Sri.M.K.Abdul Rahiman, Cochin V. DCIT, Cochin

ITA 200/COCH/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8778 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: K R SUDHAKARAN PILLAI
• Keywords: Capital asset; Reasonable cause
• Section: 273B; 54B; 54F; 2(14)

Judgement Text

1 ITA NO.200/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO.200/COCH/2014 (ASSESSMENT YEAR 2005-06) SHRI M.K. ABDUL RAHIM VS DY.CIT, CIR.2(1) MULAKKAMPILLY HOUSE ERANAKULAM VAZHAKKALA, TRIKKAKARA PO KOCHI 682 021 PAN : AHBPA4652J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.R. SUDHAKARAN PILLAI RESPONDENT BY : SMT. LATHA V KUMAR DATE OF HEARING : 10-12-2014 DATE OF PRONOUNCEMENT : 06-02-2015 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE WAS EARLIER DISPOSED O F BY AN ORDER DATED 14-07-2014. HOWEVER, THE ASSESSEE FILED AN A PPLICATION IN M.P. NO.93/COCH-2014 TO RECALL THE ORDER OF THIS TRIBUNA L DATED 14-07-2014. AFTER HEARING BOTH PARTIES, THE ORDER OF THIS TRIBU NAL DATED 14-07-2014 WAS RECALLED BY AN ORDER DATED 10-10-2014. ACCORDINGLY , THE APPEAL OF THE ASSESSEE IS TAKEN UP FOR FINAL DISPOSAL. 2 ITA NO.200/COCH/2014 2. SHRI K.R. SUDHAKARAN PILLAI, THE LD.REPRESENTATI VE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS.37,55,708 TOWARDS LONG TERM CAPITAL GAIN ON THE GROUND THAT T HE SAME WAS NOT DISCLOSED IN THE RETURN OF INCOME. ACCORDING TO TH E LD.REPRESENTTIVE, THE ASSESSEE HAS SOLD AGRICULTURAL LAND IN TRIKKAKARA P ANCHYAT. THERE IS NO COLUMN IN THE RETURN OF INCOME TO DISCLOSE THE EXEM PTED INCOME. ACCORDING TO THE LD.REPRESENTATIVE, PROFIT ON SALE OF AGRICULTURAL LAND IS EXEMPTED FROM TAXATION. IN THE ABSENCE OF ANY SPECI FIC COLUMN IN THE RETURN OF INCOME, ACCORDING TO THE LD.REPRESENTATIV E, THE ASSESSEE HAS NOT DISCLOSED THE GAIN ON CAPITAL GAIN. IF IT IS DISCL OSED, ACCORDING TO THE LD.RPERESENTATIVE, IT WILL NOT HAVE ANY EFFECT IN T HE COMPUTATION OF TOTAL INCOME. ACCORDING TO THE LD.REPRESENTATIVE, THE AS SESSING OFFICER, HOWEVER, FOUND THAT WHAT WAS SOLD BY THE ASSESSEE I S NOT AGRICULTURAL LAND. ACCORDINGLY, THE ASSESSING OFFICER BROUGHT THE SAME UNDER CAPITAL GAIN TAX. THE LD.REPRESENTATIVE SUBMITTED THAT THE ASSESSEE W AS UNDER THE BONA FIDE IMPRESSION THAT THE PROFIT ON SALE OF AGRICULTURAL LAND WAS EXEMPTED FROM TAX, THEREFORE THERE WAS A REASONABLE CAUSE ON THE PART OF THE ASSESSEE U/S 273B OF THE ACT. THE LD.REPRESENTATIVE HAS PL ACED HIS RELIANCE ON THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN CIT VS RAJIV BHATTARA (2014) 360 ITR 121 (P&H); GUJARAT HIGH COURT IN CIT VS WHITELENE CHEMICALS (2014) 360 ITR 385 (GUJ) AND THE JUDGMENT OF THE JAIPUR BENCH OF THE RAJASTHAN HIGH COURT IN CIT VS KRISHI TYRE & RETREADING AND 3 ITA NO.200/COCH/2014 RUBBER INDUSTRIES (2014) 360 ITR 580 (RAJ). THE LD .REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF THE APEX CO URT IN THE CASE OF ASHOK PAI VS CIT (2007) 292 ITR 11 (SC); CIT VS REL IANCE PETRO PRODUCTS PVT LTD (2010) 322 ITR 158 (SC); CIT VS ATUL MOHAN BINDAL (2009) 317 ITR 1 (SC). ACCORDING TO THE LD.REPRESENTATIVE, SI NCE THE ASSESSEE BONA FIDELY BELIEVED THAT THE LAND WAS AGRICULTURAL LAND , THERE CANNOT BE ANY LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 3. ON THE CONTRARY, SHRI LATHA V KUJMAR, THE LD.DR SUBMITTED THAT THE LANDED PROPERTY OF THE ASSESSEE IS SITUATED IN KAKK ANAD, TRIKKAKARA PANCHAYAT. THE ASSESSEE CLAIMED THE SAME AS AGRICU LTURAL LAND. HOWEVER, THE ASSESSING OFFICER FOUND THAT THE LAND WAS NOT AN AGRICULTURAL LAND. THIS TRIBUNAL EXAMINED THE ISSUE IN ITA NO.3 01/COCH/.2009 BY AN ORDER DATED 21-10-2011, COPY OF WHICH IS PLACED AT PAGE 1 OF THE PAPER BOOK ELABORATELY AND FOUND THAT THE LAND IS NOT AN AGRICULTURAL LAND. ACCORDING TO THE LD.DR, ONCE THE TRIBUNAL FOUND THA T THE LAND IS NOT AGRICULTURAL LAND, THEN THE ASSESSEE HAS TO NATURAL LY LIABLE FOR CAPITAL GAIN TAX ON SALE OF THE VERY SAME LAND. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE LAND IS AN AGRICULTURAL LAND IS NOT JUSTIF IED. THE CIT(A) HAS RIGHTLY CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFIC ER. 4 ITA NO.200/COCH/2014 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE ASSESSEE HAS NOT DISCLOSED ANY CAPITAL GAIN ON SALE OF THE LAND AT KAKKANAD. THE CLAIM OF THE ASSESSEE IS THAT THE LAND SOLD BY THE ASSESS EE IS AN AGRICULTURAL LAND, THEREFORE, IT IS EXEMPTED FROM TAXATION, THE ASSESSEE ALSO CLAIMS THAT THE INCOME-TAX RETURN DOES NOT CONTAIN ANY COLUMN F OR DISCLOSING ANY EXEMPTED INCOME. THE ASSESSEE FURTHER CLAIMS THAT THERE WAS A REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR NO T DISCLOSING THE CAPITAL GAIN IN THE RETURN OF INCOME. 5. NO DOUBT, THIS TRIBUNAL EXAMINED THE ISSUE AFTER CONSIDERING THE CLAIM OF THE ASSESSEE THAT THE SUBJECT LAND IS AN A GRICULTURAL LAND AND FOUND THAT THE LAND IS NOT AN AGRICULTURAL LAND. T HEREFORE, THE ISSUE CANNOT BE REAGITATED AT THIS STAGE. IT IS ALSO A WELL SET TLED PRINCIPLES OF LAW THAT THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDENT. THE AUTHORITY CONCERNED IS EXPECTED T O RE-APPRECIATE THE MATERIAL IN THE PENALTY PROCEEDINGS. IF THERE IS A REASONABLE CAUSE FOR NOT DISCLOSING A PARTICULAR INCOME, THEN IT MAY BE A RE ASON FOR NOT LEVYING PENALTY U/S 271(1) IN VIEW OF SECTION 273B OF THE ACT. 6. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THIS TRIBUNAL IN ITA NOP.301/COCH/2009 DATED 21-10-2011. APPARENTLY, TH E DIFFERENCE IN THE 5 ITA NO.200/COCH/2014 LANGUAGE EMPLOYED BY THE LEGISLATURE IN SECTION 2(1 4), 10(37) AND SECTION 54B WAS NOT BROUGHT TO THE NOTICE OF THE BENCH, WHI CH HEARD THE APPEAL. SECTION 2(14) DEFINES THE AGRICULTURAL LAND. HOWEV ER, SECTION 10(37) AND SECTION 54B REQUIRES THE ASSESSEE TO USE THE LAND F OR AGRICULTURAL PURPOSE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF THE TRA NSFER. HOWEVER, SUCH REQUIREMENT OF USE FOR AGRICULTURAL PURPOSE IS CONS CIOUSLY OMITTED BY THE PARLIAMENT IN SECTION 2(14) OF THE ACT. THEREFORE, A DOUBT ARISES WHETHER THE LAND IN SECTION 2(14) IS EXPECTED TO BE CULTIVA TED IMMEDIATELY TWO YEARS PRECEDING THE DATE OF TRANSFER OF NOT? IN FACT, AN OTHER DIVISION BENCH OF THIS TRIBUNAL EXAMINED THIS ISSUE ELABORATELY IN THE CAS E OF SHRI M.J. THOMAS & ORS IN ITAS NO 224/COCH/2011 & ORS ORDER DATED 06-0 6-2014 AND AFTER THE FINDING THAT THE STATE GOVERNMENT IS NOT MAINTAININ G ANY RECORDS FOR CULTIVATION IN THE STATE OF KERALA, HAS OBSERVED AS FOLLOWS: 27. THE STATE GOVERNMENT IS EXPECTED TO MAINTAIN CULTIVATION ACCOUNT FOR THE PURPOSE OF ESTIMATION O F FOOD PRODUCTION OF THE STATE AND POSSIBLE EXCESS OR DEFI CIT IN THE FOOD PRODUCTION SO AS TO MAKE NECESSARY ARRANGEMENT FOR SUPPLY OF FOOD TO THE PEOPLE. IN SPITE OF BEST EFF ORTS TAKEN BY THIS TRIBUNAL, NO EVIDENCE IS COMING FORWARD FROM T HE REVENUE TO SHOW THAT THE STATE GOVERNMENT WAS MAINTAINING A NY RECORD. IN FACT, THE ASSESSING OFFICER, AFTER EXAM INING THE VILLAGE ADMINISTRATIVE OFFICER, ADDITIONAL TAHSILDA R AND AGRICULTURAL OFFICER, FOUND THAT THE VILLAGE ADMINI STRATIVE OFFICER AND TAHSILDAR ARE NOT MAINTAINING ANY RECOR D FOR THE 6 ITA NO.200/COCH/2014 PURPOSE OF CULTIVATION. EVEN THE AGRICULTURAL OFFI CER IS NOT MAINTAINING ANY RECORDS FOR CULTIVATION. THE RECOR DS AVAILABLE WITH THE STATE GOVERNMENT ARE ONLY THE REGISTER FOR COLLECTION OF CONTRIBUTION TOWARDS KERALA AGRICULTURAL WORKERS W ELFARE FUND, BASIC TAX REGISTER AND THE CLASSIFICATION OF LAND AS AGRICULTURAL LAND. APART FROM THESE, THERE IS NO O THER MATERIAL AVAILABLE WITH THE STATE GOVERNMENT. IF THAT IS SO , IT IS NOT KNOWN HOW THE FOOD PRODUCTION OF THE STATE WAS ESTI MATED SO AS TO ENSURE SUFFICIENT SUPPLY OF FOOD TO THE PEOPL E OF THE STATE. THE FACT REMAINS IS THAT THE REVENUE COULD NOT PRODUCE ANY EVIDENCE FOR CULTIVATION OF LAND MAINTAINED BY GOVERNMENT OF KERALA. FROM THE REMAND REPORT FILED BY THE ASS ESSING OFFICER THE FOOD PRODUCTION OF THE STATE APPEARS TO HAVE BEEN ESTIMATED ON THE BASIS OF THE FARMERS, WHO WERE REG ISTERED ON THE RECORDS OF PADDY FIELD WITHOUT CONSIDERING THE ACTUAL CULTIVATION. THEREFORE, THE STATE GOVERNMENT FOR T HE PURPOSE OF FOOD PRODUCTION CONSIDERS THE PADDY FIELDS AND THE AGRICULTURISTS AS A BASIS FOR FOOD PRODUCTION. IN THOSE SITUATIONS, THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE VILLAGE OFFICER TO SHOW THAT THE SUBJECT LANDS WERE UNDER CULTIVATION. THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT IN THE ABSENCE OF ANY OTHER RECORD MAINTAINED BY THE S TATE GOVERNMENT FOR CULTIVATION OF THE LAND, THE CERTIFI CATE GIVEN BY THE VILLAGE ADMINISTRATIVE OFFICER, WHO IS PERSONAL LY ACQUAINTED WITH THE LAND MAY BE ONE OF THE FACTORS TO BE TAKEN INTO CONSIDERATION. THIS TRIBUNAL CANNOT IGNORE TH E CERTIFICATE GIVEN BY THE VILLAGE ADMINISTRATIVE OFFICER ON THE BASIS OF HIS ACQUAINTANCE WITH THE FIELD CERTIFYING THAT THE SUB JECT LANDS WERE SUBJECTED TO CULTIVATION. 7 ITA NO.200/COCH/2014 28. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM AND OTHERS VS CIT (1993) 204 ITR 631 (SC). IN THE CASE BEFORE THE APEX COURT, THE ASSESSEE SOLD A PIECE OF LAND S ITUATED WITHIN THE REVENUE LIMITS OF NAVAGAON VILLAGE IN TH E MUNICIPAL LIMITS OF SURAT MUNICIPALITY. IN THE YEAR 1967, TH E ASSESSEE AGREED TO SELL THE LAND TO A HOUSING SOCIETY. THE ASSESSEE CLAIMED THE GAIN ON TRANSFER OF SUCH LAND AS EXEMPT U/S 2(14) OF THE ACT. THE APEX COURT FOUND THAT THE ASSESSEE APPLYING FOR PERMISSION TO SELL THE LAND FOR NON AGRICULTURA L PURPOSE AND IMMEDIATELY AFTER APPLICATION FOR CONVERSION OF LAN D, THE LAND WAS NOT CULTIVATED FOR A PERIOD OF FOUR YEAR. IN TH OSE FACTUAL CIRCUMSTANCES, THE APEX COURT FOUND THAT THE LAND I N QUESTION IS NOT AN AGRICULTURAL LAND. IN THE CASE BEFORE US , THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF LAND FOR NON AGRICULTURAL PURPOSE. THE LAND IN QUESTION IS CLAS SIFIED AS AGRICULTURAL LAND AND THE VILLAGE OFFICER CERTIFIED THAT THE LAND WAS SUBJECTED TO CULTIVATION. THE ASSESSEE IS CONT RIBUTING TO THE AGRICULTURAL LABOURERS WELFARE FUND AND ALSO P AYING REVENUE TAX AS AGRICULTURAL LAND WHICH IS EVIDENCE FROM BASIC TAX REGISTER. IN VIEW OF THE MATERIAL AVAILABLE ON RECORD DISCLOSING THE CULTIVATION OF LAND, THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT JUDGMENT OF THE APEX COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM AND OTHERS (SUPRA ) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. 29. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEOR GE (SUPRA). IN THE CASE BEFORE THE KERALA HIGH COURT IN THE CASE 8 ITA NO.200/COCH/2014 OF SMT. ASHA GEORGE (SUPRA), THE QUESTION AROSE FOR CONSIDERATION WAS EXEMPTIONS U/S 54B AND 54F OF THE ACT. ONE OF THE PRE-CONDITIONS FOR GRANT OF EXEMPTIONS U /S 54B AND 54F IS THAT THE LAND SHOULD BE USED FOR CULTIVATION IMMEDIATELY TWO YEARS BEFORE THE DATE OF TRANSACTION. SUCH A C ONDITION IS NOT AVAILABLE FOR TREATING THE LAND AS CAPITAL ASSE T U/S 2(14) OF THE ACT. THEREFORE, AS OBSERVED EARLIER, WHAT IS R EQUIRED IS THE CONNECTION BETWEEN THE LAND AND THE AGRICULTURAL PU RPOSE AND IF THE LAND IS CULTIVATED IN ANY OF THE EARLIER YEA RS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LAND HAS TO B E TREATED AS AGRICULTURAL LAND. THE MATERIAL EVIDENCE PRODUCED BY THE ASSESSEES ARE - (I) THE CERTIFICATE ISSUED BY THE V ILLAGE OFFICER; (II) CERTIFICATE ISSUED BY THE AGRICULTURAL OFFICER ; (III) CLASSIFICATION OF LAND BY STATE GOVERNMENT AS AGRIC ULTURAL LAND; (IV) RECEIPT FOR PAYMENT OF CONTRIBUTION TO AGRICUL TURAL WORKERS WELFARE FUND; AND (V) BASIC TAX REGISTER. FROM TH ESE MATERIALS, IT APPEARS THAT THE STATE GOVERNMENT HAS CLASSIFIED THE SUBJECT LAND AS AGRICULTURAL LAND. THE GOVERNM ENT IS COLLECTING TAX AS AGRICULTURAL LAND WHICH IS EVIDEN T FROM THE BASIC TAX REGISTER. THE ASSESSEES ARE ALSO CONTRIB UTING TOWARDS AGRICULTURAL WORKERS WELFARE FUND. THE VI LLAGE OFFICER CERTIFIED THAT THE SUBJECT LANDS WERE SUBJE CTED TO CULTIVATION. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SUBJECT LANDS WERE AGRI CULTURAL LANDS BEYOND THE MUNICIPAL LIMITS OR BEYOND 8 KMS R ADIUS OF THE NOTIFIED MUNICIPALITY. THEREFORE, THE SUBJECT LAND CANNOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF S ECTION 2(14) OF THE ACT; HENCE NOT LIABLE FOR CAPITAL GAIN TAX U NDER THE INCOME-TAX ACT. 9 ITA NO.200/COCH/2014 7. IN VIEW OF THE SUBSEQUENT OF THE DECISION OF THE DIVISION BENCH OF THIS TRIBUNAL, THE CLASSIFICATION OF LAND AS AGRICULTURA L LAND THE CERTIFICATE ISSUED BY THE VILLAGE OFFICER AND THE LOCAL BODIES ASSUMES MORE SIGNIFICANCE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE CLAIM OF THE ASSESSEE THAT HE WAS UNDER THE BONA FIE IMPRESSION THAT THE LAND WAS AN AGRICULTURAL LAND IS JUSTIFIED. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WAS A REASONABLE CAUSE ON THE PART OF THE ASS ESSEE IN NOT DISCLOSING THE GAIN ARISING ON SALE OF SUCH LAND. MOREOVER, W HEN THE ASSESSEE MADE A CLAIM ON THE BONA FIDE BELIEF THAT THE SUBJECT LA ND WAS AN AGRICULTURAL LAND, MERELY BECAUSE THE SAME WAS REJECTED, THAT CA NNOT BE A REASON TO LEVY PENALTY IN VIEW OF THE JUDGMENT OF THE APEX CO URT IN RELIANCE PETRO PRODUCTS PVT LTD (SUPRA). HENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT LEVY OF PENALTY U/S 271(1)(C) IS NOT JUSTIFIED IN VIEW OF SECTION 273B OF THE ACT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTH ORITIES ARE SET ASIDE AND THE PENALTY IS DELETED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06 TH FEBRUARY, 2015. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 06 TH FEBRUARY, 2015 PK/- 10 ITA NO.200/COCH/2014 COPY TO: 1. SHRI M.K. ABDUL RAHIM, MULAKKAMPILLY HOUSE, VAZH AKKALA, TRIKKAKARA PO, KOCHI 682 021 2. DY.CIT, CIR.2(1), KOCHI 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH