PASHMINA HOLDINGS LTD, MUMBAI V. DCIT CEN CIR 44, MUMBAI

ITA 2246/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6985 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIRAMA KARTHIKEYAN
• Keywords: Business income; Source of fund; Cost of acquisition
• Section: 143(3); 153A

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 2246 /MUM/201 7 ( / ASSESSMENT YEAR: 2011 - 12 ) PASHMINA HOLDINGS LTD. NEW HIND HOUSE 3, N. M. MARG BALLARD, ESTATE, MUMBAI - 400 001 / VS. DCIT CEN CIR 44, AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN NO. AA ACP4177E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NIRAV PODDAR , AR / RESPONDENTBY : SHRI ABHIRAMA KARTHIKEYAN , DR / DATE OF HEARING : 20 .12 .2018 / DATE OF PRONOUNCEMENT : 02.01.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 50, MUMBAI DATED 27.01.17 F OR AY 20 11 - 12. 2 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE PASSING ORDER OF ASSESSMENT U/S 153A R.W.S 143(3) OF THE I.T. ACT HAD MADE ADDITIONS BY TREATING SALE OF AGRICULTURAL LAND AS BUSINESS INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, DISMISSED TH E APPEAL OF THE ASSESSEE. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. 3 . THE SOLITARY GROUND S RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN HOLDING THAT THE PROFIT FOR SALE OF AGRICULTURAL LAND OF RS. 2,10,07,961/ - REPRESENTS BUSINESS INCOME OF THE ASSESSEE. 4 . LD. AR APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE LD. CIT(A). FROM THE RECORDS , WE FIND THAT SUBMISSIONS MADE BY LD. AR ARE DULY 3 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. RECORDED IN PARA NO. 5.2 OF T HE ORDER OF LD. CIT(A), WHICH ARE REPRODUCED BELOW: - 5.2. SUBMISSIONS OF THE APPELLANT MADE DURING THE COURSE OF APPEAL PROCEEDINGS ARE PARAPHRASED BELOW: - (I) IN P .Y, 2010 - 11, THE APPELLANT SOLD AGRICULTURAL LAND (BEARING GAT NO, 546 SITUATED AT VILLAGE AWAS, ALIBAUG TALUKA, RAIGAD DISTRICT) WHICH IT HAD PURCHASED ON 02,06.2006. TI LL THE DATE OF SALE, NO ACTIVITY WAS CARRIED ON (HE SAID LAND AND NO AMOUNT WAS EXPEND ED TOWARDS ANY IMPROVEMENT MADE ON THE ABOVE - MENTIONED AGRICULTURAL LAND, (II) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE SAID AGRICULTURAL LAND SOLD IN P. Y. 2010 - 11 WAS THE PROCEEDS FROM THE REDEMPTION OF MUTUAL FUND. (II I) IN THE COMPUTATION OF TOTAL INCOME, THE APPELLANT HAD DISCLOSED PROFIT ON SALE ON THE AFORESAID AGRICULTURAL LAND AS BEING EXEMPT FROM TAX (I.E. U/S 10(1) OF THE INCOME TAX ACT), THE SAME WAS ALSO DULY REFLECTED IN THE RETURN FILED U/S 153A OF THE INCOME TAX ACT, 1961. (IV) THE LAND BEING AGRICULTURAL IN NATURE WAS NEVER IN DISPUTE BY THE AO FOR THE A. Y. 2011 - 12. HOWEVER, WITHOUT APPRECIATING THE CONTENTION OF THE APPELLANT 4 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. AND DISREGARDING THE GLARING SET OF FACTS, THE LEARNED AO, ON THE BASIS OF CONSISTENCY HELD THE PROFIT OF RS 2, 10,07,961 ON SALE OF AGRICULTURAL LAND (RS 2,97,50,000 BEING SALES CONSIDERATION LESS RS 87,42,039 BEING PURCHASE COST) AS BUSINESS INCOME AND ACCORDINGLY ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT. (V) FOR THE PLOT OF LAND SOLD IN P. Y. 2005 - 06 T HE ITAT HAS HELD THAT THE INTENTION OF THE ASSESSEE IN AY 2006 - 07 WAS TO PURCHASE SEVERAL GATS WITH A VIEW TO CONSOLIDATE INTO ONE FOR SALE TO SOME PARTY FOR PROFIT, AFTER THE PURCHASES THE ASSESSEE HAD MADE SIGNIFICANT AMOUNT OF IMPROVEMENTS ON THE SAID L ANDS. SUBSEQUENTLY THE SAID PROPERTY (I.E. THE PLOT OF LANDS ALONG WITH SUPERSTRUCTURES BUILT THEREON) HAD BEEN SOLD TO ONE PAR T Y MAKING IT CLEAR THAT IT WAS NOT THE INTENTION OF THE ASSESSEE TO HOLD THE PROPERTY FOR INVESTMENT, FOR THE PLOT OF LAND SOLD I N P.Y. 2010 - 11, THE INTENTION OF THE APPELLANT WAS ONLY TO HOLD THE PROPERTY (HERE ONLY ONE OAT NAMELY GAT NO. 546) FOR INVESTMENT. THE SAME IS SUBSTANTIATED BY THE CONDUCT OF THE APPELLANT BECAUSE SINCE PURCHASE, THE APPELLANT DID NOT INCUR ANY COST OF IM PROVEMENT ON THE SAID PARCEL OF LAND. ULTIMATELY, ONLY THE LAND (WITHOUT ANY STRUCTURE BUILT THEREON) WAS SOLD IN AY 2011 - 12. 5 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. (VI) FOR THE PLOT OF LAND SOLD IN P. Y. 2005 - 06, THE ASSESSEE PURCHASED SEVERAL PARCELS OF ADJOINING LAND IN A SYSTEMATIC MANNER. THEREAFTER, IT SPENT SIGNIFICANT AMOUNT OF MONEY BY WAY OF INSTALLATIONS AND IMPROVEMENTS AND THEN SOLD ALL THE LANDS ALONG WITH THE STRUCTURES TO ONE PARTY BY THE NAME OF 'AVANI AGRICULTURAL FARMS PVT LTD.' THE AVERAGE HOLDING PERIOD OF LANDS IN THIS CAS E WAS APPROX. 2 - 3 YEARS DURING WHICH THE ASSESSEE HAD SPENT SIGNIFICANT AMOUNT OF MONEY BY WAY OF INSTALLATIONS AND IMPROVEMENTS ON THE SAID LAND. FOR THE PLOT OF LAND SOLD IN P.Y. 2010 - 11, ONLY ONE PARCEL OF AGRICULTURAL LAND WAS PURCHASED BEARING GAT NO. 546 AT AWAS VILLAGE, ALIBAG TALUKA. HERE, THE APPELLANT HELD THE SAID AGRICULTURAL LAND FOR APPROX, 4 YEARS WITHOUT INCURRING ANY IMPROVEMENT ON THE SAID LAND IN THESE 4 YEARS. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY THE REVENUE AU THORITIES. 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD IN THE SHAPE OF PAPER BOOK AS WELL AS THE ORDERS PASSED BY REVENUE 6 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. AUTHORITIES. WE FIND THAT AO HAD MADE THE ADDITION S WHILE HOLD ING THAT THE AMOUNT OF SALE OF AGRICULTURAL LAND BY THE ASSESSEE BE TREATED AS BUSINESS INCOME . IN DOING SO, THE AO HAD RELIED UPON THE ORDERS FOR AY 2005 - 06 IN ASSESSEES OWN CASE. WHEREAS ON THE CONTRARY, LD. AR HAD ALL ALONG BEEN ARGUING THAT THE FACTS FOR THE AY 2005 - 06 ARE DIFFERENT FROM THE FACTS OF THE YEAR UNDER CONSIDERATION. 7. THIS PART OF ARGUMENTS OF LD. AR HAD ALREADY BEEN ACCEPTED BY LD. CIT(A) IN PARA NO. 5.3 OF ITS ORDER . LD. CIT(A) HAD ALSO AGREED THAT THE FACTS OF AY 2005 - 06 ARE DIFFERENT FROM THE FACTS FOR THE YEAR UNDER CONSIDERATION, BUT STILL LD. CIT(A) UPHELD THE ADDITION S MADE BY AO BY HOLDING THAT THE ASSESSEE HAD PAID THE LAND REVENUE TO THE STATE GOVT. THUS , IT WAS HELD THAT THE ASSESSEE HAD INCURRED EXPENSES TOWARDS MAIN TENANCE . IT WAS FURTHER HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN AS TO HOW THE LAND REVENUE PAID TO THE TALATHI WAS ACCOUNTED FOR IN ITS BOOKS OF ACCOUNT . 7 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. 8 . AFTER HAVING METICULOUSLY GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS ORDE RS PAS SED BY THE REVENUE AUTHORITIES AND WHILE TAKING INTO CONSIDERATION THE DOCUMENTS PLACED ON RECORD AS WELL AS ARGUMENTS ADDRESSED BY BOTH THE PARTIES, WE ARE OF THE CONSIDERED VIEW THAT SINCE IT IS AN UNDISPUTED FACT THAT THE FACTS OF THE YEAR UNDER CONSIDERATION ARE DIFFERENT FROM T HE FACTS OF AY 2005 - 06, WHICH WAS THE ONLY BASIS FOR TREATING THE SALE OF LAND AS BUSINESS INCOME. APART FROM THAT, WE HAVE ALSO NOTICED THAT THE ASSESSEE HAD NOT MADE ANY IMPROVEMENT AN D HAD ONLY PAID LAND REVENUE TO THE STATE GOVT., WHICH EVEN OTHERWISE IS A STATUTORY LIABILITY . THUS , BY MERE MAKING PAYMENT OF LAND REVENUE TO THE STATE GOVT, ITSELF DO NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD INCURRED EXPENSES TOWARDS MAINTENA NCE AND CLAIMED AS EXPENDITURE. IF AT ALL, THE ASSESSEE HAD CLAIMED THE PAYMENT OF LAND REVENUE AS IT S EXPENSES, THEN IN THAT EVENTUALITY, THE SAME CAN BE DISALLOWED. B UT ONLY BECAUSE OF THE FACT THAT STATUTORY DUES WERE PAID BY THE ASSESSEE, THE LAND CANN OT BE CATEGORIZED AS BUSINESS ASSET (STOCK - IN - TRADE). 8 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. 8. EVEN OTHERWISE AFTER APPRECIATING THE ORDERS FOR AY 2005 - 06, WE FIND THAT IN THAT YEAR , THE LAND IN QUESTION WAS SOLD ALONGWITH FARM HOUSE AND THUS, THE SAME WAS TREATED AS BUSINESS INCOME , BUT IN THE PRESENT CASE, THE AGRICULTURAL LAND WAS PURCHASED IN AY 2007 - 08 AND THE ASSESSEE HAD BEEN HOLDING THE SAME FOR A SUBSTANTIAL PERIOD OF TIME UNTIL IT WAS SOLD IN AY 2011 - 12 WITHOUT IMPROVEMENT . WE HAVE ALSO PERUSED THE WRITTEN SUBMISSION FILED BEFO RE LD. CIT(A) WHICH ARE AT PAGE NO. 66 OF THE PAPER BOOK, WHEREIN ALSO THE ASSESSEE HAD REITERATED THE FACT THAT NO EXPENSES WERE INCURRED ON THE IMPROVEMENT OF THE LAND AND IN ORDER TO SUPPORT THE SAID FACT, THE ASSESSEE HAD SUBMITTED A SUMMARY OF COMPUTA TION OF INCOME TOGETHER WITH PROFIT AND LOSS ACCOUNT. WE HAVE ALSO NOTICED THAT IT WAS NEVER DISPUTED BY THE REVENUE THAT THE NATURE OF LAND WAS AGRICULTURE. IT IS ALSO A SETTLED LAW THAT EACH ASSESSMENT YEAR IS A SEPARATE YEAR HAVING ITS OWN FACTS. THUS ACCORDING TO US, THE LD. CIT(A) HAD TAKEN A VERY NARROW VIEW OF THE ENTIRE FACTS AND HAD TREATED THE LAND SOLD BY THE ASSESSEE AS BUSINESS ASSET, ONLY BY TAK ING INTO CONSIDERATION THAT ASSESSEE HAD PAID LAND REVENUE TO THE STATE GOVT. THEREFORE, 9 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. IN VIEW OF OUR ABOVE FINDINGS, WE ARE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE AFTER THE PURCHASE OF THE LAND HAD HELD IT FOR CONSIDERABLE PERIOD AND SOLD IT OFF WITHOUT INCURRING ANY EXPENSES FOR IMPROVEMENT. THE NATURE OF THE LAND HAD ALWAYS REMAINED AGRICULTURAL THROUGHOUT AND THUS BY MERE MAKING OF PAYMENT OF STATUTORY DUE TO THE STATE GOVT DO NOT LEADS US TO CONCLUDE THAT THE AGRICULTURAL LAND SOLD BY TH E ASSESSEE WAS BUSINESS ASSET . THE FACTS OF AY 2005 - 06 ARE ALSO DIFFERENT FROM THE FACTS OF THE YEAR UNDER CONSIDERATION AND THUS, WE DIR ECT THE AO DELETE THE ADDITIONS ON THE REASONS MENTIONED ABOVE. 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JAN , 201 9 . SD/ - SD / - ( R. C. SHARMA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 02 . 01 .201 9 SR.PS . DHANANJAY 10 I.T.A. NO. 2246 /MUM/201 7 PASHMINA HOLDINGS LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI