THE ITO, 2(5), Indore V. Shri Sheikh Mohd. Imran, Indore

ITA 26/IND/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6374 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 23-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: SHREYA JAIN CAS
• Keywords: Capital asset; Principle of natural justice
• Section: 44AD; 143(3); 54B; 142(1); 131

Judgement Text

SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 1 IN THE INCOME TAX APPELLATE TRIBUNA L INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, HONBLE JUDICIAL MEM BER AND SHRI MANISH BORAD, HONBLE ACCOUNTANT ME MBER ITA NO. 26/IND/2017 A.Y. 2012-13 PAN CECPS6577J INCOME TAX OFFICER 2(5) INDORE ::: APPELLANT VS SHEIKH MOHD. IMRAN, 53/1, NANDLALPURA, INDORE ::: RESPONDENT C.O. NO.01/IND/2018 A.Y. 2012-13 SHEIKH MOHD. IMRAN, 53/1, NANDLALPURA, INDORE ::: APPELLANT VS INCOME TAX OFFICER 2(5) INDORE ::: RESPONDENT APPELLANT BY SHRI K.G.GOYAL , SR.DR RESPONDENT BY SHRI PRAKASH JAIN & MS. SHREYA JAIN, CAS DATE OF HEARING 30 .7.2018 DATE OF PRONOUNCEMENT 31 .7.2018 SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 2 O R D E R PER SHRI MANISH BORAD, AM THIS APPEAL FILED AT THE INSTANCE OF REVENUE A ND CROSS OBJECTION BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2012 -13 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III (IN SHORT CIT(A)], INDORE DATED 26.10.2016 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT FRAMED B Y THE ITO-2(5), INDORE DATED 25.3.2015. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F CIVIL CONSTRUCTION DECLARING HIS INCOME U/S 44AD OF THE A CT. INCOME OF RS.5,36,450/- DECLARED IN THE E-RETURN FILED ON 05. 01.2013. CASE PICKED UP FOR SCRUTINY AND NECESSARY NOTICES U/S 14 3(2) AND 142(1) OF THE ACT ISSUED AND DETAILS CALLED FOR EXAMINING BY THE LD.A.O. THE LD. A.O WHILE SCRUTINIZING THE DOCUMENTS OBSERV ED THAT THE ASSESSEE HAS SOLD LAND AT GRAM RAU FOR CONSIDERATIO N OF RS.5,92,98,311/- BUT HAS NOT DISCLOSED THIS TRANSAC TION OF SALE CONSIDERATION TREATING THE IMPUGNED LAND AS AGRICUL TURE LAND NOT FORMING PART OF THE CAPITAL ASSET AND THE CAPITAL G AIN DERIVED THERE SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 3 FROM TREATED AS EXEMPTED. ASSESSEE ALSO PURCHASED AGRICULTURAL LAND VALUING AT RS.3,56,25,519/- OUT OF THE SALE CO NSIDERATION. THE TOTAL LONG TERM CAPITAL GAIN FROM SALE OF IMPUGNED LAND WAS CALCULATED AT RS.2,36,72,792/- (SALE CONSIDERATION RS.5,92,98,311/- LESS AGRICULTURE LAND PURCHASED AT RS.3,56,25,519/-). THEREAFTER LD.A.O CARRIED OUT I NVESTIGATION AND ALSO PROCURED CERTAIN INFORMATION FROM NAGAR PARISH AD, RAU AND CAME TO A CONCLUSION THAT THE ASSESSEE WAS LIABLE T O PAY LONG TERM CAPITAL GAIN TAX ON THE GAIN OF RS.2,36,72,792/-. I NCOME ACCORDINGLY ASSESSED AT RS.2,42,09,250/- 3. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE L D.CIT(A) AND PARTLY SUCCEEDED AS THE LD.CIT(A) DELETED THE ADDIT ION OF RS.2,36,72,792/- MADE BY THE LD.A.O TOWARDS LONG TE RM CAPITAL GAIN HOLDING THAT THE IMPUGNED LAND SOLD BY THE ASS ESSEE DOES NOT CONSTITUTE AS CAPITAL ASSET IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(14)(III) READ WITH NOTIFICATION NO.9447 D ATED 6.1.94. 4. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL AND ASSESSEE HAS FILED CROSS OBJECTION RAISING FOLLOWIN G GROUNDS; SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 4 REVENUES APPEAL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN:- (I) WHETHER THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,36,72,792/- RELYING ON EVIDENCES GATHERED DURI NG APPEAL WITHOUT GIVING ANY OPPORTUNITY TO THE A.O WHICH IS AGAINST PRINCIPLE OF NATURAL JUSTICE. (II) WHETHER THE LD.CIT(A) WAS JUSTIFIED IN FACTS AND C IRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.23672792 /- WHICH WAS BASED ON ENQUIRIES AS MENTIONED IN ASSESSMENT O RDER. ASESSEES CROSS OBJECTIONS. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD.CIT(A) ERRED IN NOT DECIDING THE GROUNDS NO. 3&4 ON MERITS, THESE GROUNDS READS AS UNDER:- 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD.AO ERRED IN ALLOWING THE DEDUCTION U/S 54B O F RS.3,56,25,519/- AS AGAINST RS.5,46,45,798/- AS CLA IMED BY THE APPELLANT AND THEREBY COMPUTED THE TAXABLE LONG TER M CAPITAL GAIN ON SALES OF AGRICULTURAL LAND AT RS.2,36,72,792/-. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD.AO ERRED IN LEVYING TAX ON LONG TERM CAPITA L GAIN OF RS.2,36,72,792/- AT THE NORMAL RATE AS AGAINST THE SPECIFIC RATE OF 20% U/S 112*1) OF THE I.T. ACT. 5. FIRST WE TAKE UP THE REVENUES APPEAL. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRING TO THE DIRECTIONS GIVEN BY THE TRIBUNAL ON THE DATE OF HEARING ON 26.4.18 TO FILED A REMAND RE PORT ISSUED BY THE ASSESSING OFFICER 2(5), INDORE ALONG WITH THE S TATEMENT OF MR. SHARAD CHANDRA SHARMA WHO IS WORKING AS PATWARI AT VILLAGE SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 5 DEPALPUR AND WAS WORKING AS PATWARI AT RAU DURING T HE PERIOD 2009-2014. THROUGH THIS REMAND REPORT LD.A.O HAS M ENTIONED THAT THE ALLEGED LAND BEARING SURVEY NO.1429/1480/1 AND OTHERS ARE ABOUT 1.5 TO 2.0 KM AWAY FROM THE MUNICIPAL LIM IT OF RAU AND WERE ALSO SITUATED AT 1.5 TO 2.0 KM FAR FROM A.B.RO AD. LD.DEPARTMENTAL REPRESENTATIVE FURTHER RELIED ON TH E FINDINGS OF LD.A.O. 6. PER CONTRA, THE LD. COUNSEL FOR THE ASSESEE SUB MITTED REFERRING TO PAGE-57 OF THE PAPER BOOK WHICH IS A PART OF THE NOTIFICATION NO.9447 DATED 6.1.94 SUBMITTED THAT VILLAGE RAU HAS BEEN SPECIFICALLY MENTIONED IN THIS NOTIFICATION AND THE AREAS FALLING WITHIN 1 KM ON EITHER SIDE OF A.B ROAD UP TO A DIST ANCE OF 8 KMS FROM THE MUNICIPAL LIMITS OF RAU ONLY FALL IN THE C ATEGORY OF CAPITAL WHEREAS THE IMPUGNED LAND IS 1.5 TO 2 KM AWAY FROM A.B ROAD AND THEREFORE DO NOT FALL UNDER THE CATEGORY OF CAPITAL ASSETS AND THEREFORE THE GAIN FROM SALE OF SAID AGRICULTURE LA ND IS EXEMPT FROM INCOME TAX. LD. COUNSEL FURTHER RELIED THE FINDINGS OF LD. CIT(A). 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE ONLY ISSUE RAISED BY THE REVENUE IS WHETHER THE SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 6 IMPUGNED AGRICULTURE LAND SITUATED AT RAU SOLD BY T HE ASSESSEE IS FORMING PART OF CAPITAL ASSET OR NOT. FROM SALE OF THE IMPUGNED AGRICULTURE LAND SITUATED AT VILLAGE RAU (M.P) LON G TERM CAPITAL GAIN OF RS.2,36,72,792/- WAS COMPUTED BY THE ASSESSEE. IT IS CONTENDED THROUGH OUT THE PROCEEDINGS BEFORE THE LOWER AUTHOR ITIES AND BEFORE US THAT THE IMPUGNED AGRICULTURE LAND IS NOT A CAPI TAL ASSET AND IS NOT LIABLE TO BE TAXED AS PER THE NOTIFICATION NO.9 447 DATED 6.1.94. THE AGRICULTURE LAND SITUATED AT RAU BEING 1.5 TO 2 KM AWAY FROM A.B ROAD IS NOT TO BE TREATED AS CAPITAL ASSET. 8. WE ALSO FIND THAT THE LD.CIT(A) DELETED THE IMPU GNED ADDITION BY GIVING DETAILED FINDING OF FACTS REFERRING TO THE N OTIFICATION AS WELL AS THE REPORTS ISSUED BY THE PATWARI OF RAU. THE RELEV ANT EXTRACT OF THE FINDINGS OF LD.CIT(A) READS AS FOLLOWS; 4.1 I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE A PPELLANTS SUBMISSION AS WELL AS THE MATERIAL ON RECORD. THE APPELLANT SOLD AGRICULTURE LAND BEING KHASRA NO. 1429/1, 14-80/1, 1 481/2/1, 1482, 1481/2/4, 1490/1, 1491/4, 1491/2/2 & 1418/1/13 AT V ILLAGE RAU FOR CONSIDERATION OF RS.6,43,32,133/-. THE ASSESSIN G OFFICER HAS MADE ADDITION OF LONG TERM CAPITAL GAIN OF RS.2,36,72,79 2/- AFTER ALLOWING SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 7 THE DEDUCTION U/S 54B OF THE INCOME TAX ACT. THE CA LCULATION OF THE SAME IS AS UNDER:- SALE CONSIDERATION RS.6,43,32,133/- LESS:INDEXED COST RS. 50,33,822/- LONG TERM CAPITAL GAIN RS.5,92,98,311/- LESS:DEDUCTION U/S 54B RS.3,56,25,519/- ADDITION MADE ON ACCOUNT OF LTCG RS.2,36,72,792/- 4.2 IN THIS CASE THE DDIT (INVESTIGATION)-I, INDORE HAD CONDUCTED AN INVESTIGATION REGARDING THE SALE OF THE ABOVE PROPE RTY BY THE APPELLANT AND ISSUED NOTICE TO THE PATWARI. IN RESPONSE TO TH E SAID NOTICE THE AREA PATWARI, SHRI SHARAD CHANDRA SHARMA, INFORMED THAT THE LAND SOLD BY THE APPELLANT IS WITHIN THE MUNICIPAL LIMIT OF VILLAGE RAU AND SITUATED AT DISTANCE OF 1.5 TO 2 KMS FROM THE A.B. R OAD. 4.3 HOWEVER, VIDE CERTIFICATE DATED 24.08.2013 THE S AME PATWARI, SHRI SHARAD CHANDRA SHARMA CERTIFIED THAT THE LAND IS SITUA TED MORE THAN 5 KMS FROM THE MUNICIPAL LIMIT OF VILLAGE RAU AND THE SAID LAND IS SITUATED 1.5 TO 2 KMS FROM THE AGRA BOMBAY ROAD (A.B . ROAD). THIS CERTIFICATE WAS FILED BY THE APPELLANT IN THE ASSESS MENT PROCEEDINGS. THE APPELLANT ALSO SUBMITTED BEFORE THE ASSESSING OF FICER A CERTIFICATE ISSUED BY THE ADDITIONAL TEHSILDAR, TEHSIL INDORE B EING NO.775/REVENUE-4/13 DATED 19.03.2013 STATING THAT TH E LAND OF THE APPELLANT IS 5 KMS AWAY FROM THE MUNICIPAL LIMIT OF VILLAGE RAU. 4.4 IN VIEW OF THE CONTRADICTORY CERTIFICATES ISSUE D BY THE APPROPRIATE LAND REVENUE AUTHORITIES ON THIS ISSUE, A LETTER WAS ISSUED TO THE PATWARI, SHRI SHARAD CHANDRA SHARMA CALLING FOR A FRESH REPORT TO RESOLVE THE MATTER WHETHER THE SAID LAND IS WITHIN O R OUTSIDE THE SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 8 MUNICIPAL LIMIT OF RAU. IN RESPONSE TO THE SAID LET TER SHRI SHARAD CHANDRA SHARMA, PATWARI OF RAU FILED A LETTER ON 25.10 .2016 CLARIFYING THE CONTROVERSY. XXXXXXXXXXXXXXXXXXXXXXXXXXXXX. 4.5 ON PERUSAL OF THE ABOVE LETTER DATED 25.10.2016 IT IS CLEAR THAT THE LETTER DATED NIL FILED BEFORE ITO (INVESTMENT) IN RES PONSE TO LETTER NO.DDIT(INVESTMENT)/I/IND/STR/13-14 DATED 08/08/2013 WAS ISSUED WITHOUT CONSIDERING THE GAZETTE NOTIFICATION ISSUED B Y THE GOVERNMENT OF MADHYA PRADESH BEARING NO.665-X-VIII-II-80. AS P ER THE ABOVE NOTIFICATION THE BOUNDARY OF MUNICIPAL LIMIT OF VIL LAGE RAU IS 158.47 ACRES. THE PATWARI SHRI SHARAD CHANDRA SHARMA IN HIS LETTER DATED 25/10/2016 HAS STATED THAT ON THE BASIS OF ABOVE GA ZETTE NOTIFICATION THE SAID LAND IN QUESTION IS SITUATED OUTSIDE THE MUNIC IPAL LIMIT OF VILLAGE RAU AT A DISTANCE OF 1.5 TO 2 KMS. AS THE LETTER DATED 25/10/2016 HAS BEEN ISSUED BY THE APPROPRIATE AUTHOR ITY OF GOVT. DEPARTMENT AFTER POINTING OUT THE CONTRADICTION IN THE EARLIER LETTER THE SAME IS BEING TAKEN INTO CONSIDERATION AND RELIANCE IS BEING PLACE ON IT. 4.6 THE NOTIFICATION NO. 9447 DATED 06.01.1994 GIVES THE DETAILS OF THE LANDS NOT FOLLOWING UNDER THE DEFINITION OF CAPITAL A SSETS IN TERMS OF SECTION 2(14)(III)(B) OF THE IT ACT. THE DETAILS OF VILLAGES AND CITIES OF MADHYA PRADESH ARE AT SERIAL NO.13 AND RAU IS AT SUB SERIVAL NO.21. THE SAID ENTRY THERE IN READS AS UNDER:- 21. RAU: AREA FALLING WITHIN 1 KM ON EITHER SIDE O F AB ROAD UPTO A DISTANCE OF 8 KMS FROM THE MUNICIPAL LIMIT OF RAU 4.6.1 THE APPELLANTS LAND IS CLEARLY NOT FALLING WI THIN 1 KM ON EITHER SIDE OF A.B ROAD UPTO A DISTANCE OF 8 KMS FROM THE M UNICIPAL LIMIT OF RAU AND AS PER THE LETTER DATED 25/10/2016 OF THE PAT WARI SHRI SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 9 SHARAD CHANDRA SHARMA IT IS ALSO OUTSIDE THE MUNICIPAL LIMITS OF RAU. THUS, IN VIEW OF THE SAID NOTIFICATION THE APP ELLANTS LAND IS NOT A CAPITAL ASSET IN TERMS OF SECTION 2(14)(III). IN VIEW OF THE ABOVE IT IS HELD THAT THE AGRICULT URAL LAND SOLD BY THE APPELLANT IS NOT LIABLE FOR CAPITAL GAIN TAX BECAUS E THE SAME DOES NOT CONSTITUTE AS CAPITAL ASSETS IN ACCORDANCE WITH PRO VISIONS OF SECTION 2(14)(III) READ WITH NOTIFICATION NO.9447 DATED 06/0 1/1994. THUS, GROUND NO.2 OF APPEAL IS ALLOWED AND THE ADDITION O F RS.2,36,72,792/- MADE UNDER THE HEAD LONG TERM CAPITA L GAIN IS DELETED. 9. WE FURTHER FIND THAT THE ASSESSEE HAS FILED AND RELIED ON THE NOTIFICATION NO.9447 DATED 6.1.94 AND THE ENTRY OF RAU AS MENTIONED AT PAGE 57 OF PAPER BOOK IS REPRODUCED BE LOW; EXTRACT OF NOTIFICATION NO.9447 DATED 6.1.1994 21. RAU AREAS FALLING WITHIN 1 KM ON EITHER SI DE OF A.B ROAD UPTO A DISTANCE OF 8 KMS FROM MUNICIPAL LIMITS OF RAU. 10. WE ALSO FIND THAT REMAND REPORT WAS CALLED BY OUR DIRECTION ON 26.4.18 AND THE LD.DEPARTMENTAL REPRESENTATIVE HAS PLACED THE REPORT BEFORE US ALONG WITH THE STATEMENT OF SHRI S HARAD CHANDRA SHARMA WHO WAS WORKING AS PATWARI OF RAU DURING THE PERIOD 2009-2014. THE CONTENT OF THIS REMAND REPORT DATED 28.5.18 ISSUED BY INCOME TAX OFFICER 2(5), INDORE IS REPRO DUCED AS UNDER; SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 10 KINDLY REFER TO YOUR LETTER F.NO.SR.(DR)/ITAT/IND/ 20 18-19/8 DATED 26.04.2018 ON THE ABOVE SUBJECT. AS PER YOUR DIRECTION A SUMMON U/S 131 OF THE ACT W AS ISSUED TO SHRI SHARAD CHANDRA SHARMA PATWARI OF RAU AND HIS STATE MENT WAS RECORDED ON OATH 25.05.2018. IN HIS STATEMENT SHRI SHARAD CHANDRA SHARMA DEPOSED TH AT THE LAND BEARING SURVEY NO.1429/1480/1, 1481/2/1, 1482, 1481/2/4, 1490/1. 1491/4, 1491/2/2, 1429/1 WHICH SHRI SHEIKH MOHD. IMRAN SOLD TO M/S DREAM BUILDERS AND DEVELOPERS WAS A BOUT 1.5 2.0 KM AWAY FROM THE MUNICIPAL LIMIT OF RAU. HE AL SO STATED THAT THE LAND IN QUESTION IS AT A DISTANCE OF ABOUT 1.5 2.0 KM AWAY FROM A.B. ROAD. A COPY OF THE STATEMENT OF SHRI SHARAD CHANDRA SHARMA IS ENCLOSED FOR READY REFERENCE. SD/- S.S. MURTHY, ITO 2(5), IN DORE 11. IN THE LIGHT OF ABOVE FACTS AS WELL AS THE RE MAND REPORT AND NOTIFICATION AND FURTHER THE REVENUE BEING UNABLE T O CONTROVERT THIS FACT, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGN ED LAND SOLD BY THE ASSESSEE WAS AN AGRICULTURE LAND USED FOR AGRIC ULTURAL OPERATIONS AND WAS NOT COVERED UNDER THE DEFINITION OF CAPITAL ASSET AS PROVIDED IN SECTION 2(14(III) OF THE ACT READ WI TH NOTIFICATION NO.9447 DATED 6.1.1994. THEREFORE NO INTERFERENCE IS CALLED FOR IN SHEIKH MOHD. IMRAN ITA 26/IND/2017 & C.O.NO.01/IND/2018 11 THE FINDINGS OF LD.CIT(A). ACCORDINGLY THE APPEAL OF THE REVENUE STANDS DISMISSED. 12 . NOW WE TAKE UP THE CROSS OBJECTIONS. AT THE OUTSE T THE LD. COUNSEL FOR THE ASSESSEE REQUESTED FOR NOT PRESSING THE CROSS OBJECTIONS. WE THEREFORE DISMISS THE ASSESSEES CRO SS OBJECTION AS NOT PRESSED. 13. IN THE RESULT APPEAL OF THE REVENUE AND CROSS O BJECTION OF ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 JULY, 2018. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER JULY 31, 2018 /DEV