULLED O UT THAT THE LAND IN QUESTION IS AGRICULTURAL LAND OR WHAT TYPE OF CULTIVATION WAS BEING DONE ON THE LAND AND THE IRRIGATION FACIL ITIES ITA NO.1860 TO 1863/MDS/2012 7 AVAILABLE TO MAKE THE LAND CULTIVABLE. A PERUSAL O F THE ORDER OF THE ASSESSING OFFICER SHOWS THAT THE ASSESSING O FFICER HAS NOT TAKEN INTO CONSIDERATION THE FACT WHETHER THE P RESENT TRANSACTION IS AN ISOLATED TRANSACTION OR THE ASSES SEE HAS UNDERTAKEN SIMILAR TRANSACTIONS IN THE PAST. THE A SSESSING OFFICER HAS TREATED THE GAIN ARISING FROM THE SALE OF ALLEGED AGRICULTURAL LAND AS BUSINESS INCOME OF THE ASSESSE E. FROM THE DOCUMENTS PLACED ON RECORD, THE NATURE OF LAND CANNOT BE ASCERTAINED. 6. ALTHOUGH IN THE SALE DEEDS AT PAGE 1 TO 39 OF T HE PAPER BOOK IT HAS BEEN MENTIONED THAT THE LAND IS AGRICU LTURAL DRY LAND. THE ASSESSEES HAVE BEEN TAKING CONTRADICTORY STAND. ON THE ONE HAND, THEY HAVE STATED THAT THEY HAD PUR CHASED THE LAND FOR MAKING A FARM HOUSE AND HAD CULTIVATE D CHRYSANTHEMUM AND MARIGOLD FLOWERS ON THE LAND IN Q UESTION. ON THE OTHER HAND, THE ASSESSEES ARE STATING THAT T HEY HAVE MADE NO IMPROVEMENT ON THE LAND. THE NATURE OF LAND MENTIONED IN THE SALE DEED IS DRY LAND. IF THERE ARE NO IRRIGATION FACILITIES ( AS ALSO CONFIRMED BY BDO) THEN HOW THE FLOWERS AS CLAIMED BY THE ASSESSEES CAN BE CULTIVAT ED . THIS ITA NO.1860 TO 1863/MDS/2012 8 GIVES RISE TO THE SUSPICION THAT THE LAND WAS PURC HASED BY THE ASSESSEE FOR TRADING AND NOT WITH THE INTENTION TO RETAIN IT AND DEVELOP AS FARM HOUSE. WHILE DEALING WITH SUCH LIKE TRANSACTIONS, ONE HAS TO LIFT THE VEIL AND LOOK THR OUGH THE NATURE (AS ALSO THE INTENTION) OF TRANSACTIONS. NO ONE SHOULD BE ALLOWED TO CIRCUMVENT THE LAW BY EXPLOITING THE LOOPHOLES. THE LEGISLATURE IN ITS WISDOM HAS EXEMPTED INCOME F ROM AGRICULTURE AS DEFINED UNDER SECTION 2(1A) TO GIVE IMPETUS TO AGRICULTURE SECTOR AND PROTECT THE INTEREST OF FARM ERS. TRADING IN AGRICULTURAL LAND AND CLAIMING THE INCOME GENERA TED THEREFROM AS AGRICULTURAL INCOME AMOUNTS TO HOODW INKING THE PROVISIONS OF THE ACT. WHEN SUCH PLOY IS USED T O CIRCUMVENT THE PROVISIONS OF LAW, DUTY IS CAST UPO N THE COURTS TO EXPOSE SUCH SUBTERFUGES. OUR VIEW IS FORTIFIED B Y THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MCDOWELL & CO.LTD. VS. COMMERCIAL TAX OFFICER RE PORTED AS 154 ITR 148(SC). THE HONBLE APEX COURT THEREIN HAS HELD AS UNDER:- IT IS NEITHER FAIR NOR DESIRABLE TO EXPECT THE LEGISLATURE TO INTERVENE AND TAKE CARE OF EVERY ITA NO.1860 TO 1863/MDS/2012 9 DEVICE AND SCHEME TO AVOID TAXATION. IT IS UP TO THE COURT TO TAKE STOCK TO DETERMINE THE NATURE OF THE NEW AND SOPHISTICATED LEGAL DEVICES TO AVOID TAX AND CONSIDER WHETHER THE SITUATION CREATED BY THE DEVICES COULD BE RELATED TO THE EXISTING LEGISLATION WITH THE AID OF IT 'EMERGING' TECHNIQUES OF INTERPRETATION AS WAS DONE IN RAMSAY, BURMA OIL AND DAWSON, TO EXPOSE THE DEVICES FOR WHAT THEY REALLY ARE AND TO REFUSE TO GIVE JUDICIAL BENEDICTION. 7. WE, THEREFORE, DEEM IT APPROPRIATE TO REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH AFTER TAKING INTO CONSIDERATION: I) REVENUE RECORDS TO DETERMINE : A) NATURE OF LAND; B) IRRIGATION FACILITIES; & C) TYPE OF CROP GROWN DURING THE PERIOD UNDER CONSIDERATION IN AND AROUND THE LAND IN QUESTION. ITA NO.1860 TO 1863/MDS/2012 10 II) TO EXAMINE WHETHER THE PRESENT TRANSACTION IS A N ISOLATED TRANSACTION OR THE ASSESSEES HAVE UNDERTAKEN SIMILAR TRANSACTIONS IN THE PAST OR THEREAFTER. III) THE OBJECTS OF THE COMPANY TO WHOM THE LAND HA S BEEN SOLD. IV) THE IMPACT OF URBANIZATION AND DEVELOPMENT IN THE AREA SURROUNDING THE LAND AND PERIPHERY OF SALEM CITY. V) THE FUTURE DEVELOPMENT AND ECONOMIC PROSPECTS OF THE LAND. AFTER EXAMINING THE TRANSACTION ON THE AFORESAID TO UCHSTONES, IF THE ASSESSING OFFICER IS OF THE OPINION THAT THE LAND IN QUESTION HAS THE POTENTIAL OF BEING EXPLOITED INTO COMMERCIAL ASSET, THEN SURELY THE GAIN FROM SALE OF LAND CAN B E ASSESSED AS BUSINESS INCOME. NEEDLESS TO SAY THAT BEFORE D ECIDING THE ISSUE AFRESH, THE ASSESSING OFFICER SHALL GRANT AN OPPORTUNITY OF HEARING TO THE ASSESSEES AND THE ASS ESSEES ARE ALSO DIRECTED TO CO-OPERATE WITH THE ASSESSING OFFICER AND PRODUCE ALL THE NECESSARY REVENUE RECORDS ETC. BEFORE ITA NO.1860 TO 1863/MDS/2012 11 THE ASSESSING OFFICER TO ENABLE HIM TO DECIDE THE I SSUE AFRESH. 8. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSES SEES ARE ALLOWED FOR STATISTICAL PURPOSES IN THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY , THE 14 TH DAY OF MARCH, 2013 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 14 TH MARCH, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.