ACIT, CHENNAI V. G.B.Rajendra Prasad, CHENNAI

ITA 2354/CHNY/2014

• Counselvise Citation: 235421714 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 14-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-09-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Keywords: Capital asset; Cost of acquisition
• Section: 131; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2354/MDS/2014 / ASSESSMENT YEAR : 2007-08 THE ASSTT. COMMISSIONER OF INCOME-TAX MEDIA CIRCLE II CHENNAI VS. SHRI G.B RAJENDRA PRASAD PLOT NO.34, SAIBABA COLONY 2 ND STREET, VIRUGAMBAKKAM CHENNAI 690 092 [PAN AAEPR 7281 C ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : DR. B. NISCHAL, JCIT /RESPONDENT BY : NONE / DATE OF HEARING : 14 - 09 - 2015 ! / DATE OF PRONOUNCEMENT : 13 - 11 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, CHENN AI, DATED 29.4.2014 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THE NOTICE OF HEARING WAS SERVED ON THE ASSESSEE T HROUGH DEPARTMENT. THE DEPARTMENT, AFTER SERVING THE NOTI CE, HAS FILED THE COPY OF THE ACKNOWLEDGMENT AS PROOF OF SERVICE OF N OTICE ON THE ITA NO. 2354/14 :- 2 -: ASSESSEE. INSPITE OF RECEIPT OF NOTICE, THE ASSESS EE HAS NOT CHOSEN TO APPEAR BEFORE THIS TRIBUNAL . THEREFORE, WE HEARD THE LD. DR AND PROCEEDED TO DISPOSE OF THE APPEAL ON MERIT. 3. DR. B. NISCHAL, LD. DEPARTMENTAL REPRESENTATIVE SU BMITTED THAT THE ASSESSEE, A CINE ARTIST, SOLD 3.075 ACRES OF LAND ON 12.3.2007 OUT OF THE TOTAL AREA OF 4.775 ACRES. THE ASSESSE E CLAIMED THAT THE PROFIT ON SALE OF THE LAND WAS EXEMPTED FROM PAYMEN T OF TAX ON THE GROUND THAT THE SAID LAND WAS AN AGRICULTURAL LAND. THE LD. DR FURTHER POINTED OUT THAT THE ASSESSEE PURCHASED 4.775 ACRE S OF LAND ON 19.1.2005 OUT OF WHICH HE SOLD 3.075 ACRES OF LAND ON 12.3.2007 WITHIN A SHORT PERIOD OF TIME. THE SALE CONSIDERAT ION RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FOR S ALE OF 3.075 ACRES OF LAND WAS ` 3,07,50,000/-. ACCORDING TO THE LD. DR, THE COST OF ACQUISITION OF 3.075 ACRES OF LAND WITH REGISTRATIO N CHARGES WAS ` 12,38,755/-. THE LD. DR FURTHER POINTED OUT THAT T HE ASSESSEE WAS ALSO EXAMINED U/S 131 OF THE ACT. THE ASSESSEE C LARIFIED BEFORE THE ASSESSING OFFICER TO A SPECIFIC QUESTION AS TO WHET HER ANY AGRICULTURAL OPERATION WAS CARRIED ON, THE LD. DR POINTED OUT TH AT THE ASSESSEE ADMITTED BEFORE THE ASSESSING OFFICER THAT HE HAD N OT CONDUCTED ANY AGRICULTURAL OPERATION IN THE LAND. THE LD. DR FUR THER SUBMITTED THAT THE CITY OF HYDERABAD WAS FAST DEVELOPING AND THE ASSESSEE INVESTED THE MONEY ONLY FOR DOING BUSINESS. ITA NO. 2354/14 :- 3 -: 4. THE LD. DR FURTHER POINTED OUT THAT THERE WAS A SEA RCH AND SEIZURE OPERATION IN THE CASE OF SHRI VENEGALLA ANA NDA PRASAD. IN THE COURSE OF SEARCH OPERATION, THE SALE DEED EXECUTED BY THE ASSESSEE THROUGH GENERAL POWER OF ATTORNEY IN FAVOUR OF M/S VARUN CONSTRUCTIONS WAS FOUND. SINCE THE ASSESSEE HAS A DMITTED THAT NO AGRICULTURAL OPERATION WAS CARRIED ON, THE INTENTIO N OF THE ASSESSEE ENGAGED HIMSELF IN REAL ESTATE BUSINESS WAS NOT CON SIDERED BY THE CIT(A). THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD. DR PLACED H IS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN SARIFABILI VS CIT, 20 4 ITR 631. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER FOUND THAT THE ACTIVITY OF THE ASSESSEE IN PURCHASE AND SALE OF THE LAND IS ADVENTURE IN THE NATURE OF TRADE, THEREFORE, THE PR OFIT ON SALE OF THE LAND HAS TO BE ASSESSED U/S 28 OF THE ACT. ACCORD INGLY, AFTER CONSIDERING THE COST OF ACQUISITION TO THE EXTENT O F ` 12,38,755/-, THE BALANCE AMOUNT OF ` 2,95,11,245/- WAS ASSESSED AS INCOME FROM BUSINESS. ON APPEAL BY THE ASSESSEE, THE CIT(A) F OUND THAT THE LAND QUESTION IS AN AGRICULTURAL LAND. THE CIT(A) FOUND THAT ADVENTURE IN THE NATURE OF TRADE DEPENDS UPON VARIOUS FACTORS AN D CIRCUMSTANCES LIKE FREQUENCY OF TRANSACTION, PERIOD OF HOLDING, I NTENTION FOR RESALE ETC. AFTER OBSERVING THAT THESE FACTS NEED TO BE EXAMINE D, HE HAS NOT ITA NO. 2354/14 :- 4 -: RECORDED ANY FINDING WHETHER THE ASSESSEE IS CARRY ING ON THE BUSINESS OF REAL ESTATE OR NOT. AT PARA 5.3 OF THE ORDER, T HE CIT(A) FOUND THAT IT WAS NOT NECESSARY THAT AGRICULTURAL OPERATION OR CU LTIVATION HAD TO BE CARRIED ON IF THE LAND WAS OTHERWISE CAPABLE OF CUL TIVATION. ACCORDINGLY, THE CIT(A) FOUND THAT THE LAND IN QUES TION IS AGRICULTURAL LAND, THEREFORE, EXEMPTED FROM TAXATION. 6. BOTH THE AUTHORITIES BELOW FAILED TO EXAMINE THE CL ASSIFICATION OF THE LAND MADE BY THE STATE GOVERNMENT. IT IS NO T IN DISPUTE THAT THE LAND IN QUESTION WAS IN THE STATE OF ANDHRA PRA DESH AND GOVERNMENT OF ANDHRA PRADESH IS MAINTAINING LAND RE CORDS. ACCORDING THE USAGE OF THE LANDS, LANDS ARE CLASSIFIED EITHER AS AGRICULTURAL LAND OR DRY LAND. EVEN THE DRY LAND CAN BE USED FOR C ULTIVATION. THEREFORE, THE ASSESSEE HAS TO ESTABLISH THAT THE LAND IN QUE STION IS CAPABLE OF CULTIVATION. THE CIT(A) HAS NOT TAKEN INTO CONSIDE RATION ANY OF THE DOCUMENTS MAINTAINED BY THE STATE GOVERNMENT EITHER ADANGAL OTHERWISE KNOWN AS VILLAGE ACCOUNT NO.2 OR ANY OT HER DOCUMENT RELATING TO CLASSIFICATION OF LAND. THEREFORE, IT IS NOT KNOWN HOW THE CIT(A) CAME TO THE CONCLUSION THAT THE LAND IN QUES TION IS CAPABLE OF CULTIVATION. MOREOVER, WHEN THE ASSESSING OFFICER FOUND THAT THE ASSESSEE ENGAGED HIMSELF IN THE BUSINESS OF REAL ES TATE, THE CIT(A) IS EXPECTED TO RECORD A FINDING WHETHER THE TRANSACTIO N IN QUESTION IS ADVENTURE IN THE NATURE OF TRADE OR NOT. UNFORTUNA TELY, THE CIT(A) HAS ITA NO. 2354/14 :- 5 -: NOT RECORDED ANY FINDING TO THAT EFFECT. IN THE AB SENCE OF ANY MATERIAL ON RECORD TO SHOW THE LAND IN QUESTION IS AN AGRICU LTURAL LAND OR NOT AND THE COPY OF THE STATEMENT RECORDED FROM THE AS SESSEE U/S 131 OF THE ACT, THIS TRIBUNAL IS UNABLE TO RECORD ANY FIND ING WHETHER THE ASSESSEE IS ENGAGED IN BUSINESS OR NOT? MOREOVER, THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASING THE LAND NEEDS T O BE ASCERTAINED. IF THE INTENTION OF THE ASSESSEE IS TO SELL THE LAND AND EARN PROFIT, THEN DEFINITELY THE TRANSACTION IS A BUSINESS TRANSACTIO N. IF THE ASSESSEE ESTABLISHES THAT INVESTMENT WAS MADE TO KEEP THE LA ND AS A CAPITAL ASSET, THEN THE TRANSACTION IN QUESTION CANNOT BE C ONSIDERED AS A BUSINESS TRANSACTION. MOREOVER, THE ASSESSING OFFI CER HAS NO OCCASION TO EXAMINE WHETHER THE LAND IN QUESTION IS AGRICULT URAL LAND OR NOT SINCE HE PROCEEDED ON THE FOOTING THAT THE TRANSACT ION IN QUESTION IS A BUSINESS TRANSACTION. IN THOSE CIRCUMSTANCES, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECO NSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE ISSUE AFRESH AND THEREAFTER FIND OUT WHETHER THE TRANSACT ION IN QUESTION IS A BUSINESS TRANSACTION OR NOT? IF THE TRANSACTION IN QUESTION IS NOT A BUSINESS TRANSACTION, THEN IT HAS TO BE EXAMINED WH ETHER THE LAND IN QUESTION IS AN AGRICULTURAL LAND OR NOT? THE ASSES SING OFFICER SHALL ITA NO. 2354/14 :- 6 -: EXAMINE ALL THE RELEVANT MATERIAL AND THEREAFTER DE CIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 13 TH NOVEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF