SMT. USHA MODI, Jaipur V. ACIT, Jaipur

ITA 200/JPR/2012

• Counselvise Citation: 20023114 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: MANISH AGARWAL
• Keywords: Bogus purchase; Capital asset; Business income
• Section: 145; 54; 54F; 2(14)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAI NI) ITA NO. 200/JP/2012 ASSESSMENT YEAR : 2008-09 PAN: ACFPM 8556 N SMT. USHA MODI VS. THE ACIT 706, VIDHYADHAR KA RASTA CIRCLE- 1 TRIPOLIYA BAZAR, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANISH AGARWAL DEPARTMENT BY: SHRI D.C. SHARMA DATE OF HEARING: 13-01-2014 DATE OF PRONOUNCEMENT: 30-01-2014 ORDER PER HARI OM MARATHA, JM:- THIS APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEA R 2008-09 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 19-01-2012 . 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T THE ASSESSEE, AS AN INDIVIDUAL, FILED HER RETURN OF INCOME (ROI), F OR THE ASSESSMENT YEAR 2008-09 ON 5-09-2008, DECLARING THE TOTAL INCOME O F RS. 2,85,120/-. THE ASSESSEE DERIVED HER INCOME FROM BUSINESS, LONG & SHORT TERM CAPITAL GAINS AND FROM OTHER SOURCES. ON PERUSAL OF THE RECORD, I T WAS NOTICED THAT THE ASSESSEE WAS CARRYING ON BUSINESS OF PRECIOUS/ SEMI -PRECIOUS STONES, LAND 2 AND SHARES BUT HAS SHOWN THE RECEIPTS FROM LAND AN D SHARE TRANSACTIONS UNDER THE HEAD CAPITAL GAINS RATHER THAN BUSINESS INCOME. IT WAS ALSO FOUND THAT SHE HAS WRONGLY CLAIMED DEDUCTION U/S 54 F OF THE ACT. THE ASSESSEE FURNISHED A CHART OF GROSS PROFIT RATE ETC IN THE CASE OF M/S. RANI GEMS WHICH IS AS UNDER:- A.Y. TURNOVER GROSS PROFIT GROSS PROFIT RATE 2006-07 1399290 469565 33.56% 2007-08 360814 155983 42.23% 2008-09 1004180 322936 32.15% HOWEVER, AFTER CONSIDERING THE REPLY OF THE ASSESSE E, IT WAS NOTICED THAT THE ASSESSEE OWNED / POSSESSED THE FOLLOWING LAND SITUA TED AT TEHSIL AMER IN DISTT. JAIPUR . SERIAL NO. KHASRA NO. RAQBA 1. 81 0.0700 HECTARES 2. 82 0.0100 HECTARES 3. 83 0.0400 HECTARES 4. 84 0.0400 HECTARES 5. 85 0.0800 HECTARES 6. 86 0.0100 HECTARES 7. 87 0.2300 HECTARES 8. 88 0.3200 HECTARES 9. 94 0.0900 HECTARES 10. 95 0.2300 HECTARES TOTAL 1.1200 HECTARES THE AO CONCLUDED THAT THE ASSESSEE HELD THE LAND FO R THE PURPOSE OF SELLING IT AS A BUSINESS COMMODITY ONLY AND NOT AS AN ASSET . ACCORDINGLY, INCOME OF RS.71,94,720/- HAS BEEN TREATED AS HER BUSINESS IN COME AND HAS BEEN ADDED TO THE TOTAL INCOME OF THE YEAR. 3 2.2 AGGRIEVED, THE ASSESSEE FILED AN APPEAL. THE LD . CIT(A) ALSO FOLLOWED THE SUIT. 2.3 NOW THE ASSESSEE IS FURTHER AGGRIEVED AND HAS R AISED GROUND NO. 1 AND 2 IN THIS REGARD. 2.4 WE HAVE HEAD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORD. IT WAS ARGUED BY THE LD. AR THAT IT IS ONLY DUE TO MISTAKE COMMITTED BY THE AUDITOR THAT A DIFFERENT OPINION H AS BEEN TAKEN BY THE AO REGARDING THE PROCEEDS OF THE SALE OF THIS AGRICULT URAL LAND. IN SUPPORT OF THIS CONTENTION, THE LD. AR HAS SUBMITTED THE FOLLOWING POINTS. (A) THE AUDITOR WHO HAS ISSUED THE AUDIT REPORT HAD REPRESENTED THE CASE BEFORE THE AO AND STATED THAT NATURE OF BUSINESS HAD INADVERTENTLY BEEN MENTIONED AS TRADIN G OF SHARES AND LAND AND THAT THE ASSESSEE WAS DOING BUSINESS O F ONLY PRECIOUS AND SEMI PRECIOUS STONES. (B) THE AO HAS OBSERVED THIS WAS A SINGLE TRANSACTI ON OF LAND DURING THE YEAR. JUST BECAUSE IT WAS FOR MORE THAN RS. 50 LACS IT IS NOT A GOOD BASIS TO FORM THE PREMISES TH E NATURE OF TRANSACTION WAS BUSINESS. THE FACT THAT THE LAND WAS SOLD TO MUSTARD SEED G HALOTI HOTELS P. LTD. IS NOT A REFLECTION ON THE ASSESSEE FOR DETERMINING THAT SHE WAS ENGAGED IN THE BUSINESS OF TRADE OF LA ND. HAD IT BEEN SO ALL THE CASES WHERE THE LAND WAS SOLD TO BU ILDERS AND DEVELOPERS OR COLONIZERS THE WOULD BE ASSESSED AS B USINESS INCOME. (D) FURTHER MORE, IT WAS POINTED OUT THAT THE ASSES SMENT ORDER WAS PASSED ON 7-12-2010 WHEREIN IN THE CASE O F THE ASSESSEE AN ORDER U/S 16(5)/17 OF THE WEALTH TAX AC T, 1957 HAD BEEN PASSED BY THE ITO, WARD- 1(1), JAIPUR ON 10-12 -2008 WHEREIN THE LAND WHICH WAS CONSIDERED TO BE AGRICUL TURAL LAND 4 WHICH WAS EXEMPTED FROM LEVY OF WEALTH TAX ACT. THE AO HAS NOT CHALLENGED THE WEALTH TAX ORDER. THEREFORE, THE SALE OF AGRICULTURAL LAND IS EXEMPT FROM BEING CHARGED FOR CAPITAL GAINS. (E) THE ASSESSEE MADE INVESTMENT IN LAND OVER AN EX TENDED PERIOD OF TIME OF 10-15 YEARS WHICH INDICATES THAT THIS WAS NOT A BUSINESS TRANSACTION. (F) THE ASSESSEE USED HER OWN FUNDS TO ACQUIRE ASSE TS AND BORROWED FUNDS WERE NOT UTILIZED FOR MAKING INVESTM ENT IN THE LAND. (G) IT WAS SUBMITTED THAT THE INTENTION OF THE ASSE SSEE CANNOT BE READ FROM HER MIND BUT WAS REFLECTED IN HER COND UCT; THE WAY SHE TREATS THE TRANSACTIONS. WHEN THE ASSESSEE NEVE R CLAIMED THAT SHE WAS TRADING IN LAND, THERE IS NO OPENING O R CLOSING STOCK OF LAND AND THE ASSESSEE HAS TREATED THE TRANSACTIO NS AS INVESTMENTS IN THE BOOKS OF ACCOUNT, THE PURCHASES OF LAND CAN ONLY BE CONSIDERED AS INVESTMENTS. THE LANDS HELD B Y THE ASSESSEE AS INVESTMENT FOR PAST MANY YEARS AND IN T HE PRECEDING YEARS NO DOUBTS WERE RAISED ABOUT THESE INVESTMENTS . 2.5 PER CONTRA, THE LD. DR HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND HAS POOH-POOHED THE ABOVE POINTS BY EXPLA INING EACH ONE BY ONE AND HAS REITERATED THE CONCLUSION DRAWN BY THE LD. CIT(A). 2.6 AFTER CONSIDERING THE ABOVE SUBMISSIONS VIS-A-V IS THE EVIDENCE AVAILABLE ON RECORD, WE ARE CONVINCED THAT THE ASSE SSEE HAS TREATED THIS LAND AS HER ASSET AND NOT STOCK IN TRADE. WHEN THE ENTIR E EVIDENCE ARE EXAMINED IN THEIR ENTIRETY, THE ONLY ONE IRRESISTIBLE CONCLUSIO N CAN BE DRAWN THAT THE ASSESSEE OWNED AND POSSESSED A PIECE OF AGRICULTUR AL LAND AS HER ASSET ACQUIRED FOR INVESTMENT AND IT WAS SOLD AS AN AGRIC ULTURAL LAND. THE ABOVE 5 POINTS MENTIONED AS (A) TO (G) HAVE BEEN DULY EXAMI NED BY US AND WE ARE OF THE CONSIDERED OPINION THAT NOT ONLY THESE CONTENTI ONS ARE CORRECT AND THEIR EFFECT WOULD TERMINATE INTO A FINDING THAT THE ASSE SSEE USED HER OWN FUNDS TO ACQUIRE THE ASSETS AND IN THE WEALTH TAX ASSESSMENT ORDER SHE HAS REFLECTED THIS LAND AS AGRICULTURAL LAND. IT IS FOUND THAT O NLY BECAUSE THERE IS SOME MISTAKE COMMITTED BY THE AUDITOR THE NATURE OF THE LAND WOULD NOT CHANGE. IT IS ALSO CLEARLY ESTABLISHED FROM RECORD THAT SHE HAS SOLD AGRICULTURAL PIECE OF LAND WHICH IS EXEMPT U/S 2(14)(III) OF THE ACT. ACCORDINGLY, WE HOLD THAT THE INCOME ARISING FROM TRANSACTION OF SALE OF AGRI CULTURAL LAND TO THE TUNE OF RS. 76,16,000/- IS NOT A BUSINESS INCOME AND IT IS SIMPLY RECEIPT ARISING FROM SALE OF AGRICULTURAL PIECE OF LAND. ACCORDINGLY, W E ORDER TO DELETE THE IMPUGNED ADDITION. IN VIEW OF THE OUR ABOVE FINDING , THE CLAIM OF DEDUCTION U/S 54F OF THE ACT WOULD BE OF ONLY OF ACADEMIC INT EREST. THIS LAND CANNOT BE TREATED AS A CAPITAL ASSET U/S 2(14) OF THE ACT. THIS RECEIPT IN FACT IS TO BE TREATED AS LONG TERM CAPITAL GAINS HAVING ARISEN FR OM SALE OF LAND AND NOT AS A BUSINESS INCOME. ACCORDINGLY, GROUND NO. 1 AND 2 OF THE ASSESSEE STAND DISPOSED OFF AS ABOVE. 3.1 GROUND 3 AND 4 WERE NOT PRESSED BY THE ASSESSEE LD. AR OF THE ASSESSEE AT THE TIME OF HEARING. THEREFORE, THESE G ROUNDS STAND DISMISSED. 4.1 THE FACTS APROPOS TO GROUND NO. 4.1 AND 4.2 ARE THAT THE AO MADE TRADING ADDITION OF 1,61,228/- @ 25% BY TREATING IT AS BOGUS PURCHASES TO THE 6 TUNE OF RS. 1,61,228/-. HOWEVER, THE LD. CIT(A) HAS SUSTAINED THE ADDITION TO RS. 40,307/- OUT OF THE SAME. 4.2 TO FURTHER ELUCIDATE THE FACTS OF THIS ISSUE, T HE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED AND PROVISION OF SECTION 145 (3) OF THE ACT WAS INVOKED. THEREAFTER, THE AO ESTIMATED THE PROFIT @ 25% OF THE ALLEGED PURCHASES. THIS ADDITION HAS BEEN REDUCED BY THE LD . CIT(A) AFTER RELYING ON PAST HISTORY OF THE ASSESSEE. IT IS SETTLED PRINCIP LE OF LAW THAT AFTER REJECTION OF BOOKS OF ACCOUNT PAST HISTORY OF THE ASSESSEE, IF AVAILABLE, IS THE BEST GUIDE. ACCORDINGLY, WE DO NOT FIND ANY FALLACY IN H IS FINDING AND CONFIRM THE SAME. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 30-01-2014. SD/- SD/- (.N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMEBR JAIPUR DATED: 30 TH JAN 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. SMT. USHA MODI, JAIPUR 2. THE ACIT, CIRCLE- 1, JAIPUR 3. THE LD. CIT(A) 4. THE DR 5. THE GUARD FILE (IT NO.200/JP/12) 6.THE LD CIT A.R. ITAT: JAIPUR 7 8 9