M/s. Abhishek Pooja Construction, Anand V. The ACIT.,Anand Circle, Anand

ITA 2366/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6014 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 20-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: A L THAKKAR
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 271(1)(c)

Judgement Text

ITA.2366/AHD/08 A.Y.2003-04. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI AND SHRI D.C. AGRA WAL ITA. NO. 2366/AHD/2008 (ASSESSMENT YEAR: 2003 -04) M/S.ABHISHEK POOJA CONSTRUCTION STATION ROAD, KARAMSAD, TAL & DIST. ANAND. VS ASSISTANT COMMISSIONER OF INCOME TAX, ANAND CIRCLE, ANAND. (APPELLANT) (RESPONDENT) PAN: AAGFA 3277 M APPELLANT BY : SHRI A.L.THAKKAR RESPONDENT BY : SMT. NEETA SHAH, SR.D.R. ( (( ( )/ )/)/ )/ ORDER PER SHRI D.C. AGRAWAL. THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FOLLOWING GROUNDS: 1. THE LD. C.I.T.(A)-IV, BARODA ERRED IN LAW AND O N FACTS IN CONFIRMING DISALLOWANCE OF RS.15,10,750/- ON ACCOUNT OF EXPENS ES INCURRED ON PURCHASE OF SOIL AS BEING CAPITAL IN NATURE. 2. THE LD. C.I.T.(A)-IV, BARODA ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.34,45,800/- OUT OF SITE DEVELOPM ENT EXPENSES. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A FIR M AND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROADS ON CONTRACT BASIS . DURING THE ASSESSMENT YEAR IN QUESTION IT CLAIMED A SUM OF RS.15,10,750/- AS R EVENUE EXPENDITURE. SIMILAR AMOUNT WAS CLAIMED IN THE A.Y. 2002-03 ALSO. IN THA T YEAR AMOUNT WAS CLAIMED ON CAPITAL ACCOUNT AND CLAIMED AS DEFERRED REVENUE EXPENDITURE. HOWEVER, A.O. HAD DISALLOWED THE CLAIM WHICH WAS CONFIRMED IN APP EAL BUT ASSESSEE DID NOT PREFER SECOND APPEAL BEFORE THE TRIBUNAL. IN THE PR ESENT YEAR ALSO, SIMILAR CLAIM WAS MADE. THE ASSESSEE HAD IN FACT INCURRED AN EXPE NDITURE OF RS.30,21,500/- ITA.2366/AHD/08 A.Y.2003-04. 2 IN THE ASSESSMENT YEAR 2002-03 WHICH WAS DECLARED I N CAPITAL ACCOUNT. HALF OF THIS WAS CLAIMED IN ASSESSMENT YEAR 2002-03 AND HAL F OF THE SUM AT RS.15,10,750/- AS REVENUE EXPENDITURE THIS YEAR. IT WAS EXPLAINED THAT AMOUNT WAS SPEND ON EXCAVATION OF LAND FOR FILLING UP THE SITE ON WHICH ROAD WAS TO BE CONSTRUCTED BUT BY MISTAKE, CLAIM WAS MADE ON CAPIT AL ACCOUNT IN THE ASSESSMENT YEAR 2002-03.THE A.O. DID NOT ACCEPT THE CLAIM ON THE GROUND THAT LAND WAS TREATED AS CAPITAL ASSET AND EXPENSES WERE TRANSFERRED TO THE SITE DEVELOPMENT ACCOUNT AS REVENUE EXPENDITURE IN THE A SSESSMENT YEAR 2002-03 AND THE DISALLOWANCE WAS UPHELD IN APPEAL. SINCE TH E FACTS ARE THE SAME AND REASONING FOR CLAIM ARE THE SAME, HE FOLLOWING HIS ORDER, DISALLOWED THE CLAIM THIS YEAR ALSO. 2.1. BEFORE LD. C.I.T.(A) IT WAS CLAIMED THAT LAND WAS STILL IN THE NAME OF ORIGINAL OWNERS AND PAYMENT FOR THE LAND IN QUESTIO N WAS GIVEN TO USE THE LAND TO EXCAVATE EARTH FOR THE PURPOSES OF ROAD CONSTRUCTIO N. IT WAS BY MISTAKE THAT AGREEMENT FOR PURCHASE OF SOIL WAS ERRONEOUSLY SHOW N IN THE FIXED ASSETS. AFFIDAVITS FROM SIX PARTIES WERE FILED. ACCORDINGLY LD. C.I.T.(A) FORWARDED THE FRESH EVIDENCE TO THE A.O. AND CALLED FOR THE REMAN D REPORT. THE A.O. SUBMITTED FOLLOWING REMAND REPORT TO THE C.I.T.(A). 2.3 THE ASSESSING OFFICER VIDE HIS REPORT SUBMITT ED AS UNDER :- THE ASSESSEES SUBMISSIONS FILED IN COURSE OF THE PRESENT APPELLATE PROCEEDINGS HAVE TO BE CONSIDERED IN LIGH T OF SUBMISSIONS MADE IN COURSE OF ASSESSMENT PROCEEDINGS PERTAINING TO ASSESSMENT YEAR 2002-03.THE ASSESSEES REPRESENTATI VE KIRAN PATEL & CO., C. AS BY THEIR LETTER DATED 23.02.2005 HAS DISCUSSED THE ISSUE OF ADDITION TO LAND AMOUNTING TO RS.30,21 ,500/-. THE RELEVANT PORTION OF THE SUBMISSIONS AS PER PARA 4(A ) OF LETTER DATED 23-02-2005 IS REPRODUCED AS UNDER :- 4 (A) REGARDING ADDITION TO ASSETS ASSESSEE COMPA NY HAS ADDITION TO LAND RS.30,21,500/- THE COMPANY HAS PR OCURED LAND FOR SOIL (EARTH) REQUIRED FOR FILLING AND LEVELING OF N EW SITE. WE ARE ENCLOSING HEREWITH LEDGER COPY OF LAND ACCOUNT INCL UDING ACCOUNT ITA.2366/AHD/08 A.Y.2003-04. 3 OF PARTIES FROM WHOM LAND IS PURCHASED AND COPY OF 7/12 FOR EACH LAND PURCHASED. DURING THE YEAR PART OF THE LAND WORTH RS.15,10,750 /- HAD BEEN UTILIZED BY DIGGING AND TAKING SOIL AND FILLIN G, LEVELING THE SAME AT ROAD SITE. FURTHER AFTER DIGGING LAND AND TAKING SOIL UP TO DEPTH OF 20/25 FEET, SUCH LAND HAS BECOME USELESS AND WHEN W E LEAVE THE PLACE/LAND THERE WOULD BE PONDS AND WOULD NOT REALI ZE ANYTHING IN TERMS OF MONETORY VALUE. IN VIEW OF THE ABOVE THIS HAS BEEN TREATED AS REVENUE EXPENDITURE UNDER THE HEAD OF SITE DEVEL OPMENT AND HAS BEEN CREDITED TO THE LAND ACCOUNT. THUS, THERE IS NO SALE OF LAND BUT THE SAME IS UTILIZED IN SITE WORK. FROM THE ABOVE SUBMISSIONS IT IS CLEAR THAT THE ASS ESSEE HAS PROCURED LAND OF AGGREGATE VALUE OF RS.30,21,500/- DURING THE FINANCIAL YEAR 2001-02. THE SAME IS SHOWN IN FIXED ASSETS SCHEDULE AS ADDITION TO FIXED ASSETS IN THE RELEVANT ACCOUNT S WHICH HAVE BEEN SUBJECT TO AUDIT AS PER SECTION 44AB OF I.T. A CT,. ON NO OCCASION DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2002-03 DID THE ASSESSEE CLAIM THAT IT HAS NOT PURCHASED THE LAND. ON THE CONTRARY THE ASSESSEES REPRESENTATIVE FILED CONFIRMATIONS FROM THE FOLLOWING PARTIES IN SUPPORT OF PURCHASE OF LAND: SL. NO. NAME OF THE TRANSFEROR VALUE OF LAND TRANSFERRED DOCUMENTS FILED IN SUPPORT OF TRANSACTION OF TRANSFER. 1 MANUBHAI CHHOTABHAI PATEL 13,25,000 PARTY HAS FILED CONFIRMATION IN SUPPORT OF TRANSACTION OF SALE OF LAND. THE LEGAL DOCUMENTATION IS YET TO BE COMPLETED. 2 KAMLABEN RAIJIBHAI SODHA PARMAR 5,26,500 PARTY HAS FILED CONFIRMATION IN SUPPORT OF TRANSACTION OF SALE OF LAND. THE LEGAL DOCUMENTATION IS YET TO BE COMPLETED. 3 HAMIRBHAI J.GOHEL. 4,75,000 PARTY HAS FILED CONFIRMATION IN SUPPORT OF ITA.2366/AHD/08 A.Y.2003-04. 4 TRANSACTION OF SALE OF LAND. THE LEGAL DOCUMENTATION IS YET TO BE COMPLETED. 4 RAVJIBHAI NANABHAI CHAUHAN 2,00,000 PARTY HAS FILED CONFIRMATION IN SUPPORT OF TRANSACTION OF SALE OF LAND. THE LEGAL DOCUMENTATION IS YET TO BE COMPLETED. 5 SHANKERBHAI HARIBHAI PARMAR. 2,06,000 PARTY HAS FILED CONFIRMATION IN SUPPORT OF TRANSACTION OF SALE OF LAND. THE LEGAL DOCUMENTATION IS YET TO BE COMPLETED. TOTAL. 27,32,500 NO CONFIRMATION IN RESPECT OF TRANSACTIONS OF PURCH ASE OF LAND OF VALUE OF RS.2,89,000/- FROM DIVYESHBHAI SHA H HAS BEEN FILED BY THE ASSESSEE. AT THE TIME OF HEARING OF APPEAL PERTAINING TO ASSE SSMENT YEAR 2002-03 THE ASSESSEES A.R. CHANGED HIS STAND THAT THE LAND CONTINUES TO BE IN THE NAME OF ORIGINAL OWNERS AND THEREFORE, CONTENDED THAT EXPENSES INCURRED ON DEVELOPMENT OF SUCH LAND WAS THAT OF REVENUE NATURE. THE LD. CIT(A) [ IN HIS ORDER DATED 23- 09-2005 IN APPEAL NO.CAB/IV-A-18/05-06 ] OBSERVED T HAT CHANGE IN STAND TAKEN BY THE ASSESSEE IS AN AFTER THOUGHT AND CANNOT BE ACCEPTED. HE FURTHER HELD THAT EXPENSES INCURRED BY THE ASSESSEE AS DEVELOPMENT EXPENSES ON THE LAND ARE CAPITAL IN NATURE AND HENCE RIGHTLY DISALLOWED BY THE A.O. AND THAT THE D EPRECIATION OF LAND IF ANY, DUE TO THE EXCAVATION OF SOIL WOULD AM OUNT TO CAPITAL LOSS TO THE ASSESSEE. IN COURSE OF THE PRESENT APPELLATE PROCEEDINGS PERT AINING TO A.Y. 2003-04, THE ASSESSEE HAS REITERATED THAT IT H AD MADE PAYMENTS TO VARIOUS LAND OWNERS FOR THE USE OF THE LAND. THE ASSESSEE MAINTAINS THAT THE LAND IS STILL IN THE NA ME OF ORIGINAL OWNERS STATED TO BE AGRICULTURISTS. THE ASSESSEE HA S ONLY SUBMITTED COPY OF 7/12 EXTRACTS OF VARIOUS PERSONS. THE ASSESSEE ITA.2366/AHD/08 A.Y.2003-04. 5 HAS NOT BROUGHT ON RECORD ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CHANGE OF STAND SO AS TO JUSTIFY THE ALLOWANCE OF ITS CLAIM. ALSO THE ASSESSEE HAS NOT BEEN ABLE TO JUSTIFY THE BASIS ON WHICH 50% OF THE VALUE OF LAND IS WRITTEN OFF TO SITE DEVELOPMEN T EXPENSES IN THE ASSESSMENT YEARS 2002-03 AND 2003-04. IN VIEW OF THE AFORESAID, IT IS CLEAR THAT THE ASSE SSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM FOR ALLOWANCE O F EXPENDITURE OF RS.15,10,750/-. THE ASSESSEE IN HIS SUBMISSION BEFORE YOUR HONOUR H AS CITED FOLLOWING DECISION OF HONBLE SUPREME COPURT & GUJARAT HIGH COURT. CIT V/S. MYSORE SUGAR CO. LTD., [46 ITR-649] (S C) CIT V/S. VALLABH GLASS WORKS LTD. [ 137 ITR-389] (GUJ.) M.A. JABBAR V/S. CIT [ 68 ITR-493 ](SC) THE FACTS OF THE CITED CASES BY THE ASSESSEE ARE AL TOGETHER DIFFERENT FROM THE FACTS OF THE ASSESSEES CASE.THE REFORE, THE RATIO OF THE CITED CASES IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 2.2. THE LD. C.I.T.(A) AFTER RECEIVING THE REMAND R EPORT CONFIRMED THE ORDER OF THE A.O. BY OBSERVING AS UNDER :- 2.4. THE ASSESSEE CONTINUES WITH HIS SHIFTING STAN CE. HE INITIALLY CLAIMED THAT LAND WAS PURCHASED BY HIM, TO THIS END IT IS SHOWN IN HIS FIXED ASSETS IN ACCOUNTS WHICH HAVE BEEN AUDITE D. HE THEN CLAIMED IT AS A REVENUE EXPENDITURE SINCE AFTER EXC AVATION OF THE SOIL, THE LAND WOULD BECOME USELESS. HE FILED CONFI RMATIONS FROM PERSONS SAYING THAT LAND HAS BEEN SOLD, NOW HE FILE S AFFIDAVITS FROM THE SAME PERSONS SAYING THAT LAND HAS NOT BEEN SOLD AND ALL THAT THEY RECEIVED WAS RENTAL INCOME IN CASH RUNNING IN LACS OF RUPEES. IT IS NOT POSSIBLE TO ACCEPT THE CHANGING STANCE OF THE ASSESSEE SINCE HE HIMSELF HAS DECLARED THE LAND PURCHASED BY HIM AS HIS FIXED ASSETS, REFLECTED IN THE BALANCE SHEET OF ACC OUNTS, WHICH HAVE BEEN DULY AUDITED, AND ALSO SUBJECTED TO TAX AUDIT. SINCE THE FACTS REMAINS THE SAME, AND IN VIEW OF THE ABOVE DISCUSSI ONS, FOLLOWING MY LEARNED PREDECESSORS ORDER FOR A.Y. 2002-03, TH E ADDITION OF RS.15,10,750/- MADE BY THE A.O IS CONFIRMED. 2.3. BEFORE US LD. A.R. FOR THE ASSESSEE SUBMITTED THAT IT IS BY INADVERTENCE THAT ASSESSEE DID NOT FILE SECOND APPEAL BEFORE THE TRIBUNAL FOR THE ASSESSMENT ITA.2366/AHD/08 A.Y.2003-04. 6 YEAR 2002-03 BUT THAT SHOULD NOT COME IN THE WAY OF ASSESSEE CHALLENGING THE ISSUE IN THE ASSESSMENT YEAR 2003-04. HE SUBMITTED THAT THE PRINCIPLES OF RESJUDICATA ARE NOT APPLICABLE TO THE INCOME TAX PR OCEEDINGS. HE RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN PIONEER SPRING AND STEEL CONCERN PVT. LTD. V. COMMISSIONER OF INCOME-TAX [1982] 135 ITR 0522- [CAL.] FOR THE PROPOSITION THAT EACH ASSESSMENT YEAR SHOULD BE TRE ATED SEPARATELY. THERE IS NO WAIVER OR ESTOPPEL OR RES JUDICATA IN RESPECT OF THE SAME. EARLIER ASSESSMENT SHOULD NOT BE TREATED AS A CONCLUSIVE, CALCUTTA HIG H COURT IN TURNER MORRISON AND CO. LTD. V. COMMISSIONER OF INCOME-TAX [1987] 1 67 ITR 0844- CALCUTTA HIGH COURT] FOR THE SAME PROPOSITION. THE ASSESSEE HAD S PENT THE SUM ON PROCUREMENT OF RAW MATERIAL I.E. EARTH AND THEREFOR E, IT SHOULD BE TREATED AS REVENUE EXPENDITURE. HE SUPPORTED HIS VIEW BY THE F OLLOWING DECISIONS:- (1) CIT VS. NAVSARI COTTON SILK MILLS 135 ITR-546 (GUJ.) (2) M.K. BROTHERS PVT. LTD., VS. CIT 86 ITR-38. (S C) (3) CIT VS. MADRAS AUTO SERVICE (P) LTD., 233 ITR- 468 (SC) 2.4. THE LD. A.R. THEN SUBMITTED THAT AGRICULTURAL LAND CAN ONLY BE PURCHASED BY AN AGRICULTURIST AND SINCE ASSESSEE FIRM IS NOT AGRICULTURIST IT HAS NO RIGHT TO PURCHASE THE LAND. HE REFERRED TO THE DECISION OF H ONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT MINERAL DEVELOPMENT CORPORATION (GMDC IN SHORT) VS. CIT [143 ITR-822], WHEREIN IT IS HELD THAT IF UNDER THE TERMS OF A MINING LEASE, MINERALS HAVE TO BE WON, EXTRACTED AND BROUGHT TO S URFACE BY MINING OPERATIONS, THE EXPENDITURE INCURRED FOR ACQUISITION OF SUCH RI GHT WOULD BE A CAPITAL IN NATURE BUT WHERE THE MINERALS ALREADY GOT AND THEN THE EXP ENDITURE INCURRED FOR OBTAINING THE RIGHT TO ACQUIRE RAW MATERIAL WOULD B E REVENUE EXPENDITURE LAID OUT FOR THE ACQUISITION OF STOCK IN TRADE. 2.5. THE LD. A.R. THEN ARGUED THAT MERELY IMPROPER ACCOUNTING SHOULD NOT DETERMINE THE CHARACTER OF AN INCOME OR EXPENDITURE . THE TRUE NATURE OF TRANSACTION SHOULD BE DETERMINED INDEPENDENT OF ACC OUNTING ENTRY PASSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. HE RELIED ON THE FOLLOWING JUDGEMENTS :- ITA.2366/AHD/08 A.Y.2003-04. 7 (1) CIT VS. M/S. SHOORJI VALLABHDAS & CO., 46 ITR- 144 (SC) (2) CIT VS. INDIA DISCOUNT CO. LTD., 75 ITR-191 (S C) (3) TRAVANCORE SUGARS & CHEMICALS LTD. VS. CIT 62 ITR-566 (SC) (4) KEDRANATH JUTE MFG.CO. LTD. VS. CIT 82 ITR-363 (SC) (5) SUTLEJ COTTON MILLS LTD. VS. CIT 116 ITR-1 (SC ). 2.6. THEREAFTER, THE LD. A.R. RELYING ON THE AFFIDA VITS FILED IN RESPECT OF THE LAND OWNERS SUBMITTED THAT AFFIDAVITS REMAINED UNCHALLEN GED AND THEREFORE, SHOULD BE ACCEPTED. 2.7. AGAINST THIS, LD. D.R. SUBMITTED THAT NO EVIDE NCE HAS BEEN FILED TO THE EFFECT THAT WHAT ASSESSEE HAS ACQUIRED WAS A RIGHT TO EXCAVATE THE LAND. THEREFORE IN VIEW OF THE DECISION OF HONBLE GUJARA T HIGH COURT IN G.M.D.C. VS. C.I.T. (143 ITR-822) THIS WOULD AMOUNT TO A CAPITAL EXPENDITURE. THE AFFIDAVITS FILED BY THE ASSESSEE DO NOT INDICATE IDENTIFICATIO N OR THE HOLDERS OF THE LAND. THEY DO NOT SHOW ANY SIGNATURE. THE ASSESSEE HAS CO NTRADICTED HIS STAND AS HELD BY THE LD. C.I.T.(A). THE ASSESSEE HAS IN FACT PURCHASED THE LAND. IT IS ONLY BEFORE ITAT THAT ASSESSEE IS STATING THAT IT IS NOT THE OWNER OF THE LAND. THE A.O. SOUGHT TO CONFRONT THE PARTIES BUT IN ABSENCE OF DE TAILS OF THEIR IDENTIFICATION, THOSE PARTIES COULD NOT BE CONTACTED. FURTHER, LD. D.R. SUBMITTED THAT CLAIM WAS MADE IN THE ASSESSMENT YEAR 2002-03 AND IN THAT YEA R IT WAS FINALLY HELD THAT IT IS A CAPITAL EXPENDITURE. THE CHARACTER OF THIS INCOME CANNOT BE AGAIN DECIDED IN THE A.Y. 2003-04. ONCE IT IS ALREADY DECIDED AND HA S BECOME FINAL. IN FACT NO NEW EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE T HIS YEAR WHICH WOULD REQUIRE RE-EXAMINATION OF THE ISSUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT FOR THE PURPO SES OF RAISING HEIGHT OF EXPRESS WAY FOR LEVELING THE SURFACE OF THE ROAD AS SESSEE SEEMS TO HAVE REQUIRED TO USE LARGE QUANTITIES OF SOIL. FOR THIS PURPOSE, HE SEEMS TO HAVE TAKEN CERTAIN PLOT OF LAND ADJACENT TO THE EXPRESS-WAY ON LY, FROM THE RESPECTIVE LAND OWNERS AND EXCAVATED THE SOIL AS AND WHEN REQUIRED. IT WAS CLAIMED THAT THERE WAS ONLY AN ORAL AGREEMENT AND NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE ITA.2366/AHD/08 A.Y.2003-04. 8 AND THE LAND OWNERS WAS EXECUTED. THE ASSESSEE CLAI MED THAT IT HAS PAID LEASE RENT FOR THE TWO FINANCIAL YEARS. A TOTAL SUM OF RS .30,12,500/-, SEEMS TO HAVE BEEN PAID TO THE LAND OWNERS APPARENTLY AS LEASE RE NT WHICH ACCORDING TO THE ASSESSEE RELATED TO THE PAYMENT FOR USE OF THE LAND WHICH WAS ERRONEOUSLY SHOWN AS ACQUISITION OF LAND IN THE FIXED ASSETS. T HE ASSESSEE CLAIMED 50% OF THE SAME AS SITE DEVELOPMENT EXPENDITURE AND BALANC E OF RS.15,10,750/- WAS CARRIED FORWARD IN THE LAND ACCOUNT AND CLAIMED AS REVENUE EXPENDITURE IN THE ASSESSMENT YEAR 2003-04. ASSESSEE HAD IN FACT PAID FOLLOWING SUMS TO THE LAND OWNERS AS UNDER :- NAME. AMOUNT HAMIRBHAI JENABHAI RATHOD 4,75, 000 MAGANBHAI MULJIBHAI PARMAR 2,89 ,000 KAMLABEN RAOJIBHAI PARMAR 5,26, 500 SHANKERBHAI HARIBHAI PARMAR 2,0 6,000 RAVJIBHAI NANABHAI CHAUHAN 2,00 ,000 MANUBHAI CHHOTABHAI PATEL 13,25,0 00 TOTAL . 30,21,500 IN ADDITION TO THIS, ASSESSEE HAD INCURRED EXPENDIT URE ON EXCAVATION AND CLAIMED THE SAME IN THE BILLS SUBMITTED TO NATIONAL HIGHWAY AUTHORITY. THE RECEIPTS THERE- FROM IS CLAIMED TO HAVE BEEN SHOWN AS INCOME BY THE ASSESSEE. THUS, THE ISSUE WHICH IS NOW BEFORE US IS WHETHER THE SUM OF RS. 15 ,10,750 BEING 50% OF RS. 30,21,500/- PAID TO THE LAND OWNERS WAS A CAPITAL E XPENDITURE OR REVENUE EXPENDITURE. 3.1. IN OUR CONSIDERED VIEW ISSUE IS NOW SETTLED AG AINST THE ASSESSEE IN VIEW OF THE POSITION HELD BY THE RESPECTIVE PARTIES IN T HE ASSESSMENT YEAR 2002-03.IN THE ASSESSMENT YEAR 2002-03 A.O. HAD GIVEN FOLLOWIN G FINDING WHICH REMAINED UNCONTROVERTED. 2.3. THE ASSESSEES EXPLANATIONIS DULY CONSIDERED . THE ASSESSE HAS PURCHASED LAND I.E. CAPITAL ASSET. THE ASSESSEE HAS UTILIZED THIS LAND FOR DIGGING AND TAKING SOIL FOR FILLING AND LEVELING TH E NEW ROAD SITES OF EXPRESS HIGHWAY.ADFTER UTILIZING, THE LAND AS AN ASSET IS S TILL THERE IN THE OWNERSHIP ITA.2366/AHD/08 A.Y.2003-04. 9 OF THE ASSESSEE. THE ASSESSEES CONTENTION THAT AFT ER TAKING SOIL FROM THE LAND, THE LAND BECAME USELESS AND WOULD NOT BE UTIL IZED FOR ANYTHING IN TERMS OF MONETARY VALUE IS NOT RELEVANT TO THE ISSU E OF THE CASE AS THE LAND IS A CAPITAL ASSET AND THE OWNERSHIP OVER THE LAND CONTINUES EVEN AFTER ITS EXPLOITATION. IT IS ONLY ON THE BASIS OF THE FACT T HAT THE LAND HAS BECOME USELESS FOR THE ASSESSEE FOR THE TIME BEING DUE TO DUG UPTO 20 TO 25 FEET PIT. EVEN ON DIGGING THE LAND FOR 10 TO 15 FEET, TH E SAME IS FILLED UP DUE TO DEPOSIT OF SOIL CARRIED ALONG WITH RAIN WATER. THE PHOTOGRAPHS FURNISHED BY THE ASSESSEE ALSO CONFIRM THE FACT THAT THE DUE LAN D HAS BEEN FILLED UP WITH RAIN WATER EVEN IN THE MONTH OF MARCH AND WOUL D GRADUALLY FILLED UP WITH DEPOSIT OF SOIL CARRIED ALONG WITH RAIN WATER. MOTHER LAND NEVER BECOMES USELESS. IT IS ONLY QUESTION OF TIME WHEN I T AGAIN COMES TO ORIGINAL FORM IN DUE COURSE. THE ASSESSEE HAS ALSO NOT GIVEN ANY BASIS ON WHICH IT HAS CLAIMED DEDUCTION OF RS.15,10,750/-. T HE ASSESSEES CONTENTION THAT THE EXPENDITURE ON LAND UTILIZED SH OULD BE TREATED AS REVENUE EXPENDITURE AND SHOULD BE ALLOWED AS DEDUCT ION IS NOT ACCEPTABLE IN VIEW OF THE ABOVE DISCUSSION. UNDER THE CIRCUMSTANCES, THE ASSESSEES CLAIM OF TREATING EXPENDITURE ON LAND AS REVENUE EXPENDITURE IS NOT ALLOWABLE AND ADDITION OF RS.15,10,750/- IS MADE TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) READ WITH EXPLANATION 1 OF THE I. T.ACT ARE INITIATED FOR FURNISHING INAC CURATE PARTICULARS OF INCOME. 3.2. THIS ORDER WAS CONFIRMED BY LD. CIT(A) AND BEC AME FINAL AS IT WAS NOT CONTESTED. THE LD. C.I.T.(A) IN THAT ORDER OBSERVED AS UNDER :- I HAVE GONE THROUGH THE SUBMISSIONS OF THE A.R. AND THE FINDINGS OF THE A.O. AND OBSERVE THAT THE CHANGE IN STAND TA KEN BY THE ASSESSEE FROM ASSESSMENT PROCEEDINGS STAGE THAT THE LAND WAS IN THE NAME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION TO THA T THE LAND CONTINUED TO BE IN THE NAME OF THE ORIGINAL OWNERS NOW AT THE AP PEAL STAGE IS AN AFTER- THOUGHT AND CAN NOT BE ACCEPTED. EVEN IF THE CHANGE OF STAND IS TAKEN INTO CONSIDERATION, THEN ALSO ANY EXPENSE INCURRED BY TH E ASSESSEE FOR DEVELOPING SUCH LAND CANNOT BE TREATED AS REVENUE E XPENSE INCURRED FOR THE PURPOSE OF BUSINESS. NUMBER OF COURTS HAVE HELD THAT THE DEVELOPMENT EXPENSES INCLUDING PROSPECTING AND BORI NG EXPENSES ON A MINE LAND CANNOT BE ALLOWED TO BE AMORTIZED BECAUSE SUCH EXPENSES ARE OF CAPITAL NATURE. EVEN, THE EXPENSES INCURRED ON R EHABILITATION OF PEOPLE ON COAL FIELDS WERE HELD TO BE OF CAPITAL NATURE BE CAUSE THE ASSESSEE BY INCURRING SUCH EXPENSES ACQUIRED A RIGHT TO POSSESS ION OF LEASE HOLD LAND WHICH IN TURN RESULTED IN ENDURING BENEFITS TO THE ASSESSEE [ (ASSAM BENGAL CEMENT CO. LTD. VS. CIT 27 ITR-34 (SC) ]. TH EREFORE, IN VIEW OF REASONING GIVEN ABOVE, THE EXPENSES INCURRED BY THE ASSESSEE AS DEVELOPMENT EXPENSES ON THE LANDS ARE CAPITAL IN NA TURE HENCE RIGHTLY ITA.2366/AHD/08 A.Y.2003-04. 10 DISALLOWED BY THE A.O. THE DEPRECIATION IN THE VALU E OF THE LAND IF ANY, DUE TO EXCAVATION OF SOIL WOULD AMOUNT TO CAPITAL LOSS TO THE ASSESSEE. THE FACTS OF THE CASES CITED BY THE APPELLANT ARE D IFFERENT FROM THE FACTS OF THE CASE UNDER CONSIDERATION,. THE DEVELOP MENT EXPENSES INCURRED BY THE APPELLANT OWNED BY IT CANNOT BE TRE ATED AS AN OUTGOINGS IN DOING THE BUSINESS OF THE ASSESSEE. IN THE CASE OF CIT VS. MYSORE SUGAR CO. 46 ITR-649 (SC) THE AMOUNT SPENT BY THE COMPANY REPRESENTED THE CURRENT EXPENDITURE TOWARDS THE PURCHASE OF SUGARC ANE, AND AS PER THE COURT IT MADE NO DIFFERENCE THAT THE SUGARCANE PURC HASED WAS GROWN BY THE FARMERS WITH THE SEEDINGS, FERTILIZER AND MONEY TAKEN ON ACCOUNT FROM THE ASSESSEE COMPANY. IN SO FAR AS THE ASSESSEE COM PANY WAS CONCERNED, IT WAS DOING NO MORE THAN MAKING A FORWA RD ARRANGEMENT FOR THE NEXT YEARS CROP AND PAYING AN AMOUNT IN ADVANC E OUT OF THE PRICE, SO THAT THE GROWING OF THE CROP MAY NOT SUFFER DUE TO WANT OF FUNDS IN THE HANDS OF THE GROWERS. THERE WAS HARDLY ANY ELEMENT OF INVESTMENT WHICH CONTEMPLATES MORE THAN PAYMENT OF ADVANCE PRICE. TH E RESULTING LOSS TO THE ASSESSEE COMPANY WAS JUST AS MUCH A LOSS ON THE REVENUE SIDE AS WOULD HAVE BEEN, IF IT HAD PAID FOR THE READY CROP WHICH WAS NOT DELIVERED, WHEREAS, IN THE INSTANT CASE OF THE APPELLANT THE E XPENSES WERE BY AND LARGE FOR INVESTMENT IN LAND CLEARING AND LEVELING. HENCE, WERE OF CAPITAL IN NATURE. THE FACTS CONTAINED IN THE CIT V/S. VALLABH GLASS W ORKS LTD., 137ITR-389 ON WHICH THE COURT HELD THAT THE EXPENSE S WERE OF REVENUE NATURE WERE ENTIRELY DIFFERENT. IN THE SAID CASE, A SURVEY WAS MADE ONLY TOP FIND OUT WHETHER THE MACHINERIES SUPPLIED BY TH E FOREIGN SUPPLIERS WERE IN ACCORDANCE WITH THE TERMS AND SPECIFICATION S CONTAINED IN THE CONTRACT. IT HAD NOTHING TO DO WITH THE COST OF ACQ UISITION. THE EXPENDITURE WAS IN THE COURSE OF THE CARRYING ON OF THE BUSINES S OF THE ASSESSEE- COMPANY AND FORMED PART OF THE PROFIT-EARNING PROCE SS. THE EXPENDITURE WAS HELD TO BE REVENUE EXPENDITURE. 3.3. SINCE APPEAL HAS NOT BEEN FILED AGAINST THE AB OVE ORDER, THE FINDING OF FACTS HAVE BECOME FINAL. BEFORE US, NOW IN THE ASS ESSMENT YEAR 2003-04 NO NEW FACTS HAVE EMERGED SO AS TO SHOW THAT LAND WAS NOT OWNED BY THE ASSESSEE OR THAT ASSESSEE HAD INCURRED EXPENDITURE ONLY ON E XCAVATION. ON THE OTHER HAND, UNDISPUTED FACT IS THAT ASSESSEE HAD PAID THE SUM OF RS.30,21,500/- ONLY AS THE PRICE OF THE LAND OR PRICE OF ACQUIRING RIGH TS TO EXCAVATE THE LAND. NO COPY OF THE AGREEMENT HAS BEEN SUBMITTED TO US OR BEFORE ANY LOWER AUTHORITIES SO AS TO SHOW THAT WHAT WAS ACQUIRED WAS NOT CAPITAL ASSE T. IT HAS BEEN HELD BY ITA.2366/AHD/08 A.Y.2003-04. 11 HONBLE GUJARAT HIGH COURT IN GMDCS CASE (SUPRA) T HAT EXPENDITURE INCURRED FOR MINING AND WINNING THE MINERALS AND FOR ACQUIR ING RIGHT TO MINE OR EXTRACTING THE MINERALS WOULD BE CAPITAL EXPENDITURE. THE ASSE SSEE HAS CLEARLY INCURRED EXPENDITURE FOR ACQUIRING RIGHT TO EXCAVATE THE LAN D, IF NOT FOR PURCHASING THE LAND FOR WHICH NO EVIDENCE HAS BEEN PROVIDED BY THE ASS ESSEE. NO DETAILS OF THE LAND OWNERS HAVE BEEN PROVIDED TO THE A.O. SO THAT HE CA N CARRY OUT INQUIRIES. NO EVIDENCE IN THE FORM OF BENAMA OF THE LAND PRIOR TO ACQUIRING SUCH RIGHT OR SUBSEQUENT TO ACQUIRING OF SUCH RIGHT HAS BEEN PROV IDED. AFFIDAVITS OF THE LAND OWNERS FILED BY THE ASSESSEE ARE IN-COMPLETE IN THE SENSE THAT THEY DO NOT PROVIDE COMPLETE DETAILS OF THE LAND OWNERS SO THAT A.O. IS ABLE TO CONTACT THEM. THERE IS NO ATTEMPT TO PRODUCE LAND OWNERS BEFORE T HE A.O. SO AS TO ENABLE HIM TO FIND OUT EXACT NATURE OF RIGHT ACQUIRED BY THE A SSESSEE. 3.4. IN ANY CASE, NO NEW EXPENDITURE HAS BEEN INCUR RED THIS YEAR. EXPENDITURE AS A WHOLE WAS INCURRED IN THE ASSESSMENT YEAR 2002 -03 AND ITS NATURE IS DETERMINED IN THAT YEAR BY THE REVENUE AUTHORITIES WHICH BECAME FINAL. THEREFORE, THE NATURE OF THAT EXPENDITURE CANNOT BE AGAIN AGITATED THIS YEAR. THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. KUMUDINI NARAYAN DALAL (249 ITR-0219) (SC), AND IN UNION OF INDIA VS. SATI SH PANALAL SHAH (249 ITR- 0221) (SC) HELD THAT WHEN NO APPEAL IS FILED TO SUP REME COURT AGAINST THE DECISION OF HIGH COURT AND THERE WERE SUBSEQUENT DE CISIONS OF THE HIGH COURTS IN THE CASE OF OTHER ASSESSES FOLLOWING EARLIER DEC ISION THEN DEPARTMENT IS NOT ENTITLED TO ACCEPT THE JUDGEMENT IN EARLIER CASE AN D CHALLENGE ITS CORRECTNESS WITHOUT CAUSE IN THE CASE OF OTHER ASSESSES. IN OTH ER WORDS, IF ONE PARTY ACCEPTS THE JUDGEMENT IN ONE YEAR THEN IT IS NOT ENTITLED T O CHALLENGE THE JUDGEMENT IN ANOTHER YEAR WITHOUT CAUSE. HONBLE PUNJAB & HARYAN A HIGH COURT IN C.I.T. VS. VIKAS CHEMI GUM INDIA (276 ITR-0032)(P&H) HAS HELD THAT WHERE ADDITION OF INCOME FROM PARTICULAR SOURCE IS DELETED IN A.Y. 19 96-97 AND THE ORDER IS NOT CHALLENGED IN THAT YEAR THEN DEPARTMENT IS NOT ENTI TLED TO CHALLENGE THE ADDITION FROM THE SAME SOURCE IN THE ASSESSMENT YEAR 1998-99 . THE HONBLE S.C. IN RADHASOAMI SATSANG VS. CIT. (193 ITR-0321) HAS HELD THAT WHERE RELIGIOUS SEAT ITA.2366/AHD/08 A.Y.2003-04. 12 IS BIFURCATED INTO TWO AND ONE GROUP IS HELD TO BE ENTITLED TO EXEMPTION THEN ON THE SAME FUNDAMENTAL FACTS OTHER GROUP IS ALSO ENTI TLED TO EXEMPTION. THUS WHEN WE APPLY ABOVE PRINCIPLE IN THE PRESENT CASE, WE FI ND THAT ONCE HALF OF THE TOTAL EXPENDITURE INCURRED IS TREATED AS CAPITAL THEN THE RE IS NO REASON TO HOLD THAT OTHER HALF OF THE EXPENDITURE, EVEN THOUGH CLAIMED IN THE SUBSEQUENT YEAR, WOULD BECOME REVENUE EXPENDITURE. THE TOTAL EXPENDITURE I S ONE AND MERELY BECAUSE IT IS BIFURCATED INTO TWO CANNOT CARRY DIFFERENT CHARA CTER. THE CHARACTER OF ENTIRE EXPENDITURE WILL HAVE TO BE DETERMINED AT ONE TIME AND WHICH HAS ALREADY BEEN DETERMINED AND HAS BECOME FINAL IN THE A.Y. 2002-03 . THERE IS NO MATERIAL TO SHOW THAT DECISION GIVEN IN A.Y. 2002-03 WAS WRONG IN LAW. NO CONTRADICTING MATERIAL HAS BEEN PRODUCED BEFORE US. ON THE OTHER HAND WHEN WE HAVE APPRECIATED FACTS WE FIND THAT EXPENDITURE INCURRED BY THE ASSESSEE FOR OBTAINING RIGHT TO EXCAVATE THE LAND, IF NOT FOR PURCHASES OF A LAND, WOULD ALSO BE CAPITAL EXPENDITURE. IN VIEW OF THIS, WE UPHOLD THE ORDER O F THE CIT (A) AND DISMISS THIS GROUND OF THE ASSESSEE. 4. THE NEXT GROUND OF APPEAL IS ABOUT THE CONFIRMIN G THE DISALLOWANCE OF RS.34,45,800/- OUT OF SITE DEVELOPMENT EXPENSES. TH E FACTS INVOLVED RELATING TO THE ISSUE ARE THAT ASSESSEE HAD CLAIMED FOLLOWING E XPENDITURE PAID TO 9 PARTIES AS SITE DEVELOPMENT EXPENDITURE. SR.NO. NAME OF THE PARTY. AMOUNT (RS.) 1 SHRI RAMTUBHAI HATHIBHAI 2,05,000 2 MANIBEN GORDHANBHAI VAGHELA 50,000 3 SHRI SURESHBHAI MOTIBHAI PATEL. 1,00,000 4 SHRI KAUSHIKBHAI PATEL 21,78,000 5 BALUBEN UDISING CHUHAN 1,94,000 6 SHRI MANOJKUMAR DAHYABHAI PATEL 3,10,000 7 SHRI MAFATBHAI B. HARIJAN 33,300 8 UJAMBEN MANIBHAI HARIJAN 45,000 9 AMBALAL RANCHHODBHAI HARIJAN 3,30,000 TOTAL 34,45,800 ITA.2366/AHD/08 A.Y.2003-04. 13 4.1. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH CONFIRMATION FROM THESE PARTIES BUT NO CONFIRMATION WAS SUBMITTED. TH E PAYMENTS WERE MADE IN CASH. IT WAS CLAIMED THAT ALL THE PARTIES ARE AGRI CULTURIST AND THEY HAVE NOT MAINTAINED ANY BOOK OR BANK ACCOUNT. HOWEVER, THE P AYMENT IS MADE BY CHEQUE TO ONE PARTY ONLY. BUT NO CONFIRMATION FROM THAT PA RTY WAS ALSO FURNISHED. IN ABSENCE OF EVIDENCE FURNISHED BY THE ASSESSEE THE A .O. DISALLOWED THE EXPENDITURE. 4.2. BEFORE THE LD. CIT(A) ASSESSEE FURNISHED CONFI RMATION FROM ALL THE 9 PARTIES. HE FORWARDED THESE CONFIRMATIONS TO THE A. O. WHO REPORTED THAT ALL THESE LETTERS ARE UNDATED AND NONE OF THEM CONTAINED DETA ILED ADDRESS OF THE CONCERNED PARTIES AND THOSE PARTIES COULD NOT BE CO NTACTED ON THE GIVEN ADDRESSES. THE A.O. REQUIRED THE ASSESSEE TO FURNIS H COMPLETE DETAILS OF THOSE PARTIES BUT SUCH DETAILS WERE NOT FURNISHED AND WHE N MATTER WAS REPORTED BACK THE LD. C.I.T.(A) CONFIRMED THE ADDITION BY OBSERVI NG AS UNDER:- 5.3. I HAVE CAREFULLY CONSIDERED THE ORDER OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. THE A.R. HAS FAIL ED TO IDENTIFY THE PERSONS TO WHOM HE HAS MADE PAYMENTS BY CASH LARGEL Y. MERELY SUBMITTING THAT THE PERSONS ARE AGRICULTURISTS CANN OT CONSTITUTE ADEQUATE EVIDENCE EXPLAINING THE EXPENDITURE. THE PRIMARY ON US LIES ON THE APPELLANT TO PROVE THE GENUINENESS OF ANY CLAIM MAD E BY HIM. SINCE THE APPELLANT HAD FAILED TO ESTABLISH THE IDENTITY AS W ELL AS TO GIVE THE ADDRESSES OF THE PERSONS, AND THE TRANSACTIONS HAVE NOT PROVED TO BE GENUINE, THE ADDITION OF RS.34,45,800/- MADE BY THE ASSESSING OFFICER WAS JUSTIFIED AND IS, THEREFORE, CONFIRMED. 4.3. BEFORE US LD. A.R. FOR THE ASSESSEE SUBMITTED THAT HE IS WILLING TO HELP THE DEPARTMENT IN SERVING LETTERS/NOTICES. HOWEVER, THE COMPLETE ADDRESSES WERE ALSO NOT FILED BEFORE US. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 4.4. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE CONSIDERED VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. C .I.T.(A). REASONS ARE THAT ASSESSEE FAILED TO PRODUCE THE COMPLETE ADDRESSES E VEN BEFORE US AND FAILED TO ITA.2366/AHD/08 A.Y.2003-04. 14 ASSURE THAT THOSE PARTIES WILL BE PRODUCED BEFORE T HE A.O. IT IS ALSO NOT EXPLAINED WHAT SERVICES THESE 9 PARTIES HAVE RENDERED TO THE ASSESSEE FOR WHICH THE PAYMENTS ARE MADE. IF IT IS SITE DEVELOPMENT EXPEN DITURE THEN WHETHER ASSESSEE HAD PURCHASED THE SITE FROM THEM OR INVOLVED THEM I N CONSTRUCTING THE SITE OR IN WHAT WAY THOSE PARTIES HAVE HELPED THE ASSESSEE IS NOT KNOWN. IN ABSENCE OF EVIDENCE FOR RENDERING SERVICES EXPENDITURE INCURRE D BY THE ASSESSEE CANNOT BE ALLOWED. IN FACT ASSESSEE HAS TO ESTABLISH THE IDEN TITY OF THE PAYEES SO THAT THE DEPARTMENT IS ABLE TO ISSUE THE SUMMONS TO THEM. WH EREVER EXPENDITURE IS INCURRED WITHOUT EVIDENCE AS TO NATURE OF SERVICES RENDERED THEN PAYMENT OF EXPENDITURE LIKE COMMISSION CANNOT BE ALLOWED. WE D ERIVE SUPPORT FROM THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN DAVINDER SINGH VS. CIT (2007) [295 ITR-0052] AND OF I.T.A.T. CHANDIGARH BE NCH IN PUNJAB BREWERIES LTD. VS. A.C.I.T. (2000) 245 ITR(A.T.) 0049. THERE ALSO THERE WAS NO EVIDENCE TO SHOW THAT EXPENDITURE WAS INCURRED FOR COMMERCIAL C ONSIDERATION. THEREFORE, SUCH EXPENDITURE COULD NOT BE ALLOWED U/S. 37. WE D ERIVE SUPPORT FROM THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF ASSAM OPESTICIDES & AGRO CHEMICALS VS. C.I.T. (1997) 227 ITR-0846 (GAUHATI H .C.). 5. AS A RESULT, WE CONFIRM THE ORDER OF THE C.I.T.( A) AND DISMISS THE APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN OPEN COURT ON 11/06/2010. SD/- SD/- ( BHAVNESH SAINI) (D.C .AGRAWAL) JUDICIAL MEMBER ACC OUNTANT MEMBER. AHMEDABAD. DATED: 11/06/2010. ITA.2366/AHD/08 A.Y.2003-04. 15 S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.