P.S.Raghupathy , CHENNAI V. ACIT Non Corporate Circle 15(1) , CHENNAI

ITA 2510/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5863 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-11-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 17-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMMIDI
• Assessee Lawyers: R SIVARAMAN
• Keywords: Capital asset; Principle of natural justice; Tangible material; Assessment record
• Section: 54F; 2(14)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , . , ! BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2510/MDS/2017 /ASSESSMENT YEAR: 2007-08 SHRI P.S.RAGHUPATHY, NO.52, VGP LAYOUT, PART-III, 3 RD MAIN ROAD, PALAVAKKAM, CHENNAI-600 041. VS. THE ASST. COMMISSIONER OF- INCOME TAX, NON-CORPORATE CIRCLE-15(1), CHENNAI. [PAN: AAFPR 5050 E ] ( % /APPELLANT) ( &'% /RESPONDENT) % ( / APPELLANT BY : MR.R.SIVARAMAN, ADV. &'% ( /RESPONDENT BY : MR.SAILENDRA MAMMIDI, CIT ( /DATE OF HEARING : 22.11.2017 ( /DATE OF PRONOUNCEMENT : 22.11.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.2510/MDS/2017 IS AN APPEAL FILED BY THE ASS ESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-15, CHENNAI, IN ITA NO.173/2015-16/CIT(A)-15 DATED 29.08.2017 FOR T HE AY 2007-08. 2. MR. SAILENDRA MAMMIDI, CIT REPRESENTED ON BEHALF OF THE REVENUE AND MR.R.SIVARAMAN, ADV, REPRESENTED ON BEHALF OF T HE ASSESSEE. ITA NO.2510/MDS/2017 :- 2 -: 3. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS )-15 (CIT(A)) DATED 29.08.2017 FOR THE ASSESSMENT YEAR 2007-08 IS CONTR ARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS OPPOSED TO THE PRI NCIPLES OF EQUITY, NATURAL JUSTICE AND FAIR PLAY. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PRE SENT RE-ASSESSMENT ORDER U/S.143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (AC T) PASSED BY THE RESPONDENT IS CLEARLY EXCEEDING JURISDICTION AND WITHOUT ANY MERI T. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE RE- ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED BEYOND A PERIOD OF FOUR YEARS FROM THE EN D OF THE RELEVANT ASSESSMENT YEAR 2007-08 WITHOUT ANY TANGIBLE MATERIAL BEING FOUND BY THE RESPONDENT. 4. THE LEARNED CIT(A) FAILED TO NOTE THAT THERE WAS ANY FAILURE TO DISCLOSE ON THE PART OF THE APPELLANT DURING THE COURSE OF THE RE-ASSESSMEN T PROCEEDINGS BEFORE THE RESPONDENT AND THE ABSENCE OF ANY CLEAR FINDING BY THE ASSESSING OFFICER TO THAT REGARD. 5. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PRE SENT RE-ASSESSMENT PROCEEDINGS WERE FINALIZED VIDE RE-ASSESSMENT ORDER DATED 30.03 .2015 WITHOUT ANY SPEAKING ORDER TO THE EFFECT OF DISPOSING THE OBJECTIONS RAISED BY THE APPELLANT. 6. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLA NT HAD NOT PRODUCED ANY SUBSTANTIAL PROOF OF SALE OF AGRICULTURAL LAND IN T ERMS OF AGRICULTURAL ACTIVITIES PERFORMED ON THE LAND THEREBY DENYING THE APPELLANT HIS CLAIM FOR EXEMPTION AS UNDER SECTION 2(14) OF THE ACT. 7. THE LEARNED CIT(A) ERRED IN CONFIRMING THE PETITIONE RS AGRICULTURAL LAND AS TO BE UNDER THE PURVIEW OF A CAPITAL ASSET WITHOUT CONSIDERING THE FACT THAT THE SAID LAND WAS SITUATED AWAY THE MUNICIPAL LIMITS AS PRESCRIBED U/S .2(14) OF THE ACT AND THEREFORE NOT LIABLE TO BE TAXED AS CAPITAL GAINS U/S.45 OF THE ACT. 8. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE DETA ILED SUBMISSIONS, EVIDENCES PLACED ON RECORD AS WELL AS SEVERAL REPRESENTATIONS MADE BY THE APPELLANT WITH REGARD TO ESTABLISHING THE FACT THAT AGRICULTURAL ACTIVITI ES WERE CONTINUOUSLY CARRIED OUT BY THE APPELLANT FOR SEVERAL YEARS AS WELL AS THE DETAILS OF THE AGRICULTURAL LAND INCLUDING PATTA, CHITTA AND ADANGAL WERE DULY PRODUCED BEFORE THE RE VENUE AUTHORITIES. 9. THE LEARNED CIT(A) HAS FAILED TO CONSIDER THE ALTERN ATE GROUND RAISED BY THE APPELLANT WITH REGARD TO SECTION 54F OF THE ACT AND PASSED HI S ORDER DATED 29.08.2017 WITHOUT CONSIDERING THE SAME. ON THE STRENGTH OF THE ABOVEMENTIONED GROUNDS AND SU CH OTHER GROUNDS THAT MAY BE SUBMITTED BEFORE OR AT THE TIME OF HEARING OF THE A PPEAL, THE HONBLE ITAT MAY BE PLEASED TO SET ASIDE THE ORDER OF THE CIT-(A) DATED 29.08.20 17 AND THUS RENDER JUSTICE. 4. IT WAS SUBMITTED BY THE LD.AR THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS DOING BUSINESS OF RUNNING OF A NURSERY UNDER THE NAME AND STYLE OF SOUNDARIYA NURSERY FROM 1995. THE ASSESSEE HAD REC EIVED CERTAIN FUNDS ON FAMILY PARTITION WHICH HE HAD USED FOR PURCHASE OF CERTAIN AGRICULTURAL ITA NO.2510/MDS/2017 :- 3 -: LANDS AT PUDUPAKKAM, KANCHEEPURAM DISTRICT, IN 1995 . THE ASSESSEE HAD DURING THE RELEVANT AY SOLD THE SAID AGRICULTURAL L ANDS WHERE HE WAS DOING THE NURSERY OPERATIONS FOR A CONSIDERATION OF RS.14 .90 CR. TO M/S.SHREYAS INVESTMENTS WHOSE MAIN BUSINESS WAS CONSTRUCTION OF BUILDINGS. IT WAS A SUBMISSION THAT THE SAID LAND WHICH WAS SOLD BY THE ASSESSEE WAS BEYOND 8 KMS LIMIT FROM THE NEAREST MUNICIPALITY AND THE L AND REVENUE AND THE LAND RECORDS SHOWED THE SAID LAND AS AGRICULTURAL L AND. THE LD.AR DREW OUR ATTENTION TO PAGE NO.146 TO 151 TO SHOW THAT TH E TAXES IN RESPECT OF THE SAID LAND WAS PAID AS KIST AND THE LAND SHOWN I N THE REVENUE RECORDS AS AGRICULTURAL LAND. IT WAS A SUBMISSION THAT THE ASSESSEE HAD ORIGINALLY FILED ITS RETURN OF INCOME ON 31.10.2007 AND HAD CL AIMED THE SALE PROCEEDS IN RESPECT OF THE SAID LAND AS AGRICULTURA L INCOME NOT LIABLE FOR CAPITAL GAINS. THE RETURN FILED BY THE ASSESSEE HA S BEEN SCRUTINIZED AND ASSESSMENT U/S.143(3) COMPLETED ON 29.12.2009 ACCEP TING THE RETURN FILED. IT WAS A SUBMISSION THAT NOTICE U/S.148 CAM E TO BE ISSUED ON 06.02.2014 TO TREAT THE SALE CONSIDERATION IN RESPE CT OF THE AGRICULTURAL LAND SOLD AS LIABLE TO CAPITAL GAINS. IT WAS A SUB MISSION THAT THE ASSESSEE HAD FILED HIS OBJECTIONS AND THE RE-ASSESSMENT CAME TO BE COMPLETED ON 30.03.2015 DENYING THE ASSESSEE THE BENEFIT OF AGRI CULTURAL INCOME IN RESPECT OF THE AGRICULTURAL LAND SOLD. IT WAS A SU BMISSION THAT AFTER THE SALE OF THE SAID AGRICULTURAL LAND, THE ASSESSEE HA D INVESTED THE SALE CONSIDERATION IN ANOTHER AGRICULTURAL LAND AND ALSO PURCHASED A RESIDENTIAL HOUSE IN THE NAME OF THE ASSESSEES WIFE. IT WAS A SUBMISSION THAT THE AGRICULTURAL LAND SOLD WAS TO THE EXTENT OF 7.00 AC RES IN PUDUPAKKAM ITA NO.2510/MDS/2017 :- 4 -: VILLAGE. IT WAS A FURTHER SUBMISSION THAT IN THE C OURSE OF THE ORIGINAL ASSESSMENT DATED 29.12.2009, THE AO HAD ALSO DEPUTE D HIS INSPECTOR TO VERIFY THE DETAILS OF THE AGRICULTURAL INCOME CLAIM ED BEFORE ACCEPTING THE RETURN FILED. IT WAS A SUBMISSION THAT THE ASSESSE E MAY BE GRANTED THE BENEFIT OF THE CLAIM OF AGRICULTURAL INCOME IN RESP ECT OF THE AGRICULTURAL LAND SOLD BY THE ASSESSEE. 5. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE AO AND THE LD.CIT(A). IT WAS A SUBMISSION THAT LD.CIT(A) HAD SPECIFICALLY RECORDED THAT THE ASSESSEE WAS UNABLE TO PROVE THE SALE OF AGRICULTURAL PRODUCE AS ALSO THE ORIGINAL BOOKS OF ACCOUNTS RELA TED TO THE AGRICULTURAL ACTIVITY. IT WAS A SUBMISSION THAT THE INSPECTORS REPORT WAS AN UNSIGNED REPORT AND CONSEQUENTLY THE SAME COULD NOT BE REGAR DED AS A VALID INSPECTORS REPORT. IT WAS A SUBMISSION THAT THE O RDER OF THE AO AND THE LD.CIT(A) WAS LIABLE TO BE SUSTAINED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE LA ND IN QUESTION WHICH HAS BEEN SOLD ADMITTEDLY HAS BEEN SHOWN AS AG RICULTURAL LAND AS PER THE CHITTA & ADANGAL. THE DISTANCE FROM THE NEARES T MUNICIPALITY HAS ALSO BEEN SHOWN TO BE BEYOND 8 KMS. THE LAND REVENUE RE CORDS ALSO CLEARLY SHOWS THAT THE LAND SPECIFIED IS AGRICULTURAL LAND. IN FACT, THERE IS AN INSPECTORS REPORT REFERRED TO IN THE ASSESSMENT OR DER DATED 29.12.2009 WHEREIN IT IS MENTIONED THAT THE INSPECTOR HAS VERI FIED THE PLACE AND HAS ALSO CONTACTED WITH THE VILLAGE ADMINISTRATIVE OFFI CE AND THE PRESIDENT OF ITA NO.2510/MDS/2017 :- 5 -: PUDUPAKKAM VILLAGE. THE COPY OF THE UNSIGNED INSPE CTORS REPORT HAS ALSO BEEN PLACED BEFORE US BY THE REVENUE. A PERUS AL OF THE ORDER OF THE LD.CIT(A) SHOWS THAT HE HAS REJECTED THE SAID INSPE CTORS REPORT ON THE GROUND THAT THE SAME IS UNSIGNED. THE SIGNING OR U N-SIGNING OF INSPECTORS REPORT IS NOT WITHIN THE CONTROL OF THE ASSESSEE. THE FACT THAT SUCH REPORT WAS AVAILABLE IN THE ASSESSMENT RECORDS AND THE SAME HAS ALSO BEEN REFERRED TO IN THE SCRUTINY ASSESSMENT PR OCEEDINGS COMPLETED ON 29.12.2009 CLEARLY SHOWS THAT AGRICULTURAL OPERA TIONS WERE ALSO CARRIED ON THE SAID LAND AND IS A VALID DOCUMENT. FURTHER, THE ASSESSEES CASE AS TO WHETHER THE RUNNING OF NURSERY WAS AGRICULTURAL OR NOT HAD BEEN CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT OF MADRAS AND RUNNING OF THE NURSERY HAS BEEN HELD TO BE AGRICULTURAL OPE RATION. A PERUSAL OF THE ASSESSMENT ORDER ALSO SHOWS THAT THE AO HAS RECOGNI ZED THAT THE ASSESSEE WAS RUNNING A NURSERY UNDER THE NAME AND S TYLE OF SOUNDARIYA NURSERY. A PERUSAL OF THE PROVISIONS OF SEC.2(1A) AS ALSO SEC.2(14)(III) SHOWS THAT AGRICULTURAL LAND IS NOT LIABLE TO BE TR EATED AS A CAPITAL ASSET SUBJECT TO THE CONDITION THAT THE LAND IS SITUATED IN AN AREA WHERE THE MUNICIPALITY HAS A POPULATION OF LESS THAN 10,000 O R AT A DISTANCE OF MORE THAN 8 KMS FROM MUNICIPALITY OR CANTONMENT WHICH HA S A POPULATION OF MORE THAN 10 LAKHS. 7. IN THE PRESENT CASE, ADMITTEDLY, THE LAND SOLD B Y THE ASSESSEE IS SITUATE BEYOND 8 KMS LIMIT, THE LAND REVENUE IS COL LECTED IN THE FORM OF KIST IN RESPECT OF THE AGRICULTURAL LAND, THE LAND REVENUE RECORDS SHOWS ITA NO.2510/MDS/2017 :- 6 -: THE LAND AS AGRICULTURAL LAND. THUS, ALL THE CONDI TIONS REQUIRED FOR HOLDING THE LAND AS AGRICULTURAL LAND STANDS COMPLIED. THI S BEING SO, WE ARE OF THE VIEW THAT THE LAND SOLD BY THE ASSESSEE BEING AN AG RICULTURAL LAND AND CONSEQUENTLY THE SAME CANNOT BE TREATED AS A CAPITA L ASSET, THE SALE OF WHICH GIVES RISE TO CAPITAL GAINS. 8. IN THE RESULT, IN GROUND NOS.6 TO 8 OF THE ASSES SEES APPEAL STANDS ALLOWED. GROUND NO.1 IS GENERAL IN NATURE. IN GROUN D NOS.2 TO 5 & GROUND NO.9 ARE RAISED BY THE ASSESSEE AGAINST THE RE-OPEN ING OF THE ASSESSMENT. AS WE HAVE ALREADY ALLOWED THE ASSESSEES APPEAL ON MERITS, WE ARE NOT GOING INTO THE TECHNICAL ISSUES OF THE RE-OPENING O F THE ASSESSMENT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 22, 2017, AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 0 /DATED: NOVEMBER 22, 2017. TLN ( &12 32 /COPY TO: 1. % /APPELLANT 4. 4 /CIT 2. &'% /RESPONDENT 5. 2 & /DR 3. 4 ( ) /CIT(A) 6. /GF