ITO, Coimbatore V. Shri Mayank Singhania, Coimbatore

ITA 2555/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4485 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G GOKUL; N SUBRAMANIAM ITP
• Keywords: Business income; Charitable institution
• Section: 143(3); 133(6)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, J UDICIAL MEMBER ./ I.T.A.NO. 2 555 /MDS/2016 / ASSESSMENT YEAR : 20 12 - 13 & C.O. NO. 1 6 0 /MDS/201 6 [IN I.T.A. NO. 2 555 /MDS/201 6 ] THE INCOME TAX OFFICER , NON CO RPORATE WARD 4(3) , COIMBATORE 641 018 . VS. SHRI MAYANK SINGHANIA, 170 - A(38 ), GANDHI NAGAR, SUNDARAPURAM, COIMBATORE 641 024. [PAN: A OGPM8725A ] ( APPELLANT ) ( RESPONDENT /CROSS OBJECTOR ) ASSESSEE BY : SHRI N. SUBRAMANIAM, ITP & SHRI G. GOKUL, C.A. DEPARTMENT BY : SHRI SHIVA SRINIVAS , JCIT / DATE OF H EARING : 2 8 . 0 2 .201 7 / DATE OF P RONOUNCEMENT : 16 . 05 . 201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THE APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3 , COIMBATORE DATED 27 .0 5 .201 6 FOR THE ASSESSMENT YEAR 20 12 - 13 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, COIMBATORE IS AGAINST THE FA CTS AND CIRCUMSTANCES OF THE CASE. I.T.A. NO . 2 555 /M/ 1 6 & C.O. NO. 1 6 0 /M/1 6 2 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, COIMBATORE ERRED IN PASSING THE ORDER WITHOUT CONSIDERING THE TEST APPLIED BY THE ASSESSING OFFICER TO TREAT THE LAND AS NON - AGRICULTURAL LAND. 3. THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) - 3, COIMBATORE ERRED IN PASSING THE ORDER WITHOUT CONSIDERING THE ASSESSING OFFICER S POINT THAT THE ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOME IN THE PREVIOUS YEARS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) - 3, COIMBATORE HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE EVIDENCE PRODUCED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS TO PROVE THAT THERE WAS AGRICULTURAL PRODUCTION IN THE LAND. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3, COIMBATORE MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, DERIVING INC OME FROM BUSINESS AND PROFESSION, CAPITAL GAIN AND FROM OTHER SOURCES. THE ASSESSEE HAS FILED HER RETURN OF ON 06.05 .2013 ADMITTING A TOTAL INCOME OF .5,04,008/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SE CTION 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE ON 05.09.2014. IN RESPONSE THERETO, THE ASSESSEE HAS FILED ALL DETAILS AS CALLED FOR. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND VERIFYING THE DETAILS, THE ASSESSING OFFICER HAS COMPL ETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .94,04,408/ - AFTER MAKING ADDITION OF .89,00,000/ - . I.T.A. NO . 2 555 /M/ 1 6 & C.O. NO. 1 6 0 /M/1 6 3 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER EXAMINING THE CASE OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER HAS RELIED ON 13 TESTS WHICH ARE T O BE APPLIED AS PER THE DECISION IN THE CASE OF CIT V. SIDDHART J DESAI 139 ITR 628 (GUJ). AFTER ANALYSING THE ACTUAL FACTS WITH REGARD TO TEST ENFORCED IN THE ABOVE DECISION, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ADDITION M ADE BY TREATING THE INCOME FROM THE SALE OF LAND AS BUSINESS INCOME CANNOT BE SUSTAINABLE ON THE GROUND THAT THE TESTS FOR TREATING THE LAND AS NON - AGRICULTURAL LAND IS NOT SATISFIED. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. B Y RELYING ON THE GROUNDS OF APPEAL, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOME IN THE PREVIOUS YEARS AND THEREFORE, THE LAND SOLD BY THE ASSESSEE CANNOT BE TREATED AS AGRICULTURAL INCOME. MOREOVER, THE ASSESSING OFFICE R WAS NOT GIVEN AN OPPORTUNITY TO EXAMINE THE EVIDENCE PRODUCED BY THE ASSESSEE THAT THERE WAS AGRICULTURAL PRODUCTION IN THE LAND. THEREFORE, THE LD. DR CONTENDED THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION BY CONSIDERING THE INCOME FROM CAPITAL GA IN. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN I.T.A. NO. 396/MDS/2016 FOR THE ASSESSMENT YEAR 2012 - 13 DATED I.T.A. NO . 2 555 /M/ 1 6 & C.O. NO. 1 6 0 /M/1 6 4 30.11.2016 AND THE ASSESSEE ALSO FILED CROSS OBJECTION IN SUPPORT OF THE ORDER PASSED BY THE LD. CIT(A). 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE MOOT QUESTION RAISED BEFORE THE TRIBUNAL IS WHETHER THE INCOM E EARNED BY THE ASSESSEE IS BUSINESS INCOME OR INCOME FROM CAPITAL GAIN OUT OF THE LAND SOLD BY THE ASSESSEE. THE ASSESSING OFFICER CONCLUDED THE ASSESSMENT BY HOLDING THAT THE LAND IS NOT AGRICULTURAL IN NATURE AND THEREFORE, THE INCOME OF THE ASSESSEE IS IN THE NATURE OF BUSINESS INCOME. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS RELIED ON 13 TESTS WHICH ARE TO BE APPLIED AS PER THE DECISION IN THE CASE OF CIT V. SIDDHART J DESAI (SUPRA) AND IN THE APPELLATE ORDER, THE LD. CIT(A) COUNTERED THE SAME AND OBSERVED AS UNDER: 6.2 I HAVE CONSIDERED THE TESTS APPLIED BY THE ASSESSING OFFICER TO TREAT THE LAND AS NON AGRICULTURAL. IN ITEM NO. 5 WHETHER THE ASSESSEE OBTAINED PERMISSION FOR NON - AGRICULTURAL USE, THE ANSWER IS 'NO'. ITEM NO. 6 THE ASSESSING OFFICER CONTENDS THAT THE LAND WAS NOT USED FOR AGRICULTURAL PURPOSES FROM PURCHASE TILL DATE. THIS ASPECT IS REBUTTED BY THE APPELLANT WITH EVIDENCE THAT MAIZE HAS BEEN GROWN. AS PER THE ITEM NO. 9 WHETHER THE LAND WAS DEVELOPED BY PLOTTING AND PROVIDING ROAD AND OTHER FACILITIES, THE ASSESSING OFFICER COMMENTED THAT THE LAND WAS NOT DEVELOPED INTO ANY PLOTS. THE ASSESSING OFFICER HAS ALSO STATED THAT THE ASSESSEE HAS NOT SOLD ANY PIECE OF LAND FOR NON - AGRICULTURAL PURPOSES. THE ASSESSING OFFICER HAS ADDED THAT THE ADJACENT LAND WHICH BELONGS TO THE ORIGINAL OWNER HAS BEEN PUT TO NON - AGRICULTURAL USE. WHAT IS DONE TO AN ADJACENT LAND CANNOT BE THE REASON FOR TREATING THIS AS NON - AGRICULTURAL. THE APPELLANT SAYS THAT THE LAND IS IN A PHYSICAL TERRAIN WHERE N ON - AGRICULTURAL ACTIVITY CANNOT BE CARRIED OUT. CONSIDERING THE EVIDENCE FURNISHED BY THE APPELLANT TO SHOW THAT THERE WAS AGRICULTURAL PRODUCTION IN THE LAND AND ALSO THE FACT THAT THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT THE LAND WAS NOT PUT TO N ON - AGRICULTURAL USE THE ADDITION MADE TREATING THE INCOME FROM THE SALE OF LAND AS BUSINESS INCOME CANNOT BE SUSTAINABLE. IN THE SAID LAND THERE NON AGRICULTURAL ACTIVITY I.T.A. NO . 2 555 /M/ 1 6 & C.O. NO. 1 6 0 /M/1 6 5 AND THE TESTS FOR TREATING THE LAND AS NON - AGRICULTURAL DOES NOT SEEM TO BE SATISFIED . 8.0 IN THE RESULT THE APPEAL IS ALLOWED. 5.1 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. SMT. SAROJ SINGHANIA IN I.T.A. NO. 396/MD S/2016 DATED 30.11.2016. WE HAVE GONE THE ORDER OF THE COORDINATE BENCHES OF THE TRIBUNAL, WHEREIN THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 5.1 WHETHER THE LAND USED FOR AGRICULTURAL PURPOSE OR NOT IS NOT THE MATERIAL FOR DETERMINING THE QUESTION WHET HER THE LAND WAS AGRICULTURAL LAND OR NOT. IN THE CASE OF CIT VS OFFICER - IN - CHARGE (105 ITR 133) HON'BLE SUPREME COURT HELD THAT AGRICULTURAL LAND MUST BE A LAND WHICH COULD BE SAID TO BE EITHER ACTUALLY USED OR ORDINARILY USED OR MEANT TO BE USED FOR AGRI CULTURAL PURPOSES, AND DETERMINATION OF THE CHARACTER OF LAND, ACCORDING TO THE PURPOSE FOR WHICH IT IS MEANT OR SET APART AND CAN BE USED, IS A MATTER OF WHICH HAVE TO BE DETERMINED ON THE FACTS OF EACH PARTICULAR CASE. IN THE PRESENT CASE THERE WAS NO DO UBT WHATSOEVER, ON THE NATURE OF THE LAND BEING AGRICULTURAL LAND, EXCEPT IT IS FACT THAT THE ASSESSEE HAS NOT CLAIMED ANY AGRICULTURAL INCOME SINCE THE ASSESSEE HAS DONATED THE ENTIRE AGRICULTURAL PRODUCE TO THE CHARITABLE TRUST [GOSHAALA]. UNDER THE PROV ISIONS OF SECTION 133(6) OF THE ACT, THE ASSESSING OFFICER HAS REQUESTED THE VILLAGE ADMINISTRATIVE OFFICER TO FURNISH THE CHITTA ADANGAL REPORT. THE CERTIFICATE FURNISHED BY THE VAO INDICATES THAT THE LANDS UNDER REFERENCE, SUBSTANTIAL PORTION OF THE LAND WAS LEFT FALLOW WHERE NO AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASSESSEE, WHICH DOES NOT MEAN THAT THE LAND IS NOT AN AGRICULTURAL LAND OR THE ASSESSEE HAS CARRIED OUT ANY NON - AGRICULTURAL ACTIVITIES IN THAT LAND. FURTHER, THERE WAS NO EVIDENCE T O SHOW THAT THE ASSESSEE HAS APPLIED FOR CHANGE OF THE LAND FOR NON - AGRICULTURAL PURPOSES. IN THIS CASE, IT MAY BE REASONABLE TO HOLD THAT THE ASSESSING OFFICER RELIED ON VARIOUS CASE LAWS RATHER THAN CONSIDERING THE FACTS OF THE CASE UNDER REFERENCE AND E XAMINING THE APPLICABILITY OF THOSE CASE LAWS, TO THE FACTS OF THE CASE. THE LANDS HELD AND SOLD BY THE ASSESSEE WERE CERTIFIED AND PROVED TO BE AGRICULTURAL LANDS AS PER REVENUE RECORDS. JUST BECAUSE THE ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOME IN T HE RETURNS EVER SINCE THE LAND WAS PURCHASED, OR EVEN NO AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASSESSEE, THE NATURE OF THE LAND SHALL NOT CHANGE UNTIL UNLESS, THE LAND IN QUESTION WAS SUBSEQUENTLY DEVELOPED FOR COMMERCIAL EXPLOITATION. FURTHER, T HE NATURE OF THE LAND HAS NOT UNDERGONE ANY CHANGE, WITH THE LAND REVENUE I.T.A. NO . 2 555 /M/ 1 6 & C.O. NO. 1 6 0 /M/1 6 6 TAX PAID BY THE ASSESSEE AND THE RECORDS STILL SHOWING THEM TO BE AGRICULTURAL LANDS. THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE LAND WAS DEVELOPED FOR COMMERCIAL EXPLOITATION, IN SPITE OF ITS PROXIMITY TO THE HIGH WAY AND SURROUNDED BY INDUSTRIES/SCHOOL/COLLEGES, ETC. THUS, BASED ON THE FACTS OF THE CASE, IT IS REASONABLE TO HOLD THAT THE LANDS UNDER REFERENCE ARE CONTINUED/REMAINED TO BE AGRICULTUR AL LANDS, WHEN THE LAND WAS NOT PUT TO NON - AGRICULTURAL USE WITHOUT ANY CONVERSION OF SUCH LANDS INTO FURTHER DEVELOPMENTS SUCH AS COMMERCIALISATION / PLOTTING OF LANDS, DO NOT AMOUNT TO ADVENTURE IN NATURE OF TRADE. THE SALE OF LAND, IRRESPECTIVE OF THEIR VALUE, AS LONG AS THE SAID ASSETS / LANDS DID NOT LOSE THE BASIC CHARACTER OF AGRICULTURAL LANDS, DOES NOT CONSTITUTE BUSINESS ACTIVITY OF THE ASSESSEE. 5.2 IN TH E CASE OF RAJA J. RAMESHWAR, RAO V. CIT [1961] 42 ITR 179, THE HON BLE SUPREME COURT HAS OBSERVED AS UNDER (HEADNOTE): IN THE HEADNOTE OF THE DECISION, THE FOLLOWING IS WHAT WAS ACTUALLY STATED, BUT WHILE RELYING ON THE DECISION, THE ASSESSING OFFICER HAS SIMPLY IGNORED THE SECOND SENTENCE OF THE HEADNOTE: EVEN A SINGLE VENTURE MAY BE REGARDED AS IN THE NATURE OF TRADE OR BUSINESS. WHEN A PERSON ACQUIRES LAND WITH A VIEW TO SELLING IT LATER AFTER DEVELOPING IT, HE IS CARRYING ON AN ACTIVITY RESULTING IN PROFIT, AND THE ACTIVITY CAN ONLY BE DESCRIBED AS A BUSINESS VENTURE. WHERE THE PERSON GOES FURTHER AND DIVIDES THE LAND INTO PLOTS, DEVELOPS THE AREA 'TO MAKE IT MORE ATTRACTIVE AND SELLS THE LAND NOT AS A SINGLE UNIT AND AS HE BOUGHT IT, BUT IN PARCELS, HE IS DEALING WITH LAND AS HIS STOCK - IN - TRADE; HE IS CARRYING ON BUSINESS AND MAKING A PROFIT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT CARRIED OUT ANY NON - AGRICULTURAL OPERATION SUCH AS DEVELOPING THE LAND BY PLOTTING AND PROVIDING ROADS AND OTHER F ACILITIES AND MOREOVER, THE ASSESSEE SOLD THE LAND ON ACREAGE BASIS AND NOT YARDAGE BASIS. THEREFORE, THE CASE LAW RELIED ON BY THE DEPARTMENT HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 5.3 THE OTHER CASE LAW RELIED ON BY THE DEPARTMENT IN THE CASE OF CIT V. NARASIMHA REDDY, NO CITATION HAS BEEN QUOTED EITHER BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OR THE DEPARTMENT IN THE STATEMENT OF FACTS FILED IN ITS APPEAL. THUS, THE SAME STANDS REJECTED. 5.4 ACCORDINGLY, THE ADDITION ON ACCOUNT OF TREATING THE GAINS TO THE ASSESSEE ON SALE OF LANDS, AS BUSINESS INCOME IS NOT SUSTAINABLE, SINCE THE LANDS UNDER REFERENCE WERE HELD TO BE AGRICULTURAL LANDS, AND THE ACTIVITIES OF PURCHASE AND SALE OF SUCH AGRICULTURAL LAND, IN OUR OPINION DID NOT CONSTITUTE BUSINESS. THUS, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. I.T.A. NO . 2 555 /M/ 1 6 & C.O. NO. 1 6 0 /M/1 6 7 5 . 2 THE FACTS AND THE GROUNDS RAISED IN THE PRESENT CASE ARE SIMILAR TO THAT OF THE CASE LAW RELIED ON BY THE ASSESSEE. THUS, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF ACIT V. SMT. SAROJ SINGHANIA (SUPRA), WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). H ENCE, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6 . IN THE CROSS OBJECTION FILED BY THE ASSESSEE, THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A) AND NO NEW GROUND HAS BEEN RAISED FOR ADJUDICATION. SINCE WE HAVE CONFIRMED TH E ORDER PASSED BY THE LD. CIT(A) AND DISMISSED THE APPEAL FILED BY THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED. 7. IN THE RESULT BOTH THE APPEAL FILED BY THE REVENUE AND THE CO FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 16 TH MAY , 2017 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 16 . 05 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.