M/s. Saraswati Builders, Chandigarh V. The Assistant Commissioner of Income tax, Amritsar.

ITA 252/ASR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0723 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Capital asset; Business income; Document seized; Additional evidence; Cost of acquisition; Assessment record; Documents seized
• Section: 40A(3); 2(14); 142(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 252(ASR)/2013 ASSESSMENT YEAR: 2009-10 M/S. SARASWATI BUILDERS H.NO.3046, SECTOR 28D, CHANDIGARH. PAN: AA4FS7181C VS. ASST. CIT, CENTRAL CIRCLE AMRITSAR. (APPELLANT) (RESPONDENT) I.T.A NO.310(ASR)/2013 ASSESSMENT YEAR: 2009-10 ASST. CIT, CENTRAL CIRCLE, AMRITSAR. VS. M/S. SARASWATI BUILDERS H.NO.3046, SECTOR 28D, CHANDIGARH. PAN: AA4FS7181C (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA (ADV.) RESPONDENT BY: SH. UMESH TAKYAR (DR) DATE OF HEARING: 17.05.2016 DATE OF PRONO UNCEMENT: 20.05.2016 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 1 9.02.2013 FOR ASST. YEAR 2009-10. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE REPRODUCED BELOW: (I.) THAT THE WORTHY COMMISSIONER OF INCOME TAX (A PPEALS), LUDHIANA HAS ERRED IN UPHOLDING ADDITION OF RS.4,29 ,59,509/- OUT ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 2 OF ADDITION OF RS.5,65,09,000/- MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF SALE OF PROPERTY AT ABHOR. (II) THAT THE WORTHY CIT(A) HAS ERRED IN TREATING T HE SALE CONSIDERATION OF THE PROPERTY AT ABOHAR AS STOCK IN TRADE NOT AS AN INVESTMENT AND CONFIRMING THE ADDITION AND IGNORING THE REMAND REPORT OF THE ASSESSING OFFICER. (III) THAT THE WORTHY CIT(A) HAS ERRED IN CONSIDERI NG THAT THE IMPUGNED PROPERTY (LAND) WAS ASSESSEES INVESTMENT, WHICH WAS CAPITAL ASSET AS PER DEFINITION U/S 2(14) AND ON WH ICH, NO CAPITAL GAIN WAS LEVIABLE. (IV) THAT NOTWITHSTANDING THE ABOVE GROUNDS OF APP EAL, IT IS SUBMITTED THAT CONFIRMATION OF ADDITION BY THE CIT( A) IS EXCESSIVE AS THE ASSESSEES SHARE IN THE LAND IS LESS AS ASSESSE D BY THE AO/CIT(A). WHEREAS THE FOLLOWING GROUNDS OF APPEAL HAS BEEN TA KEN BY THE REVENUE. (I). THE LD. CIT(A),I, LUDHIANA, HAS ERRED IN FACT S AND LAW BY ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A OF THE ACT I.T. RULES 1962, WHICH WAS NOT PRODUCED DURING THE COURSE OF A SSESSMENT PROCEEDINGS EVEN WHEN THE CASE DOES NOT FALL UNDER RULE 46A(1)(A),(B),(C) OR (D) OF THE I.T. RULES 1962. (II) THAT THE LD. CIT(A)-I, LUDHIANA HAS ERRED IN L AW AND ON FACTS IN DELETING THE ADDITION OF RS.2,23,67,907/- MADE ON A CCOUNT OF NON- GENUINE LOANS TAKEN BY THE ASSESSEE BY ADMITTING TH E ADDITIONAL EVIDENCE UNDER RULE 46A OF THE I. T. RULES 1962 I.E . PARTNERSHIP DEED DURING THE APPELLATE PROCEEDINGS. THE CIT(A) H AS NOT APPRECIATED THE FACT THAT IN SPITE OF REASONABLE OP PORTUNITY OFFERED TO EXPLAIN AND TO PRODUCE THE EVIDENCE OF LOAN. (III) THAT THE LD. CIT(A)-I, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,06,00,000/- MADE ON A CCOUNT OF UNACCOUNTED RECEIPT ON SALE OF MUKTSAR COLONY BY NO T APPRECIATING THE FACTS THAT IN SPITE OF REASONABLE OPPORTUNITY D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT PRODUC ED A COPY OF CANCELLATION AGREEMENT. (IV) THAT THE LD. CIT(A)-I, LUDHIANA HAS ERRED IN L AW AND ON FACTS IN DELETING THE ADDITION OF RS.9,29,650/- MADE ON ACCO UNT OF DISALLOWANCE U/S 40A(3) BY ADMITTING ADDITIONAL EVI DENCE AND NOT APPRECIATING THE FACTS THAT IN SPITE OF REASONABLE OPPORTUNITY TO EXPLAIN THE PAYMENTS DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE HAS NOT PRODUCED THE COPY OF AFFIDAVIT OF THE PERSON TO WHOM THE PAYMENTS HAD BEEN MADE. ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 3 (V) THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL ON OR BEFORE IS HEARD AND DISPOSED OFF. (IV) IT IS PRAYED THAT THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS), SET ASIDE AND THAT OF THE AO BE RESTORED ON MERITS. 3. THE APPEAL OF THE ASSESSEE WAS EARLIER DISMISSED FOR NON PROSECUTION VIDE TRIBUNAL ORDER DATED 22.08.2013, H OWEVER, THE SAID ORDER WAS RECALLED VIDE TRIBUNAL ORDER DATED 3.1.20 14 AND THE APPEAL WAS LISTED FOR HEARING ON MERITS. 4. THE BRIEF FACTS OF THE CASE AS NOTED IN ASSESSME NT ORDER ARE THAT ACTION U/S 132 WAS CARRIED OUT BY DIRECTOR OF INCOM E TAX (INV.), LUDHIANA ON 3.09.2009 AND NOTICE TO THE ASSESSEE WA S ISSUED U/S 153A. IN RESPONSE TO THE SAID NOTICE THE RETURN WAS FILED DECLARING INCOME OF RS.23,51,930/- ON 15.06.2011. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS MADE CERTAIN ADDITIONS WHICH ARE SURMISED AS UNDER: (I) ADDITION ON ACCOUNT OF UNSECURED LOANS OF RS.2,23,67,907/- (II) ADDITION OF ACCOUNT OF UNACCOUNTED RECEIPTS O F RS.1,06,00,000/- ON SALE OF MUKTSAR COLONY. (III) DISALLOWANCE U/S 40A(3), RS.9,29,650/- (IV) UNACCOUNTED TRANSACTIONS REGARDING PROPERTY AT ABOHAR RS.4,63,45,325/- TOTAL RS. 80,242,882/- 5. AGGRIEVED WITH THE ORDER THE ASSESSEE FILED APPE AL BEFORE LEARNED CIT(A) AND LEARNED CIT(A) PARTLY ALLOWED RELIEF TO THE ASSESSEE AFTER ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 4 OBTAINING REMAND REPORT FROM ASSESSING OFFICER AND BY RECORD HIS FINDINGS IN RESPECT OF VARIOUS ADDITIONS AS UNDER: ADDITION ON ACCOUNT OF UNSECURED LOANS OF RS.2,23 ,67,907/- 7. THE ASSESSING OFFICER IN HIS REMAND REPORT HAS R AISED THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCE AND HAS CONTENDED THAT THE SAME MAY NOT BE ADMITTED AS ENOUGH OPPORTUNITY HAD BEEN AFFO RDED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. I HAVE EXAMINED THE FACTS OF THE CASE AND IT IS SEEN THAT THE ASSESSEE HAD MOVED AN APPLI CATION FOR ADMISSION OF HIS CASE FOR DIFFERENT ASSESSMENT YEARS BEFORE THE HONBLE SETTLEMENT COMMISSION AND THE SAME WERE DULY ADMITTED EXCEPT F OR THE YEAR UNDER CONSIDERATION AND THE PROCEEDINGS FOR ASSESSMENT WE RE THEREFORE TAKEN UP AFRESH ON 18.01.2012 LEADING TO THE ASSESSMENT ORDE R DATED 03.02.2012. IT IS APPARENT THAT LIMITED TIME WAS AVAILABLE WITH THE AO, SO MUCH SO THAT, THE AO HAS NOT EVEN CROSS VERIFIED THE INFORMATION SUBMITTED BY THE ASSESSEE IN RESPECT OF THE UNSECURED LOANS AND HAS ALSO NOT SOUGHT ANY ADDITIONAL EVIDENCE FROM THE ASSESSEE TO PROVE ITS CASE. THE ASSESSING OFFICER HAS MERELY TAKEN THE INFORMATION PROVIDED B Y THE ASSESSEE AND CONCLUDED ADVERSELY WITHOUT SEEKING ANY FURTHER EVI DENCE FROM THE ASSESSEE. IT IS CLEAR THAT THE EVIDENCE NOW SOUGHT TO BE FILED BY THE ASSESSEE HAS NOT BEEN CREATED AFRESH AND HAS BEEN P ART OF THE INCOME TAX ASSESSMENT RECORDS OF THE INDIVIDUALS/ENTITIES CONC ERNED. IT IS ALSO CLEAR THAT THE SAME COULD NOT BE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS THE SAME HAD NOT BEEN SPECIFICALLY C ALLED FOR. THEREFORE IT IS A FIT CASE FOR ADMISSION OF ADDITIONAL EVIDENCE AND IS ALLOWED ACCORDINGLY. THE ASSESSING OFFICER IN HIS REMAND REPORT HAS VERI FIED ALL THE UNSECURED LOANS AND ACCEPTED THE GENUINENESS THEREOF BUT HAS REMARKED WITH REFERENCE TO LOANS AT SERIAL NO.2 THAT THE SAME MAY NOT BE CONSIDERED AS GENUINE AS THE APPELLANT HAD NOT FILED THE DISSOLUT ION DEED OF OLD PARTNERSHIP. I HAVE PERUSED THE VARIOUS DOCUMENTS F IELD BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING APPELLANT PROCE EDINGS WHICH INCLUDE THE CONFIRMATIONS FROM THE LENDER, COPY OF THE BANK STATEMENTS OF THE APPELLANT REFLECTING SUCH PAYMENTS AND COPY OF ACCO UNTS OF THE PARTNERS IN THE FIRM AND THE FACT THAT THE CAPITAL ACCOUNTS OF THE ERSTWHILE PARTNERS HAVE BEEN TREATED AS LOANS ON RETIREMENT THEREOF. N OTHING HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN RESPECT OF THE EVIDENCE SUBMITTED TO SHOW THAT THE IDENTITY, CREDIT WORTHINESS OR THE GE NUINENESS OF THE LENDERS WAS IN DOUBT. THE APPELLANT HAS FILED SUFFICIENT EV IDENCE TO EXPLAIN THE UNSECURED LOANS CREDITED IN ITS BOOKS OF ACCOUNTS U NDER SECTION 68. THE ADDITION IS THEREFORE DIRECTED TO BE DELETED. ADDITION ON ACCOUNT OF UNACCOUNTED RECEIPTS OF RS.1 ,06,00,000/- ON SALE OF MUKTSAR COLONY. 12.I HAVE CONSIDERED THE BASIS OF ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON THE ISSUE. IT IS APP ARENT THAT THE ASSESSING OFFICER HAS VERIFIED THE CONTENTIONS OF T HE APPELLANT WHICH ARE BASED UPON THE SEIZED RECORD AS WELL AS THE AUDITED P&L ACCOUNT/BALANCE ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 5 SHEET FOR ASSESSMENT YEAR 2010-11 AND HAS FOUND THE CONTENTIONS OF THE APPELLANT AS CORRECT. THE IMPUGNED RECEIPTS OF RS.1 ,06,00,000/- WHICH HAS BEEN RECEIVED AS ADVANCE AS PART OF LARGER DEAL HAD BEEN ADJUSTED AGAINST THE SALES BOOKED IN ASSESSMENT YEAR 2010-11 AND REF LECTED ACCORDINGLY. IT IS ALSO APPARENT THAT THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS DID NOT LOOK INTO THE FACTS OF THE CASE AND MERELY PRESUMED THAT THE RECEIPTS AMOUNTED TO INCOME FOR ASSESSMENT YEAR 2009-10. THE EVIDENCE FILED BY THE APPELLANT AND VERIFIED BY THE ASSESSING OFFICER MAKES IT AMPLY CLEAR THAT THE ORIGINAL AGREEMENT IN PURSUANCE OF WHICH AMOUNT OF RS.4,86,00,000/- HAD BEEN RECEIVED HAD BE EN CANCELLED AND THE AMOUNT SHOWN AS ADVANCE HAD BEEN ADJUSTED AGAINST T HE SALES OF VARIOUS PLOTS IN THE ASSESSMENT YEAR 2010-11. THE ASSESSING OFFICERS OBJECTION WITH REFERENCE TO ADMISSION OF ADDITIONAL EVIDENCE HAS ALREADY BEEN DEALT WITH BY THE UNDER SIGNED AT PARA NO.7 OF THE ORDER. IN THE CIRCUMSTANCES THE AMOUNT OF RS.1,06,00,000/- BEING ACCOUNT FOR IN THE ASSESSMENT YEAR 2010-11 AND DISCLOSED ACCORDINGLY CAN NOT BE TREATE D AS INCOME OF ASSESSMENT YEAR 2009-10. THE ADDITION MADE THEREFOR E IS DIRECTED TO BE DELETED. DISALLOWANCE U/S 40A(3), RS.9,29,650/- 16. I HAVE CONSIDERED THE BASIS OF ADDITIONS MADE B Y THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON THE ISSUE AND THE CO MMENTS OF THE ASSESSING OFFICER IN THE REMAND REPORT. IT IS APPAR ENT THAT THE CLAIM OF AMOUNT PAID IN CASH BEING COVERED BY RULE 6DD HAS B EEN MADE BY THE ASSESSEE IN THE AUDIT REPORT AS WELL AS DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER ON RECEIPT OF TH E EXPLANATION DID NOT SEEK ANY FURTHER EXPLANATION TO SUPPORT THE CASE OF EXCEPTION AND PROCEEDED TO MAKE THE IMPUGNED DISALLOWANCE. THE FI LING OF ADDITIONAL EVIDENCE IN THE FORM OF AFFIDAVITS BY CONCERNED PER SONS DURING THE APPELLATE PROCEEDINGS MAKES IT CLEAR THAT THE SAME HAD NOT BEEN ASKED FOR EARLIER. THE ASSESSING OFFICER HAS NOT BROUGHT ON R ECORD ANYTHING ADVERSE IN THE EVIDENCE FILED BY THE ASSESSEE AND IT IS SEE N THAT THE EXPLANATION OF THE ASSESSEE IS CONSISTENT WITH ORIGINAL CLAIM. THE NAMES AND ADDRESSES OF THE CONCERNED PERSONS HAD BEEN PROVIDED DURING T HE ASSESSMENT PROCEEDINGS AND THE FACT THAT THEY WERE NOT SERVED BY THE BANK BRANCH CAN NOT BE CHANGED AT A LATER DATE. THE ADDITIONAL EVIDENCE IS THEREFORE ADMITTED IN VIEW OF MY COMMENTS IN PARA NO.7. THE A DDITION MADE THEREFORE DIRECTED TO BE DELETED. UNACCOUNTED TRANSACTIONS REGARDING PROPERTY AT ABO HAR 20. I HAVE CONSIDERED THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER, THE ARGUMENTS OF THE AR DURING THE APPELLANT PROCEE DINGS AND THE COMMENTS OF THE ASSESSING OFFICER WITH RESPECT TO T HE VERIFICATION DONE DURING APPELLATE PROCEEDINGS. THE APPELLANT HAD CLA IMED THAT THE IMPUGNED LAND WAS NOT A CAPITAL ASSET AS PER THE DE FINITION U/S 2(14) OF THE OFFICER INDEPENDENTLY TO BE CORRECT. THE APPELL ANT THEREFORE CLAIMED THAT NO CAPITAL GAINS WAS LEVIABLE ON THE IMPUGNED SALE EVEN IF THE AMOUNT ACTUALLY RECORDED IN THE BOOKS OF ACCOUNTS WAS RS.8 0 LACS AS RECORDED IN THE REGISTRATION DEED WHEREAS THE ACTUAL SALE CONSI DERATION AMOUNTED TO RS.4,65,00,900/-. HERE IT WOULD BE EXTREMELY RELEVA NT TO KEEP IN MIND THE ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 6 FACT THAT THE APPELLANT FIRM IS ENGAGED IN BUSINESS OF REAL ESTATE DEVELOPMENT INVOLVING PURCHASE AND SALE OF LAND. IT IS THEREFORE NORMAL FOR THE APPELLANT TO AGGREGATE LANDHOLDINGS WITH A VIEW TO EITHER DEVELOP THE SAME INTO RESIDENTIAL/COMMERCIAL PROJECT OR WITH A VIEW TO SIMPLY TRADE THE SAME AT A LATER DATE FOR PROFIT. THIS MEANS THAT TH E PURCHASE OF LAND IN THE CASE OF THE APPELLANT WOULD NORMALLY BE IN THE NATU RE OF STOCK IN TRADE. IT IS IN THIS CONTEXT THAT THE SALES OF SUCH STOCK IN TRADE SHOULD BE PART OF THE SALES OF THE APPELLANT RATHER THAN BEING TREATED AS CAPITAL GAIN AS DONE BY THE ASSESSEE. THE ASSET IN QUESTION TO BE CONSIDERE D FOR TAXATION UNDER THE HEAD 'INCOME FROM CAPITAL GAINS' HAS TO BE RECORDED AS 'INVESTMENTS' IN THE BALANCE SHEET OF THE ASSESSEE. THE PERUSAL OF T HE ASSESSMENT RECORDS IN THIS REGARD REVEALS THAT ASSESSEE HAD INCORPORAT ED THE FOLLOWING NOTE IN THE AUDIT REPORT FILED ALONG WITH THE RETURN OF INC OME DATED 15.06.2011:- 'DURING THE YEAR ON 01.04.2008 THE PARTNERS THROUGH RESOLUTION HAVE MUTUALLY DECIDED TO CONVERT THEIR S TOCK IN TRADE PERTAINING TO ABOHAR LAND AND MANSA LAND IN TO CAPI TAL ASSET AND THEREAFTER THEY SOLD THE LAND AT ABOHAR FOR SUM OF RS.80,00,000/- (EIGHTY LACS), THE CAPITAL GAIN ON THE SAID LAND WA S EXEMPT AS CERTIFIED BY THE PARTNERS, THE LAND IS BEYOND 2 KMS FROM THE MUNICIPAL LIMIT OF ABOHAR AND AGRICULTURAL ACTIVITI ES WERE CARRIED ON. THE SAME HAS BEEN PURCHASED BY THE FIRM IN THE YEAR 2005 FOR RS.35,41,391/- AND THE DIFFERENCE AMOUNT OF RS.44,5 8,609/- HAS BEEN TRANSFERRED TO PARTNERS AMOUNT CAPITAL ACCOUNT ON THE SAME DAY. HERE IT IS IMPORTANT TO APPRECIATE THAT THE LAND IN QUESTION HAD BEEN PURCHASED BY THE APPELLANT FIRM IN THE YEAR 2005 FO R RS.35,41,391/- AND ADMITTEDLY HAD BEEN TREATED AS STOCK IN TRADE FOR T HREE YEARS CONTINUOUSLY AND THE SAME WAS CLAIMED TO BE CONVERTED INTO THE C ATEGORY OF INVESTMENTS VIDE AN INTERNAL RESOLUTION IN THE FINANCIAL YEAR 2 008-09. THE SEQUENCE OF EVENTS IN THIS REGARD CAN BE APPRECIATED MORE CLEAR LY IF THE FOLLOWING DATES ARE SEQUENTIALLY APPRAISED. I) RETURN FILED ON DATED 15.06.2011. II) DUE DATE IN OCTOBER, 2009. III) AUDIT DONE ON 31.03.2011. IV) DATE OF SEARCH - 03.09.2009 V) NOTICE U/S 142(1) ISSUED ON 01.10.2010. 21. IT IS APPARENT THAT THE SEIZURE OF DOCUMENTS ON 03.09.2009 DURING THE SEARCH OPERATION EVIDENCING UNACCOUNTED RECEIPTS, M ADE THE ASSESSEE ADOPT THE BACK DATED PLANNING OF CONVERTING THE IMP UGNED LAND INTO INVESTMENT CATEGORY IN ORDER TO CLAIM THE SAME TO B E EXEMPT BEING AGRICULTURAL LAND. IT IS FURTHER TO BE APPRECIATED THAT THE LAND IN QUESTION HAD BEEN STOCK IN TRADE RIGHT FROM THE DATE OF PURC HASE AND THE CLAIM OF THE SAME BEING CONVERTING INTO INVESTMENTS IS MEREL Y AN EYEWASH INTENDED TO TAKE THE ADVANTAGE OF DEFINITION OF CAP ITAL ASSET UNDER SECTION 2(14). IT IS ALSO IMPORTANT TO REMEMBER THAT THE AS SESSEE HAD NOT FILED THE RETURN FOR ASSESSMENT YEAR 2009- 10 WITHIN THE PRES CRIBED TIME LIMITS NOR THE AUDIT HAD BEEN DONE AS PER THE PRESCRIBED TIME LIMITS AND THE BELATED ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 7 RETURN HAS BEEN FILED ON 15.06.2011 I.E. ALMOST 18 MONTHS AFTER THE DATE OF SEARCH WHEREIN THIS BACK DATED CLAIM HAS FIRST SURF ACED. IT IS ANOTHER MATTER THAT THE ASSESSING OFFICER DURING THE ASSESS MENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS HAS NOT BEEN ABLE TO APPRECIATE THE CRUCIAL SIGNIFICANCE OF THIS MOVE BY THE ASSESSEE. THERE IS NO DOUBT IN MY MIND THAT THE ENTIRE EXERCISE STARTED WITH THE RECOVERY OF THE SEIZED DOCUMENTS EVIDENCING UNACCOUNTED RECEIPTS OF SALE CONSIDERATI ON AND ACCEPTANCE THEREOF DURING THE COURSE OF SEARCH OPERATIONS. THE REFORE, THE AMOUNT OF PROFITS EARNED BY THE ASSESSEE ON ACCOUNT OF SALE O F THE AMOUNTS OF PROFITS EARNED BY THE ASSESSEE ON ACCOUNT OF SALE OF THE LA ND HAS TO BE TAXED IN THE YEAR UNDER CONSIDERATION AS BUSINESS RECEIPTS. THEREFORE, THE ADDITION OF RS.4,29,59,509/- IS CONFIRMED BEING THE DIFFEREN CE BETWEEN THE SALE CONSIDERATION AND THE COST OF PURCHASE THEREOF. 6. AT THE OUTSET, THE LEARNED DR FIRST TOOK UP THE APPEAL FILED BY REVENUE AND SUBMITTED THAT LEARNED CIT(A) IN VIOLAT ION OF PROVISIONS OF RULE 46A HAD ACCEPTED THE ADDITIONAL EVIDENCE AND H AD ALLOWED RELIEF TO THE ASSESSEE. HE FURTHER SUBMITTED THAT LEARNED CIT (A) HAD NOT APPRECIATED THAT A NUMBER OF OPPORTUNITIES WERE GIV EN TO ASSESSEE AND ASSESSEE HAD NOT FILED THE RELEVANT DOCUMENTS BEFOR E ASSESSING OFFICER, THEREFORE, HE ARGUED THAT THE APPEAL OF THE REVENUE MAY BE REMITTED BACK TO THE ASSESSING OFFICER WHO SHOULD DECIDE THE ISSUE AFRESH. 7. IN RESPONSE TO THE ARGUMENTS OF LEARNED DR, THE LEARNED AR SUBMITTED THAT LEARNED CIT(A) HAD DULY FORWARDED TH E SUBMISSIONS OF ASSESSEE TO THE ASSESSING OFFICER AND HAD OBTAINED REMAND REPORT FROM HIM AND THEREFORE, AFTER GOING THOROUGH THE REMAND REPORT HE HAD RIGHTLY DELETED THE ADDITIONS. AS REGARDS THE ARGUMENT OF L EARNED DR THAT SUFFICIENT OPPORTUNITIES WERE PROVIDED TO THE ASSES SEE, THE LEARNED AR SUBMITTED THAT ASSESSEE ALONG WITH ITS OTHER GROUP CASES HAD APPROACHED THE HONBLE SETTLEMENT COMMISSION, NEW DELHI IN NOV EMBER & DECEMBER, 2011, AND THEREFORE WAS HOPEFUL FOR SETTL EMENT AND THEREFORE, ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 8 COULD NOT FILE THE DOCUMENTS. IT WAS SUBMITTED THAT THE PETITION FOR ASST. YEAR 2009-10 WAS REJECTED DUE TO NON MAINTAINABILIT Y OF APPLICATION AND IN THE MEANWHILE ASSESSING OFFICER HAD PASSED THE O RDER DURING THE EXTENDED TIME ON 3.2.2012 AND THEREFORE, NO REASONA BLE OPPORTUNITY WAS AVAILABLE TO ASSESSEE TO FILE THE NECESSARY DOCUMEN TS AND, THEREFORE, LEARNED CIT(A) HAS RIGHTLY ADMITTED ADDITIONAL EVID ENCES AFTER CONFRONTING THE SAME TO THE ASSESSING OFFICER. WITHOUT PREJUDIC E, IT WAS ARGUED THAT ASSESSEE HAD ALREADY FILED DETAILS OF UNSECURED LOA NS ALONG WITH THEIR PAN NUMBER AND ASSESSING OFFICER WITHOUT REQUIRING ASSESSEE TO PROVIDE FURTHER INFORMATION FRAMED THE ASSESSMENT AND THERE FORE, LEARNED CIT(A) WAS JUSTIFIED ADMITTING THE ADDITIONAL EVIDENCES. 8. ARGUING ASSESSEES APPEAL THE LEARNED AR SUBMITT ED THAT THERE IS ONLY ONE GROUND OF APPEAL IN THE ASSESSEES APPEAL AND THAT IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAD CONFIRMED THE ADD ITION MADE BY ASSESSING OFFICER ON ACCOUNT OF SALE OF PROPERTY AT ABOHAR. HIGHLIGHTING THE FACTS OF THE CASE THE LEARNED AR SUBMITTED THAT ASSESSEE ALONGWITH OTHER JOINT OWNERS OF CERTAIN LAND HAD SOLD SUCH LA ND AND HAD CLAIMED TO BE EXEMPT FROM CAPITAL GAINS BEING THE ASSET WAS A GRICULTURAL LAND BUT THE SAME WAS REJECTED BY ASSESSING OFFICER AND IN T HE CASE OF GROUP COMPANIES THEY HAD AGREED BEFORE THE SETTLEMENT COM MISSION FOR TAXABILITY OF SUCH INCOME AS BUSINESS INCOME AND TH EREFORE IN THE PRESENT APPEAL THE ASSESSEE IS NOT ON THE ISSUE OF TAXABILITY OF SUCH PROFITS AS BUSINESS INCOME BUT HE SUBMITTED THAT AS SESSING OFFICER HAD ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 9 WRONGLY CALCULATED THE ADDITION BY INCLUDING THE SH ARE OF SHAM LAL ONE OF THE CO-OWNER IN THE INCOME OF ASSESSEE WHICH IS HIGHLY UNJUSTIFIED AS IN THIS WAY THERE WILL BE DOUBLE TAXATION AS MR. SH AM LAL ONE OF THE CO- OWNERS HAD ALREADY OFFERED HIS SHARE AS BUSINESS PR OFITS BEFORE THE SETTLEMENT COMMISSION. HE SUBMITTED THAT THE LAND I N QUESTION ON WHICH ADDITION WAS MADE WAS BASED UPON DOCUMENTS SE IZED DURING SURVEY AND IN THIS RESPECT OUR ATTENTION WAS INVITE D TO (PB-843 AND 843 A). THE LEARNED AR SUBMITTED THAT TOTAL AREA OF LAN D AS PER THIS DOCUMENT WAS 4245.33 MARLAS OUT OF WHICH THE SHARE OF ASSESSEE WAS 43% EQUIVALENT TO 1825.49 MARLAS AND THE SALE CONSI DERATION FOR THIS AMOUNT AS NOTED IN PAGE 843 COMES OUT 3,42,27,938/- , AND THEREFORE, THE ADDITION SHOULD HAVE BEEN TO THE EXTENT OF RS.3 4,227,938/- ONLY WHEREAS THE ASSESSING OFFICER HAD WRONGLY CALCULATE D THE FIGURE AT RS.46,500,900/-. THE LEARNED AR SUBMITTED THAT ASSE SSING OFFICER HAD NOTED DOWN THE SHARE OF ASSESSEE AT 43% BUT THE ADD ITION HAS BEEN MADE FOR RS.4,65,00,900/-. HE SUBMITTED THAT WHILE MAKIN G THE ADDITION THE ASSESSING OFFICER BESIDES INCLUDING THE SHARE OF AS SESSEE AT RS.1825.49 MARLAS HAD INCLUDED THE SHARE OF MR. SHAM LAL AT 63 6.79 MARLAS WHICH IS ALSO MENTIONED ON (PB-843). IT WAS SUBMITTED THA T MR. SHAM LAL BEFORE THE SETTLEMENT COMMISSION HAD ALREADY PAID D UE TAXES ON THE SALE OF HIS SHARE OF LAND AND IN THIS RESPECT OUR ATTENT ION WAS INVITED TO PAGE 857 WHERE A COPY OF ORDER OF SETTLEMENT COMMISSION U/S 245D(4) PASSED IN RESPECT OF ASSESSEE AND OTHER GROUP COMPANIES IN CLUDING MR. SHAM ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 10 LAL WAS PLACED. IN VIEW OF THE ABOVE, IT WAS SUBMIT TED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO MAKE CORRECT ASSESSMENT OF INCOME FROM THE SALE OF PROPERTY AT ABHOR. 9. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ABOVE CASES WERE ORIGINALLY HEARD ON 8.01.2016, HOWEVER, AT THE TIME OF DICTATION IT WAS OBSERVED THAT ASSESSEE HAD RAISED A NEW ISSUE FOR DETERMINATION O F CORRECT INCOME OF THE ASSESSEE WHICH IT HAD NOT TAKEN BEFORE THE AUTH ORITIES BELOW THEREFORE, THE CASES WERE RE-FIXED FOR CLARIFICATIO N AND FINALLY THE CASES WERE HEARD ON 17.05.2016. THE LEARNED AR, IN REPLY TO THE CLARIFICATIONS SUBMITTED THAT THE ASSESSING OFFICER HAD WRONGLY CA LCULATED THE ADDITION AS THE SHARE OF ASSESSEE WAS ADMITTEDLY 1825.49 MAR LAS BEING 43% OF 4245.33 MARLAS, AND THIS FACT WAS VERIFIABLE FROM ( PB-843) WHICH IS COPY OF SEIZED DOCUMENTS AND WHICH SHOWS THAT THE LAND B ELONGING TO ASSESSEE WAS ONLY 1825.49 MARLA AND THE SALE CONSID ERATION OF WHICH AS NOTED IN THE SEIZED DOCUMENT WAS ONLY RS.34,22,7,93 8/- WHEREAS THE ASSESSING OFFICER HAD MADE ADDITION OF RS.46,509,00 0/-. IT WAS SUBMITTED THAT THE ASSESSEE DURING THE APPELLATE PR OCEEDINGS HAD ALSO FILED COMPLETE DETAILS AND IN THIS RESPECT PAGE 16 OF LEARNED CIT(A)S ORDER IS IMPORTANT WHERE THE LEARNED CIT(A) HAS NOTED DOW N THE SHARE OF ASSESSEE AT 43% AND GROSS VALUE OF SALES AT RS.3,4 2,92,062/-. ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 11 THEREFORE, LEARNED AR SUBMITTED THAT IT WAS NOT A N EW ISSUE AND IS PART OF THE EXISTING RECORDS AND AUTHORITIES BELOW WERE BOUND TO ASSESS THE CORRECT INCOME AND IN THIS RESPECT RELIANCE WAS PLA CED ON CIRCULAR NO.14(XL-35) OF 1955 FOR THE PROPOSITION THAT ONLY LEGITIMATE AND ONLY DUE TAXES SHOULD BE COLLECTED. 11. WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LEARN ED AR FOR THE PROPOSITION THAT CORRECT AMOUNT OF TAXES SHOULD BE COLLECTED AND ASSESSING OFFICERS SHOULD NOT MISUSE THE LACK OF KN OWLEDGE OF THE ASSESSEE. CIRCULAR NO.14(XL-35) OF 1995 DATED 11 TH APRIL,1955 IN PARA 6 DIRECTS THE ASSESSING OFFICER TO COLLECT CORRECT TA XES. THE SAID PARA IS REPRODUCED BELOW: THE INTENTION OF THIS CIRCULAR IS NOT THAT TAX DUE SHOULD NOT BE CHARGED OR THAT ANY FAVOUR SHOULD BE SHOWN TO ANYBODY IN THE M ATTER OF ASSESSMENT, OR THAT WHERE INVESTIGATIONS ARE CALLED FOR, THEY S HOULD NOT BE MADE. WHATEVER THE LEGITIMATE TAX IT MUST BE ASSESSED AND MUST BE COLLECTED. THE PURPOSE OF THIS CIRCULAR IS MERELY TO EMPHASIZE THAT WE SHOULD NOT TAKE ADVANTAGE OF AN ASSESSEES IGNORANCE TO COLLECT MOR E TAX OUT OF HIM THAN IS LEGITIMATELY DUE FROM HIM. 12. IT IS UNDISPUTED FACT THAT THE TOTAL AREA OF LA ND WAS 4245.43 MARLAS AS NOTED IN THE SEIZED DOCUMENT PLACED AT (PB PAGE 843). IT IS ALSO UNDISPUTED FACT THAT SHARE OF ASSESSEE WAS 43% THER EFORE, THE SHARE OF ASSESSEE WAS ONLY 1825.49 MARLAS. IT IS ALSO UNDISP UTED FACT THAT THE RATE FOR THE PURPOSE OF CALCULATION OF INCOME OF TH E ASSESSEE HAS BEEN TAKEN FROM THE SEIZED DOCUMENT @RS.18750/- PER MARL A. THE ABOVE FACT IS FURTHER FORTIFIED FROM PARA 20 OF ORDER OF SETTL EMENT COMMISSION WHERE THE SETTLEMENT COMMISSION HAS ALSO NOTED THE SHARE OF THE ASSESSEE AT ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 12 43% OUT OF TOTAL LAND OF 4243.55 MARLAS AND HAD ALS O NOTED THAT SAID LAND WAS SOLD AT RS.18750 PER MARLAS. FOR THE SAKE OF CONVENIENCE PARA 20 OF THE SAID ORDER PLACED AT (PB-857) IS REPRODUC ED BELOW. 20. AT PARA 12.3 OF THE SOF IN THE CASE OF SHRI SH AM LAL, IT HAS BEEN MENTIONED THAT 4243.55 MARLAS OF LAND AT ABOHAR WAS PURCHASE BY 3 CO- OWNERS VIZ., M/S J.V TRADING CO. (50% SHARE), SARAS WARI BUILDERS (43% SHARE), AND SHRI LACHMAN DASS (7% SHARE). THIS LAND WAS SOLD @RS.18.750 PER MARLA IN THE A.Y 2009-10. FURTHER DE TAILS OF THIS BUSINESS VENTURE HAVE BEEN PROVIDED AT PARA 12.34 OF THE SOF , WHEREIN THE COST OF LAND AND PREOPERATIVE EXPENSES (BEING LAND DEVELOPM ENT EXPENSES) IS ALSO REFLECTED. SHRI SHAM LAL IS A 30% PARTNER OF M/S J. V. TRADING CO. SHRI SHAM LAL, IN HIS SOF, HAS CLAIMED THAT THE SAID LAN D IS MORE THAN 3 KMS AWAY FROM THE MUNICIPAL LIMITS OF ABOHAR AND AGRICU LTURAL ACTIVITY IS BEING CONDUCTED THEREON. IT HAS BEEN CONTENDED AS PER SEC TION 2(14), THE LAND IS NOT A CAPITAL ASSET, AND NO CAPITAL GAINS ARISE FRO M THE SALE OF THE LAND; AS SUCH THERE IS NO GENERATION OF THE TAXABLE INCOME. FROM THE ABOVE FACTS IT IS APPARENT THAT ASSESSEES SHARE WAS DEFINITELY 43% OF THE TOTAL LAND AND THE GROSS RECEIPTS FROM S ALE OF SUCH LAND @ RS.18,750 PER MARLA COMES OUT OF AT RS.34,22,7,938/ - AND THEREFORE, THE ASSESSING OFFICER SHOULD NOT HAVE TAKEN THE VALUE O F SALE CONSIDERATION AT RS.4,65,09,900/-. THE CONTENTION OF LEARNED AR T HAT ASSESSING OFFICER HAS INCLUDED THE SHARE OF MR. SHAM LAL ALSO SEEMS T O BE CORRECT BECAUSE OF THE FACT THAT IF THE SHARE OF MR. SHAM LAL IS IN CLUDED IN THE LAND HOLDING OF ASSESSEE, IT WILL COME OUT AT ABOUT THE SAME FIGURE FOR WHICH ASSESSING OFFICER HAD MADE THE ADDITION. HOWEVER, O N THIS ACCOUNT ALSO THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIE D AS PER MR. SHAM LAL HAD ALREADY OFFERED HIS SHARE OF INCOME FROM LAND A S BUSINESS INCOME BEFORE SETTLEMENT COMMISSION. IN THIS RESPECT, PARA 20.2 OF ORDER OF SETTLEMENT COMMISSION PLACED AT (PB PAGE-857) IS RE LEVANT AND FOR THE SAKE OF CONVENIENCE THE SAME IS REPRODUCED BELOW. ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 13 20.2. WE HAVE ASKED THE APPLICANT TO EXPLAIN WHY THE SURPLUS ARISING FROM THE SAID SALE TRANSACTION SHOULD NOT BE TREATE D AS BUSINESS INCOME, SINCE ALL THE OTHER TRANSACTIONS OF THE APPLICANT G ROUP ARE RELATED TO DEVELOPMENT AND SALE OF LAND IN THE NORMAL COURSE O F THE BUSINESS OF THE GROUP. THE APPLICANTS AR HAS THEREUPON BROUGHT TO O UR NOTICE THAT, IN THE CASE OF M/S SARASWATI BUILDERS FOR THE A.Y2009-10, FOR WHICH THE SAID ASSESS- FIRM IS NOT BEFORE THE SETTLEMENT COMMISSIO N, THE A.O. HAS TAKEN THE SAME VIEW AS PROPOSED BY US AND HAS BROUGHT TO TAX THE SURPLUS ARISING FROM THE SALE OF THE SHARE OF M/S SARASWATI BUILDERS AS BUSINESS INCOME. THE SAID ADDITION HAS BEEN UPHELD BY THE CI T (APPEALS)-1, LUDHIANA. THE LEARNED AR FURTHER SUBMITTED THAT, IN THE SPIRIT OF SETTLEMENT, THE ENTIRE PROFIT ARISING FROM THE SALE OF THE SHARE OF M/S J.V. TRADING CO. AMOUNTING TO RS .3,47,83,567/- MAY BE SIMILAR TAXED AS BUSINESS INCOME IN THE HANDS OF SH. SHAM LAL IN THE A.Y. 2009-10. THE LEARNED A.R SUBMITTED THAT ALL THE FACTS HAVE BEEN PROVIDED IN THE SOF AND NOTHING HAS BEEN CONCEALED. THE TAXATION OF THE SAID AMOUNT HAS ARISEN ONLY BECAUSE OF THE TREATMENT OF THE LAND AS STOCK IN TRADE INSTEAD OF A CAPITAL ASSET, WHICH IS A DEBATABLE ISSUE, BUT HAS BEEN OFFERED TO TAX BY THE APPLICANT IN THE SPIRIT OF SETTLEMENT. THE A PPLICANT HAS PRAYED FOR IMMUNITY FROM PENALTY AND PROSECUTION AND IN VIEW O F THE SUBSTANTIAL TAX INVOLVED, FURTHER PRAYED FOR GRANT OF INSTALLMENT O F ONE YEAR FOR PAYMENT OF THE TAX. 13. THEREFORE, FROM ALL ANGLES IT IS OBSERVED THAT ASSESSING OFFICER SHOULD HAVE MADE THE ADDITION FOR CORRECT FIGURE OF RS.3,42,27,938/- INSTEAD OF RS.4,65,09,900/-. THE LEARNED CIT(A), HA S REDUCED THE ADDITION TO RS.4,29,59,509/- AFTER REDUCING THE COS T PRICE OF THE LAND AS 35,41,391/- WHERE AS IN OUR CONSIDERED OPINION THE LEARNED CIT(A) SHOULD HAVE RESTRICTED THE SAME TO RS.30,68,6,547/- (BEING CORRECT SALE VALUE RS.34227938/- PURCHASE COST RS.3541391/-). TH EREFORE, WE ALLOW GROUND NO.(IV) OF ASSESSEES APPEAL AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION CONFIRMED BY LEARNED CIT(A) A T RS.42,95,9,509/-TO RS.30,68,6,547/- ONLY. 14. AS REGARDS THE CONTENTION OF THE ASSESSEE ON TH E OTHER GROUNDS OF APPEAL THAT THE ASSET SHOULD HAVE BEEN TREATED AS C APITAL ASSET, WE DO ITA NOS.252 & 310 (ASR)/2013 ASST. YEAR: 2009-10 14 NOT FIND ANY FORCE IN THE GROUNDS OF APPEAL AS MR. SHAM LAL AND HIS GROUP COMPANIES HAS ALREADY ADMITTED BEFORE THE SET TLEMENT COMMISSION THAT THE SAME MAY BE TREATED AS BUSINESS INCOME, TH EREFORE, GROUND NOS. (I) TO (III) ARE DISMISSED. 15. IN VIEW OF THE ABOVE, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 16. AS REGARDS THE APPEAL OF REVENUE, WE FIND THAT THE LEARNED CIT(A) HAS RIGHTLY ADMITTED ADDITIONAL EVIDENCES WHICH WER E NECESSARY FOR ARRIVING AT THE JUSTICE, THEREFORE, THE CONTENTIONS OF LEARNED DR THAT LEARNED CIT(A) SHOULD NOT HAVE ACCEPTED DO NOT CARR Y ANY FORCE. THE LEARNED CIT(A) HAS PASSED A REASONED AND SPEAKING O RDER AND HAS PASSED THE ORDER AFTER OBTAINING REMAND REPORT FROM HE ASSESSING OFFICER THEREFORE, WE DO NOT FIND ANY CONFORMITY IN THE SAM E AND THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 17. IN NUTSHELL, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED AND APPEAL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:20.05.2016. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER