The ACIT,B K Circle, Palanpur V. Shri Prakashkumar Bhagchandbhai Khatri, Deesa

ITA 1902/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9144 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Deemed dividend; Tax effect
• Section: 143(3)

Judgement Text

ITA NO.1902 /AHD/2013 ASSESSMENT YEAR 200 9 - 10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM ] ITA NO.1902 /AHD/2013 ASSESSMENT YEAR 200 9 - 10 ASSTT. COMMISSIONER OF INCOME TAX B.K. CIRCLE, PALANPUR. ..... .......... .APPELLANT VS. PRAKASHKUMAR BHAGCHANDBHAI KHATRI .... ..... .......... RESPONDENT C/O. VIJAY R. CHHUNCHHA, NYAY MANDIR, TIRUPATI COMPLEX, DEESA 385 535 DIST. BANASKANTHA [PAN: AHWPK 4055 G ] APPEARANCES BY: JAMES KURIAN FOR THE APPELLANT URVASHI SODHAN FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 02.12.2016 DATE OF PRONOUNCING THE ORDER : 28 . 0 2 .2017 O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, IS DIRECTED AGAINST THE ORDER DATED 10 TH APR IL, 2013, PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 , FOR THE ASSESSMENT YEAR 200 9 - 10 . 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE : 1. THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS ) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,74,873/ - MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN (L.T.C.G.) ON THE GROUND THAT PROFIT ON SALE OF LAND WAS RIGHTLY DECLARED AS LTCG BY TH E ASSESSEE IGNORING THE FACT THAT ASSESSEE HAD OBTAINED N.A. CERTIFICATE & CARRIED OUT PLOTTING BEFORE SALE OF SUCH PLOTS WHICH PROVES ASSESSEE S PURPOSE WAS TO SALE LAND FOR HIGHER PROFIT AND NOT TO HOLD FOR INVESTMENT. ITA NO.1902 /AHD/2013 ASSESSMENT YEAR 200 9 - 10 PAGE 2 OF 4 3. BRIEFLY STATED, THE RELEVANT MA TERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER NOTICED THAT THE ASSESSEE HAS SOLD 8 PLOTS AND DECLARED LONG TERM CAPI T AL GAINS OF RS.4,74,873/ - IN RESPECT OF THE SAME. IT WAS NOTICED THAT THE ASSESSEE HAD PURCHASED SAID LAND (SURVEY NO.508 & 509) , IN 2001. IT WAS AN AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME BUT ON 10 TH JULY 2002, THE LAND USE WAS CONVERTED AND THE LAND WAS TREATED A S NON - AGRICULTURAL THEREAFTER . ON THE SAID PIECE OF LAND, PLOTTING W AS DONE, AND, THE ASSESSEE SOLD 76 PLOTS IN 2003 - 04 , 39 PLOTS IN 2004 - 05, 9 PLOTS IN 2005 - 06 , 19 PLOTS IN 2008 - 09 AND 8 PLOTS IN 2009 - 10. ON THESE FACTS, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SALE OF PLOTS WAS AN ORGANISED BUSINESS ACTIVITY AND PROFITS ON SALE OF THE PLOT WAS TREATED AS BUSINESS PROFITS AS AGAINST LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CI T(A) WHO REVERSED THE ACTION OF THE ASSESSING O FFICER AND OBSE RVED AS FOLLOWS : - 5.3. I HAVE CONSIDERED THE OBSERVATIONS OF THE A.O. AND THE SUBMISSIONS MADE BY THE ID AR. THE UNDISPUTED FACTS OF THE ISSUE ARE THAT THE APPELLANT HAD ACQUIRED THE LAND IN THE YEAR 2001 FOR WHICH THE PERMISSION OF CONVERSION IN TO NO N - AGRICULTURE USE WAS OBTAINED WAY BACK ON 10 - 07 - 2002. THE PART OF SUCH LAND IS SOLD IN THE PREVIOUS YEAR 2008 - 09 RELEVANT TO ASSESSMENT YEAR 2009 - 10. THUS THE LAND IS HELD FOR QUITE A LONG PERIOD OF TIME AS INVESTMENT AND THE INTENTION TO HOLD IT AS INVES TMENT AND NOT TO DEAL WITH IT AS STOCK IN TRADE IS FURTHER EVIDENT FROM THE CONDUCT OF THE ASSESSEE AS IT IS SHOWN AS FIXED ASSETS IN THE ACCOUNTS AND NOT AS STOCK IN TRADE. THIS POSITION IS ACCEPTED IN EARLIER YEAR. I AM THEREFORE OF THE OPINION THAT ON THE FACTS OF THE CASE, THE PROFIT ON SALE OF LAND WAS RIGHTLY DECLARED AS LONG TERM CAPITAL GAIN BY THE ASSESSEE. THE A.O. IS NOT JUSTIFIED IN TREATING THE PROFIT AS BUSINESS INCOME. THE A.O. DIRECTED TO ASSESS THE IMPUGNED AMOUNT OF RS 4,74,873 / - AS LONG TERM CAPITAL GAIN AS DECLARED BY THE APPELLANT. THIS GROUND OF APPEAL IS ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE LEARNED C IT(A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERI AL ON RECORD IN THE LIGHT OF APPLICABLE LEGAL POSITION. 6. WE FIND THAT THE PLOTS OF LAND WERE ALL ALONG TREATED BY THE ASSESSEE AS INVESTMENTS AND THE GAINS ON SALE OF THESE PLOTS WERE ALL AL ONG FINALLY ACCEPTED A S LONG TERM CAPITAL GAINS, AND THE MATTER RESTS THERE. WHETHER THESE ISSUES COULD NOT BE CARRIED IN FURTHER APPEAL BEFORE THE HIGHER AUTHORITIES DUE TO LOW TAX EFFECT OR FOR WHATEVER ITA NO.1902 /AHD/2013 ASSESSMENT YEAR 200 9 - 10 PAGE 3 OF 4 REASONS , THE FACT REMAINS THAT SUCH A TREATMENT, I.E. CAPITAL GAINS, HAS ATTAINED FINALITY. THERE IS NO POINT IN DISTURBING THIS POSITION AT THIS STAGE. EVEN ON MERITS, WE SEE NO REASONS TO DISTURB THE FINDINGS OF THE LEARNED CIT (A). THERE IS NO DISPUTE THAT THE PLOTS WERE HELD BY THE ASSESSEE SINCE 2002. THE MERE F ACT THAT PLOTTING WAS DONE CANNOT R ENDER IT AN O RGANISED BUSINESS ACTIVITY. THIS ISSUES IS ALSO COVERED, IN FAVOUR OF THE ASSESSEE BY A CO - ORDINAT E BENCH DECISION IN THE CASE OF NARSINGHDAS SURAJMAL PROPERTIES PVT. LTD. VS. ACIT [(2015) 59 TAXMAN 172 (GUA)]. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MAT T ER. 7. GROUND NO.1 IS THUS DISMISSED. 8. ON GROUND NO S . 2 & 3, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCES : - 2 A) THE LD . COMMISSIONER OF INCOME TAX APPEAL (APPEALS) - XX, AHMEDABAD HAS ERRED I N LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,15,47,960/ - U/S. 22(2)(E) OF THE ACT IGNORING THE FACT THAT ASSESSEE HAD RECEIVED THE AMOUNTS IN QUESTION AS LOAN/ADVANCE PROVISIONS TO WHICH PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE CLEARLY APPLICABLE. 2 B) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FAC T S TO HOLD THAT THE ACCUMULATED PROFIT DID NOT INCLUDE THE PROFIT OF THE YEAR WITHOUT TAKING INTO CONSIDERATION, THE DATES OF ADVANCES GIVEN VIS - - VIS THE ACCUMULATED PROFIT OF THE YEAR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XX, AHMEDABAD OUGHT TO HAVE UPHELD THE OR D ER O F THE ASSESSING O FFICER. 9. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AFORE SAID ISSUE IS COVERED, IN FAVOU R OF THE ASSESSEE, IN ASSESSEE S OWN CAS E FOR THE ASSESSMENT YEAR 2008 - 09. IN THE SAID ORDER, THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLO WS : - 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22(E) OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS RECEIVED T HE AMOUNT AT RS. 1,30,502/ - FROM VAIBHAV CORPORATION PVT. LTD., A COMPANY IN WHICH THE ASSESSEE IS A DIRECTOR AND HOLDS 93% OF ITS SHARE HOLDING. IT IS ALSO A FACT THAT ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH VAIBHAV CORPORATION FOR DEVELOPMENT AND CON STRUCTION ON THE LAND, THE LAND BEING OWNED BY THE ASSESSEE. THE PERUSAL OF THE AGREEMENT REVEALS THAT VARIOUS CONDITIONS ITA NO.1902 /AHD/2013 ASSESSMENT YEAR 200 9 - 10 PAGE 4 OF 4 HAVE BEEN INCORPORATED WHICH ALSO INCLUDES ONE OF THE CONDITION BEING THAT THE SALE PRICE OF THE LAND HAS BEEN DECIDED BETWEEN BOTH TH E PARTIES, NAMELY, ASSESSEE AND VAIBHAV CORPORATION AND WHICH THE ASSESSEE WOULD RECEIVE ON IT BEING COLLECTED BY VAIBHAV CORPORATION FROM THE MEMBERS ON THE SALE AND THE ASSESSEE SHALL GIVE REGISTERED SALE DEED IN THE NAME OF SUCH MEMBER. THE PERUSAL OF T HE AFORESAID AND OTHER CLAUSES OF THE AGREEMENT WHICH HAS BEEN ENTERED BY THE ASSESSEE WITH VAIBHAV CORPORATION SUPPORTS THE ARGUMENT OF THE LD. A.R. THAT THE TRANSACTION TO BE A BUSINESS TRANSACTION. WE FIND THAT HON BLE DELHI HIGH COURT IN THE CASE OF CI T VS. RAJKUMAR (2009) 318 ITR 462 (DEL) HAS HELD THAT TRADE ADVANCES WHICH ARE IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTION WOULD NOT FALL WITH THE AMBIT OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT. HON BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. CREATIVE DYEING & PRINTING PVT. LTD. (SUPRA) HAS ALSO HELD THAT AMOUNT ADVANCED FOR BUSINESS TRANSACTION DO NOT FALL WITHIN THE DEFINITION OF SECTION 2(22)(E) OF THE ACT. BEFORE US, NO MATERIAL HAS BEEN PLACED ON RECORD BY THE RE VENUE TO DEMONSTRATE THAT THE AGREEMENT ENTERED BY THE ASSESSEE WITH VAIBHAV CORPORATION WAS NOT A GENUINE AGREEMENT. IN VIEW OF THESE FACTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO ADDITION U/S.2(22)(E) COULD BE MADE. WE THEREFORE SET ASIDE THE ADD ITION MADE BY A.O. AND THUS THIS GROUND OF ASSESSEE IS ALLOWED. 10. RESPECTFULLY FOLLOWING THE VIEWS SO EXPRESSED BY THE CO - ORDINATE BENCH, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 11. GROUND NO S.2 & 3 ARE ALSO DISMISSED. 1 2 . IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 28 TH DAY OF FEBRUARY, 2017. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 28 TH DAY OF FEBR UARY , 2017 . COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD